Morningstar Document Research FORM 10-K

Morningstar Document Research FORM 10-K
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FORM 10-K
ONCOR ELECTRIC DELIVERY CO LLC - N/A
Filed: February 28, 2014 (period: December 31, 2013)
Annual report with a comprehensive overview of the company
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user
assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be
limited or excluded by applicable law. Past financial performance is no guarantee of future results.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-K
[ ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2013
— OR —
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-100240
Oncor Electric Delivery Company LLC
(Exact name of registrant as specified in its charter)
75-2967830
Delaware
(I.R.S. Employer Identification No.)
(State of Organization)
1616 Woodall Rodgers Fwy., Dallas, TX 75202
(214) 486-2000
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code)
___________________________________
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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes___ No √
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
√
No
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
No √
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes √ No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of 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. √
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ___ Accelerated filer ___ Non-Accelerated filer √ (Do not check if smaller reporting company)
Smaller reporting company ___
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No √
Aggregate market value of Oncor Electric Delivery Company LLC common membership interests held by non-affiliates: None
As of February 27, 2014, 80.03% of the outstanding membership interests in Oncor Electric Delivery Company LLC (Oncor) were directly held by
Oncor Electric Delivery Holdings Company LLC and indirectly by Energy Future Holdings Corp., 19.75% of the outstanding membership interests
were held by Texas Transmission Investment LLC and 0.22% of the outstanding membership interests were indirectly held by certain members of
Oncor’s management and board of directors. None of the membership interests are publicly traded.
__________________________________________
DOCUMENTS INCORPORATED BY REFERENCE - None
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
TABLE OF CONTENTS
Page
Glossary
3
PART I
Items 1 and 2.
BUSINESS AND PROPERTIES
6
Item 1A.
RISK FACTORS
11
Item 1B.
UNRESOLVED STAFF COMMENTS
17
Item 3.
LEGAL PROCEEDINGS
17
Item 4.
MINE SAFETY DISCLOSURES
17
Item 5.
PART II
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED EQUITY HOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
18
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
18
19
Item 6.
Item 7.
RESULTS OF OPERATIONS
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
36
Item 8.
Item 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
38
75
Item 9A.
CONTROLS AND PROCEDURES
75
Item 9B.
OTHER INFORMATION
77
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
78
Item 11.
Item 12.
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED EQUITY HOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
87
126
PRINCIPAL ACCOUNTING FEES AND SERVICES
142
Item 13.
Item 14.
131
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
144
Oncor Electric Delivery Company LLC’s (Oncor) annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and any amendments to those reports are made available to the public, free of charge, on the Oncor website at http://www.oncor.com as soon as
reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission. The information on Oncor’s
website or available by hyperlink from the website shall not be deemed a part of, or incorporated by reference into, this annual report on Form 10K. The representations and warranties contained in any agreement that we have filed as an exhibit to this annual report on Form 10-K or that we
have or may publicly file in the future may contain representations and warranties made by and to the parties thereto as of specific dates. Such
representations and warranties may be subject to exceptions and qualifications contained in separate disclosure schedules, may represent the
parties’ risk allocation in the particular transaction, or may be qualified by materiality standards that differ from what may be viewed as material
for securities law purposes.
This annual report on Form 10-K and other Securities and Exchange Commission filings of Oncor and its subsidiary occasionally make references
to Oncor (or “we,” “our,” “us” or “the company”) when describing actions, rights or obligations of its subsidiary. These references reflect the fact
that the subsidiary is consolidated with Oncor for financial reporting purposes. However, these references should not be interpreted to imply that
Oncor is actually undertaking the action or has the rights or obligations of its subsidiary or that the subsidiary company is undertaking an action
or has the rights or obligations of its parent company or of any other affiliate.
2
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
GLOSSARY
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below
AMS
Bondco
CREZ
Deed of Trust
EECRF
EFH Corp.
EFH Retirement Plan
EFIH
EPA
ERCOT
ERISA
FERC
Fitch
GAAP
Investment LLC
IRS
kV
kWh
LIBOR
advanced metering system
Refers to Oncor Electric Delivery Transition Bond Company LLC, a wholly-owned
consolidated bankruptcy-remote financing subsidiary of Oncor that has issued
securitization (transition) bonds to recover certain regulatory assets and other costs.
Competitive Renewable Energy Zone
Deed of Trust, Security Agreement and Fixture Filing, dated as of May 15, 2008, made
by Oncor to and for the benefit of The Bank of New York Mellon Trust Company,
N.A. (as successor to The Bank of New York Mellon, formerly The Bank of New
York), as collateral agent, as amended
energy efficiency cost recovery factor
Refers to Energy Future Holdings Corp., a holding company, and/or its subsidiaries,
depending on context. Its major subsidiaries include Oncor and TCEH.
Refers to a defined benefit pension plan sponsored by EFH Corp., in which Oncor
participat es. In 2012, EFH Corp. made various changes to the EFH Retirement Plan,
including splitting off all of the assets and liabilities associated with Oncor employees
and all retirees and terminated vested participants of EFH Corp. and its subsidiaries
(including discontinued businesses) into a new plan. See Oncor Retirement Plan below.
Refers to Energy Future Intermediate Holding Company LLC, a direct, wholly-owned
subsidiary of EFH Corp. and the direct parent of Oncor Holdings.
US Environmental Protection Agency
Electric Reliability Council of Texas, Inc., the independent system operator and the
regional coordinator of various electricity systems within Texas
Employee Retirement Income Security Act of 1974, as amended
US Federal Energy Regulatory Commission
Fitch Ratings, Ltd. (a credit rating agency)
generally accepted accounting principles
Refers to Oncor Management Investment LLC, a limited liability company and
minority membership interest owner (approximately 0.22%) of Oncor, whose managing
member is Oncor and whose Class B Interests are owned by certain members of the
management team and independent directors of Oncor.
US Internal Revenue Service
kilovolts
kilowatt-hours
London Interbank Offered Rate , an interest rate at which banks can borrow funds, in
marketable size, from other banks in the London interbank market
3
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Limited Liability Company
Agreement
Luminant
Moody’s
MW
NERC
Oncor
Oncor Holdings
Oncor Retirement Plan
Oncor Ring-Fenced Entities
OPEB
OPEB Plan
PUCT
PURA
purchase accounting
REP
S&P
SARs
SARs Plan
SEC
Sponsor Group
The Second Amended and Restated Limited Liability Company Agreement of Oncor,
dated as of November 5, 2008, by and among Oncor Holdings, Texas Transmission
and Investment LLC, as amended
Refers to subsidiaries of TCEH engaged in competitive market activities consisting of
electricity generation and wholesale energy sales and purchases as well as commodity
risk management and trading activities, all largely in Texas.
Moody’s Investors Services, Inc. (a credit rating agency)
megawatts
North American Electric Reliability Corporation
Refers to Oncor Electric Delivery Company LLC, a direct , majority-owned subsidiary
of Oncor Holdings, and/or its wholly-owned consolidated bankruptcy-remote financing
subsidiary, Bondco, depending on context.
Refers to Oncor Electric Delivery Holdings Company LLC, a direct, wholly-owned
subsidiary of EFIH and the direct majority owner (approximately 80.03%) of Oncor,
and/or its subsidiaries, depending on context .
Refers to the defined benefit pension plan sponsored by Oncor. In 2012, EFH Corp.
made various changes to the EFH Retirement Plan, including splitting off all of the
assets and liabilities associated with Oncor employees and all retirees and terminated
vested participants of EFH Corp. and its subsidiaries (including discontinued
businesses) into a new plan. Effective January 1, 2013, Oncor assumed sponsorship
of this new plan.
Refers to Oncor Holdings and its direct and indirect subsidiaries , including Oncor.
other postretirement employee benefits
Refers to an EFH Corp. sponsored plan (in which Oncor participates) that offers certain
health care and life insurance benefits to eligible employees and their eligible dependents
upon the retirement of such employees from the company.
Public Utility Commission of Texas
Texas Public Utility Regulatory Act
The purchase method of accounting for a business combination as prescribed by US
GAAP, whereby the cost or “purchase price” of a business combination, including the
amount paid for the equity and direct transaction costs, are allocated to identifiable
assets and liabilities (including intangible assets) based upon their fair values. The
excess of the purchase price over the fair values of assets and liabilities is recorded as
goodwill.
retail electric provider
Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. (a
credit rating agency)
Stock Appreciation Rights
Refers to the Oncor Stock Appreciation Rights Plan.
US Securities and Exchange Commission
Refers collectively to certain investment funds affiliated with Kohlberg Kravis Roberts
& Co. L.P. (KKR), TPG Global, LLC (together with its affiliates, TPG) and GS
Capital Partners, an affiliate of Goldman, Sachs & Co., that have an ownership
interest in Texas Holdings.
4
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Supplemental Retirement
Plan
TCEH
TCEQ
TCOS
TCRF
Texas Holdings
Texas Holdings Group
Texas margin tax
Texas Transmission
TRE
TXU Energy
US
VIE
Refers to the Oncor Supplemental Retirement Plan.
Refers to Texas Competitive Electric Holdings Company LLC, a direct, wholly-owned
subsidiary of Energy Future Competitive Holdings Company and an indirect
subsidiary of EFH Corp., and/or its subsidiaries, depending on context. Its major
subsidiaries include Luminant and TXU Energy.
Texas Commission on Environmental Quality
transmission cost of service
transmission cost recovery factor
Refers to Texas Energy Future Holdings Limited Partnership, a limited partnership
controlled by the Sponsor Group that owns substantially all of the common stock of
EFH Corp.
Refers to Texas Holdings and its direct and indirect subsidiaries other than the Oncor
Ring-Fenced Entities.
A privilege tax imposed on taxable entities chartered/organized or doing business in the
State of Texas that, for accounting purposes, is reported as an income tax. Also referred
to as “Texas franchise tax” and/or “Texas gross margin tax.”
Refers to Texas Transmission Investment LLC, a limited liability company that owns a
19.75% equity interest in Oncor. Texas Transmission is an entity indirectly owned by
a private investment group led by OMERS Administration Corporation, acting through
its infrastructure investment entity, Borealis Infrastructure Management Inc., and the
Government of Singapore Investment Corporation, acting through its private equity and
infrastructure arm, GIC Special Investments Pte Ltd. Texas Transmission is not
affiliated with EFH Corp., any of EFH Corp.’s subsidiaries or any member of the
Sponsor Group.
Refers to Texas Reliability Entity, Inc., an independent organization that develops
reliability standards for the ERCOT region and monitors and enforces compliance with
NERC standards and ERCOT protocols.
Refers to TXU Energy Retail Company LLC, a direct, wholly-owned subsidiary of
TCEH engaged in the retail sale of electricity to residential and business
customers. TXU Energy is a REP in competitive areas of ERCOT.
United States of America
variable interest entity
5
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
PART I
Items 1. and 2. BUSINESS AND PROPERTIES
References in this report to “we,” “our,” “us” and “the company” are to Oncor and or/its subsidiary as apparent in the
context. See “Glossary” on page ii for definition of terms and abbreviations.
Overview of Oncor
We are a regulated electricity transmission and distribution company that provides the essential service of delivering
electricity safely, reliably and economically to end-use consumers through our electrical systems, as well as providing
transmission grid connections to merchant generation facilities and interconnections to other transmission grids in Texas. We
are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of EFIH, a direct,
wholly-owned subsidiary of EFH Corp. Oncor Holdings owns 80.03% of our outstanding membership interests, Texas
Transmission owns 19.75% of our outstanding membership interests and certain members of our management team and board
of directors indirectly beneficially own the remaining 0.22% of our outstanding membership interests. We are a limited liability
company organized under the laws of the State of Delaware, formed in 2007 as the successor entity to Oncor Electric Delivery
Company, a corporation formed under the laws of the State of Texas in 2001.
We operate the largest transmission and distribution system in Texas, delivering electricity to more than 3.2 million homes
and businesses and operating more than 120,000 miles of transmission and distribution lines. We provide:
·
transmission services to electricity distribution companies, cooperatives, municipalities, and
·
distribution services to REPs, including subsidiaries of TCEH, which sell electricity to retail customers .
Our transmission and distribution rates are regulated by the PUCT, and in certain instances, by the FERC. We are not a
seller of electricity, nor do we purchase electricity for resale. The company is managed as an integrated business;
consequently, there are no reportable segments.
Our transmission and distribution assets are located principally in the north-central, eastern and western parts of
Texas. This territory has an estimated population in excess of ten million, about forty percent of the population of Texas, and
comprises 91 counties and over 400 incorporated municipalities, including Dallas/Fort Worth and surrounding suburbs, as
well as Waco, Wichita Falls, Odessa, Midland, Tyler and Killeen. Most of our 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. At December 31,
2013, we had approximately 3, 420 full-time employees, including approximately 6 90 employees under collective bargaining
agreements.
Various “ring-fencing” measures have been taken to enhance the separateness between the Oncor Ring-Fenced Entities and
the Texas Holdings Group and our credit quality. These measures serve to mitigate our and Oncor Holdings’ credit exposure to
the Texas Holdings Group and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be
substantively consolidated with the assets and liabilities of the Texas Holdings Group in the event of a bankruptcy of one or
more of those entities. Such measures include, among other things: our sale of a 19.75% equity interest to Texas Transmission
in November 2008; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being
comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support
to, or receiving credit support from, any member of the Texas Holdings Group. The assets and liabilities of the Oncor RingFenced Entities are separate and distinct from those of the Texas Holdings Group, including TXU Energy and Luminant, and
none of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of any member of
the Texas Holdings Group. We do not bear any liability for debt or contractual obligations of the Texas Holdings Group, and
vice versa. Accordingly, our operations are conducted, and our cash flows are managed, independently from the Texas
Holdings Group.
As noted in SEC filings made by members of the Texas Holdings Group, EFH Corp. and other members of the Texas
Holdings Group have engaged in discussions with certain unaffiliated creditors regarding certain of those entities’ capital
structures and long-term liquidity, as well as possible restructuring transactions involving those entities. We believe the “ringfencing” measures discussed above mitigate our exposure to a bankruptcy or other restructuring transaction involving members
of the Texas Holdings Group.
6
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Oncor’s Market (ERCOT statistics below were derived from information published by ERCOT)
We operate within the ERCOT market. This market represents approximately 85% of the electricity consumption in
Texas. ERCOT is the regional reliability coordinating organization for member electricity systems in Texas and the Independent
System Operator (ISO) of the interconnected transmission grid for those systems. ERCOT is responsible for ensuring
reliability, adequacy and security of the electric systems, as well as nondiscriminatory access to transmission service by all
wholesale market participants in the ERCOT region. ERCOT’s membership consists of more than 300 corporate and associate
members, including electric cooperatives, municipal power agencies, independent generators, independent power marketers,
transmission service providers and distribution services providers, independent REPs and consumers.
In 2013, ERCOT’s hourly demand peaked at 67,245 MW as compared to the peak demand of 66,548 MW in
2012. The ERCOT market has limited interconnections to other markets in the US and Mexico, which currently limits
potential imports into and exports out of the ERCOT market to 1,106 MW of generation capacity (or approximately 2% of peak
demand). In addition, wholesale transactions within the ERCOT market are generally not subject to regulation by the FERC.
The ERCOT market operates under reliability standards set by NERC. The PUCT has primary jurisdiction over the
ERCOT market to ensure the adequacy and reliability of power supply across Texas’ main interconnected transmission
grid. We, along with other owners of transmission and distribution facilities in Texas, assist the ERCOT ISO in its
operations. We have planning, design, construction, operation and maintenance responsibility for the portion of the
transmission grid and for the load-serving substations we own, primarily within our certificated distribution service area. We
participate with the ERCOT ISO and other ERCOT utilities in obtaining regulatory approvals and planning, designing and
constructing new transmission lines in order to remove existing constraints and interconnect generation on the ERCOT
transmission grid. The new transmission lines are necessary to meet reliability needs, support renewable energy production and
increase bulk power transfer capability.
Oncor’s Strategies
We focus on delivering electricity in a safe and reliable manner, minimizing service interruptions and investing in our
transmission and distribution infrastructure to maintain our system, serve our growing customer base with a modernized grid
and support renewable energy production.
We believe that building and leveraging upon opportunities to scale our operating advantage and technology programs
enables us to create value by eliminating duplicative costs, efficiently managing supply costs, and building and standardizing
distinctive process expertise over a larger grid. Scale also allows us to take part in large capital investments in our transmission
and distribution system, with a smaller fraction of overall capital at risk and with an enhanced ability to streamline costs . Our
growth strategies are to invest in technology upgrades and to construct new transmission and distribution facilities to meet the
needs of the growing Texas market and support renewable energy production. We and other transmission and distribution
businesses in ERCOT benefit from regulatory capital recovery mechanisms known as “capital trackers” that we believe enable
adequate and timely recovery of transmission, distribution and advanced metering investments through our regulated rates.
Oncor’s Operations
Performance — We achieved or exceeded market performance protocols in 12 out of 14 PUCT market metrics in
2013. These metrics measure the success of transmission and distribution companies in facilitating customer transactions in
the competitive Texas electricity market.
Investing in Infrastructure and Technology — In 2013, we invested approximately $ 1.1 billion in our network to
construct, rebuild and upgrade transmission lines and associated facilities, to extend the distribution infrastructure, and to
pursue certain initiatives in infrastructure maintenance and information technology. Reflecting our commitment to
infrastructure, in September 2008, we and several other ERCOT utilities filed with the PUCT a plan to participate in the
construction of transmission improvements designed to interconnect existing and future renewable energy facilities to transmit
electricity from CREZs identified by the PUCT. In 2009, the PUCT awarded us CREZ construction projects . T he projects
involve the construction of transmission lines and stations to support the transmission of electricity from
7
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
renewable energy sources, principally wind generation facilities, in west Texas to population centers in the eastern part of the
state. In addition to these projects, ERCOT completed a study in December 2010 that will result in us and other transmission
service providers building additional facilities to provide further voltage support to the transmission grid as a result of
CREZ. At December 31, 2013, our cumulative CREZ-related capital expenditures totaled $1.871 billion, including $411
million in 2013. All CREZ-related line and station construction projects were energized by the end of 2013. Additional voltage
support projects were completed in January 2014, with the exception of one series capacitor project that is scheduled to be
completed in December 2015 in order to allow for further study and evaluation. The delay to 2015 is not expected to have a
significant impact on the ability of the CREZ system to support existing or currently expected renewable generation. See “Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Regulation and Rates.”
Our technology upgrade initiatives include development of a modernized grid through advanced digital communication,
data management, real-time monitoring and outage detection capabilities to take advantage of our recent deployment of advanced
digital metering equipment. This modernized grid is producing electricity service reliability improvements and providing for
additional products and services from REPs that enable businesses and consumers to better manage their electricity usage and
costs. The advanced meters can be read remotely, rather than by a meter reader physically visiting the location of each
meter. Advanced meters facilitate automated demand side management, which allows consumers to monitor the amount of
electricity they are consuming and adjust their electricity consumption habits. With the new meters integrated, we report 15minute interval, billing-quality electricity consumption data to ERCOT for market settlement purposes. The data from the new
meters makes it possible for REPs to support new programs and pricing options.
Electricity Transmission — Our electricity transmission business is responsible for the safe and reliable operations of
our 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 our transmission
facilities in coordination with ERCOT.
We are a member of ERCOT, and our transmission business actively assists the operations of ERCOT and market
participants. Through our transmission business, we participate with ERCOT and other member utilities to plan, design,
construct and operate new transmission lines, with regulatory approval, necessary to maintain reliability, interconnect to
merchant generation facilities, increase bulk power transfer capability and minimize limitations and constraints on the ERCOT
transmission grid.
Transmission revenues are provided under tariffs approved by either the PUCT or, to a small degree related to an
interconnection to other markets, the FERC. Network transmission revenues compensate us for delivery of electricity over
transmission facilities operating at 60 kV and above. Other services we offer through our transmission business include
system impact studies, facilities studies, transformation service and maintenance of transformer equipment, substations and
transmission lines owned by other parties.
PURA allows us to update our transmission rates periodically to reflect changes in invested capital. This “capital
tracker” provision encourages investment in the transmission system to help ensure reliability and efficiency by allowing for
timely recovery of and return on new transmission investments.
At December 31, 2013 , our transmission facilities included 6,522 circuit miles of 345kV transmission lines and 9, 658
circuit miles of 138kV and 69kV transmission lines. Sixty- seven generation facilities totaling 3 6, 410 MW were directly
connected to our transmission system at December 31, 2013, and 2 92 transmission stations and 70 9 distribution substations
were served from our transmission system.
8
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
At December 31, 2013, our transmission facilities had the following connections to other transmission grids in Texas:
Number of Interconnected Lines
Grid Connections
345kV
8
-
Brazos Electric Power Cooperative, Inc.
Rayburn Country Electric Cooperative, Inc.
Lower Colorado River Authority
Texas New Mexico Power
Tex-La Electric Cooperative of Texas, Inc.
American Electric Power Company, Inc. (a)
Texas Municipal Power Agency
Lone Star Transmission
Centerpoint Energy Inc.
Electric Transmission Texas, LLC
Sharyland Utilities, L.P.
Other small systems operating wholly within Texas
10
4
5
7
12
8
6
6
138kV
112
39
23
9
12
7
6
1
6
7
69kV
23
6
2
12
1
11
3
_____________
(a) One of the 345-kV lines is an asynchronous high-voltage direct current connection with the Southwest Power Pool.
Electricity Distribution — Our electricity distribution business is responsible for the overall safe and efficient operation
of distribution facilities, including electricity delivery, power quality and system reliability. These responsibilities consist of
the ownership, management, construction, maintenance and operation of the distribution system within our certificated service
area. Our distribution system receives electricity from the transmission system through substations and distributes electricity
to end-users and wholesale customers through 3,1 77 distribution feeders.
Our distribution system include d over 3.2 million points of delivery at December 31, 2013. Over the past five years, the
number of distribution system points of delivery we serve, excluding lighting sites, grew an average of 1. 13% per year, adding
approximately 4 3,700 points of delivery in 2013.
Our distribution system consists of 56,6 83 miles of overhead primary conductors, 21, 621 miles of overhead secondary
and street light conductors, 1 6,169 miles of underground primary conductors and 9, 9 6 6 miles of underground secondary
and street light conductors. The majority of the distribution system operates at 25kV and 12.5kV.
Distribution revenues from residential and small business users are based on actual monthly consumption (kWh), and,
depending on size and annual load factor, revenues from large commercial and industrial users are based either on actual
monthly demand (kilowatts) or the greater of actual monthly demand (kilowatts) or 80% of peak monthly demand during the
prior eleven months.
The PUCT has approved a periodic rate adjustment, which allows utilities to file, under certain circumstances, up to
four rate adjustments between rate reviews to recover distribution-related investments on an interim basis.
Customers — Our transmission customers consist of municipalities, electric cooperatives and other distribution
companies. Our distribution customers consist of more than 80 REPs, including TCEH and certain electric cooperatives in our
certificated service area. Revenues from TCEH represented 2 7% of our total operating revenues in 2013. Revenues from REP
subsidiaries of a nonaffiliated entity , NRG Energy, Inc., collectively represented 15% of our total operating revenues in
2013. No other customer represented more than 10% of our total operating revenues. The consumers of the electricity we deliver
are free to choose their electricity supplier from REPs who compete for their business.
Seasonality — Our revenues and results of operations are subject to seasonality, weather conditions and other electricity
usage drivers, with revenues being highest in the summer.
Regulation and Rates — As our operations are wholly within Texas, we believe we are not a public utility as defined in
the Federal Power Act and, as a result, we are not subject to general regulation under this act. However, we are subject to
reliability standards adopted and enforced by the TRE and the NERC (including critical infrastructure protection) under the
Federal Power Act. See Item “1A. Risk Factors – As a transmission operator, we are subject to mandatory reliability
standards and periodic audits of our compliance with those standards. Efforts to comply with those standards could
subject us to higher operating costs and/or increased capital expenditures, and non-compliance with applicable
standards could subject us to penalties that could have a material effect on our business.”
9
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The PUCT has original jurisdiction over transmission and distribution rates and services in unincorporated areas and in
those municipalities that have ceded original jurisdiction to the PUCT and has exclusive appellate jurisdiction to review the rate
and service orders and ordinances of municipalities. Generally, 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 appropriate regulatory authority (i.e., the PUCT
or the municipality with original jurisdiction).
At the state level, PURA 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 PUCT has adopted rules implementing the state open-access requirements for all utilities
that are subject to the PUCT’s jurisdiction over transmission services, including us.
Securitization Bonds — Our consolidated financial statements include our wholly-owned, bankruptcy-remote
financing subsidiary, Bondco. This financing subsidiary was organized for the limited purpose of issuing certain transition
bonds in 2003 and 2004. Bondco issued $1.3 billion principal amount of transition bonds to recover generation-related
regulatory asset stranded costs and other qualified costs under an order issued by the PUCT in 2002. At December 31, 2013,
$311 million principal amount of transition bonds (maturing between 2014 and 2016) was outstanding.
Environmental Regulations and Related Considerations — The TCEQ and the EPA have jurisdiction over water
discharges (including storm water) from facilities in Texas. We believe our facilities are presently in material compliance with
applicable state and federal requirements relating to discharge of pollutants into the water. We believe we hold all required waste
water discharge permits from the TCEQ for facilities in operation and have applied for or obtained necessary permits for
facilities under construction. We also believe we can satisfy the requirements necessary to obtain any required permits or
renewals. There are also federal rules pertaining to Spill Prevention, Control and Countermeasure (SPCC) plans for oil-filled
electrical equipment and bulk storage facilities for oil that affect certain of our facilities. We have implemented SPCC plans as
required for those substations, work centers and distribution systems, and believe we are currently in compliance with these
rules.
Treatment, storage and disposal of solid waste 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 Resource Conservation and Recovery Act of 1976
and the Toxic Substances Control Act, and the TCEQ has issued regulations under the Texas Solid Waste Disposal Act
applicable to our facilities. We are in compliance with applicable solid and hazardous waste regulations.
Our capital expenditures for environmental matters totaled $14 million in 2013 and are expected to total approximately $ 13
million in 2014.
10
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Item 1A. RISK FACTORS
Some important factors in addition to others specifically addressed in “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” that could have a material negative impact on our operations, financial results
and financial condition, or could cause our actual results or outcomes to differ materially from any projected outcome contained
in any forward-looking statement in this report, include:
Our business is subject to ongoing complex governmental regulations and legislation that have impacted, and may in
the future impact, our business and/or results of operations.
Our business operates in a changing market environment influenced by various state and federal legislative and regulatory
initiatives regarding the restructuring of the energy industry. We will need to continually adapt to these changes.
Our business is subject to changes in state and federal laws (including PURA, the Federal Power Act, the Public Utility
Regulatory Policies Act of 1978 and the Energy Policy Act of 2005), changing governmental policy and regulatory actions
(including those of the PUCT, the NERC, the TRE, the TCEQ, the FERC and the EPA) and the rules, guidelines and protocols
of ERCOT with respect to matters including, but not limited to, market structure and design, construction and operation of
transmission facilities, acquisition, disposal, depreciation and amortization of regulated assets and facilities, recovery of costs
and investments, return on invested capital and environmental matters. Changes in, revisions to, or reinterpretations of existing
laws and regulations may have an adverse effect on our business and we could be exposed to increased costs to comply with the
more stringent requirements or new interpretations and to potential liability for customer refunds, penalties or other amounts. If
it is determined that we did not comply with applicable statutes, regulations, rules, tariffs or orders and we are ordered to pay a
material amount in customer refunds, penalties or other amounts, our financial condition, results of operations and cash flow
would be materially adversely affected.
For example, under the Energy Policy Act of 2005, the FERC can impose penalties (up to $1 million per day per
violation) for failure to comply with mandatory electric reliability standards, including standards to protect the power system
against potential disruptions from cyber and physical security breaches. In addition, the PUCT may impose penalties on us if
it finds that we violated any law, regulation, PUCT order or other rule or requirement. The PUCT has the authority to impose
penalties of up to $25,000 per day per violation.
The Texas Legislature meets every two years. The last regular session ended in May 2013. The next regular session is
scheduled to commence in January 2015. However, at any time the governor of Texas may convene a special session of the
Legislature. During any regular or special session bills may be introduced that, if adopted, could materially and adversely
affect our business and our business prospects.
The rates of our electricity delivery business are subject to regulatory review and may be reduced below current levels,
which could adversely impact our financial condition and results of operations.
The rates we charge are regulated by the PUCT and certain cities and are subject to cost-of-service regulation and annual
earnings oversight. This regulatory treatment does not provide any assurance as to achievement of earnings levels. Our rates
are regulated based on an analysis of our costs and capital structure, as reviewed and approved in a regulatory
proceeding. While rate regulation is premised on the full recovery of prudently incurred costs and a reasonable rate of return on
invested capital, there can be no assurance that the PUCT will judge all of our costs to have been prudently incurred, that the
PUCT will not reduce the amount of invested capital included in the capital structure that our rates are based upon, or that the
regulatory process in which rates are determined will always result in rates that will produce full recovery of our costs,
including regulatory assets reported in the balance sheet, and the return on invested capital allowed by the PUCT.
Attacks on our infrastructure or other events that disrupt or breach our cyber/data or physical security measures
could have an adverse impact on our reputation, disrupt business operations and expose us to significant liabilities
including penalties for failure to comply with federal, state or local statutes and regulations , which could have a
material effect on our results of operations, liquidity and financial condition.
A breach of cyber/data security measures that impairs our information technology infrastructure could disrupt normal
business operations and affect our ability to control our transmission and distribution assets, access customer information and
limit communication with third parties. Recently there have been numerous attacks on government and industry information
technology systems that have resulted in material operational, reputation and/or financial costs. While we
11
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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have controls in place designed to protect our information technology infrastructure and have not had any significant breaches,
any loss of confidential or proprietary data through a breach could adversely affect our reputation, expose us to material legal
and regulatory claims, impair our ability to execute on business strategies and/or materially affect our results of operations,
liquidity and financial condition.
A physical attack on our transmission and distribution infrastructure could also interfere with normal business
operations and affect our ability to control our transmission and distribution assets. While we have security measures in place
designed to protect our transmission and distribution system and have not had any significant security breaches, a physical
security breach could adversely affect our reputation, expose us to material regulatory claims and/or materially affect our results
of operations, liquidity and financial condition.
As part of the continuing development of new and modified reliability standards, the FERC has approved changes to its
Critical Infrastructure Protection reliability standards and has established standards for assets that a utility has identified as
“critical cyber assets.” Under the Energy Policy Act of 2005, the FERC can impose penalties (up to $1 million per day per
violation) for failure to comply with mandatory electric reliability standards, including standards to protect the power system
against potential disruptions from cyber and physical security breaches.
We participate in industry groups and discussions with regulators to remain current on emerging threats and mitigating
techniques. These groups include, but are not limited to: the US Cyber Emergency Response Team, the National Electric
Sector Cyber Security Organization, the Department of Homeland Security, the US Nuclear Regulatory Commission and
NERC. We also apply the knowledge gained by continuing to invest in technology, processes, security measures and services
to detect, mitigate and protect our assets, both physical and cyber. These investments include upgrades to network architecture
and physical security measures, regular intrusion detection monitoring and compliance with emerging industry regulation.
Our capital deployment program may not be executed as planned, which could adversely impact our financial
condition and results of operations.
There can be no guarantee that the execution of our capital deployment program for our electricity delivery facilities will be
successful, and there can be no assurance that the capital investments we intend to make in connection with our electricity
delivery business will produce the desired reductions in cost and improvements to service and reliability. Furthermore, there
can be no guarantee that our capital investments, including our investments associated with projects to construct CREZ-related
transmission lines and facilities and additional voltage support projects will ultimately be recoverable through rates or, if
recovered, that they will be recovered on a timely basis. For more information regarding the limitation on recovering the value of
investments using rates and the CREZ project, see “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Key Risks and Challenges” and “– Regulation and Rates.”
Market volatility may impact our business and financial condition in ways that we currently cannot predict.
Because our operations are capital intensive, we expect to rely over the long-term upon access to financial markets as a
significant source of liquidity for capital requirements not satisfied by cash-on-hand, operating cash flows or our revolving
credit facility. Considering our construction plans to service our growing customer base and ERCOT needs, it is likely we will
incur additional debt. In addition, we may incur additional debt in connection with other investments in infrastructure or
technology, such as smart grid systems. Our ability to access the capital or credit markets may be severely restricted at a time
when we would like, or need, to access those markets, which could have an impact on our flexibility to react to changing
economic and business conditions. In addition, the cost of debt financing may be materially and adversely impacted by these
market conditions. Even if we are able to obtain debt financing, we may be unable to recover in rates some or all of the costs of
such debt financing if they exceed our PUCT-approved cost of debt determined in our most recent rate review or subsequent rate
reviews. Accordingly, there can be no assurance that the capital and credit markets will continue to be a reliable or acceptable
source of short-term or long-term financing for us. Additionally, disruptions in the capital and credit markets could have a
broader impact on the economy in general in ways that could lead to reduced electricity usage, which could have a negative
impact on our revenues, or have an impact on our customers, counterparties and/or lenders, causing them to fail to meet their
obligations to us.
Adverse actions with respect to our credit ratings could negatively affect our ability to access capital .
Our access to capital markets and our cost of debt could be directly affected by our credit ratings. Any adverse action
with respect to our credit ratings could generally cause borrowing costs to increase and the potential pool of investors and
funding sources to decrease. Our credit ratings are currently substantially higher than those of EFH Corp., our majority
12
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
equity investor. If credit rating agencies were to change their views of our independence of EFH Corp., our credit ratings would
likely decline. Despite our ring-fencing measures, rating agencies have in the past taken, and could in the future take, an
adverse action with respect to our credit ratings in response to financing and liability management activities by, or restructuring
transactions involving EFH Corp. and other members of the Texas Holdings Group. Further, it is unclear how any bankruptcy
filing including EFH Corp. and other members of the Texas Holdings Group and related proceedings may effect our credit
ratings. In the event any such adverse action takes place and causes our borrowing costs to increase, we may not be able to
recover such increased costs if they exceed our PUCT-approved cost of debt determined in our most recent rate review or
subsequent rate reviews.
Most of our large suppliers and counterparties require an expected level of creditworthiness in order for them to enter into
transactions with us. If our credit ratings decline, the costs to operate our business could increase because counterparties could
require the posting of collateral in the form of cash-related instruments, or counterparties could decline to do business with us.
As a transmission operator, we are subject to mandatory reliability standards and periodic audits of our compliance
with those standards. Efforts to comply with those standards could subject us to higher operating costs and/or
increased capital expenditures, and non-compliance with applicable standards could subject us to penalties that could
have a material effect on our business.
The FERC has jurisdiction with respect to ensuring the reliability of electric transmission service, including transmission
facilities owned by utilities within ERCOT. The FERC has designated the NERC to establish and enforce reliability standards,
under FERC oversight, for all owners, operators and users of the bulk power system. The FERC has approved the delegation
by NERC of compliance and enforcement authority for reliability in the ERCOT region to the TRE. To maintain compliance
with the mandatory reliability standards, we may be subjected to higher operating costs and/or increased capital
expenditures. While we expect to recover costs and expenditures from customers through regulated rates, there can be no
assurance that the PUCT will approve full recovery of such costs or the timing of any such recovery. In addition, if we were to
be found to be in noncompliance with applicable reliability standards, we could be subject to sanctions, including monetary
penalties. Under the Energy Policy Act of 2005, FERC can impose penalties (up to $1 million per day per violation) for failure
to comply with reliability standards, which would not be recoverable from customers through regulated rates . We have five
registrations with NERC – as a transmission planner, a transmission owner, a transmission operator, a distribution provider
and a load serving entity. As a registered entity, we are subject to periodic audits by the TRE of our compliance with reliability
standards. These audits will occur as designated by the TRE at a minimum of every three years. We cannot predict the
outcome of any such audits .
Our revenues are concentrated in a small number of customers, including TCEH, and any delay or default in
payment could adversely affect our cash flows, financial condition and results of operations.
Our revenues from the distribution of electricity are collected from more than 80 REPs, including TXU Energy (a
subsidiary of TCEH), that sell the electricity we distribute to consumers. Revenues from TCEH represented 2 7% of our total
operating revenues for the year ended December 31, 2013. Revenues from REP subsidiaries of a non-affiliated entity , NRG
Energy, Inc., collectively represented 15% of our total operating revenues for the year ended December 31, 2013. Adverse
economic conditions, structural problems in the market served by ERCOT or financial difficulties of TCEH or one or more
other REPs could impair the ability of these REPs to pay for our services or could cause them to delay such payments. We
depend on these REPs to timely remit these revenues to us. We could experience delays or defaults in payment from these REPs,
which could adversely affect our cash flows, financial condition and results of operations. Due to commitments made to the
PUCT in 2007, we are not allowed to recover bad debt expense, or certain other costs and expenses, from rate payers in the
event of a default or bankruptcy by an affiliate REP.
In the future, we could have liquidity needs that could be difficult to satisfy under some circumstances, especially in
uncertain financial market conditions.
Our operations are capital intensive. We rely on access to financial markets and our revolving credit facility as a
significant source of liquidity for capital requirements, including maturities of long-term debt, not satisfied by cash-on-hand or
operating cash flows. The inability to raise capital on favorable terms or access liquidity facilities, particularly during times of
uncertainty similar to those experienced in the financial markets in 2008 and 2009, could adversely impact our ability to
sustain and grow our business and would likely increase capital costs that may not be recoverable through rates. Our access to
the financial markets and our revolving credit facility, and the pricing and terms we receive in the financial markets, could be
adversely impacted by various factors, such as:
13
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
·
·
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·
changes in financial markets that reduce available credit or the ability to obtain or renew liquidity facilities on
acceptable terms;
economic weakness in the ERCOT market;
changes in interest rates;
a deterioration of our credit or a reduction in our credit ratings;
a deterioration of the credit or bankruptcy of one or more lenders under our revolving credit facility that affects the
ability of the lender(s) to make loans to us;
a deterioration of the credit or bankruptcy of EFH Corp. or EFH Corp.’s other subsidiaries or a reduction in the credit
ratings of EFH Corp. or EFH Corp.’s other subsidiaries that is perceived to potentially have an adverse impact on us
despite the ring-fencing of the Oncor Ring-Fenced Entities from the Texas Holdings Group;
a material breakdown in our risk management procedures, and
the occurrence of changes that restrict our ability to access our revolving credit facility.
Our primary source of liquidity aside from operating cash flows is our ability to borrow under our revolving credit
facility. The revolving credit facility contains a debt-to-capital ratio covenant that effectively limits our ability to incur
indebtedness in the future. At December 31, 2013, we were in compliance with such covenant. See Note 5 to Financial
Statements for further information regarding this covenant. The revolving credit facility and the senior notes and debentures
issued by us are secured by the Deed of Trust, which permits us to secure other indebtedness with the lien of the Deed of Trust
up to the aggregate of (i) the amount of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain
property additions that could be certified to the Deed of Trust collateral agent. At December 31, 2013, the available bond credits
were approximately $2.176 billion. The amount of future debt we could secure with property additions, subject to those
property additions being certified to the Deed of Trust collateral agent, was $ 1.173 billion. In 2007, we committed to the PUCT
that we would maintain a regulatory capital structure at or below the assumed debt-to-equity ratio established periodically by the
PUCT for ratemaking purposes, which is currently set at 60% debt to 40% equity. At December 31, 2013, our regulatory
capitalization ratio was 58.7% debt and 41.3% equity. Our ability to incur additional long-term debt will be limited by our
regulatory capital structure.
The costs of providing pension and OPEB and related funding requirements may have a material adverse effect on
our financial condition, results of operations and cash flows.
We offer certain pension and health care and life insurance (OPEB) benefits to eligible employees and their eligible
dependents upon the retirement of such employees. Some of these benefits are provided through participation with EFH Corp.
and certain other subsidiaries of EFH Corp. in joint plans.
In 2012, we also entered into an agreement with EFH Corp. to assume primary responsibility for pension benefits of
certain participants for whom EFH Corp. bore primary funding responsibility (a closed group of retired and terminated vested
plan participants not related to our regulated utility business) . As the Oncor Retirement Plan received an amount of plan assets
equal to the liabilities we assumed for those participants, execution of the agreement did not have a material impact on our
reported results of operations or financial condition in 2012. However, there can be no guarantee that such assumption will not
have an impact on our results of operations or financial condition in the future.
Our share of the costs of providing pension and OPEB benefits and related funding requirements are dependent upon
numerous factors, assumptions and estimates and are subject to changes in these factors, assumptions and estimates,
including the market value of the assets funding the pension and the OPEB plans. Benefits costs and related funding
requirements are also subject to changing employee demographics (including but not limited to age, compensation levels and
years of accredited service), the level of contributions made to retiree plans, expected and actual earnings on plan assets and the
discount rates used in determining the projected benefit obligation. Changes made to the provisions of the plans may also
impact current and future benefit costs. Fluctuations in actual market returns as well as changes in general interest rates may
result in increased or decreased benefit costs in future periods.
If EFH Corp., which is highly leveraged, was unable to make contributions to the EFH Retirement Plan while it is a
member of our controlled group within the meaning of ERISA, we could be liable under ERISA for such contributions as well
as any unfunded pension plan liability that EFH Corp. is unable to pay. EFH Corp.’s portion of the EFH Retirement Plan’s
unfunded pension liability is $ 31 million at December 31, 2013. Funding for the EFH Retirement Plan is expected to total
approximately $103 million in 2014 and $119 million in the 2014 to 2018 period. We are expected to fund approximately $83
million in 2014 and $83 million in the 2014 to 2018 period of the total amount consistent with our share of this plan. Our share
of funding for the EFH Retirement Plan represents obligations we assumed with respect to certain employees of EFH Corp.’s
predecessor at the time of deregulation of the Texas electricity market. PURA allows for our
14
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
recovery of those costs and, as a result, in 2005 we entered into an agreement with EFH Corp.’s predecessor to assume those
costs.
See Note 9 to Financial Statements and “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Financial Condition – Pension and OPEB Plan Funding” for further information regarding pension and
OPEB plans’ funding.
Our ring-fencing measures may not work as planned and a bankruptcy court may nevertheless subject Oncor to the
claims of its affiliates’ creditors.
As discussed above, to enhance the separateness between the Oncor Ring-Fenced Entities and the Texas Holdings Group
and our credit quality, various legal, financial and contractual provisions were implemented. These enhancements are intended
to minimize the risk that a court would order any of the Oncor Ring-Fenced Entities’ assets and liabilities to be substantively
consolidated with those of any member of the Texas Holdings Group in connection with a bankruptcy case involving one or
more members of the Texas Holdings Group. Substantive consolidation is an equitable remedy in bankruptcy that results in
the pooling of the assets and liabilities of the debtor and one or more of its affiliates solely for purposes of the bankruptcy case,
including for purposes of distributions to creditors and voting on and treatment under a reorganization plan. Bankruptcy
courts have broad equitable powers, and as a result, outcomes in bankruptcy proceedings are inherently difficult to predict. To
the extent a bankruptcy court were to determine that substantive consolidation is appropriate under the facts and circumstances,
then the assets and liabilities of any Oncor Ring-Fenced Entity that is subject to the substantive consolidation order would be
available to help satisfy the debt or contractual obligations of the Texas Holdings Group entity that is a debtor in bankruptcy
and subject to the same substantive consolidation order. If any Oncor Ring-Fenced Entity were included in such a substantive
consolidation order, the secured creditors of Oncor would retain their liens and priority with respect to Oncor’s assets.
If any member of the Texas Holdings Group were to become a debtor in a bankruptcy case, there can be no assurance that
a court would not order an Oncor Ring-Fenced Entity’s assets and liabilities to be substantively consolidated with those of such
member of the Texas Holdings Group or that a proceeding would not result in a disruption of services we receive from, or jointly
with, our affiliates. See Note 1 to Financial Statements for additional information on our ring fencing measures.
Our rights under certain agreements with EFH Corp. and other members of the Texas Holdings Group could be
adversely affected in connection with a bankruptcy proceeding involving those entities .
We are party to various contracts and unexpired leases with EFH Corp. and other members of the Texas Holdings Group,
as described in Note 11 to Financial Statements. The US Bankruptcy Code permits a debtor in bankruptcy to assume (accept)
or reject executory contracts and unexpired leases. If members of the Texas Holdings Group were to become debtors in a
bankruptcy case and determined to reject some or all of their executory contracts and unexpired leases with us in connection
with that bankruptcy case, our results of operations and financial condition could be adversely affected.
G oodwill that we have recorded is subject to at least annual impairment evaluations, and as a result, we could be
required to write off some or all of this goodwill, which may cause adverse impacts on our financial condition and
results of operations.
In accordance with accounting standards, recorded goodwill is not amortized but is reviewed annually or more frequently
for impairment, if certain conditions exist, and may be impaired. Any reduction in or impairment of the value of goodwill will
result in a charge against earnings, which could cause a material adverse impact on our reported results of operations and
financial condition. See Note 1 to Financial Statements for goodwill impairment assessment and testing.
Our results of operations and financial condition could be negatively impacted by any development or event beyond
our control that causes economic weakness in the ERCOT market.
We derive substantially all of our revenues from operations in the ERCOT market, which covers approximately 75% of
the geographical area in the State of Texas. As a result, regardless of the state of the economy in areas outside the ERCOT
market, economic weakness in the ERCOT market could lead to reduced demand for electricity in the ERCOT market. Such a
reduction could have a material negative impact on our results of operations and financial condition.
15
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Disruptions at power generation facilities owned by third parties could interrupt our sales of transmission and
distribution services.
The electricity we transmit and distribute to customers of REPs is obtained by the REPs from electricity generation
facilities. We do not own or operate any generation facilities. If generation is disrupted or if generation capacity is inadequate,
our sales of transmission and distribution services may be diminished or interrupted, and our results of operations, financial
condition and cash flows may be adversely affected.
The operation and maintenance of electricity delivery facilities involves significant risks that could adversely affect our
results of operations and financial condition.
The operation and maintenance of delivery facilities involves many risks, including equipment breakdown or failure of
facilities, lack of sufficient capital to maintain the facilities, impact of unusual or adverse weather conditions or other natural
events, as well as the risk of performance below expected levels of efficiency or reliability, the occurrence of any of which could
result in lost revenues and/or increased expenses that may not be recoverable through rates. A significant number of our
facilities were constructed many years ago. In particular, older transmission and distribution equipment, even if maintained in
accordance with good engineering practices, may require significant capital expenditures to keep operating at peak efficiency or
reliability. The risk of increased maintenance and capital expenditures arises from damage to facilities due to storms, natural
disasters, wars, terrorist acts and other catastrophic events. Further, our ability to successfully and timely complete capital
improvements to existing facilities or other capital projects is contingent upon many variables and subject to substantial
risks. Should any such efforts be unsuccessful, we could be subject to additional costs that may not be recoverable through
rates and/or the write-off of our investment in the project or improvement.
Insurance, warranties or performance guarantees may not cover all or any of the lost revenues or increased expenses that
could result from the risks discussed above. Likewise, our ability to obtain insurance, and the cost of and coverage provided
by such insurance, could be affected by events outside our control.
Changes in technology or increased conservation efforts may reduce the value of our electricity delivery facilities and
may significantly impact our business in other ways as well.
Research and development activities are ongoing to improve existing and alternative technologies to produce electricity,
including gas turbines, fuel cells, microturbines, photovoltaic (solar) cells and concentrated solar thermal devices. It is possible
that advances in these or other technologies will reduce the costs of electricity production from these technologies to a level that
will enable these technologies to compete effectively with traditional generation plants. Changes in technology could also alter the
channels through which retail customers buy electricity. To the extent self-generation facilities become a more cost-effective
option for certain customers, our revenues could be materially reduced.
Also, electricity demand could be reduced by increased conservation efforts and advances in technology, which could
likewise significantly reduce the value of our electricity delivery facilities. Certain regulatory and legislative bodies have
introduced or are considering requirements and/or incentives to reduce energy consumption by a fixed date. Effective energy
conservation by our customers could result in reduced energy demand, or significantly slow the growth in demand. Such
reduction in demand could materially reduce our revenues. Furthermore, we may incur increased capital expenditures if we are
required to invest in conservation measures.
We are dependent upon a limited number of suppliers and service providers for certain of our operations. If any of
these suppliers or service providers failed or became unable to perform on their agreements with us, it could disrupt
our business and have an adverse effect on our cash flows, financial condition and results of operations.
We rely on suppliers and service providers to provide us with certain specialized materials and services, including
materials and services for power line maintenance, repair and construction, our AMS, information technology and customer
operations. The financial condition of our suppliers and service providers may be adversely affected by general economic
conditions, such as credit risk and the turbulent macroeconomic environment in recent years. Because many of the tasks of
these suppliers and service providers require specialized electric industry knowledge and equipment, if any of these parties fail
to perform, go out of business or otherwise become unable to perform, we may not be able to transition to substitute suppliers or
service providers in a timely manner. This could delay our construction and improvement projects, increase our costs and
disrupt our operations, which could negatively impact our business and reputation. In addition, we could be subject to fines or
penalties in the event a delay resulted in a violation of a PUCT or other regulatory order.
16
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Our revenues and results of operations are seasonal.
A significant portion of our revenues is derived from rates that we collect from REPs based on the amount of electricity we
distribute on behalf of such REPs. Sales of electricity to residential and commercial customers are influenced by temperature
fluctuations. Thus, our revenues and results of operations are subject to seasonality, weather conditions and other electricity
usage drivers, with revenues being highest in the summer.
The litigation environment in which we operate poses a significant risk to our business.
We are involved in the ordinary course of business in a number of lawsuits involving employment, commercial and
environmental issues and other claims for injuries and damages, among other matters. Judges and juries in the State of Texas
have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property
damage and business tort cases. We use appropriate means to contest litigation threatened or filed against us, but the litigation
environment in the State of Texas poses a significant business risk.
The loss of the services of our key management and personnel could adversely affect our ability to operate our
business.
Our future success will depend on our ability to continue to attract and retain highly qualified personnel. We compete for
such personnel with many other companies, in and outside our industry, government entities and other organizations. We may
not be successful in retaining our current personnel or in hiring or retaining qualified personnel in the future. Our failure to
attract new personnel or retain our existing personnel could have a material adverse effect on our business.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 3.
LEGAL PROCEEDINGS
We are involved in various legal and administrative proceedings in the normal course of business the ultimate resolution of
which, in the opinion of management, should not have a material effect on our financial position, results of operations or cash
flows. See Note 7 to Financial Statements for additional information concerning our legal and regulatory proceedings.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
17
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED EQUITY HOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
At December 31, 201 3, 80.03% of our outstanding membership interests was held by Oncor Holdings and indirectly held
by EFH Corp., 19.75% was held by Texas Transmission and 0.22% was indirectly held by certain members of our
management team and board of directors through Investment LLC. None of the membership interests are publicly traded, and
none were issued in 201 3.
See Note 8 to Financial Statements for a description of cash distributions we paid to our members and the restrictions on
our ability to pay such distributions.
Item 6.
SELECTED FINANCIAL DATA
2013
Total assets
Property, plant & equipment ─ net
At December 31,
2011
2012
2010
(millions of dollars, except ratios)
2009
$
18,234
11,902
4,064
$
17,990
11,318
4,064
$
17,371
10,569
4,064
$
16,846
9,676
4,064
$
16,232
9,174
4,064
$
5,381
7,409
12,790
$
5,400
7,304
12,704
$
5,144
7,181
12,325
$
5,333
6,988
12,321
$
4,996
6,847
11,843
Goodwill
Capitalization
Long-term debt, less amounts due currently
Membership interests
Total
$
$
$
$
$
Capitalization ratios (a)
Long-term debt, less amounts due currently
Membership interests
Total
42.0%
58.0%
42.5%
57.5%
41.7%
58.3%
43.3%
56.7%
42.2%
57.8%
100.0%
100.0%
100.0%
100.0%
100.0%
_______________
(a)
For purposes of reporting to the PUCT, the regulatory capitalization ratio at December 31, 2013 was 58.7% debt and 41.3% equity. See “Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ― Financial Condition ― Available
Liquidity/Credit Facility” and Note 8 to Financial Statements for additional information regarding regulatory capitalization ratios.
2013
2012
Year Ended December 31,
2011
2010
2009
(millions of dollars, except ratios)
Operating revenues
Net income
$
$
3,552
432
$
$
3,328
349
$
$
3,118
367
$
$
2,914
352
$
$
2,690
320
Capital expenditures
$
1,079
$
1,389
$
1,362
$
1,020
$
998
2.76
6.4%
Ratio of earnings to fixed charges
Embedded interest cost on long-term debt ─ end of period (a)
2.49
7.0%
2.62
6.6%
2.60
6.5%
2.40
6.6%
_______________
(a)
Represents the annual interest and amortization of any discounts, premiums, issuance costs (including the effects of interest rate hedges) and
any deferred gains/losses on reacquisitions divided by the carrying value of the debt plus or minus the unamortized balance of any discounts,
premiums, issuance costs (including the effects of interest rate hedges) and gains/losses on reacquisitions at the end of the year.
18
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations for the fiscal years ended
December 31, 2013, 2012 and 2011 should be read in conjunction with Selected Financial Data and our audited consolidated
financial statements and the notes to those statements.
All dollar amounts in the tables in the following discussion and analysis are stated in millions of US dollars unless
otherwise indicated.
BUSINESS
We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to
REPs, including subsidiaries of TCEH, that sell power in the north-central, eastern and western parts of Texas. Revenues from
TCEH represented 27%, 29% and 33% of our total operating revenues for the years ended December 31, 2013, 2012 and 2011,
respectively. We are a majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of EFIH, a
direct, wholly-owned subsidiary of EFH Corp. Oncor Holdings owns 80.03% of our outstanding membership interests, Texas
Transmission owns 19.75% of our outstanding membership interests and certain members of our management team and board
of directors indirectly own the remaining 0.22% of the outstanding membership interests through Investment LLC. We are
managed as an integrated business; consequently, there are no separate reportable business segments.
Various “ring-fencing” measures have been taken to enhance the separateness between the Oncor Ring-Fenced Entities and
the Texas Holdings Group and our credit quality. These measures serve to mitigate our and Oncor Holdings’ credit exposure to
the Texas Holdings Group and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be
substantively consolidated with the assets and liabilities of the Texas Holdings Group in the event of a bankruptcy of one or
more of those entities. Such measures include, among other things: our sale of a 19.75% equity interest to Texas Transmission
in November 2008; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being
comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support
to, or receiving credit support from, any member of the Texas Holdings Group. The assets and liabilities of the Oncor RingFenced Entities are separate and distinct from those of the Texas Holdings Group, including TXU Energy and Luminant, and
none of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of any member of
the Texas Holdings Group. We do not bear any liability for debt or contractual obligations of the Texas Holdings Group, and
vice versa. Accordingly, our operations are conducted, and our cash flows are managed, independently from the Texas
Holdings Group.
As noted in SEC filings made by members of the Texas Holdings Group, EFH Corp. and other members of the Texas
Holdings Group have engaged in discussions with certain unaffiliated creditors regarding certain of those entities’ capital
structures and long-term liquidity, as well as possible restructuring transactions involving those entities. We believe the “ringfencing” measures discussed above mitigate our exposure to a bankruptcy or other restructuring transaction involving members
of the Texas Holdings Group.
Significant Activities and Events
Debt-Related Activities — See Note 6 to Financial Statements for information regarding the issuance of $100 million
principal amount of senior secured notes in May 2013.
Matters with the PUCT — See discussion of these matters, including CREZ-related construction projects, below under
“Regulation and Rates.”
KEY RISKS AND CHALLENGES
Following is a discussion of key risks and challenges facing management and the initiatives currently underway to
manage such challenges. For additional information concerning risk factors related to our business, see “Item1A. Risk Factors”
in this report.
19
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Rates and Cost Recovery
Our rates are regulated by the PUCT and certain cities and are subject to regulatory rate-setting processes and annual
earnings oversight. This regulatory treatment does not provide any assurance as to achievement of earnings levels. Our rates
are regulated based on an analysis of our costs and capital structure, as reviewed and approved in a regulatory proceeding. Rate
regulation is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested
capital. However, there is no assurance that the PUCT will judge all of our costs to have been prudently incurred, that the
PUCT will not reduce the amount of invested capital included in the capital structure that our rates are based upon, that the
regulatory process in which rates are determined will always result in rates that produce full recovery of our costs or that our
authorized return on equity will not be reduced. See “Regulation and Rates” below for further information.
EFH Corp. Potential Restructuring Activities
As noted in SEC filings made by members of the Texas Holdings Group, EFH Corp. and other members of the Texas
Holdings Group have engaged in discussions with certain unaffiliated creditors regarding certain of those entities’ capital
structures and long-term liquidity, as well as possible restructuring transactions involving those entities. See “Item 1A. Risk
Factors” and Notes 7 and 11 to Financial Statements for a discussion of risks relating to, and potential impacts of, these
restructuring activities.
Capital Availability and Cost
Our access to capital markets and cost of debt could be directly affected by our credit ratings. Any adverse action with
respect to our credit ratings could generally cause borrowing costs to increase and the potential pool of investors and funding
sources to decrease. Our credit ratings are currently substantially higher than those of the Texas Holdings Group. If credit
rating agencies were to change their views of our independence from any member of the Texas Holdings Group, our credit
ratings would likely decline. We believe this risk is substantially mitigated by the ring-fencing measures as described in Note 1
to Financial Statements.
Technology Initiatives
Risks to our technology initiative programs include nonperformance by equipment and service providers, failure of the
technology to meet performance expectations and inadequate cost recovery allowances by regulatory authorities. We are
implementing measures to mitigate these risks, but there can be no assurance that these technology initiatives will achieve the
operational and financial objectives.
Cyber Security and Infrastructure Protection Risk
A breach of cyber/data or physical security measures that impairs our information technology infrastructure or
transmission and distribution infrastructure could disrupt normal business operations, affect our ability to control our
transmission and distribution system, expose us to material regulatory claims and limit communication with third parties. Any
loss of confidential or proprietary data through a cyber/data breach could also materially affect our reputation, expose the
company to legal claims or impair our ability to execute on business strategies. We participate in industry groups and with
regulators to remain current on emerging threats and mitigating techniques. While we have not experienced any security breach
with a significant operational, reputational or financial impact, we recognize the growing threat within our industry and are
proactively taking steps to continuously improve our technology, security measures, processes and services to detect, mitigate
and protect our assets, both physical and cyber.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are discussed in Note 1 to Financial Statements. We follow accounting principles
generally accepted in the US. Application of these accounting policies in the preparation of our consolidated financial
statements requires management to make estimates and assumptions about future events that affect the reporting of assets and
liabilities at the balance sheet dates and revenues and expenses during the periods covered. The following is a summary of
certain critical accounting policies that are impacted by judgments and uncertainties and under which different amounts might
be reported using different assumptions or estimation methodologies.
20
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Contingencies
As noted in Note 1 to Financial Statements, EFH Corp. and other members of the Texas Holdings Group have indicated
that they have been involved in discussions regarding possible restructuring transactions. Due to the uncertainty of the outcome
of these restructuring activities, we have applied our contingency policy to the accounts receivable from affiliates arising from
the various related party transactions described in Note 11 to Financial Statements. We have determined that no loss
contingency is probable as of December 31, 2013. We do not have enough information about the plans of the Texas Holdings
Group to determine that the likelihood of a loss contingency is remote. At February 27, 2014, we had collected all but $6
million of the accounts receivable from affiliates outstanding at December 31, 2013. In addition, with respect to the various
contracts and unexpired leases with EFH Corp. and certain of its subsidiaries, the US Bankruptcy Code permits a debtor in
bankruptcy to assume (accept) or reject executory contracts and unexpired leases. We have determined that as of December 31,
2013 a loss contingency of approximately $20 million related to these agreements is reasonably possible if members of the Texas
Holdings Group were to become debtors in a bankruptcy case and determined to reject their executory contracts and unexpired
leases with us.
Revenue Recognition
Revenue includes an estimate for electricity delivery services provided from the billed meter reading date to the end of the
period (unbilled revenue). For electricity delivery services billed on the basis of kWh volumes, unbilled revenue is based on
data collected through our AMS. For other electricity delivery services, unbilled revenue is based on average daily revenues for
the most recent period applied to the number of unmetered days through the end of the period. Accrued unbilled revenues totaled
$180 million, $147 million and $127 million at December 31, 2013, 2012 and 2011, respectively.
Accounting for the Effects of Income Taxes
Our tax sharing agreement with Oncor Holdings and EFH Corp. was amended in November 2008 to include Texas
Transmission and Investment LLC. The tax sharing agreement provides for the calculation of amounts related to income taxes
for each of Oncor Holdings and Oncor substantially as if these entities file their own income tax returns and requires payments
to the members determined on that basis (without duplication for any income taxes paid by a subsidiary of Oncor Holdings).
We became a partnership for US federal income tax purposes effective with the equity sale to Texas Transmission and
Investment LLC in November 2008. Accordingly, while partnerships are not subject to income taxes, in consideration of the tax
sharing agreement and the presentation of our financial statements as an entity subject to cost-based regulatory rate-setting
processes, with such costs historically including income taxes, the financial statements present amounts determined under the
tax sharing agreement as “provision in lieu of income taxes” and “liability in lieu of deferred income taxes” for periods
subsequent to the equity sale. Such amounts are determined in accordance with the provisions of the accounting guidance for
income taxes and accounting standards that provide interpretive guidance for accounting for uncertain tax positions and thus
differences between the book and tax bases of assets and liabilities are accounted for as if we were a stand-alone
corporation. The accounting guidance for rate-regulated enterprises requires the recognition of regulatory assets or liabilities if it
is probable such deferred tax amounts will be recovered from, or returned to customers in future rates.
Our expense amounts related to income taxes and related balance sheet amounts are recorded pursuant to our tax sharing
agreement as discussed above. Recording of such amounts involves significant management estimates and judgments,
including judgments and estimates of the timing and probability of recognition of income and deductions by taxing
authorities. In assessing the likelihood of realization of assets related to income taxes, management considers estimates of the
amount and character of future taxable income. Actual amounts related to income taxes could vary from estimated amounts due
to the future impacts of various items, including changes in income tax laws, our forecasted financial condition and results of
operations in future periods, as well as final review of filed tax returns by taxing authorities. EFH Corp.’s income tax returns
are regularly subject to examination by applicable tax authorities. In management’s opinion, the liability recorded pursuant to
income tax accounting guidance related to uncertain tax positions reflects future amounts that may be owed as a result of any
examination.
See Notes 1 and 3 to Financial Statements.
21
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Regulatory Assets
Our financial statements at December 31, 2013 and 2012 reflect total regulatory assets of $ 1.771 billion and $2.093
billion, respectively. These amounts include $ 281 million and $409 million, respectively , of generation-related regulatory
assets recoverable by transition bonds as discussed immediately below. Rate regulation is premised on the full recovery of
prudently incurred costs and a reasonable rate of return on invested capital. Regulatory decisions can have an impact on the
recovery of costs, the rate earned on invested capital and the timing and amount of assets to be recovered by rates. See Note 4 to
Financial Statements for more information regarding regulatory assets and liabilities.
Generation-related regulatory asset stranded costs arising prior to the Texas Electric Choice Plan (the 1999 legislation that
restructured the electric utility industry in Texas to provide for retail competition) became subject to recovery through issuance
of $1.3 billion principal amount of transition bonds in accordance with a regulatory financing order. The carrying value of the
regulatory asset upon final issuance of the bonds in 2004 represented the projected future cash flows to be recovered from REPs
by us through revenues as a transition charge to service the principal and fixed rate interest on the bonds. The regulatory asset
is being amortized to expense in an amount equal to the transition charge revenues being recognized .
Other regulatory assets that we believe are probable of recovery, but are subject to review and possible disallowance,
totaled $422 million and $315 million at December 31, 2013 and 2012, respectively. These amounts consist primarily of
storm-related service recovery costs and employee retirement costs.
Impairment of Long-Lived Assets and Goodwill
We evaluate long-lived assets (including intangible assets with finite lives) for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable.
We also evaluate goodwill for impairment annually (at December 1) and whenever events or changes in circumstances
indicate that an impairment may exist. The determination of the existence of these and other indications of impairment involves
judgments that are subjective in nature and may require the use of estimates in forecasting future results and cash flows.
Under the quantitative goodwill impairment analysis, if at the assessment date our carrying value exceeds our estimated
fair value (enterprise value), then the estimated enterprise value is compared to the estimated fair values of our operating assets
(including identifiable intangible assets) and liabilities at the assessment date. The resultant implied goodwill amount is
compared to the recorded goodwill amount. Any excess of the recorded goodwill amount over the implied goodwill amount is
written off as an impairment charge.
Testing performed in December 2013 and 2012 was based on the quantitative method and determined that our estimated
fair value was substantially in excess of the net carrying value of our operating assets and liabilities, resulting in no additional
testing. In December 2011, we concluded, b ased on the results of a qualitative assessment, that our estimated enterprise fair
value was more likely than not greater than our net carrying value. As a result, no further testing for impairment was
required. Accordingly, there were no impairments of goodwill in the years ended December 31, 2013, 2012 or 2011.
Defined Benefit Pension Plans and OPEB Plans
We offer certain pension, health care and life insurance benefits to eligible employees and their eligible dependents upon the
retirement of such employees. Some of these benefits are provided through participation with EFH Corp. and certain other
subsidiaries of EFH Corp. in joint plans. Reported costs of providing noncontributory pension and OPEB benefits are
dependent upon numerous factors, assumptions and estimates.
PURA provides for our recovery of pension and OPEB costs for all applicable former employees of the regulated
predecessor integrated electric utility. These costs are associated with our active and retired employees as well as active and
retired personnel engaged in other EFH Corp. activities related to service prior to the deregulation and disaggregation of EFH
Corp.’s businesses effective January 1, 2002 (recoverable service). Accordingly, we entered into an agreement with EFH Corp.
whereby we assumed responsibility in 2005 for applicable pension and OPEB costs related to those personnel’s recoverable
service.
22
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
We are authorized to establish a regulatory asset or liability for the difference between the amounts of pension and OPEB
costs reflected in our PUCT-approved billing rates and the actual amounts that would otherwise have been recorded as charges
or credits to earnings related to recoverable service. Accordingly, we defer (principally as a regulatory asset or property)
additional pension and OPEB costs consistent with PURA. Amounts deferred are ultimately subject to regulatory
approval. Any retirement costs not associated with recoverable service are recognized in comprehensive income.
Benefit costs are impacted by actual and actuarial estimates of employee demographics (including but not limited to age,
compensation levels and years of accredited service), the level of contributions made to retiree plans, expected and actual
earnings on plan assets and the discount rates used in determining the projected benefit obligation. Actuarial assumptions are
reviewed and updated annually based on current economic conditions and trends. Changes made to the provisions of the plans
may also impact current and future benefit costs. Fluctuations in actual equity market returns as well as changes in general
interest rates may result in increased or decreased benefit costs in future periods.
In accordance with accounting rules, changes in benefit obligations associated with factors discussed above may be
immediately recognized in other comprehensive income and reclassified as a current cost in future years. As such, significant
portions of benefit costs recorded in any period may not reflect the actual level of cash benefits provided to plan
participants. Net direct and indirect allocated pension and OPEB costs as determined under applicable accounting rules are
summarized in the following table:
Year Ended December 31,
2013
$
Pension costs
2012
95
OPEB costs
$
132
179
27
206
(95)
(169)
37
Total benefit costs
Less amounts deferred principally as property or a regulatory asset
$
Net amounts recognized as expense
37
Discount rate (percentage) (a)(b)
$
$
20
37
$
$
104
95
74
169
(132)
$
37
5.50%
5.00%
4.10%
Funding of the pension plans and the OPEB Plan (c)
2011
$
193
_____________
(a) As a result of the amendments to the EFH Retirement Plan in 2012, discussed in Note 9 to Financial Statements, the discount rate reflected in
net pension costs for January through July 2012 was 5.00%, for August through September 2012 was 4.15% and for October through
December 31, 2012 was 4.20%.
(b) Discount rate for OPEB was 4.10%, 4.95% and 5.55% in 2013, 2012 and 2011, respectively.
(c) 2012 amount excludes transfers of investments between benefit plans in 2012. See Note 9 to Financial Statements for additional information
regarding pension and OPEB plans .
Sensitivity of these costs to changes in key assumptions is as follows:
Increase/(decrease) in 2014 Pension and
OPEB Costs
Assumption
Discount rate – 1% increase
$
(32)
Discount rate – 1% decrease
$
$
$
34
Expected return on assets – 1% increase
Expected return on assets – 1% decrease
(23)
23
See Note 9 to Financial Statements regarding other disclosures related to pension and OPEB obligations.
23
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
RESULTS OF OPERATIONS
Operating Data
Year Ended December 31,
2013
2012
2011
Operating statistics:
Electric energy billed volumes (gigawatt-hours):
Residential
Other (a)
Total electric energy billed volumes
41,486
40,377
43,888
70,826
112,312
69,994
110,371
69,949
113,837
106.1
89.9
106.2
1.4
75.6
1.2
77.6
83.1
3,284
3,242
3,203
Reliability statistics (b):
System Average Interruption Duration Index (SAIDI) (nonstorm)
System Average Interruption Frequency Index (SAIFI) (nonstorm)
Customer Average Interruption Duration Index (CAIDI) (nonstorm)
1.3
Electricity points of delivery (end of period and in thousands):
Electricity distribution points of delivery (based on number of active meters)
Operating revenues:
$
Distribution base revenues
1,826
$
1,789
$
1,993
703
629
555
TCRF (c)
846
733
401
Transition charges
149
148
66
144
150
142
103
49
43
Other miscellaneous revenues
73
73
77
Intercompany eliminations (c)
(259)
3,552
(231)
(204)
Transmission base revenues (TCOS) (c)
Reconcilable rates:
AMS surcharges
EECRF and rate case expense surcharges
$
Total operating revenues
$
3,328
$
3,118
________________
Includes small business, large commercial and industrial and all other non-residential distribution points of delivery.
SAIDI is the average number of minutes electric service is interrupted per consumer in a year. SAIFI is the average number of electric service
interruptions per consumer in a year. CAIDI is the average duration in minutes per electric service interruption in a year.
A portion of transmission base revenues (TCOS) is recovered from Oncor’s distribution customers through the TCRF rate.
(a)
(b)
(c)
24
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Financial Results ─ Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Total operating revenues increased $224 million, or 7%, to $3.552 billion in 2013. All revenue is billed under tariffs
approved by the PUCT. The increase reflected:
· Distribution base revenues — Base rates are set periodically in a rate review docket initiated by either us or the
PUCT. The present distribution base rates became effective on January 1, 2012. The $37 million increase in
distribution base rate revenues consisted of a $21 million impact of higher average consumption, largely driven by the
effects of colder fall/winter weather in 2013 as compared to 2012 and an estimated $16 million effect of growth in
points of delivery.
· Transmission base revenues — TCOS revenues are collected from load serving entities benefitting from our
transmission system. REPs serving customers in our service territory are billed though the TCRF mechanism
discussed below while other load serving entities are billed directly. In order to reflect changes in our invested
transmission capital, PUCT rules allow us to update our TCOS rates by filing up to two interim TCOS rate
adjustments in a calendar year. The $74 million increase in transmission base revenues primarily reflects interim rate
increases to recover ongoing investment, including a return component, in the transmission system. See TCOS
Filings Table below for a listing of Transmission Interim Rate Update Applications impacting revenues for the years
ended December 31, 2013 and 2012 as well as filings that will impact revenues for the year ended December 31, 2014 .
TCOS Filings Table
Annual
Revenue
Impact
Third-Party
Wholesale
Transmission
Included in
TCRF
Docket No.
Filed
Effective
42267
February 2014*
April 2014
$
74
$
47
$
27
41706
July 2013
September 2013
$
71
$
45
$
26
41166
January 2013
March 2013
$
27
$
17
$
10
40603
July 2012
August 2012
$
30
$
19
$
11
40142
January 2012
March 2012
$
2
$
1
$
1
39644
August 2011
__________
October 2011
$
35
$
22
$
13
* Application pending.
· Reconcilable Rates — The PUCT has designated certain tariffs (TCRF, EECRF surcharge, AMS surcharge and
charges related to transition bonds) as reconcilable, which means the differences between amounts billed under these
tariffs and the related incurred costs, including a return component where allowed, are deferred as either regulatory
assets or regulatory liabilities. Accordingly, at prescribed intervals, future applicable tariffs are adjusted to either
repay regulatory liabilities or collect regulatory assets. Changes in these tariffs do not impact operating income, except
for the AMS return component, but do impact the timing of cash flows. See Note 1 to Financial Statements for
accounting treatment of reconcilable tariffs.
-
TCRF is a distribution rate charged to REPs to recover fees we pay to other transmission service providers under
their TCOS rates and the retail portion of our own TCOS rate. PUCT rules allow us to update the TCRF
component of our retail delivery rates on March 1 and September 1 each year. The $113 million increase in
TCRF revenue reflects the pass through of an $86 million increase in third-party wholesale transmission expense
described below and a $27 million increase in our own TCOS rate to recover ongoing investment in our
transmission system including a return component. At December 31, 2013, approximately $37 million was
deferred as under-recovered wholesale transmission service expense (see Note 4 to Financial Statements). See
TCRF Filings Table below for a listing of TCRF filings impacting cash flow for the years ended December 31,
2013 and 2012 as well as filings that will impact cash flow for the year ended December 31, 2014 .
25
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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TCRF Filings Table
Semi-Annual
Billing Impact
Increase (Decrease)
Docket No.
Filed
Effective
42059
December 2013
March 2014 – August 2014
$
44
41543
June 2013
September 2013 – February 2014
$
88
41002
November 2012
$
(47)
$
129
$
(41)
$
24
40451
June 2012
39940
November 2011
39456
June 2011
March 2013 – August 2013
September 2012 – February 2013
March 2012 – August 2012
September 2011 – February 2012
-
Transition charges — Transition charge revenue is dedicated to paying the principal and interest of transition
-
AMS surcharges — The PUCT has authorized monthly per customer advanced meter cost recovery factors
-
EECRF surcharges — The EECRF is a reconcilable rate designed to recover current energy efficiency program
bonds. We account for the difference between transition charge revenue recognized and cost related to the
transition bonds as a regulatory liability. Annual true-up adjustments are filed to increase or decrease the
transition charges such that sufficient funds will be collected during the following period to meet scheduled debt
service payments. The final transition bonds mature in 2016. The $5 million increase in charges related to
transition bonds corresponds with an offsetting increase in amortization expense and primarily reflects higher
electricity volumes delivered by us due to the effects of colder fall/winter weather in 2013 as compared to 2012.
designed to recover the cost of our initial AMS deployment over an eleven-year period ending in 2019. We
recognize revenues equal to reconcilable expenses incurred including depreciation net of calculated savings plus a
return component on our investment. The $6 million increase in recognized AMS revenues is due to increased
costs driven by meter installation and systems development. See “Regulation and Rates” below.
costs and performance bonuses earned by exceeding PUCT targets in prior years and recover or refund any
over/under recovery of our costs in prior years. We recognize the performance bonuses in other miscellaneous
revenues upon approval by the PUCT. PUCT rules require us to file an annual EECRF tariff update by the first
business day in June of each year for implementation on March 1 of the next calendar year. For the year ended
2013, we recognized a $17 million increase in EECRF surcharges, which is offset in operation and maintenance
expense. See EECRF Filings Table below for a listing of EECRF filings impacting revenues for the years ended
December 31, 2013 and 2012 as well as filings that will impact revenues for the year ended 2014 .
EECRF Filings Table
Monthly Charge per
Under-
Program
Residential
Costs
Customer
/ (Over)Recovery
Performance
Bonus
Docket No.
Filed
Effective
41544
May 2013
March 2014
$
1.01 * $
62
$
40361
May 2012
January 2013
$
1.23
$
62
39375
May 2011
January 2012
$
0.99
$
49
12
$
$
9
$
2
$
8
$
(3)
(1)
__________
* Monthly charge of $1.01 is for a residential customer using 1,000 kWh, as the energy efficiency substantive rules require
rates to be on a volumetric basis as of March 2014 rather than a fixed monthly charge.
· Other miscellaneous revenues — Miscellaneous revenues includes disconnect/reconnect fees and other discretionary
revenues for services requested by REPs, services provided on a time and materials basis, rents, energy efficiency
performance bonuses approved by the PUCT and other miscellaneous revenues .
26
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Wholesale transmission service expense increased $86 million, or 17%, to $588 million in 2013. Third-party wholesale
transmission service expense increased $95 million in 2013 due to higher fees paid to other transmission entities and a 2%
increase in volumes, partially offset by a $9 million charge associated with a wholesale transmission cost settlement in 2012.
Operation and maintenance expense increased $12 million, or 2%, to $681 million in 2013. The change included $16
million in higher labor and employee benefits costs and $8 million in higher other costs, offset by $12 million in lower
vegetation management expenses, $6 million in lower outside services costs, $5 million in lower professional services costs and
$2 million in lower amortization of regulatory assets. Operation and maintenance expense also reflects fluctuations in expenses
that are offset by corresponding revenues, including a $17 million increase in costs related to programs designed to improve
customer electricity efficiency and a $4 million decrease related to advanced meters. Amortization of regulatory assets reported
in operation and maintenance expense totaled $52 million and $54 million in 2013 and 2012, respectively.
Depreciation and amortization increased $43 million, or 6%, to $814 million in 2013. The increase reflected $38 million
attributed to ongoing investments in property, plant and equipment (including $12 million attributed to investments related to
the deployment of advanced meters) and $5 million in higher amortization of regulatory assets associated with transition bonds
(with an offsetting increase in revenues).
Other income totaled $18 million in 2013 and $26 million in 2012. The 2013 and 2012 amounts included accretion of
an adjustment (discount) to regulatory assets resulting from purchase accounting totaling $18 million and $23 million,
respectively. See Note 12 to Financial Statements.
Other deductions totaled $15 million and $64 million in 2013 and 2012, respectively. The decrease was primarily
attributable to the SARs settlement in 2012. See Note 12 to Financial Statements.
Provision in lieu of income taxes totaled $249 million in 2013 (including $247 million related to operating income and $2
million related to nonoperating income) compared to a net $234 million (including $240 million related to operating income and a
benefit of $6 million related to nonoperating income) in 2012. The effective income tax rate on pretax income was 36.6% in
2013 and 40.1% in 2012. The 2013 effective income tax rate on pretax income differs from the US federal statutory rate of 35%
primarily due to the effect of $14 million of non-deductible amortization of the regulatory asset attributed to a change in
deductibility of the Medicare Part D subsidy as a result of the Patient Protection and Affordable Care Act of 2010 and the effect
of the 2013 Texas margin tax, partially offset by the reversal of accrued interest and taxes totaling $16 million attributed to the
resolution of certain uncertain tax positions . See Note 3 to Financial Statements.
Interest income decreased $20 million, or 83%, to $4 million in 2013. The change reflected a $16 million decrease as a
result of our sale of the TCEH transition bond interest reimbursement agreement to EFIH in August 2012 (see Note 11 to
Financial Statements for discussion of the sale) and a $6 million decrease attributable to a prior year sales tax refund, partially
offset by a $2 million increase in assets related to an employee benefit plan.
Interest expense and related charges decreased $3 million, or 1%, to $371 million in 2013. The change was driven by a
$9 million decrease attributable to lower average interest rates, partially offset by a $3 million increase attributable to higher
average borrowings reflecting ongoing capital investments and $3 million in higher amortization of net debt-related costs.
Net income increased $83 million, or 24%, to $432 million in 2013. The change reflected increased revenue from higher
transmission rates, growth in points of delivery and lower other deductions, partially offset by higher depreciation, lower
interest income, higher income taxes and higher operation and maintenance expenses.
Financial Results ─ Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Total operating revenues increased $210 million, or 7%, to $3.328 billion in 2012. All revenue is billed under tariffs
approved by the PUCT. The increase reflected:
· Distribution base revenues — A $204 million decrease in distribution base rate revenues consisted of a $223 million
impact from reclassifying all TCRF revenues as reconcilable revenues resulting from a rate structure
27
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
change in 2011 (with a corresponding amount recognized in TCRF revenues below) and a $78 million impact of lower
average consumption, primarily due to the effects of milder weather in 2012 as compared to 2011. These decreases
were partially offset by $77 million in higher distribution tariffs and an estimated $20 million effect of growth in
points of delivery.
-
·
Transmission base revenues — The $74 million increase in transmission base revenues primarily reflects
interim rate increases to recover ongoing investment, including a return component, in the transmission
system. See TCOS Filings Table above for a listing of TCOS filings impacting revenues for the years ended
December 31, 2012 and 2011.
Reconcilable Rates:
-
TCRF — The $332 million increase in TCRF consisted of a $223 million impact from reclassifying all TCRF
revenues as reconcilable revenues resulting from a rate structure change in 2011 (with a corresponding amount
recognized in distribution base revenues above) and a $109 million increase in TCRF revenues, which primarily
reflects the pass through of a $63 million increase in third-party wholesale transmission expense described
below. At December 31, 2012, approximately $40 million was deferred as under-recovered wholesale
transmission service expense (see Note 4 to Financial Statements). See TCRF Filings Table above for a listing of
TCRF filings impacting cash flow for the years ended December 31, 2012 and 2011.
-
Transition charges — The $6 million decrease in charges related to transition bonds corresponds with an
-
AMS surcharges — The $39 million increase in recognized AMS revenues is due to increased costs driven by
-
EECRF surcharges— For the year ended 2012, we recognized a $6 million increase in EECRF surcharges,
offsetting increase in amortization expense and primarily reflects lower electricity volumes delivered due to the
effects of milder weather in 2012 as compared to 2011.
meter installation and systems development completed in 2012.
which is offset in operation and maintenance expense. See EECRF Filings Table above for a listing of EECRF
filings impacting revenues for the years ended December 31, 2012 and 2011.
· Other miscellaneous revenues — The $4 million decrease in other miscellaneous revenues is primarily due to lower
REP discretionary services as a result of the continuing deployment of advanced meters.
Wholesale transmission service expense increased $63 million, or 14%, to $502 million, due to higher fees paid to other
transmission entities and a 2% increase in volumes.
Operation and maintenance expense increased $11 million, or 2%, to $669 million in 2012. The change included $12
million in higher amortization of regulatory assets and $6 million in higher outside services costs, partially offset by a $14
million effect of unusual non-cash expenses in 2011 (primarily consisting of a $9 million write off of excessive inventory and a
$5 million decrease related to SARs). Operation and maintenance expense also reflects fluctuations in other expenses that are
offset by corresponding revenues, including a $6 million increase in costs related to programs designed to improve customer
electricity demand efficiencies and a $2 million increase in costs related to advanced meters. Amortization of regulatory assets
reported in operation and maintenance expense totaled $54 million and $42 million in 2012 and 2011, respectively.
Depreciation and amortization increased $52 million, or 7%, to $771 million in 2012. The increase reflected $58 million
attributed to ongoing investments in property, plant and equipment (including $26 million related to advanced meters), partially
offset by $6 million in lower amortization of regulatory assets associated with transition bonds (with an offsetting decrease in
revenues).
Taxes other than amounts related to income taxes increased $15 million, or 4%, to $415 million in 2012. The change
was the result of a $9 million increase in property taxes and a $6 million increase in local franchise fees.
28
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Other income totaled $26 million in 2012 and $30 million in 2011. The 2012 and 2011 amounts included accretion of
an adjustment (discount) to regulatory assets resulting from purchase accounting totaling $23 million and $29 million,
respectively. See Note 12 to Financial Statements.
Other deductions totaled $64 million in 2012 and $9 million in 2011. The increase was the result of a SARs settlement
totaling $57 million, partially offset by a $2 million decrease in professional fees and other expenses. See Notes 10 and 12 to
Financial Statements.
Provision in lieu of income taxes totaled a net $234 million in 2012 (including $240 million related to operating income
and a benefit of $6 million related to nonoperating income) compared to $229 million in 2011 (including $209 million related
to operating income and $20 million related to nonoperating income). The effective income tax rate on pretax income was 40.1%
in 2012 and differs from the US federal statutory rate of 35% primarily due to non-deductible amortization of the regulatory
asset resulting from a change in deductibility of Medicare Part D subsidy as a result of the Patient Protection and Affordable
Care Act of 2010 and the effect of the 2012 Texas gross margin tax . See Note 3 to Financial Statements for reconciliation of the
effective rate to the US federal statutory rate.
Interest income decreased $8 million, or 25%, to $24 million in 2012. The decrease reflected lower reimbursement of
transition bond interest from TCEH due to lower remaining principal amounts and our sale of the TCEH interest agreement to
EFIH in August 2012, partially offset by a $6 million increase in interest income related to a sales tax refund. See Note 11 to
Financial Statements for discussion of the sale of the interest agreement.
Interest expense and related charges increased $15 million, or 4%, to $374 million in 2012. The change was driven by a
$22 million increase attributable to higher average borrowings reflecting ongoing capital investments and $15 million in higher
amortization of debt issuance costs and discounts, partially offset by a $14 million decrease attributable to lower average
interest rates and a n $8 million decrease attributable to higher capitalized interest.
Net income decreased $18 million, or 5%, to $349 million in 2012. The change reflected the effects on revenue of milder
weather, the effect of the SARs settlement and increases in depreciation and interest expense, partially offset by increased
revenue from higher transmission and distribution rates and growth in points of delivery.
OTHER COMPREHENSIVE INCOME
We reported $19 million and $3 million (both after tax) in other comprehensive income for the years ended December 31,
2013 and 2012, respectively. These amounts represent the net actuarial losses of the non-recoverable portion of benefit plans
(see Note 9 to Financial Statements for information regarding changes to the pension plans).
In August 2011, we entered into interest rate hedge transactions hedging the variability of treasury bond rates used to
determine the interest rates on an anticipated issuance of senior secured notes. The hedges were terminated in November 2011
upon the issuance of the senior secured notes. We reported the $46 million ($29 million after tax) loss related to the fair value
of the hedge transaction in accumulated other comprehensive income, which is being reclassified into net income over the life of
the senior secured notes issued, which mature in 2041.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash Flows — Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Cash provided by operating activities totaled $1.370 billion and $1.269 billion in 2013 and 2012, respectively. The
$101 million change was driven by an $84 million decrease in pension and OPEB contributions, a $57 million effect of a
SARs payout in 2012 (see Note 10 to Financial Statements), a $35 million increase in transmission and distribution receipts
due to higher rates, a $30 million increase in accounts payable levels, a $17 million decrease in cash interest payments due to
the early redemption of debt in June 2012 (see Note 6 to Financial Statements) and a $15 million decrease in energy efficiency
program payments. These increases in cash were partially offset by a $103 million increase in estimated federal and state
income tax payments and a $29 million decrease in cash as a result of the sale of our tax reimbursement agreement to EFIH in
August 2012 (see Note 11 to Financial Statements).
29
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Cash used in financing activities totaled $324 million in 2013 and cash provided by financing activities totaled $132
million in 2012. The 2013 activity reflected $310 million of cash used in distributions to our members (an $85 million
increase compared to 2012 (see Note 8 to Financial Statements)) and $125 million in cash principal payments on transition
bonds (a $7 million increase compared to 2012 (see Note 6 to Financial Statements)), partially offset by a $100 million
increase from the issuance of long-term debt in May 2013 and a $10 million increase in short-term borrowings.
Cash used in i nvesting activities, which consists primarily of capital expenditures, totaled $1.064 billion in 2013 and
$1.368 billion in 2012. The $304 million, or 22%, decrease was driven by lower capital expenditures for CREZ and advanced
metering deployment initiatives, partially offset by higher capital expenditures for distribution facilities to serve new customers,
information technology initiatives, and infrastructure maintenance.
Depreciation and amortization expense reported in the statements of consolidated cash flows was $34 million and $31
million more than the amounts reported in the statements of consolidated income for the years ended December 31, 2013 and
2012, respectively. The differences result from amortization reported in the following different lines items in the statements of
consolidated income: regulatory asset amortization (reported in operation and maintenance expense), the accretion of the
adjustment (discount) to regulatory assets (reported in other income) and the amortization of debt fair value discount (reported in
interest expense and related charges) .
Cash Flows — Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Cash provided by operating activities totaled $1.269 billion and $1.295 billion in 2012 and 2011, respectively. The
$26 million change was driven by a $112 million effect of significantly lower income tax refunds in 2012 compared to 2011, a
$57 million SARs payout (see Note 10 to Financial Statements), a $26 million decrease in accounts payable levels, a $20
million increase in ad valorem tax payments primarily due to the timing of such payments, a $20 million increase in cash
interest payments primarily due to the early redemption of debt in June 2012 (see Note 6 to Financial Statements), a $20 million
increase in cash payments to third-party transmission providers and an $18 million decrease in transition-related interest
income as a result of the sale to EFIH of our interest and tax agreements with TCEH (see Note 11 to Financial
Statements). These decreases in cash were partially offset by a $119 million increase in transmission and distribution receipts
due to higher rates, an $89 million decrease in pension and OPEB contributions, a $25 million decrease in cash purchases of
materials and supplies and a $22 million decrease related to retrospective municipal franchise fees paid as a result of the 2011
rate review settlement.
Cash provided by financing activities totaled $132 million and $80 million in 2012 and 2011, respectively. The 2012
activity reflected a $343 million increase in short-term borrowings, a $159 million increase reflecting the sale to EFIH of our
interest and tax agreements with TCEH (see Note 11 to Financial Statements) and $20 million in payments received on the
related note receivable from TCEH, partially offset by $225 million of cash used in distributions to our members (an $80
million increase compared to 2011 (see Note 8 to Financial Statements)), $118 million in cash principal payments on
transition bonds (a $5 million increase compared to 2011 (all discussed in Note 6 to Financial Statements)) and $46 million
in debt discount, financing and reacquisition expenses.
Cash used in i nvesting activities, which consisted primarily of capital expenditures, totaled $1.368 billion in 2012 and
$1.396 billion in 2011. The $28 million, or 2%, change was driven by the effect of the hedge transaction in 2011 (discussed
in “Other Comprehensive Income” above) and a decrease in capital expenditures for transmission facilities, advanced metering
deployment initiatives and infrastructure maintenance, partially offset by an increase in capital expenditures for information
technology initiatives, distribution facilities to serve new customers and other general plant.
Depreciation and amortization expense reported in the statements of consolidated cash flows was $31 million and $13
million more than the amounts reported in the statements of consolidated income for the years ended December 31, 2012 and
2011, respectively. The differences represent the accretion of the adjustment (discount) to regulatory assets, net of the
amortization of debt fair value discount, both due to purchase accounting, and reported in other income and interest expense and
related charges, respectively, in the statements of consolidated income. In addition, the differences represent regulatory asset
amortization, which is reported in operation and maintenance expense in the statements of consolidated income.
Long-Term Debt Activity — Repayments of long-term debt in 2013 totaled $125 million and represent transition bond
principal payments at scheduled maturity dates.
30
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Issuances of long-term debt in 2013 totaled $100 million, consisting of the May 2013 sale of $100 million aggregate
principal amount of 4.550% senior secured notes maturing in December 2041 (Additional 2041 Notes). The Additional 2041
Notes were an additional issuance of our 4.550% senior secured notes maturing in December 2041, $300 million aggregate
principal amount of which were previously issued in November 2011 (2041 Notes). The Additional 2041 Notes were issued as
part of the same series as the 2041 Notes. We used the net proceeds of approximately $107 million from the sale of the
Additional 2041 Notes to repay borrowings under our revolving credit facility and for general corporate purposes. The
Additional 2041 Notes and 2041 Notes are secured by the first priority lien (s ee Note 6 to Financial Statements), and are
secured equally and ratably with all of our other secured indebtedness.
See Note 6 to Financial Statements for additional information regarding repayments, redemptions and issuances of longterm debt.
Available Liquidity/Credit Facility — Our primary source of liquidity, aside from operating cash flows, is our ability to
borrow under our revolving credit facility. At December 31, 2013 and 2012, we had a $2.4 billion secured revolving credit
facility (see Note 5 to Financial Statements). The revolving credit facility expires in October 2016 . Subject to the limitations
described below, available borrowing capacity under our revolving credit facility totaled $1.649 billion and $1.659 billion at
December 31, 2013 and 2012, respectively. We may request an increase in our borrowing capacity of $100 million in the
aggregate and up to two one-year extensions, provided certain conditions are met, including lender approval.
The revolving credit facility contains a senior debt-to-capitalization ratio covenant that effectively limits our ability to
incur indebtedness in the future. At December 31, 2013, we were in compliance with the covenant. See “ Financial Covenants,
Credit Rating Provisions and Cross Default Provisions” below for additional information on this covenant and the
calculation of this ratio. The revolving credit facility and the senior notes and debentures issued by us are secured by the Deed
of Trust, which permits us to secure other indebtedness with the lien of the Deed of Trust up to the aggregate of (i) the amount
of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain property additions that have been certified
to the Deed of Trust collateral agent. Accordingly, the availability under our revolving credit facility is limited by the amount of
available bond credits and any property additions certified to the Deed of Trust collateral agent in connection with the revolving
credit facility borrowings. In addition, our outstanding senior notes and debentures are secured by the Deed of Trust. To the
extent we continue to issue debt securities secured by the Deed of Trust, those debt securities would also be limited by the
amount of available bond credits and any property additions that have been certified to the Deed of Trust collateral agent. At
December 31, 2013, the available bond credits totaled $2.176 billion, and the amount of additional potential indebtedness that
could be secured by property additions, subject to the completion of a certification process, totaled $1.173 billion. At December
31, 2013, the available borrowing capacity of the revolving credit facility could be fully drawn.
Under the terms of our revolving credit facility, the commitments of the lenders to make loans to us are several and not
joint. Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the
aggregate amount of such lender’s commitments under the facility. See Note 5 to Financial Statements for additional
information regarding the revolving credit facility.
Cash and cash equivalents totaled $27 million and $45 million at December 31, 2013 and 2012, respectively. Available
liquidity (cash and available credit facility capacity) at December 31, 2013 totaled $1.676 billion reflecting a decrease of $28
million from December 31, 2012. The change reflects our ongoing capital investment in transmission and distribution
infrastructure.
We also committed to the PUCT that we would maintain a regulatory capital structure at or below the assumed debt-toequity ratio established periodically by the PUCT for ratemaking purposes, which is currently set at 60% debt to 40%
equity. At December 31, 2013 and 2012, our regulatory capitalization ratios were 58.7% debt and 41.3% equity and 58.8%
debt and 41.2% equity, respectively. See Note 8 to Financial Statements for discussion of the regulatory capitalization ratio.
Liquidity Needs, Including Capital Expenditures — We expect our capital expenditures to total approximately $1.1
billion in 2014 and approximately $1.0 billion in 2015, including amounts related to CREZ voltage support projects, and
approximately $1.1 billion in each of the years 2016 through 2018. These capital expenditures are expected to be used for
investment in transmission and distribution infrastructure.
31
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
We expect cash flows from operations, combined with availability under the revolving credit facility, to provide sufficient
liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending
for at least the next twelve months. As noted in Note 1 to Financial Statements, EFH Corp. and other members of the Texas
Holdings Group have indicated that they have been involved in discussions regarding possible restructuring transactions. We
do not expect that any such restructuring transactions would have a material impact on our liquidity. Should additional
liquidity or capital requirements arise, we may need to access capital markets, generate equity capital or preserve equity through
reductions or suspension of distributions to members. In addition, we may also consider new debt issuances, repurchases,
exchange offers and other transactions in order to refinance or manage our long-term debt. The inability to raise capital on
favorable terms or failure of counterparties to perform under credit or other financial agreements, particularly during any
uncertainty in the financial markets, could impact our ability to sustain and grow the business and would likely increase
capital costs that may not be recoverable through rates.
Distributions — On February 19, 2014, our board of directors declared a cash distribution of $53 million, which was
paid to our members on February 20, 2014. See Note 8 to Financial Statements for discussion of distribution restrictions.
During 2013, our board of directors declared, and we paid, the following cash distributions to our members:
Declaration Date
Payment Date
October 29, 2013
October 31, 2013
$
95
July 31, 2013
August 1, 2013
$
95
May 1, 2013
May 2, 2013
$
70
February 13, 2013
February 15, 2013
$
50
Amount
Pension and OPEB Plan Funding — Our funding for the pension plans and the OPEB Plan for the calendar year
2014 is expected to total $87 million and $15 million, respectively. Based on the funded status of the pension plans at
December 31, 2013, our aggregate pension plans and OPEB Plan funding is expect ed to total approximately $ 547 million for
2014 to 2018. In 2013, we made cash contributions to the pension plans and the OPEB Plan of $9 million and $11 million,
respectively. See Note 9 to Financial Statements for additional information regarding the pension plans and the OPEB Plan .
Capitalization — Our capitalization ratios were 42.0% and 42.5% long-term debt, less amounts due currently, to 58.0%
and 57.5% membership interests at December 31, 2013 and 2012, respectively.
Financial Covenants, Credit Rating Provisions and Cross Default Provisions — Our revolving credit facility
contains a financial covenant that requires maintenance of a consolidated senior debt-to-capitalization ratio of no greater than
0.65 to 1.00. For purposes of this ratio, debt is calculated as indebtedness defined in the revolving credit facility (principally,
the sum of long-term debt, any capital leases, short-term debt and debt due currently in accordance with US GAAP). The debt
calculation excludes transition bonds issued by Bondco, but includes the unamortized fair value discount related to
Bondco. Capitalization is calculated as membership interests determined in accordance with US GAAP plus indebtedness
described above. At December 31, 2013, we were in compliance with this covenant with a debt-to-capitalization ratio of 0.45 to
1.00.
Impact on Liquidity of Credit Ratings — The rating agencies assign credit ratings to certain of our debt securities. Our
access to capital markets and cost of debt could be directly affected by our credit ratings. Any adverse action with respect to
our credit ratings could generally cause borrowing costs to increase and the potential pool of investors and funding sources to
decrease. In particular, a decline in credit ratings would increase the cost of our revolving credit facility (as discussed
below). In the event any adverse action with respect to our credit ratings takes place and causes borrowing costs to increase, we
may not be able to recover such increased costs if they exceed our PUCT-approved cost of debt determined in our most recent
rate review or subsequent rate reviews.
Most of our large suppliers and counterparties require an expected level of creditworthiness in order for them to enter into
transactions with us. If our credit ratings decline, the costs to operate our business could increase because counterparties could
require the posting of collateral in the form of cash-related instruments, or counterparties could decline to do business with us.
32
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Presented below are the credit ratings assigned for our debt securities at February 27, 2014. In February 2013, S&P
changed our senior secured credit rating to A from A- after revising its criteria for rating utility first mortgage bonds
and Moody’s changed our senior secured credit rating to Baa3 from Baa2, which was primarily driven by its view of the risks
to which we are exposed by EFH Corp. (our majority equity investor) and TCEH, and increased debt at EFIH. Oncor is on
“stable” outlook with S&P, Fitch and Moody’s.
Senior Secured
A
BBB+
S&P
Fitch
Moody’s
Baa3
As described in Note 6 to Financial Statements, our long-term debt, excluding Bondco’s non-recourse debt, is currently
secured pursuant to the Deed of Trust by a first priority lien on certain of our transmission and distribution assets and is
considered senior secured debt.
A rating reflects only the view of a rating agency, and is not a recommendation to buy, sell or hold securities. Ratings can
be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a
change.
Material Credit Rating Covenants — Our revolving credit facility contains terms pursuant to which the interest rates
charged under the agreement may be adjusted depending on credit ratings. Borrowings under the revolving credit facility bear
interest at per annum rates equal to, at our option, (i) LIBOR plus a spread ranging from 1.00% to 1.75% depending on credit
ratings assigned to our senior secured non-credit enhanced long-term debt or (ii) an alternate base rate (the highest of (1) the
prime rate of JPMorgan Chase, (2) the federal funds effective rate plus 0.50%, and (3) daily one-month LIBOR plus 1.00%)
plus a spread ranging from 0.00% to 0.75% depending on credit ratings assigned to our senior secured non-credit enhanced longterm debt. Based on our current ratings, our borrowings are generally LIBOR-based and will bear interest at LIBOR plus
1.50%. A decline in credit ratings would increase the cost of our revolving credit facility and likely increase the cost of any debt
issuances and additional credit facilities.
Material Cross Default Provisions — Certain financing arrangements contain provisions that may result in an event of
default if there was a failure under other financing arrangements to meet payment terms or to observe other covenants that could
result in an acceleration of payments due. Such provisions are referred to as “cross default” provisions.
Under our revolving credit facility, a default by us or our subsidiary in respect of indebtedness in a principal amount in
excess of $100 million or any judgments for the payment of money in excess of $50 million that are not discharged within 60
days may cause the maturity of outstanding balances ($745 million in short-term borrowings and $6 million in letters of credit
at December 31, 2013) under that facility to be accelerated. Additionally, under the Deed of Trust, an event of default under
either our revolving credit facility or our indentures would permit our lenders and the holders of our senior secured notes to
exercise their remedies under the Deed of Trust.
Long-Term Contractual Obligations and Commitments — The following table summarizes our contractual cash
obligations at December 31, 2013 (see Notes 6 and 7 to Financial Statements for additional disclosures regarding these long-term
debt and non-cancelable purchase obligations).
One to
Contractual Cash Obligations
Less Than
One Year
Long-term debt – principal
$
Long-term debt – interest
Operating leases (a)
Obligations under outsourcing agreements
Total contractual cash obligations
$
Three
Years
$
131
Five Years
More than
Five Years
$
$
Three to
680
874
3,851
Total
$
5,536
339
595
540
3,119
6
88
7
7
1
-
14
-
-
95
564
$
1,289
$
1,415
$
6,970
4,593
$
10,238
____________
(a) Includes short-term noncancelable leases.
33
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The following are not included in the table above:
·
·
·
·
·
individual contracts that have an annual cash requirement of less than $1 million (however, multiple contracts with
one counterparty that are more than $1 million on an aggregated basis have been included);
employment contracts with management;
liabilities related to uncertain tax positions totaling $54 million discussed in Note 3 to Financial Statements as the
ultimate timing of payment is not known;
our estimated funding of the pension plans and the OPEB Plan totaling $102 million in 2014 and approximately
$ 547 million for the 2014 to 2018 period as discussed above under “Pension and OPEB Plan Funding,” and
capital expenditures under PUCT orders and other commitments made.
Guarantees — At December 31, 2013, we did not have any material guarantees.
OFF-BALANCE SHEET ARRANGEMENTS
At December 31, 2013, we did not have any material off-balance sheet arrangements with special purpose entities or VIEs.
COMMITMENTS AND CONTINGENCIES
See Note 7 to Financial Statements for details of commitments and contingencies.
CHANGES IN ACCOUNTING STANDARDS
There have been no recently issued accounting standards effective after December 31, 2013 that are expected to materially
impact us.
REGULATION AND RATES
Sunset Review and Other State Legislation
Sunset review is the regular assessment by the Texas Legislature of the continuing need for a state agency to exist, and is
grounded in the premise that an agency will be abolished unless legislation is passed to continue functions. On a specified time
schedule, the Texas Sunset Advisory Commission (Sunset Commission) closely reviews each agency and recommends action
on each agency to the Texas Legislature, which action may include modifying or even abolishing the agency. The PUCT was
subject to review by the Sunset Commission and a limited sunset review by the Texas Legislature in 2013. During the 2013
regular legislative session, which ended in May 2013, the Texas Legislature extended the life of the PUCT until 2023. No other
legislation passed during the 2013 regular legislative session is expected to have a substantial impact on our financial position,
results of operations or cash flows.
Matters with the PUCT
Application for Reconciliation of AMS Surcharge (PUCT Docket No. 41814) — In September 2013, we filed an
application with the PUCT for reconciliation of all costs incurred and investments made from January 1, 2011 through
December 31, 2012, in the deployment of our AMS pursuant to the AMS Deployment Plan approved in Docket No.
35718. During the 2011 to 2012 period, we incurred approximately $300 million of capital expenditures and $34 million of
operating and maintenance expense, and billed customers approximately $174 million through the AMS surcharge. We were not
seeking a change in the AMS surcharge in this proceeding. In November 2013, we filed an amended request and the PUCT
Staff filed its recommendation concluding that all costs presented in the amended application, with the exception of less than
$1,000 of expenses , are appropriate for recovery. In December 2013, the PUC T issued its final order in the proceeding agreeing
with the PUCT Staff’s recommendation, finding that costs expended and investments made in the deployment of our AMS
through December 31, 2012 were properly allocated, reasonable and necessary.
34
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
2008 Rate Review (PUCT Docket No. 35717 ) — In August 2009, the PUCT issued a final order with respect to our
June 2008 rate review filing with the PUCT and 204 cities based on a test year ended December 31, 2007 (PUCT Docket No.
35717), and new rates were implemented in September 2009. In November 2009, the PUCT issued an order on rehearing that
established a new rate class but did not change the revenue requirements. We and four other parties appealed various portions
of the rate review final order to a state district court. In January 2011, the district court signed its judgment reversing the PUCT
with respect to two issues: the PUCT’s disallowance of certain franchise fees and the PUCT’s decision that PURA no longer
requires imposition of a rate discount for state colleges and universities. We filed an appeal with the Texas Third Court of
Appeals (Austin Court of Appeals) in February 2011 with respect to the issues we appealed to the district court and did not
prevail upon, as well as the district court’s decision to reverse the PUCT with respect to discounts for state colleges and
universities. Oral argument before the Austin Court of Appeals was completed in April 2012. There is no deadline for the court
to act. We are unable to predict the outcome of the appeal.
Competitive Renewable Energy Zones (CREZs) (PUCT Docket Nos. 35665 and 37902) — In 2009, the PUCT
awarded us CREZ construction projects . The projects involve the construction of transmission lines and stations to support
the transmission of electricity from renewable energy sources, principally wind generation facilities, in west Texas to population
centers in the eastern part of the state. In addition to these projects, ERCOT completed a study in December 2010 that will result
in us and other transmission service providers building additional facilities to provide further voltage support to the
transmission grid as a result of CREZ . At December 31, 2013, our cumulative CREZ-related capital expenditures totaled
$1.871 billion, including $411 million during 2013. All CREZ-related line and station construction projects were energized by
the end of 2013. Additional voltage support projects were completed in January 2014, with the exception of one series capacitor
project that is scheduled to be completed in December 2015 in order to allow for further study and evaluation. The delay to
2015 is not expected to have a significant impact on the ability of the CREZ system to support existing or currently expected
renewable generation .
Summary
We cannot predict future regulatory or legislative actions or any changes in economic and securities market
conditions. Such actions or changes could significantly alter our basic financial position, results of operations or cash flows.
35
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Market risk is the risk that we may experience a loss in value as a result of changes in market conditions such as interest
rates that may be experienced in the ordinary course of business. We may transact in financial instruments to hedge interest rate
risk related to our debt, but there are currently no such hedges in place. All of our long-term debt at December 31, 2013 and
2012 carried fixed interest rates.
Expected Maturity Date
2013
Total
Carrying
2014
2015
2016
2017
2018
There-after
Amount
2012
2013 Total
Fair Value
Total
Carrying
Amount
2012 Total
Fair Value
Long-term debt (including current
maturities):
Fixed rate debt amount (a)
$
Average interest rate
131 $
5.34%
639 $
6.15%
41 $
5.29%
324 $
5.00%
550 $
6.80%
3,851 $
5,536 $
6.03%
6.04%
6,188 $
─
5,561 $
6.12%
6,568
─
_________________
(a)
Excludes unamortized premiums and discounts. See Note 6 to Financial Statements for a discussion of changes in long-term debt obligations.
Credit Risk
Credit risk relates to the risk of loss associated with nonperformance by counterparties. Our customers consist
primarily of REPs. As a prerequisite for obtaining and maintaining certification, a REP must meet the financial resource
standards established by the PUCT. Meeting these standards does not guarantee that a REP will be able to perform its
obligations. REP certificates granted by the PUCT are subject to suspension and revocation for significant violation of PURA
and PUCT rules. Significant violations include failure to timely remit payments for invoiced charges to a transmission and
distribution utility pursuant to the terms of tariffs approved by the PUCT. We believe PUCT rules that allow for the recovery
of uncollectible amounts due from nonaffiliated REPs significantly reduce our credit risk.
Our net exposure to credit risk associated with trade accounts receivable from affiliates totaled $132 million at December
31, 2013, consisting of $83 million of billed receivables and $56 million of unbilled receivables, of which $7 million is
secured by letters of credit posted by TCEH for our benefit. Under PUCT rules, unbilled amounts are billed within the
following month and amounts are due in 35 days of billing. Due to commitments made to the PUCT, this concentration of
accounts receivable from affiliates increases the risk that a default could have a material effect on earnings and cash flows. In
the event of an affiliated REP default, we would not be able to recover in rates the amount in default. At February 27, 2014, we
had collected all but $ 6 million of the accounts receivable from affiliates outstanding at December 31, 2013. Our net exposure
with respect to accounts receivable from affiliates totaled $145 million at February 27, 2014. See Note 11 to Financial
Statements for additional information regarding our transactions with affiliates.
Our exposure to credit risk associated with accounts receivable from nonaffiliates totaled $388 million at December 31,
2013. The nonaffiliated receivable amount is before the allowance for uncollectible accounts, which totaled $3 million at
December 31, 2013. The nonaffiliated exposure includes trade accounts receivable from REPs totaling $294 million, which are
almost entirely noninvestment grade. At December 31, 2013, REP subsidiaries of a nonaffiliated entity, collectively represented
approximately 12% of the nonaffiliated trade receivable amount. No other nonaffiliated parties represented 10% or more of the
total trade accounts receivable amount. We view our exposure to this customer to be within an acceptable level of risk tolerance
considering PUCT rules and regulations; however, this concentration increases the risk that a default could have a material
effect on cash flows.
36
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
FORWARD-LOOKING STATEMENTS
This report and other presentations made by us contain “forward-looking statements.” All statements, other than
statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise,
that address activities, events or developments that we expect or anticipate to occur in the future, including such matters as
projections, capital allocation, future capital expenditures, business strategy, competitive strengths, goals, future acquisitions or
dispositions, development or operation of facilities, market and industry developments and the growth of our business and
operations (often, but not always, through the use of words or phrases such as “intends,” “plans,” “will likely result,” “are
expected to,” “will continue,” “is anticipated,” “estimated,” “should,” “projection,” “target,” “goal,” “objective” and
“outlook”), are forward-looking statements. Although we believe that in making any such forward-looking statement our
expectations are based on reasonable assumptions, any such forward-looking statement involves uncertainties and is qualified
in its entirety by reference to the discussion of risk factors under “Item 1A. Risk Factors ” and the discussion under “Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this report and the following
important factors, among others, that could cause actual results to differ materially from those projected in such forwardlooking statements:
· prevailing governmental policies and regulatory actions, including those of the US Congress, the Texas Legislature,
the Governor of Texas, the FERC, the PUCT, the NERC, the TRE, the EPA, and the TCEQ, with respect to:
- allowed rate of return;
- permitted capital structure;
- industry, market and rate structure;
- recovery of investments;
- acquisition and disposal of assets and facilities;
- operation and construction of facilities;
- changes in tax laws and policies, and
- changes in and compliance with environmental, reliability and safety laws and policies;
· legal and administrative proceedings and settlements, including the exercise of equitable powers by courts;
· weather conditions and other natural phenomena;
· acts of sabotage, wars or terrorist or cyber security threats or activities;
· economic conditions, including the impact of a recessionary environment;
· unanticipated population growth or decline, or changes in market demand and demographic patterns, particularly in
ERCOT;
· changes in business strategy, development plans or vendor relationships;
· unanticipated changes in interest rates or rates of inflation;
· unanticipated changes in operating expenses, liquidity needs and capital expenditures;
·
·
·
·
·
·
·
·
·
·
·
·
·
inability of various counterparties to meet their financial obligations to us, including failure of counterparties to
perform under agreements;
adverse impacts on us as a result of restructuring transactions involving EFH Corp. and other members of the Texas
Holdings Group;
general industry trends;
hazards customary to the industry and the possibility that we may not have adequate insurance to cover losses
resulting from such hazards;
changes in technology used by and services offered by us;
significant changes in our relationship with our employees, including the availability of qualified personnel, and the
potential adverse effects if labor disputes or grievances were to occur;
changes in assumptions used to estimate costs of providing employee benefits, including pension and OPEB, and
future funding requirements related thereto;
significant changes in critical accounting policies material to us;
commercial bank and financial market conditions, access to capital, the cost of such capital, and the results of
financing and refinancing efforts, including availability of funds in the capital markets and the potential impact of
disruptions in US credit markets;
circumstances which may contribute to future impairment of goodwill, intangible or other long-lived assets;
financial restrictions under our revolving credit facility and indentures governing our debt instruments;
our ability to generate sufficient cash flow to make interest payments on our debt instruments;
actions by credit rating agencies , and
37
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
·
our ability to effectively execute our operational strategy.
Any forward-looking statement speaks only at the date on which it is made, and, except as may be required by law, we
undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is
made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to
predict all of them; nor can we assess the impact of each such factor or the extent to which any factor, or combination of
factors, may cause results to differ materially from those contained in any forward-looking statement. As such, you should not
unduly rely on such forward-looking statements.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of Oncor Electric Delivery Company LLC
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Oncor Electric Delivery Company LLC and subsidiary (the
“Company”) as of December 31, 2013 and 2012, and the related statements of consolidated income, comprehensive income,
cash flows, and membership interests for each of the three years in the period ended December 31, 2013. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Oncor
Electric Delivery Company LLC and subsidiary as of December 31, 2013 and 2012, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company has implemented certain ring-fencing measures,
which management believes mitigate the Company’s exposure to a bankruptcy or other restructuring transaction involving
members of the Texas Holdings Group.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2013, based on the criteria established in Internal
Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 27, 2014 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 27, 2014
38
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
ONCOR ELECTRIC DELIVERY COMPANY LLC
STATEMENTS OF CONSOLIDATED INCOME
Year Ended December 31,
2012
2013
2011
(millions of dollars)
Operating revenues:
$
Nonaffiliates
2,585
$
2,366
$
967
3,552
3,328
1,026
3,118
Operation and maintenance
588
681
502
669
439
658
Depreciation and amortization
814
771
719
Provision in lieu of income taxes (Notes 3 and 11)
247
240
209
Taxes other than amounts related to income taxes
424
400
2,754
415
2,597
2,425
798
731
693
Other income (Note 12)
18
26
30
Other deductions (Note 12)
15
64
9
2
(6)
20
4
24
32
371
374
359
367
Affiliates
Total operating revenues
962
2,092
Operating expenses:
Wholesale transmission service
Total operating expenses
Operating income
Other income and deductions:
Nonoperating provision in lieu of income taxes (Note 3)
Interest income
Interest expense and related charges (Note 12)
$
Net income
432
$
349
$
See Notes to Financial Statements.
39
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
ONCOR ELECTRIC DELIVERY COMPANY LLC
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
Year Ended December 31,
2013
2012
2011
(millions of dollars)
$
Net income
432
$
349
$
367
Other comprehensive income (loss):
Cash flow hedges (Notes 1 and 6):
Net decrease in fair value of derivatives (net of tax benefit of
$—, $— and $17)
-
-
(29)
2
2
3
-
3
(29)
(19)
(3)
-
Derivative value net loss recognized in net income (net of tax
benefit of $1, $1 and $—)
Total cash flow hedges
Defined benefit pension plans (net of tax benefit of $11, $1 and
$—) (Note 9)
Total other comprehensive income (loss)
$
Comprehensive income
(17)
415
(29)
-
$
349
$
338
See Notes to Financial Statements.
40
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
ONCOR ELECTRIC DELIVERY COMPANY LLC
STATEMENTS OF CONSOLIDATED CASH FLOWS
Year Ended December 31,
2013
2012
2011
(millions of dollars)
Cash flows — operating activities:
$
Net income
432
$
349
$
367
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
Provision in lieu of deferred income taxes – net
Other – net
848
194
802
208
732
258
(4)
(4)
(3)
Changes in operating assets and liabilities:
(129)
Accounts receivable — trade (including affiliates)
52
(36)
9
(3)
25
38
(9)
17
(53)
(101)
(7)
Other — assets
172
(17)
111
Other — liabilities
(137)
(8)
Inventories
Accounts payable — trade (including affiliates)
Deferred revenues (Note 4)
Cash provided by operating activities
1,370
1,269
(169)
1,295
100
900
300
(125)
(1,018)
(113)
10
343
15
Cash flows — financing activities:
Issuances of long-term debt (Note 6)
Repayments of long-term debt (Note 6)
Net increase in short-term borrowings (Note 5)
(310)
(225)
(145)
Decrease in note receivable from TCEH (Note 11)
-
20
40
Sale of related-party agreements (Note 11)
-
159
-
Debt discount, premium, financing and reacquisition expenses – net
1
(46)
Other – net
-
(1)
-
(324)
132
80
(1,079)
15
(1,389)
21
(1,362)
(1,064)
(1,368)
(1,396)
(18)
33
(21)
Distributions to members (Note 8)
Cash (used in) provided by financing activities
(17)
Cash flows — investing activities:
Capital expenditures
Other – net
Cash used in investing activities
Net change in cash and cash equivalents
Cash and cash equivalents — beginning balance
$
Cash and cash equivalents — ending balance
45
27
$
12
45
(34)
33
$
12
See Notes to Financial Statements.
41
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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ONCOR ELECTRIC DELIVERY COMPANY LLC
CONSOLIDATED BALANCE SHEETS
At December 31,
2013
2012
(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash — Bondco (Note 12)
Trade accounts receivable from nonaffiliates – net (Note 12)
Trade accounts and other receivables from affiliates (Note 11)
Amounts receivable from members related to income taxes (Note 11)
Materials and supplies inventories — at average cost
Prepayments and other current assets
$
Total current assets
Restricted cash — Bondco (Note 12)
Investments and other property (Note 12)
Property, plant and equipment – net (Note 12)
Goodwill (Notes 1 and 12)
Regulatory assets – net ― Oncor (Note 4)
Regulatory assets –- net ― Bondco (Note 4)
Other noncurrent assets
$
Total assets
27
52
385
135
$
45
55
338
53
23
-
65
79
73
766
16
91
11,902
4,064
1,098
226
71
18,234
79
643
16
83
$
11,318
4,064
1,453
335
78
17,990
LIABILITIES AND MEMBERSHIP INTERESTS
Current liabilities:
Short-term borrowings (Note 5)
Long-term debt due currently ― Bondco (Note 6)
Trade accounts payable
Amounts payable to members related to income taxes (Note 11)
Accrued taxes other than amounts related to income
Accrued interest
Other current liabilities
$
745
131
178
$
23
169
95
135
Total current liabilities
Long-term debt, less amounts due currently ― Oncor (Note 6)
Long-term debt, less amounts due currently ― Bondco (Note 6)
Liability in lieu of deferred income taxes (Notes 1, 3 and 11)
Other noncurrent liabilities and deferred credits (Notes 11 and 12)
Total liabilities
735
125
121
22
153
95
109
1,476
5,202
179
2,414
1,554
10,825
1,360
5,090
2,180
1,746
10,686
7,457
7,335
310
Commitments and contingencies (Note 7)
Membership interests (Note 8):
Capital account ― number of interests outstanding 2013 and 2012 – 635,000,000
Accumulated other comprehensive loss
Total membership interests
$
Total liabilities and membership interests
(48)
(31)
7,409
18,234
7,304
$
17,990
See Notes to Financial Statements.
42
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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ONCOR ELECTRIC DELIVERY COMPANY LLC
STATEMENTS OF CONSOLIDATED MEMBERSHIP INTERESTS
Year Ended December 31,
2013
2012
2011
(millions of dollars)
Capital account:
$
Balance at beginning of period
7,335
$
7,212
$
6,990
367
(310)
349
(225)
(145)
11)
-
(2)
-
Other
-
1
-
7,457
7,335
7,212
Net income
432
Distributions to members
Sale of related-party agreements (net of tax benefit of $—, $1 and $—) (Note
Balance at end of period (number of interests outstanding: 2013, 201 2 and 2011 –
635 million)
Accumulated other comprehensive income (loss), net of tax effects:
Balance at beginning of period
Net effects of cash flow hedges (net of tax expense (benefit) of $1, $1 and $(17))
Defined benefit pension plans (net of tax benefit of $11, $1 and $—) (Note 9)
Balance at end of period
(31)
(31)
(2)
2
(19)
3
(29)
(3)
-
(48)
$
Total membership interests at end of period
7,409
(31)
$
7,304
(31)
$
7,181
See Notes to Financial Statements .
43
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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ONCOR ELECTRIC DELIVERY COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
References in this report to “we,” “our,” “us” and “the company” are to Oncor and/or its subsidiary as apparent in the
context. See “Glossary” for definition of terms and abbreviations.
We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to
REPs, including subsidiaries of TCEH, that sell power in the north-central, eastern and western parts of Texas. Revenues from
TCEH represented 27%, 29% and 33% of our total operating revenues for the years ended December 31, 2013, 2012 and 2011,
respectively. We are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of
EFIH, a direct, wholly-owned subsidiary of EFH Corp. EFH Corp. is a subsidiary of Texas Holdings, which is controlled by
the Sponsor Group. Oncor Holdings owns 80.03% of our membership interests, Texas Transmission owns 19.75% of our
membership interests and certain members of our management team and board of directors indirectly own the remaining
membership interests through Investment LLC. We are managed as an integrated business; consequently, there are no separate
reportable business segments.
Our consolidated financial statements include our wholly-owned, bankruptcy-remote financing subsidiary, Bondco, a
VIE (see Note 12) . This financing subsidiary was organized for the limited purpose of issuing certain transition bonds to
recover generation-related regulatory asset stranded costs and other qualified costs under an order issued by the PUCT in
2002. Bondco issued an aggregate $1.3 billion principal amount of transition bonds during 2003 and 2004.
Various “ring-fencing” measures have been taken to enhance the separateness between the Oncor Ring-Fenced Entities and
the Texas Holdings Group and our credit quality. These measures serve to mitigate our and Oncor Holdings’ credit exposure to
the Texas Holdings Group and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be
substantively consolidated with the assets and liabilities of the Texas Holdings Group in the event of a bankruptcy of one or
more of those entities. Such measures include, among other things: our sale of a 19.75% equity interest to Texas Transmission
in November 2008; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being
comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support
to, or receiving credit support from, any member of the Texas Holdings Group. The assets and liabilities of the Oncor RingFenced Entities are separate and distinct from those of the Texas Holdings Group, including TXU Energy and Luminant, and
none of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of any member of
the Texas Holdings Group. We do not bear any liability for debt or contractual obligations of the Texas Holdings Group, and
vice versa. Accordingly, our operations are conducted, and our cash flows are managed, independently from the Texas
Holdings Group.
As noted in SEC filings made by members of the Texas Holdings Group, EFH Corp. and other members of the Texas
Holdings Group have engaged in discussions with certain unaffiliated creditors regarding certain of those entities’ capital
structures and long-term liquidity, as well as possible restructuring transactions involving those entities. We believe the “ringfencing” measures discussed above mitigate our exposure to a bankruptcy or other restructuring transaction involving members
of the Texas Holdings Group.
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with US GAAP and on the same basis as the
audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. 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. All dollar amounts
in the financial statements and tables in the notes are stated in millions of US dollars unless otherwise indicated.
44
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Consolidation of Variable Interest Entities
A VIE is an entity with which we have a relationship or arrangement that indicates some level of control over the entity or
results in economic risks to us. We consolidate a VIE if we have: a) the power to direct the significant activities of the VIE and
b) the right or obligation to absorb profit and loss from the VIE (primary beneficiary). See Note 12.
Income Taxes
EFH Corp. files a consolidated federal income tax return. Effective with the November 2008 sale of equity interests to
Texas Transmission and Investment LLC, we became a partnership for US federal income tax purposes, and subsequently we
are not a member of EFH Corp.’s consolidated tax group and only EFH Corp.’s share of our partnership income is included in
its consolidated federal income tax return. Our tax sharing agreement with Oncor Holdings and EFH Corp. was amended in
November 2008 to include Texas Transmission and Investment LLC. The tax sharing agreement provides for the calculation of
tax liability substantially as if we and Oncor Holdings were taxed as corporations, and requires tax payments to members
determined on that basis (without duplication for any income taxes paid by a subsidiary of Oncor Holdings). Accordingly,
while partnerships are not subject to income taxes, in consideration of the tax sharing agreement and the presentation of our
financial statements as an entity subject to cost-based regulatory rate-setting processes, with such costs including income taxes,
the financial statements present amounts determined under the tax sharing agreement as “provision in lieu of income taxes” and
“liability in lieu of deferred income taxes” for periods subsequent to the sales of equity interests discussed in Note 3.
Such amounts are determined in accordance with the provisions of accounting guidance for income taxes and for
uncertainty in income taxes and thus differences between the book and tax bases of assets and liabilities are accounted for as if
we were taxed as a corporation. The accounting guidance for rate-regulated enterprises requires the recognition of regulatory
assets or liabilities if it is probable such deferred tax amounts will be recovered from, or returned to customers in future
rates. Investment tax credits are amortized to income over the estimated lives of the related properties.
We classify interest and penalties expense related to uncertain tax positions as current provision in lieu of income taxes as
discussed in Note 3.
Use of Estimates
Preparation of our financial statements requires management to make estimates and assumptions about future events that
affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including
fair value measurements. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are
made in subsequent periods to reflect more current information. No material adjustments were made to previous estimates or
assumptions during the current year.
Derivative Instruments and Mark-to-Market Accounting
We have from time-to-time entered into derivative instruments to hedge interest rate risk. If the instrument meets the
definition of a derivative under accounting standards related to derivative instruments and hedging activities, the fair value of
each derivative is recognized on the balance sheet as a derivative asset or liability and changes in the fair value are recognized in
net income, unless criteria for certain exceptions are met. This recognition is referred to as “mark-to-market” accounting.
Reconcilable Tariffs
The PUCT has designated certain tariffs (TCRF, EECRF surcharges, AMS surcharges and charges related to transition
bonds) as reconcilable, which means the differences between amounts billed under these tariffs and the related incurred costs
are deferred as either regulatory assets or regulatory liabilities. Accordingly, at prescribed intervals, future tariffs are adjusted to
either repay regulatory liabilities or collect regulatory assets.
Revenue Recognition
Revenue includes an estimate for electricity delivery services provided from the billed meter reading date to the end of the
period (unbilled revenue). For electricity delivery services billed on the basis of kWh volumes, unbilled revenue is
45
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
based on data collected through our AMS. For other electricity delivery services, unbilled revenue is based on average daily
revenues for the most recent period applied to the number of unmetered days through the end of the period.
Impairment of Long-Lived Assets and Goodwill
We evaluate long-lived assets (including intangible assets with finite lives) for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable.
We also evaluate goodwill for impairment annually (at December 1) or whenever events or changes in circumstances
indicate that an impairment may exist.
Goodwill impairment tests performed in 2013 and 2012 were based on determinations of enterprise value using discounted
cash flow analyses, comparable company equity values and any relevant transactions indicative of enterprise values
(quantitative assessment). The test performed in 2011 was based on a qualitative assessment in which we considered
macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant
events. No impairments were recognized in 2013, 2012 or 2011 .
System of Accounts
Our accounting records have been maintained in accordance with the FERC Uniform System of Accounts as adopted by
the PUCT.
Defined Benefit Pension Plans and Other Postretirement Employee Benefit (OPEB) Plans
We have liabilities under pension plans that offer benefits based on either a traditional defined benefit formula or a cash
balance formula and the OPEB Plan that offers certain health care and life insurance benefits to eligible employees and their
eligible dependents upon the retirement of such employees from the company. Costs of pension and OPEB plans are dependent
upon numerous factors, assumptions and estimates. In 2012, EFH Corp. made various changes to the EFH Retirement Plan,
including splitting off into a new plan all of the assets and liabilities associated with Oncor employees and all retirees and
terminated vested participants of EFH Corp. and its subsidiaries (including discontinued businesses). See Note 9 for
additional information regarding the pension plans and the OPEB Plan.
Contingencies
We evaluate and account for contingencies using the best information available. A loss contingency is accrued and
disclosed when it is probable that an asset has been impaired or a liability incurred and the amount of the loss can be
reasonably estimated. If a range of probable loss is established, the minimum amount in the range is accrued, unless some
other amount within the range appears to be a better estimate. If the probable loss cannot be reasonably estimated, no accrual is
recorded, but the loss contingency is disclosed to the effect that the probable loss cannot be reasonably estimated. A loss
contingency will be disclosed when it is reasonably possible that an asset has been impaired or a liability incurred. If the
likelihood that an impairment or incurrence is remote, the contingency is neither accrued nor disclosed. Gain contingencies are
recognized upon realization.
Fair Value of Nonderivative Financial Instruments
The carrying amounts for financial assets classified as current assets and the carrying amounts for financial liabilities
classified as current liabilities approximate fair value due to the short maturity of such instruments. The fair values of other
financial instruments, for which carrying amounts and fair values have not been presented, are not materially different than
their related carrying amounts. The following discussion of fair value accounting standards applies primarily to our
determination of the fair value of assets in the pension and OPEB plan trusts (see Note 9) and long-term debt (see Note 6).
Accounting standards related to the determination of fair value define fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use a
“mid-market” valuation convention (the mid-point price between bid and ask prices) as a practical expedient to measure fair
value for the majority of our assets and liabilities subject to fair value measurement on a recurring basis. We
46
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
primarily use the market approach for recurring fair value measurements and use valuation techniques to maximize the use of
observable inputs and minimize the use of unobservable inputs.
We categorize our assets and liabilities recorded at fair value based upon the following fair value hierarchy:
· Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the
measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on an ongoing basis.
· Level 2 valuations use inputs that, in the absence of actively quoted market prices, are observable for the asset or
liability, either directly or indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active
markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other
than quoted prices that are observable for the asset or liability such as interest rates and yield curves observable at
commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data
by correlation or other means. Our Level 2 valuations utilize over-the-counter broker quotes, quoted prices for similar
assets or liabilities that are corroborated by correlations or other mathematical means and other valuation inputs.
· Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent
observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for
the asset or liability at the measurement date. We use the most meaningful information available from the market
combined with internally developed valuation methodologies to develop our best estimate of fair value.
We utilize several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the
market approach of using prices and other market information for identical and/or comparable assets and liabilities for those
items that are measured on a recurring basis.
Franchise Taxes
Franchise taxes are assessed to us by local governmental bodies, based on kWh delivered and are the principal component
of taxes other than amounts related to income taxes as reported in the income statement. Franchise taxes are not a “pass through”
item. The rates we charge customers are intended to recover the franchise taxes, but we are not acting as an agent to collect the
taxes from customers.
Cash and Cash Equivalents
For purposes of reporting cash and cash equivalents, temporary cash investments purchased with a remaining maturity
of three months or less are considered to be cash equivalents. See Note 12 for details regarding restricted cash.
Property, Plant and Equipment
Properties are stated at original cost. The cost of self-constructed property additions includes materials and both direct and
indirect labor and applicable overhead and an allowance for funds used during construction.
Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated service lives of the
properties based on depreciation rates approved by the PUCT. As is common in the industry, depreciation expense is recorded
using composite depreciation rates that reflect blended estimates of the lives of major asset groups as compared to depreciation
expense calculated on a component asset-by-asset basis. Depreciation rates include plant removal costs as a component of
depreciation expense, consistent with regulatory treatment. Actual removal costs incurred are charged to accumulated
depreciation. When accrued removal costs exceed incurred removal costs, the difference is reclassified as a regulatory obligation
to retire assets in the future.
Allowance for Funds Used During Construction (AFUDC)
AFUDC is a regulatory cost accounting procedure whereby both interest charges on borrowed funds and a return on
equity capital used to finance construction are included in the recorded cost of utility plant and equipment being
constructed. AFUDC is capitalized on all projects involving construction periods lasting greater than thirty days. The equity
portion of capitalized AFUDC is accounted for as other income. We recorded $1 million of equity AFUDC in the
47
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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year ended December 31, 2012 and none in the years ended December 31, 2013 and 2011. See Note 12 for detail of amounts
charged to interest expense.
Regulatory Assets and Liabilities
Our financial statements reflect regulatory assets and liabilities under cost-based rate regulation in accordance with
accounting standards related to the effect of certain types of regulation. Regulatory decisions can have an impact on the recovery
of costs, the rate earned on invested capital and the timing and amount of assets to be recovered by rates. See Note 4 for details
of regulatory assets and liabilities.
2. REGULATORY MATTERS
2008 Rate Review
In August 2009, the PUCT issued a final order with respect to our June 2008 rate review filing with the PUCT and 204
cities based on a test year ended December 31, 2007 (PUCT Docket No. 35717), and new rates were implemented in September
2009. In November 2009, the PUCT issued an order on rehearing that established a new rate class but did not change the
revenue requirements. We and four other parties appealed various portions of the rate review final order to a state district court.
In January 2011, the district court signed its judgment reversing the PUCT with respect to two issues: the PUCT’s
disallowance of certain franchise fees and the PUCT’s decision that PURA no longer requires imposition of a rate discount for
state colleges and universities. We filed an appeal with the Texas Third Court of Appeals (Austin Court of Appeals) in
February 2011 with respect to the issues we appealed to the district court and did not prevail upon, as well as the district court’s
decision to reverse the PUCT with respect to discounts for state colleges and universities. Oral argument before the Austin
Court of Appeals was completed in April 2012. There is no deadline for the court to act. We are unable to predict the outcome of
the appeal.
We are involved in various other regulatory proceedings in the normal course of business, the ultimate resolution of
which, in the opinion of management, should not have a material effect upon our financial position, results of operations or
cash flows.
48
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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3. INCOME TAXES
The components of our reported provision (benefit) in lieu of income taxes are as follows:
Year Ended December 31,
2013
Reported in operating expenses:
Current:
US federal
State
Deferred:
US federal
State
Amortization of investment tax credits
$
2012
51
12
$
21
Reported in other income and deductions:
Current:
US federal
State
Deferred federal
(55)
21
200
248
(3)
(4)
(5)
247
240
209
(5)
-
(14)
-
9
1
7
8
10
2
Total reported in other income and deductions
$
Total provision in lieu of income taxes
$
23
181
6
Total reported in operating expenses
2011
-
(6)
249
$
20
$
234
229
Reconciliation of provision in lieu of income taxes computed at the US federal statutory rate to provision in lieu of income
taxes:
Year Ended December 31,
2013
2012
2011
Income before provision in lieu of income taxes
$
681
$
583
$
596
Provision in lieu of income taxes at the US federal statutory rate of 35%
Amortization of investment tax credits – net of deferred tax effect
Amortization (under regulatory accounting) of statutory tax rate changes
Amortization of Medicare subsidy regulatory asset
Texas margin tax, net of federal tax benefit
Nondeductible losses (gains) on benefit plan investments
Other, including audit settlements
$
238
$
204
$
209
(5)
Reported provision in lieu of income taxes
$
(3)
(2)
14
(3)
(10)
249
(3)
-
14
14
(2)
15
36.6%
Effective rate
(4)
(3)
14
(1)
11
$
234
40.1%
$
15
229
38.4%
The net amounts of $ 2.414 billion and $2.180 billion reported in the balance sheets at December 31, 2013 and 2012,
respectively, as liability in lieu of deferred income taxes include amounts previously recorded as net deferred tax
liabilities. Upon the sale of equity interests to Texas Transmission and Investment LLC in 2008, we became a partnership for
US federal income tax purposes, and the temporary differences that gave rise to the deferred taxes will, over time, become
taxable to the equity holders. Under a tax sharing agreement among us and our equity holders (see Note 1), we make payments
to the equity holders for income taxes as the partnership earnings become taxable to the equity holders. Accordingly, as the
temporary differences become taxable, we will pay the equity holders. In the unlikely event such amounts are not paid under
the tax sharing agreement, it is probable that they would be reimbursed to rate payers.
49
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
At December 31, 2013 and 2012, we had $21 million and $52 million of alternative minimum tax (AMT) credit
carryforwards, respectively, available to offset future tax sharing payments. The AMT credit carryforwards have no expira tion
date. At December 31, 2013, we had $162 million of net operating loss (NOL) carryforwards for federal income tax purposes
that expire between 2028 and 2030 . The NOL carryforwards relate to tax years under audit and can be used to offset future
taxable income once the audits are complete. We expect to use all of our NOL carryforwards prior to their expiration date.
Accounting For Uncertainty in Income Taxes
Prior to November 2008, we were a member of the EFH Corp. consolidated tax group. Effective with the November 2008
sale of equity interests to Texas Transmission and Investment LLC, we became a partnership for US federal income tax
purposes. EFH Corp. and its subsidiaries file or have filed income tax returns in US federal, state and foreign jurisdictions
and are subject to examinations by the IRS and other taxing authorities. Examinations of EFH Corp. and its subsidiaries’
income tax returns for the years ending prior to January 1, 2007 are complete, but the tax years 2003 through 2006 remain in
appeals with the IRS. Texas franchise and margin tax returns are under examination or still open for examination for tax years
beginning after 2006. Subsequent to November 2008, we are not a member of the EFH Corp. consolidated tax group and assess
our liability for uncertain tax positions in our partnership returns.
We have been advised by EFH Corp. that approval by the Joint Committee on Taxation for the 1997 through 2002 IRS
appeals settlement was received in May 2013 and that all issues contested have been resolved. As a result, the liability for
uncertain tax positions was reduced by $32 million in the second quarter of 2013. This resolution also resulted in a $10
million net reduction to liability in lieu of deferred income taxes and a reversal of accrued interest and tax totaling $ 5 million ($ 3
million after tax), which is reported as a decrease in provision in lieu of income taxes. We made a cash payment of $33 million
to EFH Corp. in the third quarter of 2013, as required under the tax sharing agreement, to settle the liability resulting from the
1997 through 2002 IRS audit, and received a $10 million refund from EFH Corp. as a result of filing amended Texas franchise
tax returns for 1997 through 2001.
The IRS audit for the years 2003 through 2006 was concluded in June 2011. A significant number of adjustments to the
originally filed returns for such years were proposed. In March 2013, EFH Corp. and the IRS agreed on terms to resolve the
disputed adjustments. In the first quarter of 2013, we reduced the liability for uncertain tax positions by $76 million to reflect
the terms of the agreement. This reduction consisted of a $58 million increase to liability in lieu of deferred income taxes and a
reversal of accrued interest and tax totaling $18 million ($ 12 million after tax), which is reported as a decrease in provision in
lieu of income taxes. In the fourth quarter of 2013, the 2003 through 2006 state tax positions were remeasured, which resulted in
a net reversal of accrued interest and tax totaling $3 million. Any cash income tax impact related to the conclusion of the 2003
through 2006 audit is expected to be immaterial.
The following table summarizes the changes to the uncertain tax positions, reported in other noncurrent liabilities in our
consolidated balance sheet, during the years ended December 31, 2013, 2012 and 2011:
2013
$
Balance at January 1, excluding interest and penalties
2012
144
$
2011
126
$
82
-
18
44
Reductions based on tax positions related to prior years (a)
(66)
-
-
Reduction related to 1997-2002 IRS appeals settlement
(24)
-
-
Additions based on tax positions related to prior years
$
Balance at December 31, excluding interest and penalties
54
$
144
$
126
_________
(a)
Includes IRS audit for the years 2003 through 2006.
Of the balances at December 31, 2013 and 2012, $51 million and $133 million, respectively, represent tax positions for
which the uncertainty relates to the timing of recognition for tax purposes. The disallowance of such positions would not affect
the effective tax rate, but would accelerate the payment of cash under the tax sharing agreement to an earlier period.
Noncurrent liabilities included a total of $2 million and $25 million in accrued interest at December 31, 2013 and 2012,
respectively. Amounts recorded related to interest and penalties totaled a benefit of $15 million in the year ended
50
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December 31, 2013 and an expense of $3 million and $2 million in the years ended December 31, 2012 and 2011, respectively
(all amounts after tax ). The federal income tax benefit on the interest accrued on uncertain tax positions is recorded as liability
in lieu of deferred income taxes.
With respect to tax positions for which the ultimate deductibility is uncertain (permanent items), should EFH Corp. or we
sustain such positions on income tax returns previously filed, our liabilities recorded would be reduced by $3 million, resulting
in increased net income and a favorable impact on the effective tax rate.
51
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
4. REGULATORY ASSETS AND LIABILITIES
Recognition of regulatory assets and liabilities and the amortization periods over which they are expected to be recovered or
refunded through rate regulation reflect the decisions of the PUCT. Components of the regulatory assets and liabilities are
provided in the table below. Amounts not earning a return through rate regulation are noted.
Remaining Rate
Recovery/Amortization
Period at
Carrying Amount At
December 31, 2013
December 31, 2013
December 31, 2012
Regulatory assets:
Generation-related regulatory assets securitized
by transition bonds (a)(e)
Employee retirement costs
Employee retirement costs to be reviewed (b)(c)
Employee retirement liability (a)(c)(d)
Self-insurance reserve (primarily storm recovery
costs) ― net
Self-insurance reserve to be reviewed (b)(c)
Securities reacquisition costs (pre-industry restructure)
Securities reacquisition costs
(post-industry restructure) ― net
Recoverable amounts in lieu of deferred
income taxes ― net
Rate review expenses (a)
Advanced meter customer education costs
Deferred conventional meter and metering
facilities depreciation
Deferred AMS costs
Energy efficiency performance bonus (a)
Under-recovered wholesale transmission
service expense ― net (a)
Energy efficiency programs (a)
Other regulatory assets
Total regulatory assets
Regulatory liabilities:
Estimated net removal costs
Investment tax credit and protected excess
deferred taxes
Over-collection of transition bond revenues (a)(e)
Energy efficiency programs (a)
2 years
6 years
To be determined
To be determined
$
$
409
87
186
738
158
196
32
128
41
Terms of related debt
Life of related asset or
5
22
liability
Largely 2 years
6 years
42
4
8
71
6
Largely 7 years
6 years
1 year
146
62
12
152
2
9
37
2
40
1
1
1,771
2,093
385
244
23
35
4
28
33
-
447
305
6 years
To be determined
3 years
1 year
Not applicable
Various
Life of utility plant
Various
2 years
Not applicable
Total regulatory liabilities
$
Net regulatory asset
____________
(a) Not earning a return in the regulatory rate-setting process.
(b) Costs incurred since the period covered under the last rate review.
(c) Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.
(d) Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.
(e)
281
71
224
491
1,324
190
10
$
1,788
Bondco net regulatory assets of $226 million at December 31, 2013 consisted of $261 million included in generation-related regulatory assets net
of the regulatory liability for over-collection of transition bond revenues of $35 million. Bondco net regulatory assets of $335 million at December
31, 2012 consisted of $368 million included in generation-related regulatory assets net of the regulatory liability for over-collection of transition
bond revenues of $33 million.
52
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
In August 2011, the PUCT issued a final order in our rate review filed in January 2011. The rate review included a
determination of the recoverability of regulatory assets at June 30, 2010, including the recoverability period of those assets
deemed allowable by the PUCT.
In accordance with the PUCT’s August 2009 order in our rate review, the remaining net book value and the approved
amount of removal cost of existing conventional meters that were replaced by advanced meters are being charged to depreciation
and amortization expense over an 11-year cost recovery period.
In September 2008, the PUCT approved a settlement for us to recover our estimated future investment for advanced
metering deployment. We began billing the AMS surcharge in the January 2009 billing month cycle. The surcharge is expected
to total $1.023 billion over the 11-year recovery period and includes a cost recovery factor of $2.19 per month per residential
retail customer and $2.39 to $5.15 per month for non-residential retail customers. We account for the difference between the
surcharge billings for advanced metering facilities and the allowable revenues under the surcharge provisions, which are based
on expenditures and an allowed return, as a regulatory asset or liability. Such differences arise principally as a result of timing
of expenditures. As indicated in the table above, the regulatory asset at December 31, 2013 and 2012 totaled $62 million and
$2 million, respectively.
As a result of purchase accounting, in 2007 the carrying value of certain generation-related regulatory assets securitized by
transition bonds, which have been reviewed and approved by the PUCT for recovery but without earning a rate of return, was
reduced by $213 million. This amount will be accreted to other income over the recovery period remaining at October 10, 2007
(approximately nine years).
See Note 11 for information regarding nuclear decommissioning cost recovery.
5.
BORROWINGS UNDER CREDIT FACILITIES
At December 31, 2013, we had a $2.4 billion secured revolving credit facility to be used for working capital and general
corporate purposes, issuances of letters of credit and support for any commercial paper issuances. The revolving credit facility
expires in October 2016, and we have the option of requesting up to two one-year extensions, with such extensions subject to
certain conditions and lender approval. The terms of the revolving credit facility allow us to request an additional increase in
our borrowing capacity of $100 million, provided certain conditions are met, including lender approval.
Borrowings under the revolving credit facility are classified as short-term on the balance sheet and are secured equally and
ratably with all of our other secured indebtedness by a first priority lien on property we acquired or constructed for the
transmission and distribution of electricity. The property is mortgaged under the Deed of Trust.
At December 31, 2013, we had outstanding borrowings under the revolving credit facility totaling $745 million with an
interest rate of 1.67% and outstanding letters of credit totaling $6 million. At December 31, 2012, we had outstanding
borrowings under the revolving credit facility totaling $735 million with an interest rate of 1.46% and outstanding letters of
credit totaling $6 million.
Borrowings under the revolving credit facility bear interest at per annum rates equal to, at our option, (i) LIBOR plus a
spread ranging from 1.00% to 1.75% depending on credit ratings assigned to our senior secured non-credit enhanced long-term
debt or (ii) an alternate base rate (the highest of (1) the prime rate of JPMorgan Chase, (2) the federal funds effective rate plus
0.50%, and (3) daily one-month LIBOR plus 1.00%) plus a spread ranging from 0.00% to 0.75% depending on credit ratings
assigned to our senior secured non-credit enhanced long-term debt. At December 31, 2013, all outstanding borrowings bore
interest at LIBOR plus 1.50%. Amounts borrowed under the facility, once repaid, can be borrowed again from time to time.
An unused commitment fee is payable quarterly in arrears and upon termination or commitment reduction at a rate equal
to 0.100% to 0.275% (such spread depending on certain credit ratings assigned to our senior secured debt) of the daily unused
commitments under the revolving credit facility. Letter of credit fees on the stated amount of letters of credit issued under the
revolving credit facility are payable to the lenders quarterly in arrears and upon termination at a rate per annum equal to the
spread over adjusted LIBOR. Customary fronting and administrative fees are also payable to letter of credit fronting banks. At
December 31, 2013, letters of credit bore interest at 1.70%, and a commitment fee (at a rate of 0.225% per annum) was payable
on the unfunded commitments under the facility, each based on our current credit ratings.
53
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Subject to the limitations described below, borrowing capacity available under the credit facility at December 31, 2013
and 2012 was $1.649 billion and $1.659 billion, respectively. Generally, our indentures and revolving credit facility limit the
incurrence of other secured indebtedness except for indebtedness secured equally and ratably with the indentures and revolving
credit facility and certain permitted exceptions. As described further in Note 6, the Deed of Trust permits us to secure
indebtedness (including borrowings under our revolving credit facility) with the lien of the Deed of Trust up to the aggregate of
(i) the amount of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain property additions that
have been certified to the Deed of Trust collateral agent. At December 31, 2013, the available bond credits were approximately
$2.176 billion and the amount of additional potential indebtedness that could be secured by property additions, subject to a
certification process, was $1.173 billion. At December 31, 2013, the available borrowing capacity of the revolving credit
facility could be fully drawn.
The revolving credit facility contains customary covenants for facilities of this type, restricting, subject to certain
exceptions, us and our subsidiaries from, among other things: incurring additional liens; entering into mergers and
consolidations; and sales of substantial assets. In addition, the revolving credit facility requires that we maintain a
consolidated senior debt-to-capitalization ratio of no greater than 0.65 to 1.00 and observe certain customary reporting
requirements and other affirmative covenants. For purposes of the ratio, debt is calculated as indebtedness defined in the
revolving credit facility (principally, the sum of long-term debt, any capital leases, short-term debt and debt due currently in
accordance with US GAAP). The debt calculation excludes transition bonds issued by Bondco, but includes the unamortized
fair value discount related to Bondco. Capitalization is calculated as membership interests determined in accordance with US
GAAP plus indebtedness described above. At December 31, 2013, we were in compliance with this covenant with a debt-tocapitalization ratio of 0.45 to 1.00 and with all other covenants .
The revolving credit facility also contains customary events of default for facilities of this type, the occurrence of which
would allow the lenders to accelerate all outstanding loans and terminate their commitments, including certain changes in control
that are not permitted transactions, cross-default provisions in the event we or any of our subsidiaries (other than Bondco)
defaults on indebtedness in a principal amount in excess of $100 million or receives judgments for the payment of money in
excess of $50 million that are not discharged within 60 days.
54
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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6. LONG-TERM DEBT
At December 31, 2013 and 2012, our long-term debt consisted of the following:
December 31,
2013
2012
Oncor (a):
$
6.375% Fixed Senior Notes due January 15, 2015
5.000% Fixed Senior Notes due September 30, 2017
6.800% Fixed Senior Notes due September 1, 2018
5.750% Fixed Senior Notes due September 30, 2020
4.100% Fixed Senior Notes due June 1, 2022
7.000% Fixed Debentures due September 1, 2022
7.000% Fixed Senior Notes due May 1, 2032
7.250% Fixed Senior Notes due January 15, 2033
7.500% Fixed Senior Notes due September 1, 2038
5.250% Fixed Senior Notes due September 30, 2040
4.550% Fixed Senior Notes due December 1, 2041
5.300% Fixed Senior Notes due June 1, 2042
Unamortized discount
Long-term debt, less amounts due currently — Oncor
Bondco (b):
4.950% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2013
5.420% Fixed Series 2003 Bonds due in semiannual installments through August 15, 2015
5.290% Fixed Series 2004 Bonds due in semiannual installments through May 15, 2016
Unamortized fair value discount related to transition bonds
Less amount due currently
Long-term debt, less amounts due currently — Bondco
$
Total long-term debt, less amounts due currently
$
500
500
324
324
550
550
126
400
126
400
800
500
350
800
500
350
300
300
475
475
400
300
500
500
(23)
(35)
5,202
5,090
106
205
10
145
281
(1)
(131)
(125)
179
310
5,381
(1)
$
5,400
__________
Secured by first priority lien on certain transmission and distribution assets equally and ratably with all of Oncor’s other secured
indebtedness. See “Deed of Trust” below for additional information.
(b) The transition bonds are nonrecourse to Oncor and were issued to securitize a regulatory asset.
(a)
Debt-Related Activity in 2013
Debt Repayments
Repayments of long-term debt in 2013 totaled $ 125 million and represent transition bond principal payments at scheduled
maturity dates.
Issuance of New Senior Secured Notes
In May 2013 , we completed the sale of $ 100 million aggregate principal amount of 4.550% senior secured notes maturing
in December 2041 (Additional 2041 Notes). The Additional 2041 Notes were an additional issuance of our 4.550% senior
secured notes maturing in December 2041, $ 300 million aggregate principal amount of which were previously issued in
November 2011 (2041 Notes). The Additional 2041 Notes were issued as part of the same series as the 2041 Notes. We used
the net proceeds of approximately $ 107 million from the sale of the Additional 2041 Notes to repay borrowings under our
revolving credit facility and for general corporate purposes. The Additional 2041 Notes and 2041 Notes are secured by the first
priority lien and are secured equally and ratably with all of our other secured indebtedness as discussed below .
55
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Interest on the Additional 2041 Notes is payable in cash semiannually in arrears on June 1 and December 1 of each year,
beginning on June 1, 2013. We may at our option redeem the notes, in whole or in part, at any time, at a price equal to 100% of
their principal amount, plus accrued and unpaid interest and a “make-whole” premium. The notes also contain customary
events of default, including failure to pay principal or interest on the notes when due.
The Additional 2041 Notes were issued in a private placement, and in July 2013 we completed an offering with the
holders of the Additional 2041 Notes to exchange their respective Additional 2041 Notes for notes that have terms identical in all
material respects to the Additional 2041 Notes (Exchange Notes), except that the Exchange Notes do not contain terms with
respect to transfer restrictions, registration rights and payment of additional interest for failure to observe certain obligations in a
certain registration rights agreement. The Exchange Notes were registered on a Form S-4, which was declared effective in June
2013.
Debt-Related Activity in 2012
Debt Repayments
Repayments of long-term debt in 2012 totaled $ 1.018 billion and represented $ 376 million principal amount of 6.375%
senior secured notes paid at the scheduled maturity date of May 1, 2012, the redemption of $ 524 million principal amount of
5.950% senior secured notes due September 1, 2013 (2013 Notes) as discussed below and $ 118 million principal amount of
transition bonds paid at scheduled maturity dates.
In June 2012, pursuant to the terms of the indenture and officer’s certificate governing the 2013 Notes, we redeemed all of
the 2013 Notes. We paid a redemption price equal to 100% of the principal amount of the 2013 Notes plus a make-whole
amount of $ 33 million. For accounting purposes, the make-whole amount was deferred as a regulatory asset and amortized to
interest expense through September 1, 2013, the original maturity date of the 2013 Notes .
Issuance of New Senior Secured Notes
In May 2012 , we issued $ 400 million aggregate principal amount of 4.100% senior secured notes maturing in June 2022
(2022 Notes) and $ 500 million aggregate principal amount of 5.300% senior secured notes maturing in June 2042 (2042 Notes,
and collectively with the 2022 Notes, the Notes). We used the proceeds (net of the initial purchasers’ discount, fees and
expenses) of approximately $ 890 million from the sale of the Notes to repay borrowings under our revolving credit facility,
redeem the 2013 Notes (as discussed above) and for other general corporate purposes. The Notes are secured equally and
ratably with all of our other secured indebtedness pursuant to the Deed of Trust by a first priority lien on property acquired or
constructed for the transmission and distribution of electricity .
Interest on the Notes is payable in cash semiannually in arrears on June 1 and December 1 of each year, beginning on
December 1, 2012. We may at our option at any time and from time to time redeem all or part of the Notes at a price equal to
100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. The Notes also contain
customary events of default, including failure to pay principal or interest on the Notes when due.
The Notes were issued in a private placement, and in August 2012 we offered holders of the Notes the opportunity to
exchange their respective Notes for notes that have terms identical in all material respects to the Notes (Exchange Notes), except
that the Exchange Notes do not contain terms with respect to transfer restrictions, registration rights and payment of additional
interest for failure to observe certain obligations in a certain registration rights agreement. The Exchange Notes were registered
on a Form S-4, which was declared effective in July 2012.
Deed of Trust
Our secured indebtedness, including the revolving credit facility described in Note 5, is secured equally and ratably by a
first priority lien on property we acquired or constructed for the transmission and distribution of electricity. The property is
mortgaged under the Deed of Trust. The Deed of Trust permits us to secure indebtedness (including borrowings under our
revolving credit facility) with the lien of the Deed of Trust up to the aggregate of (i) the amount of available bond credits, and (ii)
85% of the lower of the fair value or cost of certain property additions that could be certified to the Deed of Trust collateral
agent. At December 31, 2013, the amount of available bond credits was approximately $ 2.176 billion and the amount of future
debt we could secure with property additions, subject to those property additions being certified to the Deed of Trust collateral
agent, was $ 1.173 billion.
56
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Maturities
Long-term debt maturities at December 31, 2013, are as follows:
Year
2014
2015
2016
2017
2018
Thereafter
Unamortized fair value discount
Unamortized discount
Total
Amount
$
131
639
41
324
550
3,851
(1)
(23)
$
5,512
Fair Value of Long-Term Debt
At December 31, 2013 and 2012, the estimated fair value of our long-term debt (including current maturities) totaled
$6.188 billion and $6.568 billion, respectively, and the carrying amount totaled $5.512 billion and $5.525 billion,
respectively. The fair value is estimated based upon the market value as determined by quoted market prices, representing
Level 1 valuations under accounting standards related to the determination of fair value .
7. COMMITMENTS AND CONTINGENCIES
EFH Corp. Potential Restructuring Activities
As noted in SEC filings made by members of the Texas Holdings Group, EFH Corp. and other members of the Texas
Holdings Group have engaged in discussions with certain unaffiliated creditors regarding certain of those entities’ capital
structures and long-term liquidity, as well as possible restructuring transactions involving those entities. See Note 11 for a
discussion of our transactions with members of the Texas Holdings Group that could potentially be impacted by any these
restructuring activities.
Leases
At December 31, 2013, our future minimum lease payments under operating leases (with initial or remaining
noncancelable lease terms in excess of one year) were as follows:
Amount
Year
2014
2015
2016
2017
2018
Thereafter
$
Total future minimum lease payments
$
6
4
3
1
14
Rent charged to operation and maintenance expense totaled $10 million for the year ended December 31, 2013 and $ 15
million for each of the years ended December 31, 2012 and 2011.
Efficiency Spending
We are required to annually invest in programs designed to improve customer electricity demand efficiencies to satisfy
ongoing regulatory requirements. The 201 4 requirement is $ 62 million.
57
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Guarantees
We have entered into contracts that contain guarantees to unaffiliated parties that could require performance or payment
under certain conditions as discussed below.
We are the lessee under various operating leases that obligate us to guarantee the residual values of the leased assets. At
December 31, 2013, both the aggregate maximum amount of residual values guaranteed and the estimated residual recoveries
totaled $7 million. These leased assets consist primarily of vehicles used in distribution activities. The average life of the
residual value guarantees under the lease portfolio is approximately 2.2 years.
For the purpose of obtaining greater access to materials, we previously guaranteed the repayment of borrowings under a
nonaffiliated party’s $7 million credit facility. The facility matured on March 31, 2013 and was not extended.
Legal/Regulatory Proceedings
We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolution
of which, in the opinion of management, should not have a material effect upon our financial position, results of operations or
cash flows.
Labor Contracts
Certain of our employees are represented by a labor union and covered by a collective bargaining agreement with an
expiration date of October 25, 2015.
Environmental Contingencies
We must comply with environmental laws and regulations applicable to the handling and disposal of hazardous
waste. We are in compliance with all current laws and regulations; however, the impact, if any, of changes to existing
regulations or the implementation of new regulations is not determinable. The costs to comply with environmental regulations
can be significantly affected by the following external events or conditions:
·
·
changes to existing state or federal regulation by governmental authorities having jurisdiction over control of toxic
substances and hazardous and solid wastes, and other environmental matters, and
the identification of additional sites requiring clean-up or the filing of other complaints in which we may be asserted
to be a potential responsible party.
58
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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8. MEMBERSHIP INTERESTS
Cash Distributions
On February 19, 2014, our board of directors declared a cash distribution of $53 million, which was pa id to our
members on February 2 0, 2014.
During 2013, our board of directors declared, and we paid the following cash distributions to our members:
Declaration Date
Payment Date
October 29, 2013
July 31, 2013
May 1, 2013
February 13, 2013
October 31, 2013
Amount
$
$
$
$
August 1, 2013
May 2, 2013
February 15, 2013
95
95
70
50
During 2012, our board of directors declared, and we paid the following cash distributions to our members:
Declaration Date
Payment Date
October 24, 2012
July 25, 2012
April 25, 2012
February 14, 2012
October 30, 2012
July 31, 2012
May 1, 2012
February 21, 2012
Amount
$
$
$
$
70
50
60
45
Distributions are limited by our required regulatory capital structure to be at or below the assumed debt-to-equity ratio
established periodically by the PUCT for ratemaking purposes, which is currently set at 60% debt to 40% equity. At December
31, 2013, our regulatory capitalization ratio was 58.7% debt and 41.3% equity. The PUCT has the authority to determine what
types of debt and equity are included in a utility’s debt-to-equity ratio. For purposes of this ratio, debt is calculated as long-term
debt plus unamortized gains on reacquired debt less unamortized issuance expenses, premiums and losses on reacquired
debt. The debt calculation excludes transition bonds issued by Bondco. Equity is calculated as membership interests
determined in accordance with US GAAP, excluding the effects of purchase accounting (which included recording the initial
goodwill and fair value adjustments and the subsequent related impairments and amortization). At December 31, 2013, $ 192
million was available for distribution to our members under the capital structure restriction.
Accumulated Other Comprehensive Income (Loss)
The following table presents the changes to accumulated other comprehensive income (loss) for the year ended December
31, 2013.
Balance at December 31, 2012
Defined benefit pension plans (net of tax)
Cash Flow Hedges
– Interest Rate
Defined Benefit
Pension and
Swap
OPEB Plans
$
Amounts reclassified from accumulated other comprehensive income
(loss) and reported in interest expense and related charges
Balance at December 31, 2013
(28)
-
$
2
$
(26)
Accumulated Other
Comprehensive
Income (Loss)
(3)
(19)
$
2
-
$
(22)
(31)
(19)
$
(48)
59
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
9. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS PLANS
Regulatory Recovery of Pension and OPEB Costs
PURA provides for our recovery of pension and OPEB costs applicable to services of our active and retired employees, as
well as services of other EFH Corp. active and retired employees prior to the deregulation and disaggregation of EFH Corp.’s
electric utility businesses effective January 1, 2002 (recoverable service). Accordingly, we entered into an agreement with EFH
Corp. whereby we assumed responsibility for applicable pension and OPEB costs related to those personnel’s recoverable
service.
We are authorized to establish a regulatory asset or liability for the difference between the amounts of pension and OPEB
costs approved in current billing rates and the actual amounts that would otherwise have been recorded as charges or credits to
earnings related to recoverable service. Amounts deferred are ultimately subject to regulatory approval. At December 31, 2013
and 2012, we had recorded regulatory assets totaling $ 786 million and $ 1.011 billion, respectively, related to pension and
OPEB costs, including amounts related to deferred expenses as well as amounts related to unfunded liabilities that otherwise
would be recorded as other comprehensive income.
In a 2012 agreement described below, we assumed primary responsibility for retirement costs related to certain nonrecoverable service. Any retirement costs associated with non-recoverable service is not recoverable through rates.
Pension Plan
We have liabilities under the Oncor Retirement Plan and the EFH Retirement Plan, both of which are qualified pension
plans under Section 401(a) of the Internal Revenue Code of 1986, as amended (Code), and are subject to the provisions of
ERISA. Employees do not contribute to either plan. These pension plans provide benefits to participants under one of two
formulas: (i) a Cash Balance Formula under which participants earn monthly contribution credits based on their compensation
and a combination of their age and years of service, plus monthly interest credits or (ii) a Traditional Retirement Plan Formula
based on years of service and the average earnings of the three years of highest earnings. The interest component of the Cash
Balance Formula is variable and is determined using the yield on 30-year Treasury bonds. Under the Cash Balance Formula,
future increases in earnings will not apply to prior service costs.
All eligible employees hired after January 1, 2001 participate under the Cash Balance Formula. Certain employees, who,
prior to January 1, 2002, participated under the Traditional Retirement Plan Formula, continue their participation under that
formula. It is the sponsors’ policy to fund the plans on a current basis to the extent required under existing federal tax and
ERISA regulations.
In August 2012, EFH Corp. approved certain amendments to the EFH Retirement Plan. These actions were completed in
the fourth quarter of 2012, and the amendments resulted in:
· the splitting off of assets and liabilities under the plan associated with our employees and all retirees and terminated
vested participants of EFH Corp. and its subsidiaries (including discontinued businesses) to a new qualified pension
plan that provides benefits identical to those provided under the EFH Retirement Plan, for which we assumed
sponsorship from EFH Corp. effective January 1, 2013 (Oncor Retirement Plan);
· maintaining assets and liabilities under the plan associated with active collective bargaining unit (union) employees of
EFH Corp.'s competitive subsidiaries under the current plan;
· the splitting off of assets and liabilities under the plan associated with all other plan participants (active nonunion
employees of EFH Corp.’s competitive businesses) to a terminating plan, freezing benefits and vesting all accrued plan
benefits for these participants, and
· the termination of, distributions of benefits under, and settlement of all of EFH Corp.'s liabilities under the terminating
plan.
As a result of these actions and in connection with assuming sponsorship of the Oncor Retirement Plan, we entered into
an agreement with EFH Corp. to assume primary responsibility for benefits of certain participants for whom EFH Corp. bore
primary funding responsibility (a closed group of retired and terminated vested plan participants not related to
60
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
our regulated utility business) at December 31, 2012 . As we received a corresponding amount of assets with the assumed
liabilities, execution of the agreement did not have a material impact on our reported results of operations or financial
condition. In the fourth quarter of 2012, EFH Corp. made cash contributions totaling $ 259 million to settle the terminating
plan obligations and fully fund its obligations under the Oncor Retirement Plan.
We also have supplemental pension plans for certain employees whose retirement benefits cannot be fully earned under the
qualified retirement plan, the information for which is included below.
OPEB Plan
We participate with EFH Corp. and other subsidiaries of EFH Corp. to offer certain health care and life insurance benefits
to eligible employees and their eligible dependents upon the retirement of such employees (OPEB Plan). For employees retiring
on or after January 1, 2002, the retiree contributions required for such coverage vary based on a formula depending on the
retiree’s age and years of service.
Pension and OPEB Costs Recognized as Expense
The pension and OPEB amounts provided herein include our allocated amounts related to EFH Corp.’s plans based on
actuarial computations and reflect our employee and retiree demographics as described above. We recognized the following n et
pension and OPEB costs as expense:
2013
$
Pension costs
OPEB costs
Total benefit costs
Less amounts deferred principally as property or a regulatory asset
Net amounts recognized as expense
Year Ended December 31,
2012
2011
95
$
37
132
(95)
$
37
$
179
27
206
(169)
$
37
$
95
74
169
(132)
37
We and EFH Corp. use the calculated value method to determine the market-related value of the assets held in the trust for
purposes of calculating our pension costs. We and EFH Corp. include the realized and unrealized gains or losses in the marketrelated value of assets over a rolling four-year period. Each year, 25% of such gains and losses for the current year and for
each of the preceding three years is included in the market-related value. Each year, the market-related value of assets is
increased for contributions to the plan and investment income and is decreased for benefit payments and expenses for that year.
We and EFH Corp. use the fair value method to determine the market-related value of the assets held in the trust for
purposes of calculating OPEB cost.
61
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Detailed Information Regarding Pension and OPEB Benefits
The following pension and OPEB information is based on December 31, 2013, 2012 and 2011 measurement dates:
Pension Plans
Year Ended December 31,
2013
2012
2011
4.10%
5.00%
7.40%
3.81%
OPEB Plan
Year Ended December 31,
2013
2012
2011
5.50%
4.10%
6.70%
4.95%
6.80%
5.55%
7.70%
3.74%
-
-
-
Assumptions Used to Determine Net Periodic
Pension and Benefit Cost:
Discount rate (a)
Expected return on plan assets
Rate of compensation increase
6.14%
3.94%
7.10%
Components of Net Pension and Benefit Cost:
Service cost
Interest Cost
Expected return on assets
Amortization of net transition obligation
Amortization of prior service cost (credit)
Amortization of net loss
Settlement charges
$
Net periodic pension and benefit cost
$
26
122
$
23
(123)
106
(109)
-
-
69
1
78
81
95
$
20
110
(99)
$
-
6
36
(11)
$
(20)
1
63
$
7
54
(14)
1
(1)
(20)
14
-
26
-
5
39
(12)
1
-
27
-
$
179
$
95
$
37
$
27
$
74
$
110
$
106
$
$
83
$
Other Changes in Plan Assets and Benefit
Obligations Recognized as Regulatory Assets or in
Other Comprehensive Income:
Net loss (gain)
Prior service cost (credit)
Amortization of net loss
Amortization of transition obligation (asset)
Amortization of prior service (cost) credit
Settlement charges
Curtailment
Total recognized as regulatory assets or other
comprehensive income
Total recognized in net periodic pension and benefit
costs and as regulatory assets or other comprehensive
income
$ (139)
-
-
-
-
(69)
(78)
(63)
(26)
-
-
-
-
(1)
20
(1)
20
(91)
(127)
(27)
(1)
1
(1)
(81)
-
(5)
-
-
-
-
(209)
(54)
42
(6)
88
(245)
115
$ (171)
$ (114)
$
125
$
137
$
31
(14)
$
_____________
(a)
As a result of the 2012 amendments discussed above, the discount rate reflected in net pension costs for January through July 2012 was
5.00%, for August through September 2012 was 4.15% and for October through December 2012 was 4.20%.
Pension Plans
Year Ended December 31,
2013
2012
OPEB Plan
Year Ended December 31,
2011
2013
2012
2011
Assumptions Used to Determine Benefit
Obligations at Period End:
Discount rate
4.74%
4.10%
5.00%
4.98%
4.10%
4.95%
Rate of compensation increase
3.94%
3.94%
3.81%
-
-
-
62
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Pension Plans
Year Ended December 31,
2013
OPEB Plan
Year Ended December 31,
2012
2013
2012
Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Participant contributions
Medicare Part D reimbursement
Settlement
Curtailment
Assumption of liabilities
Actuarial (gain) loss
Benefits paid
$
Projected benefit obligation at end of year
$
2,857
$
3,038
$
(57)
924
$
6
94
(58)
913
Accumulated benefit obligation at end of year
$
2,752
$
2,908
$
-
$
-
Fair value of assets at beginning of year
Actual return (loss) on assets
Employer contributions
Settlement
Assets related to assumed liabilities
Participant contributions
Benefits paid
$
2,327
$
1,542
199
93
(268)
852
$
190
21
11
$
197
25
11
Fair value of assets at end of year
$
2,271
$
(2,857)
2,271
(586)
3,038
$
26
122
2,215
$
23
106
(3)
-
(183)
(143)
913
6
36
-
14
(268)
(5)
860
198
(91)
-
$
809
5
39
15
2
3
-
10
Change in Plan Assets:
80
9
(2)
(143)
-
-
15
(58)
190
-
14
$
(91)
2,327
$
(57)
179
$
(3,038)
$
$
2,327
(711)
$
$
Funded Status:
Projected benefit obligation at end of year
Fair value of assets at end of year
Funded status at end of year
$
Pension Plans
Year Ended December 31,
2013
(924)
179
(745)
$
$
(913)
190
(723)
OPEB Plan
Year Ended December 31,
2012
2013
2012
Amounts Recognized in the Balance Sheet Consist
of:
Liabilities:
Other current liabilities
Other noncurrent liabilities
$
(3)
Net liability recognized
$
(583)
(586)
$
Regulatory assets:
Net loss
Prior service cost (credit)
$
362
$
Net regulatory asset recognized
Accumulated other comprehensive net loss
$
$
-
(711)
$
(745)
(745)
$
(723)
602
$
220
$
$
247
(111)
136
$
(3)
(708)
$
362
$
602
$
(91)
129
$
33
$
3
$
1
-
-
$
-
(723)
1
63
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The following tables provide information regarding the assumed health care cost trend rates.
Year Ended December 31,
2013
2012
Assumed Health Care Cost Trend Rates – Not Medicare Eligible:
Health care cost trend rate assumed for next year
Rate to which the cost trend is expected to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
8.00%
5.00%
2022
8.50%
5.00%
2022
7.00%
5.00%
2021
7.50%
5.00%
2021
Assumed Health Care Cost Trend Rates – Medicare Eligible:
Health care cost trend rate assumed for next year
Rate to which the cost trend is expected to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
1-Percentage
Point Increase
1-Percentage Point
Decrease
Sensitivity Analysis of Assumed Health Care Cost Trend Rates:
$
Effect on accumulated postretirement obligation
Effect on postretirement benefits cost
117
7
$
(97)
(6)
The following table provides information regarding pension plans with projected benefit obligations (PBO) and
accumulated benefit obligations (ABO) in excess of the fair value of plan assets.
At December 31,
2013
2012
Pension Plans with PBO and ABO in Excess of Plan Assets:
$
Projected benefit obligations
Accumulated benefit obligations
Plan assets
2,857
2,752
2,271
$
3,038
2,908
2,327
Pension Plans and OPEB Plan Investment Strategy and Asset Allocations
Our investment objective for the retirement plans is to invest in a suitable mix of assets to meet the future benefit
obligations at an acceptable level of risk, while minimizing the volatility of contributions. Equity securities are held to achieve
returns in excess of passive indexes by participating in a wide range of investment opportunities. International equity securities
are used to further diversify the equity portfolio and may include investments in both developed and emerging international
markets. Fixed income securities include primarily corporate bonds from a diversified range of companies, US Treasuries and
agency securities and money market instruments. Our investment strategy for fixed income investments is to maintain a high
grade portfolio of securities, which assists us in managing the volatility and magnitude of plan contributions and expense while
maintaining sufficient cash and short-term investments to pay near-term benefits and expenses.
The retirement plans’ investments are managed in two pools: one associated with the recoverable service portion of plan
obligations related to our regulated utility business, and the other associated with plan obligations for the closed group of retired
and terminated plan participants not related to our regulated utility business that we assumed from EFH Corp. in connection
with our sponsorship of the Oncor Plan¸ as discussed above. The recoverable service portion is invested in a broadly
diversified portfolio of equity and fixed income securities. The nonrecoverable service portion is invested in fixed income
securities intended to fully hedge the obligations, within practical limitations.
64
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The target asset allocation ranges of pension plan investments by asset category are as follows:
Target Allocation Ranges
Recoverable
Nonrecoverable
24% - 30%
—
Asset Category
US equities
International equities
Fixed income
—
19% - 25%
45% - 57%
100%
Our investment objective for the OPEB Plan primarily follows the objectives of the pension plans discussed above, while
maintaining sufficient cash and short-term investments to pay near-term benefits and expenses. The actual amounts at
December 31, 2013 provided below are consistent with the asset allocation targets.
Fair Value Measurement of Pension Plan Assets
At December 31, 2013 and 2012, pension plan assets measured at fair value on a recurring basis consisted of the
following:
At December 31, 2013
Level 1
Level 2
Level 3
At December 31, 2012
Total
Level 1
Level 2
Level 3
Total
Asset Category
Interest-bearing cash
Equity securities:
$
US
- $
- $
160
82
7
-
332
-
1,265
108
55
-
587 $
1,677
1,265
108
55
7
2,271
250
International
Fixed income securities:
Corporate bonds (a)
337
US Treasuries
Other (b)
Preferred securities
Total assets
$
160
$
-
$
7
7 $
$
344
$
- $
134
$
- $
134
287
206
280
95
7
-
-
1,319
206
-
1,319
206
486 $
1,834
7
7 $
7
2,327
73
-
$
301
73
_____________
(a) Substantially all corporate bonds are rated investment grade by a major ratings agency such as Moody’s.
(b)
Other consists primarily of municipal bonds and fixed income derivative instruments.
There was no significant change in the fair value of Level 3 assets in the periods presented.
65
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Fair Value Measurement of OPEB Plan Assets
At December 31, 2013 and 2012, OPEB Plan assets measured at fair value on a recurring basis consisted of the following:
At December 31, 2013
Level 1
Level 2
Level 3
$
$
$
At December 31, 2012
Total
Level 1
Level 2
Level 3
$
$
$
Total
Asset Category
Interest-bearing cash
Equity securities:
US
International
Fixed income securities:
Corporate bonds (a)
US Treasuries
Other (b)
Preferred securities
$
Total assets
-
6
53
35
5
43
-
34
131
-
-
1
2
-
$
48
$
$
6
-
10
-
58
35
49
6
31
-
-
34
-
42
4
3
-
1
45
45
-
$
179
-
$
-
125
$
65
$
-
$
10
-
55
-
42
4
48
-
31
-
$
190
_____________
(a)
(b)
Substantially all corporate bonds are rated investment grade by a major ratings agency such as Moody’s.
Other consists primarily of diversified bond mutual funds.
Expected Long-Term Rate of Return on Assets Assumption
The retirement plans’ strategic asset allocation is determined in conjunction with the plans’ advisors and utilizes a
comprehensive Asset-Liability modeling approach to evaluate potential long-term outcomes of various investment strategies. The
modeling incorporates long-term rate of return assumptions for each asset class based on historical and future expected asset
class returns, current market conditions, rate of inflation, current prospects for economic growth, and taking into account the
diversification benefits of investing in multiple asset classes and potential benefits of employing active investment management.
Pension Plans
Asset Class
OPEB Plan
Expected Long-Term
Rate of Return
Asset Class
Expected Long-Term
Rate of Return
7.59%
6.71%
6.71%
International equity securities
7.83%
401(h) accounts
US equity securities
7.20%
Life insurance VEBA
Real estate
6.20%
Union VEBA
Credit strategies
5.87%
Non-union VEBA
3.80%
Fixed income securities
5.30%
Weighted average
7.05%
Weighted average (a)
7.39%
_____________
(a)
The 2014 expected long-term rate of return for the nonregulated portion of the Oncor Retirement Plan is 4.72%.
Significant Concentrations of Risk
The plans’ investments are exposed to risks such as interest rate, capital market and credit risks. We seek to optimize
return on investment consistent with levels of liquidity and investment risk which are prudent and reasonable, given prevailing
capital market conditions and other factors specific to participating employers. While we recognize the importance of return,
investments will be diversified in order to minimize the risk of large losses unless, under the circumstances, it is clearly
prudent not to do so. There are also various restrictions and guidelines in place including limitations on types of investments
allowed and portfolio weightings for certain investment securities to assist in the mitigation of the risk of large losses.
66
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Assumed Discount Rate
For the Oncor retirement plans at December 31, 2013, we selected the assumed discount rate using the Aon Hewitt AAAAA Bond Universe yield curve, which is based on corporate bond yields and at December 31, 2013 consisted of 1,095
corporate bonds with an average rating of AA and AAA using Moody’s, S&P and Fitch ratings. For the EFH Retirement Plan,
the OPEB Plan and, for dates earlier than December 31, 2013, the Oncor Retirement Plan, we and EFH Corp. selected the
assumed discount rate using the Aon Hewitt AA Above Median yield curve, which is based on corporate bond yields and at
December 31, 2013 consisted of 389 corporate bonds with an average rating of AA using Moody’s, S&P and Fitch ratings.
Amortization in 2014
In 2014, amortization of the net actuarial loss and prior service cost for the defined benefit pension plans from regulatory
assets into net periodic benefit cost is expected to be $ 39 million and less than $ 1 million, respectively. Amortization of the net
actuarial loss and prior service credit for the OPEB Plan from regulatory assets into net periodic benefit cost is expected to be
$26 million and a $ 20 million credit, respectively.
Pension and OPEB Plan Cash Contributions
Our contributions to the benefit plans were as follows:
Year Ended December 31,
2013
Pension plans contributions
OPEB Plan contributions
Total contributions
2012
2011
$
9
11
$
93
11
$
175
18
$
20
$
104
$
193
Our funding for the pension plans and the OPEB Plan is expected to total $ 87 million and $ 15 million, respectively in
2014 and approximately $ 408 million and $ 139 million, respectively, for the 2014 to 2018 period.
Future Benefit Payments
Estimated future benefit payments to beneficiaries are as follows:
2014
Pension plans
OPEB Plan
$
$
155
45
2015
$
$
159
49
2016
$
$
165
52
2017
$
$
169
55
2018
$
$
175
57
2019-23
$
$
942
316
Thrift Plan
Our employees may participate in a qualified savings plan, the EFH Corp. Thrift Plan (Thrift Plan). This plan is a
participant-directed defined contribution plan intended to qualify under Section 401(a) of the Code, and is subject to the
provisions of ERISA. Under the terms of the Thrift Plan, employees who do not earn more than the IRS threshold
compensation limit used to determine highly compensated employees may contribute, through pre-tax salary deferrals and/or
after-tax applicable payroll deductions, the lesser of 75% of their regular salary or wages or the maximum amount permitted
under law. Employees who earn more than such threshold may contribute from 1% to 20% of their regular salary or
wages. Employer matching contributions are also made in an amount equal to 100% of the first 6 % of employee contributions
for employees who are covered under the Cash Balance Formula of the Oncor Retirement Plan, and 75% of the first 6 % of
employee contributions for employees who are covered under the Traditional Retirement Plan Formula of the Oncor Retirement
Plan. Employer matching contributions are made in cash and may be allocated by participants to any of the plan's investment
options. Our contributions to the Thrift Plan totaled $ 13 million, $ 12 million and $ 12 million for the years ended December
31, 2013, 2012 and 2011, respectively.
67
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
10.
STOCK-BASED COMPENSATION
We currently do not offer stock-based compensation to our employees or directors. In 2008, we established the SARs Plan
under which certain of our executive officers and key employees were granted stock appreciation rights payable in cash, or in
some circumstances, Oncor membership interests. In February 2009, we established the Oncor Electric Delivery Company
LLC Director Stock Appreciation Rights Plan (the Director SARs Plan) under which certain non-employee members of our
board of directors and other persons having a relationship with us were granted SARs payable in cash, or in some
circumstances, Oncor membership interests.
In November 2012, we accepted the early exercise of all outstanding SARs (both vested and unvested, totaling
14,322,219 SARs under the SARs Plan and 55,000 SARs under the Director SARs Plan) issued to date pursuant to both
SARs Plans. The early exercise was permitted by our board of directors pursuant to the provision of the SARs Plan that
permits the board to accelerate the vesting and exercisability of SARs. The early exercise of SARs entitled each participant in
the SARs Plan to: (1) an exercise payment (Exercise Payment) equal to the number of SARs exercised multiplied by the
difference between $ 14.54 and the base price of the SARs (as stated in the award letter for each SARs grant); and (2) the
accrual of interest on all dividends declared to date with respect to the SARs, but no further dividend accruals. Additionally,
certain executive officers agreed to defer payment of a portion of his/her Exercise Payment until the earlier of November 7, 2016
or the occurrence of an event triggering SAR exercisability pursuant to Section 5(c)(ii) of the SARs Plan. These deferred
payments totaled approximately $ 6 million in the aggregate. As a result of the early exercise, in 2012 we paid an aggregate of
approximately $ 64 million related to Exercise Payments ($ 57 million charged to expense), and began accruing interest on
approximately $ 18 million in aggregate dividends .
As described above, as part of the 2012 early exercise of SARs we began accruing interest on dividends declared with
respect to the SARs. Under both SARs plans, dividends that are paid in respect of Oncor membership interests while the
SARs were outstanding were credited to the SARs holder’s account as if the SARs were units, payable upon the earliest to occur
of death, disability, separation from service, unforeseeable emergency, a change in control, or the exercise of the SARs. As a
result, in 2012 we recorded compensation expense of approximately $6 million relating to dividend accruals through November
2012. For accounting purposes, the liability is discounted based on an employee’s or director’s expected retirement date. We
recognized approximately $2 million and $1 million in accretion and interest with respect to such dividends in 2013 and 2012,
respectively.
11. RELATED-PARTY TRANSACTIONS
The following represent our significant related-party transactions and related matters:
·
We record revenue from TCEH, principally for electricity delivery fees, which totaled $967 million, $962 million
and $1,026 million for the years ended December 31, 2013, 2012 and 2011, respectively. The fees are based on
rates regulated by the PUCT that apply to all REPs. The balance sheets at December 31, 2013 and 2012 reflect
accounts receivable from affiliates totaling $ 135 million ($ 5 6 million of which was unbilled) and $ 53 million ($ 48
million of which was unbilled), respectively, primarily consisting of trade receivables from TCEH related to these
electricity delivery fees. At February 27, 2014, we had collected all but $ 6 million of the accounts receivable from
affiliates outstanding at December 31, 2013. Trade accounts receivable from TCEH at December 31, 2012 reflects
timing of payments in 2012.
·
Prior to August 2012, we recognized interest income from TCEH under an agreement related to our generation-related
regulatory assets, which have been securitized through the issuance of transition bonds by Bondco. This interest
income, which served to offset our interest expense on the transition bonds, totaled $ 16 million and $ 32 million for
the years ended December 31, 2012 and 2011, respectively. Also prior to August 2012, we received reimbursement
under a note receivable from TCEH for incremental amounts payable related to income taxes as a result of delivery fee
surcharges related to the transition bonds. Amounts received under the note receivable for the year ended December
31, 2012 totaled $ 20 million.
In August 2012, we sold to EFIH all future interest reimbursements and the remaining $ 159 million obligation under
the note with TCEH. As a result, EFIH paid, and we received, an aggregate $ 159 million for the agreements. The
sale of the related-party agreements was reported as a $ 2 million (after tax) decrease in total membership interests in
2012 in accordance with accounting rules for related-party transactions.
68
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
·
EFH Corp. subsidiaries charge us for certain administrative services at cost. Our payments to EFH Corp.
subsidiaries for administrative services, which are primarily reported in operation and maintenance expenses, totaled
$ 30 million, $ 32 million and $ 34 million for the years ended December 31, 2013, 2012 and 2011, respectively . We
also charge each other for shared facilities at cost. Our payments to EFH Corp. subsidiaries for shared facilities
totaled $4 million, $ 5 million and $4 million for the years ended December 31, 2013, 2012 and 2011,
respectively . Payments we received from EFH Corp. subsidiaries related to shared facilities, totaled $ 2 million for
each of the years ended December 31, 2013 and 2012 and $ 1 million for the year ended December 31, 2011.
·
Under Texas regulatory provisions, the trust fund for decommissioning TCEH’s Comanche Peak nuclear generation
facility is funded by a delivery fee surcharge we collect from REPs and remit monthly to TCEH. Delivery fee
surcharges totaled $ 16 million for each of the years ended December 31, 2013 and 2012 and $17 million for the year
ended December 31, 2011. Our sole obligation with regard to nuclear decommissioning is as the collection agent of
funds charged to ratepayers for nuclear decommissioning activities. If, at the time of decommissioning, actual
decommissioning costs exceed available trust funds, we would not be obligated to pay any shortfalls but would be
required to collect any rates approved by the PUCT to recover any additional decommissioning costs. Further, if
there were to be a surplus when decommissioning is complete, such surplus would be returned to ratepayers under
terms prescribed by the PUCT.
·
We are not a member of EFH Corp.’s consolidated tax group, but EFH Corp.’s consolidated federal income tax return
includes EFH Corp.’s portion of our results due to EFH Corp.’s equity ownership in us. Under the terms of a tax
sharing agreement among us, Oncor Holdings, Texas Transmission, Investment LLC and EFH Corp., we are
generally obligated to make payments to Texas Transmission, Investment LLC and EFH Corp., pro rata in
accordance with their respective membership interests, in an aggregate amount that is substantially equal to the
amount of federal income taxes that we would have been required to pay if we were filing our own corporate income
tax return. For periods prior to the tax sharing agreement (entered into in October 2007 and amended and restated in
November 2008), we are responsible for our share of redetermined tax liability for the EFH Corp. consolidated tax
group. EFH Corp. also includes our results in its consolidated Texas margin tax payments, which are accounted for
as income taxes and calculated as if we were filing our own return. See discussion in Note 1 under “Income
Taxes.” Under the “in lieu of” tax concept, all in lieu of tax assets and tax liabilities represent amounts that will
eventually be settled with our members.
Amounts payable to (receivable from) members related to income taxes under the agreement and reported on our
balance sheet consisted of the following:
At December 31, 2013
EFH
Corp.
Federal income taxes
$
Texas margin taxes
Total payable (receivable) $
Texas
Transmission
(18) $
23
5
(5) $
-
$
(5) $
At December 31, 2012
Total
(23)
$
23
-
Texas
Transmission
EFH
Corp.
$
-
$
Total
-
22
-
22 $
-
$
-
22
$
22
69
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Cash payments made to (received from) members related to income taxes consisted of the following:
Year Ended December 31, 2013
EFH
Corp.
Federal income taxes (a)
$
Texas margin taxes (b)
Total payments (receipts) $
Texas
Transmission
78 $
12
90 $
11 $
-
11 $
Total
89
Year Ended December 31, 2012
EFH
Corp.
$
12
101
Texas
Transmission
(18) $
21
$
3
(5) $
-
$
(5) $
Total
(23)
21
(2)
______________
(a) Includes $33 million payment made to EFH Corp. in 2013 related to the 1997-2002 I R S appeals settlement .
(b) Includes $10 million refund received from EFH Corp. in 2013 related to 1997-2001 amended Texas franchise tax returns.
·
Our PUCT-approved tariffs include requirements to assure adequate credit worthiness of any REP to support the
REP’s obligation to collect transition bond-related charges on behalf of Bondco. Under these tariffs, as a result of
TCEH’s credit rating being below investment grade, TCEH is required to post collateral support in an amount equal
to estimated transition charges over specified time periods. Accordingly, at December 31, 2013 and 2012, TCEH
had posted letters of credit in the amount of $ 9 million and $ 11 million, respectively, for our benefit.
·
In connection with assuming sponsorship of the Oncor Retirement Plan in 2012, we entered into an agreement with
EFH Corp. to assume primary responsibility for retirement benefits of a closed group of retired and terminated vested
retirement plan participants not related to our regulated utility business . As the Oncor Retirement Plan received an
amount of plan assets equal to the liabilities we assumed for those participants, execution of the agreement did not
have a material impact on our reported results of operations or financial condition. See Note 9 for further
information regarding funding for the pension plans .
·
As discussed in Note 1, EFH Corp. and other members of the Texas Holdings Group have engaged in discussions
with certain unaffiliated creditors regarding possible restructuring transactions involving those entities. The US
Bankruptcy Code permits a debtor in bankruptcy to assume or reject executory contracts and unexpired leases. If
members of the Texas Holdings Group were to become debtors in a bankruptcy case and determined to reject some or
all of their executory contracts and unexpired leases with us, our results of operations and financial condition could
be adversely affected. At December 31, 2013, our exposure to the Texas Holdings Group with respect to executory
contracts and unexpired leases totaled approximately $20 million.
·
Affiliates of the Sponsor Group have, and from time-to-time may in the future (1) sell, acquire or participate in the
offerings of our debt or debt securities in open market transactions or through loan syndications, and (2) perform
various financial advisory, dealer, commercial banking and investment banking services for us and certain of our
affiliates for which they have received or will receive customary fees and expenses.
See Notes 3, 8 and 9 for information regarding the tax sharing agreement, distributions to members and our participation
in EFH Corp. pension and OPEB plans, respectively.
70
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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12. SUPPLEMENTARY FINANCIAL INFORMATION
Variable Interest Entities
We are the primary beneficiary and consolidate a wholly-owned VIE, Bondco, which was organized for the limited
purpose of issuing specific transition bonds and purchasing and owning transition property acquired from us that is pledged as
collateral to secure the bonds. We act as the servicer for this entity to collect transition charges authorized by the PUCT. These
funds are remitted to the trustee and used for interest and principal payments on the transition bonds and related costs.
The material assets and liabilities of Bondco are presented separately on the face of our Consolidated Balance Sheet
because the assets are restricted and can only be used to settle the obligations of Bondco, and Bondco’s creditors do not have
recourse to our general credit or assets.
Our maximum exposure does not exceed our equity investment in Bondco, which was $ 16 million at both December 31,
2013 and 2012. We did not provide any financial support to Bondco during the years ended December 31, 2013 and 2012.
Major Customers
Revenues from TCEH represented 27%, 29% and 33% of our total operating revenues for the years ended December 31,
2013, 2012 and 2011, respectively. Revenues from REP subsidiaries of a nonaffiliated entity , collectively represented 15% of
total operating revenues for each of the years ended December 31, 2013, 2012 and 2011. No other customer represented 10% or
more of our total operating revenues.
Other Income and Deductions
Year Ended December 31,
2013
2012
2011
Other income:
Accretion of fair value adjustment (discount) to regulatory assets due
to purchase accounting
$
$
$
17
1
18
$
$
3
$
Net gain on sale of other properties and investments
Total other income
$
29
1
26
$
30
3
$
4
$
23
3
Other deductions:
Professional fees
SARs exercise (Note 10)
Other
$
Total other deductions
2
57
-
10
4
5
9
15
$
64
Interest Expense and Related Charges
2013
$
Interest expense
Year Ended December 31,
2012
2011
360
$
366
$
359
Amortization of debt issuance costs and discounts
21
18
3
Allowance for funds used during construction – capitalized interest portion
(10)
(10)
(3)
$
Total interest expense and related charges
371
$
374
$
359
71
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Restricted Cash
Restricted cash amounts reported on our balance sheet consisted of the following:
At December 31, 2013
Current
Assets
Customer collections related to transition bonds used only to
service debt and pay expenses
$
Total restricted cash
Assets
$
52
$
Noncurrent
Assets
55
$
-
10
-
6
-
$
$
-
10
-
Reserve for shortfalls of transition bond charges
Current
Assets
Noncurrent
52
Reserve for fees associated with transition bonds
At December 31, 2012
6
16
-
$
16
$
55
Trade Accounts Receivable
Trade accounts receivable reported on our balance sheet consisted of the following:
At December 31,
2013
2012
$
Gross trade accounts receivable
527
$
395
(55)
(139)
Trade accounts receivable from TCEH
Allowance for uncollectible accounts
Trade accounts receivable from nonaffiliates – net
(2)
338
(3)
$
385
$
Gross trade accounts receivable at December 31, 2013 and 2012 included unbilled revenues of $ 180 million and $ 147
million, respectively. At both December 31, 2013 and 2012, REP subsidiaries of a nonaffiliated entity collectively represented
approximately 12% of the nonaffiliated trade accounts receivable amount. Trade accounts receivable from TCEH at December
31, 2012 reflects timing of payments in 2012.
Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by
REPs are deferred as a regulatory asset. Due to commitments made to the PUCT in 2007, we are not allowed to recover bad debt
expense, or certain other costs and expenses, from ratepayers in the event of a default or bankruptcy by an affiliate REP.
Investments and Other Property
Investments and other property reported on our balance sheet consisted of the following:
At December 31,
2013
Assets related to employee benefit plans, including employee savings programs
Land
Total investments and other property
$
2012
88
$
80
$
3
83
3
$
91
The majority of these assets represent cash surrender values of life insurance policies that are purchased to fund liabilities
under deferred compensation plans. At December 31, 2013 and 2012, the face amount of these policies totaled $159 million
and $152 million, respectively, and the net cash surrender values (determined using a Level 2 valuation technique) totaled $71
million and $ 6 5 million, respectively. Changes in cash surrender value are netted against premiums paid. Other investment
assets held to satisfy deferred compensation liabilities are recorded at market value.
72
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Property, Plant and Equipment
Property, plant and equipment reported on our balance sheet consisted of the following:
Composite Depreciation Rate/
Avg. Life at December 31, 2013
Assets in service:
Distribution
At December 31,
2013
2012
$
4.1% / 24.6 years
2.8% / 35.8 years
9.1% / 11.0 years
Transmission
Other assets
Total
Less accumulated depreciation
Net of accumulated depreciation
Construction work in progress
Held for future use
Property, plant and equipment – net
$
10,055
6,133
868
$
9,745
5,482
856
17,056
5,725
16,083
5,407
11,331
556
15
11,902
10,676
627
15
11,318
$
Depreciation expense as a percent of average depreciable property approximated 3.7%, 3.9% and 4.0% for the years ended
December 31, 2013, 2012 and 2011, respectively.
Intangible Assets
Intangible assets (other than goodwill) reported on our balance sheet consisted of the following:
At December 31, 2013
Gross
Carrying
Accumulated
Amount
Amortization
Identifiable intangible assets subject to
amortization included in property, plant
and equipment:
Land easements
$
Capitalized software
440
385
825
$
Total
$
82
189
271
$
At December 31, 2012
Gross
Carrying
Accumulated
Amount
Amortization
Net
$
$
358
196
554
$
$
295 $
409
704 $
79
Net
$
220
299
$
216
189
405
Aggregate amortization expense for intangible assets totaled $ 53 million, for each of the years ended December 31, 2013
and 2012 and $48 million for the year ended December 31, 2011. At December 31, 201 3, the weighted average remaining
useful lives of capitalized la nd easements and software were 85 years and 4 years, respectively. The estimated aggregate
amortization expense for each of the next five fiscal years is as follows:
Year
2014
2015
2016
2017
2018
Amortization
Expense
$
55
55
52
44
40
At both December 31, 2013 and 2012, goodwill totaling $4.1 billion was reported on our balance sheet. None of this
goodwill is being deducted for tax purposes. See Note 1 regarding goodwill impairment assessment and testing.
73
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Other Noncurrent Liabilities and Deferred Credits
Other noncurrent liabilities and deferred credits reported on our balance sheet consisted of the following:
At December 31,
Retirement plans and other employee benefits
Uncertain tax positions (including accrued interest)
Amount payable related to income taxes
Investment tax credits
Other
$
$
Total other noncurrent liabilities and deferred credits
2013
1,399
56
17
20
62
1,554
2012
1,495
169
$
-
24
58
1,746
$
Supplemental Cash Flow Information
Year Ended December 31,
2013
Cash payments (receipts) related to:
Interest
Capitalized interest
$
2012
361
Interest (net of amounts capitalized)
Amount in lieu of income taxes:
Federal
State
Total amount in lieu of income taxes
SARs exercise
Noncash construction expenditures (a)
$
2011
$
378
360
(10)
(10)
(3)
351
368
357
89
12
101
(23)
(134)
4
64
-
84
103
140
21
20
(2)
(114)
______________
(a) Represents end-of-period accruals.
Quarterly Information (unaudited)
Results of operations by quarter for the years ended December 31, 2013 and 2012 are summarized below. In our opinion,
all adjustments (consisting of normal recurring accruals) necessary for a fair statement of such amounts have been
made. Quarterly results are not necessarily indicative of a full year’s operations because of seasonal and other factors.
First Quarter
2013
Operating revenues
$
817
180
87
Operating income
Net income
First Quarter
2012
Operating revenues
$
Operating income
Net income (a)
783
Second Quarter
$
857
189
96
Second Quarter
$
828
157
75
188
107
Fourth Quarter
Third Quarter
$
966
239
146
$
103
Fourth Quarter
Third Quarter
$
912
190
925
$
792
156
28
230
139
______________
(a) Fourth quarter 2012 reflects a $57 million pre-tax charge to expense associated with the SARs settlement (see Note 10 ).
74
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of our management, including the
principal executive officer and principal financial officer, of the effectiveness of the design and operation of the disclosure
controls and procedures in effect at December 31, 2013. Based on the evaluation performed, our management, including the
principal executive officer and principal financial officer, concluded that the disclosure controls and procedures were
effective. There has been no change in our internal control over financial reporting during the most recently completed fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ONCOR ELECTRIC DELIVERY COMPANY LLC
MANAGEMENT’S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Oncor Electric Delivery Company LLC is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) for the
company. Oncor Electric Delivery Company LLC’s internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in condition or the deterioration of compliance with
procedures or policies.
The management of Oncor Electric Delivery Company LLC performed an evaluation as of December 31, 2013 of the
effectiveness of the company’s internal control over financial reporting based on the Committee of Sponsoring Organizations of
the Treadway Commission’s (COSO’s) Internal Control - Integrated Framework (1992). Based on the review performed,
management believes that as of December 31, 2013 Oncor Electric Delivery Company LLC's internal control over financial
reporting was effective.
The independent registered public accounting firm of Deloitte & Touche LLP as auditors of the consolidated financial
statements of Oncor Electric Delivery Company LLC has issued an attestation report on Oncor Electric Delivery Company
LLC’s internal control over financial reporting.
/s/ ROBERT S. SHAPARD
/s/ DAVID M. DAVIS
Robert S. Shapard, Chairman of the Board
and Chief Executive
David M. Davis, Senior Vice President
and Chief Financial Officer
February 27, 2014
75
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of Oncor Electric Delivery Company LLC
Dallas, Texas
We have audited the internal control over financial reporting of Oncor Electric Delivery Company LLC and subsidiary (the
“Company”) as of December 31, 2013 based on criteria established in Internal Control – Integrated Framework (1992)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of the changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2013, based on the criteria established in Internal Control – Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements as of and for the year ended December 31, 2013 of the Company and our report dated
February 27, 2014 expressed an unqualified opinion on those financial statements and included an explanatory paragraph
regarding the Company’s ring-fencing.
/s/ Deloitte & Touche LLP
Dallas, Texas
February 27, 2014
76
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Item 9B. OTHER INFORMATION
On February 25, 2014, the previously announced resignation of Monte E. Ford from our board of directors became
effective in accordance with the terms of our Limited Liability Company Agreement upon the appointment on such date of
Timothy A. Mack. Pursuant to the terms of the Limited Liability Company Agreement of Oncor Holdings, Mr. Mack was
appointed to our board of directors by the Nominating Committee of Oncor Holdings. Mr. Mack has been designated as an
independent director (as defined in the Limited Liability Company Agreement). Mr. Mack has also been appointed to the Oncor
Holdings board of directors as an independent director. Mr. Mack has not yet been named to any Board committees. As a
member of our board of directors and the board of directors of Oncor Holdings, Mr. Mack will be compensated pursuant to our
standard compensation program for independent directors. See "Executive Compensation - Director Compensation" for a
discussion of our independent director compensation program.
77
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The names of our directors and information about them, as furnished by the directors themselves, are set forth below:
Name
Age
Business Experience and Qualifications
Thomas M. Dunning (3)
71
Thomas M. Dunning has served as our Director since October 2007 and in July 2010 was
elected Lead Independent Director by our board of directors. Since his retirement in 2008 as
Chairman of Lockton Dunning Benefits, a company specializing in the design and servicing of
employee benefits, he has served as Chairman Emeritus. Mr. Dunning also served as
Chairman and Chief Executive Officer of Lockton Dunning Benefit Company, its predecessor
company, from 1998 to 2007 following the 1998 acquisition of Dunning Benefits Corporation
by the Lockton Group of Companies. Mr. Dunning currently serves on the boards of
directors of American Beacon Funds, BancTec, Baylor Health Care System Foundation,
Oncor Holdings, and a number of non-profit organizations. He is also a former Chairman of
the Dallas Fort Worth International Airport board and a former director of the Southwestern
Medical Foundation.
We believe Mr. Dunning’s experience with employee benefit programs and his understanding
of employee benefits as part of an overall employee compensation program is important to
Oncor in his roles as a director and member of the Organization and Compensation Committee
(O&C Committee). As member and former chair of the O&C Committee, overseeing the
design and effectiveness of Oncor’s executive compensation programs, Mr. Dunning offers
broad experience in understanding and addressing compensation-related issues and
challenges. His past appointments by Texas Governors as Chairman of the Texas Water
Development Board and a director on the boards of the Texas Department of Transportation,
Texas Department of Human Services and Texas Department of Criminal Justice, as well as
his past service as Chairman of the Dallas/Fort Worth International Airport board, add to the
extensive experience and leadership skills Mr. Dunning provides to our board. His experience
and familiarity with Texas government, combined with 48 years of experience in business and
strong record of civic involvement in Texas, are valuable to our Texas-based business.
Robert A. Estrada (1)
67
Robert A. Estrada has served as our Director since October 2007. Mr. Estrada is Chairman
of the Board and Chief Compliance Officer of Estrada Hinojosa & Company, Inc., an
investment banking firm specializing in public finance that he co-founded in 1992. In addition
to these positions, he also served as President and Chief Executive Officer of the firm from
1992 to 2006. Since its inception, Estrada Hinojosa & Company, Inc. has been involved in
municipal bond underwritings totaling over $80 billion and has provided financial advisory
services on financings totaling more than $50 billion. Mr. Estrada is a member of the boards
of directors of Oncor Holdings and several civic and arts organization boards. From 2001
until 2008, Mr. Estrada served on the Board of Regents of the University of Texas System,
a system with over 60,000 employees and a budget of approximately $14 billion, pursuant to
an appointment by the Governor of Texas. While serving on the University of Texas System
Board of Regents, Mr. Estrada chaired its audit, compliance and management review
committee. From 2004 until 2010, he served two consecutive terms on the board of
directors of the Federal Reserve Bank of Dallas. From 1990 to 1994, Mr. Estrada also
served on the board of directors of the Student Loan Marketing Association (Sallie Mae), a
$45 billion entity and was a member of the board’s executive committee.
We believe Mr. Estrada’s skills and experience in the financial and legal sectors qualify him to
serve as a director of Oncor and chair of the Audit Committee. We also believe his
comprehensive understanding of financial, compliance and business matters pertinent to us
and his experience in serving large clients and boards regarding these matters are significant
assets to our board. Mr. Estrada also has 28 years of legal experience as a securities attorney,
giving him a familiarity with securities law issues and investor disclosure requirements relevant
to our company.
78
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Name
Age
Business Experience and Qualifications
Thomas D. Ferguson (2)
60
Thomas D. Ferguson has served as our Director since January 2011. Mr. Ferguson
currently serves as a Managing Director of Goldman, Sachs & Co., having joined the firm in
2002. Mr. Ferguson heads the asset management efforts for the merchant bank’s U.S. real
estate investment activity. Mr. Ferguson serves on the board of EFH Corp. and is on the
board of managers of EFIH. Mr. Ferguson formerly held board seats at American Golf, one
of the largest golf course management companies in the world, Agricultural Company of
America Partners, LP, an owner and manage r of agriculture real estate, Nor1, a provid er of
revenue enhancement solutions to the travel industry , Associated British Ports, the largest
port company in the UK, Red de Carreteras, a toll road concessionaire in Mexico and Carrix,
one of the largest private container terminal operators in the world.
Mr. Ferguson was appointed by the Sponsor Group as a member of our board of directors
pursuant to the Sponsor Group’s right in the Limited Liability Company Agreem ent to
designate two directors. His extensive experience with corporate finance and in owning and
managing privately held enterprises qualifies Mr. Ferguson for serving on our board of
directors.
Printice L. Gary (1)
67
Printice L. Gary has served as our director since February 2014 .
Mr. Gary is the founding partner of, and since its founding in 1991
has served as the chief executive officer of, Carleton Residential
Properties, a real estate firm engaged in investing, developing,
general contracting and asset management of properties
throughout Texas and the Southwest. His prior business experience
includes serving as a Texas division partner for multi-family
development with Trammel Crow Residential from 1985-1991 and
serving as the president of Centex Corporation’s homebuilding and
mortgage banking subsidiary, Fox & Jacobs Homes, from 19781985. Mr. Gary also currently serves on the board of directors of
the National Equity Fund, Inc., a Chicago-based nonprofit tax credit
syndicator and asset manager that has sourced and invested over
$10 billion in affordable housing production across the nation. Mr.
Gary has also served on the governing bodies of various state
entities pursuant to appointments by the Governor(s) of Texas,
including the board of directors of the University of Texas
Investment Management Company, a $27 billion endowment fund,
from 2009 until 2013, the University of Texas System Board of
Regents from 2007 until 2013, where he was chairman of the
facilities planning and construction committee, the University of
Texas System Board for Lease of University Lands from 2008 to
2013, the Texas State Tax Reform Commission in 2003, and the
North Texas Tollway Authority board of directors from 1996 to 2000.
We believe Mr. Gary’s extensive skills and experience in the
business and financial sectors are a significant asset to us in his
role both as a director of Oncor and as a member of the Audit
Committee. In addition, Mr. Gary’s entrepreneurial background,
founding Carleton Residential Properties, a company that has
grown to over $100 million in annual revenues, brings valuable
experiences to our board of directors. His experience with Texas
government through his service on various state entities also
brings great value to our Texas-based business.
79
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Name
Age
Business Experience and Qualifications
William T. Hill, Jr. (2)
71
William T. Hill, Jr. has served as our Director since October 2007. In 2012, Mr. Hill began
practicing law with the law firm of William T. Hill, Jr., Attorney at Law. Prior to 2012, he
was of counsel to the Dallas criminal defense law firm of Fitzpatrick Hagood Smith & Uhl
LLP. In 2007, he served as Director of Strategic Initiatives of Mercy Street Ministries. From
1999 to 2007, Mr. Hill was Criminal District Attorney of the Dallas County District
Attorney’s office. Mr. Hill serves on the boards of directors of Hilltop Holdings,
Incorporated, a New York Stock Exchange listed company in the insurance industry, Baylor
Hospital Foundation, Oncor Holdings and a number of charitable organizations.
We believe Mr. Hill’s 47 years of experience with legal and compliance matters, along with his
management of a large group of highly skilled professionals, have given him considerable
knowledge concerning many matters that come before our board of directors. In addition, as
District Attorney he developed judgment and decision-making abilities that assist him today in
evaluating and making decisions on issues that face our board of directors. Mr. Hill has also
served on several civic and charitable boards over the past 37 years, which has given him
invaluable experience in corporate governance matters.
Jeffrey Liaw (3)
37
Jeffrey Liaw has served as our Director since November 2007. Mr. Liaw currently serves as
the Chief Financial Officer of FleetPride, Inc., a nationwide distributor of heavy-duty truck
and trailer parts, a position he has held since December 2012. From 2005 until December
2012, Mr. Liaw served as a principal with TPG, focusing on their energy and industrial
investing practice areas. TPG is a leading private investment firm with approximately $55
billion in assets under management. Before joining TPG in 2005, he worked for Bain Capital
in its industrials practice since 2001. Mr. Liaw also serves on the board of directors of
Armstrong World Industries, Inc., a New York Stock Exchange-listed designer and
manufacturer of floors and ceilings , and Oncor Holdings, and is on the board of managers of
EFIH. Mr. Liaw also previously served on the boards of directors of Graphic Packaging
Holding Company, a New York Stock Exchange-listed provider of packaging solutions , and
EFH Corp.
Mr. Liaw was appointed by the Sponsor Group as a member of our board of directors
pursuant to the Sponsor Group’s right in the Limited Liability Company Agreement to
designate two directors. As a former investment professional in the energy and industrial
investing practice of TPG and a current chief financial officer of a large company, Mr. Liaw
provides his valuable insights and knowledge regarding energy-related and financial matters.
Timothy A. Mack
61
Timothy A. Mack has served as our director since February 2014. Mr. Mack has been a
member of the Dallas, Texas law firm, Mack Matheson & Marchesoni PLLC, since March
2009. Prior thereto, Mr. Mack was a partner at an international law firm, Hunton & Williams
LLP, and its predecessor firm in Dallas, Texas, where he had practiced law since 1980. Mr.
Mack’s law practice focuses on energy-related matters, particularly finance, securities,
corporate and partnership law, corporate governance and mergers and acquisitions. Mr. Mack
is a member of the board of directors of various local non-profit organizations.
We believe Mr. Mack’s experience of over 30 years in advising energy companies in finance,
securities, corporate governance and merger and acquisition matters, as well as his prior
experience in participating in the management of a large international law firm, brings to the
Board additional knowledge and valuable first-hand experience with the duties of directors.
80
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Name
Rheal R. Ranger (1)
Business Experience and Qualifications
Age
55
Rheal R. Ranger has served as our Director since October 2012. Mr. Ranger currently
serves as Executive Vice President with Borealis Infrastructure Management Inc. (Borealis),
the infrastructure investment arm of Canada’s OMERS pension plan, a position he has held
since January 2012. In such role, he is responsible for leading and managing Borealis's
transaction team in New York. Prior to assuming this role, he was Borealis's Executive Vice
President and Chief Financial Officer, a position that he fulfilled since joining Borealis in June,
2004. From 1987 to 2004, he served in various executive management positions (including
CFO and CEO) within the Standard Broadcasting group of companies, one of Canada’s
largest broadcast companies, and from 1982 to 1987 he served as a Tax Manager with
Arthur Andersen, a large international accounting firm. In his role as an officer of Borealis,
Mr. Rheal has been appointed as an officer and director of several Borealis affiliates and
companies in which Borealis invests. He has served as a director for Midland Co-Generation
Venture, a 1633MW gas fired power plant located in Midland, Michigan, since December
2012.
Mr. Ranger was appointed as a member of our board of directors by Texas Transmission
pursuant to Texas Transmission’s right under the Limited Liability Company Agreement to
designate two directors. Mr. Ranger has extensive experience in structuring multi-layered
investment structures in different regulatory and tax jurisdictions and has actively participated
in a number of Borealis's acquisitions and asset management activities. We believe Mr.
Ranger’s extensive business, financial and management experience in the energy industry
brings great value to our board of directors, particularly with respect to management and
financial matters.
Robert S. Shapard
58
Robert S. Shapard has served as the Chairman of our Board of Directors and Chief
Executive since April 2007. Mr. Shapard joined EFH Corp.’s predecessor in October 2005
as a strategic advisor, helping implement and execute growth and development strategies for
Oncor. Between March and October 2005, he served as Chief Financial Officer of Tenet
Healthcare Corporation, one of the largest for-profit hospital groups in the United States, and
was Executive Vice President and Chief Financial Officer of Exelon Corporation, a large
electricity generator and utility operator, from 2002 to February 2005. Before joining
Exelon, he was executive vice president and chief financial officer of Ultramar Diamond
Shamrock, a North American refining and marketing company, since 2000. Previously, from
1998 to 2000, Mr. Shapard was CEO and managing director of TXU Australia Pty. Ltd., a
subsidiary of the former TXU Corp., which owned and operated electric generation,
wholesale trading, retail, and electric and gas regulated utility businesses. Mr. Shapard has
served since September 2013 as a member of the board of directors and audit committee of
Leidos Holdings, Inc. (formerly SAIC, Inc.), a New York Stock Exchange -listed provider of
scientific, engineering and systems integration services . Mr. Shapard is also a director of
Oncor Holdings and a manager of Bondco. He also serves as chairman of the board of
directors of Gridwise ® Alliance, the nation’s foremost smart grid organization.
As our chief executive, Mr. Shapard brings his unique knowledge of our company and our
industry to the board of directors. His prior experience with EFH Corp., Exelon and as CEO
of TXU Australia gives him extensive leadership experience in the electric industry in both
regulated and unregulated markets. Mr. Shapard’s previous experience as chief financial
officer of Tenet Healthcare Corporation and Ultramar Diamond Shamrock provided him with
substantial experience in other complex financial and business environments.
81
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Name
Age
Business Experience and Qualifications
Richard W. Wortham III (2) (3)
75
Richard W. Wortham III has served as our Director since October 2007. Since 1976 he has
served as Trustee of The Wortham Foundation, Inc., a private philanthropic foundation with
assets of approximately $260 million dedicated to the support and development of Houston’s
cultural fabric. Mr. Wortham has served as President of the Wortham Foundation, Inc. since
November 2011 and served as Secretary and Treasurer from November 2008 until
November 2011. From November 2005 to November 2008, he was Chairman and Chief
Executive Officer of that foundation. Mr. Wortham also serves as a Trustee and member of
the audit committee of HC Capital Trust, a $1 4 billion family of mutual funds, and the
Center for Curatorial Studies at Bard College and is a Life Trustee and Treasurer of The
Museum of Fine Arts, Houston. Mr. Wortham is also a director of Oncor Holdings.
Additionally, Mr. Wortham has held a leadership role in several companies, including a
founding role in several national banks.
We believe Mr. Wortham’s over 31 years of extensive business and civic experience qualify
him to serve on our board of directors and chair our O&C Committee. Mr. Wortham also
currently serves on the executive, finance, audit and investment committees of the Museum
of Fine Arts, Houston, which presently has an endowment of approximately $1 billion. Mr.
Wortham’s experience has given him substantial and significant knowledge and experience
regarding financial management and corporate governance matters relevant to our board of
directors.
Steven J. Zucchet (2) (3)
48
Steven J. Zucchet has served as our Director since November 2008. Mr. Zucchet is a
Senior Vice President of Borealis Infrastructure Management, Inc. (Borealis), an investment
arm of Canada’s OMERS pension plan, a position he has held since November 2003. From
1996 until joining Borealis, Mr. Zucchet served as Chief Operating Officer of Enwave Energy
Ltd., where he was responsible for operations and major infrastructure projects. In his role
as an officer of Borealis, Mr. Zucchet has been appointed as an officer and director of several
Borealis affiliates and companies in which Borealis invests. His focus at Borealis is in the
energy sector, where he leads the pursuit of investment opportunities in the energy sector and
is responsible for asset management.
Mr. Zucchet was appointed as a member of our board of directors by Texas Transmission
pursuant to Texas Transmission’s right under the Limited Liability Company Agreement to
designate two directors. Mr. Zucchet has extensive experience in the energy industry.
Through Borealis, he serves on the board of directors for Bruce Power A, a four reactor
nuclear site located in Ontario, Canada. His experience prior to joining Borealis also focused
in the energy industry, serving as Chief Operating Officer of Enwave Energy Ltd. for seven
years. Prior to joining Enwave Energy Ltd., he spent seven years with an international
consulting firm where he worked primarily on transportation and energy related projects. We
believe Mr. Zucchet’s experience in the energy industry gives him an important and valuable
understanding of our business.
_______________
(1)
(2)
(3)
Member of Audit Committee.
Member of Nominating and Governance Committee.
Member of Organization and Compensation Committee.
82
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Director Appointments
Pursuant to our Limited Liability Company Agreement, the Sponsor Group (through Oncor Holdings) has a right to
designate two individuals to serve on our board of directors. Mr. Ferguson, a managing director of Goldman, Sachs & Co.,
and Mr. Liaw, a former TPG principal, are each managers of the sole general partner of Texas Holdings and were each
designated to serve on our board of directors by the Sponsor Group. Our Limited Liability Company Agreement also grants
Texas Transmission the right to designate two individuals to serve on our board of directors. Rheal R. Ranger and Steven J.
Zucchet, each of whom is an officer of Borealis, an affiliate of Texas Transmission, were designated to serve on our board of
directors by Texas Transmission. Directors appointed by the Sponsor Group and Texas Transmission are referred to as
member directors.
Our Limited Liability Company Agreement also provides that six of our directors will be independent directors under the
standards set forth in Section 303A of the New York Stock Exchange Manual and other standards in our Limited Liability
Company Agreement, and that two of those independent directors will be special independent directors under the standards set
forth in our Limited Liability Company Agreement. See “Certain Relationships and Related Transactions, and Director
Independence — Director Independence” for a discussion of the independent director and special independent director
qualifications. Our board of directors has determined that Messrs. Dunning, Estrada, Gary, Hill, Mack and Wortham are
independent directors and that each of M essrs. Gary and Hill qualifies as a special independent director. Independent directors
are appointed by the nominating committee of Oncor’s Holdings’ board of directors. The nominating committee of Oncor
Holdings is required to consist of a majority of independent directors.
Our board of directors determined that Nora Mead Brownell, who served as a member of our board of directors until her
resignation on February 12, 2014, qualified as an independent director and special independent director f or purposes of our
Limited Liability Company Agreement. Our board of directors determined that Monte E. Ford, who served as a member of our
board of directors until his resignation on February 25, 2014, qualified as an independent director for purposes of our Limited
Liability Company Agreement. As required by our Limited Liability Company Agreement and the Second Amended and
Restated Limited Liability Company Agreement of Oncor Holdings, the nominating committee of Oncor Holdings appointed Mr.
Gary as Ms. Brownell’s successor and Mr. Mack as Mr. Ford’s successor. Our board of directors has determined that , for
purposes of our Limited Liability Company Agreement, Mr. Gary qualifies as an independent director and special independent
director and Mr. Mack qualifies as an independent director .
The board of directors of the sole member of Oncor Holdings has the right, pursuant to the terms of our Limited Liability
Company Agreement, to designate one director that is an officer of Oncor. Mr. Shapard, our Chairman and Chief Executive,
serves as this director.
Audit Committee
The Audit Committee is a separately-designated standing audit committee, established in accordance with section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Our Audit Committee is composed of Messrs. Estrada, Gary
and Ranger, each of whom is an “audit committee financial expert” as defined in Item 407(d)(5) of SEC Regulation SK. Messrs. Estrada and Gary are independent directors under the standards set forth in our Limited Liability Company
Agreement. Mr. Ranger is a member director, appointed by Texas Transmission.
83
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Executive Officers
The names of our executive officers and information about them, as furnished by the executive officers themselves, are set
forth below:
Name
Age
Robert S. Shapard
58
Positions and Offices
Presently Held
Business Experience (Preceeding Five Years)
Chairman of the Board and
Chief Executive
Robert S. Shapard has served as the Chairman of our Board of
Directors and Chief Executive since April 2007. Mr. Shapard
joined EFH Corp.’s predecessor in October 2005 as a strategic
advisor, helping implement and execute growth and development
strategies for Oncor. Between March and October 2005, he served
as Chief Financial Officer of Tenet Healthcare Corporation, one of
the largest for-profit hospital groups in the United States, and was
Executive Vice President and Chief Financial Officer of Exelon
Corporation, a large electricity generator and utility operator,
from 2002 to February 2005. Before joining Exelon, he was
executive vice president and chief financial officer of Ultramar
Diamond Shamrock, a North American refining and marketing
company, since 2000. Previously, from 1998 to 2000, Mr.
Shapard was CEO and managing director of TXU Australia Pty.
Ltd., a subsidiary of the former TXU Corp., which owned and
operated electric generation, wholesale trading, retail, and electric
and gas regulated utility businesses. Mr. Shapard has served since
September 2013 as a member of the board of directors and audit
committee of Leidos Holdings, Inc. (formerly SAIC, Inc.), a New
York Stock Exchange-listed provider of scientific, engineering and
systems integration service. Mr. Shapard is also a director of
Oncor Holdings and a manager of Bondco. He also serves as
chairman of the board of directors of Gridwise ® Alliance, the
nation’s foremost smart grid organization.
Walter Mark Carpenter
61
Senior Vice President,
T&D Operations
Walter Mark Carpenter has served as our Senior Vice President,
T&D Operations since October 2011, and in such role is
responsible for overseeing transmission grid management
operations and Oncor’s interface with ERCOT. He also oversees
the system’s distribution operation centers, as well as Oncor’s
outage management system, the deployment of the advanced
meter system and its integration into operations. From February
2010 until October 2011 he served as our Vice President and Chief
Technology Officer, and from 2008 until February 2010 he
served as our Vice President and Chief Information Officer. Mr.
Carpenter has served EFH Corp’s predecessor and Oncor for 39
years and has held various field management and engineering
management positions in transmission and distribution. Mr.
Carpenter is a registered Professional Engineer in the State of
Texas and is a member of the Institute of Electrical and Electronic
Engineers (IEEE) Power System Relaying Committee and the
Texas Society of Professional Engineers.
84
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Positions and Offices
Presently Held
Business Experience (Preceeding Five Years)
Name
Age
Don J. Clevenger
43
Senior Vice President,
Strategic Planning
Don J. Clevenger has served as our Senior Vice President,
Strategic Planning, since January 2013. From February 2010
through December 2012, he served as our Senior Vice President,
External Affairs and before that, served as our Vice President,
External Affairs from June 2008 until February 2010, Mr.
Clevenger served as our Vice President, Legal and Corporate
Secretary from December 2007 to June 2008. Between
November 2005 and December 2007, Mr. Clevenger held a
leadership position in our company with various legal and
regulatory responsibilities. Prior to his transfer to Oncor in
November 2005, he was Senior Counsel of the Business Services
unit of EFH Corp. since April 2004. Mr. Clevenger was a partner
in the law firm of Hunton & Williams LLP before he joined EFH
Corp.’s predecessor. Mr. Clevenger is also a manager of Bondco
and served as a member of the board of directors of the
Association of Electric Companies of Texas, Inc.
David M. Davis
56
Senior Vice President and
Chief Financial Officer
David M. Davis has served as our Senior Vice President and Chief
Financial Officer since February 2010. From July 2006 until
February 2010, he served as Vice President and Chief Financial
Officer. He joined Oncor in 2004 and held a leadership position in
Oncor’s finance and accounting group until July 2006. From
1991 to 2004, Mr. Davis served in various positions at EFH
Corp.’s predecessor including roles in accounting, information
technology and financial planning. Mr. Davis is a certified public
accountant. Mr. Davis is also a manager of Bondco.
Deborah L. Dennis
59
Senior Vice President,
Human Resources &
Corporate Affairs
Deborah L. Dennis has served as our Senior Vice President,
Human Resources & Corporate Affairs since January 2013. Ms.
Dennis has been employed with Oncor and its predecessors and
affiliates for 35 years in a number of corporate and customer
service functions, including 13 years as a Vice President, most
recently serving as Vice President of Corporate Affairs from 2011
to December 2012, and Vice President - Dallas Customer
Operations from 2007 to 2011. Ms. Dennis has extensive
experience in human resources, customer service, supply chain,
outsourcing management and corporate philanthropy.
James A. Greer
53
Senior Vice President and
Chief Operating Officer
James A. Greer has served as our Senior Vice President and Chief
Operating Officer since October 2011. From October 2007 until
October 2011 he served as our Senior Vice President, Asset
Management and Engineering and in such role was responsible for
the development of strategies, policies and plans for optimizing the
value and performance of electric delivery systems and related
assets. From 2004 to 2007, Mr. Greer served a similar role as our
Vice President. Since joining EFH Corp.’s predecessor in 1984,
Mr. Greer has held a number of leadership positions within Oncor
and EFH Corp. in such areas as engineering, operations and
governmental relations. Mr. Greer also serves as a member of the
Board of Directors of the Texas Board of Professional Engineers
and is a registered Professional Engineer in the State of Texas.
85
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Name
Age
Michael E. Guyton
55
Positions and Offices
Presently Held
Business Experience (Preceeding Five Years)
Senior Vice President and
Chief Customer Officer
Michael E. Guyton has served as our Senior Vice President since
January 2013 and, as of July 2013, also our Chief Customer
Officer. In his role as Senior Vice President and Chief Customer
Officer, Mr. Guyton oversees activities including customer
operations and service, community relations and economic
development initiatives. Mr. Guyton has extensive experience in
customer operations, having served in various customer
operations positions with Oncor and its predecessors and affiliates
for 36 years, including 11 years as a Vice President. Prior to
assuming his current role, Mr. Guyton served as our Vice
President of Customer Operations w ith responsibility for customer
operations in the city of Fort Worth and Tarrant County since
July 2006. Mr. Guyton also currently serves as chairman of the
board of directors of Texas Health Harris Methodist Hospital in Ft.
Worth.
E. Allen Nye, Jr.
46
Senior Vice President,
General Counsel &
Secretary
E. Allen Nye, Jr. has served as our Senior Vice President, General
Counsel and Secretary since January 2011 , and in such role is
responsible for overseeing all of Oncor’s legal and compliance
matters. In January 2013 his responsibilities were expanded to
include oversight of all regulatory and governmental affairs activity
of Oncor. From June 2008 until joining Oncor, Mr. Nye
practiced law as a partner in the Dallas office of Vinson & Elkins
LLP, where he focused on representation of regulated energy
companies before state and federal government agencies, including
the PUCT, the State Office of Administrative Hearings and the
FERC. Prior to Vinson & Elkins, Mr. Nye was a partner in the
law firm of Hunton & Williams from January 2002 until May
2008.
There is no family relationship between any of our executive officers, between any of our directors, or between any
executive officer and any director.
Code of Conduct
We maintain certain corporate governance documents on our website at www.oncor.com. Our Code of Conduct can be
accessed by selecting “Corporate Governance” under the “Investors” tab on the website. Our Code of Conduct applies to all of
our employees and officers, including our Chief Executive, Chief Operating Officer, Chief Financial Officer and Controller,
and it also applies to our directors, except for provisions pertinent only to employees. Any amendments to our Code of Conduct
will be posted on our website promptly. Printed copies of the corporate governance documents that are posted on our website are
available to any person without charge upon written request to the Corporate Secretary of Oncor Electric Delivery Company
LLC at 1616 Woodall Rodgers Freeway, Suite 7E-002, Dallas, Texas 75202-1234.
86
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Item 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
Our board of directors has designated an Organization and Compensation Committee of the board of directors (O&C
Committee) to establish and assess our executive compensation policies, which include participation in Oncor-sponsored
programs as well as certain employee benefit programs sponsored by EFH Corp. The O&C Committee met five times in 2013.
The responsibilities of the O&C Committee include:
·
·
·
Determining and overseeing executive compensation programs, including making recommendations to our board of
directors, when and if its approval is required, with respect to the adoption, amendment or termination of incentive
compensation, equity-based and other executive compensation and benefit plans, policies and practices;
Establishing, reviewing and approving corporate goals and objectives relevant to executive compensation and
evaluating the performance of our Chief Executive (CEO) and other executive officers in light of those goals and
objectives and ultimately approving executive compensation based on those evaluations; and
Advising our board of directors with respect to compensation of its independent directors.
The O&C Committee conducts a review of total direct compensation for our executive officers, including the executive
officers named in the Summary Compensation Table below (collectively with the CEO, the Named Executive Officers, and
each, a Named Executive Officer) from time to time as it deems appropriate. The O&C Committee conducted such a review in
2013. In determining the total direct compensation of our executive officers, the O&C Committee considers the performance of
the executives, a competitive market analysis of executive compensation provided by a compensation consultant engaged by the
O&C Committee and a peer group analysis. The O&C Committee obtains the input of the CEO on the performance of
executive officers reporting to the CEO. The CEO assesses the performance of each executive reporting to him in light of the
executive’s business unit and function and presents a performance evaluation and compensation recommendation for each of
these individuals to the O&C Committee. The CEO also reviews and considers the competitive market analysis in making his
recommendation. The O&C Committee also evaluates the CEO’s performance. The O&C Committee then determines total
compensation, including base salary, annual incentive awards and long-term incentive awards, for each of our executive
officers as it deems appropriate.
In the first quarter of each fiscal year, the O&C Committee approves corporate goals and objectives under the annual
incentive program and long term incentive program for our executive officers for the current fiscal year, as well as the annual
incentive payouts relating to the previous fiscal year’s performance. Following the completion of each fiscal year, in connection
with the annual determination of the incentive awards to be paid to our executive officers reporting to the CEO, the CEO
conducts an annual performance review of each such executive officer and evaluates each executive’s performance relative to the
corporate goals and objectives for the completed fiscal year set by the O&C Committee. The CEO then makes
recommendations to the O&C Committee with respect to other executive officers’ annual incentive compensation. The O&C
Committee considers the CEO’s recommendations when determining annual incentive award payouts to those executive officers
for the previous fiscal year, as well as goals and objectives under the annual incentive programs for the current fiscal year. The
O&C Committee also annually evaluates the CEO’s performance in light of the goals and objectives for the previous fiscal year
and, after considering this evaluation, determines the CEO’s annual incentive award payout, as well as goals and objectives
under the annual incentive programs for the current fiscal year.
Compensation Philosophy
Our compensation philosophy, principles and practices are intended to compensate executives appropriately for their
contribution to the attainment of key strategic objectives, and to strongly align the interests of executives and equity holders
through equity-based plans and performance goals. We believe that:
·
Levels of executive compensation should be based upon an evaluation of the performance of our business (through
operational metrics including safety, reliability, operational efficiency and infrastructure readiness and financial
performance) and individual executives as well as a comparison to compensation levels of persons with
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·
·
comparable responsibilities in business enterprises of similar size, scale, complexity, risk and performance;
Compensation plans should balance both short-term and long-term objectives, and
The overall compensation program should emphasize variable compensation elements that have a direct link to
company and individual performance.
Objectives of Compensation Philosophy
Our compensation philosophy is designed to meet the following objectives:
·
·
·
·
·
Attracting and retaining high performers;
Rewarding company and individual performance by providing compensation levels consistent with the level of
contribution and degree of accountability;
Aligning performance measures with our goals and allocating a significant portion of the compensation to incentive
compensation in order to drive the performance of our business;
Basing incentive compensation in part on the satisfaction of company operational metrics (including safety, reliability,
operational efficiency and infrastructure readiness) with the goal of motivating performance towards improving the
services we provide our customers, and
Creating value for our equity holders and promoting the long-term performance of the company by strengthening the
correlation between the long-term interests of our executives and the interests of our equity holders.
Elements of Compensation
In an effort to achieve our compensation objectives, we have established a compensation program for our executives that
principally consists of:
·
·
·
·
·
·
Base salary;
Short-term incentives through the opportunity to earn an annual performance bonus pursuant to the Oncor Third
Amended and Restated Executive Annual Incentive Plan (Executive Annual Incentive Plan);
Long-term incentives through (a) the opportunity to purchase equity interests in Investment LLC, granted at the O&C
Committee’s discretion pursuant to the 2008 Equity Interests Plan for Key Employees of Oncor Electric Delivery
Company LLC and its Affiliates (Equity Interests Plan), and (b) awards under the Oncor Electric Delivery Company
LLC Long-Term Incentive Plan (Long-Term Incentive Plan);
Deferred compensation and retirement plans through (a) the opportunity to participate in a 401(k) savings plan (EFH
Thrift Plan) sponsored by EFH Corp. and a salary deferral program (Salary Deferral Program) and receive certain
company matching contributions, (b) the opportunity to participate in a defined benefit retirement plan and a
supplemental retirement plan, and (c) an employer-paid subsidy for health coverage upon the executive’s retirement
from Oncor for executives hired prior to January 1, 2002;
Perquisites and other benefits, including, for executives elected prior to January 1, 2004, the opportunity to participate
in a split-dollar life insurance plan (EFH Split-Dollar Life Insurance Plan) sponsored by EFH Corp.; and
Contingent payments through a change of control policy and a severance plan.
For more information about each of the incentive and other benefit plans available to our executive officers see the
compensation tables and the accompanying narratives immediately following “– Compensation Discussion and Analysis.”
Compensation Consultant
In January 2013, the O&C Committee engaged Towers Watson, a compensation consultant, to update its 2012
competitive analysis of executive compensation for certain executives as a result of changes to the scope of responsibilities for
certain executives effective January 1, 2013. In October 2013, the O&C Committee again engaged Towers Watson to advise and
report directly to the O&C Committee on executive compensation issues, including a competitive market analyses of our
executive compensation and independent directors’ compensation. Towers Watson also provides consulting and other services to
Oncor’s human resources department.
88
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Market Data
While we try to ensure that the greater part of an executive officer’s compensation is directly linked to the executive’s
individual performance and Oncor’s financial and operational performance, we also seek to set our executive compensation
program in a manner that is competitive with that of our peer group in order to promote retention of key personnel and to attract
high-performing executives from outside our company. In the third quarter of 2013, the O&C Committee assessed
compensation of our executives against a number of companies in the transmission/distribution industry and fully integrated
utilities. For purposes of the 2013 assessment, Towers Watson completed a competitive market analysis of executive
compensation for the O&C Committee in October 2013. This analysis involved national utility industry market survey data
targeted at both the 50 th and 75th percentiles based on compensation information for utilities in the United States with respect to
base salary, target cash annual incentives, and long-term incentives, and the resulting target total cash compensation (base
salary and target cash annual incentives) and total direct compensation (base salary, target cash annual incentives and long-term
incentives). The survey data was aged from the reporting date to January 1, 2014, using an annual rate of 3%, which was the
average 2013 merit increase for executives based on the market survey data. Market values were also size-adjusted to $3.3
billion in annual revenues.
In addition to the market data for utilities in the national marketplace, Towers Watson also provided publicly available
data for a subset of these utilities, a peer group of transmission/distribution utility companies as well as fully integrated utility
companies. Oncor’s size, based on revenues, is at the 50 th percentile of this peer group. Towers Watson provided information on
total target direct compensation, base salary, annual incentive targets and long-term incentives with respect to the five highest
paid executives at each of those companies, along with comparisons of each such executive to the comparable Oncor executive.
We include both transmission/distribution utility companies as well as fully integrated utility companies in our peer group
because we compete with both for qualified executive personnel. The primary peer group consisted of the following 12
companies:
American Electric Power Co., Inc.
Consolidated Edison, Inc.
CenterPoint Energy. Inc.
Cleco Corp.
El Paso Electric Co.
IdaCorp Inc.
ITC Holdings Corp.
Northeast Utilities
OGE Energy Corp.
Pepco Holdings Inc.
Portland General Electric Co.
TECO Energy, Inc.
The O&C Committee considered both peer group data and the competitive market survey data, along with individual
performance and responsibilities, when determining total direct executive compensation, as well as each element of total direct
compensation (base salary, annual incentives and long-term incentives). The O&C Committee targeted total direct
compensation around the 50th percentile of the competitive market survey group. The 2013 competitive market analysis
indicated that aggregate target total direct compensation of our executives was below the 50 th percentile of the competitive market
survey group. As a result of its review of the Towers Watson study and individual performance and responsibilities, effective
November 26, 2013, the O&C Committee increased the base salaries of all Named Executive Officers, including our CEO,
and increased the target annual incentive from 50% of base salary to 55% for Messrs. Clevenger, Davis, Greer and Nye.
Compensation Elements
A significant portion of each executive officer’s compensation is variable, at-risk and directly linked to achieving
company performance objectives set by the O&C Committee and the alignment with equity owner interests in order to achieve
long-term success of our company. Other factors impacting compensation include individual performance, retention risk, and
market compensation data. None of these other factors are assigned individual weights, but are considered together. The
company has no policies or formula for allocating compensation among the various elements. The following is a description of
the principal compensation components provided to our executives.
Base Salary
We believe that base salary should be commensurate with the scope and complexity of each executive’s position, the level
of responsibility required, and demonstrated performance. We also believe that a competitive level of base salary is required to
attract and retain qualified talent.
As part of its review of total direct compensation for our executives officers, the O&C Committee reviews and determines
executive officers’ base salaries periodically as it deems appropriate. The periodic review includes the O&C Committee’s
review of the most recent analysis of our executive compensation against competitive market data and
89
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
comparison to our peer group. Our CEO also reviews this analysis, along with the performance and level of responsibility of
each executive officer, reporting to him, and makes recommendations to the O&C Committee regarding any salary changes for
such executive officers. The O&C Committee may also approve salary increases as a result of an executive’s promotion or a
significant change in an executive’s responsibilities.
In January 2013, the O&C Committee engaged Towers Watson to update its 2012 competitive analysis of executive
compensation for certain executives as a result of changes to the scope of responsibilities for certain executives effective January
1, 2013. This study indicated that the base salary of our Senior Vice President and Chief Operating Officer, James A. Greer,
was significantly below the 50 th percentile of the competitive market for his position. As a result, the O&C Committee increased
Mr. Greer’s base salary in February 2013. No other changes were made to the compensation of our Named Executive Officers as
a result of the January 2013 update to the 2012 Towers Watson study. In October 2013, the O&C Committee also engaged
Towers Watson to, among other things, prepare a competitive market analysis of our executive compensation. As a result of this
study, the O&C Committee increased the base salary of each of our Named Executive Officers, effective November 26, 2013,
to bring those salaries closer to the 50 th percentile of the competitive market for their respective offices.
Annual Base Salary for Named Executive Officers
The annual base salaries of Named Executive Officers at December 31, 2013 were as follows:
At
December 31, 2013 (1)
Name
Title
Robert S. Shapard
Chairman of the Board and Chief Executive Officer
$750,000
David M. Davis
Senior Vice President and Chief Financial Officer
$400,000
Don J. Clevenger
Senior Vice President, Strategic Planning
$385,000
James A. Greer
Senior Vice President and Chief Operating Officer
$400,000
E. Allen Nye, Jr.
Senior Vice President, General Counsel & Secretary
$445,000
_______________
(1)
Annual base salaries were increased effective November 26, 2013 as follows: Mr. Shapard - increased from $700,000 to $750,000; Mr.
Davis - increased from $375,000 to $400,000; Mr. Clevenger - increased from $365,000 to $385,000; Mr. Greer - increased from
$375,000 to $400,000; and Mr. Nye - increased from $425,000 to $445,000.
Executive Annual Incentive Plan
The O&C Committee and our CEO are responsible for administering the Executive Annual Incentive Plan. The award
targets under the plan are established on a company-wide basis and the O&C Committee seeks to set these targets at
performance challenging levels. The O&C Committee determines annual target award percentages for executives based on an
evaluation of the most recent competitive market analysis conducted by their independent compensation consultant and, with
respect to executives other than our CEO, recommendations from our CEO. In making his recommendations to the O&C
Committee regarding target award percentages, our CEO assesses the performance goals of each executive reporting to him
against the goals of the executive’s business unit and function and reviews the competitive market analysis. Executive Annual
Incentive Plan awards are based on a target payout, which are set as a percentage of a participant’s base salary and are based on
target performance of Oncor and individual participant performance. The target payout for each executive is set near the median
of executives with similar responsibilities among our competitive market survey group. Elected officers of the Company having
a title of vice president or above and other specified key employees are eligible to participate in the Executive Annual Incentive
Plan provided they are employed by us for a period of at least three full months during a plan year. Participants who die,
become disabled or retire during a plan year are eligible to receive prorated awards under the plan for that plan year provided
they completed at least three full months of employment in such
90
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plan year. Any awards to executive officers are in the sole discretion of the O&C Committee, and such awards are prorated for
the number of months in which the individual was employed by the company.
The aggregate amount of funding for awards payable in any given plan year is determined based on (1) the target award
levels of all participants in the Executive Annual Incentive Plan (Aggregate Incentive Pool), (2) achievement of a threshold and
target “EBITDA,” consisting of Oncor’s earnings before interest, taxes, depreciation and amortization, excluding securitization
revenue and amortization of purchase accounting adjustments, and (3) any additional operational, financial or other metrics that
the O&C Committee elects to apply in determining the aggregate amount of awards (Additional Metrics). Based on the level of
attainment of these EBITDA and any Additional Metrics targets, the O&C Committee determines an aggregate performance
final funding percentage. This final funding percentage is applied to the Aggregate Incentive Pool to provide the initial amount of
funds available for awards to participants under the Executive Annual Incentive Plan, which may then be adjusted by
individual performance modifiers. The O&C Committee sets Additional Metrics, performance goals, target awards and
individual performance modifiers in its discretion, and also has broad discretion to adjust funding percentages and individual
awards.
For 2013, the O&C Committee established Additional Metrics based on operational targets relating to (1) a safety metric
based on the number of employee injuries using a Days Away, Restricted or Transfer (DART) system, (2) a reliability metric as
measured by the System Average Interruption Duration Index (SAIDI), (3) an operational efficiency metric based on the
achievement of targeted operation and maintenance expense (O&M) and sales, general and administrative expense (SG&A)
levels determined on a per customer cost basis, and (4) an infrastructure readiness metric based on the capital expenditure per
three year average kW peak. The purpose of these operational targets, which are based on safety, reliability, operational
efficiency and infrastructure readiness metrics, is to promote enhancement of our services to customers. The safety metric is
important to our operations because it promotes the health and welfare of our employees. In addition, lowering the number of
accidents reduces our operating costs, which in turn contributes to lower rates for our customers. Reliability is measured by
SAIDI, which measures the average number of minutes electric service is interrupted per customer in a year. This metric
promotes our commitment to minimizing service interruptions to our customers as the lower the SAIDI level for the year, the
greater the funding percentage under the Executive Annual Incentive Plan. Since weather can greatly impact reliability and is
outside of our control, the reliability metric measures SAIDI on a non-storm basis. The purpose of the operational efficiency
metric is to promote lower expenditures relative to customers served, which in turn contributes to lower rates for our customers.
The purpose of the infrastructure readiness metric is to promote capital expenditures in line with the previously set capital
plan. While this metric discourages exceeding the budget, it also discourages spending that is too far below the capital plan, as
we believe expenditures to improve our facilities and other capital expenditures are important to maintaining the quality of and
enhancing our services to our customers.
Funding of the Aggregate Incentive Pool is based first on the achievement of stated EBITDA thresholds and targets set by
the O&C Committee for that year and then, assuming the EBIDTA threshold is met, the operational funding percentage based
on achievement of the Additional Metrics. Incentives are only payable under the Executive Annual Incentive Plan in the event the
threshold EBITDA is achieved. If the threshold EBITDA is achieved, then the EBITDA funding percentage is 50%. If the
target EBITDA is achieved, the EBITDA funding percentage is 100%. If actual EBITDA exceeds the target EBITDA, then
funding equals the operational funding percentage, up to 150%. If actual EBITDA is less than or is equal to the target
EBITDA, then funding of the Aggregate Incentive Pool is the lesser of the EBITDA funding percentage or the operational
funding percentage. For 2013, our EBITDA for purposes of the Executive Annual Incentive Plan met the threshold EBITDA
and met the target EBITDA, resulting in an EBITDA funding percentage of 100%. Our operational funding percentage was
102.8%. As a result, funding of the Aggregate Incentive Pool was based on the lesser of the two percentages, resulting in an
Aggregate Incentive Pool funding percentage of 100%. For more detailed information on the calculation of the 2013 EBITDA
funding percentage and the operational funding percentage, see the narrative that follows the Grants of Plan- Based Awards –
2013 table.
To calculate an executive officer’s award amount, the final funding percentage is first multiplied by the executive officer’s
target award, which is computed as a percentage of actual base salary. Based on the executive officer’s performance, an
individual performance modifier is then applied to the calculated award to determine the final incentive payment. An individual
performance modifier is based on reviews and evaluations of the executive officer’s performance by the CEO and the O&C
Committee (or solely the O&C Committee in the case of our CEO). Factors used in determining individual performance
modifiers may include operational measures (including the safety, reliability, operational efficiency and infrastructure readiness
metrics discussed above), company objectives, individual management and other goals, specific job objectives and
competencies, the demonstration of team building and support attributes and general demeanor and behavior. Each executive
officer’s individual performance modifier is set by the O&C Committee within a range
91
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determined in its discretion. For 2013 plan year awards, the O&C Committee set this range at plus fifty percent (+50%) to
minus fifty percent (-50%). The O&C Committee did not apply any individual performance modifiers to 2013 Named
Executive Officer awards.
The following table provides a summary of the 2013 targets and actual awards for each Named Executive Officer. All
awards under the Executive Annual Incentive Plan are made in the form of lump sum cash payments to participants by March
15 of the year following the plan year to which the award relates.
2013 Annual Incentives (Payable in 2014) for Named Executive Officers
Opportunity
,
Target Payout
Opportunity
(% of Salary)
Target Award
($ Value)
Robert S. Shapard
75%
David M. Davis (1)
55%
55%
55%
55%
Name
Don J. Clevenger (1)
James A. Greer (1)
E. Allen Nye, Jr. (1)
Actual Award
Actual Award ($)
(% of Target)
528,125
542,913
190,208
184,937
188,125
215,188
195,534
190,115
193,393
221,213
102.8
102.8
102.8
102.8
102.8
_____________
(1)
Incentive target payout opportunity percentages were increased by the O&C Committee from 50% to 55% effective November 26, 2013
for Messrs. Clevenger, Davis, Greer, and Nye based on the October 2013 Towers Watson study. Target Awards reflect a pro-rata
calculation based on the two target payout opportunities, using 50% for the first 11 months of the year and 55% for the final month of
the year.
Retention Agreement
In February 2013, the O&C Committee approved our entrance into a retention agreement with Mr. Nye to reinforce and
encourage his continued dedication to us as a member of the executive management team and to assure that we will retain his
services to achieve our retention objectives. As our Senior Vice President, General Counsel and Secretary, Mr. Nye is
responsible for overseeing all of Oncor’s legal, regulatory and legislative efforts. In approving the agreement, the O&C
Committee considered Mr. Nye’s demonstrated leadership qualities, his ongoing contributions to the Company’s success, the
potential retention risk and the extent of disruption likely to be caused by unplanned attrition. The agreement provides for the
payment of a one-time cash retention bonus of $300,000 to Mr. Nye contingent upon his continued employment and satisfactory
performance of his job duties as directed by Oncor through December 31, 2014. For a description of the material terms of this
retention agreement, see “— Individual Named Executive Officers Compensation — Compensation of Other Named Executive
Officers — E. Allen Nye, Jr.”
Long-Term Incentives
Our long-term incentive program currently consists of the Equity Interests Plan and the Long-Term Incentive Plan. The
Long-Term Incentive Plan was adopted in February 2013, to be effective as of January 1, 2013, as a replacement long-term
incentive program to the SARs Plan. The purpose of our long-term incentive program is to promote the long-term financial
interests and growth of Oncor by attracting and retaining management and other personnel and key service providers. Our longterm incentive program was developed to enable us to be competitive in our compensation practices and because we believe that
equity ownership in Oncor under the Equity Interests Plan and the opportunity to benefit from positive long-term performance of
the company under our plans motivate our management to work towards the long-term success of our business and align
management’s interests with those of our equity holders. In addition, we believe that certain employment-related conditions and
the multi-year time periods of these programs, as discussed in more detail below, provide significant retentive value to us.
Equity Interests Plan and Management Investment Opportunity
The Equity Interests Plan allows our board of directors to offer non-employee directors, management and other personnel
and key service providers of Oncor the right to invest in Class B membership units of Investment LLC (each, a Class B
Interest), an entity whose only assets consist of equity interests in Oncor. As a result, each holder of Class B Interests holds an
indirect ownership interest in Oncor. Any dividends received by Investment LLC from Oncor in respect
92
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of its membership interests in Oncor are subsequently distributed by Investment LLC to the holders of Class B Interests in
proportion to the number of Class B Interests held by such holders.
In November 2008 and August 2011, pursuant to the terms of the Equity Interests Plan, our board of directors offered
certain officers and key employees the opportunity to invest in Investment LLC and purchase Class B Interests in Investment
LLC for the fair market value of Class B Interests on such date, as determined by our board of directors (collectively, the
Management Investment Opportunity). In addition to the opportunity to purchase Class B Interests in Investment LLC such
officers and key employees also received an amount of SARs based on the aggregate amount invested. SARs received in
connection with the Management Investment Opportunity were subject to the terms of the SARs Plan, and were all exercised in
2012 as discussed under “— Stock Appreciation Rights Settlement” below. Participants in the Management Investment
Opportunity were also given the option to fund any or all of their investment in Investment LLC using funds in their Salary
Deferral Program accounts. Any Class B Interests purchased by an executive officer using funds in his or her Salary Deferral
Program account are held of record by the Salary Deferral Program for the benefit of such officer.
In connection with the Management Investment Opportunity, each participant entered into a management stockholder’s
agreement and a sale participation agreement. The management stockholder’s agreement, among others things, gives Oncor the
right to repurchase a participant’s Class B Interests in the event of specified terminations of a participant’s employment or
violation by a participant of certain of his or her non-compete obligations. We believe this repurchase right provides significant
retentive value to our business. For a more detailed description of the terms of the management stockholder’s agreement and sale
participation agreement, see “Certain Relationships and Related Transactions, and Director Independence – Related Party
Transactions – Agreements with Management and Directors.”
Pursuant to its limited liability company agreement, Investment LLC must at all times ensure that for each outstanding
Class B Interest it issues, Investment LLC holds a corresponding number of units of Oncor’s equity interests. As a result, any
future issuances under the Equity Interests Plan will require Investment LLC to purchase from Oncor Holdings additional
equity interests of Oncor. Investment LLC has entered into a revolving stock purchase agreement with Oncor Holdings pursuant
to which Investment LLC may purchase units of Oncor’s equity interests held by Oncor Holdings in the event Investment LLC
proposes to issue additional Class B Interests pursuant to the Equity Interests Plan. However, the aggregate number of equity
interests sold by Oncor Holdings pursuant to the revolving stock purchase agreement cannot result in Oncor Holdings owning
less than 80% of Oncor’s outstanding equity interests, or 508,000,000 units. At February 25, 2014, Investment LLC may
purchase from Oncor Holdings up to an additional 191,492 units of Oncor and issue up to a corresponding number of Class
B Interests.
For a more detailed description of the Equity Interests Plan and the Management Investment Opportunity, refer to the
narrative that follows the Grants of Plan-Based Awards – 2013 table.
Long-Term Incentive Plan
On February 13, 2013, our board of directors adopted the Long-Term Incentive Plan, effective January 1, 2013, as a
replacement long-term incentive program to the SARs Plan. The Long-Term Incentive Plan encourages retention of executive
officers and key employees by stipulating performance periods of generally 36 months. We also believe that these multi-year
performance periods encourage participants to strive for the long-term, sustained success of the company. The nature of the
performance targets also ensures that participants strive towards both financial and operational goals.
Our board of directors delegated administration of the Long-Term Incentive Plan to the O&C Committee. Our executive
officers and any other key employees of the company or its subsidiaries designated by the O&C Committee are eligible to
participate. The plan provides for cash awards to be paid after completion of a performance period based on achievement of
certain stated performance goals. A performance period under the Long-Term Incentive Plan is the 36 month period beginning
each January 1, unless otherwise determined by the O&C Committee in its sole discretion, and the participants for each
performance period shall be determined by the O&C Committee not later than the 90 th day after commencement of such
performance period. Performance goals are set forth in each participant’s individual award agreement and consist of one or more
specific performance objectives established by the O&C Committee in its discretion within the first 90 days of the applicable
performance period. Performance goals may be designated with respect to the company as a whole or one or more operating
units, and may also be determined on an absolute basis or relative to internal goals, or relative to levels attained in prior years,
or relative to other companies or indices, or as ratios expressing
93
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relationships between two or more performance goals. For 2013, the O&C Committee set the performance targets on a companywide basis and at levels it believes are performance challenging.
The O&C Committee determined that the performance goals used for the Long-Term Incentive Plan awards granted in
2013 would consist of both financial and operational metrics. The funding of the 2013 Long-Term Incentive Plan award is
contingent first upon Oncor achieving a cumulative threshold net income level for the three year period. If Oncor fails to achieve
the stated net income level for the performance period, no award is payable. If Oncor achieves the threshold net income level, the
percentage of target net income achieved is used to determine a funding trigger percentage. Once a funding trigger percentage is
determined, an operational goal percentage is determined based on Oncor’s satisfaction of four operational metrics. The
operational goals used for the Long-Term Incentive Plan awards mirror the operational metrics used for awards under the
Executive Annual Incentive Plan. These goals relate to (1) a safety metric based on the number of employee injuries using a
Days Away, Restricted or Transfer (DART) system, (2) a reliability metric as measured by the System Average Interruption
Duration Index (SAIDI), (3) an operational efficiency metric based on the achievement of targeted operation and maintenance
expense (O&M) and sales, general and administrative expense (SG&A) levels determined on a per customer cost basis, and (4)
an infrastructure readiness metric based on the capital expenditure per three year average kW peak. The purpose of these
operational targets, which are based on safety, reliability, operational efficiency and infrastructure readiness metrics, is to
promote enhancement of our services to customers. The O&C Committee set the threshold, target and stretch levels for each
operational metric. The achievement of those levels results in funding for a specific metric of 50%, 100% and 150%,
respectively. Once the threshold has been achieved, actual results in between each level results in a funding percentage equal to
the percentage of the target achieved. Based on the weighting for each operational metric, an aggregate weighted average of
operational goal percentage is determined. The amount of each Long-Term Incentive Plan award is then determined based on the
product of (i) the funding trigger percentage, multiplied by (ii) the weighted average of stated operational goal percentages,
multiplied by (iii) the target opportunity dollar amount stated in each individual award letter.
The plan also gives the O&C Committee the discretion to adjust long-term awards to prevent unintended dilution or
enlargement as a result of certain extraordinary events. For each performance goal, the O&C Committee may set threshold,
target and above-target levels of attainment and the manner of calculating the award amounts at each level (such as a specified
dollar amount or a percentage or multiple of base salary). However, the Long-Term Incentive Plan provides that the maximum
award payable for a performance period shall not exceed 150% of the target award.
The following table provides a summary of the targets awards granted to each Named Executive Officer in 2013. All
awards under the Long Term Incentive Plan are to be made in the form of lump sum cash payments to participants on or before
April of the year following the last year of the performance period. For target awards granted in 2013, awards are payable on or
before April 1, 2016.
2013 Target Long-Term Incentive Plan Awards (Payable in 2016) for Named Executive Officers
Target Award
($ Value)
Name
Robert S. Shapard
David M. Davis
Don J. Clevenger
James A. Greer
E. Allen Nye, Jr.
$
$
1,926,400
552,000
$
$
$
537,280
552,000
625,600
For a more detailed description of the Long-Term Incentive Plan, refer to the narrative that follows the Grants of PlanBased Awards – 2013 table.
Stock Appreciation Rights Settlement
The O&C Committee adopted and implemented the SARs Plan in 2008. Between 2008 and 2011, the O&C Committee
awarded SARs pursuant to the SARs Plan to certain employees of Oncor, including the Named Executive Officers. In 2012,
our board of directors offered all participants in the SARs Plan the opportunity to participate in an early exercise of all
outstanding SARs issued under the SARs Plan (SARs Exercise Opportunity). All participants in the SARs Plan accepted the
SARs Exercise Opportunity in November 2012, and as a result, all outstanding SARs under the SARs
94
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Plan were exercised. The SARs Exercise Opportunity entitled each participant in the SARs Plan, including our Named
Executive Officers, to: (1) an exercise payment, paid in 2012, subject to certain deferrals by executive officers as described
below; and (2) the accrual of interest on all dividends declared to date with respect to the SARs, and no further dividend
accruals. As a result of the SARs Exercise Opportunity, we began to accrue interest for the Named Executive Officers on the
following amounts of dividends: Mr. Shapard, $5,104,820; Mr. Davis, $816,771; Mr. Clevenger, $816,771, Mr. Greer,
$1,061,802; and Mr. Nye, $250,649. The dividends and interest are payable when dividends would become payable under
the SARs Plan, which is generally upon a participant’s death, disability, separation from service, unforeseeable emergency, or a
change in control, each as defined by section 409A of the Internal Revenue Code. After the withholding of all applicable taxes,
each of the Named Executive Officers agreed to defer from his exercise payments the following amounts: Mr. Shapard,
$2,957,400; Mr. Davis, $473,184; Mr. Clevenger, $473,184, Mr. Greer, $615,139, and Mr. Nye, $147,966. These Named
Executive Officers agreed to defer such amounts until the earlier of November 7, 2016 or the occurrence of an event triggering
SAR exercisability under the SARs Plan. These events generally include a change of control, an EFH realization event, a
liquidity event or the achievement of certain financial returns as described in the SARs Plan. The deferred amounts were placed
in a bankruptcy-remote trust.
The SARs Plan remains in effect solely with respect to the payout of these dividend, interest and deferred exercise
payment amounts. The O&C Committee does not plan to issue any additional SARs under the SARs Plan. The Long-Term
Incentive Plan was developed to replace the SARs Plan as the primary long-term incentive component of executive compensation.
Deferred Compensation and Retirement Plans
Our executive compensation package includes the ability to participate in the Salary Deferral Program, the EFH Thrift
Plan, the Oncor Retirement Plan and the Supplemental Retirement Plan and for executives hired before January 1, 2002,
subsidized retiree health care coverage. We believe that these programs, which are common among companies in the utility
industry, are important to attract and retain qualified executives. Although some of these plans are sponsored by EFH Corp.,
Oncor is directly responsible for the costs of any matching awards, premiums and other payments relating to Oncor employees
pursuant to these programs.
Salary Deferral Program
Oncor executive officers are eligible to participate in a Salary Deferral Program that allows employees to defer a portion of
their salary and annual incentive award and to receive a matching award based on their salary deferrals. Executives can
currently defer up to 50% of their base salary and up to 85% of any annual incentive award. At the executive officer’s option
the deferral period can be set for seven years, until retirement or a combination of both. Oncor generally matches 100% of
deferrals up to 8% of salary deferred under the program. Oncor does not match deferred annual incentive awards. Matching
contributions vest at the earliest of seven years after the deferral date, executive’s retirement or a change in control of Oncor (as
defined in the Salary Deferral Program). The program encourages employee retention as, generally, participants who terminate
their employment with us prior to the seven year vesting period forfeit our matching contribution to the program.
Participants in the Management Investment Opportunity were also given the option to fund any or all of their investment
in Investment LLC using funds in their Salary Deferral Program accounts. The Salary Deferral Program is the record holder of
Class B Interests purchased by executives using funds in their Salary Deferral Program accounts.
Refer to the narrative that follows the Nonqualified Deferred Compensation table below for a more detailed description of
the Salary Deferral Program.
Thrift Plan
Under the EFH Thrift Plan, all eligible employees of EFH Corp. and any of its participating subsidiaries, including
Oncor, may contribute a portion of their regular salary or wages to the plan. Under the EFH Thrift Plan, Oncor matches a
portion of an employee’s contributions. This matching contribution is 75% of the employee’s contribution up to the first 6% of
the employee’s salary for employees covered under the traditional defined benefit component of the Oncor Retirement Plan, and
100% of the employee’s contribution up to 6% of the employee’s salary for employees covered under the cash balance
component of the Oncor Retirement Plan. All matching contributions are invested in EFH Thrift Plan investments as directed
by the participant and are immediately vested.
95
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Retirement Plan
All Oncor employees are eligible to participate in a retirement plan, which is qualified under applicable provisions of the
Code. Until January 1, 2013, Oncor was a participating employer in the EFH Retirement Plan. In August 2012, EFH Corp.
announced various changes to the EFH Retirement Plan, including splitting off into a new plan all of the assets and liabilities
associated with Oncor employees and all retirees and terminated vested participants of EFH Corp. and its subsidiaries
(including discontinued businesses). Effective January 1, 2013, Oncor assumed sponsorship of the new plan, which is referred
to in this Annual Report as the Oncor Retirement Plan. The benefits to Oncor employees are identical under the EFH Retirement
Plan and the Oncor Retirement Plan. See Footnote 9 to Financial Statements for additional information on the EFH Retirement
Plan and the Oncor Retirement Plan.
The Oncor Retirement Plan contains both a traditional defined benefit component and a cash balance
component. Effective January 1, 2002, the defined benefit plan changed from a traditional final average pay design to a cash
balance design. This change was made to better align the retirement program with competitive practices. All participants were
extended an opportunity to remain in the traditional program component or transition to the cash balance component. Messrs.
Davis and Greer elected to remain in the traditional program.
All employees employed after January 1, 2002 are eligible to participate only in the cash balance component. As a result,
Messrs. Shapard, Clevenger and Nye are covered only under the cash balance component. For a more detailed description of
the Oncor Retirement Plan, refer to the narrative that follows the Pension Benefits table.
Supplemental Retirement Plan
Oncor executives participate in the Supplemental Retirement Plan. The Supplemental Retirement Plan provides for the
payment of retirement benefits that:
·
·
·
Would otherwise be capped by the Code’s statutory limits for qualified retirement plans;
Include Executive Annual Incentive Plan awards in the definition of earnings (for participants in the traditional
program component only), and/or
Oncor is obligated to pay under contractual arrangements.
For a more detailed description of the Supplemental Retirement Plan, please refer to the narrative that follows the Pension
Benefits table below.
Retiree Health Care
Employees hired by Oncor (or EFH Corp’s predecessor) prior to January 1, 2002 are generally entitled to receive an
employer-paid subsidy for retiree health care coverage upon their retirement from Oncor. As such, Messrs. Davis and Greer
will be entitled to receive a subsidy from Oncor for retiree health care coverage upon their retirement from Oncor. Messrs.
Shapard, Clevenger and Nye were hired after January 1, 2002 and are not eligible for the employer subsidy.
Perquisites and Other Benefits
Perquisites provided to our executive officers are intended to serve as part of a competitive total compensation program and
to enhance our executives’ ability to conduct company business. These benefits include financial planning, a preventive
physical health exam, reimbursements for certain business-related country club and/or luncheon club membership costs. For a
more detailed description of the perquisites, refer to Footnote 3 in the Summary Compensation Table below.
The following is a summary of benefits offered to our executive officers that are not available to all employees:
Executive Financial Planning: All executive officers are eligible to receive executive financial planning services. These
services are intended to support them in managing their financial affairs, which we consider especially important given the high
level of time commitment and performance expectation required of our executives. Furthermore, these services help ensure
greater accuracy and compliance with individual tax regulations.
96
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Executive Physical Health Exam: All executive officers are also eligible to receive an annual physical examination. We
recognize the importance of the health of our senior management team and the vital leadership role they play in directing and
operating the company. The executive officers are important assets of the company and this benefit is designed to help ensure
their health and long-term ability to serve our equity holders.
Country Club/Luncheon Club Membership: Certain executive officers are entitled to reimbursement of country club or
luncheon club memberships if the company determines that a business need exists for such executive’s memberships, as such
clubs provide those officers with a setting for cultivating business relationships and interaction with key community leaders
and officials.
Split-Dollar Life Insurance: As a participating subsidiary in the EFH Corp. Split-Dollar Life Insurance Program (SplitDollar Life Insurance Program), split-dollar life insurance policies were purchased for eligible executives of Oncor. The
eligibility provisions of this program were modified in 2003 so that no new participants were added after December 31,
2003. Accordingly, none of our Named Executive Officers are eligible to participate in the Split-Dollar Life Insurance Program,
although certain of our other executives are participants. The death benefits of participants’ insurance policies are equal to two,
three or four times their annual EFH Split-Dollar Life Insurance Program compensation, depending on their executive
category. Individuals who first became eligible to participate in the Split-Dollar Life Insurance Program after October 15,
1996, vested in the insurance policies issued under the Split-Dollar Life Insurance Program over a six-year period. Oncor pays
the premiums for the policies and has received a collateral assignment of the policies equal in value to the sum of all of its
insurance premium payments. Although the Split-Dollar Life Insurance Program is terminable at any time, it is designed so
that if it is continued, EFH Corp./Oncor will fully recover all of the insurance premium payments covered by the collateral
assignments either upon the death of the participant or, if the assumptions made as to policy yield are realized, upon the later of
15 years of participation or the participant’s attainment of age 65. At the Merger, the Split-Dollar Life Insurance Program was
amended to freeze the death benefits at the then current level.
Spouse Travel Expenses: From time to time we pay for an executive officer's spouse to travel with the executive officer
when taking a business trip, if their presence contributes to the business purpose.
In addition to the benefits described above, Oncor offers its executive officers the ability to participate in benefit plans for
medical, dental and vision insurance, group term life insurance and accidental death and disability, which are generally made
available to all employees at the company.
Individual Named Executive Officers Compensation
Oncor has not entered into employment agreements with any of the Named Executive Officers. As described below, in
February 2013 Oncor entered into a retention agreement with Mr. Nye providing for the payment of a one-time cash retention
bonus if certain conditions are satisfied.
CEO Compensation
Robert S. Shapard
The following is a summary of Mr. Shapard’s individual compensation for 2013.
Base Salary: Mr. Shapard’s base salary as Chairman and CEO was increased from $700,000 to $750,000 effective
November 26, 2013.
Annual Incentive: In 2014, the O&C Committee awarded Mr. Shapard $542,913 pursuant to the Executive Annual
Incentive Plan, reflecting the result of Oncor’s 2013 performance as well as the O&C Committee’s review of Mr. Shapard’s
overall leadership of the company in 2013. For more detailed information on the calculation of Executive Annual Incentive
Awards, see “—Compensation Elements — Executive Annual Incentive Plan” above and the Grants of Plan- Based Awards –
2013 table and related narrative.
Long-Term Incentives: In 2013, Mr. Shapard was granted a Long-Term Incentive Plan target award of $1,926,400 for
the performance period of January 1, 2013 through December 31, 2015. Actual awards will be based on the Company’s
achievement of the performance goals set forth in the award agreement and are payable on or before April 1, 2016. See “—
97
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Compensation Elements —Long-Term Incentives — Long-Term Incentive Plan” above and the Grants of Plan Based Awards2013 table and related narrative for additional information on the Long-Term Incentive Plan and target awards.
Compensation of Other Named Executive Officers
David M. Davis
The following is a summary of Mr. Davis’s individual compensation for 2013.
Base Salary: Mr. Davis’ base salary as Senior Vice President and Chief Financial Officer was increased from $375,000
to $400,000 effective November 26, 2013.
Annual Incentive: In 2014, the O&C Committee awarded Mr. Davis $195,534 pursuant to the Executive Annual
Incentive Plan, reflecting the result of Oncor’s 2013 performance, as well as Mr. Davis’s individual performance in 2013.
Specifically, the O&C Committee and the CEO considered his management of the company’s financial systems, operations
and initiatives, including the maintenance of planning, budgeting, accounting, and treasury functions and his management of
the liquidity of Oncor’s maintenance and construction programs. For more detailed information on the calculation of Executive
Annual Incentive Awards, see “—Compensation Elements — Executive Annual Incentive Plan” above and the Grants of PlanBased Awards – 2013 table and related narrative.
Long-Term Incentives: In 2013, Mr. Davis was granted a Long-Term Incentive Plan target award of $552,000 for the
performance period of January 1, 2013 through December 31, 2015. Actual awards will be based on the Company’s
achievement of the performance goals set forth in the award agreement and are payable on or before April 1, 2016. See “—LongTerm Incentives — Long-Term Incentive Plan” above and the Grants of Plan Based Awards-2013 table and related narrative for
additional information on the Long-Term Incentive Plan and target awards.
Don J. Clevenger
The following is a summary of Mr. Clevenger’s individual compensation for 2013.
Base Salary: Mr. Clevenger’s base salary as Senior Vice President, Strategic Planning, was increased from $365,000 to
$385,000 effective November 26, 2013.
Annual Incentive: In 2014, the O&C Committee awarded Mr. Clevenger $190,115 pursuant to the Executive Annual
Incentive Plan, reflecting the result of Oncor’s 2013 performance, as well as Mr. Clevenger’s individual performance in 2013.
Specifically, the O&C Committee and the CEO evaluated his performance overseeing the development of strategies, policies and
plans for optimizing the value and performance of our electric delivery systems and related assets. For more detailed information
on the calculation of Executive Annual Incentive Awards, see “—Compensation Elements — Executive Annual Incentive Plan”
above and the Grants of Plan- Based Awards – 2013 table and related narrative.
Long-Term Incentives: In 2013, Mr. Clevenger was granted a Long-Term Incentive Plan target award of $537,280 for
the performance period of January 1, 2013 through December 31, 2015. Actual awards will be based on the Company’s
achievement of the performance goals set forth in the award agreement and are payable on or before April 1, 2016. See “—LongTerm Incentives — Long-Term Incentive Plan” above and the Grants of Plan Based Awards-2013 table and related narrative for
additional information on the Long-Term Incentive Plan and target awards.
James A. Greer
The following is a summary of Mr. Greer’s individual compensation for 2013.
Base Salary: Mr. Greer’s base salary as Senior Vice President and Chief Operating Officer was increased from $350,000
to $375,000 effective February 26, 2013 and to $400,000 effective November 26, 2013.
Annual Incentive: In 2014, the O&C Committee awarded Mr. Greer $193,393 pursuant to the Executive Annual
Incentive Plan, reflecting the result of Oncor’s 2013 performance, as well as Mr. Greer’s individual performance in 2013
overseeing the complex operations of Oncor’s entire transmission and distribution system, one of the largest such systems in the
country. For more detailed information on the calculation of Executive Annual Incentive Awards, see “—
98
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Compensation Elements — Executive Annual Incentive Plan” above and the Grants of Plan- Based Awards – 2013 table and
related narrative.
Long-Term Incentives: In 2013, Mr. Greer was granted a Long-Term Incentive Plan target award of $552,000 for the
performance period of January 1, 2013 through December 31, 2015. Actual awards will be based on the Company’s
achievement of the performance goals set forth in the award agreement and are payable on or before April 1, 2016. See “—LongTerm Incentives — Long-Term Incentive Plan” above and the Grants of Plan Based Awards-2013 table and related narrative for
additional information on the Long-Term Incentive Plan and target awards.
E. Allen Nye, Jr.
The following is a summary of Mr. Nye’s individual compensation for 2013.
Base Salary: Mr. Nye’s base salary as Senior Vice President and General Counsel was increased from $425,000 to
$445,000 effective November 26, 2013.
Annual Incentive: In 2014, the O&C Committee awarded Mr. Nye $221,213 pursuant to the Executive Annual Incentive
Plan, reflecting the result of Oncor’s 2013 performance, as well as Mr. Nye’s individual performance in 2013 overseeing all
legal, regulatory and governmental affairs matters affecting Oncor. For more detailed information on the calculation of Executive
Annual Incentive Awards, see “—Compensation Elements — Executive Annual Incentive Plan” above and the Grants of PlanBased Awards – 2013 table and related narrative.
Long-Term Incentives: In 2013, Mr. Nye was granted a Long-Term Incentive Plan target award of $625,600 for the
performance period of January 1, 2013 through December 31, 2015. Actual awards will be based on the Company’s
achievement of the performance goals set forth in the award agreement and are payable on or before April 1, 2016. See “—LongTerm Incentives — Long-Term Incentive Plan” above and the Grants of Plan Based Awards-2013 table and related narrative for
additional information on the Long-Term Incentive Plan and target awards.
Retention Agreement: In February 2013, the O&C Committee approved our entrance into a retention agreement with Mr.
Nye. The agreement provides for the payment of a one-time cash retention bonus of $300,000 to Mr. Nye contingent upon his
continued employment and satisfactory performance of his job duties as directed by Oncor through December 31, 2014. The
bonus is payable in accordance with Oncor’s normal payroll practices or as soon as practicable after December 31, 2014. In the
event Mr. Nye is terminated with cause or elects to terminate his employment without good reason prior to December 31, 2014,
he will immediately forfeit the retention bonus. In the event Mr. Nye’s employment is terminated prior to December 31, 2014
either by Oncor without cause, by him for good reason, or as a result of his death or disability, the retention bonus will
immediately vest and become payable. Under the agreement, a termination for “cause” is defined as a termination as a result of
the commitment of any of the following actions by Mr. Nye: (i) a breach of any fiduciary duty to Oncor, (ii) gross negligence in
the performance of his duties, (iii) failure or refusal to carry out the duties of his position with Oncor, (iv) any action or
omission that results in material injury to the assets, business prospectus or reputation of Oncor or any of its affiliates, (v)
appropriation of a material business opportunity of Oncor or any of its affiliates, including securing or attempting to secure
personal profit as a result of any transaction involving Oncor or any of its affiliates; (vi) breach of Oncor’s Code of Conduct or
a material employment policy or rule; or (vii) any indictment or plea of nolo contendere or guilty for any crime involving fraud,
theft, embezzlement or moral turpitude. The agreement defines “good reason” as any one or more of the following actions taken
without Mr. Nye’s express consent: (i) a reduction in base salary other than a broad-based reduction of base salaries for
similarly situated Oncor executives; or (ii) a material reduction in the aggregate level or benefits for which Mr. Nye is eligible,
other than a broad-based benefits reduction for similarly situated executives. The agreement also provides that during Mr.
Nye’s employment with Oncor or any affiliate and for a period of 12 months thereafter, he will not directly or indirectly solicit,
recruit, encourage or in any way cause any executive of Oncor or any affiliate to terminate his employment with Oncor or such
affiliate. An affiliate is defined in the agreement as any entity that controls, is controlled by, or is under common control with,
Oncor.
99
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Contingent Payments
Change in Control Policy
Oncor makes available a change in control policy (the Change in Control Policy) for its eligible executives. The purpose
of the Change in Control Policy is to provide the payment of transition benefits to eligible executives if:
·
·
Their employment with the company or a successor is terminated within twenty-four months following a change in
control of the company; and
They:
o are terminated without cause, or
o resign for good reason due to a reduction in salary or a material reduction in the aggregate level or value of
benefits for which they are eligible.
The terms “change in control,” “without cause” and “good reason” are defined in the Change in Control Policy.
We believe these payments, to be triggered upon meeting the criteria above, provide incentive for executives to fully
consider potential changes that are in the best interest of Oncor and our equity holders, even if such changes would result in the
executives’ termination. We also believe it is important to have a competitive change in control program to attract and retain the
caliber of executives that our business requires and to foster an environment of relative security within which we believe our
executives will be able to focus on achieving company goals. Refer to the “Potential Payments upon Termination” for detailed
information about payments and benefits that our executive officers are eligible to receive under the Change in Control Policy.
Severance Plan
Oncor also makes available a Severance Plan (the Severance Plan) to provide certain benefits to eligible executives. The
purpose of the Severance Plan is to provide benefits to eligible executives who are not eligible for severance pursuant to another
plan or agreement (including an employment agreement) and whose employment is involuntarily terminated for reasons other
than:
·
·
·
Cause (as defined in the Severance Plan);
Disability of the employee, if the employee is a participant in our long-term disability plan, or
A transaction involving the company or any of its affiliates in which the employee is offered employment with a
company involved in, or related to, the transaction.
We believe it is important to have a severance plan in place to attract and retain the caliber of executives that our business
requires and to foster an environment of relative security within which we believe our executives will be able to focus on
achieving company goals. Refer to the “Potential Payments upon Termination” for detailed information about payments and
benefits that our executive officers are eligible to receive under the Severance Plan.
Accounting and Tax Considerations
Accounting Considerations
Based on accounting guidance for compensation arrangements, no compensation expense is recognized with respect to
Class B Interests issued pursuant to the Management Investment Opportunity as the units were purchased by participants for
fair value.
Under the SARs Plan and related 2012 SARs Exercise Opportunity, while the SARs are outstanding, amounts equal to
dividends that are paid in respect of Oncor membership interests are credited to the SARs holder’s account as if the SARs were
units of Oncor, payable upon the earliest to occur of death, disability, separation from service, unforeseeable emergency or a
change in control. As payments under the dividend provision are not contingent upon a future liquidity event, the liability
related to the declared dividends is accrued as vested. For accounting purposes, the liability is discounted based on an
employee’s expected retirement date.
100
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Income Tax Considerations
Section 162(m) of the Code limits the tax deductibility by a publicly held company of compensation in excess of $1
million paid to the CEO or any other of its three most highly compensated executive officers other than the principal financial
officer. Because we are a privately-held limited liability company, Section 162(m) will not limit the tax deductibility of any
executive compensation for 2013.
The O&C Committee administers our compensation programs with the good faith intention of complying with Section
409A of the Code.
The information contained herein under the heading “Organization and Compensation Committee Report” is not to be
deemed to be “soliciting material” or “filed” with the SEC pursuant to Section 407(e)(5) of SEC Regulation S-K.
Organization and Compensation Committee Report
The Organization and Compensation Committee has reviewed and discussed with management the Compensation
Discussion and Analysis set forth in this Form 10-K. Based on such review and discussions, the committee recommended to
the board of directors that the Compensation Discussion and Analysis be included in this Form 10-K.
Organization and Compensation Committee
Richard W. Wortham III, Chair
Thomas M. Dunning
Jeffrey Liaw
Steven J. Zucchet
Compensation Committee Interlocks and Insider Participation
Two of our O&C Committee members, Mr. Liaw and Mr. Zucchet, are not classified as independent directors under the
standards set forth in the Limited Liability Company Agreement. Mr. Liaw is a former principal of TPG, a member of the
Sponsor Group, and is a manager of Texas Energy Future Capital Holdings LLC, the sole general partner of Texas Holdings.
Mr. Liaw was appointed to the board of directors by Oncor Holdings, which is a subsidiary of EFH Corp. Mr. Liaw also
served as a member of the EFH Corp. board of directors until December 31, 2012. Mr. Zucchet is employed by Borealis
Infrastructure Management, Inc., a beneficial owner of Texas Transmission, and serves as an officer and director of Texas
Transmission’s parent company. Mr. Zucchet was appointed to the board of directors by Texas Transmission. For a
description of the ability of Oncor Holdings and Texas Transmission to appoint directors, see “Directors, Executive Officers
and Corporate Governance – Director – Director Appointments.” For a description of Oncor related party transactions involving
the Sponsor Group, EFH Corp. and Texas Transmission, see “Certain Relationships and Related Transactions, and Director
Independence.”
No member of the O&C Committee is or has ever been one of our officers or employees. No interlocking relationship
exists between our executive officers and the board of directors or compensation committee of any other company.
101
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The following table provides information, for the fiscal years ended December 31, 2013, 2012, and 2011 regarding the
aggregate compensation paid to our Named Executive Officers.
Summary Compensation Table
Change in
Pension Value
and Nonqualified
Name and Principal
Position
Salary
Year
($)
Bonus
($)
Option/
Non-Equity
Deferred
SAR
Incentive Plan
Compensation
Compensation
Earnings
All Other
Compensation
($)(1)
($)(2)
($)(3)
Awards
($)
Total
($)
Robert S. Shapard
Chairman of the Board
and Chief Executive
Officer
David M. Davis
Senior Vice President
and Chief Financial
Officer
Don J. Clevenger
Senior Vice President,
Strategic Planning
James A. Greer
Senior Vice President
and Chief Operating
2013
2012
2011
704,167
700,000
700,000
0
0
0
0
0
0
542,913
505,575
627,165
120,683
285,531
99,087
246,888
18,486,361
972,443
1,614,651
19,977,467
2,398,695
2013
2012
2011
377,083
375,000
352,083
0
0
0
0
0
0
195,534
180,563
210,299
71,223
559,203
376,526
79,560
2,996,698
192,316
723,400
4,111,464
1,131,224
2013
2012
2011
366,667
365,000
342,083
0
0
0
0
0
0
190,115
175,748
182,285
36,935
26,332
33,407
82,265
2,998,351
194,803
675,982
3,565,431
752,578
2013
2012
372,917
350,000
0
0
0
0
193,393
168,525
145,722
556,772
87,299
3,874,877
799,331
4,950,174
2013
2012
2011
426,667
425,000
416,950
0
0
0
0
1,736 1,796,484
221,213
204,638
253,853
29,437
29,249
0
74,566
121,051
92,141
751,883
779,938
2,561,164
Officer
E. Allen Nye, Jr.
Senior Vice President,
General Counsel and
Secretary
______________
(1)
(2)
(3)
Amounts reported as “Non-Equity Incentive Plan Compensation” were earned by the executive in the respective year and represent
amounts related to awards for such years pursuant to the Execu tive Annual Incentive Plan. Awards under the Executive Annual
Incentive Plan for any given year are paid in March of the following year.
Amounts reported under this column reflect the aggregate change in actuarial value at December 31 of the specified year as compared to
December 31 of the previous year of each executive’s accumulated benefits under the Oncor Retirement Plan and the Supplemental
Retirement Plan. For a more detailed description of these plans, see “– Compensation Discussion and Analysis – Compensation Elements
– Deferred Compensation and Retirement Plans” and the narrative that follows the Pension Benefits table below. With respect to the
Oncor Retirement Plan, Messrs. Davis and Greer are covered under the traditional defined benefit component and Messrs. Shapard,
Clevenger and Nye are covered under the cash balance component. There are no above-market or preferential earnings for nonqualified
deferred compensation.
Amounts reported as “All Other Compensation” for 2013 are attributable to the executive’s receipt of compensation as described in the
following table:
102
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
2013 All Other Compensation Components for Named Executive Officers
Salary
Deferral
SARs Plan
Settlement
Dividend Interest
Match
Program
Company
Match
Accruals
Perquisites ($)
($)
($) (1)
($)(2)
(3)
EFH Thrift
Plan Company
Name
Total ($)
Robert S. Shapard
15,300
56,333
145,579
29,676
246,888
David M. Davis
11,475
30,167
23,293
14,625
79,560
Don J. Clevenger
15,300
29,333
23,293
14,339
82,265
James A. Greer
11,475
29,833
30,280
15,711
87,299
E. Allen Nye, Jr.
11,730
34,133
7,148
21,555
74,566
______________
(1)
(2)
(3)
Amounts represent company matching amounts under the Salary Deferral Program. Refer to the narrative that follows the
Nonqualified Deferred Compensation table below for a more detailed description of the Salary Deferral Program and the matching
formula.
As discussed under “ Compensation Discussion and Analysis – Compensation Elements – Long-Term Incentives – Stock Appreciation
Rights Settlement,” in connection with the SARs Exercise Opportunity participants agreed that no further dividends would accrue, but
that interest would be paid on dividends accrued to date. Amounts in this column reflect such interest accruals in 2013.
Amounts reported under this column represent the aggregate amount of perquisites received by each Named Executive Officer. Those
perquisites are detailed in the following table. Amounts reported below represent the actual cost to Oncor for the perquisites
provided. For a discussion of the perquisites received by our executive officers, see “– Compensation Discussion and Analysis –
Compensation Elements – Perquisites and Other Benefits.”
2013 Perquisites for Named Executive Officers
Country Club
Name
Financial
Planning
Executive
and/or Luncheon
Spouse
Physical
Travel
Other
($)
($)
Club Dues
($)
($) (1)
($) (2)
10,730
2,634
11,952
9,410
2,682
2,533
—
2,572
James A. Greer
9,410
E. Allen Nye, Jr.
9,410
Robert S. Shapard
David M. Davis
Don J. Clevenger
575
Total ($)
3,785
29,676
—
—
14,625
10,051
—
1,716
14,339
6,301
—
—
—
15,711
2,684
9,461
—
—
21,555
______________
(1)
(2)
Amounts in this column represent spouse expenses for accompanying the Named Executive Officer on business travel.
Amounts in this column represent the cost of event tickets for personal entertainment.
103
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Grants of Plan-Based Awards – 2013
The following table sets forth information regarding grants of plan-based awards to Named Executive Officers under
Executive Annual Incentive Plan during the fiscal year ended December 31, 2013.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
Name
Robert S. Shapard
Threshold
Target
Max.
($)
($)
($)
264,063
963,200
528,125
1,926,400
792,188
2,889,600
Executive Annual Incentive Plan (1)
Long-Term Incentive Plan (2)
95,104
276,000
190,208
552,000
285,312
828,000
Don J. Clevenger
Executive Annual Incentive Plan (1)
Long-Term Incentive Plan (2)
92,469
268,640
184,938
537,280
277,407
805,920
94,063
276,000
188,125
552,000
282,188
828,000
107,594
312,800
215,188
625,600
322,782
938,400
Executive Annual Incentive Plan (1)
Long-Term Incentive Plan (2)
David M. Davis
James A. Greer
Executive Annual Incentive Plan (1)
Long-Term Incentive Plan (2)
E. Allen Nye, Jr.
Executive Annual Incentive Plan (1)
Long-Term Incentive Plan (2)
________________
(1) The amounts reported reflect the threshold, target and maximum amounts available under the Executive Annual Incentive
Plan. Threshold, target and maximum amounts were determined by the O&C Committee in February 2013 and final awards were
granted by the O&C Committee in February 2014. The actual awards for the 2013 plan year will be paid in March 2014 and are
reported in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.”
(2) The amounts reported reflect the threshold, target and maximum amounts available under the Long-Term Incentive Plan. Target amounts
for each Named Executive Officer were determined by the O&C Committee in February 2013 and final awards will be payable on or
before April 1, 2016 based on achievement of performance goals for the 2013-2015 performance period, as discussed in more detail
below under “— Long-Term Incentive Plan.”
Executive Annual Incentive Plan
The Executive Annual Incentive Plan is a cash bonus plan intended to provide a performance-based annual reward for the
successful attainment of certain annual performance goals and business objectives that are established by the O&C
Committee. Elected officers of the Company having a title of vice president or above and other specified key employees are
eligible to participate in the Executive Annual Incentive Plan provided they are employed by us for a period of at least three full
months during a January 1 to December 31 plan year. The O&C Committee and our CEO are responsible for administering the
Executive Annual Incentive Plan.
The aggregate amount of funding for awards payable in any given plan year is determined based on (1) the target award
levels of all participants in the Executive Annual Incentive Plan (Aggregate Incentive Pool), (2) Oncor’s EBITDA and (3) any
additional operational, financial or other metrics that the O&C Committee elects to apply in determining the aggregate amount of
awards (Additional Metrics). Target award levels are set as a percentage of a participant’s base salary and are based on target
performance of Oncor and individual participant performance. Additional Metrics are determined by the O&C Committee in its
discretion and may include, among other things, safety, reliability, operational efficiency, and infrastructure readiness
measures. The O&C Committee also determines the threshold EBITDA and the thresholds relating to any Additional Metrics
that are necessary to fund awards for each plan year. Based on the level of attainment of these EBITDA and Additional Metrics
targets, the O&C Committee determines an aggregate performance final funding percentage. This final funding percentage is
applied to the Aggregate Incentive Pool to provide the total amount of funds available for awards to participants under the
Executive Annual Incentive Plan.
104
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
2013 Funding Percentage
As described above, the funding percentage is based on EBITDA and any Additional Metrics the O&C Committee elects
to apply in any given plan year, which we refer to as the operational funding percentage. For 2013, the O&C Committee
exercised the discretion granted it in the plan and established Additional Metrics based on operational targets relating to (1) a
safety metric based on the number of employee injuries using a Days Away, Restricted or Transfer (DART) system, (2) a
reliability metric as measured by the System Average Interruption Duration Index (SAIDI), (3) an operational efficiency metric
based on the achievement of targeted operation and maintenance expense (O&M) and sales, general and administrative expense
(SG&A) levels determined on a per customer cost basis and (4) an infrastructure readiness metric based on the capital
expenditure per three year average kW peak. The purpose of these operational targets, which are based on safety, reliability,
operational efficiency and infrastructure readiness metrics, is to promote enhancement of our services to customers.
Funding of the Aggregate Incentive Pool is based first on the achievement of stated EBITDA thresholds and targets set by
the O&C Committee for that year and then, assuming the EBIDTA threshold is met, the achievement of the operational targets.
The final Aggregate Incentive Pool funding percentage is determined based on both EBITDA and operational achievement, as
described below.
Step 1: EBITDA Achievement
Incentives are only payable under the Executive Annual Incentive Plan in the event the threshold EBITDA is achieved. If
the threshold EBITDA is achieved, then the EBITDA funding percentage is 50%. If the target EBITDA is achieved, the
EBITDA funding percentage is 100%. If actual EBITDA exceeds the target EBITDA, then funding equals the operational
funding percentage, up to 150%. If actual EBITDA is an amount between the threshold and target, the EBITDA funding
percentage equals 50% plus the product of (i) 50%, multiplied by (ii) a fraction, the numerator of which equals the difference
between actual EBITDA and threshold EBITDA and the denominator of which equals the difference between threshold
EBITDA and target EBITDA.
For 2013, the EBITDA funding triggers (threshold and target), actual results and funding percentage under the Executive
Annual Incentive Plan were as follows:
EBITDA
Threshold
($ in millions) (1)
Target
($ in millions) (2)
Actual Results
($ in millions)
EBITDA Funding
Percentage (3)
1,567
1,742
1,764
100
______________
(1)
(2)
(3)
Achievement of the threshold EBITDA level results in a 50% funding percentage.
Achievement of the target EBITDA level results in a 100% funding percentage.
Provided that the threshold has been met, the EBITDA funding percentage equals the percentage of target EBITDA achieved.
Step 2: Operational Achievement
If the threshold EBITDA is achieved, then once the EBITDA funding percentage is determined, the operational metrics set
by the O&C Committee are then applied to determine an operational funding percentage. The operational funding percentage can
increase or decrease the funding percentage of the Aggregate Incentive Pool. If actual EBITDA exceeds the target EBITDA, then
funding equals the operational funding percentage, up to 150%. If actual EBITDA is less than or is equal to the target
EBITDA, then funding of the Aggregate Incentive Pool is the lesser of the EBITDA funding percentage or the operational
funding percentage. For 2013, since actual EBITDA exceeded the target EBITDA, the Aggregate Incentive Pool was based on the
operational funding percentage of 102.8%.
The O&C determines the operational metrics to be applied to the operational funding percentage, and the weighting of each
of those metrics within the final operational funding percentage. As with the EBITDA funding percentage, each operational
metric must meet a threshold level in order to provide any funding for that metric. Meeting the threshold amount results in 50%
of the available funding for that specific metric. The O&C Committee also sets target and superior levels for each operational
metric, and achievement of those levels results in funding for a specific metric of 100% and
105
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
150%, respectively. Once threshold has been achieved, actual results in between each level results in a funding percentage equal
to the percentage of the target achieved (up to 150%, for achievement of the superior performance level).
For 2013, the operational funding triggers, actual results and funding percentages under the Executive Annual Incentive
Plan were as follows:
Operational
Goal
Weighting
Superior (3)
Target (2)
Threshold (1)
Actual
Results
Funding
Percentage
Safety
(measured in number of injuries per 200,000 hours)
DART
0.83
0.92
30%
0.78
0.59
45.0%
87.0
100.2
17.4%
145.60
156.29
30.4%
102.06%
10.0%
Reliability
(measured in minutes)
Non-storm
SAIDI
96.0
101.0
30%
Operational Efficiency – O&M
O&M
(measured in $ per customer)
167.52
156.56
30%
Operational Efficiency – Infrastructure Readiness
Capital
expenditures
per three year
average kW
peak
10%
97.00% - 97.99%
98.00% - 98.99%
103.00% - 105.00%
101.50% - 102.99%
99.00% - 101.49%
Total Operational Funding Percentage
102.8%
______________
(1)
Achievement of the threshold operational metric level results in funding of 50% of the available funding percentage for that specific
operational metric. Failure to achieve the threshold results in no funding for that specific operational metric.
(2)
Achievement of the target operational metric level results in funding of 100% of the available funding percentage for that specific
operational metric.
(3)
Achievement above the superior operational metric level results in funding of up to 150% of the available funding percentage for that
specific operational metric.
In 2013, satisfaction of safety metrics comprised 30% of the operational funding percentage. The safety metric measures
the number of employee injuries using a DART system, which measures the amount of time our employees are away from their
regular employment posts due to injury. DART is measured in the number of injuries per 200,000 hours and does not include
employees that are part of the individual performance incentive program offered to our meter readers. The safety metric is
important to our operations because it promotes the health and welfare of our employees. In addition, lowering the number of
accidents reduces our operating costs, which in turn contributes to lower rates for our customers.
In 2013, satisfaction of reliability metrics comprised 30% of the operational funding percentage. Reliability is measured by
SAIDI, which measures the average number of minutes electric service is interrupted per customer in a year. This metric
promotes our commitment to minimizing service interruptions to our customers as the lower the SAIDI level for the year, the
greater the funding percentage under the Executive Annual Incentive Plan. Since weather can greatly impact reliability and is
outside of our control, the reliability metric measures SAIDI on a non-storm basis.
In 2013, satisfaction of operational efficiency metrics related to O&M comprised 30% of the operational funding
percentage. Operational efficiency is measured based on O&M per customer, excluding third party network transmission fees
and amortization of regulatory assets. The purpose of the O&M metric is to promote lower expenditures relative to customers
served, which in turn contributes to lower rates for our customers.
In 2013, satisfaction of operational efficiency metrics related to infrastructure readiness comprised the final 10% of the
operational funding percentage. Infrastructure readiness is measured based on Oncor’s capital expenditures (including net
removal costs, but excluding allowance for funds used during construction) for the preceding three years’ average kW peak
loads. The purpose of the infrastructure readiness metric is to promote capital expenditures in line with the previously set capital
plan. While this metric discourages exceeding the budget, it also discourages spending that is too far below the capital plan, as
we believe expenditures to improve our facilities and other capital expenditures are important to maintaining the quality of and
enhancing our services to our customers.
106
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
As discussed above, an aggregate operational funding percentage amount for all participants was determined based on the
level of attainment of the above operational targets.
Step 3: Applying Operational Funding Percentage to EBITDA Funding Percentage
The operational funding percentage can increase or decrease the funding percentage of the Aggregate Incentive Pool. If
actual EBITDA exceeds the target EBITDA, then funding equals the operational funding percentage, up to 150%. If actual
EBITDA is less than or equals the target EBITDA, then funding of the Aggregate Incentive Pool is the lesser of the EBITDA
funding percentage or the operational funding percentage. For 2013, since actual EBITDA exceeded the target EBITDA, the
Aggregate Incentive Pool was based on the operational funding percentage of 102.8%.
Individual Performance Modifier and Determination
To calculate an executive officer’s award amount, the final funding percentage is first multiplied by the executive officer’s
target award, which is computed as a percentage of actual base salary. Based on the executive officer’s performance, an
individual performance modifier is then applied to the calculated award to determine the final incentive payment. An individual
performance modifier is based on reviews and evaluations of the executive officer’s performance by the CEO and the O&C
Committee (or solely the O&C Committee in the case of our CEO) and may adjust an award upward or downward. The
individual performance modifier is determined on a subjective basis. Factors used in determining individual performance
modifiers may include operational measures (including the safety, reliability, operational efficiency metrics and infrastructure
readiness discussed above), company objectives, individual management and other goals, specific job objectives and
competencies, the demonstration of team building and support attributes and general demeanor and behavior. The O&C
Committee did not apply any individual performance modifiers to 2013 Named Executive Officer awards.
Long-Term Incentive Plan
On February 13, 2013, our board of directors adopted the Long-Term Incentive Plan, effective January 1, 2013. Our
board of directors delegated administration of the Long-Term Incentive Plan to the O&C Committee. Our executive officers and
any other key employees of the company or its subsidiaries designated by the O&C Committee are eligible to participate. The
plan provides for cash awards to be paid after completion of a performance period based on achievement of certain stated
performance goals. A performance period under the Long-Term Incentive Plan is the 36 month period beginning each January 1,
unless otherwise determined by the O&C Committee in its sole discretion, and the participants for each performance period
shall be determined by the O&C Committee not later than the 90 th day after commencement of such performance period.
Performance goals are set forth in each participant’s individual award agreement and consist of one or more specific
performance objectives established by the O&C Committee in its discretion within the first 90 days of the applicable
performance period. Performance goals may be designated with respect to the company as a whole or one or more operating
units, and may also be determined on an absolute basis or relative to internal goals, or relative to levels attained in prior years,
or relative to other companies or indices, or as ratios expressing relationships between two or more performance goals.
The O&C Committee determined that the performance goals used for the Long-Term Incentive Plan awards granted in
2013 would consist of both financial and operational metrics. The funding of the 2013 Long-Term Incentive Plan award is
contingent first upon Oncor achieving a cumulative threshold net income level for the three year period. If Oncor fails to achieve
the stated net income level for the performance period, no award is payable. If Oncor achieves the threshold net income level, the
percentage of target net income achieved is used to determine a funding trigger percentage. Once a funding trigger percentage is
determined, an operational goal percentage is determined based on Oncor’s satisfaction of four operational metrics. The
operational goals used for the Long-Term Incentive Plan awards mirror the operational metrics used for awards under the
Executive Annual Incentive Plan. These goals relate to (1) a safety metric based on the number of employee injuries using a
Days Away, Restricted or Transfer (DART) system, (2) a reliability metric as measured by the System Average Interruption
Duration Index (SAIDI), (3) an operational efficiency metric based on the achievement of targeted operation and maintenance
expense (O&M) and sales, general and administrative expense (SG&A) levels determined on a per customer cost basis, and (4)
an infrastructure readiness metric based on the capital expenditure per three year average kW peak. The purpose of these
operational targets, which are based on safety, reliability, operational efficiency and infrastructure readiness metrics, is to
promote enhancement of our services to customers. The O&C Committee set the threshold, target and stretch levels for each
operational metric. The achievement
107
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
of those levels results in funding for a specific metric of 50%, 100% and 150%, respectively. Once the threshold has been
achieved, actual results in between each level results in a funding percentage equal to the percentage of the target achieved. Based
on the weighting for each operational metric, an aggregate weighted average of operational goal percentage is determined. The
amount of each Long-Term Incentive Plan award is then determined based on the product of (i) the funding trigger percentage,
multiplied by (ii) the weighted average of stated operational goal percentages, multiplied by (iii) the target opportunity dollar
amount stated in each individual award letter.
For Long-Term Incentive Plan awards granted to our Named Executive Officers in 2013, the funding triggers and
performance goals are as follows:
Funding Trigger
Net Income ($ millions; 2013-2015 cumulative)
Threshold
Target
$1,069
$1,227.70
Performance Goals
Weighting
Performance Goal
Performance Metric
30%
Safety - Days Away, Restricted or Transfer (DART), cumulative;
measured in number of injuries per 200,000 hours)
30%
Reliability - measured by non-storm System Average Interruption
Duration Index (SAIDI) in minutes; cumulative
Average operational efficiency - measured by operation and
30%
10%
maintenance expense (O&M) and sales, general and administrative
expense (SG&A) on a cost per customer basis
Operational efficiency - measured by an infrastructure readiness
metric based on the capital expenditure per three year average
kW peak; %; cumulative
Threshold
Target
Stretch
Threshold
Target
Stretch
Threshold
Target
Stretch
Threshold
Target
Stretch
0.92
0.83
0.78
300
279
252
$176.24
$164.72
$153.18
97.0 - 97.9, 103.0 - 105.0
98.0 - 98.9, 101.5 - 102.9
99.0 - 101.49
Under the terms of the plan, the O&C Committee must measure and certify the levels of attainment of performance goals
within 90 days following the completion of the performance period. Any awards for such period shall be paid on or about April
1 following the performance period, but in no event later than the end of the calendar year following the end of the applicable
performance period. At the discretion of the O&C Committee, individuals newly hired or promoted into positions that qualify
to participate in the Long-Term Incentive Plan may begin participating in the plan for one or more open performance periods on a
full or pro-rata basis upon the date of hire or promotion.
The Long-Term Incentive Plan encourages retention of executive officers and key employees by stipulating performance
periods of generally 36 months. Participants must be continuously employed by us through the last day of the performance
period in order to receive a long-term incentive award for that performance period. If a participant is employed by us on the last
day of the performance period but his/her employment terminates for any reason other than by us for cause prior to the payment
of the award for that performance period, the participant will be entitled to receive payment of the award. In the event a
participant is terminated by us for cause, the participant will forfeit any unpaid Long-Term Incentive Plan award. For purposes
of the Long-Term Incentive Plan, “cause” has the same meaning as defined in any employment agreement or change-in-control
agreement of such participant in effect at the time of termination of employment. If there is no such employment or change-incontrol agreement, “cause” means the indictment on or pleading guilty or nolo contendere to, a felony or misdemeanor involving
moral turpitude of such participant, or upon the participant, in the carrying out his or her duties to the company, (i) engaging in
conduct that causes a breach of his/her fiduciary duties to us, our subsidiaries or our investors, (ii) committing an act of gross
negligence, or (iii) committing gross misconduct resulting in material economic harm to us. If a participant’s employment is
terminated for reasons other than death, disability, retirement or following a change in control prior to the last day of the
performance period, all of such participant’s outstanding and unpaid Long-Term Incentive Plan awards shall be cancelled.
Upon a termination due to death, disability or retirement, for each outstanding Long-Term Incentive Plan unpaid award, the
participant (or his/her beneficiary in the case of death) shall be entitled to receive, on the same date as awards are paid for that
period to other participants, an award equal to the product of (i) a fraction, the numerator of which is the number of days in the
performance period up to and including the date of the separation of service and the denominator of which is the number of
108
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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days in the entire performance period, and (ii) the Long-Term Incentive Plan award for such performance period based on actual
performance. In the event of a termination following a change in control, a participant shall be entitled to receive, within 60 days
following the separation from service, an award equal to the product of (i) a fraction, the numerator of which is the number of
days in the performance period up to and including the date of the separation of service and the denominator of which is the
number of days in the entire performance period, and (ii) the Long-Term Incentive Plan award for such performance period
based on target performance.
For purposes of the Long-Term Incentive Plan, a “change in control” means , in one or a series of related transactions, (i)
the sale of all or substantially all of the consolidated assets or capital stock of EFH Corp., Oncor Holdings, or Oncor to a
person (or group of persons acting in concert) who is not an affiliate of any member of the Sponsor Group; (ii) a merger,
recapitalization or other sale by EFH Corp., any member of the Sponsor Group or their affiliates, to a person (or group of
persons acting in concert) that results in more than 50% of EFH Corp.’s common stock (or any resulting company after a
merger) being held by a person (or group of persons acting in concert) that does not include any member of the Sponsor Group
or any of their respective affiliates; or (iii) a merger, recapitalization or other sale of common stock by EFH Corp., any member
of the Sponsor Group or their affiliates, after which the Sponsor Group owns less than 20% of the common stock of, and has
the ability to appoint less than a majority of the directors to the board of directors of, EFH Corp. (or any resulting company
after a merger); and with respect to any of the events described in clauses (i) and (ii) above, such event results in any person (or
group of persons acting in concert) gaining control of more seats on the board of directors of EFH Corp. than the Sponsor
Group. However, the Long-Term Incentive Plan also provides that should a change in control occur under clauses (i) through
(iii) above with respect to the assets or capital stock of EFH Corp., a change in control will not be deemed to have occurred
unless such change in control would result in the material amendment or interference with the separateness undertakings set
forth in our Limited Liability Company Agreement, or would adversely change or modify the definition of an independent
director in our Limited Liability Company Agreement.
As the administrator of the Long-Term Incentive Plan, the O&C Committee has the authority to prescribe, amend and
rescind rules and regulations relating to the plan, determine the terms and conditions of any awards and make all other
determinations deemed necessary or advisable for the administration of the plan. The O&C Committee has broad discretion
under the plan and may delegate to one or more officers of the company the authority to grant Long-Term Incentive Plan awards
to employees who are not executive officers. Our board of directors may at any time terminate, alter, amend or suspend the
Long-Term Incentive Plan and any awards granted pursuant to it, subject to certain limitations. In the event of a change in
control, our board of directors may, in its discretion, terminate the plan and cancel all outstanding and unpaid awards, except
that in the event of a termination of the plan in connection with a change in control, participants shall be entitled, within 90
days following the termination of the plan, to payment of each outstanding and unpaid award in an amount equal to the product
of: (i) a fraction, the numerator of which is the number of days in the performance period up to and including the date of the
plan termination and the denominator of which is the number of days in the entire performance period, and (ii) the Long-Term
Incentive Plan award for such performance period based on target performance.
Equity Interests Plan and Management Investment Opportunity
The Equity Interests Plan allows our board of directors to offer non-employee directors, management and other personnel
and key service providers of Oncor the right to invest in Class B membership units of Investment LLC (each, a Class B
Interest), an entity whose only assets consist of equity interests in Oncor. As a result, each holder of Class B Interests holds an
indirect ownership interest in Oncor. Any dividends received by Investment LLC from Oncor in respect of its membership
interests in Oncor are subsequently distributed by Investment LLC to the holders of Class B Interests in proportion to the
number of Class B Interests held by such holders.
Our board of directors administers the Equity Interests Plan. As the plan administrator, our board of directors determines
the participants, the number of Class B Interests offered to any participant, the purchase price of the Class B Interests and the
other terms of the award. Our board of directors may also amend, suspend or terminate the Equity Interests Plan at any
time. Upon purchasing any Class B Interests, participants may be required to enter into certain agreements with the Company
and Investment LLC, including a management stockholder’s agreement and a sale participation agreement described below. The
Equity Interests Plan will terminate on November 5, 2018 or an earlier or a later date determined by our board of directors.
In 2008, our executive officers and certain key employees were given the option to purchase Class B Interests of
Investment LLC pursuant to the 2008 Management Investment Opportunity offered under the Equity Interests Plan. Each
109
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
participant in the 2008 Management Investment Opportunity purchased Class B Interests at a price of $10.00 per unit, which
was the same price per unit as paid by Texas Transmission in connection with its November 2008 investment in
Oncor. Because the Class B Interests were purchased for fair market value, they are not included in the Summary
Compensation Table or the Outstanding Equity Awards at Fiscal Year-End Table below as stock awards. Refer to “–
Compensation Discussion and Analysis – Compensation Elements – Long Term Incentives – Equity Interests Plan and
Management Investment Opportunity” for a more detailed discussion of the Equity Interests Plan and Management Investment
Opportunity.
In connection with the Management Investment Opportunity, each participant entered into a management stockholder’s
agreement and a sale participation agreement. The management stockholder’s agreement, among others things, gives Oncor the
right to repurchase a participant’s Class B Interests in the event of specified terminations of a participant’s employment or
violation by a participant of certain of his or her non-compete obligations. We believe this repurchase right provides significant
retentive value to our business. For a more detailed description of the terms of the management stockholder’s agreement and sale
participation agreement, see “Certain Relationships and Related Transactions, and Director Independence – Related Party
Transactions – Agreements with Management and Directors.”
The Named Executive Officers beneficially own the following amounts of Class B Interests: Mr. Shapard: 300,000; Mr.
Davis: 50,000; Mr. Clevenger 50,000; Mr. Greer: 75,000; and Mr. Nye 18,368. The amounts of Class B Interests each
participant could purchase were determined by the O&C Committee. Each participant was permitted to use his funds in the
Salary Deferral Program to purchase the Class B Interests. All Class B Interests purchased using funds held in the Salary
Deferral Program are held of record by the Salary Deferral Program for the benefit of the respective participants. Messrs. Davis,
Clevenger and Greer each elected to purchase Class B Interests using Salary Deferral Program funds. As a result, 19,868 of
Mr. Davis’s Class B Interests, 8,703 of Mr. Clevenger’s Class B Interests and 25,000 of Mr. Greer’s Class B Interests are held
of record by the Salary Deferral Program.
The following table sets forth information regarding Oncor’s participation in the retirement plans that provide for benefits,
in connection with, or following, the retirement of Named Executive Officers for the fiscal year ended December 31, 2013:
Pension Benefits – 2013
Payments
Present Value of During Last
Accredited Service (#) Accumulated Benefit Fiscal Year
(1)
($) (2)
($)
─
28.0833
833,442
─
28.0833
292,868
Number of Years
Name
Robert S. Shapard
Plan Name
Oncor Retirement Plan
Supplemental Retirement Plan
David M. Davis
Don J. Clevenger
James A. Greer
E. Allen Nye, Jr.
Oncor Retirement Plan
21.5000
Supplemental Retirement Plan
21.5000
Oncor Retirement Plan
8.6667
Supplemental Retirement Plan
8.6667
Oncor Retirement Plan
28.5000
Supplemental Retirement Plan
28.5000
Oncor Retirement Plan
2.0000
Supplemental Retirement Plan
2.0000
1,009,765
866,033
109,207
57,664
1,275,022
604,621
22,773
35,913
─
─
─
─
─
─
─
─
_____________
(1)
(2)
Accredited service for each of the plans is determined based on an employee’s age and hire date. Employees hired by Oncor or an EFH
Corp. affiliate prior to January 1, 1985 became eligible to participate in the plan the month after their completion of one year of service
and attainment of age 25. Employees hired after January 1, 1985 became eligible to participate in the plan the month after their
completion of one year of service and attainment of age 21.
Through 2013, Mr. Shapard accumulated benefits in two EFH Corp.-sponsored supplemental retirement plans as a result of his service
as an employee of EFH Corp.’s predecessor prior to joining Oncor. Those benefits were paid solely by EFH Corp. in connection with
various changes made by EFH Corp. to its retirement plans in 2013.
110
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Until January 1, 2013, Oncor was a participating employer in the EFH Retirement Plan. In August 2012, EFH Corp.
made various changes to the EFH Retirement Plan, in which Oncor was a participating employer, including splitting off into a
new plan all of the assets and liabilities associated with Oncor employees and all retirees and terminated vested participants of
EFH Corp. and its subsidiaries (including discontinued businesses). Effective January 1, 2013, Oncor assumed sponsorship
of the new plan, referred to in this Annual Report as the Oncor Retirement Plan. See Footnote 9 to Financial Statements for
additional information on the EFH Retirement Plan and the Oncor Retirement Plan. The benefits to Oncor employees are identical
under the EFH Retirement Plan and the Oncor Retirement Plan.
The Oncor Retirement Plan contains both a traditional defined benefit component and a cash balance component. Only
employees hired before January 1, 2002 may participate in the traditional defined benefit component. All new employees hired
after January 1, 2002 participate in the cash balance component. In addition, the cash balance component covers employees
previously covered under the traditional defined benefit component who elected to convert the actuarial equivalent of their
accrued traditional defined benefit to the cash balance component during a special one-time election opportunity effective in
2002. The employees that participate in the traditional defined benefit component do not participate in the cash balance
component.
Annual retirement benefits under the traditional defined benefit component, which applied during 2013 to Messrs. Davis
and Greer are computed as follows: for each year of accredited service up to a total of 40 years, 1.3% of the first $7,800, plus
1.5% of the excess over $7,800, of the participant’s average annual earnings (base salary) during his/her three years of highest
earnings. Under the cash balance component, which covers Messrs. Shapard, Clevenger and Nye, a hypothetical account is
established for participants and credited with monthly contribution credits equal to a percentage of the participant’s
compensation (3.5%, 4.5%, 5.5% or 6.5% depending on the participant’s combined age and years of accredited service), plus
interest credits based on the average yield of the 30-year Treasury bond for the 12 months ending November 30 of the prior
year. Benefits paid under the traditional defined benefit component of the Oncor Retirement Plan are not subject to any reduction
for Social Security payments but are limited by provisions of the Code.
The Supplemental Retirement Plan provides for the payment of retirement benefits, which would otherwise be limited by
the Code or the definition of earnings under the Oncor Retirement Plan, including any retirement compensation required to be
paid pursuant to contractual arrangements. Under the Supplemental Retirement Plan, retirement benefits are calculated in
accordance with the same formula used under the Oncor Retirement Plan, except that, with respect to calculating the portion of
the Supplemental Retirement Plan benefit attributable to service under the traditional defined benefit component of the Oncor
Retirement Plan, earnings also include Executive Annual Incentive Plan awards. The amount of earnings attributable to the
Executive Annual Incentive Plan awards is reported under the Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table.
The table set forth above illustrates the present value on December 31, 2013 of each Named Executive Officer’s Retirement
Plan benefit and benefits payable under the Supplemental Retirement Plan, based on his or her years of service and
remuneration through December 31, 2013. Benefits accrued under the Supplemental Retirement Plan after December 31, 2004
are subject to Section 409A of the Code. Accordingly, certain provisions of the Supplemental Retirement Plan have been
modified in order to comply with the requirements of Section 409A and related guidance.
The present value of accumulated benefits for the traditional benefit component of the Oncor Retirement Plan and
Supplemental Retirement Plan was calculated based on the executive’s annuity payable at the earliest age that unreduced benefits
are available under the Plans (generally age 62). Unmarried executives are assumed to elect a single life annuity. For married
executives, it is assumed that 65% will elect a 100% joint and survivor annuity and 35% will elect a single life annuity. Postretirement mortality was based on the 2014 Static Mortality Table for Annuitants and Non-Annuitants per Treasury regulation
1.430(h)(3)-1(e). A discount rate of 4.72% was applied, and no pre-retirement mortality or turnover was reflected.
The present value of accumulated benefit for the cash balance component of the Oncor Retirement Plan and the
Supplemental Retirement Plan was calculated as the value of the executive’s cash balance account projected to age 65 at an
assumed growth rate of 4.50% and then discounted back to December 31, 2013 at 4.72%. No mortality or turnover
assumptions were applied.
Early retirement benefits under the Oncor Retirement Plan are available to all of our employees upon their attainment of age
55 and achievement of 15 years of accredited service. Early retirement results in a retirement benefit payment reduction of 4
percent for each full year (and 0.333% for each additional full calendar month) between the date the
111
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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participant retires and the date the participant would reach age 62. Benefits under the Supplemental Retirement Plan are subject
to the same age and service restrictions, but are only available to our executive officers and certain other key employees.
The following table sets forth information regarding the deferral of components of our Named Executive Officers’
compensation on a basis that is not tax-qualified for the fiscal year ended December 31, 2013:
Nonqualified Deferred Compensation – 2013
Name
Robert S. Shapard
Salary Deferral Program
SARs Exercise Opportunity Deferral
David M. Davis (4)
Salary Deferral Program
SARs Exercise Opportunity Deferral
Don J. Clevenger (5)
Salary Deferral Program
SARs Exercise Opportunity Deferral
James A. Greer (6)
Salary Deferral Program
SARs Exercise Opportunity Deferral
E. Allen Nye, Jr.
Salary Deferral Program
SARs Exercise Opportunity Deferral
Executive in
Registrant
Aggregate
Contributions
Contributions
Earnings (Loss)
Aggregate
Balance at
in Last Fiscal
in Last Fiscal
in Last Fiscal
Withdrawals/
Last Fiscal
Year
Year
Year
Distributions
Year End
($)(1)(2)
($)(3)
($)
($)
($)
Aggregate
56,333
—
56,333
—
161,122
17,683
114,247
—
1,058,913
2,975,154
30,167
—
30,167
—
82,439
2,829
—
—
624,895
476,025
29,333
—
29,333
—
82,686
2,829
—
—
542,884
476,025
29,833
—
29,833
—
49,185
3,678
—
—
597,646
618,832
34,133
—
34,133
—
48,285
885
—
—
255,884
148,854
_______________
Amounts in this column for the Salary Deferral Program represent salary deferrals pursuant to the Salary Deferral Program and are
included in the “Salary” amounts in the Summary Compensation Table above.
(2) Amounts in this column for the SARs Exercise Opportunity Deferral represent amounts the respective Named Executive Officer agreed
to defer pursuant to the SARs Exercise Opportunity, as discussed in more detail in the narrative immediately following this table.
(3) Amounts in this column represent company-matching awards pursuant to the Salary Deferral Program and are included in the “All Other
Compensation” amounts in the Summary Compensation Table above.
(4) $9,698 of Mr. Davis’s aggregate earnings in the last fiscal year are attributable to earnings associated with the Class B Interests he
purchased using funds in his Salary Deferral Program account pursuant to the Management Investment Opportunity.
(5) $4,248 of Mr. Clevenger’s aggregate earnings in the last fiscal year are attributable to earnings associated with the Class B Interests he
purchased using funds in his Salary Deferral Program account pursuant to the Management Investment Opportunity.
(6) $12,202 of Mr. Greer’s aggregate earnings in the last fiscal year are attributable to earnings associated with the Class B Interests he
purchased using funds in his Salary Deferral Program account pursuant to the Management Investment Opportunity.
(1)
Salary Deferral Program
Under the Salary Deferral Program each employee of Oncor, who is in a designated job level and whose annual salary is
equal to or greater than an amount established under the Salary Deferral Program ($118,470 for the program year beginning
January 1, 2013) may elect to defer up to 50% of annual base salary, and/or up to 85% of any bonus or incentive award. This
deferral may be made for a period of seven years, for a period ending with the retirement of such employee, or for a combination
thereof, at the election of the employee. Oncor makes a matching award, subject to forfeiture under certain circumstances, equal
to 100% of up to the first 8% of salary deferred under the Salary Deferral Program. Oncor does not match deferred annual
incentive awards. Matching contributions vest at the earliest of seven years after the deferral date, executive’s retirement or a
change in control of Oncor (as defined in the Salary Deferral Program).
112
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113
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Deferrals are credited with earnings or losses based on the performance of investment alternatives under the Salary
Deferral Program selected by each participant. Among the investment alternatives, certain participants were eligible to use funds
in the Salary Deferral Program to purchase Class B Interests in November 2008 pursuant to the Equity Interests Plan and
Management Investment Opportunity. For additional information regarding the Equity Interests Plan and Management
Investment Opportunity, see “Long Term Incentives - Equity Interests Plan and Management Investment Opportunity.
” Distributions from Oncor to Investment LLC are distributed pro rata to the holders of Class B Interests in accordance with
their proportionate ownership of Class B Interests. Any distributions attributable to Class B Interests purchased using a
participant’s funds in the Salary Deferral Program are deposited in such participant’s Salary Deferral Program account as
earnings.
At the end of the applicable account maturity period, the trustee for the Salary Deferral Program distributes the deferrals
and the applicable earnings in cash as a lump sum or in annual installments at the participant’s election made at the time of
deferral. Oncor is financing the retirement option portion of the Salary Deferral Program through the purchase of corporateowned life insurance on some lives of participants. The proceeds from such insurance are expected to allow us to fully recover
the cost of the retirement option.
SARs Exercise Opportunity Deferrals
In connection with the SARs Exercise Opportunity in November 2012, c ertain Named Executive Officers agreed to defer
payments of a portion of his/her Exercise Payment in the following amounts: Mr. Shapard, $2,957,400; Mr. Davis, $473,184;
Mr. Clevenger, $473,184; Mr. Greer, $615,139; and Mr. Nye, $147,966. These Named Executive Officers agreed to defer the
amounts until the earlier of November 7, 2016 or the occurrence of an event triggering SAR exercisability. These events
generally include a change of control, an EFH realization event, a liquidity event or the achievement of certain financial returns
as described in the SARs Plan. The deferred amounts were placed in a bankruptcy-remote trust.
Potential Payments upon Termination or Change in Control
The tables and narrative below provide information for payments to Oncor’s Named Executive Officers (or, as
applicable, enhancements to payments or benefits) in the event of termination including retirement, voluntary, for cause, death,
disability, without cause or change in control of Oncor. The amounts shown below assume that such a termination of
employment and/or change in control occurred on December 31, 2013.
In 2013, all of our executive officers were eligible to receive benefits under the terms of the Change in Control Policy and
the Severance Plan, as more fully described following the tables below. In addition to the provisions of those plans, the Salary
Deferral Program provides that all company-matching awards will become automatically vested in the event of a change in
control. The amounts listed in the tables below regarding the Salary Deferral Program only represent the immediate vesting of
company matching contributions resulting from death, disability or the occurrence of a change in control. Vested amounts and
contributions made to such plan by each Named Executive Officer are disclosed in the Nonqualified Deferred Compensation
table above. For a more detailed discussion of the Salary Deferral Program, see the Nonqualified Deferred Compensation table
above and the narrative following the Nonqualified Deferred Compensation table.
Early retirement benefits under the Oncor Retirement Plan are available to all of our employees upon their attainment of age
55 and achievement of 15 years of accredited service. Early retirement results in a retirement benefit payment reduction of 4
percent for each full year (and 0.333% for each additional full calendar month) between the date the participant retires and the
date the participant would reach age 62. Benefits under the Supplemental Retirement Plan are subject to the same age and
service restrictions, but are only available to our executive officers and certain other key employees. At December 31, 2013,
Messrs. Clevenger, Greer and Nye were not eligible to retire because they had not met the age requirement. However, because
Mr. Shapard participates in the cash balance component of the retirement plans, and because he has satisfied both the age
requirement and 10 years of accredited service, he may withdraw his full account balances under each plan upon termination of
his employment. Upon achievement of the age and service requirements, executive officers are entitled to receive their full cash
account balance upon termination. No additional potential payments will be triggered by any termination of employment or
change in control, and as a result no amounts are reported in the tables below for such retirement plans. For a more detailed
discussion of the retirement plans, see the Pension Benefits table above and the narrative following the Pension Benefits table.
114
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
All our Named Executive Officers participate in benefit plans for group term life insurance and accidental death and
disability. Any benefits received under these policies are paid to the beneficiary by a third-party provider.
In connection with the November 2012 SARs Exercise Opportunity, each SARs holder agreed that no further dividends
would accumulate following such exercise, and that interest would accrue on their existing dividend accounts until such
dividends were paid in accordance with the terms of the SARs Plan. The dividends and interest are payable when dividends
would become payable under the SARs Plan, generally upon a participant’s death, disability, separation from service,
unforeseeable emergency, or a change in control, each as defined by section 409A of the Internal Revenue Code. Each of our
Named Executive Officers also agreed to defer a certain portion of his exercise payment amount, which was deposited into a
bankruptcy-remote trust, until the earlier of November 7, 2016 or the occurrence of an event triggering SAR exercisability under
the SARs Plan. These events generally include a change of control, an EFH realization event, a liquidity event or the
achievement of certain financial returns as described in the SARs Plan.
Mr. Nye is party to a retention agreement that provides for the payment of a one-time
cash retention bonus of $300,000 contingent upon his continued employment and satisfactory
performance of his job duties as directed by Oncor through December 31, 2014. The bonus is
payable in accordance with Oncor’s normal payroll practices or as soon as practicable after
December 31, 2014. In the event Mr. Nye is terminated with cause or elects to terminate his
employment without good reason prior to December 31, 2014, he will immediately forfeit the
retention bonus. In the event Mr. Nye’s employment is terminated prior to December 31, 2014
either by Oncor without cause, by him for good reason, or as a result of his death or disability,
the retention bonus will immediately vest and become payable. For more information on this retention
agreement, see “Compensation Discussion and Analysis – Individual Named Executive Officers Compensation –
Compensation of Other Named Executive Officers – E. Allen Nye, Jr.” No other Named Executive Officer is party to any
employment or other agreement that provides for additional benefits upon a termination of employment or change in control.
115
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
1. Mr. Shapard
Potential Payments to Mr. Shapard Upon Termination ($)
Without
Cause Or
For Good
For
Cause
Death
Disability
-
-
-
-
Retirement
Benefit
Cash Severance
(1)
Voluntary
-
Without
Reason In
Cause
Or For
Connection
With
Good
Reason
Change in
Control
2,062,500
Executive Annual Incentive Plan
562,500
-
-
562,500
562,500
-
Salary Deferral Program (2)
325,744
-
-
465,349
465,349
-
5,273,539 5,273,539 5,273,539
5,273,539
SARs Plan dividends (3)
SARs Exercise Deferral (4)
Long-Term Incentive Plan
5,273,539
-
642,133
-
-
-
-
-
642,133
-
642,133
5,273,539
-
2,625,000
-
465,349
5,273,539
2,957,400
642,133
642,133
Health & Welfare
- Medical/COBRA
-
-
-
-
-
49,221
49,221
- Dental/COBRA
-
-
-
-
-
3,804
3,804
Outplacement Assistance
-
-
-
-
-
196,875
196,875
8,228,072
12,213,321
Totals
6,803,916
5,273,539 5,273,539 6,943,521
6,943,521
_______________
(1)
(2)
(3)
(4)
Mr. Shapard participates in the cash balance component of the Oncor Retirement Plan and the Supplemental Retirement Plan, and because
he has reached age 55 and achieved 10 years of plan participation, under the terms of the plans he may withdraw his full account balances
under each plan upon termination of his employment for any reason.
Amounts reported reflect the immediate vesting of company matching contributions resulting from retirement, death, disability or the
occurrence of a change in control.
In connection with the November 2012 SARs Exercise Opportunity, accounts ceased accruing dividends as of the date of such exercise
but accrue interest until the dividend account is payable in accordance with the SARs Plan. Amounts above include interest accumulated
on Mr. Shapard’s dividend account through December 31, 2013.
In connection with the November 2012 SARs Exercise Opportunity, Mr. Shapard agreed to defer $2,957,400 of his Exercise Payment
until the earlier of November 7, 2016 or certain events that would trigger SARs exercisability under the SARs Plan. These events
generally include a change of control, an EFH Realization Event (as defined in the SARs Plan), a liquidity event or the achievement of
certain financial returns as described in the SARs Plan.
116
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
2. Mr. Davis
Potential Payments to Mr. Davis Upon Termination ($)
Reason
Benefit
Cash Severance
Retirement
Voluntary
For
Cause
Death
Disability
-
-
-
-
-
Reason In
Cause
Or For
Connection
With
Good
Reason
Change in
Control
620,000
220,000
-
-
220,000
220,000
-
Salary Deferral Program (1)
106,033
-
-
182,815
182,815
-
SARs Plan dividends (2)
843,766
843,766
843,766
Long-Term Incentive Plan
-
184,000
843,766 843,766
-
-
-
-
-
184,000
-
184,000
Without
Cause Or
For Good
Without
Executive Annual Incentive Plan
SARs Exercise Deferral (3)
in Control
843,766
-
620,000
-
182,815
843,766
473,184
184,000
184,000
Health & Welfare
- Medical/COBRA
-
-
-
-
-
32,814
32,814
- Dental/COBRA
-
-
-
-
-
2,535
2,535
Outplacement Assistance
-
-
-
-
-
93,000
93,000
1,776,115
2,432,114
Totals
1,353,799
843,766
843,766
1,430,581
1,430,581
_________________
(1)
(2)
(3)
Amounts reported reflect the immediate vesting of company matching contributions resulting from retirement, death, disability or the
occurrence of a change in control.
In connection with the November 2012 SARs Exercise Opportunity, accounts ceased accruing dividends as of the date of such exercise
but accrue interest until the dividend account is payable in accordance with the SARs Plan. Amounts above include interest accumulated
on Mr. Davis’s dividend account through December 31, 2013.
In connection with the November 2012 SARs Exercise Opportunity, Mr. Davis agreed to defer $473,184 of his Exercise Payment until
the earlier of November 7, 2016 or certain events that would trigger SARs exercisability under the SARs Plan. These events generally
include a change of control, an EFH Realization Event (as defined in the SARs Plan), a liquidity event or the achievement of certain
financial returns as described in the SARs Plan.
117
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
3. Mr. Clevenger
Potential Payments to Mr. Clevenger Upon Termination ($)
Reason
Without
Cause Or
For Good
Reason
Voluntary
For
Cause
Death
Disability
Cash Severance
-
-
-
-
Executive Annual Incentive Plan
-
-
211,750
211,750
-
Salary Deferral Program (1)
-
-
212,602
212,602
-
843,766
843,766
Benefit
SARs Plan dividends (2)
SARs Exercise Opportunity Deferral
843,766
843,766
-
-
-
-
- Medical/COBRA
-
,
-
- Dental/COBRA
-
,
Outplacement Assistance
-
,
(3)
Long-Term Incentive Plan
-
179,093
-
179,093
Change in Control
Without Cause Or
For Good Reason
In Connection With
Change in Control
596,750
596,750
-
212,602
843,766
843,766
473,184
-
179,093
179,093
-
32,668
32,668
-
-
2,535
2,535
-
-
89,513
89,513
1,744,325
2,430,111
Health & Welfare
Totals
843,766
843,766
1,447,211
1,447,211
_________________
(1)
(2)
(3)
Amounts reported reflect the immediate vesting of company matching contributions resulting from death, disability or the occurrence of a
change in control.
In connection with the November 2012 SARs Exercise Opportunity, accounts ceased accruing dividends as of the date of such exercise
but accrue interest until the dividend account is payable. Amounts above include interest accumulated on Mr. Clevenger’s dividend
account December 31, 2013.
In connection with the November 2012 SARs Exercise Opportunity, Mr. Clevenger agreed to defer $473,184 of his Exercise Payment
until the earlier of November 7, 2016 or certain events that would trigger SARs exercisability under the SARs Plan. These events
generally include a change of control, an EFH Realization Event (as defined in the SARs Plan), a liquidity event or the achievement of
certain financial returns as described in the SARs Plan.
118
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
4. Mr. Greer
Potential Payments to Mr. Greer Upon Termination ($)
Reason
Without
Cause Or
For Good
Reason
Voluntary
For
Cause
Death
Disability
Cash Severance
-
-
-
-
Executive Annual Incentive Plan
-
-
220,000
220,000
-
Salary Deferral Program (1)
-
-
138,182
138,182
-
1,096,896
1,096,896
Benefit
SARs Plan dividends (2)
SARs Exercise Opportunity Deferral
1,096,896
1,096,896
-
-
-
-
- Medical/COBRA
-
-
-
- Dental/COBRA
-
-
Outplacement Assistance
-
-
(3)
Long-Term Incentive Plan
-
184,000
-
184,000
Change in Control
Without Cause Or
For Good Reason
In Connection With
Change in Control
620,000
620,000
-
138,182
1,096,896
1,096,896
615,139
-
184,000
184,000
-
32,814
32,814
-
-
2,522
2,522
-
-
93,000
93,000
2,029,232
2,782,553
Health & Welfare
Totals
1,096,896
1,096,896
1,639,078
1,639,078
_________________
(1)
(2)
(3)
Amounts reported reflect the immediate vesting of company matching contributions resulting from death, disability or the occurrence of a
change in control.
In connection with the November 2012 SARs Exercise Opportunity, accounts ceased accruing dividends as of the date of such exercise
but accrue interest until the dividend account is payable in accordance with the SARs Plan. Amounts above include interest accumulated
on Mr. Greer’s dividend account December 31, 2013.
In connection with the November 2012 SARs Exercise Opportunity, Mr. Greer agreed to defer $615,139 of his Exercise Payment until
the earlier of November 7, 2016 or certain events that would trigger SARs exercisability under the SARs Plan. These events generally
include a change of control, an EFH Realization Event (as defined in the SARs Plan), a liquidity event or the achievement of certain
financial returns as described in the SARs Plan.
119
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
5. Mr. Nye
Potential Payments to Mr. Nye Upon Termination ($)
Reason
Without
Cause Or
For Good
Reason
Voluntary
For
Cause
Death
Disability
Cash Severance
-
-
-
-
Executive Annual Incentive Plan
-
-
244,750
244,750
-
Salary Deferral Program (1)
-
-
127,942
127,942
-
258,933
258,933
Benefit
SARs Plan dividends (2)
SARs Exercise Opportunity Deferral
258,933
258,933
-
In Connection With
Change in Control
689,750
689,750
-
127,942
258,933
258,933
147,966
-
-
Long-Term Incentive Plan
-
-
208,533
208,533
208,533
208,533
Retention Agreement (4)
-
-
300,000
300,000
300,000
300,000
- Medical/COBRA
-
-
-
-
32,668
32,668
- Dental/COBRA
-
-
-
-
2,535
2,535
Outplacement Assistance
-
-
-
-
103,463
103,463
1,595,882
1,871,790
(3)
-
Change in Control
Without Cause Or
For Good Reason
-
Health & Welfare
Totals
258,933
258,933
1,140,158
1,140,158
_________________
(1)
(2)
(3)
(4)
Amounts reported reflect the immediate vesting of company matching contributions resulting from death, disability or the occurrence of a
change in control.
In connection with the November 2012 SARs Exercise Opportunity, accounts ceased accruing dividends as of the date of such exercise
but accrue interest until the dividend account is payable. Amounts above include interest accumulated on Mr. Nye’s dividend account
December 31, 2013.
In connection with the November 2012 SARs Exercise Opportunity, Mr. Nye agreed to defer $147,966 of his Exercise Payment until the
earlier of November 7, 2016 or certain events that would trigger SARs exercisability under the SARs Plan. These events generally
include a change of control, an EFH Realization Event (as defined in the SARs Plan), a liquidity event or the achievement of certain
financial returns as described in the SARs Plan.
In February 2013, Mr. Nye entered into a retention agreement with Oncor that provides for the payment of a one-time cash retention
bonus of $300,000 to Mr. Nye contingent upon his continued employment and satisfactory performance of his job duties as directed by
Oncor through December 31, 2014. The bonus is payable in accordance with Oncor’s normal payroll practices or as soon as practicable
after December 31, 2014. In the event Mr. Nye is terminated with cause or elects to terminate his employment without good reason prior
to December 31, 2014, he will immediately forfeit the retention bonus. For more information on this retention agreement, see
“Compensation Discussion and Analysis – Individual Named Executive Officers Compensation – Compensation of Other Named
Executive Officers – E. Allen Nye, Jr.”.
120
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Change in Control Policy
We maintain a Change in Control Policy for our executive team, which consists of our executive officers and certain nonexecutive vice presidents. The purpose of this Change in Control Policy is to provide the payment of transition benefits to
eligible executives if:
·
·
Their employment with the company or a successor is terminated within twenty-four months following a change in
control of the company; and
They:
o are terminated without cause, or
o resign for good reason due to a reduction in salary or a material reduction in the aggregate level or value of
benefits for which they are eligible.
The Change in Control Policy provides for the payment of transition benefits to eligible executives if any of the following
occur within 24 months following a change in control:
·
·
The executive is terminated without cause. Cause is defined as either (a) the definition in any executive’s applicable
employment agreement or change in control agreement or (b) if there is no such employment or change in control
agreement, cause exists: (i) if, in carrying out his or her duties to Oncor, an executive engages in conduct that
constitutes (A) a breach of his or her fiduciary duty to Oncor, its subsidiaries or shareholders, (B) gross neglect or
(C) gross misconduct resulting in material economic harm to Oncor or its subsidiaries, taken as a whole, or (ii) upon
the indictment of the executive, or the plea of guilty or nolo contendere by the executive to, a felony or a misdemeanor
involving moral turpitude.
The executive resigns for good reason. Good reason is defined as any of the following being taken without the
executive’s consent: (a) a reduction in the executive’s base salary, other than a broad-based reduction of base salaries
of all similarly situated executives of the surviving corporation after a change in control, or subsidiary, as applicable,
unless such broad-based reduction only applies to former executives of Oncor; (b) a material reduction in the aggregate
level or value of benefits for which the executive is eligible, immediately prior to the change in control (as defined
below), other than a broad-based reduction applicable on a comparable basis to all similarly situated executives; or (c)
the executive is required to permanently relocate outside of a fifty (50) mile radius of the executive’s principal
residence.
“Change in control” is defined in the Change in Control Policy as the occurrence of the following, in one or a series of
related transactions, (i) the sale of all or substantially all of the consolidated assets or capital stock of EFH Corp., Oncor
Holdings or Oncor to a person (or group of persons acting in concert) who is not an affiliate of any member of the Sponsor
Group; (ii) a merger, recapitalization or other sale by EFH Corp., any member of the Sponsor Group or their affiliates, to a
person (or group of persons acting in concert) of the common stock of EFH Corp., no par value (“EFH Common Stock”) that
results in more than 50% of the EFH Common Stock (or any resulting company after a merger) being held by a person (or
group of persons acting in concert) that does not include any member of the Sponsor Group or any of their respective affiliates;
or (iii) a merger, recapitalization or other sale of EFH Common Stock by EFH Corp., any member of the Sponsor Group or
their affiliates, after which the Sponsor Group owns less than 20% of the EFH Common Stock, and has the ability to appoint
less than a majority of the directors to the board of directors of EFH Corp. (or of any resulting company after a merger); and
with respect to any of the events described in clauses (i) and (ii) above, such event results in any person (or group of persons
acting in concert) gaining control of more seats on the board of directors of EFH Corp. than the Sponsor Group; provided
however, that notwithstanding the foregoing, (x) clause (i) above shall be deemed not to include any reference to EFH Corp., and
clauses (ii) and (iii) shall not apply, in each case, for purposes of interpreting the termination or applicability of any puts, calls
or release from transfer restrictions upon transfers of equity interests of Oncor or Oncor Holdings, (y) clause (i) above shall be
deemed not to include any reference to Oncor Holdings for purposes of interpreting the termination or applicability of any puts,
calls or release from transfer restrictions upon transfers of equity interests of Oncor and (z) clause (i) above shall be deemed not
to include any reference to Oncor for the purposes of interpreting the termination or applicability of any puts, calls or release
from transfer restrictions upon the transfer of equity units of Oncor Holdings. In addition, should a change in control occur
under clauses (i) through (iii) above with respect to the assets or capital stock of EFH Corp., a change in control will not be
deemed to have occurred unless such change in control would result in the material amendment or interference with the
separateness undertakings under our Limited Liability Company Agreement, or would adversely change or modify the
definition of an independent director in our Limited Liability Company Agreement.
121
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Our executive officers are eligible to receive the following under the Change in Control Policy:
·
·
·
·
·
·
A one-time lump sum cash severance payment in an amount equal to the greater of (i) a multiple (2 times for Mr.
Shapard and 1 time for each other executive officer) of the sum of the executive’s (a) annualized base salary and (b)
annual target incentive award for the year of termination or resignation, or (ii) the amount determined under Oncor’s
severance plan for non-executive employees (which pays two weeks of an employee’s pay for every year of service up
to the 20th year of service, and three weeks pay for every year of service above 20 years of service);
Continued eligibility for distribution of already-granted equity awards at maturity; however, any such distribution
will be prorated for the period of employment during the relevant performance or restriction period prior to termination;
Continued coverage at our expense under our health care benefit plans for the applicable COBRA period with the
executive’s contribution for such plans being at the applicable employee rate for 18 months (unless and until the
executive becomes eligible for benefits with another employer) and, if the executive is covered under our healthcare
plans through the end of such period, at the end of such continued coverage the executive may continue participation
in our health care plans at the applicable COBRA rate for 18 months, in the case of Mr. Shapard, or six months, in
the case of each other executive, and Oncor will reimburse the executive the monthly difference between the applicable
employee rate for such coverage and the COBRA rate paid by the executive for such period;
Outplacement assistance at our expense for 18 months, in the case of Mr. Shapard, and one year, in the case of the
other executive officers;
Any vested, accrued benefits to which the executive is entitled under our employee benefits plans; and
If any of the severance benefits described in the Change in Control Policy shall result in an excise tax pursuant to Code
Sections 280G or 4999 of the Code, payable by the executive, a tax gross-up payment to cover such additional taxes,
subject to reduction for certain Section 280G purposes.
Severance Plan
We maintain the Severance Plan for our executive team, which consists of our executive officers and certain non-executive
vice presidents. The purpose of the Severance Plan is to provide benefits to eligible executives who are not eligible for severance
pursuant to another plan or agreement (including an employment agreement) and whose employment is involuntarily terminated
for reasons other than:
·
·
·
Cause (as defined in the Severance Plan);
Disability of the employee, if the employee is a participant in our long-term disability plan; or
A transaction involving the company or any of its affiliates in which the employee is offered employment with a
company involved in, or related to, the transaction.
The Severance Plan provides for severance payments to executives whose employment is involuntarily terminated for
reasons other than:
·
·
·
Cause, which is defined as either (a) the definition in any executive’s applicable employment agreement or change in
control agreement or, (b) if there is no such employment or change in control agreement, cause exists: (i) if, in carrying
out his or her duties to the Company, an executive engages in conduct that constitutes (A) a breach of his or her
fiduciary duty to Oncor, its subsidiaries or shareholders (including a breach or attempted breach of the restrictive
covenants under the Severance Plan), (B) gross neglect or (C) gross misconduct resulting in material economic harm
to Oncor or its subsidiaries, taken as a whole, or (ii) upon the indictment of the executive, or the plea of guilty or nolo
contendere by the executive to a felony or a misdemeanor involving moral turpitude;
Participation in the EFH Corp.-sponsored long-term disability plan or any successor plan; or
A transaction involving the Company or any of its affiliates in which the executive is offered employment with a
company involved in, or related to, the transaction.
Our executive officers are eligible to receive the following under the Severance Plan:
·
A one-time lump sum cash severance payment in an amount equal to the greater of (i) the sum of (a) a multiple of two
times for Mr. Shapard and one time for each other Named Executive Officer of the executive’s annualized base salary
and (b) a prorated portion of the executive’s annual target incentive award for the year of termination, or (ii) the amount
determined under Oncor’s severance plan for non-executive employees;
122
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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·
·
·
Continued coverage at our expense under the Company’s health care benefit plans for 18 months, with the executive’s
contribution for such plans being at the applicable employee rate (unless and until the executive becomes eligible for
coverage for benefits through employment with another employer, at which time the executive’s required contribution
shall be the applicable COBRA rate) and, if the executive is covered under our healthcare plans through the end of
such period, at the end of such continued coverage the executive may continue participation in our health care plans at
the applicable COBRA rate for 18 months, in the case of Mr. Shapard, or six months, in the case of each other
executive, and Oncor will reimburse the executive the monthly difference between the applicable employee rate for such
coverage and the COBRA rate paid by the executive for such period;
Outplacement assistance at the company’s expense for 18 months, in the case of Mr. Shapard, and one year, in the
case of other executive officers; and
Any vested accrued benefits to which the executive is entitled under Oncor’s or EFH Corp.’s employee benefits plans.
In order to receive benefits under the plan, a participant must enter into an agreement and release within 45 days of being
notified by us of such participant’s eligibility to receive benefits under the plan. The Severance Plan also provides that for a
period of one year after a termination contemplated by the plan, a participant may not recruit, solicit, induce or in any way
cause any employee, consultant or contractor engaged by Oncor to terminate his/her relationship with Oncor.
123
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Risk Assessment of Compensation Policies and Practices
The O&C Committee reviews the compensation policies and practices applicable to Oncor’s employees (both executive
and non-executive) annually each February in order to determine whether such compensation policies and practices create risks
that are reasonably likely to have a material adverse effect on Oncor. In February 2014 the O&C Committee concluded that
current compensatory policies and practices do not create risks that are reasonably likely to have a material adverse effect on
Oncor. In arriving at this conclusion, the O&C Committee discussed with management the various compensation policies and
practices of the company and the compensation payable pursuant to each, and evaluated whether the compensation payable
under each plan or policy could result in (i) incenting employees to take risks that could result in a material adverse effect to
Oncor, or (ii) payments by the company significant enough to cause a material adverse effect to Oncor.
We believe that the following factors in our employee compensation program limit risks that could be reasonably likely to
have a material adverse effect on the company:
·
·
·
·
·
·
·
Our compensation program is designed to provide a mix of base salary, annual cash incentives and (for eligible
employees) long-term equity and cash incentives, which we believe motivates employees to perform at high levels while
mitigating any incentive for short-term risk-taking that could be detrimental to our company’s long-term best interests.
Our annual cash incentive plans for both executives and non-executives contain maximum payout levels, which helps
avoid excessive total compensation and reduces the incentive to engage in unnecessarily risky behavior.
The funding percentages under the Executive Annual Incentive Plan and the non-executive employee annual incentive
plan are based on the performance of our total company, which mitigates any incentive to pursue strategies that might
maximize the performance of a single business group to the detriment of the company as a whole.
We place an emphasis on individual, non-financial performance metrics in determining individual compensation
amounts, serving to restrain the influence of objective factors on incentive pay and providing management (in the case
of non-executive employees) and the O&C Committee (in the case of executive employees) the discretion to adjust
compensation downward if behaviors are not consistent with Oncor’s business values and objectives.
Long-term incentives for eligible employees (under the Long-Term Incentive Plan beginning in 2013) are measured over
three years to ensure employees have significant value tied to the long-term performance of the company.
Our executive officers and other senior members of management purchased equity through the Management Investment
Opportunity, which we believe motivates them to consider the long-term interests of the company and its equity owners
and discourages excessive risk-taking that could negatively impact the value of their equity interests.
We have internal controls over financial reporting and other financial, operational and compliance policies and
practices designed to keep our compensation programs from being susceptible to manipulation by any employee,
including our executive officers.
124
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Director Compensation
The table below sets forth information regarding the aggregate compensation paid to the members of the board of directors
during the fiscal year ended December 31, 2013. Directors who are officers of Oncor and directors who are not independent
directors (as defined in the Limited Liability Company Agreement), do not receive any fees for service as a director. Oncor
reimburses all directors for reasonable expenses incurred in connection with their services as directors.
Name
Fees Earned or Paid in
SARs Exercise Opportunity
Cash
($) (3)
Interest Accrual on Dividends
Total
($) (4)
($)
Nora Mead Brownell (1)
155,000
—
155,000
Thomas M. Dunning
185,000
745
185,745
Robert A. Estrada
150,000
186
150,186
Monte E. Ford (2)
135,000
745
135,745
William T. Hill, Jr.
170,000
—
170,000
Richard W. Wortham III
150,000
372
150,372
Thomas D. Ferguson
—
—
—
Jeffrey Liaw
—
—
—
Rheal R. Ranger
—
—
—
Robert S. Shapard
—
—
—
Steven J. Zucchet
—
—
—
_______________
(1)
(2)
(3)
(4)
Ms. Brownell resigned from our board of directors effective February 12, 2014, and Printice L. Gary was appointed to our board of
directors as her successor.
Mr. Ford resigned from our board of directors effective February 25, 2014, and Timothy A. Mack was appointed to our board of
directors as his successor.
Amounts reflect the following director fees paid to independent directors quarterly, in arrears: (a) $ 33,750 for service as a director,
(b) an additional $3,750 director’s fee for each of Messrs. Estrada (Audit Committee), Hill (Nominating & Governance Committee) and
Wortham (O&C Committee) for serving as committee chairs, (c) an additional $5,000 for each of Ms. Brownell and Mr. Hill for serving
as special independent directors, and (d) an additional $12,500 for Mr. Dunning for serving as our lead independent director. Nonindependent directors do not receive any fees for serving on our board of directors. Amounts above do not include an additional
$15,000 annual fee (paid in quarterly installments, in arrears), paid to each independent director as a fee for serving on the Oncor
Holdings board of directors.
Under the Director SARs Plan, dividends that are paid in respect of Oncor membership int erests while the SARs are outstanding are
credited to the SARs holder’s account as if the SARs were units of Investment LLC, payable upon the earliest to occur of death,
disability, separation from service, unforeseeable emergency or a change in control. In November 2012 our board of directors accepted
for early exercise all outstanding SARs issued under the Director SARs Plan upon the same terms as the SARs Exercise Opportunity
offered to management. As part of such exercise, each participant in the Director SARs Plan agreed that he would be entitled to no
further dividend accruals after the date of such exercise, but that the dividend account would accumulate interest until such dividends
became payable pursuant to the SARs Plan. Amounts in this column include interest accruals in 2013 for each Director SARs Plan
participant.
The O&C Committee determines compensation for independent directors that serve on the board of directors. All director
fees are paid quarterly, in arrears. In 2013, each of our independent directors received a quarterly fee of $33,750 for service on
our board of directors, and an additional quarterly fee of $3,750 for service on the Oncor Holdings’ board of directors. In
October 2013, the O&C Committee engaged Towers Watson to conduct a competitive market analysis of independent directors
compensation, using the same peer group and methodology used in its October 2013 analysis of executive compensation. See
“Executive Compensation - Compensation Discussion and Analysis – Overview – Market Data” for a description of this peer
group and methodology. As a result of this study, which indicated that the annual cash retainer paid to each independent
director was approximately 11% below the 50 th percentile of the competitive market, in October 2013 the O&C Committee
recommended, and the board of directors approved, increasing the annual cash retainer fee for each independent director to
$170,000, payable quarterly in arrears, effective January 1, 2014. In addition, the O&C Committee recommended, and the
board of directors approved, an additional potential annual cash payment for each independent director of up to $80,000,
payable quarterly, in arrears, as may be determined in the discretion of the board of directors during the fourth quarter of each
calendar year in recognition of additional time commitments and responsibilities
125
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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to Oncor business matters expected to be required of independent directors in the following calendar year. For 2014, the board of
directors approved an additional annual cash payment of $80,000, payable in four equal installments at the end of each
calendar quarter of the 2014 calendar year, to the independent directors in recognition of the additional time commitments and
responsibilities expected to be required of them in 2014.
In addition to the retainer fees discussed above, each board committee chair receives an additional $3,750 quarterly fee for
the extra responsibilities associated with such position, our lead independent director (Mr. Dunning) receives an additional
$12,500 quarterly fee for the additional duties associated with that position, and each of our Special Independent Directors (as
defined in our Limited Liability Company Agreement) receives an additional quarterly fee of $5,000 to compensate for their
additional responsibilities as Special Independent Directors. For a description of the independence standards applicable to our
independent directors, see “Certain Relationships and Related Transactions, and Director Independence.”
Our LLC Agreement provides that each of the Sponsor Group and Texas Transmission has the right to appoint two
directors to our board of directors. None of those four directors (Messrs. Ferguson, Liaw, Ranger and Zucchet) receives
compensation from us for his service as a director. In addition, Mr. Shapard, our CEO, does not receive additional
compensation for serving on the board of directors.
Purchases of Class B Interests
Eligible participants in the Equity Interests Plan include non-employee directors, and our board of directors has granted
independent directors the option to purchase Class B Interests pursuant to the Equity Interests Plan. For a description of the
Equity Interests Plan, see “– Elements of Compensation – Long-Term Incentives – Equity Interests Plan and Management
Investment Opportunity.”
Effective January 2009 four of our independent directors at the time, Messrs. Dunning, Estrada, Ford and Wortham,
purchased the following amounts of Class B Interests pursuant to the Equity Interests Plan: Dunning: 20,000, Estrada: 5,000,
Ford: 20,000 and Wortham: 10,000. Similar to the Management Investment Opportunity, these Class B Interests were
purchased at a price of $10.00 per unit. Because the Class B Interests were purchased for fair market value, they are not
included in the Director Compensation Table as stock awards. In connection with their investments, these directors entered into
director stockholder agreements and sale participation agreements. For a description of the material terms of these agreements,
see “Certain Relationships and Related Transactions, and Director Independence – Related Party Transactions – Agreements
with Management and Directors.”
In connection with these investments, Oncor Holdings sold 55,000 of its equity interests in Oncor to Investment LLC at a
price of $10.00 per unit pursuant to the terms of a revolving stock purchase agreement. For a description of the revolving stock
purchase agreement, see “– Elements of Compensation – Long-Term Incentives – Equity Interests Plan and Management
Investment Opportunity.”
Director Stock Appreciation Rights Settlement
In February 2009, Oncor implemented the Director SARs Plan to allow participants to participate in the economic
equivalent of the appreciation of Oncor’s LLC Units. Each of the independent directors who purchased Class B Interests in
January 2009 received one SAR for each Class B Interest purchased. In November 2012, in connection with the SARs Exercise
Opportunity offered to management, our board of directors accepted for early exercise all outstanding SARs issued under the
Director SARs Plan, pursuant to the provision of the Director SARs Plan that permits the board to accelerate the vesting and
exercisability of SARs . At the time of such exercise, all outstanding SARs under the Director SARs Plan were vested. The
November 2012 exercise of SARs entitled each participant in the Director SARs Plan, to: (1) an exercise payment, paid in 2012;
and (2) the accrual of interest on all dividends declared to date with respect to the SARs, and no further dividend accruals. As a
result, we began accruing interest on the following amounts of dividends: Mr. Dunning, $26,140, Mr. Estrada, $6,535; Mr.
Ford, $26,140; and Mr. Wortham, $13,070. These interest payments are payable in connection with payment of the dividends
under the Director SARs Plan. The Director SARs Plan remains in effect solely with respect to the payment of the dividends
and interest, which are payable upon the earliest to occur of death, disability, separation from service, unforeseeable emergency
or a change in control, each as defined in Section 409A of the Internal Revenue Code.
126
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED EQUITY HOLDER MATTERS
Equity Compensation Plan Information
The following table presents information concerning the Stock Appreciation Rights Plan and Director Stock Appreciation
Rights Plan (collectively, the Plans) at December 31, 2013. In 2012, our board of directors accepted for early exercise all
outstanding SARs issued under the Plans and effectively terminated further use of the plans for SARs issuances. These plans
remain in effect solely for the limited purpose of the timing of the certain payments related to the early exercise of all outstanding
SARs. The early exercise was permitted by our board of directors pursuant to the provision of the SARs Plan that permits the
board to accelerate the vesting and exercisability of SARs. The early exercise of SARs entitled each participant in the SARs
Plan to: (1) an exercise payment equal to the number of SARs exercised multiplied by the difference between $14.54 and the
base price of the SARs (as stated in the award letter for each SARs grant); and (2) the accrual of interest on all dividends
declared to date with respect to the SARs, but no further dividend accruals. Under both Plans, dividends that are paid in
respect of Oncor membership interests while the SARs were outstanding were credited to the SARs holder’s account as if the
SARs were units, payable upon the earliest to occur of death, disability, separation from service, unforeseeable emergency, a
change in control, or the exercise of the SARs. As part of their exercise agreements, participants in the Plans agreed to that no
further dividends would accrue, and that instead interest would accrue on all dividends declared to date, with both interest and
dividend amounts becoming payable at the time dividends become payable pursuant to the terms of the Plans. Additionally,
certain executive officers agreed to defer payment of a portion of his/her Exercise Payment until the earlier of November 7, 2016
or the occurrence of an event triggering SAR exercisability pursuant to Section 5(c)(ii) of the SARs Plan. These deferred
payments totaled approximately $6 million in the aggregate.
There were no SARs outstanding under either plan in 2013, and our board of directors has indicated that it does not
intend to issue SARs under either plan in the future. For a discussion of the Plans and the 2012 exercise and settlement of all
SARs, see “Executive Compensation — Compensation Discussion & Analysis — Compensation Elements — Long-Term
Incentives — Stock Appreciation Rights Settlement,” “Executive Compensation – Director Compensation – Director SARs Plan
Settlement,” and Note 10 to Financial Statements.
Number of securities
remaining available for
Equity compensation plans approved by
security holders (1)(2)
Equity compensation plans not approved
by security holders
Total
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average exercise
price of outstanding
options, warrants and
rights
(b)
future issuance under
equity compensation plans
(excluding securities reflected
in column (a))
(c)
—
—
—
—
—
—
—
—
—
_______________
(1)
(2)
As required by the terms of our Limited Liability Company Agreement, we obtained the consent of EFIH to issue SARs under the
Plans. Consents from our other members were not solicited as they are not required under the Limited Liability Company Agreement.
Neither of the Plans results in the issuance of equity. Rather, SARs issued under the Plans give the holders the right to receive the
economic value of the appreciation of our equity interests. All outstanding SARs under the Plans were accepted for early exercise in
November 2012, and both Plans remain in effect sole ly for the limited purpose of the timing of certain payments, as discussed in the
narrative above. For more information, see “Executive Compensation – Compensation Discussion and Analysis – Compensation
Elements – Long-Term Incentives – Stock Appreciation Rights Settlement” and “Executive Compensation – Director Compensation –
Director SARs Plan Settlement.”
127
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Our executive officers, certain key employees and independent members of our board of directors were given the option to
purchase Class B Interests of Investment LLC in 2008 pursuant to the 2008 Management Investment Opportunity offered under
the Equity Interests Plan. Each participant in the 2008 Management Investment Opportunity purchased Class B Interests at a
price of $10.00 per unit, which was the same price per unit as the price per unit paid by Texas Transmission in connection
with its November 2008 investment in Oncor. In August 2011, Mr. Nye purchased Class B Interests in Investment LLC for
$12.25 per unit (the fair market value of the Class B Interests, as determined by our board of directors based on a third party
independent analysis) pursuant to the 2011 Management Investment Opportunity. Because the Class B Interests in each of the
2011 and the 2008 Management Investment Opportunity were purchased for fair market value, and it is expected that any
future issuances under the Equity Interests Plan will be subject to the same purchase requirement, we do not consider the grants
to be compensation. Refer to “Directors, Executive Officers and Corporate Governance — Compensation Discussion and
Analysis — Compensation Elements — Long Term Incentives — Equity Interests Plan and Management Investment
Opportunity” for a more detailed discussion of the Equity Interests Plan and Management Investment Opportunity.
128
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Security Ownership of Equity Interests of Oncor of Certain Beneficial Owners and Management
The following table lists the number of limited liability company units (LLC Units) of Oncor beneficially owned by our
directors and current executive officers and the holders of more than 5% of our LLC Units at February 27, 2014.
The amounts and percentages of LLC Units beneficially owned are reported on the basis of SEC regulations governing the
determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a
security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right
to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of
computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these
rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no economic interest.
The amounts and percentages of LLC Units beneficially
owned are reported on the basis of SEC regulations
Name
governing
the determination of beneficial ownership of
Oncor Electric Delivery Holdings Company LLC (1)(2)(3)(4)(5)
securities. Under SEC rules, a person is deemed to be a
Texas Transmission Investment LLC (6)
“beneficial owner” of a security if that person has or shares
votingofpower
Name
Director
or investment
or Executivepower,
Officer which includes the power
to
dispose
of or (7)
to direct the disposition of such security. A
Don
J. Clevenger
person
is also deemed to be a beneficial owner of any
David M. Davis (7)
securities of which that person has a right to acquire
Thomas M. Dunning (7)
beneficial ownership within 60 days. Securities that can be
Robert
A. Estrada
(7)
so acquired
are deemed
to be outstanding for purposes of
computing
Thomas
D. Ferguson
such person’s
(4) ownership percentage, but not for
purposes
computing
any other person’s percentage. Under
Printice L. of
Gary
(8)
these rules, more than one person may be deemed to be a
James A. Greer (7)
beneficial owner of the same securities and a person may be
William
deemed T.
to Hill,
be a Jr.
beneficial owner of securities as to which
Jeffrey
Liaw
such person(9)
has no economic interest.
Amount and Nature of
Beneficial Ownership
Percent of Class
508,191,492
80.03%
125,412,500
19.75%
1,396,008
(13)
1,396,008
(13)
1,396,008
(13)
1,396,008
(13)
508,191,492
80.03%
—
—
(13)
1,396,008
—
—
—
—
—
Timothy A. Mack (10)
—
(13)
1,396,008
Allen Nye, Jr. (7)
—
Rheal R. Ranger (11)
—
(13)
1,396,008
Robert S. Shapard (7)
(13)
1,396,008
Richard W. Wortham III (7)
Steven J. Zucchet (12)
—
—
509,587,500
80.25%
All current directors and executive officers as a group
(18 persons)
_______________
(1) Oncor Electric Delivery Holdings Company LLC (Oncor Holdings) beneficially owns 508,191,492 LLC Units of Oncor. The sole
member of Oncor Holdings is EFIH, whose sole member is EFH Corp. The address of Oncor Holdings is 1616 Woodall Rodgers
Freeway, Dallas, TX 75202 and each of EFIH and EFH Corp. is 1601 Bryan Street, Dallas, TX 75201. Texas Holdings beneficially
owns 98.99% of the outstanding shares of EFH Corp. The sole general partner of Texas Holdings is Texas Energy Future Capital
Holdings LLC (Texas Capital), which, pursuant to the Amended and Restated Limited Partnership Agreement of Texas Holdings, has the
right to vote all of the EFH Corp. shares owned by Texas Holdings. The TPG Funds, the Goldman Entities and the KKR Entities (each
as defined below, and collectively, the Texas Capital Funds) collectively own 91.08% of the outstanding units of Texas Capital. The Texas
Capital Funds exercise control over Texas Capital and each has the right to designate and remove the managers of Texas Capital appointed
by such Texas Capital Fund. Because of these relationships, each of the Texas Capital Funds may be deemed to have beneficial ownership
of the shares of EFH Corp. owned by Texas Holdings and the LLC Units owned by Oncor Holdings, but each disclaims beneficial
ownership of such shares of EFH Corp. and LLC Units. The address of both Texas Holdings and Texas Capital is 301 Commerce
Street, Suite 3300, Fort Worth, Texas 76102.
(2)
EFIH has pledged 100% of its equity interests in Oncor Holdings to holders of certain of its secured notes as security for such notes. In
the event of certain defaults by EFIH under its related obligations, these holders could exercise their pledge rights and a change in control
of Oncor could occur.
129
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The TPG Funds beneficially own 302,923,439.752 units of Texas Capital, representing 27.01% of the outstanding units, including (i)
271,639,218.931 units held by TPG Partners V, L.P., a Delaware limited partnership (TPG Partners V), whose general partner is TPG
GenPar V, L.P., a Delaware limited partnership (TPG GenPar V), whose general partner is TPG GenPar V Advisors, LLC, a Delaware
limited liability company, whose sole member is TPG Holdings I, L.P., a Delaware limited partnership (TPG Holdings), (ii)
29,999,994.650 units held by TPG Partners IV, L.P., a Delaware limited partnership (TPG Partners IV), whose general partner is TPG
GenPar IV, L.P., a Delaware limited partnership, whose general partner is TPG GenPar IV Advisors, LLC, a Delaware limited liability
company, whose sole member is TPG Holdings, (iii) 710,942.673 units held by TPG FOF V-A, L.P., a Delaware limited partnership
(TPG FOF A), whose general partner is TPG GenPar V and (iv) 573,283.498 units held by TPG FOF V-B, L.P., a Delaware limited
partnership (TPG FOF B and, together with TPG Partners V, TPG Partners IV and TPG FOF A, the TPG Funds), whose general
partner is TPG GenPar V. The general partner of TPG Holdings is TPG Holdings I-A, LLC, a Delaware limited liability company, whose
sole member is TPG Group Holdings (SBS), L.P., a Delaware limited partnership, whose general partner is TPG Group Holdings (SBS)
Advisors, Inc., a Delaware corporation (Group Advisors). David Bonderman and James G. Coulter are officers and sole shareholders of
Group Advisors and may therefore be deemed to beneficially own the units held by the TPG Funds. David Bonderman is also a manager
of Texas Capital. Messrs. Bonderman and Coulter disclaim beneficial ownership of the LLC Units held by Texas Holdings except to the
extent of their pecuniary interest therein. The address of Group Advisors and Messrs. Bonderman and Coulter is c/o TPG Global LLC,
301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.
(4) GS Capital Partners VI Fund, L.P., GSCP VI Offshore TXU Holdings, L.P., GSCP VI Germany TXU Holdings, L.P., GS Capital
Partners VI Parallel, L.P., GS Global Infrastructure Partners I, L.P., GS Infrastructure Offshore TXU Holdings, L.P. (GSIP
International Fund), GS Institutional Infrastructure Partners I, L.P., Goldman Sachs TXU Investors L.P. and Goldman Sachs TXU
Investors Offshore Holdings, L.P. (collectively, Goldman Entities) beneficially own 303,094,945.954 units of Texas Capital, representing
27.02% of the outstanding units. Affiliates of The Goldman Sachs Group, Inc. (Goldman Sachs) are the general partner, managing
general partner or investment manager of each of the Goldman Entities, and each of the Goldman Entities shares voting and investment
power with certain of their respective affiliates. Each of Goldman Sachs and the Goldman Entities disclaims beneficial ownership of such
shares of EFH Corp. and LLC Units except to the extent of its pecuniary interest therein. Mr. Ferguson is a manager of Texas Capital
and an executive with an affiliate of Goldman Sachs. By virtue of his position in relation to Texas Capital and the Goldman Entities, Mr.
Ferguson may be deemed to have beneficial ownership with respect to the units of Texas Capital held by the Goldman Entities. Mr.
Ferguson disclaims beneficial ownership of the LLC Units held by Oncor Holdings except to the extent of his pecuniary interest in those
units. The address of each entity and individual listed in this footnote is c/o Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004.
(5) KKR 2006 Fund L.P., KKR PEI Investments, L.P., KKR Partners III, L.P., KKR North American Co-Invest Fund I L.P., KKR
Reference Fund Investments L.P. and TEF TFO Co-Invest, LP (collectively, KKR Entities) beneficially own 415,473,419.680 units of
Texas Capital, representing 37.05% of the outstanding units. The KKR Entities disclaim beneficial ownership of any shares of EFH
Corp. and LLC Units in which they do not have a pecuniary interest. KKR & Co. L.P., as the holding company of affiliates that directly
or indirectly control the KKR Entities, other than KKR Partners III, LP., may be deemed to share voting and dispositive power with
respect to the shares of EFH Corp. and LLC Units beneficially owned by such KKR Entities, but disclaims beneficial ownership of such
shares of EFH Corp. and LLC Units except to the extent of their pecuniary interest in those shares of EFH Corp. and LLC Units. As
the designated members of KKR Management LLC (which is the general partner of KKR & Co. L.P.) and the managing members of
KKR III GP LLC (which is the general partner of KKR Partners III, L.P.), Henry R. Kravis and George R. Roberts may be deemed to
share voting and dispositive power with respect to the shares of EFH Corp. and LLC Units beneficially owned by the KKR Entities but
disclaim beneficial ownership of such shares of EFH Corp. and LLC Units except to the extent of their pecuniary interest in those shares
of EFH Corp. and LLC Units. The address of each entity and individual listed in this footnote is c/o Kohlberg Kravis Roberts & Co.
L.P., 9 West 57th Street, Suite 4200, New York, New York 10019
(6) Texas Transmission Investment LLC (Texas Transmission) beneficially owns 125,412,500 LLC Units of Oncor. The sole member of
Texas Transmission is Texas Transmission Holdings Corporation (TTHC). The address of each of Texas Transmission and TTHC is
1105 North Market Street, Suite 1300, Wilmington, DE 19801. BPC Health Corporation (BPC Health) and Borealis Power Holdings
Inc. (Borealis Power) may be deemed, as a result of their ownership of 49.5% of the shares of Class A Common Stock of TTHC (Class
A Shares) and 49.5% of the shares of Class B Common Stock of TTHC (Class B Shares), respectively, and certain provisions of
TTHC’s Shareholders Agreement (which provide that BPC Health and Borealis Power, when acting together with Cheyne Walk
Investment Pte Ltd (Cheyne Walk) or Hunt Strategic Utility Investment, L.L.C. (Hunt Strategic), may direct TTHC in certain matters) ,
to have beneficial ownership of the 125,412,500 LLC Units owned by Texas Transmission. OMERS Administration Corporation
(OAC) beneficially owns BPC Health and, therefore, OAC may also be deemed to have beneficial ownership of such LLC Units. Borealis
Power is wholly-owned by Borealis Infrastructure Corporation and Borealis Management Trust owns 70% of the voting shares of
Borealis Infrastructure Corporation. The trustee of Borealis Management Trust is Borealis Infrastructure Holdings Corporation and,
therefore, Borealis Infrastructure Holdings Corporation may also be deemed to have beneficial ownership of such LLC Units. The
address of OAC is One University Avenue, Suite 700, Toronto, Ontario M5J 2P1, Canada. The address of Borealis Infrastructure
Holdings Corporation is 333 Bay Street, Suite 2400, Toronto, Ontario, M5H 2T6, Canada. Cheyne Walk Investment Pte Ltd (Cheyne
Walk) may be deemed, as a result of its ownership of 49.5% of each of the Class A Shares and the Class B Shares, and certain
provisions of TTHC’s Shareholders Agreement (which provide that Cheyne Walk, when acting together with BPC Health and Borealis
Power or Hunt Strategic, may direct TTHC in certain matters) , to have beneficial ownership of the 125,412,500 LLC Units owned by
Texas Transmission. GIC Pte Ltd (GIC) beneficially owns Cheyne Walk and therefore GIC may also be deemed to have beneficial
ownership of such LLC Units. The address of each of Cheyne Walk and GIC is 168 Robinson Road, #37-01, Capital Tower, Singapore
068912. Hunt Strategic Utility Investment, L.L.C. (Hunt Strategic) may be deemed, as a result of its ownership of 1% of each of the
Class A Shares and the Class B Shares, and certain provisions of TTHC’s Shareholders Agreement (which provide that Hunt Strategic,
when acting together with BPC Health and
(3)
130
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Borealis Power or Cheyne Walk, may direct TTHC in certain matters) , to have beneficial ownership of the 125,412,500 LLC Units
owned by Texas Transmission. Ray L. Hunt (Hunt) beneficially owns Hunt Strategic and therefore Hunt may also be deemed to have
beneficial ownership of such LLC Units. The address of each of Hunt Strategic and Hunt is 1900 North Akard, Dallas, Texas 75201.
(7) Includes the 1,396,008 equity interests owned by Oncor Management Investment LLC (Investment LLC). The managing member of
Investment LLC is Oncor, which holds all of the outstanding voting interests of Investment LLC. The management and board of directors
of Oncor may be deemed, as a result of their management of Oncor, to have shared voting or dispositive power. The following Named
Executive Officers and directors each beneficially own the following amounts of the outstanding non-voting membership interests of
Investment LLC: Mr. Clevenger: 50,000 (including 8,702.9 of the aggregate outstanding non-voting membership interests that are held
by the Salary Deferral Program on Mr. Clevenger’s behalf), Mr. Davis: 50,000 (including 19,868.4 of the aggregate outstanding nonvoting membership interests that are held by the Salary Deferral Program on Mr. Davis’s behalf), Mr. Dunning: 20,000 (held by a family
limited partnership, of which Mr. Dunning serves as managing general partner), Mr. Estrada: 5,000, Mr. Greer: 75,000 (including
25,000 of the aggregate outstanding non-voting membership interests that are held by the Salary Deferral Program on Mr. Greer’s
behalf), Mr. Nye: 18,368, Mr. Shapard: 300,000 (held by a family limited partnership, of which Mr. Shapard serves as general partner)
and Mr. Wortham: 10,000 (held by a revocable trust, of which Mr. Wortham serves as trustee and beneficiary). Each of the persons
referenced in this footnote disclaims beneficial ownership of such equity interests except to the extent of their pecuniary interest in those
equity interests. See “Executive Compensation – Compensation Discussion and Analysis — Compensation Elements — Long-Term
Incentives — Equity Interests Plan and Management Investment Opportunity” for a discussion of investments in Investment LLC by
certain of Oncor’s executive officers and “Executive Compensation – Director Compensation – Purchases of Class B Interests” for a
discussion of investments in Investment LLC by certain of Oncor’s independent directors. The address of each individual named in this
footnote is c/o Oncor Management Investment LLC, c/o Oncor Electric Delivery Company LLC, 1616 Woodall Rodgers Freeway,
Dallas, Texas, 75202, Attn: Legal Department.
(8) Mr. Gary was appointed to our board of directors on February 12, 2014 as the successor to Nora Mead Brownell, whose resignation
was effective on such date.
(9) Jeffrey Liaw is a former TPG principal and a manager of Texas Capital. Mr. Liaw does not have voting or investment power over, and
disclaims beneficial ownership of, the LLC Units held by Oncor Holdings. The address of Mr. Liaw is c/o FleetPride, Inc., 8401 New
Trails, Suite 150, The Woodlands, TX 77381
(10) Mr. Mack was appointed to our board of directors on February 25, 2014 as the successor to Monte E. Ford, whose resignation was
effective on such date.
(11) Rheal R. Ranger is Executive Vice President of Borealis Infrastructure Management Inc., a Director of TTHC, a Director and Executive
Vice President of Borealis Power and Executive Vice President of BPC Health. Mr. Ranger does not have voting or investment power
over, and disclaims beneficial ownership of, the LLC Units held by Texas Transmission. The address of Mr. Ranger is c/o Borealis
Infrastructure Management Inc., 320 Park Avenue, 17 th Floor, New York, NY 10022.
(12) Steven Zucchet is Senior Vice President of Borealis Infrastructure Management Inc., a Director and Senior Vice President of TTHC and
a Senior Vice President of Borealis Power. Mr. Zucchet does not have voting or investment power over, and disclaims beneficial
ownership of, the LLC Units held by Texas Transmission. The address of Mr. Zucchet is c/o Borealis Infrastructure Management Inc.,
Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2100, Toronto, ON M5J 2J2 Canada.
(13) Less than 1% beneficial ownership.
131
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Policies and Procedures Relating to Related Party Transactions
Our board of directors has adopted a policy regarding related person transactions as part of our corporate governance
guidelines. Under this policy, a related person transaction shall be consummated or shall continue only if:
1.
the audit committee of the board of directors approves or ratifies such transaction in accordance with the policy and
if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated
third party;
2.
the transaction is approved by the disinterested members of the board of directors; or
3.
the transaction involves compensation approved by the O&C Committee of the board of directors.
For purposes of this policy, the term “related person” means any related person pursuant to Item 404 of Regulation S-K of
the Securities Act, except transactions with EFH Group Members (as defined below), which are subject to restrictions set forth
in our Limited Liability Company Agreement
A “related person transaction” is a transaction between us and a related person (including any transactions requiring
disclosure under Item 404 of Regulation S-K under the Securities Act, if applicable), other than the types of transactions
described below, which are deemed to be pre-approved by the audit committee:
1.
any compensation paid to an executive officer or director if the compensation is reported (or would have been
reported, in the case of executive officers that are not named executive officers) under Item 402 of Regulation S-K of
the Securities Act, provided that such executive officer or director is not an immediate family member of an executive
officer or director and provided that the board of directors or the O&C Committee has approved such compensation;
2.
any transaction with another company at which a related person’s only relationship is as an employee (other than an
executive officer), director or beneficial owner of less than 10% of that company’s ownership interests;
3.
any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which
a related person’s only relationship is as an employee (other than an executive officer) or director;
4.
any transaction with a partnership in which a related person’s only relationship is as a limited partner, and the
related person is not a general partner and does not hold another position in the partnership, and all related persons
have an interest of less than 10% in the partnership;
5.
transactions where the related person’s interest arises solely from the ownership of Oncor’s equity securities and all
holders of that class of equity securities received the same benefit on a pro rata basis;
6.
transactions involving a related party where the rates or charges involved are determined by competitive bids;
7.
any transaction with a related party involving the rendering of services as a common or contract carrier, or public
utility, as rates or charges fixed in conformity with law or governmental authority;
8.
any transaction with a related party involving services as a bank depositary of funds, transfer agent, registrar,
trustee under a trust indenture, or similar service;
9.
transactions available to all employees or customers generally (unless required to be disclosed under Item 404 of
Regulation S-K of the Securities Act, if applicable); and
10. transactions involving less than $100,000 when aggregated with all similar transactions;
11. transactions between Oncor and its subsidiaries or between subsidiaries of Oncor;
12. transactions not required to be disclosed under Item 404 of Regulation S-K of the Securities Act; and
13. open market purchases of Oncor or its subsidiaries’ debt or equity securities and interest payments on such debt
securities.
132
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Our board of directors has determined that it is appropriate for its audit committee to review and approve or ratify related
person transactions. In unusual circumstances, we may enter into related person transactions in advance of receiving approval,
provided that such related person transactions are reviewed and ratified as soon as reasonably practicable by the audit
committee of the board of directors. If the audit committee determines not to ratify such transactions, we shall make all
reasonable efforts to cancel or otherwise terminate such transactions.
The related person transactions described below under the heading “Related Party Transactions” were generally approved
prior to the adoption of our related party transactions policy. Except as otherwise indicated, these transactions were approved
by our board of directors.
The related person transactions policy described above also does not apply to transactions with EFH Group Members (as
defined below), which are subject to restrictions set forth in our Limited Liability Company Agreement. Accordingly, the
transactions with EFH Corp. or its subsidiaries were not approved by the board of directors or Audit Committee and were
approved by our management.
Our Limited Liability Company Agreement requires certain separateness undertakings and provides that we will maintain
an arm’s length relationship with EFH Corp., its successors, its subsidiaries and any individual or entity controlling or
owning, directly or indirectly, more than 49% of our outstanding equity interests (collectively, the EFH Group Members), other
than Oncor Holdings, Texas Transmission and each of their subsidiaries and only enter into transactions, other than certain
specified transactions, with the EFH Group Members that are both (i) on a commercially reasonable basis, and (ii) if such
transaction is material, approved by (a) a majority of the members of our board of directors, and (b) prior to a Trigger Event (as
defined in our Limited Liability Company Agreement), the directors appointed by Texas Transmission, at least one of whom
must be present and voting in order to approve the transaction.
133
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Related Party Transactions
Transactions with EFH Corp. and its Subsidiaries
Except as otherwise indicated, transactions described below were between us and either EFH Corp. or its wholly-owned
subsidiaries (other than the subsidiary described under “– Limited Partnership Interest”) and were approved by our
management.
Transactions with TCEH
We record revenue from TCEH, principally for electricity delivery fees, which totaled $ 9 67 million, $962 million and
$1,026 million for the years ended December 31, 2013, 2012 and 2011, respectively. The fees are based on rates regulated by
the PUCT that apply to all REPs. These revenues included approximately $2 million for each of the years ended December 31,
2013, 2012 and 2011 pursuant to a transformer maintenance agreement with TCEH. The balance sheets at December 31, 2013
and 2012 reflect accounts receivable from affiliates totaling $135 million ($56 million of which was unbilled) and $53 million
($48 million of which was unbilled), respectively, primarily consisting of trade receivables from TCEH related to these
electricity delivery fees . At February 27, 2014, we had collected all but $6 million of the accounts receivable from affiliates
outstanding at December 31, 2013. At February 27 , 2014, our net exposure with respect to accounts receivable from affiliates
totaled $145 million.
Under Texas regulatory provisions, the trust fund for decommissioning TCEH’s Comanche Peak nuclear generation
facility is funded by a delivery fee surcharge we collect from REPs and remit monthly to TCEH. Delivery fee surcharges
totaled $16 million for each of the years ended December 31, 2013 and 2012 and $17 million for the year ended December 31,
2011. Our sole obligation with regard to nuclear decommissioning is as the collection agent of funds charged to ratepayers for
nuclear decommissioning activities. If, at the time of decommissioning, actual decommissioning costs exceed available trust
funds, we would not be obligated to pay any shortfalls but would be required to collect any rates approved by the PUCT to
recover any additional decommissioning costs. Further, if there were to be a surplus when decommissioning is complete, such
surplus would be returned to ratepayers under terms prescribed by the PUCT.
Our PUCT-approved tariffs include requirements to assure adequate credit worthiness of any REP to support the REP’s
obligation to collect transition bond-related charges on behalf of Bondco. Under these tariffs, as a result of TCEH’s credit
rating being below investment grade, TCEH is required to post collateral support in an amount equal to estimated transition
charges over specified time periods. Accordingly, at December 31, 2013 and 2012, TCEH had posted letters of credit in the
amounts of $9 million and $11 million, respectively, for our benefit.
Prior to August 2012, we recognized interest income from TCEH under an agreement related to our generation-related
regulatory assets, which have been securitized through the issuance of transition bonds by Bondco. This interest income,
which served to offset our interest expense on the transition bonds, totaled $ 16 million and $32 million for the years ended
December 31, 2012 and 2011, respectively. Also prior to August 2012, we received reimbursement under a note receivable from
TCEH for incremental amounts payable related to income taxes as a result of delivery fee surcharges related to the transition
bonds. Amounts received under the note receivable for the year ended December 31, 2012 totaled $ 20 million. See “Sale of
TCEH Reimbursement Agreements to EFIH” below for more information regarding the halt of this interest income and note
receivable.
Sale of TCEH Reimbursement Agreements to EFIH
Until August 2012, we were party to two agreements with TCEH related to certain generation-related regulatory assets that
were securitized through the issuance of transition bonds by Bondco. One agreement provided for the reimbursement to us by
TCEH of our interest expense on the transition bonds, which we recognized as interest income when received. The interest
income, which served to offset our interest expense on the transition bonds, totaled $16 million, $32 million and $37 million
for the years ended December 31, 2012, 2011 and 2010, respectively. The second agreement consisted of a noninterest bearing
note receivable from TCEH to reimburse us for incremental income taxes payable as a result of delivery fee surcharges to
customers related to transition bonds. Our financial statements reflected a note receivable from TCEH that totaled zero and
$179 million ($41 million reported as current in trade accounts and other receivables from affiliates) at December 31, 2012 and
December 31, 2011, respectively, related to these income taxes.
134
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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In August 2012, we sold to EFIH all future interest reimbursements and the remaining $159 million obligation under the
note with TCEH. As a result, EFIH paid, and we received, an aggregate $159 million for the agreements. The sale of the
related-party agreements was reported as a $2 million (after tax) decrease in total membership interests in 2012 in accordance
with accounting rules for related-party transactions.
This transaction was approved by both our board of directors and, from a related party transactions standpoint, by the
Audit Committee of the board of directors.
Services provided by EFH Subsidiaries
EFH Corp. subsidiaries charge us for certain administrative services at cost. These costs, which are reported in operation
and maintenance expenses, totaled $30 million, $32 million and $34 million for the years ended December 31, 2013, 2012 and
2011, respectively.
Services provided to EFH Subsidiaries
Subsidiaries of EFH Corp. paid us $143,000, $173,000 and $58,000 for the years ended December 31, 2013, 2012 and
2011, respectively, with respect to services we provided to EFH Corp. subsidiaries (excluding revenue, including electricity
delivery fees, collected from TCEH). These services included waste management and other services for the years ended
December 31, 2013 and 2012 and waste management and fleet management for the year ended December 31, 2011.
Warehouse transactions
We and EFH Corp. subsidiaries occasionally issue materials from our warehouses and bill each other for these
transactions. We made no payments to EFH Corp. subsidiaries in the years ended December 31, 2013, 2012 and 2011 related
to warehouse transactions. EFH Corp. subsidiaries made no payments to us in the years ended December 31, 2013 and 2012
and paid us $210,000 in the year ended December 31, 2011, related to warehouse transactions.
Real Estate Transactions/Shared Facilities
We and EFH Corp. subsidiaries also bill each other for shared facilities. Our payments to EFH Corp. and/or its
subsidiaries with respect to shared facilities (including lease payments, utilities and telecommunications equipment) totaled $4
million, $5 million and $4 million for the years ended December 31, 2013, 2012 and 2011, respectively. Payments we received
from EFH Corp. and/or its subsidiaries with respect to shared facilities totaled $2 million for each of the years ended December
31, 2013 and 2012 and $840,000 for the year ended December 31, 2011.
Pension and OPEB Plans
We have liabilities under the Oncor Retirement Plan and the EFH Retirement Plan, both of which are qualified pension
plans under Section 401(a) of the Internal Revenue Code of 1986, as amended (Code), and are subject to the provisions of
ERISA. Employees do not contribute to either plan. We also participate in the health care and life insurance benefit plan (OPEB
Plan) offered by EFH Corp. to eligible employees of EFH Corp. and its subsidiaries and their eligible dependents upon the
retirement of such employees from us. In 2013, 2012 and 2011, we made cash contributions to the pension plans totaling $9
million, $93 million and $175 million, respectively, and to the OPEB Plan totaling $11 million, $11 million and $18 million,
respectively. These amounts include our payments to the plans with respect to pension and OPEB obligations for certain
employees of EFH Corp.’s predecessor at the time of deregulation of the Texas electricity market. PURA allows for our recovery
of those costs and, as a result, in 2005 we entered into an agreement with EFH Corp.’s predecessor to assume those costs .
In 2012, EFH Corp. made various changes to the EFH Retirement Plan, including splitting off into a new plan all of the
assets and liabilities associated with Oncor employees and all retirees and terminated vested participants of EFH Corp. and its
subsidiaries (including discontinued businesses). Effective January 1, 2013, Oncor assumed sponsorship of this new plan,
referred to herein as the Oncor Retirement Plan. In connection with assuming sponsorship of the Oncor Retirement Plan, we
entered into an agreement with certain TXU Energy Company LLC affiliates to assume primary responsibility for benefits of
certain participants for whom EFH Corp. bore primary funding responsibility (a closed group of retired and terminated vested
plan participants not related to our regulated utility business) as of December 31, 2012 . In
135
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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December 2012, the Oncor Retirement Plan received approximately $850 million of plan assets in connection with this
assumption, which equaled the liabilities we assumed for those participants. In addition, in December 2012 we received an
aggregate of approximately $10 million in cash and trust fund transfers with respect to supplemental retirement plan and OPEB
obligations we assumed for those participants.
For additional information on the pension and OPEB plans, see Note 9 to Financial Statements.
Health and Welfare Benefit Agreement
We currently participate in the Energy Future Holdings Health and Welfare Benefit Program, pursuant to which we
provide employee benefits to our workforce. In October 2013, we notified EFH Corp. of our intention to withdraw from the
benefit program, effective June 30, 2014, and entered into an agreement with EFH Corp. pursuant to which we agreed to pay
EFH Corp. (i) $1,000,000, to reimburse EFH Corp. for its increased costs of providing benefits under the program as a result of
our withdrawal from the program, and (ii) an administrative fee of $100,000, to compensate EFH Corp. for the additional
administrative work required of EFH Corp. in order to effectuate our withdrawal from the benefit program and transition to a
new benefit program. These amounts are payable in a lump sum on June 30, 2014, the effective date of our withdrawal from the
EFH Corp. benefit program.
Limited Partnership Interest
We have a 19.5% limited partnership interest, with a carrying value of less than $1 million at December 31, 2013, 2012
and 2011, in an EFH Corp. subsidiary holding principally software-related assets. Equity losses related to this interest are
reported in other deductions and totaled less than $1 million for each of the years ended December 31, 2013, 2012 and
2011. These losses primarily represent amortization of software assets held by the subsidiary.
Potential Exposure in a Possible EFH Corp. Restructuring
As discussed in Note 1 to Financial Statements, EFH Corp. and other members of the Texas Holdings Group have
engaged in discussions with certain unaffiliated creditors regarding possible restructuring transactions involving those
entities. The US Bankruptcy Code permits a debtor in bankruptcy to assume or reject executory contracts and unexpired
leases. If members of the Texas Holdings Group were to become debtors in a bankruptcy case, and determined to reject some or
all of their executory contracts and unexpired leases with us, our results of operations and financial condition could be
adversely affected. At December 31, 2013, our exposure to EFH Corp. with respect to executory contracts and unexpired leases
totaled approximately $20 million.
Agreements with Oncor Members
Tax-Sharing Agreement
We are not a member of EFH Corp.’s consolidated tax group, but EFH Corp.’s consolidated federal income tax return
includes EFH Corp.’s portion of our results due to EFH Corp.’s equity ownership in us. Under the terms of a tax sharing
agreement among us, Oncor Holdings, Texas Transmission, Investment LLC and EFH Corp., we are generally obligated to
make payments to Texas Transmission, Investment LLC and EFH Corp., pro rata in accordance with their respective
membership interests, in an aggregate amount that is substantially equal to the amount of federal income taxes that we would
have been required to pay if we were filing our own corporate income tax return. For periods prior to the tax sharing agreement
(entered into in October 2007 and amended and restated in November 2008), we are responsible for our share of redetermined tax
liability for the EFH Corp. consolidated tax group. EFH Corp. also includes our results in its consolidated Texas margin tax
payments, which are accounted for as income taxes and calculated as if we were filing our own return. See discussion in Note
1 under “Income Taxes.” Under the “in lieu of” tax concept, all in lieu of tax assets and tax liabilities represent amounts that
will eventually be settled with our members.
At December 31, 2013, we had federal income tax amounts receivable from members under the agreement totaling
$ 23 million ($18 million due from EFH Corp. and $ 5 million due from Texas Transmission and Investment LLC) and a
current Texas margin tax payable to EFH Corp. totaling $ 23 million. At December 31, 2012, we had a current Texas margin tax
payable to EFH Corp. under the agreement of $ 22 million, which is reported as amounts payable to members related to income
taxes.
136
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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We have been advised by EFH Corp. that approval by the Joint Committee on Taxation for the 1997 through 2002 IRS
appeals settlement was received in May 2013 and that all issues contested have been resolved. As a result, the liability for
uncertain tax positions was reduced by $32 million in the second quarter of 2013. This resolution also resulted in a $10
million net reduction to liability in lieu of deferred income taxes and a reversal of accrued interest and tax totaling $5 million ($3
million after tax), which is reported as a decrease in provision in lieu of income taxes. We made a cash payment of $33 million
to EFH Corp. in the third quarter of 2013, as required under the tax sharing agreement, to settle the liability resulting from the
1997 through 2002 IRS audit, and received a $10 million refund from EFH Corp. as a result of filing amended Texas franchise
tax returns for 1997 through 2001.
We made income tax payments totaling $ 101 million (including $11 million in federal income tax-related payments to
members other than EFH Corp.) in the year ended December 31, 2013. On a net basis, we received income tax refunds from
members of $2 million (including $5 million in refunds from members other than EFH Corp.) in the year ended December 31,
2012.
Pursuant to the terms of Investment LLC’s limited liability company agreement, Investment LLC dividends cash it
receives from us to the holders of Class B Interests pro rata in accordance with their Class B Interests. See “Executive
Compensation – Compensation Discussion and Analysis – Compensation Elements – Long-Term Incentives – Equity Interests
Plan and Management Investment Opportunity” for a discussion of investments in Investment LLC by certain of our executive
officers and “Executive Compensation - Director Compensation – Purchases of Class B Interests” for a discussion of
investments in Investment LLC by certain of our independent directors. The amounts distributed by Investment LLC to the
holders of Class B Interests consist of both (1) Investment LLC’s pro rata share of any dividends we pay to members with
respect to our earnings, and (2) Investment LLC’s pro rata share of any amounts we pay to members pursuant to our
obligations under the tax sharing agreement.
Second Amended and Restated Limited Liability Company Agreement of Oncor
The Second Amended and Restated Limited Liability Company Agreement of Oncor (as amended, Limited Liability
Company Agreement), among other things, sets out the members’ respective governance rights in respect of their ownership
interests in Oncor. Among other things, the Limited Liability Company Agreement provides for the management of Oncor by a
board of directors consisting of 11 members, including at least six Independent Directors (as defined in the Limited Liability
Company Agreement), two directors designated directly or indirectly by Texas Transmission (subject to certain conditions), two
directors designated indirectly by EFH Corp. and one director that is also an officer of Oncor. Texas Transmission also has the
right to designate one non-voting observer to the board of directors, who is entitled to attend all meetings of the board of directors
(subject to certain exceptions) and receive copies of all notices and materials provided to the board of directors.
The Limited Liability Company Agreement prohibits Oncor and its subsidiaries from taking certain material actions
outside the ordinary course of business without prior approvals by the members, some or all of the Independent Directors
and/or the directors designated by one or more of the members. Additionally, the Limited Liability Company Agreement
contains provisions regulating capital accounts of members, allocations of profits and losses and tax allocation and
withholding.
The Limited Liability Company Agreement also requires that any changes to Oncor’s procedures and limitations on
declaring and paying distributions be approved by (i) a majority of the Independent Directors, (ii) all of the EFH Corp. directors
and (iii) the Texas Transmission director(s) present and voting, provided that at least one Texas Transmission director must be
present and voting in order to approve such matter. In addition, any annual budget with an aggregate amount of capital and
operating and maintenance expenditures that are more than 10% less than the capital and operating and maintenance
expenditures in the annual budget for the immediately prior fiscal year must be approved by (a) a majority of the Independent
Directors and (b) the Texas Transmission director(s) present and voting, provided that at least one Texas Transmission director
must be present and voting in order to approve such action. Also, any acquisition of or investment in any third party which
involves the purchase of or investment in assets located outside the State of Texas for consideration in an amount greater than
$1.5 billion must be approved by (a) a majority of the Independent Directors and (b) the Texas Transmission director(s)
present and voting, provided that at least one Texas Transmission director must be present and voting in order to approve such
action.
137
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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Registration Rights Agreement
In November 2008, we entered into a registration rights agreement (Registration Rights Agreement) by and among us,
Oncor Holdings, Texas Transmission and EFH Corp. The Registration Rights Agreement grants customary registration rights
to certain of our members. Subject to certain limitations set forth in the Registration Rights Agreement, these rights include,
without limitation, the following: (i) the right of Oncor Holdings at any time, and after ten years from the date of the Registration
Rights Agreement, the right of Texas Transmission, to demand that we register a specified amount of membership interests in
accordance with the Securities Act of 1933, as amended; (ii) the right of both Oncor Holdings and Texas Transmission to
demand registration of a specified amount of membership interests following an initial public offering; and (iii) the right of all
members that are parties to the Registration Rights Agreement to have their membership interests registered if we propose to file a
registration statement relating to an offering of membership interests (with certain exceptions).
Subject to certain exceptions, whenever we are required to effect the registration of any membership interests pursuant to
the Registration Rights Agreement, we have agreed to use our best efforts to cause the applicable registration statement to become
effective, and to keep each such registration statement effective until the earlier of (a) at least 180 days (or two years for a shelf
registration statement) or (b) the time at which all securities registered under such registration statement have been sold.
Investor Rights Agreement
The investor rights agreement dated as of November 5, 2008, by and among Oncor, Oncor Holdings, Texas
Transmission, EFH Corp. and any other persons that subsequently become a party thereto (Investor Rights Agreement) governs
certain rights of certain members of Oncor and EFH Corp. arising out of their direct or indirect ownership of Oncor
membership interests, including, without limitation, transfers of Oncor membership interests and restrictions thereon. Among
other transfer restrictions, the Investor Rights Agreement provides that, prior to the earlier of the completion of a qualified initial
public offering or seven years from the date of the Investor Rights Agreement, Texas Transmission may transfer its Oncor
membership interests only to certain permitted transferees or with the prior approval of Oncor Holdings. Following such time
period, Texas Transmission may transfer its Oncor membership interests under a registration statement or pursuant to
applicable securities laws. The Investor Rights Agreement also grants Texas Transmission certain “tag-along” rights in relation
to certain sales of Oncor membership interests by Oncor Holdings. Subject to certain conditions, these “tag-along” rights allow
Texas Transmission to sell a pro-rata portion of its Oncor membership interests in the event of a sale of Oncor membership
interests by Oncor Holdings on the same terms as Oncor Holdings would receive for its Oncor membership interests. The
agreement further provides that under certain offerings of equity securities occurring before an initial public offering of Oncor,
Texas Transmission and Oncor Holdings will receive preemptive rights to purchase their pro-rata share of the equity securities
to be sold pursuant to such offerings. The Investor Rights Agreement also provides EFH Corp. with a right of first refusal to
purchase any Oncor membership interests to be sold in a permitted sale by Texas Transmission or its permitted transferees.
Additionally, Texas Holdings, EFH Corp., certain of EFH Corp.’s subsidiaries and Oncor Holdings have certain “dragalong” rights in relation to offers from third-parties to purchase their directly or indirectly owned membership interests in
Oncor, where the resulting sale would constitute a change of control of Oncor. These “drag-along” rights compel Texas
Transmission and all other members of Oncor to sell or otherwise transfer their membership interests in Oncor on substantially
the same terms as Texas Holdings, EFH Corp., the EFH Corp. subsidiary or Oncor Holdings (as applicable). Pursuant to the
Investor Rights Agreement, all members of Oncor that have entered into such agreement must cooperate with Oncor in
connection with an initial public offering of Oncor.
Transactions with the Sponsor Group
In October 2007, we entered into our $2 billion secured revolving credit facility with a syndicate of financial institutions
and other lenders. The original syndicate included affiliates of GS Capital Partners, a member of the Sponsor
Group. Affiliates of GS Capital Partners have from time to time engaged in commercial banking transactions with us in the
normal course of business. On October 11, 2011, we amended and restated the secured revolving credit facility. The
syndicate, under the amended and restated revolving credit facility, did not include affiliates of GS Capital Partners or any
other member of the Sponsor Group. In May 2012 we requested and received a $400 million increase in commitments under the
revolving credit facility, and those additional commitments did not include affiliates of GS Capital Partners or any other
member of the Sponsor Group. At December 31, 2013 and 2012, members of the Sponsor Group had no outstanding
commitments in the revolving credit facility.
138
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During the year-to-date period ending October 10, 2011, the largest principal amount outstanding under the revolving
credit facility attributable to the lender commitments of affiliates of GS Capital Partners was $76 million. Under the terms of
the revolving credit facility, their commitments to make loans were and are several and not joint. Interest rates under the
revolving credit facility for that period ranged from 0.46% to 0.54%. Since October 11, 2011, we have had no outstanding
borrowings or commitments under the revolving credit facility attributable to the lender commitments of affiliates of GS Capital
Partners.
See Note 5 to Financial Statements for additional information regarding the revolving credit facility.
Affiliates of the Sponsor Group have, and from time-to-time may in the future (1) sell, acquire or participate in the
offerings of our debt or debt securities in open market transactions or through loan syndications, and (2) perform various
financial advisory, dealer, commercial banking and investment banking services for us and certain of our affiliates for which
they have received or will receive customary fees and expenses.
We have entered into, and may continue to enter into, arrangements with members of the Sponsor Group and/or their
respective affiliates to use their products and services in the ordinary course of their business, which often result in revenues to
members of the Sponsor Group or their respective affiliates in excess of $120,000 annually.
Agreements with Management and Directors
Retention Agreement
In February 2013, the Organization & Compensation committee of our board of directors approved our entrance into a
retention agreement with E. Allen Nye, Jr., our Senior Vice President, General Counsel & Secretary. The agreement provides for
the payment of a one-time cash retention bonus of $300,000 to Mr. Nye contingent upon his continued employment and
satisfactory performance of his job duties as directed by Oncor through December 31, 2014. The bonus is payable in
accordance with Oncor’s normal payroll practices or as soon as practicable after December 31, 2014. In the event Mr. Nye is
terminated with cause or elects to terminate his employment without good reason prior to December 31, 2014, he will
immediately forfeit the retention bonus. In the event Mr. Nye’s employment is terminated prior to December 31, 2014 either by
Oncor without cause, by him for good reason, or as a result of his death or disability, the retention bonus will immediately vest
and become payable. Under the agreement, a termination for “cause” is defined as a termination as a result of the commitment
of any of the following actions by Mr. Nye: (i) a breach of any fiduciary duty to Oncor, (ii) gross negligence in the performance
of his duties, (iii) failure or refusal to carry out the duties of his position with Oncor, (iv) any action or omission that results in
material injury to the assets, business prospectus or reputation of Oncor or any of its affiliates, (v) appropriation of a material
business opportunity of Oncor or any of its affiliates, including securing or attempting to secure personal profit as a result of
any transaction involving Oncor or any of its affiliates; (vi) breach of Oncor’s Code of Conduct or a material employment
policy or rule; or (vii) any indictment or plea of nolo contendere or guilty for any crime involving fraud, theft, embezzlement or
moral turpitude. The agreement defines “good reason” as any one or more of the following actions taken without Mr. Nye’s
express consent: (i) a reduction in base salary other than a broad-based reduction of base salaries for similarly situated Oncor
executives; or (ii) a material reduction in the aggregate level or benefits for which Mr. Nye is eligible, other than a broad-based
benefits reduction for similarly situated executives. The agreement also provides that during Mr. Nye’s employment with Oncor
or any affiliate and for a period of 12 months thereafter, he will not directly or indirectly solicit, recruit, encourage or in any
way cause any executive of Oncor or any affiliate to terminate his employment with Oncor or such affiliate. An affiliate is
defined in the agreement as any entity that controls, is controlled by, or is under common control with, Oncor.
SARS Exercise Agreements
In November 2012, our board of directors accepted for early exercise all outstanding SARs issued under the SARs Plan
and the Director SARs Plan. The early exercise was completed pursuant to the provision of the plans that permits the board to
accelerate the vesting and exercisability of SARs. Each of our executive officers and certain of our independent directors
(Messrs. Dunning, Estrada, Ford and Wortham) were participants in the SARs early exercise in 2012. In connection with the
early exercise, each participant in the plans entered into an exercise agreement that entitled each participant to: (1) an exercise
payment (Exercise Payment) equal to the number of SARs exercised multiplied by the difference between $14.54 and the base
price of the SARs (as stated in the award letter for each SARs grant); and (2) the accrual of interest on all dividends declared to
date with respect to the SARs, but no further dividend accruals. Additionally, certain executive officers, including all of our
current executive officers, agreed in their exercise agreements to defer payment of a portion of his/her Exercise Payment until the
earlier of November 7, 2016 or the occurrence of an
139
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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event triggering SAR exercisability pursuant to Section 5(c)(ii) of the SARs Plan. These deferred payments totaled
approximately $6 million in the aggregate for 2012 executive officers. As a result of the early exercise, in 2012 we paid an
aggregate of approximately $64 million related to Exercise Payments ($57 million charged to expense), $35 million of which
was attributable to our executive officers and $250,000 of which was attributable to independent directors that participated in
the Director SARs Plan. We also began accruing interest on approximately $18 million in aggregate dividend. In the years
ended December 31, 2013 and 2012, we recognized $ 1,807,000 and $ 338,000, respectively, in accretion and interest related to
dividends with respect to executive officers’ dividend accounts, and $3,000 and $1,000, respectively, with respect to Director
SARs Plan accounts.
Management Investment Opportunity
Each executive officer participating in the Management Investment Opportunity entered into a management stockholder’s
agreement and sale participation agreement with us. Each director that purchased Class B Interests of Investment LLC in 2009
entered into a director stockholder’s agreement and a sale participation agreement with us. The terms of these agreements, which
were approved by the O&C Committee, are detailed below.
Management Stockholder’s Agreement
The management stockholder’s agreement contains restrictions on the participant’s ability to transfer any Class B
Interests. Except in certain limited circumstances, any Oncor equity interests or Class B Interests beneficially owned by the
participant will be non-transferable prior to the later of (1) October 10, 2012 or (2) with respect to certain interests, a “qualified
public offering” (as defined in the management stockholder’s agreement). In addition, the management stockholder’s agreement
gives the Company certain rights of first refusal in the event the participant attempts to sell any Oncor equity interests or Class
B Interests after October 10, 2012, but prior to the earlier to occur of (1) a “change in control” (as defined in the management
stockholder’s agreement) or (2) consummation of a qualified public offering of Oncor.
In addition, the management stockholder’s agreement gives us certain rights to repurchase the participant’s Class B
Interests (1) if the participant terminates his employment without “good reason” (as defined in the management stockholder’s
agreement) prior to October 10, 2012, at a price equal purchase price paid by the participant for the Class B Interests; or (2) if
we terminate the participant’s employment for cause (as defined in the management stockholder’s agreement) or if the participant
violates certain of his or her non-compete obligations, at a price equal to the lesser of the fair market value of the Class B
Interests or the purchase price paid by the participant for the Class B Interests. The management stockholder’s agreement also
gives the participant or the participant’s estate, as applicable, certain rights to compel our company to repurchase its Oncor
equity interests and Class B Interests upon the death or disability of the participant for a price equal to the fair market value of
the Oncor equity interests and Class B Interests. Generally, these rights will terminate on the earlier of (a) a change in control of
Oncor or (b) the later of (i) October 10, 2012, or (ii) a public offering of Oncor or Investment LLC equity.
The management stockholder’s agreement also provides that if the participant terminates his employment without good
reason prior to October 10, 2012, we may redeem the vested SARs at a per unit purchase price equal to the excess, if any, of the
fair market value over the base price of the SARs, less 20% of the excess. In addition, if the participant so terminates his
employment, the participant must pay us 20% of the amount by which any cash payment received in respect of previously
vested and exercised SARs exceeded the base price of those SARs. If the participant terminates his employment without good
reason on or after October 10, 2012, we may redeem the vested SARs at a per unit purchase price equal to the excess, if any, of
the fair market value over the base price of the SARs. Furthermore, the management stockholder’s agreement provides that
upon the death or disability of the participant, the participant or participant’s estate, as applicable, will be entitled to receive, in
exchange for the vested SARs, a cash payment equal to the product of (1) the excess, if any, of the fair market value over the
base price of the SARs and (2) the number of SARs then credited to the participant. Generally, these rights will terminate on the
earlier of (a) a change in control of Oncor or (b) the later of (i) October 10, 2012, or (ii) a public offering of Oncor or Investment
LLC equity.
Furthermore, the management stockholder’s agreement provides that, subject to certain conditions, the participant will
receive certain piggy-back rights to sell its Oncor equity interests and Class B Interests to Oncor if there is a proposed sale by
the Sponsor Group or Texas Holdings of (1) the common stock of EFH Corp.; or (2) a sale of 50% or more of the outstanding
partnership interests of Texas Holdings. Subject to certain conditions, the participant will also receive these rights if Oncor
Holdings proposes to sell any of its Oncor equity interests. Additionally, the participant will be subject to certain drag-along
rights in the event (a) Texas Holdings or a member of the Sponsor Group proposes to sell a number of
140
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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shares of common stock of EFH Corp. or limited partnership interests of Texas Holdings equal to 50% or more of the
outstanding shares of common stock of EFH Corp. or limited partnership interests of Texas Holdings, as applicable; or (b)
Oncor Holdings proposes to sell 50% or more of the outstanding Oncor equity interests. Generally, these rights will terminate on
the earlier of (a) a change in control of Oncor or (b) the later of (i) October 10, 2012, or (ii) a public offering of Oncor or
Investment LLC equity.
The management stockholder’s agreement also contains certain non-compete provisions, including a restriction on the
participant from engaging in a competing business during the term of the participant’s employment with us and for 12 months
following his or her termination of employment with us.
Director Stockholder’s Agreement
The director stockholder’s agreement contains restrictions on the participant’s ability to transfer any Class B Interests.
Until the earlier of a “qualified public offering” (as defined in the director stockholder’s agreement), five years from the date of
the agreement or the occurrence of a “change of control” (as defined in the director stockholder’s agreement) in the event a
director proposes to transfer any Oncor equity interests or Class B Interests, except in certain limited circumstances, such
director must first offer such equity interests or Class B Interests to us or Investment LLC, as applicable.
Furthermore, the director stockholder’s agreement provides that, subject to certain conditions, the participant will receive
certain piggy-back rights to sell its Oncor equity interests and Class B Interests to Oncor if there is a proposed sale by the
Sponsor Group or Texas Holdings of (1) the common stock of EFH Corp.; or (2) 50% or more of the outstanding partnership
interests of Texas Holdings. Subject to certain conditions, the participant will also receive these rights if Oncor Holdings
proposes to sell any of its Oncor equity interests. Additionally, the participant will be subject to certain drag-along rights in the
event (a) Texas Holdings or a member of the Sponsor Group proposes to sell a number of shares of common stock of EFH
Corp. or limited partnership interests of Texas Holdings equal to 50% or more of the outstanding shares of common stock of
EFH Corp. or limited partnership interests of Texas Holdings, as applicable; or (b) Oncor Holdings proposes to sell 50% or
more of the outstanding Oncor equity interests. Generally, the rights described in this paragraph will terminate on the earlier of a
change in control of Oncor or the later of (i) five years from the date of the agreement , or (ii) a public offering of Oncor or
Investment LLC equity .
Sale Participation Agreements
The sale participation agreements entered into by members of our management and board of directors in connection with
their investments in Investment LLC give us, Oncor Holdings and certain of Oncor Holdings’ investors drag-along rights in the
event Oncor, Oncor Holdings or certain of Oncor Holdings’ investors engage in corporate transactions in which they sell a direct
or indirect equity interest in Oncor. In addition, the sale participation agreement gives the participant tag-along rights in the
event Oncor, Oncor Holdings or certain of Oncor Holdings’ investors engage in corporate transactions in which they sell a direct
or indirect equity interest in Oncor. The form of sale participation agreement entered into by management is identical to the form
of sale participation agreement entered into by directors, except with respect to termination of the agreement. In the case of
management, the rights described in this paragraph will terminate on the earlier of (1) a change in control of Oncor or (2) the
later of (a) October 10, 2012 or (b) certain public offerings of Oncor’s equity interests. In the case of directors, the rights
described in this paragraph will terminate on the earlier of (i) a change in control of Oncor or (ii) the later of (x) five years from
the date of the agreement or (y) certain public offerings of Oncor’s equity interests.
141
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Director Independence
Our Limited Liability Company Agreement provides that six members of our board of directors must be deemed
independent. For a director to be deemed independent, our board of directors must affirmatively determine that such director
does not have a material relationship with Oncor or EFH Corp. or their respective successors and subsidiaries, any entity that
controls or owns directly or indirectly more than 49% of the equity interests in Oncor, and certain other specified entities that
directly or indirectly own securities of Oncor (collectively, the Non-Ring Fenced Entities). In addition, under our Limited
Liability Company Agreement, to be deemed independent, a director must also meet the independence standards in Section 303A
of the New York Stock Exchange Manual in all material respects. Our Limited Liability Company Agreement further provides
that a director that otherwise meets these requirements will not be precluded from qualifying as independent if such director
otherwise meets such criteria but (i) served as a director or shareholder of EFH Corp. prior to the October 2007 merger of Texas
Energy Future Merger Sub Corp. with and into EFH Corp., (ii) indirectly or beneficially owns equity interests through a mutual
fund or similar investment vehicle with respect to which the director does not have discretion or control over the investments
held by such investment vehicle, (iii) directly or indirectly holds an amount of legal or beneficial stock in any of the Non-Ring
Fenced Entities that is de minimis and which the other independent directors determine would not reasonably be expected to
influence the judgment of such director in determining the interests of Oncor or its members, or (iv) is a ratepayer, supplier,
creditor or independent contractor of, or a person who received any benefit from or provided any services to, Oncor, Oncor
Holdings or any of the Non-Ring Fenced Entities, if the other independent directors determine that such relationship would not
reasonably be expected to influence the judgment of the director in determining the interests of Oncor or its members.
In addition, our Limited Liability Company Agreement requires that two of the six independent members of our board of
directors also meet additional independence qualifications. These directors, known as special independent directors, may not,
during their service as a director or at any time in the five years preceding their appointment, be (i) a direct or indirect legal or
beneficial owner in Oncor, Oncor Holdings or any of the Non-Ring Fenced Entities, (ii) a creditor; supplier; employee; officer;
director; family member of any officer, employee or director; manager or contractor of Oncor, Oncor Holdings or any of the
Non-Ring Fenced Entities, or (iii) a person who controls (directly, indirectly or otherwise) Oncor, Oncor Holdings or any of the
Non-Ring Fenced Entities or any creditor, supplier, employee, officer, director, manager or contractor of Oncor, Oncor
Holdings or any of the Non-Ring Fenced Entities. However, a director will not be precluded from being deemed a special
independent director if such director otherwise meets the requirements but (i) indirectly or beneficially owns stock through a
mutual fund or similar diversified investment vehicle (other than investment vehicles affiliated with KKR, TPG or Goldman
Sachs & Co. ), or (ii) directly or indirectly legally or beneficially owns interests in a Non-Ring Fenced Entity, if such ownership
does not exceed one percent of the net worth of such director. A special independent director may also serve as an independent
director of Oncor Holdings or any of Oncor’s subsidiaries.
Our board of directors has determined that Messrs. Dunning, Estrada, Gary, Hill, Mack and Wortham are independent
directors under the standards in Section 303A of the New York Stock Exchange Manual and the other standards in our Limited
Liability Company Agreement. Further, our board of directors has determined that each of Messrs. Gary and Hill qualifies as a
special independent director under the standards set forth in our Limited Liability Company Agreement.
In July 2010, our board of directors created the position of Lead Independent Director and appointed Mr. Dunning to serve
in that role. The Lead Independent Director presides at meetings of the independent directors, serves as a liaison to the EFH
Corp. board of directors, and performs such duties and responsibilities as may be specified by the board.
Our board of directors has designated an Audit Committee, Nominating and Governance Committee and Organization and
Compensation Committee to exercise certain powers and authorities of the board of the directors. Members of these committees
are not required by our Limited Liability Company Agreement or board of directors to meet any independence standards. Mr.
Liaw has served on the Organization and Compensation Committee since the committee’s inception, and Mr. Zucchet was
appointed to such committee effective May 5, 2010. Mr. Ranger, who was appointed by Texas Transmission to our board of
directors in October 2012, was appointed to the audit committee effective January 9, 2013. Mr. Ferguson and Mr. Zucchet were
appointed to the Nominating and Governance Committee effective February 15, 2011. None of Messrs. Ferguson, Liaw,
Ranger, or Zucchet qualifies as an independent director for purposes of our Limited Liability Company Agreement.
142
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Deloitte & Touche LLP is our independent registered public accounting firm.
In 2008, our Audit Committee adopted a policy governing the engagement of our independent registered public accounting
firm. The policy provides that in addition to the audit of the financial statements, related quarterly reviews and other audit
services, and providing services necessary to complete SEC filings, our independent auditor may be engaged to provide nonaudit services as described herein. Prior to engagement, all services to be rendered by the independent auditor must be
authorized by our Audit Committee in accordance with pre-approval procedures which are defined in the policy. The preapproval procedures require:
1.
the annual review and pre-approval by our Audit Committee of all anticipated audit and non-audit services, and
2.
the quarterly pre-approval by our Audit Committee of services, if any, not previously approved and the review of the
status of previously approved services.
Our Audit Committee may also approve certain ongoing non-audit services not previously approved in the limited
circumstances provided for in the SEC rules. All services performed in 2013 by Deloitte & Touche LLP, the member firms of
Deloitte & Touche Tohmatsu and their respective affiliates (Deloitte & Touche) were pre-approved by our Audit Committee.
The policy defines those non-audit services which our independent auditor may also be engaged to provide as follows:
1.
·
·
·
·
·
Audit-related services, including:
due diligence, accounting consultations and audits related to mergers, acquisitions and divestitures;
employee benefit plan and political action plan audits;
accounting and financial reporting standards consultation;
internal control reviews, and
attest services, including agreed-upon procedures reports that are not required by statute or regulation.
·
·
·
·
Tax-related services, including:
tax compliance;
general tax consultation and planning;
tax advice related to mergers, acquisitions and divestitures, and
communications with and request for rulings from tax authorities.
·
·
·
·
Other services, including:
process improvement, review and assurance;
litigation and rate review assistance;
forensic and investigative services, and
training services.
2.
3.
The policy prohibits us from engaging our independent auditor to provide:
1.
2.
bookkeeping or other services related to our accounting records or financial statements;
financial information systems design and implementation services;
3. appraisal or valuation services, fairness opinions or contribution-in-kind reports;
4.
actuarial services;
5. internal audit outsourcing services;
6. management or human resources functions;
7. broker-dealer, investment advisor or investment banking services;
8. legal and expert services unrelated to the audit, and
9. any other service that the Public Company Accounting Oversight Board determines, by regulation, to be impermissible.
143
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
In addition, the policy prohibits our independent auditor from providing tax or financial planning advice to any of our
officers.
The policy also contains the following standard of conduct for our independent auditor related to staffing and conducting
its annual audit:
1.
no member performing the audit of our financial statements will be under the direction of the lead member of such firm
conducting the financial statement audit work for EFH Corp.;
2. the audit team will reach its own conclusions as to the sufficiency and adequacy of the audit procedures necessary to
conduct the audit;
3. the audit team accepts the sole responsibility for the opinion on our financial statements;
4. the audit team may use other EFH Corp. auditors as a service provider;
5. the audit team may consider the EFH Corp. Sarbanes-Oxley Act compliance audit team as a service provider;
6. the audit team may consider the EFH Corp. tax compliance audit team as a service provider;
7. the audit team is not prohibited from sharing the results of its audit procedures or conclusions with the EFH Corp. audit
team so that an opinion on EFH Corp.’s consolidated financial statements can be rendered;
8. our independent auditor shall be bound by the professional standards and the Rules for the Accounting Profession of the
Texas State Board of Public Accountancy regarding confidentiality of client information;
9. the audit team will have a separate engagement letter with the Audit Committee and will render separate billings for audit
work pursuant to such contract directly to our designated employee, and
10. the audit team will address its reports to our Audit Committee, board of directors and/or management team as appropriate.
Compliance with our Audit Committee’s policy relating to the engagement of Deloitte & Touche is monitored on behalf of
our Audit Committee by our chief internal audit executive. Reports from Deloitte & Touche and the chief internal audit executive
describing the services provided by Deloitte & Touche and fees for such services are provided to our Audit Committee no less
often than quarterly.
For the years ended December 31, 2013 and 2012, fees billed (in US dollars) to us by Deloitte & Touche were as follows:
Years Ended December 31,
2013
2012
Audit Fees. Fees for services necessary to perform the annual audit, review SEC filings, fulfill
statutory and other attest service requirements and provide comfort letters and consents.
$ 2,402,000
Audit-Related Fees. Fees for services including internal control reviews, attest services that are
not required by statute or regulation, and consultation concerning financial accounting and
reporting standards .
155,000
175,000
-
-
Tax Fees. Fees for tax compliance, tax planning and tax advice related to mergers and
acquisitions, divestitures, and communications with and requests for rulings from taxing
authorities.
All Other Fees. Fees for services including process improvement reviews, forensic accounting
reviews, and litigation and rate review assistance.
-
$ 2,557,000
Total
$
1,772,000
-
$
1,947,000
144
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statement schedules are omitted because of the absence of the conditions under which they are
required or because the required information is included in the consolidated financial statements or notes thereto.
Exhibits:
(b)
Exhibits
Previously Filed*
With File
Number
3(i)
Articles of Incorporation
3(a)
333-100240
As
Exhibit
3(a)
—
3(ii)
By-laws
3(b)
333-100240
3(a)
—
Second Amended and Restated Limited Liability Company
Agreement of Oncor Electric Delivery Company LLC, dated as
of November 5, 2008, by and among Oncor Electric Delivery
Holdings Company LLC, Texas Transmission Investment
LLC and Oncor Management Investment LLC.
3(c)
—
First Amendment to Second Amended and Restated Limited
Liability Company Agreement of Oncor Electric Delivery
Company LLC, entered into as of February 18, 2009, by and
among Oncor Electric Delivery Holdings Company LLC, Texas
Transmission Investment LLC and Oncor Management
Investment LLC
Form 10-Q (filed
November 6, 2008)
3(c)
333-100240
Certificate of Formation of Oncor Electric Delivery Company
LLC.
Form 10-Q (filed
November 14, 2007)
2008 Form 10-K (filed
March 3, 2009)
(4)
Instruments Defining the Rights of Security Holders, Including Indentures.
4(a)
333-100240
4(a)
—
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York, as Trustee.
Form S-4 (filed October
2, 2002)
4(b)
001-12833
Form 8-K (filed
October 31, 2005)
10.1
—
Supplemental Indenture No. 1, dated October 25, 2005, to
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York.
4(c)
333-100240
4(b)
—
Officer’s Certificate, dated May 6, 2002, establishing the terms
of Oncor Electric Delivery Company LLC’s 6.375% Senior
Notes due 2012 and 7.000% Senior Notes due 2032.
Form S-4 (filed October
2, 2002)
4(d)
333-106894
Form S-4 (filed July 9,
2003)
4(c)
—
Officer’s Certificate, dated December 20, 2002, establishing the
terms of Oncor Electric Delivery Company LLC’s 6.375%
Senior Notes due 2015 and 7.250% Senior Notes due 2033.
4(e)
333-100240
4(b)
—
Supplemental Indenture No. 2, dated May 15, 2008, to
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York.
4(a)
—
Indenture (for Unsecured Debt Securities), dated as of August
1, 2002, between Oncor Electric Delivery Company LLC and
The Bank of New York, as Trustee.
Form 10-Q (filed May
15, 2008)
4(f)
333-100242
Form S-4 (filed October
2, 2002)
145
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
4(g)
333-100240
4(c)
—
Supplemental Indenture No. 1, dated May 15, 2008, to
Indenture and Deed of Trust, dated as of August 1, 2002,
between Oncor Electric Delivery Company LLC and The Bank
of New York.
4(b)
—
Officer’s Certificate, dated August 30, 2002, establishing the
terms of Oncor Electric Delivery Company LLC’s 5%
Debentures due 2007 and 7% Debentures due 2022.
4.1
—
Officer’s Certificate, dated September 8, 2008, establishing the
terms of Oncor Electric Delivery Company LLC’s 5.95%
Senior Secured Notes due 2013, 6.80% Senior Secured Notes
due 2018 and 7.50% Senior Secured Notes due 2038.
4(c)
—
Investor Rights Agreement, dated as of November 5, 2008, by
and among Oncor Electric Delivery Company LLC, Oncor
Electric Delivery Holdings Company LLC, Texas
Transmission Investment LLC and Energy Future Holdings
Corp.
4(d)
—
Registration Rights Agreement, dated as of November 5, 2008,
by and among Oncor Electric Delivery Company LLC, Oncor
Electric Delivery Holdings Company LLC, Energy Future
Holdings Corp. and Texas Transmission Investment LLC.
4(a)
—
Deed of Trust, Security Agreement and Fixture Filing, dated as
of May 15, 2008, by Oncor Electric Delivery Company LLC,
as Grantor, to and for the benefit of The Bank of New York, as
Collateral Agent.
4(n)
—
First Amendment to Deed of Trust, dated as of March 2, 2009,
by and between Oncor Electric Delivery Company LLC and
The Bank of New York Mellon (formerly The Bank of New
York) as Collateral Agent.
10.1
—
Second Amendment to Deed of Trust, Security Agreement and
Fixture Filing dated as of September 3, 2010 by and between
Oncor Electric Delivery Company LLC, as Grantor, to and for
the benefit of The Bank of New York Mellon, as Collateral
Agent.
10.1
—
Third Amendment to Deed of Trust, Security Agreement and
Fixture Filing dated November 10, 2011 by and between Oncor
Electric Delivery Company LLC, as Grantor, to and for the
benefit of The Bank of New York Mellon Trust Company,
N.A. (as successor to the Bank of New York Mellon, formerly
The Bank of New York), as Collateral Agent.
4.1
—
Officer’s Certificate, dated September 13, 2010, establishing the
terms of Oncor’s 5.25% Senior Secured Notes due 2040.
4.1
—
Officer’s Certificate, dated October 8, 2010, establishing the
terms of Oncor’s 5.00% Senior Secured Notes due 2017 and
5.75% Senior Secured Notes due 2020.
4.1
—
Officer’s Certificate, dated November 23, 2011, establishing
the terms of Oncor’s 4.55% Senior Secured Notes due 2041.
Form 10-Q (filed May
15, 2008)
4(h)
333-100242
Form S-4 (filed October
2, 2002)
4(i)
333-100240
Form 8-K (filed
September 9, 2008)
4(j)
333-100240
Form 10-Q (filed
November 6, 2008)
4(k)
333-100240
Form 10-Q (filed
November 6, 2008)
4(l)
333-100240
Form 10-Q (filed May
15, 2008)
4(m)
333-100240
2008 Form 10-K (filed
March 3, 2009)
4(n)
333-100240
Form 8-K (filed
September 3, 2010)
4(o)
333-100240
Form 8-K (filed
November 15, 2011)
4(p)
333-100240
Form 8-K (filed
September 16, 2010)
4(q)
333-100240
Form 8-K (filed
October 12, 2010)
4(r)
333-100240
Form 8-K (filed
November 23, 2011)
146
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
4(s)
333-100240
4.1
—
Officer’s Certificate, dated May 18, 2012, establishing the
terms of Oncor’s 4.10% Senior Secured Notes due 2022 and
Oncor’s 5.30% Senior Secured Notes due 2042.
4.2
—
Registration Rights Agreement, dated May 18, 2012, among
Oncor and the representatives of the initial purchasers of
Oncor’s 4.10% Senior Secured Notes due 2022 and Oncor’s
5.30% Senior Secured Notes due 2042.
4.1
—
Registration Rights Agreement, dated May 13, 2013, among
Oncor and the representatives of the initial purchasers of the
additional 4.55% Senior Secured Notes due 2041.
Form 8-K (filed May
18, 2012)
4(t)
333-100240
Form 8-K (filed May
18, 2012)
4(u)
333-100240
Form 8-K (filed May
13, 2013)
(10)
Material Contracts.
Management Contracts; Compensatory Plans, Contracts and Arrangements
10(a)
333-100240
10(i)
—
Oncor Electric Delivery Company LLC Non-employee Director
Compensation Arrangement.
10.1
—
Form of Management Stockholder Agreement (Senior
Management Form).
10(l)
—
Form of Director Stockholder’s Agreement.
10(m)
—
Form of Director Sale Participation Agreement.
10(n)
—
Oncor Electric Delivery Company LLC Director Stock
Appreciation Rights Plan.
10(o)
—
Form of Stock Appreciation Rights Award Letter pursuant to the
Director Stock Appreciation Rights Plan.
10(p)
—
2008 Equity Interests Plan for Key Employees of Oncor Electric
Delivery Company LLC and its affiliates.
10(q)
—
Form of Sale Participation Agreement (Management Form).
10(r)
—
Oncor Electric Delivery Company LLC Stock Appreciation
Rights Plan.
10(s)
—
Form of Stock Appreciation Rights Award Letter pursuant to the
Stock Appreciation Rights Plan.
10(p)
—
Oncor Salary Deferral Program.
2007 Form 10-K (filed
March 31, 2008)
10(b)
333-100240
Form 8-K (filed
February 23, 2009)
10(c)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(d)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(e)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(f)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(g)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(h)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(i)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(j)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(k)
333-100240
2009 Form 10-K (filed
February 19, 2010)
147
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
10(l)
333-100240
10(q)
—
Oncor Supplemental Retirement Plan.
10(gg)
—
EFH Split Dollar Life insurance Program, as amended and
restated, executed March 2, 2006, effective as of May 20, 2005.
10(n)
—
Amendment to the EFH Split Dollar Life Insurance Program,
effective as of October 10, 2007.
10(w)
—
Oncor Electric Delivery Company LLC Executive Change in
Control Policy.
10(x)
—
Oncor Electric Delivery Company LLC Executive Severance
Plan and Summary Plan Description.
10(y)
—
Oncor Electric Delivery Company LLC Second Amended and
Restated Executive Annual Incentive Plan.
10(a)
—
Oncor Electric Delivery Company LLC Third Amended and
Restated Executive Annual Incentive Plan.
10(s)
—
Retention Agreement, effective as of February 12, 2013, between
Oncor Electric Delivery Company LLC and E. Allen Nye, Jr.
10(t)
—
Oncor Electric Delivery Company LLC Long-Term Incentive
Plan.
10(u)
—
Form of Oncor Electric Delivery Company LLC Long-Term
Incentive Plan Award Agreement.
10.1
—
Form of Indemnification Agreement.
10.1
—
Amended and Restated Revolving Credit Agreement, dated as of
October 11, 2011, among Oncor Electric Delivery Company
LLC, as borrower, the lenders listed therein, JPMorgan Chase
Bank, N.A., as administrative agent for the lenders, JPMorgan
Chase Bank, N.A., as swingline lender, and JPMorgan Chase
2009 Form 10-K (filed
February 19, 2010)
10(m)
001-12833
2005 Form 10-K (filed
March 6, 2006)
10(n)
001-12833
2007 Form 10-K (filed
March 31, 2008)
10(o)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(p)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(q)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(r)
333-100240
Form 10-Q (filed July
29, 2011)
10(s)
333-100240
2012 Form 10-K (filed
February 19, 2013)
10(t)
333-100240
2012 Form 10-K (filed
February 19, 2013)
10(u)
333-100240
2012 Form 10-K (filed
February 19, 2013)
10(v)
333-100240
2012 Form 8-K (filed
October 7, 2013)
Credit Agreements
10(w)
333-100240
Form 8-K (filed
October 11, 2011)
Bank, N.A., Barclays Bank PLC, The Royal Bank of
Scotland plc, Bank of America, N.A. and Citibank, N.A., as
fronting banks for letters of credit issued thereunder.
148
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
10(x)
333-100240
—
Joinder Agreement, dated as of May 15, 2012, by and among
Oncor, as Borrower, JPMorgan Chase Bank, N.A., as
administrative agent under the Credit Agreement, swingline
lender and fronting bank, Barclays Bank PLC, Bank of
America, N.A., Citibank, N.A. and The Royal Bank of
Scotland PLC, as fronting banks, and each party identified as
an “Incremental Lender” on the signature pages thereto.
10(i)
—
Agreement, dated as of March 10, 2005, by and between Oncor
Electric Delivery Company LLC and certain TXU Energy
Company LLC affiliates allocating to Oncor Electric Delivery
Company LLC the pension and post-retirement benefit costs for
all Oncor Electric Delivery Company LLC employees who had
retired or had terminated employment as vested employees prior
to January 1, 2002.
10(b)
—
Amended and Restated Tax Sharing Agreement, dated as of
November 5, 2008, by and among Oncor Electric Delivery
Company LLC, Oncor Electric Delivery Holdings Company
LLC, Oncor Management Investment LLC, Texas
Transmission Investment LLC and Energy Future Holdings
Corp.
10(eee)
—
Stipulation as approved by the PUCT in Docket No. 34077.
10(fff)
—
Amendment to Stipulation Regarding Section 1, Paragraph 35
and Exhibit B in Docket No. 34077.
10(ae)
—
PUCT Order on Rehearing in Docket No. 34077.
10.1
Form 8-K (filed May
15, 2012)
Other Material Contracts
10(y)
333-100240
2004 Form 10-K (filed
March 23, 2005)
10(z)
333-100240
Form 10-Q (filed
November 6, 2008)
10(aa)
001-12833
2007 Form 10-K (filed
March 31, 2008)
10(ab)
001-12833
2007 Form 10-K (filed
March 31, 2008)
10(ac)
333-100240
2010 Form 10-K (filed
February 18, 2011)
(12)
Statement Regarding Computation of Ratios.
12(a)
(21)
Computation of Ratio of Earnings to Fixed Charges, and Ratio
of Earnings to Combined Fixed Charges and Preference
Dividends.
—
Subsidiaries of Oncor Electric Delivery Company LLC.
Subsidiaries of the Registrant.
21(a)
(31)
—
Rule 13a - 14(a)/15d - 14(a) Certifications.
31(a)
—
Certification of Robert S. Shapard, chairman of the board and
chief executive of Oncor Electric Delivery Company LLC,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)
—
Certification of David M. Davis, senior vice president and chief
financial officer of Oncor Electric Delivery Company LLC,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
149
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
(32)
Section 1350 Certifications.
32(a)
—
Certification of Robert S. Shapard, chairman of the board and
chief executive of Oncor Electric Delivery Company LLC,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)
—
Certification of David M. Davis, senior vice president and chief
financial officer of Oncor Electric Delivery Company LLC,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99(a)
—
Financing Order.
99(b)
—
Internal Revenue Service Private Letter Ruling pertaining to the
(99)
Additional Exhibits.
99(a)
333-91935
Form S-3 (filed July 1,
2003)
99(b)
333-91935
Form S-3 (filed July 1,
transition bonds, dated May 21, 2002.
2003)
99(c)
333-91935
Form S-3 (filed July 1,
99(c)
—
Internal Revenue Service Private Letter Ruling pertaining to the
transition bonds, dated February 18, 2000.
2003)
XBRL Data Files.
101.INS
—
XBRL Instance Document
101.SCH
—
XBRL Taxonomy Extension Schema Document
101.CAL
—
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
—
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
—
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
—
XBRL Taxonomy Extension Presentation Linkbase
Document
_______________
* Incorporated herein by reference.
150
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Oncor Electric
Delivery Company LLC has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
0 0
ONCOR ELECTRIC DELIVERY COMPANY LLC
Date: February 27, 2014
By
/s/ ROBERT S. SHAPARD
(Robert S. Shapard, Chairman of the Board
and Chief Executive)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on behalf of Oncor Electric Delivery Company
LLC and in the capacities and on the date indicated.
/s/
/s/
Signature
Title
Date
ROBERT S. SHAPARD
Principal Executive
February 27, 2014
(Robert S. Shapard, Chairman of the Board
and Chief Executive)
Officer and Director
DAVID M. DAVIS
Principal Financial Officer
February 27, 2014
Principal Accounting Officer
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
(David M. Davis, Senior Vice President and
Chief Financial Officer)
/s/
RICHARD C. HAYS
(Richard C. Hays, Controller)
/s/
THOMAS M. DUNNING
(Thomas M. Dunning)
/s/
ROBERT A. ESTRADA
(Robert A. Estrada)
/s/
THOMAS D. FERGUSON
(Thomas D. Ferguson)
/s/
PRINTICE L. GARY
(Printice L. Gary )
/s/
WILLIAM T. HILL, JR.
(William T. Hill, Jr.)
/s/
JEFFREY LIAW
(Jeffrey Liaw)
/s/
(Timothy A. Mack)
/s/
RHEAL R. RANGER
(Rheal R, Ranger)
/s/
RICHARD W. WORTHAM III
(Richard W. Wortham III)
/s/
STEVEN J. ZUCCHET
(Steven J. Zucchet)
151
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
EXHIBIT INDEX
Exhibits
Previously Filed*
With File
Number
3(i)
Articles of Incorporation
3(a)
333-100240
As
Exhibit
3(a)
—
3(ii)
By-laws
3(b)
333-100240
3(a)
—
Second Amended and Restated Limited Liability Company
Agreement of Oncor Electric Delivery Company LLC, dated as
of November 5, 2008, by and among Oncor Electric Delivery
Holdings Company LLC, Texas Transmission Investment
LLC and Oncor Management Investment LLC.
3(c)
—
First Amendment to Second Amended and Restated Limited
Liability Company Agreement of Oncor Electric Delivery
Company LLC, entered into as of February 18, 2009, by and
among Oncor Electric Delivery Holdings Company LLC, Texas
Transmission Investment LLC and Oncor Management
Investment LLC.
Form 10-Q (filed
November 6, 2008)
3(c)
333-100240
Certificate of Formation of Oncor Electric Delivery Company
LLC.
Form 10-Q (filed
November 14, 2007)
2008 Form 10-K (filed
March 3, 2009)
(4)
Instruments Defining the Rights of Security Holders, Including Indentures.
4(a)
333-100240
4(a)
—
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York, as Trustee.
Form S-4 (filed October
2, 2002)
4(b)
001-12833
Form 8-K (filed
October 31, 2005)
10.1
—
Supplemental Indenture No. 1, dated October 25, 2005, to
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York.
4(c)
333-100240
4(b)
—
Officer’s Certificate, dated May 6, 2002, establishing the terms
of Oncor Electric Delivery Company LLC’s 6.375% Senior
Notes due 2012 and 7.000% Senior Notes due 2032.
Form S-4 (filed October
2, 2002)
4(d)
333-106894
Form S-4 (filed July 9,
2003)
4(c)
—
Officer’s Certificate, dated December 20, 2002, establishing the
terms of Oncor Electric Delivery Company LLC’s 6.375%
Senior Notes due 2015 and 7.250% Senior Notes due 2033.
4(e)
333-100240
4(b)
—
Supplemental Indenture No. 2, dated May 15, 2008, to
Indenture and Deed of Trust, dated as of May 1, 2002, between
Oncor Electric Delivery Company LLC and The Bank of New
York.
4(a)
—
Indenture (for Unsecured Debt Securities), dated as of August
1, 2002, between Oncor Electric Delivery Company LLC and
The Bank of New York, as Trustee.
Form 10-Q (filed May
15, 2008)
4(f)
333-100242
Form S-4 (filed October
2, 2002)
152
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4(g)
333-100240
4(c)
—
Supplemental Indenture No. 1, dated May 15, 2008, to
Indenture and Deed of Trust, dated as of August 1, 2002,
between Oncor Electric Delivery Company LLC and The Bank
of New York.
4(b)
—
Officer’s Certificate, dated August 30, 2002, establishing the
terms of Oncor Electric Delivery Company LLC’s 5%
Debentures due 2007 and 7% Debentures due 2022.
4.1
—
Officer’s Certificate, dated September 8, 2008, establishing the
terms of Oncor Electric Delivery Company LLC’s 5.95%
Senior Secured Notes due 2013, 6.80% Senior Secured Notes
due 2018 and 7.50% Senior Secured Notes due 2038.
4(c)
—
Investor Rights Agreement, dated as of November 5, 2008, by
and among Oncor Electric Delivery Company LLC, Oncor
Electric Delivery Holdings Company LLC, Texas
Transmission Investment LLC and Energy Future Holdings
Corp.
4(d)
—
Registration Rights Agreement, dated as of November 5, 2008,
by and among Oncor Electric Delivery Company LLC, Oncor
Electric Delivery Holdings Company LLC, Energy Future
Holdings Corp. and Texas Transmission Investment LLC.
4(a)
—
Deed of Trust, Security Agreement and Fixture Filing, dated as
of May 15, 2008, by Oncor Electric Delivery Company LLC,
as Grantor, to and for the benefit of The Bank of New York, as
Collateral Agent.
4(n)
—
First Amendment to Deed of Trust, dated as of March 2, 2009,
by and between Oncor Electric Delivery Company LLC and
The Bank of New York Mellon (formerly The Bank of New
York) as Collateral Agent.
10.1
—
Second Amendment to Deed of Trust, Security Agreement and
Fixture Filing dated as of September 3, 2010 by and between
Oncor Electric Delivery Company LLC, as Grantor, to and for
the benefit of The Bank of New York Mellon, as Collateral
Agent.
10.1
—
Third Amendment to Deed of Trust, Security Agreement and
Fixture Filing dated November 10, 2011 by and between Oncor
Electric Delivery Company LLC, as Grantor, to and for the
benefit of The Bank of New York Mellon Trust Company,
N.A. (as successor to the Bank of New York Mellon, formerly
The Bank of New York), as Collateral Agent.
4.1
—
Officer’s Certificate, dated September 13, 2010, establishing
the terms of Oncor’s 5.25% Senior Secured Notes due 2040.
Form 10-Q (filed May
15, 2008)
4(h)
333-100242
Form S-4 (filed October
2, 2002)
4(i)
333-100240
Form 8-K (filed
September 9, 2008)
4(j)
333-100240
Form 10-Q (filed
November 6, 2008)
4(k)
333-100240
Form 10-Q (filed
November 6, 2008)
4(l)
333-100240
Form 10-Q (filed May
15, 2008)
4(m)
333-100240
2008 Form 10-K (filed
March 3, 2009)
4(n)
333-100240
Form 8-K (filed
September 3, 2010)
4(o)
333-100240
Form 8-K (filed
November 15, 2011)
4(p)
333-100240
Form 8-K (filed
September 16, 2010)
153
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4(q)
333-100240
4.1
—
Officer’s Certificate, dated October 8, 2010, establishing the
terms of Oncor’s 5.00% Senior Secured Notes due 2017 and
5.75% Senior Secured Notes due 2020.
4.1
—
Officer’s Certificate, dated November 23, 2011, establishing
the terms of Oncor’s 4.55% Senior Secured Notes due 2041.
4.1
—
Officer’s Certificate, dated May 18, 2012, establishing the
terms of Oncor’s 4.10% Senior Secured Notes due 2022 and
Oncor’s 5.30% Senior Secured Notes due 2042.
4.2
—
Registration Rights Agreement, dated May 18, 2012, among
Oncor and the representatives of the initial purchasers of
Oncor’s 4.10% Senior Secured Notes due 2022 and Oncor’s
5.30% Senior Secured Notes due 2042.
4.1
—
Registration Rights Agreement, dated May 13, 2013, among
Oncor and the representatives of the initial purchasers of the
additional 4.55% Senior Secured Notes due 2041.
Form 8-K (filed
October 12, 2010)
4(r)
333-100240
Form 8-K (filed
November 23, 2011)
4(s)
333-100240
Form 8-K (filed May
18, 2012)
4(t)
333-100240
Form 8-K (filed May
18, 2012)
4(u)
333-100240
Form 8-K (filed May
13, 2013)
(10)
Material Contracts.
Management Contracts; Compensatory Plans, Contracts and Arrangements
10(a)
333-100240
10(i)
—
Oncor Electric Delivery Company LLC Non-employee Director
Compensation Arrangement.
10.1
—
Form of Management Stockholder Agreement (Senior
Management Form).
10(l)
—
Form of Director Stockholder’s Agreement.
10(m)
—
Form of Director Sale Participation Agreement.
10(n)
—
Oncor Electric Delivery Company LLC Director Stock
Appreciation Rights Plan.
10(o)
—
Form of Stock Appreciation Rights Award Letter pursuant to the
Director Stock Appreciation Rights Plan.
10(p)
—
2008 Equity Interests Plan for Key Employees of Oncor Electric
Delivery Company LLC and its affiliates.
2007 Form 10-K (filed
March 31, 2008)
10(b)
333-100240
Form 8-K (filed
February 23, 2009)
10(c)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(d)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(e)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(f)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(g)
333-100240
2008 Form 10-K (filed
March 3, 2009)
154
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10(h)
333-100240
10(q)
—
Form of Sale Participation Agreement (Management Form).
10(r)
—
Oncor Electric Delivery Company LLC Stock Appreciation
Rights Plan.
10(s)
—
Form of Stock Appreciation Rights Award Letter pursuant to the
Stock Appreciation Rights Plan.
10(p)
—
Oncor Salary Deferral Program.
10(q)
—
Oncor Supplemental Retirement Plan.
10(gg)
—
EFH Split Dollar Life insurance Program, as amended and
restated, executed March 2, 2006, effective as of May 20,
2005.
10(n)
—
Amendment to the EFH Split Dollar Life Insurance Program,
effective as of October 10, 2007.
10(w)
—
Oncor Electric Delivery Company LLC Executive Change in
Control Policy.
10(x)
—
Oncor Electric Delivery Company LLC Executive Severance
Plan and Summary Plan Description.
10(y)
—
Oncor Electric Delivery Company LLC Second Amended and
Restated Executive Annual Incentive Plan.
10(a)
—
Oncor Electric Delivery Company LLC Third Amended and
Restated Executive Annual Incentive Plan.
10(s)
—
Retention Agreement, effective as of February 12, 2013, between
Oncor Electric Delivery Company LLC and E. Allen Nye, Jr.
2008 Form 10-K (filed
March 3, 2009)
10(i)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(j)
333-100240
2008 Form 10-K (filed
March 3, 2009)
10(k)
333-100240
2009 Form 10-K (filed
February 19, 2010)
10(l)
333-100240
2009 Form 10-K (filed
February 19, 2010)
10(m)
001-12833
2005 Form 10-K (filed
March 6, 2006)
10(n)
001-12833
2007 Form 10-K (filed
March 31, 2008)
10(o)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(p)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(q)
333-100240
2010 Form 10-K (filed
February 18, 2011)
10(r)
333-100240
Form 10-Q (filed July
29, 2011)
10(s)
333-100240
2012 Form 10-K (filed
February 19, 2013)
155
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
10(t)
333-100240
10(t)
—
Oncor Electric Delivery Company LLC Long-Term Incentive
Plan.
10(u)
—
Form of Oncor Electric Delivery Company LLC Long-Term
Incentive Plan Award Agreement.
10(u)
—
Form of Indemnification Agreement.
10.1
—
Amended and Restated Revolving Credit Agreement, dated as of
October 11, 2011, among Oncor Electric Delivery Company
LLC, as borrower, the lenders listed therein, JPMorgan Chase
Bank, N.A., as administrative agent for the lenders, JPMorgan
Chase Bank, N.A., as swingline lender, and JPMorgan Chase
2012 Form 10-K (filed
February 19, 2013)
10(u)
333-100240
2012 Form 10-K (filed
February 19, 2013)
10(v)
333-100240
Form 10-Q (filed
October 7, 2013)
Credit Agreements
10(w)
333-100240
Form 8-K (filed
October 11, 2011)
Bank, N.A., Barclays Bank PLC, The Royal Bank of
Scotland plc, Bank of America, N.A. and Citibank, N.A., as
fronting banks for letters of credit issued thereunder.
10(x)
333-100240
—
Joinder Agreement, dated as of May 15, 2012, by and among
Oncor, as Borrower, JPMorgan Chase Bank, N.A., as
administrative agent under the Credit Agreement, swingline
lender and fronting bank, Barclays Bank PLC, Bank of
America, N.A., Citibank, N.A. and The Royal Bank of
Scotland PLC, as fronting banks, and each party identified as
an “Incremental Lender” on the signature pages thereto.
10(i)
—
Agreement, dated as of March 10, 2005, by and between Oncor
Electric Delivery Company LLC and certain TXU Energy
Company LLC affiliates allocating to Oncor Electric Delivery
Company LLC the pension and post-retirement benefit costs for
all Oncor Electric Delivery Company LLC employees who had
retired or had terminated employment as vested employees prior
to January 1, 2002.
10(b)
—
Amended and Restated Tax Sharing Agreement, dated as of
November 5, 2008, by and among Oncor Electric Delivery
Company LLC, Oncor Electric Delivery Holdings Company
LLC, Oncor Management Investment LLC, Texas
Transmission Investment LLC and Energy Future Holdings
Corp.
10.1
Form 8-K (filed May
15, 2012)
Other Material Contracts
10(y)
333-100240
2004 Form 10-K (filed
March 23, 2005)
10(z)
333-100240
Form 10-Q (filed
November 6, 2008)
156
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
10(aa)
001-12833
2007 Form 10-K (filed
10(eee)
—
Stipulation as approved by the PUCT in Docket No. 34077.
10(fff)
—
Amendment to Stipulation Regarding Section 1, Paragraph 35
and Exhibit B in Docket No. 34077.
10(ae)
—
PUCT Order on Rehearing in Docket No. 34077.
March 31, 2008)
10(ab)
001-12833
2007 Form 10-K (filed
March 31, 2008)
10(ac)
333-100240
2010 Form 10-K (filed
February 18, 2011)
(12)
Statement Regarding Computation of Ratios.
12(a)
(21)
Computation of Ratio of Earnings to Fixed Charges, and Ratio
of Earnings to Combined Fixed Charges and Preference
Dividends.
—
Subsidiaries of Oncor Electric Delivery Company LLC.
Subsidiaries of the Registrant.
21(a)
(31)
—
Rule 13a - 14(a)/15d - 14(a) Certifications.
31(a)
—
Certification of Robert S. Shapard, chairman of the board and
chief executive of Oncor Electric Delivery Company LLC,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)
—
Certification of David M. Davis, senior vice president and chief
financial officer of Oncor Electric Delivery Company LLC,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)
—
Certification of Robert S. Shapard, chairman of the board and
chief executive of Oncor Electric Delivery Company LLC,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)
—
Certification of David M. Davis, senior vice president and chief
financial officer of Oncor Electric Delivery Company LLC,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99(a)
—
Financing Order.
99(b)
—
Internal Revenue Service Private Letter Ruling pertaining to the
(32)
Section 1350 Certifications.
(99)
Additional Exhibits.
99(a)
333-91935
Form S-3 (filed July 1,
2003)
99(b)
333-91935
Form S-3 (filed July 1,
transition bonds, dated May 21, 2002.
2003)
157
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
99(c)
333-91935
Form S-3 (filed July 1,
99(c)
—
Internal Revenue Service Private Letter Ruling pertaining to the
transition bonds, dated February 18, 2000.
2003)
XBRL Data Files
101.INS
—
XBRL Instance Document
101.SCH
—
XBRL Taxonomy Extension Schema Document
101.CAL
—
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
—
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
—
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
—
XBRL Taxonomy Extension Presentation Linkbase Document
_______________
* Incorporated herein by reference.
158
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Supplemental Information to be Furnished with Reports Filed
Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act
No annual report, proxy statement, form of proxy or other proxy soliciting material has been sent to security holders of Oncor
Electric Delivery Company LLC during the period covered by this Annual Report on Form 10-K for the fiscal year ended
December 31, 2013.
159
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
E xhibit 12(a)
ONCOR ELECTRIC DELIVERY COMPANY LLC
C OMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31,
2012
2011
2010
2013
2009
(millions of dollars, except ratios)
Earnings:
432
$
Add: Total federal income taxes
249
386
$ 1,067
$
390
973
$
$
381
$
384
$
$
5
386
$
390
Fixed charges (see detail below)
Total earnings
$
349
Income from continuing operations
$
234
367
229
368
964
$
$
$
352
215
355
922
$
353
846
362
6
368
$
349
$
348
$
6
355
$
353
320
173
Fixed Charges:
Interest expense, excluding capitalized interest
Rentals representative of the interest factor
Total fixed charges
Ratio of earnings to fixed charges
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
2.76
6
2.49
$
2.62
2.60
5
2.40
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
E xhibit 21(a)
ONCOR ELECTRIC DELIVERY COMPANY LLC
SUBSIDIARY LIST
Effective February 27, 2014
Jurisdiction
Oncor Electric Delivery Transition Bond Company LLC
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
Delaware
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Exhibit 31(a)
ONCOR ELECTRIC DELIVERY COMPANY LLC
Certificate Pursuant to Section 302
of Sarbanes – Oxley Act of 2002
I, Robert S. Shapard, certify that:
1.
I have reviewed this annual report on Form 10-K of Oncor Electric Delivery Company LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this repor t based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal co ntrol over financial reporting.
Date: February 27, 2014
Name:
Title:
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
/s/ Robert S. Shapard
Robert S. Shapard
Chairman of the Board and Chief Executive
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Exhibit 31(b)
ONCOR ELECTRIC DELIVERY COMPANY LLC
Certificate Pursuant to Section 302
of Sarbanes – Oxley Act of 2002
I, David M. Davis, certify that:
1.
I have reviewed this annual report on Form 10-K of Oncor Electric Delivery Company LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiary , is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal co ntrol over financial reporting.
Date: February 27, 2014
Name:
Title:
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
/s/ David M. Davis
David M. Davis
Senior Vice President and Chief Financial Officer
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Exhibit 32(a)
ONCOR ELECTRIC DELIVERY COMPANY LLC
Certificate Pursuant to Section 906
of Sarbanes – Oxley Act of 2002
CERTIFICATION OF CEO
The undersigned, Robert S. Shapard, Chairman of the Board and Chief Executive of Oncor
Electric Delivery Company LLC (the “Company”), DOES HEREBY CERTIFY that:
1.
The Company’s Annual Report on Form 10- K for the period ended December 31, 2013
(the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
2.
Information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 27th
day of February , 2014.
Name:
Title:
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
/s/ Robert S. Shapard
Robert S. Shapard
Chairman of the Board and Chief Executive
Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
A signed original of this written statement required by Section 906 has been provided to Oncor Electric Delivery
Company LLC and will be retained by Oncor Electric Delivery Company LLC and furnished to the Securities and
Exchange Commission or its staff upon request.
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Exhibit 32(b)
ONCOR ELECTRIC DELIVERY COMPANY LLC
Certificate Pursuant to Section 906
of Sarbanes – Oxley Act of 2002
CERTIFICATION OF CFO
The undersigned, David M. Davis, Senior Vice President and Chief Financial Officer of Oncor
Electric Delivery Company LLC (the “Company”), DOES HEREBY CERTIFY that:
1.
The Company’s Annual Report on Form 10-K for the period ended December 31, 2013
(the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
2.
Information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 27th
day of February , 2014.
Name:
Title:
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
/s/ David M. Davis
David M. Davis
Senior Vice President and Chief Financial Officer
Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
A signed original of this written statement required by Section 906 has been provided to Oncor Electric Delivery
Company LLC and will be retained by Oncor Electric Delivery Company LLC and furnished to the Securities and
Exchange Commission or its staff upon request.
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: ONCOR ELECTRIC DELIVERY CO LLC, 10-K, February 28, 2014
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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