UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2016

— OR —

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

Commission File Number 1-12833

Energy Future Holdings Corp.

(Exact name of registrant as specified in its charter)



Texas		46-2488810
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1601 Bryan Street, Dallas, TX 75201-3411		(214) 812-4600
(Address of principal executive offices) (Zip Code)		(Registrant's telephone number, including area code)

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 x No o

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 x No o

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 o Accelerated filer o Non-Accelerated filer x (Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

At ~~August~~November 21, 2016, there were 1,669,861,379 shares of common stock, without par value, outstanding of Energy Future Holdings Corp. (substantially all of which were owned by Texas Energy Future Holdings Limited Partnership, Energy Future Holdings Corp.’s parent holding company, and none of which is publicly traded).

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TABLE OF CONTENTS

		PAGE
GLOSSARY		ii
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Statements of Consolidated Loss — Three and Six Months Ended June 30, 2016 and 2015	1
	Condensed Statements of Consolidated Income (Loss) — Three and Nine Months Ended September 30, 2016 and 2015	1
	Condensed Statements of Consolidated Comprehensive Loss — Three and Six Months Ended June 30, 2016 and 2015	1
	Condensed Statements of Consolidated Comprehensive Income (Loss) — Three and Nine Months Ended September 30, 2016 and 2015	1
	Condensed Statements of Consolidated Cash Flows — Six Months Ended June 30, 2016 and 2015	2
	Condensed Statements of Consolidated Cash Flows — Nine Months Ended September 30, 2016 and 2015	2
	Condensed Consolidated Balance Sheets — June 30, 2016 and December 31, 2015	3
	Condensed Consolidated Balance Sheets — September 30, 2016 and December 31, 2015	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	6562
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	6663
Item 1A.	Risk Factors	6663
Item 4.	Mine Safety Disclosures	6663
Item 6.	Exhibits	6664
SIGNATURE		6866

Energy Future Holdings Corp.'s (EFH Corp.) 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 EFH Corp. website at http://www.energyfutureholdings.com, as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission. The information on EFH Corp.'s website shall not be deemed a part of, or incorporated by reference into, this quarterly report on Form 10-Q. The representations and warranties contained in any agreement that we have filed as an exhibit to this quarterly report on Form 10-Q, or that we have or may publicly file in the future, may contain representations and warranties made by and to the parties thereto at 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 quarterly report on Form 10-Q and other Securities and Exchange Commission filings of EFH Corp. and its subsidiaries occasionally make references to EFH Corp. (or "we," "our," "us" or "the Company"), EFCH, EFIH, TCEH, TXU Energy, Luminant, Oncor Holdings or Oncor when describing actions, rights or obligations of their respective subsidiaries. These references reflect the fact that the subsidiaries are consolidated with, or otherwise reflected in, their respective parent company's financial statements for financial reporting purposes. However, these references should not be interpreted to imply that the parent company is actually undertaking the action or has the rights or obligations of the relevant subsidiary company or vice versa.

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.

2015 Form 10-K		EFH Corp.'s Annual Report on Form 10-K for the year ended December 31, 2015
Chapter 11 Cases		Cases being heard in the US Bankruptcy Court for the District of Delaware (Bankruptcy Court) concerning voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code (Bankruptcy Code) filed on April 29, 2014 by the Debtors
Competitive Electric segment		prior to the Effective Date, the EFH Corp. business segment that ~~consists~~consisted principally of TCEH
Consolidated EBITDA		Consolidated EBITDA means TCEH EBITDA adjusted to exclude noncash items, unusual items and other adjustments allowable under the agreement governing the TCEH DIP Facility. See the definition of EBITDA below. Consolidated EBITDA and EBITDA are not recognized terms under US GAAP and, thus, are non-GAAP financial measures. We are providing Consolidated EBITDA in this Form 10-Q (see reconciliation in Exhibit 99(b)) solely because of the important role that Consolidated EBITDA plays in respect of covenants contained in the agreement governing the TCEH DIP Facility. We do not intend for Consolidated EBITDA (or EBITDA) to be an alternative to net income as a measure of operating performance or an alternative to cash flows from operating activities as a measure of liquidity or an alternative to any other measure of financial performance presented in accordance with US GAAP. Additionally, we do not intend for Consolidated EBITDA (or EBITDA) to be used as a measure of free cash flow available for management's discretionary use, as the measure excludes certain cash requirements such as adequate assurance payments, interest payments, tax payments and other debt service requirements. Because not all companies use identical calculations, our presentation of Consolidated EBITDA (and EBITDA) may not be comparable to similarly titled measures of other companies.
Contributed EFH Debtors		certain EFH Debtors that became subsidiaries of Reorganized TCEH on the Effective Date
CSAPR		the final Cross-State Air Pollution Rule issued by the EPA in July 2011
DIP Facilities		Refers, collectively, to the TCEH DIP Roll Facilities, the TCEH DIP Facility and the EFIH DIP Facility. See Note 10 to the Financial Statements.
Debtors		EFH Corp. and the majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities. Prior to the Effective Date, also included the TCEH Debtors and the Contributed EFH Debtors.
Disclosure Statement		Disclosure Statement for the Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code filed by the Debtors with the Bankruptcy Court in ~~May~~August 2016
D.C. Circuit Court		US Court of Appeals for the District of Columbia Circuit
EBITDA		earnings (net income) before interest expense, income taxes, depreciation and amortization
Effective Date		October 3, 2016, the date the TCEH Debtors and the Contributed EFH Debtors completed their reorganization under the Bankruptcy Code and emerged from the Chapter 11 Cases
EFCH		Energy Future Competitive Holdings Company LLC, a direct, wholly owned subsidiary of EFH Corp. and, prior to the ~~direct~~Effective Date, the indirect parent of the TCEH, ~~and/or its subsidiaries~~Debtors, depending on context
EFH Corp.		Energy Future Holdings Corp. and/or its subsidiaries, depending on context, whose major subsidiaries include Oncor and, prior to the Effective Date, included the TCEH Debtors and ~~Oncor~~the Contributed EFH Debtors
EFH Debtors		EFH Corp. and its subsidiaries that are Debtors in the Chapter 11 Cases, including the EFIH Debtors, but excluding the TCEH Debtors and the Contributed EFH Debtors
EFH Debtors Plan Support Agreement		Agreement to support the reorganization of the EFH Debtors pursuant to the Plan of Reorganization entered into in September 2016 by the EFH Debtors and affiliates of NextEra Energy Inc. and approved by the Bankruptcy Court in September 2016
EFIH		Energy Future Intermediate Holding Company LLC, a direct, wholly owned subsidiary of EFH Corp. and the direct parent of Oncor Holdings
EFIH Debtors		EFIH and EFIH Finance
EFIH DIP Facility		EFIH's and EFIH Finance's $5.4475 billion debtor-in-possession financing facility. See Note 10 to the Financial Statements.
EFIH Finance		EFIH Finance Inc., a direct, wholly owned subsidiary of EFIH, formed for the sole purpose of serving as co-issuer with EFIH of certain debt securities
EFIH First Lien Notes		EFIH's and EFIH Finance's 6.875% Senior Secured First Lien Notes and 10.000% Senior Secured First Lien Notes exchanged or settled in June 2014 as discussed in Note 10 to the Financial Statements, collectively
EFIH PIK Notes		EFIH's and EFIH Finance's $1.530 billion principal amount of 11.25%/12.25% Senior Toggle Notes
EFIH Second Lien Notes		EFIH's and EFIH Finance's $322 million principal amount of 11% Senior Secured Second Lien Notes and $1.389 billion principal amount of 11.75% Senior Secured Second Lien Notes, collectively
EPA		US Environmental Protection Agency

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EFIH Second Lien Notes		EFIH's and EFIH Finance's $322 million principal amount of 11% Senior Secured Second Lien Notes and $1.389 billion principal amount of 11.75% Senior Secured Second Lien Notes, collectively
EPA		US Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas
ERISA		Employee Retirement Income Security Act of 1974, as amended
Federal and State Income Tax Allocation Agreements		Prior to the Effective Date, EFH Corp. and certain of its subsidiaries (including EFCH, EFIH and TCEH, but not including Oncor Holdings and Oncor) ~~are~~were parties to a Federal and State Income Tax Allocation Agreement, executed in May 2012 but effective as of January 2010. The Agreement was rejected by the TCEH Debtors and the Contributed EFH Debtors on the Effective Date. EFH Corp., Oncor Holdings, Oncor, Texas Transmission, and Oncor Management Investment LLC are parties to a separate Federal and State Income Tax Allocation Agreement dated November 2008. See Note 6 to the Financial Statements and Management's Discussion and Analysis, under Financial Condition.
FERC		US Federal Energy Regulatory Commission
Fifth Circuit Court		US Court of Appeals for the Fifth Circuit
GAAP		generally accepted accounting principles
GHG		greenhouse gas
GWh		gigawatt-hours
ICE		the IntercontinentalExchange, an electronic commodity derivative exchange
IRS		US Internal Revenue Service
LIBOR		London Interbank Offered Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market
LSTC		liabilities subject to compromise
Luminant		subsidiaries of Reorganized TCEH engaged in competitive market activities consisting of electricity generation and wholesale energy sales and purchases as well as commodity risk management, all largely in Texas
market heat rate		Heat rate is a measure of the efficiency of converting a fuel source to electricity. Market heat rate is the implied relationship between wholesale electricity prices and natural gas prices and is calculated by dividing the wholesale market price of electricity, which is based on the price offer of the marginal supplier in ERCOT (generally natural gas plants), by the market price of natural gas. Forward wholesale electricity market price quotes in ERCOT are generally limited to two or three years; accordingly, forward market heat rates are generally limited to the same time period. Forecasted market heat rates for time periods for which market price quotes are not available are based on fundamental economic factors and forecasts, including electricity supply, demand growth, capital costs associated with new construction of generation supply, transmission development and other factors.
MATS		the Mercury and Air Toxics Standard established by the EPA
Merger		the transaction referred to in the Agreement and Plan of Merger under which Texas Holdings agreed to acquire EFH Corp., which was completed on October 10, 2007
MMBtu		million British thermal units
MW		megawatts
MWh		megawatt-hours
NOX		nitrogen oxide
NRC		US Nuclear Regulatory Commission
NYMEX		the New York Mercantile Exchange, a commodity derivatives exchange
Oncor		Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings and an indirect subsidiary of EFH Corp., that is engaged in regulated electricity transmission and distribution activities
Oncor Holdings		Oncor Electric Delivery Holdings Company LLC, a direct, wholly owned subsidiary of EFIH and the direct majority owner of Oncor, and/or its subsidiaries, depending on context

iii

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Oncor		Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings and an indirect subsidiary of EFH Corp., that is engaged in regulated electricity transmission and distribution activities
Oncor Holdings		Oncor Electric Delivery Holdings Company LLC, a direct, wholly owned subsidiary of EFIH and the direct majority owner of Oncor, and/or its subsidiaries, depending on context
Oncor Ring-Fenced Entities		Oncor Holdings and its direct and indirect subsidiaries, including Oncor
OPEB		postretirement employee benefits other than pensions
Petition Date		April 29, 2014, the date the Debtors made the Bankruptcy Filing
Plan of Reorganization		Fourth Amended Joint Plan of Reorganization filed by the Debtors with the Bankruptcy Court in ~~May~~September 2016
Plan Support Agreement		Third Amendment to the Amended and Restated Plan Support Agreement, entered into in December 2015, amending and restating the Plan Support Agreement
PUCT		Public Utility Commission of Texas
purchase accounting		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.
Reorganized TCEH		TCEH Corp., and/or its subsidiaries, depending on context. On the Effective Date, the TCEH Debtors and the Contributed EFH Debtors emerged from Chapter 11 and became subsidiaries of TCEH Corp. Subsequent to the Effective Date, TCEH Corp. continued substantially the same operations as TCEH.
Regulated Delivery segment		the EFH Corp. business segment that consists primarily of our investment in Oncor
REP		retail electric provider
RCT		Railroad Commission of Texas, which among other things, has oversight of lignite mining activity in Texas
S&P		Standard & Poor's Ratings (a credit rating agency)
SEC		US Securities and Exchange Commission
Securities Act		Securities Act of 1933, as amended
SG&A		selling, general and administrative
Settlement Agreement		Amended and Restated Settlement Agreement among the Debtors, the Sponsor Group, settling TCEH first lien creditors, settling TCEH second lien creditors, settling TCEH unsecured creditors and the official committee of unsecured creditors of TCEH (collectively, the Settling Parties), approved by the Bankruptcy Court in December 2015. See Note 2 to the Financial Statements.
SO2		sulfur dioxide
Sponsor Group		Refers, collectively, to certain investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P., 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
TCEH		Texas Competitive Electric Holdings Company LLC, a direct, wholly owned subsidiary of EFCH and, anprior ~~indirect~~to ~~subsidiary~~the ofEffective ~~EFH Corp.~~Date, ~~and/or~~the ~~its~~parent ~~subsidiaries~~company of the TCEH Debtors, depending on context, that ~~are~~were engaged in electricity generation and wholesale and retail energy market activities, and whose major subsidiaries ~~include~~included Luminant and TXU Energy. Subsequent to the Effective Date, TCEH Corp. continued substantially the same operations as TCEH.
TCEH Debtors		~~EFCH, TCEH and~~ the subsidiaries of TCEH that ~~are~~were Debtors in the Chapter 11 Cases
TCEH DIP Facility		TCEH's $3.375 billion debtor-in-possession financing facility, which was repaid in August 2016. See Note 10 to the Financial Statements.
TCEH Finance		TCEH Finance, Inc., a direct, wholly owned subsidiary of TCEH, formed for the sole purpose of serving as co-issuer with TCEH of certain debt securities
TCEH DIP Roll Facilities		TCEH's $4.250 billion debtor-in-possession to exit financing facility. See Note 10 to the Financial Statements.
TCEH Senior Secured Facilities		Refers, collectively, to the TCEH First Lien Term Loan Facilities, TCEH First Lien Revolving Credit Facility and TCEH First Lien Letter of Credit Facility with a total principal amount of $22.616 billion.
TCEH Finance		TCEH Finance, Inc., a direct, wholly owned subsidiary of TCEH, formed for the sole purpose of serving as co-issuer with TCEH of certain debt securities. TCEH Finance, Inc. was dissolved on the Effective Date.

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TCEH Senior Secured Notes		TCEH's and TCEH Finance's $1.750 billion principal amount of 11.5% First Lien Senior Secured Notes
TCEH Senior Secured Facilities		Refers, collectively, to the TCEH First Lien Term Loan Facilities, TCEH First Lien Revolving Credit Facility and TCEH First Lien Letter of Credit Facility with a total principal amount of $22.616 billion. The claims arising under these facilities were discharged in the Chapter 11 Cases on the Effective Date pursuant to the Plan of Reorganization.
TCEH Senior Secured Notes		TCEH's and TCEH Finance's $1.750 billion principal amount of 11.5% First Lien Senior Secured Notes. The claims arising under these notes were discharged in the Chapter 11 Cases on the Effective Date pursuant to the Plan of Reorganization.
TCEQ		Texas Commission on Environmental Quality
Terminated Plan		Sixth Amended Joint Plan of Reorganization filed by the Debtors in November 2015, as amended, confirmed by the Bankruptcy Court in December 2015, which became null and void in May 2016
Texas Holdings		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.
Texas Holdings Group		Texas Holdings and its direct and indirect subsidiaries other than the Oncor Ring-Fenced Entities
Texas Transmission		Texas Transmission Investment LLC, a limited liability company that owns a 19.75% equity interest in Oncor and is not affiliated with EFH Corp., any of EFH Corp.'s subsidiaries or any member of the Sponsor Group
TXU Energy		TXU Energy Retail Company LLC, a direct, wholly owned subsidiary of Reorganized TCEH that is a REP in competitive areas of ERCOT and is engaged in the retail sale of electricity to residential and business customers
US		United States of America
VIE		variable interest entity

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PART I. FINANCIAL INFORMATION


Item 1.	FINANCIAL STATEMENTS

ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES, A DEBTOR-IN-POSSESSION

CONDENSED STATEMENTS OF CONSOLIDATED INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(millions of dollars)
Operating revenues	$	1,~~233~~690		$	1,~~256~~737		$	23,~~283~~973		$	24,~~527~~265
Fuel, purchased power costs and delivery fees	(~~654~~874		)	(~~646~~831		)	(12,~~208~~082		)	(12,~~259~~090		)
Net gain (loss) from commodity hedging and trading activities	(118		)	20			(53		)	123
Net gain from commodity hedging and trading activities	336			103			282			226
Operating costs	(~~255~~190		)	(~~217~~189		)	(~~474~~664		)	(~~410~~598		)
Depreciation and amortization	(~~166~~159		)	(~~222~~203		)	(~~307~~467		)	(~~440~~643		)
Selling, general and administrative expenses	(~~161~~169		)	(~~177~~192		)	(~~319~~487		)	(~~355~~547		)
Impairment of goodwill (Note 5)	—			—(700		)	—			(~~700~~1,400		)
Impairment of long-lived assets (Note 7)	—			—(1,295		)	—			(~~676~~1,971		)
Other income (Note 18)	1610			128			2132			1927
Other deductions (Note 18)	(2744		)	(226		)	(4892		)	(6186		)
Interest expense and related charges (Note 8)	(~~402~~435		)	(~~380~~383		)	(~~797~~1,232		)	(~~988~~1,375		)
Reorganization items (Note 9)	(5284		)	(68		)	(~~122~~206		)	(~~207~~275		)
Loss before income taxes and equity in earnings of unconsolidated subsidiaries	(586		)	(424		)	(1,024		)	(2,427		)
Income (loss) before income taxes and equity in earnings of unconsolidated subsidiaries	81			(2,039		)	(943		)	(4,467		)
Income tax benefit (Note 6)	171			137			298			537
Income tax benefit (expense) (Note 6)	(42		)	452			256			990
Equity in earnings of unconsolidated subsidiaries (net of tax) (Note 4)	85127			75127			~~147~~274			~~151~~278
Net loss	$	(330	)	$	(212	)	$	(579	)	$	(1,739	)
Net income (loss)	$	166		$	(1,460	)	$	(413	)	$	(3,199	)

See Notes to the Financial Statements.

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(millions of dollars)
Net loss	$	(330	)	$	(212	)	$	(579	)	$	(1,739	)
Net income (loss)	$	166		$	(1,460	)	$	(413	)	$	(3,199	)
Other comprehensive income (loss), net of tax effects:
Effects related to pension and other retirement benefit obligations (net of tax benefit of $1, $—, $2 and $1)	(2		)	—			(3		)	(2		)
Effects related to pension and other retirement benefit obligations (net of tax benefit of $1, $1, $3 and $2)	(2		)	(1		)	(5		)	(3		)
Cash flow hedges derivative value net loss related to hedged transactions recognized during the period (net of tax benefit of $— in all periods)	1—			—			1			1
Net effects related to Oncor — reported in equity in earnings of unconsolidated subsidiaries (net of tax)	1			—1			12			12
Total other comprehensive loss	—(1		)	—			(12		)	—
Comprehensive loss	$	(330	)	$	(212	)	$	(580	)	$	(1,739	)
Comprehensive income (loss)	$	165		$	(1,460	)	$	(415	)	$	(3,199	)

See Notes to the Financial Statements.

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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES, A DEBTOR-IN-POSSESSIONCONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS(Unaudited)
	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
	(millions of dollars)
Cash flows — operating activities:
Net loss	$	(~~579~~413	)	$	(13,~~739~~199	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	~~355~~539			~~514~~757
Deferred income tax benefit, net	(~~278~~215		)	(~~410~~784		)
Impairment of goodwill (Note 5)	—			~~700~~1,400
Impairment of long-lived assets (Note 7)	—			~~676~~1,971
Contract claims adjustments (Note 9)	313			2826
Adjustment to asbestos liability	23			—
Fees paid on EFIH Second Lien Notes repayment and EFIH DIP Facility (Notes 10 and 11)(reported as financing activities)	14			28
Unrealized net (gain) loss from mark-to-market valuations of commodity positions	~~253~~36			(74107		)
Equity in earnings of unconsolidated subsidiaries	(~~147~~274		)	(~~151~~278		)
Distributions of earnings from unconsolidated subsidiaries (Note 4)	86135			~~120~~206
Write-off of intangible and other assets (Note 18)	4145			5983
Other, net	3264			2749
Changes in operating assets and liabilities:
Margin deposits, net	(~~133~~124		)	46108
Payables due to unconsolidated subsidiary	(26		)	(89113		)
Other operating assets and liabilities, including liabilities subject to compromise	(~~157~~177		)	(~~307~~270		)
Cash used in operating activities	(~~512~~328		)	(~~572~~123		)
Cash flows — financing activities:
Borrowings under TCEH DIP Revolving Credit Facility (Note 10)	1,115			—
Borrowings under TCEH DIP Roll Facilities and TCEH DIP Facility (Note 10)	4,680			—
Repayments/repurchases of debt (Note 10)	(132,699		)	(~~456~~469		)
TCEH DIP Roll Facilities financing fees	(112		)	—
Fees paid on EFIH Second Lien Notes repayment and EFIH DIP Facility (Notes 10 and 11)	(14		)	(28		)
Cash provided by (used in) financing activities	1,~~088~~855			(~~484~~497		)
Cash flows — investing activities:
Capital expenditures	(~~169~~230		)	(~~194~~261		)
Nuclear fuel purchases	(1133		)	(1177		)
Lamar and Forney acquisition — net of cash acquired (Note 3)	(1,343		)	—
Changes in restricted cash	(9365		)	(433		)
Proceeds from sales of nuclear decommissioning trust fund securities (Note 18)	~~155~~201			73315
Investments in nuclear decommissioning trust fund securities (Note 18)	(~~163~~215		)	(81328		)
Other, net	68			811
Cash used in investing activities	(1,~~534~~247		)	(~~209~~307		)
Net change in cash and cash equivalents	~~(958~~280		)	(~~1,265~~927		)
Cash and cash equivalents — beginning balance	2,286			3,428
Cash and cash equivalents — ending balance	$	12,~~328~~566		$	2,~~163~~501

See Notes to the Financial Statements.

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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES, A DEBTOR-IN-POSSESSIONCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)
	June 30, 2016			December 31, 2015
	September 30, 2016			December 31, 2015
	(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	12,~~328~~566		$	2,286
Restricted cash (Note 18)	~~533~~16			524
Trade accounts receivable — net (Note 18)	~~658~~751			533
Inventories (Note 18)	~~420~~374			428
Commodity and other derivative contractual assets (Note 15)	~~363~~256			465
Margin deposits related to commodity contracts	2342			6
Other current assets	8565			81
Total current assets	34,~~410~~070			4,323
Restricted cash (Note 18)	~~507~~650			507
Investment in unconsolidated subsidiary (Note 4)	6,~~125~~204			6,064
Other investments (Note 18)	1,~~032~~061			984
Property, plant and equipment — net (Note 18)	10,~~537~~427			9,430
Goodwill (Note 5)	152			152
Identifiable intangible assets — net (Note 5)	1,~~151~~138			1,166
Commodity and other derivative contractual assets (Note 15)	1572			10
Accumulated deferred income taxes	~~891~~830			609
Other noncurrent assets	8996			85
Total assets	$	2324,~~909~~700		$	23,330
LIABILITIES AND EQUITY
Current liabilities:
Borrowings under debtor-in-possession credit facilities (Note 10)	$	75,~~940~~400		$	6,825
Long-term debt due currently (Note 10)	349			35
Trade accounts payable	~~417~~418			413
Net payables due to unconsolidated subsidiary (Note 16)	~~202~~210			204
Commodity and other derivative contractual liabilities (Note 15)	~~315~~125			203
Margin deposits related to commodity contracts	3664			152
Accrued taxes	~~115~~145			134
Accrued interest	~~124~~111			121
Other current liabilities	~~364~~372			425
Total current liabilities	96,~~547~~854			8,512
Long-term debt, less amounts due currently (Note 10)	52			60
Borrowings under debtor-in-possession credit facilities (Note 10)	3,387			—
Liabilities subject to compromise (Note 11)	37,788			37,786
Long-term debt, less amounts due currently (Note 10)	31			60
Commodity and other derivative contractual liabilities (Note 15)	71			1
Liabilities subject to compromise (Note 11)	37,815			37,786
Other noncurrent liabilities and deferred credits (Note 18)	2,092			2,032
Commodity and other derivative contractual liabilities (Note 15)	5			1
Total liabilities	49,550			48,391
Other noncurrent liabilities and deferred credits (Note 18)	2,084			2,032
Total liabilities	50,176			48,391
Commitments and Contingencies (Note 12)
Total equity (Note 13)	(25,~~641~~476		)	(25,061		)
Total liabilities and equity	$	2324,~~909~~700		$	23,330

See Notes to the Financial Statements.

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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES, A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

References in this report to "we," "our," "us" and "the Company" are to EFH Corp. and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.

EFH Corp., a Texas corporation, is a Dallas-based holding company that conducts its operations principally through its ~~TCEH and~~ Oncor ~~subsidiaries. EFH Corp. is a~~ subsidiary ~~of Texas Holdings~~and, ~~which~~prior isto ~~controlled~~October ~~by the Sponsor Group. TCEH is a holding company for subsidiaries engaged in competitive electricity market activities largely in Texas~~3, ~~including~~2016 ~~electricity~~(the ~~generation,~~Effective ~~wholesale energy sales and purchases~~Date), ~~commodity~~its ~~risk~~TCEH ~~management, and retail electricity operations~~subsidiaries. ~~TCEH~~EFH isCorp. ~~a wholly owned subsidiary of EFCH, which~~ is a ~~holding company and a wholly owned~~ subsidiary of ~~EFH Corp. Oncor is engaged in regulated electricity transmission and distribution operations in~~ Texas~~. Oncor~~ ~~provides distribution services to REPs, including subsidiaries of TCEH, which sell electricity to residential, business and other consumers. Oncor~~ Holdings, ~~a holding company that holds an approximate 80% equity interest in Oncor, is a wholly owned subsidiary of EFIH,~~ which is acontrolled ~~holding~~by ~~company and a wholly owned subsidiary of EFH Corp. Oncor Holdings and its subsidiaries (~~the ~~Oncor~~Sponsor ~~Ring-Fenced Entities) are not consolidated in EFH Corp~~Group.~~'s financial statements in accordance with consolidation accounting standards related to variable interest entities (VIEs) (see Note 4).~~

Prior to the Effective Date, TCEH was a holding company for subsidiaries engaged in competitive electricity market activities largely in Texas, including electricity generation, wholesale energy sales and purchases, commodity risk management, and retail electricity operations. On the Effective Date, subsidiaries of TCEH (the TCEH Debtors) and certain EFH Corp. subsidiaries (the Contributed EFH Debtors) emerged from the Chapter 11 Cases as subsidiaries of a newly-formed company, Reorganized TCEH. On the Effective Date, Reorganized TCEH was spun-off from EFH Corp. in a tax-free transaction to the former first lien creditors of TCEH (see Note 2).

Oncor is engaged in regulated electricity transmission and distribution operations in Texas. Oncor provides distribution services to REPs, including subsidiaries of Reorganized TCEH, which sell electricity to residential, business and other consumers. Oncor Holdings, a holding company that holds an approximate 80% equity interest in Oncor, is a wholly owned subsidiary of EFIH, which is a holding company and a wholly owned subsidiary of EFH Corp. Oncor Holdings and its subsidiaries (the Oncor Ring-Fenced Entities) are not consolidated in EFH Corp.'s financial statements in accordance with consolidation accounting standards related to variable interest entities (VIEs) (see Note 4).

Various ring-fencing measures have been taken to enhance the credit quality of Oncor. Such measures include, among other things: the ownership of a 19.75% equity interest in Oncor by Texas Transmission; maintenance of separate books and records for the Oncor Ring-Fenced Entities; Oncor's 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 Ring-Fenced Entities are separate and distinct from those of the Texas Holdings Group, 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. Oncor's operations are conducted, and its cash flows managed, independently from the Texas Holdings Group.

Consistent with the ring-fencing measures discussed above, the assets and liabilities of the Oncor Ring-Fenced Entities have not been, and are not expected to be, substantively consolidated with the assets and liabilities of the Debtors in the Chapter 11 Cases.

WeAt ~~have~~September 30, 2016, we had two reportable segments: the Competitive Electric segment, consisting largely of TCEH, and the Regulated Delivery segment, consisting largely of our investment in Oncor. See Note 17 for further information concerning reportable business segments.

Bankruptcy Proceeding

On April 29, 2014 (the Petition Date), EFH Corp. and the substantial majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities (collectively, the Debtors), filed voluntary petitions for relief (the Bankruptcy Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). On the Effective Date, the TCEH Debtors and the Contributed EFH Debtors completed their reorganization under the Bankruptcy Code and emerged from the Chapter 11 Cases as subsidiaries of Reorganized TCEH. The EFH Debtors have not yet completed their Chapter 11 Cases. See Note 2 for further discussion regarding the Chapter 11 Cases.

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Basis of Presentation, Including Application of Bankruptcy Accounting and Discontinued Operations

The condensed consolidated financial statements have been prepared in accordance with US GAAP. The condensed consolidated financial statements have been prepared as if EFH Corp. is a going concern and contemplate the realization of assets and liabilities in the normal course of business. The condensed consolidated financial statements reflect the application of Financial Accounting Standards Board Accounting Standards Codification 852, Reorganizations (ASC 852). During the ~~pendency of the~~ Chapter 11 Cases, the EFH Debtors will operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. ASC 852 applies to entities that have filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Code. The guidance requires that transactions and events directly associated with the reorganization be distinguished from the ongoing operations of the business. In addition, the guidance provides for changes in the accounting and presentation of liabilities. See Notes 9 and 11 for discussion of these accounting and reporting changes.

The results of operations of TCEH are included in continuing operations in the accompanying financial statements. As discussed in Note 2, the spin-off of Reorganized TCEH occurred on October 3, 2016. The results of operations of Reorganized TCEH will be reported as discontinued operations in our statement of consolidated income (loss) for the year ended December 31, 2016.

Investments in unconsolidated subsidiaries, which are 50% or less owned and/or do not meet accounting standards criteria for consolidation, are accounted for under the equity method (see Note 4). Adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and related notes included in our 2015 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of US dollars unless otherwise indicated.

Use of Estimates

Preparation of financial statements requires 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 and estimates of expected allowed claims. 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.

Changes in Accounting Standards

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-2 (ASU 2016-02), Leases. The ASU amends previous GAAP to require the recognition of lease assets and liabilities for operating leases. The ASU will be effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Retrospective application to comparative periods presented will be required in the year of adoption. We are currently evaluating the impact of this ASU on our financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-08 (ASU 2016-08), Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). ASU 2016-08 clarifies the implementation guidance for principal versus agent considerations related to ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides the core principle and key steps in determining the recognition of revenue. The effective date for these updates has been deferred to fiscal years beginning after December 15, 2017. We are currently assessing the impact of these ASUs on our financial statements.

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2. CHAPTER 11 CASES

On the Petition Date, EFH Corp. and the substantial majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. During the ~~pendency of the~~ Chapter 11 Cases, the EFH Debtors will operate their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

Plan of Reorganization

In ~~May~~August 2016, the Debtors filed the Plan of Reorganization and the Disclosure Statement, ~~with~~each as it related to the ~~Bankruptcy~~TCEH ~~Court. In~~Debtors ~~July~~and ~~2016,~~the inContributed ~~connection~~EFH Debtors, with the ~~Merger~~Bankruptcy ~~Agreement~~Court ~~(as~~and ~~described~~the ~~below),~~Plan ~~each~~ of ~~the~~Reorganization ~~EFH~~was ~~Debtors~~confirmed. The ~~and~~Plan ~~NextEra~~of ~~Energy,~~Reorganization ~~Inc.~~provides ~~(NEE)~~that ~~agreed~~the toconfirmation ~~certain~~and ~~amendments~~effective todate of the Plan of Reorganization with respect to the ~~EFH~~TCEH Debtors ~~(the~~and ~~Amended Plan). Pursuant to~~ the ~~terms~~Contributed ~~of the~~ EFH Debtors ~~Plan~~may ~~Support~~occur ~~Agreement~~separate ~~(as described below)~~from, itand isindependent ~~expected~~of, ~~that~~ the ~~Debtors~~confirmation ~~will~~and ~~file~~effective ~~the~~date ~~Amended~~of ~~Plan with~~ the ~~Bankruptcy~~Plan ~~Court~~of ~~and~~Reorganization ~~seek~~with ~~confirmation~~respect ofto the ~~Amended~~EFH ~~Plan~~Debtors.

The ~~Plan~~TCEH ofDebtors ~~Reorganization provides (~~and the ~~Amended~~Contributed ~~Plan~~EFH ~~will~~Debtors ~~provide)~~emerged ~~that~~from the ~~confirmation~~Chapter ~~and~~11 ~~effective~~Cases ~~date~~on of the ~~Plan~~Effective ofDate ~~Reorganization~~in ~~with~~a ~~respect~~tax-free tospin-off ~~the~~from ~~TCEH~~EFH ~~Debtors~~Corp. The ~~may~~tax-free ~~occur~~spin-off ~~separate~~generated ~~from,~~a ~~and~~taxable ~~independent~~gain ~~of,~~that ~~the~~will ~~confirmation~~be ~~and~~largely ~~effective~~offset ~~date~~with ofavailable net operating losses (NOLs), substantially reducing the ~~Plan~~NOLs ofthat ~~Reorganization~~will ~~with~~be ~~respect~~available to ~~the~~ EFH ~~Debtors~~Corp. after the transaction.

With respect to the ~~TCEH Debtors (and certain~~ EFH Debtors ~~that will become subsidiaries of Reorganized TCEH upon emergence of the TCEH Debtors from the Chapter 11 Cases (the Contributed EFH Debtors))~~, the Plan of Reorganization, subject to certain conditions, provides for, among other things, a tax-free spin-off from EFH Corp. (the Reorganized TCEH Spin-Off), including a transaction that will result in a step-up in the tax basis of certain TCEH assets contributed to a subsidiary of TCEH (Reorganized TCEH). With respect to the EFH Debtors, the Plan of Reorganization (as will be amended by the Amended Plan), subject to certain conditions and certain regulatory approvals, ~~will~~provides ~~provide~~ for, among other things, the acquisition by ~~NEE~~affiliates of ~~the~~NextEra ~~EFH~~Energy ~~Debtors~~Inc. (~~as reorganized~~NEE) ~~after~~of the ~~Reorganized~~EFH ~~TCEH~~Debtors ~~Spin-Off pursuant to the Merger Agreement~~ (as ~~described below~~reorganized).

~~Information~~The ~~contained~~EFH Debtors will emerge from bankruptcy if and when a plan of reorganization (including the Plan of Reorganization) receives the requisite approval from the appropriate holders of claims, the Bankruptcy Court enters an order confirming such plan of reorganization and certain conditions to the effectiveness of such plan of reorganization are satisfied. There are no assurances that the Bankruptcy Court will confirm the Plan of Reorganization as it relates to the EFH Debtors. If the Bankruptcy Court does enter such a confirmation order, the EFH Debtors cannot emerge from the Chapter 11 Cases until certain conditions precedent (set forth in the Plan of Reorganization) are satisfied (~~including~~or ~~when~~otherwise ~~amended~~waived by the ~~Amended~~sponsor of the Plan of Reorganization). Such ~~and~~conditions include, among other things, the ~~Disclosure~~receipt ~~Statement~~of isall ~~subject~~necessary totax ~~change~~opinions and regulatory approvals, ~~whether~~all asconditions ato ~~result~~the completion of ~~amendments~~the totransactions ~~such~~contemplated ~~documents~~by the Merger Agreement (defined below) having been satisfied, ~~requirements~~and the disallowance by the Bankruptcy Court (pursuant to an order that has not been stayed or reversed or remanded on appeal as of the date the EFH Debtors emerge from the Chapter 11 Cases) of all make-whole claims asserted by the EFIH first lien trustee and EFIH second lien trustee. As described in Note 12, ~~actions~~certain of ~~third~~the ~~parties~~proceedings orrelated ~~otherwise~~to make-whole claims asserted by various constituencies remain ongoing. Additional disclosures regarding the conditions precedent to the consummation of the Plan of Reorganization are set forth in the Disclosure Statement approved by the Bankruptcy Court in September 2016.

~~Solely as it pertains to the TCEH Debtors and the Contributed~~ EFH Debtors, ~~the Disclosure Statement has been approved by the Bankruptcy Court, and the confirmation hearing for the~~ Plan ofSupport Reorganization is scheduled to commence on August 17, 2016. There can be no assurance that the TCEH Debtors' stakeholders will vote to accept the Plan of Reorganization or that the Bankruptcy Court will confirm the Plan of Reorganization, in each case, as it relates to the TCEH Debtors. With respect to the EFH Debtors, no Disclosure Statement has been approved by the Bankruptcy Court, and no date to confirm the Plan of Reorganization has been scheduled. See Scheduling Matters below.Agreement

~~The~~In July 2016, the EFH Debtors and ~~the~~NEE ~~TCEH~~entered ~~Debtors,~~into ~~respectively,~~a ~~will~~plan ~~emerge~~support ~~from~~agreement ~~bankruptcy~~(the ifEFH ~~and~~Debtors ~~when,~~Plan inSupport ~~each~~Agreement) ~~case,~~to aeffect ~~plan~~an ofagreed ~~reorganization~~upon ~~receives~~restructuring of the ~~requisite~~EFH ~~approval~~Debtors ~~from~~pursuant to the ~~appropriate~~Plan ~~holders~~ of ~~claims~~Reorganization. In September 2016, ~~the~~certain ~~Bankruptcy~~creditors ~~Court~~of ~~enters~~EFH anCorp. ~~order~~and ~~confirming~~EFIH ~~such~~became ~~plan~~parties ofto ~~reorganization~~the ~~and~~EFH ~~certain~~Debtors ~~conditions~~Plan toSupport Agreement. The Bankruptcy Court approved the ~~effectiveness~~EFH ofDebtors ~~such~~Plan ~~plan~~Support ofAgreement ~~reorganization~~in ~~are~~September ~~satisfied~~2016.

~~Plan~~Settlement ~~Support~~ Agreement ~~and EFH Debtors Plan Support Agreement~~

InThe Settling Parties entered into a settlement agreement (the Settlement Agreement) in August 2015 (as amended in September 2015) ~~and~~to ~~November~~compromise ~~2015)~~and settle, inamong ~~connection~~other ~~with~~things ~~the~~(a) ~~Terminated~~intercompany ~~Plan,~~claims ~~each~~among of the Debtors, ~~entered~~(b) ~~into~~claims aand ~~Plan~~causes ~~Support~~of ~~Agreement~~actions ~~(Plan~~against ~~Support~~holders ~~Agreement)~~of ~~with,~~first ~~among~~lien ~~other~~claims ~~parties,~~against ~~various~~TCEH ofand ~~their~~the ~~respective~~agents ~~creditors,~~under the ~~Sponsor~~TCEH ~~Group~~Senior ~~and~~Secured ~~the~~Facilities, ~~official~~(c) ~~committee~~claims and causes of ~~TCEH~~action ~~unsecured~~against ~~creditors~~holders of interests in ~~order~~EFH toCorp. ~~effect~~and ancertain ~~agreed~~related ~~upon~~entities ~~restructuring~~and (d) claims and causes of ~~the~~action ~~Debtors~~against ~~pursuant~~each toof the ~~Terminated~~Debtors' ~~Plan~~current orand former directors, ~~upon~~the ~~certain~~Sponsor ~~events~~Group, anmanagers ~~Alternative~~and ~~Restructuring~~officers ~~(as~~and ~~defined~~other inrelated entities. Under the ~~Plan~~terms ~~Support~~of the Settlement Agreement), ~~pursuant~~TCEH towas ~~another~~granted ~~plan~~a of$700 ~~reorganization~~million unsecured claim against EFH Corp. ~~The~~This ~~Bankruptcy~~claim ~~Court~~remains ~~approved~~outstanding ~~the~~and ~~Debtors'~~is ~~entry~~subject ~~into~~to treatment under the Plan ~~Support~~of Reorganization as it relates to the EFH Debtors. The Bankruptcy Court approved the Settlement Agreement in ~~September~~December 2015.

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InMerger May 2016, certain first lien creditors of TCEH (the Required TCEH First Lien Creditors) delivered a Plan Support Termination Notice to the Debtors and the other parties to the Plan Support Agreement notifying such parties of the occurrence of a Plan Support Termination Event pursuant to the Plan Support Agreement. The delivery of the Plan Support Termination Notice caused the Terminated Plan to become null and void. The delivery of the Plan Support Termination Notice did not, subject to certain conditions, terminate the obligations under the Plan Support Agreement of certain of the parties thereto to support an Alternative Restructuring pursuant to another plan of reorganization such as the Plan of Reorganization (including as to be amended by the Amended Plan).Agreements

~~The~~In ~~parties'~~July ~~obligations~~2016, ~~with~~EFH ~~respect~~Corp. toand anEFIH ~~Alternative~~entered ~~Restructuring,~~into ~~which~~an ~~remain~~Agreement inand ~~effect~~Plan of Merger (~~including~~Merger Agreement) with ~~respect~~NEE toand ~~the~~a ~~Plan~~wholly-owned subsidiary of ~~Reorganization~~NEE (~~including~~Merger asSub). The toMerger beAgreement was amended byin September 2016. Pursuant to the ~~Amended~~Merger ~~Plan))~~Agreement, ~~may~~at bethe ~~terminated~~effective ~~upon~~time of the ~~occurrence~~Plan of ~~certain~~Reorganization ~~events~~as ~~described~~it inrelates to the ~~Plan~~EFH ~~Support~~Debtors, ~~Agreement. In~~NEE ~~addition,~~will ~~under~~acquire the ~~Plan~~EFH ~~Support~~Debtors ~~Agreement,~~(as ~~the~~reorganized) ~~supporting~~as ~~parties~~a ~~have~~result ~~committed~~of toa ~~support~~merger ~~the~~(EFH ~~inclusion~~Debtor ofMerger) ~~releases~~between ~~with~~EFH ~~respect~~Corp. toand ~~the~~Merger ~~claims~~Sub ~~described~~ in ~~the~~which ~~Settlement~~Merger ~~Agreement~~Sub ~~(described~~will ~~below)~~survive inas ~~the~~a ~~context~~wholly owned subsidiary of anNEE. The ~~alternative~~consideration ~~plan~~payable ~~(which~~by ~~would~~NEE ~~become~~pursuant ~~effective~~to ~~when~~the aMerger ~~plan~~Agreement consists of ~~reorganization~~cash ~~contemplating~~and anNEE ~~Alternative~~common ~~Restructuring,~~stock ~~such~~paid asto ~~the~~certain ~~Plan~~creditors of ~~Reorganization~~the ~~(including~~EFH asDebtors. The toMerger beAgreement ~~amended~~was approved by the ~~Amended~~Bankruptcy ~~Plan),~~Court ~~becomes~~in ~~effective)~~September 2016.

InThe ~~July~~Merger ~~2016~~Agreement contains representations and warranties and interim operating covenants that are customary for an agreement of this nature. The Merger Agreement also includes various conditions precedent to consummation of the transactions, including a condition that certain approvals and rulings are obtained, including from the ~~EFH~~PUCT, ~~Debtors~~the FERC and the IRS. NEE ~~entered~~will ~~into~~not abe ~~plan~~required ~~support~~to ~~agreement~~consummate (the EFH ~~Debtors~~Debtor ~~Plan~~Merger ~~Support~~if, among other items, the PUCT approval is obtained but with conditions, commitments or requirements that impose a Burdensome Condition (as defined in the Merger Agreement). In toOctober ~~effect~~2016, anNEE ~~agreed~~and ~~upon~~Oncor ~~restructuring~~filed ofa ~~the~~joint ~~EFH~~merger ~~Debtors~~approval ~~pursuant~~application towith the ~~Amended Plan~~PUCT. The ~~EFH~~PUCT ~~Debtors~~has ~~Plan~~up ~~Support~~to ~~Agreement~~180 ~~has~~days ~~not~~to ~~yet~~approve ~~been~~the ~~approved~~application. NEE's byand Merger Sub's obligations under the ~~Bankruptcy~~Merger ~~Court~~Agreement are not subject to any financing condition.

~~Settlement~~Following the approval of the Merger Agreement by the Bankruptcy Court and until confirmation of the Plan of Reorganization as it relates to the EFH Debtors by the Bankruptcy Court, EFH Corp. and EFIH may continue or have discussions or negotiations with respect to acquisition proposals for the EFH Debtors (a) with persons that were in active negotiation at the time of approval of the Merger Agreement by the Bankruptcy Court and (b) with persons that submit an unsolicited acquisition proposal that is, or is reasonably likely to lead to, a Superior Proposal (as defined in the Merger Agreement). If the Merger Agreement is terminated for certain reasons set forth therein and an alternative transaction is consummated by EFH Corp. or EFIH in which neither NEE nor any of its affiliates obtains direct or indirect ownership of approximately 80% of Oncor, then EFH Corp. and/or EFIH will be required to pay a termination fee of $275 million to NEE (though the allocation between EFH Corp. and EFIH of such fee is subject to a separate order of the Bankruptcy Court).

The Settling Parties entered into a settlement agreement (the Settlement Agreement) in August 2015 (as amended in September 2015) to compromise and settle, among other things (a) intercompany claims among the Debtors, (b) claims and causes of actions against holders of first lien claims against TCEH and the agents under the TCEH Senior Secured Facilities, (c) claims and causes of action against holders of interests in EFH Corp. and certain related entities and (d) claims and causes of action against each of the Debtors' current and former directors, the Sponsor Group, managers and officers and other related entities. The Bankruptcy Court approved the Settlement Agreement in December 2015. The Settlement Agreement remains effective, notwithstanding the termination of the Terminated Plan.

Merger Agreement

In July 2016, EFH Corp. and EFIH entered into an Agreement and Plan of Merger (Merger Agreement) with NEE and a wholly-owned subsidiary of NEE (Merger Sub). Pursuant to the Merger Agreement, at the effective time of the Amended Plan, NEE will acquire the EFH Debtors (as reorganized) as a result of a merger (EFH Debtor Merger) between EFH Corp. and Merger Sub in which Merger Sub will survive as a wholly owned subsidiary of NEE. The consideration payable by NEE pursuant to the Merger Agreement consists primarily of cash paid to certain creditors. A portion of the consideration to be distributed to certain holders of allowed claims and interests in EFH Corp. and EFIH as set forth in the Amended Plan will consist of common stock of NEE.

The Merger Agreement contains representations and warranties and interim operating covenants that are customary for an agreement of this nature. The Merger Agreement also includes various conditions precedent to consummation of the transactions, including (a) a condition that certain approvals and rulings be obtained, including from the PUCT and the IRS and (b) a condition that the Reorganized TCEH Spin-Off shall have occurred. NEE will not be required to consummate the EFH Debtor Merger if, among other items, the PUCT approval is obtained but with conditions, commitments or requirements that impose a Burdensome Condition (as defined in the Merger Agreement). NEE's and Merger Sub's obligations under the Merger Agreement are not subject to any financing condition.

Prior to approval of the Merger Agreement by the Bankruptcy Court, EFH Corp. and EFIH may continue to solicit acquisition proposals with respect to the EFH Debtors. In addition, following approval of the Merger Agreement by the Bankruptcy Court and until confirmation of the Amended Plan by the Bankruptcy Court, EFH Corp. and EFIH may continue or have discussions or negotiations with respect to acquisition proposals for the EFH Debtors (a) with persons that were in active negotiation at the time of approval of the Merger Agreement by the Bankruptcy Court and (b) with persons that submit an unsolicited acquisition proposal that is, or is reasonably likely to lead to, a Superior Proposal (as defined in the Merger Agreement).

The Merger Agreement may be terminated upon certain events, including, among other things:


•	by either party, if the EFH Debtor Merger is not consummated by March 26, 2017, subject to a 90-day extension under certain conditions, or

•

by EFH Corp. or EFIH, until the entry of the confirmation order of the Plan of Reorganization with respect to the EFH Debtors, if their respective board of directors or managers determines, after consultation with its independent financial advisors and outside legal counsel, and based on advice of such counsel, that the failure to terminate the Merger Agreement is inconsistent with its fiduciary duties; provided that a material breach of EFH Corp.'s or EFIH’s obligations under certain provisions of the Merger Agreement has not provided the basis for such determination.

In October 2016, an affiliate of NEE entered into an Agreement and Plan of Merger (the TTI Merger Agreement) with Texas Transmission and certain of its affiliates to purchase Texas Transmission's 19.75% interest in Oncor for approximately $2.4 billion. The TTI Merger Agreement contains various conditions precedent to consummation of the transactions contemplated thereby. In connection with the TTI Merger Agreement and subject to Bankruptcy Court approval, EFH Corp. waived its rights of first refusal to purchase (as set forth in an Investor Rights Agreement, dated November 5, 2008, by and among Oncor, Oncor Holdings, TTI and EFH Corp.) Texas Transmission's 19.75% interest in Oncor. So long as such waiver is in effect, NEE has agreed not to consummate the transactions contemplated by the TTI Merger Agreement prior to the consummation of the transactions contemplated by the Merger Agreement.

In October 2016, an affiliate of NEE entered into an Interest Purchase Agreement (the Oncor Purchase Agreement) with Oncor and Oncor Management Investment LLC, an entity that owns approximately 0.22% interest in Oncor on behalf of certain members of Oncor's current and former management, for approximately $27 million. The Oncor Purchase Agreement contains various conditions precedent to consummation of the transactions contemplated thereby, including the consummation of the transactions contemplated by the Merger Agreement.

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• by EFH Corp. or EFIH, until the entry of the confirmation order of the Amended Plan with respect to the EFH Debtors, if their respective board of directors or managers determines, after consultation with its independent financial advisors and outside legal counsel, and based on advice of such counsel, that the failure to terminate the Merger Agreement is inconsistent with its fiduciary duties; provided that a material breach of EFH Corp.'s or EFIH’s obligations under certain provisions of the Merger Agreement has not provided the basis for such determination.

Following approval of the Merger Agreement by the Bankruptcy Court, if the Merger Agreement is terminated for certain reasons set forth therein and an alternative transaction is consummated by EFH Corp. or EFIH in which neither NEE nor any of its affiliates obtains direct or indirect ownership of approximately 80% of Oncor, then EFH Corp. and EFIH will pay a termination fee of $275 million to NEE.

EFH Corp.'s and EFIH’s respective obligations under the Merger Agreement are subject in all respects to the prior approval of the Bankruptcy Court. Under the terms of the EFH Debtors Plan Support Agreement, the EFH Debtors will seek Bankruptcy Court approval of the Merger Agreement.

Regulatory Approvals

In May 2016, the TCEH Debtors received approval from the NRC with respect to the change of control application contemplated by the Plan of Reorganization as it relates to the emergence of the TCEH Debtors (and the EFH Contributed Debtors). In July 2016, the TCEH Debtors submitted an application to the RCT to request to substitute and replace the TCEH Debtors' existing mine reclamation performance collateral bond with a similar collateral bond in connection with the refinancing of the TCEH DIP Facility and the TCEH Debtors' proposed exit financing facility. We expect the RCT to complete its review and take action on the application in the third quarter of 2016.

The consummation of the transactions contemplated by the Merger Agreement with respect to the EFH Debtors requires the prior approval of, among others, the PUCT and the FERC.

Scheduling Matters

In May 2016, the Bankruptcy Court entered an order establishing a timeline for approval of a disclosure statement and a hearing to consider confirmation of the Plan of Reorganization as it applies to the ~~TCEH Debtors and the Contributed~~ EFH Debtors,. In ~~and,~~September ~~separately~~2016, ~~establishing~~the aBankruptcy ~~timeline~~Court ~~for~~approved ~~approval of a disclosure statement and a hearing to consider confirmation of~~ the ~~Plan~~Disclosure ofStatement ~~Reorganization~~ as it ~~applies~~relates to the ~~remaining~~ EFH Debtors. ~~Pursuant~~The toBankruptcy ~~such~~Court ~~scheduling order, solely as it pertains to the TCEH Debtors and the Contributed EFH Debtors, the Disclosure Statement~~ has ~~been~~scheduled ~~approved by~~ the ~~Bankruptcy Court, and the~~ confirmation hearing for the Plan of Reorganization isas ~~scheduled~~it relates to ~~commence~~the onEFH ~~August~~Debtors ~~17,~~in December 2016. InThe ~~June~~timelines ~~2016,~~set ~~the~~forth ~~Bankruptcy~~in ~~Court~~the ~~entered~~scheduling aorder ~~supplement~~are subject to ~~its~~further ~~May~~revision ~~2016~~by ~~order adjourning~~ the ~~schedule~~Bankruptcy ~~solely~~Court ~~with~~and ~~respect~~may tochange ~~the~~based ~~EFH~~on ~~Debtors'~~subsequent ~~schedule. We~~orders ~~expect~~entered ~~that~~by the Bankruptcy Court ~~will~~(on ~~set~~its aown, ~~revised~~upon ~~schedule~~the ~~relating~~motion toof ~~the~~a ~~EFH~~party, ~~Debtors~~or ~~beginning~~upon in the ~~third~~EFH ~~quarter~~Debtors' ~~of 2016~~request).

The timelines set forth in the scheduling order are subject to further revision by the Bankruptcy Court and may change based on subsequent orders entered by the Bankruptcy Court (on its own, upon the motion of a party, or upon the Debtors' request).

Tax Matters

In ~~June~~July ~~2014~~2016, ~~EFH~~we ~~Corp.~~received ~~filed~~ a ~~request with the IRS for a~~ private letter ruling, ~~which request has been supplemented from time to time in response to requests from the IRS for information or as required by changes in the contemplated transactions~~ (~~as supplemented,~~ the Private Letter Ruling)~~. In~~ ~~July~~from ~~2016, we received~~ the ~~Private Letter Ruling~~IRS. It provides, among other things, for certain rulings regarding the qualification of (a) the transfer of certain assets and ordinary course operating liabilities to Reorganized TCEH and (b) the distribution of the equity of Reorganized TCEH, the cash proceeds from Reorganized TCEH debt, if any, the cash proceeds from the sale of preferred stock in a newly-formed ~~entity~~subsidiary of Reorganized TCEH, and the right to receive payments under a tax receivables agreement ~~(if any)~~, to holders of TCEH first lien claims, as a reorganization qualifying for tax-free treatment to the extent of the Reorganized TCEH stock received. In addition to the Private Letter Ruling, we are pursuing and expect to receive the required tax opinions that will supplement the Private Letter Ruling, as required by the Plan of Reorganization with respect to the TCEH Debtors.

8The Merger Agreement provides that a closing condition to the EFH Debtor Merger is the receipt of a supplemental private letter ruling (the Supplemental Ruling) from the IRS regarding the impact of the EFH Debtor Merger on certain rulings received in the Private Letter Ruling. We expect to submit a request to the IRS for the Supplemental Ruling in the fourth quarter of 2016.

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The Merger Agreement provides that a closing condition to the EFH Debtor Merger is the receipt of a supplemental private letter ruling (the Supplemental Ruling) from the IRS regarding the impact of the EFH Debtor Merger on certain rulings received in the Private Letter Ruling. We expect to submit a request to the IRS for the Supplemental Ruling during 2016 as the transaction and bankruptcy process progresses. The Supplemental Ruling is only required for the consummation of the transactions contemplated by the EFH Debtor Merger and not for the emergence of the TCEH Debtors (and the Contributed EFH Debtors) as contemplated by the Plan of Reorganization.

Implications of the Chapter 11 Cases

Our ability to continue as a going concern is contingent upon, among other factors, our ability to comply with the financial and other covenants contained in the EFIH DIP ~~Facilities~~Facility described in Note 10, our ability to obtain new debtor in possession financing in the event the EFIH DIP ~~Facilities~~Facility were to expire during the pendency of the Chapter 11 Cases, our ability to complete a Chapter 11 plan of reorganization in a timely manner, including obtaining creditor and Bankruptcy Court approval of such plan, obtaining applicable regulatory approvals required for such plan and our ability to obtain any exit financing needed to implement such plan. These circumstances and uncertainties inherent in the bankruptcy proceedings raise substantial doubt about our ability to continue as a going concern.

Pre-Petition Claims

Holders of the substantial majority of pre-petition claims against the Debtors were required to file proofs of claims by the bar date established by the Bankruptcy Court. A bar date is the date by which certain claims against the Debtors must be filed if the claimants wish to receive any distribution in the Chapter 11 Cases. The Bankruptcy Court established a bar date of October 27, 2014 for the substantial majority of claims. In addition, in July 2015, the Bankruptcy Court entered an order establishing December 14, 2015 as the bar date for certain asbestos claims that arose or are deemed to have arisen before the Petition Date, except for certain specifically exempt claims.

Since the Petition Date and prior to the applicable bar dates (which have expired), wethe ~~have~~Debtors received approximately 41,300 filed pre-petition claims, including approximately 30,900 in filed asbestos claims. We have substantially completed the process of reconciling all non-asbestos claims that were filed and have recorded such claims at the expected allowed amount. As of ~~August~~November 21, 2016, approximately 5,700 of those claims have been settled, withdrawn or expunged. We continue to work with creditors regarding ~~certain~~unsettled ~~non-asbestos~~ claims to determine the ultimate amount of the allowed claims. Differences between those final allowed claims and the liabilities recorded in the condensed consolidated balance sheets will be recognized as reorganization items in our condensed statements of consolidated income (loss) as they are resolved. The resolution of such claims could result in material adjustments to our financial statements.

~~Certain~~In ~~claims~~September ~~filed~~and orOctober ~~reflected~~2016, inthe ~~our~~Debtors ~~schedules~~filed ofwith ~~assets~~the ~~and~~Bankruptcy ~~liabilities~~Court ~~will~~reports bedeveloped ~~resolved~~by onindependent ~~the~~experts ~~applicable~~that ~~effective~~provide ~~date~~analysis ofand ~~the~~estimation ~~applicable~~of ~~plan~~potential ofliabilities ~~reorganization,~~associated ~~including~~with ~~certain~~asbestos-related claims. In ~~filed~~connection bywith ~~holders~~developing ofthose ~~funded~~reports, ~~debt~~we ~~and~~recorded ~~contract~~an ~~counterparties. Claims~~adjustment ~~that~~to ~~remain~~our ~~unresolved~~estimated orliability ~~unreconciled~~associated ~~through~~with ~~the~~those ~~filing~~claims ofduring ~~this~~the ~~report~~three ~~have~~months ~~been~~ended ~~estimated~~September ~~based~~30, ~~upon~~2016 ~~management's~~(see ~~best~~Note ~~estimate~~18). That ofestimated ~~the~~liability ~~likely~~is ~~claim~~subject ~~amounts~~to ~~that~~revisions, ~~the~~which ~~Bankruptcy~~may ~~Court~~be ~~will~~material, ~~ultimately~~as ~~allow~~further information arises.

~~Separation of the EFH Debtors and the TCEH Debtors~~8

~~Upon~~Table ~~the effective date~~ of the Plan of Reorganization as it relates to the TCEH Debtors (and the EFH Contributed Debtors), the EFH Debtors and the TCEH Debtors (together with the EFH Contributed Debtors) will be separated and no longer be affiliated companies. In addition to the plan of reorganization, the separation will be effectuated by a separation agreement, a transition services agreement and a tax matters agreement. A proposed form of each of these agreements was filed with the Bankruptcy Court by the Debtors in July 2016. These agreements must be approved by the Bankruptcy Court and, as a result, are subject to change.Contents

~~Unaudited~~Certain ~~Condensed~~claims ~~Combined~~filed ~~Debtor~~or ~~Financial~~reflected ~~Statements~~in our schedules of assets and liabilities will be resolved on the applicable effective dates of the applicable plan of reorganization, including certain claims filed by holders of funded debt and contract counterparties. Claims that remain unresolved or unreconciled through the filing of this report have been estimated based upon management's best estimate of the likely claim amounts that the Bankruptcy Court will ultimately allow.

~~The~~On ~~condensed combined financial statements presented below represent~~ the ~~financial~~Effective ~~statements of the Debtors. EFH Corp.'s non-Debtor subsidiaries~~Date, ~~excluding~~ the ~~Oncor~~TCEH ~~Ring-Fenced~~Debtors ~~Entities,~~(together ~~which~~with ~~are substantively comprised of~~ the ~~recently~~Contributed ~~acquired~~EFH Lamar and Forney generation assets, are accounted for as non-consolidated subsidiaries in these financial statements, and their net income is included in equity in earnings of non-debtor entities (net of taxDebtors) inemerged ~~these~~from ~~condensed~~the ~~statements~~Chapter of11 ~~combined~~Cases ~~loss~~ and ~~investment~~discharged inapproximately ~~non-debtor~~$33.7 ~~entities~~billion in ~~these~~LSTC. Distributions ~~condensed~~for ~~combined~~the ~~balance~~settled ~~sheets. Intercompany~~claims ~~items~~related ~~and~~to ~~transactions~~the ~~among~~funded ~~the~~debt TCEH Debtors have ~~been~~commenced ~~eliminated~~subsequent into ~~consolidation~~the inEffective ~~these financial statements~~Date.

Separation of the EFH Debtors from the TCEH Debtors and the Contributed EFH Debtors

Upon the Effective Date of the Plan of Reorganization as it relates to the TCEH Debtors and the Contributed EFH Debtors, the EFH Debtors and the TCEH Debtors (together with the Contributed EFH Debtors) were separated and are no longer affiliated companies. In addition to the Plan of Reorganization, the separation was effectuated, in part, pursuant to the terms of a separation agreement, a transition services agreement and a tax matters agreement.

Separation Agreement

On the Effective Date, EFH Corp., Reorganized TCEH and a subsidiary of Reorganized TCEH entered into a separation agreement that provides for, among other things, the transfer of certain assets and liabilities by EFH Corp., EFCH and TCEH to Reorganized TCEH. Among other things, EFH Corp., EFCH and/or TCEH, as applicable, (1) transferred the TCEH Debtors and certain contracts and assets (and related liabilities) primarily related to the business of the TCEH Debtors to Reorganized TCEH, (2) transferred sponsorship of certain employee benefit plans (including related assets), programs and policies to a subsidiary of Reorganized TCEH and (3) assigned certain employment agreements from EFH Corp. and certain of the Contributed EFH Debtors to a subsidiary of Reorganized TCEH.

Transition Services Agreement

On the Effective Date, EFH Corp. and a subsidiary of Reorganized TCEH entered into a transition services agreement that provides for, among other things, (1) the applicable subsidiaries of Reorganized TCEH to provide certain services to the EFH Debtors, including business services administration, accounting, corporate secretary, tax, human resources, information technology, internal audit and SOX compliance, physical facilities and corporate security, treasury and legal services and (2) EFH Corp. to pay such subsidiary of Reorganized TCEH all reasonable and documented fees, costs and expenses (including employee-related overhead and general and administrative expenses) incurred by Reorganized TCEH and its subsidiaries related directly to these services.

Tax Matters Agreement

On the Effective Date, Reorganized TCEH and EFH Corp. entered into a tax matters agreement whereby the parties agreed to take certain actions and refrain from taking certain actions to preserve the intended tax treatment of the tax-free spin-off of Reorganized TCEH from EFH Corp. The Tax Matters Agreement includes limitations on certain actions of Reorganized TCEH, EFH Corp. and EFIH in order to preserve the tax-free nature of the TCEH spin-off, as well as certain indemnification obligations in the event the reorganization fails to be treated as a tax-free transaction (a) as a result of the breach of any covenants in the Tax Matters Agreement or (b) under "no-fault" circumstances. In the event any indemnification obligations are triggered, the party owing the obligation would likely be materially and adversely affected. Additionally, the covenants and other limitations with respect to the Tax Matters Agreement may limit the ability of Reorganized TCEH, EFH Corp. and/or EFIH to undertake certain transactions that may otherwise be value-maximizing.

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Unaudited Condensed ~~statements~~Combined ofDebtor ~~combined~~Financial ~~loss of the Debtors for the three and six months ended June 30, 2016 and 2015 are presented below:~~Statements

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating revenues	$	1,234		$	1,256		$	2,283		$	2,527
Fuel, purchased power costs and delivery fees	(677		)	(646		)	(1,230		)	(1,259		)
Net gain (loss) from commodity hedging and trading activities	(117		)	20			(53		)	123
Operating costs	(239		)	(223		)	(462		)	(421		)
Depreciation and amortization	(137		)	(219		)	(274		)	(433		)
Selling, general and administrative expenses	(156		)	(175		)	(312		)	(352		)
Impairment of goodwill	—			—			—			(700		)
Impairment of long-lived assets	—			—			—			(676		)
Other income (deductions) and interest income	(13		)	2			(29		)	(52		)
Interest expense and related charges	(401		)	(379		)	(798		)	(987		)
Reorganization items	(52		)	(68		)	(122		)	(207		)
Loss before income taxes and equity in earnings of non-debtor entities	(558		)	(432		)	(997		)	(2,437		)
Income tax benefit	161			140			289			545
Equity in earnings of non-debtor entities (net of tax)	67			80			129			153
Net loss	$	(330	)	$	(212	)	$	(579	)	$	(1,739	)

The condensed combined financial statements presented below represent the financial statements of the Debtors. EFH Corp.'s non-Debtor subsidiaries, excluding the Oncor Ring-Fenced Entities, which are substantively comprised of the recently acquired Lamar and Forney generation assets, are accounted for as non-consolidated subsidiaries in these financial statements, and their net income is included in equity in earnings of non-debtor entities (net of tax) in these condensed statements of combined loss and investment in non-debtor entities in these condensed combined balance sheets. Intercompany items and transactions among the Debtors have been eliminated in consolidation in these financial statements.

Condensed statements of combined ~~comprehensive~~income (loss) of the Debtors for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 are presented below:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net loss	$	(330	)	$	(212	)	$	(579	)	$	(1,739	)
Operating revenues	$	1,690		$	1,737		$	3,973		$	4,265
Other comprehensive loss (net of tax)	—			—			(1		)	—
Fuel, purchased power costs and delivery fees	(913		)	(831		)	(2,143		)	(2,090		)
Comprehensive loss	$	(330	)	$	(212	)	$	(580	)	$	(1,739	)
Net gain from commodity hedging and trading activities	153			103			101			226
Operating costs	(184		)	(194		)	(646		)	(615		)
Depreciation and amortization	(133		)	(200		)	(407		)	(633		)
Selling, general and administrative expenses	(169		)	(190		)	(481		)	(542		)
Impairment of goodwill	—			(700		)	—			(1,400		)
Impairment of long-lived assets	—			(1,295		)	—			(1,971		)
Other income (deductions) and interest income	(31		)	(18		)	(61		)	(70		)
Interest expense and related charges	(434		)	(385		)	(1,231		)	(1,372		)
Reorganization items	(84		)	(68		)	(206		)	(275		)
Loss before income taxes and equity in earnings of non-debtor entities	(105		)	(2,041		)	(1,101		)	(4,477		)
Income tax benefit	24			453			312			997
Equity in earnings of non-debtor entities (net of tax)	247			128			376			281
Net income (loss)	$	166		$	(1,460	)	$	(413	)	$	(3,199	)

Condensed statements of combined comprehensive income (loss) of the Debtors for the three and nine months ended September 30, 2016 and 2015 are presented below:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income (loss)	$	166		$	(1,460	)	$	(413	)	$	(3,199	)
Other comprehensive loss (net of tax)	(1		)	—			(2		)	—
Comprehensive income (loss)	$	165		$	(1,460	)	$	(415	)	$	(3,199	)

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Condensed statements of combined cash flows of the Debtors for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 are presented below:

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Cash used in operating activities	$	(~~545~~482	)	$	(~~574~~137	)
Cash flows — financing activities:
Borrowings under TCEH DIP Revolving Credit Facility	1,115			—
Borrowings under TCEH DIP Roll Facilities and TCEH DIP Revolving Credit Facility	4,680			—
Repayments/repurchases of debt	(10		)	(451		)
TCEH DIP Roll Facilities financing fees	(112		)	—
Repayments/repurchases of debt	(2,686		)	(453		)
Advances from non-debtor affiliates	97			—
Fees paid on EFIH Second Lien Notes repayment and EFIH DIP Facility	(14		)	(28		)
Cash provided by (used in) financing activities	1,~~091~~965			(~~479~~481		)
Cash flows — investing activities:
Advances to non-debtor affiliates	(126		)	(68		)
Investment in non-debtor affiliates	(1,~~338~~325		)	—
Capital expenditures	(~~136~~189		)	(~~195~~261		)
Nuclear fuel purchases	(1133		)	(1177		)
Proceeds from sales of nuclear decommissioning trust fund securities	~~155~~201			73315
Investments in nuclear decommissioning trust fund securities	(~~163~~215		)	(81328		)
Other, net	(4		)	(5		)
Changes in restricted cash	365			33
Cash used in investing activities	(1,509		)	(225		)
Other, net	8			2
Net change in cash and cash equivalents	(963		)	(1,278		)
Cash used in investing activities	(1,194		)	(324		)
Net change in cash and cash equivalents	289			(942		)
Cash and cash equivalents — beginning balance	2,258			3,417
Cash and cash equivalents — ending balance	$	12,~~295~~547		$	2,~~139~~475

Condensed combined balance sheets of the Debtors at June 30, 2016 and December 31, 2015 are presented below:

	June 30, 2016			December 31, 2015
ASSETS
Total current assets	$	3,491		$	4,443
Restricted cash	507			507
Advances to non-debtor entities	115			115
Investment in non-debtor entities	7,529			6,147
Other investments	1,032			984
Property, plant and equipment — net	9,080			9,287
Goodwill	152			152
Identifiable intangible assets — net	1,146			1,170
Commodity and other derivative contractual assets	12			10
Accumulated deferred income taxes	702			424
Other noncurrent assets	48			39
Total assets	$	23,814		$	23,278
LIABILITIES AND EQUITY
Total current liabilities	$	9,537		$	8,496
Long-term debt, less amounts due currently	19			23
Liabilities subject to compromise	37,788			37,786
Commodity and other derivative contractual liabilities	20			1
Other noncurrent liabilities and deferred credits	2,091			2,033
Total liabilities	49,455			48,339
Total equity	(25,641		)	(25,061		)
Total liabilities and equity	$	23,814		$	23,278

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Condensed combined balance sheets of the Debtors at September 30, 2016 and December 31, 2015 are presented below:



	September 30, 2016			December 31, 2015
ASSETS
Total current assets	$	4,153		$	4,443
Restricted cash	650			507
Advances to non-debtor entities	115			115
Investment in non-debtor entities	7,720			6,147
Other investments	1,061			984
Property, plant and equipment — net	8,988			9,287
Goodwill	152			152
Identifiable intangible assets — net	1,133			1,170
Commodity and other derivative contractual assets	29			10
Accumulated deferred income taxes	679			424
Other noncurrent assets	58			39
Total assets	$	24,738		$	23,278
LIABILITIES AND EQUITY
Total current liabilities	$	6,923		$	8,496
Borrowings under debtor-in-possession credit facility	3,387			—
Long-term debt, less amounts due currently	—			23
Liabilities subject to compromise	37,815			37,786
Commodity and other derivative contractual liabilities	4			1
Other noncurrent liabilities and deferred credits	2,085			2,033
Total liabilities	50,214			48,339
Total equity	(25,476		)	(25,061		)
Total liabilities and equity	$	24,738		$	23,278


3.	LAMAR AND FORNEY ACQUISITION

In April 2016, Luminant purchased all of the membership interests in La Frontera Holdings, LLC (La Frontera), the indirect owner of two combined-cycle gas turbine (CCGT) natural gas fueled generation facilities representing nearly 3,000 MW of capacity located in ERCOT, from a subsidiary of NextEra Energy, Inc. (the Lamar and Forney Acquisition). The facility in Forney, Texas has a capacity of 1,912 MW and the facility in Paris, Texas has a capacity of 1,076 MW. The acquisition ~~continues~~diversified toTCEH's ~~diversify our~~ fuel mix and ~~increases~~increased the dispatch flexibility in ~~our~~its fleet. The aggregate purchase price was approximately $1.313 billion, which included the repayment of approximately $950 million of existing project financing indebtedness of La Frontera at closing, plus approximately $~~240~~236 million for cash and net working capital ~~subject to final settlement~~. The purchase price was funded by cash-on-hand and additional borrowings under the TCEH DIP Facility totaling $1.1 billion. After completing the acquisition, we repaid approximately $230 million of borrowings under the TCEH DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. La Frontera and its subsidiaries ~~are~~were subsidiary guarantors under the TCEH DIP ~~Facility~~Roll Facilities and, on the Effective Date, became subsidiary guarantors under the senior secured exit facilities (see Note 10).

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Purchase Accounting

The Lamar and Forney Acquisition has been accounted for in accordance with ASC 805, Business Combinations (ASC 805), with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. ~~The~~ related purchase agreement contains a traditional working capital adjustment that is still being finalized, and as a result our purchase price allocation is not yet complete and is considered to be provisional at this time. The provisional amounts recognized are subject to revision until our valuations are completed, not to exceed one year, and any material adjustments identified that existed as of the acquisition date will be recognized in the current period. We expect the working capital adjustment to be finalized in the third quarter of 2016.

To fair value the acquired property, plant and equipment, we used a discounted cash flow analysis, classified as Level 3 within the fair value hierarchy levels (see Note 14). This discounted cash flow model was created for each generation facility based on its remaining useful life. The discounted cash flow model included gross margin forecasts for each power generation facility determined using forward commodity market prices obtained from long-term forecasts. We also used management's forecasts of generation output, operations and maintenance expense, SG&A and capital expenditures. The resulting cash flows, estimated based upon the age of the assets, efficiency, location and useful life, were then discounted using plant specific discount rates of approximately 9%.

The following table summarizes the consideration paid and the preliminary allocation of the purchase price to the fair value amounts recognized for the assets acquired and liabilities assumed related to the Lamar and Forney Acquisition as of the acquisition date. ~~The~~During the three months ended September 30, 2016, the working capital adjustment included in the purchase price ~~allocation~~was isfinalized ~~subject~~between tothe ~~change~~parties, ~~based~~and onthe ~~final~~purchase ~~working~~price ~~capital~~allocation ~~adjustments~~was completed.

Cash paid to seller at close	$	603
Preliminary net working capital adjustments	(8		)
Net working capital adjustments	(4		)
Consideration paid to seller	~~595~~599
Cash paid to repay project financing at close	950
Total cash paid related to acquisition	$	1,~~545~~549
Cash and cash equivalents	$	210
Property, plant and equipment — net	1,316
Commodity and other derivative contractual assets	47
Other assets	44
Total assets acquired	1,617
Commodity and other derivative contractual liabilities	53
Trade accounts payable and other liabilities	1915
Total liabilities assumed	7268
Identifiable net assets acquired	$	1,~~545~~549

The Lamar and Forney Acquisition did not result in the recording of goodwill since the purchase price did not exceed the fair value of the net assets acquired.

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Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 assumes that the Lamar and Forney Acquisition occurred on January 1, 2015. The unaudited pro forma financial information is provided for information purposes only and is not necessarily indicative of the results of operations that would have occurred had the Lamar and Forney Acquisition been completed on January 1, 2015, nor are they indicative of future results of operations.

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Revenues	$	24,~~425~~116		$	34,~~044~~942
Net income (loss)	$	(~~594~~429	)	$	(13,~~651~~141	)

The unaudited pro forma financial information includes adjustments for incremental depreciation as a result of the fair value determination of the net assets acquired and interest expense on borrowings under the TCEH DIP ~~Facility~~Roll Facilities in lieu of interest expense incurred prior to the acquisition.

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4.	VARIABLE INTEREST ENTITIES

A variable interest entity (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. Accounting standards require consolidation of 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 (i.e., we are the primary beneficiary of the VIE). In determining the appropriateness of consolidation of a VIE, we evaluate its purpose, governance structure, decision making processes and risks that are passed on to its interest holders. We also examine the nature of any related party relationships among the interest holders of the VIE and the nature of any special rights granted to the interest holders of the VIE.

Oncor Holdings, an indirect wholly owned subsidiary of EFH Corp. that holds an approximate 80% interest in Oncor, is not consolidated in EFH Corp.'s financial statements, and instead is accounted for as an equity method investment, because the structural and operational ring-fencing measures discussed in Note 1 prevent us from having power to direct the significant activities of Oncor Holdings or Oncor. In accordance with accounting standards, we account for our investment in Oncor Holdings under the equity method, as opposed to the cost method, based on our level of influence over its activities. See below for additional information about our equity method investment in Oncor Holdings. There are no other material investments accounted for under the equity or cost method. The maximum exposure to loss from our interests in VIEs does not exceed our carrying value.

Non-Consolidation of Oncor and Oncor Holdings

Our investment in unconsolidated subsidiary as presented in the condensed consolidated balance sheets totaled $6.~~125~~204 billion and $6.064 billion at ~~June~~September 30, 2016 and December 31, 2015, respectively, and consists almost entirely of our interest in Oncor Holdings, which we account for under the equity method as described above. Oncor provides services, principally electricity distribution, to TCEH's retail operations, and the related revenues represented 2324% and 2425% of Oncor Holdings' consolidated operating revenues for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively.

See Note 16 for discussion of Oncor Holdings' and Oncor's transactions with EFH Corp. and its other subsidiaries.

Distributions from Oncor Holdings and Related Considerations — Oncor Holdings' distributions of earnings to us totaled $86135 million and $~~120~~206 million for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively. Distributions may not be paid except to the extent Oncor maintains a required regulatory capital structure as discussed below. At ~~June~~September 30, 2016, $9869 million was eligible to be distributed to Oncor's members after taking into account the regulatory capital structure limit, of which approximately 80% relates to our ownership interest in Oncor. The boards of directors of each of Oncor and Oncor Holdings can withhold distributions to the extent the applicable board determines in good faith that it is necessary to retain such amounts to meet expected future requirements of Oncor and/or Oncor Holdings.

Oncor's distributions are limited by its regulatory capital structure, which is required 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 ~~June~~September 30, 2016, Oncor's regulatory capitalization ratio was 59.46% debt to 40.64% equity. 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. Equity is calculated as membership interests determined in accordance with US GAAP, excluding the effects of accounting for the Merger (which included recording the initial goodwill and fair value adjustments and the subsequent related impairments and amortization).

EFH Corp., Oncor Holdings, Oncor and Oncor's minority investor are parties to a Federal and State Income Tax Allocation Agreement. Additional income tax amounts receivable or payable may arise in the normal course under that agreement.

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Oncor Holdings Financial Statements — Condensed statements of consolidated income of Oncor Holdings and its subsidiaries for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 are presented below:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Operating revenues	$	~~948~~1,071		$	~~938~~1,072		$	12,~~891~~962		$	12,~~884~~957
Operation and maintenance expenses	(~~389~~414		)	(~~367~~387		)	(~~791~~1,206		)	(~~746~~1,134		)
Depreciation and amortization	(~~193~~190		)	(~~220~~217		)	(~~403~~593		)	(~~437~~653		)
Taxes other than income taxes	(~~107~~118		)	(~~108~~116		)	(~~220~~338		)	(~~220~~336		)
Other income and (deductions) — net	(3		)	(69		)	(811		)	(717		)
Interest expense and related charges	(8485		)	(84		)	(~~168~~252		)	(~~165~~250		)
Income before income taxes	~~172~~261			~~153~~259			~~301~~562			~~309~~567
Income tax expense	(65101		)	(5899		)	(~~116~~217		)	(~~119~~217		)
Net income	~~107~~160			95160			~~185~~345			~~190~~350
Net income attributable to noncontrolling interests	(2233		)	(2033		)	(3871		)	(3972		)
Net income attributable to Oncor Holdings	$	85127		$	75127		$	~~147~~274		$	~~151~~278

Assets and liabilities of Oncor Holdings at ~~June~~September 30, 2016 and December 31, 2015 are presented below:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	225	$	26
Restricted cash	—		38
Trade accounts receivable — net	~~407~~450		388
Trade accounts and other receivables from affiliates	~~124~~146		118
Income taxes receivable from EFH Corp.	9079		107
Inventories	9591		82
Prepayments and other current assets	9897		88
Total current assets	~~816~~888		847
Other investments	99102		97
Property, plant and equipment — net	13,~~439~~617		13,024
Goodwill	4,064		4,064
Regulatory assets — net	1,~~184~~114		1,194
Other noncurrent assets	4541		31
Total assets	$	19,~~647~~826	$	19,257
LIABILITIES
Current liabilities:
Short-term borrowings	$	~~1,133~~880	$	840
Long-term debt due currently	—324		41
Trade accounts payable — nonaffiliates	~~213~~205		150
Income taxes payable to EFH Corp.	1115		20
Accrued taxes other than income	~~106~~156		181
Accrued interest	8269		82
Other current liabilities	~~117~~139		144
Total current liabilities	1,~~662~~788		1,458
Accumulated deferred income taxes	2,~~039~~096		1,985
Long-term debt, less amounts due currently	5,~~650~~513		5,646
Other noncurrent liabilities and deferred credits	2,~~326~~338		2,306
Total liabilities	$	11,~~677~~735	$	11,395

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5.	GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Goodwill

The following table provides information regarding our goodwill balance, all of which relates to the Competitive Electric segment and arose in connection with accounting for the Merger. None of the goodwill is being deducted for tax purposes.

Goodwill before impairment charges	$	18,342
Accumulated noncash impairment charges	(18,190		)
Balance at June 30, 2016 and December 31, 2015	152
Balance at September 30, 2016 and December 31, 2015	152

Goodwill Impairments

Goodwill and intangible assets with indefinite useful lives are required to be tested for impairment at least annually (we have selected a December 1 test date) or whenever events or changes in circumstances indicate an impairment may exist.

During the three months ended September 30, 2015 and March 31, 2015, we experienced an impairment ~~indicator~~indicators related to decreases in forward wholesale electricity prices when compared to those prices reflected in our ~~December 1, 2014~~ goodwill impairment testing analysis as of March 31, 2015 and December 1, 2014, respectively. As a result, the likelihood of a goodwill ~~impairment~~impairments had increased, and we initiated further testing of goodwill. ~~Our~~During ~~testing~~the ofthree ~~goodwill~~and ~~for~~nine ~~impairment~~months asended September 30, 2015, our testing of ~~March~~goodwill ~~31,~~for ~~2015~~impairment resulted in an impairment ~~charge~~charges totaling $700 million and $1.4 billion, respectively, which we reported in the Competitive Electric segment results.

Identifiable Intangible Assets

Identifiable intangible assets, including amounts that arose in connection with accounting for the Merger, are comprised of the following:

	June 30, 2016						December 31, 2015
	September 30, 2016						December 31, 2015
Identifiable Intangible Asset	GrossCarryingAmount		AccumulatedAmortization		Net		GrossCarryingAmount		AccumulatedAmortization		Net
Retail customer relationship	$	463	$	~~448~~451	$	1512	$	463	$	442	$	21
Capitalized in-service software	~~378~~384		~~237~~250		~~141~~134		362		214		148
Other identifiable intangible assets (a)	53		1821		3532		72		35		37
Total identifiable intangible assets subject to amortization	$	894	$	703	191		$	897	$	691	206
Total identifiable intangible assets subject to amortization (b)	$	900	$	722	178		$	897	$	691	206
Retail trade name (not subject to amortization)					955						955
Mineral interests (not currently subject to amortization)					5						5
Total identifiable intangible assets					$	1,~~151~~138					$	1,166

____________

(a) Includes favorable purchase and sales contracts, environmental allowances and credits and mining development costs. See discussion below regarding impairment charges recorded in the ~~six~~nine months ended ~~June~~September 30, 2015 related to other identifiable intangible assets.

At(b) ~~June 30,~~Amounts ~~2016 and December 31, 2015, amounts~~ related to fully amortized assets that are expired, or of no economic value, have been excluded from both the gross carrying and accumulated amortization amounts ~~in the table above~~.

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Amortization expense related to finite-lived identifiable intangible assets (including the condensed statements of consolidated income (loss) line item) consisted of:

Identifiable Intangible Asset	Condensed Statements of Consolidated Income (Loss) Line	Segment	Three Months Ended ~~June~~September 30,				~~Six~~Nine Months Ended ~~June~~September 30,
			2016		2015		2016		2015
Retail customer relationship	Depreciation and amortization	Competitive Electric	$	3	$	4	$	69	$	913
Capitalized in-service software	Depreciation and amortization	Competitive Electric and Corporate and Other	1213		1113		2538		2235
Other identifiable intangible assets	Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization	Competitive Electric	—3		79		36		1221
Total amortization expense (a)			$	1519	$	2226	$	3453	$	4369

____________

(a) Amounts recorded in depreciation and amortization totaled $1718 million and $1821 million for the three months ended ~~June~~September 30, 2016 and 2015, respectively, and $3452 million and $3354 million for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively.

As of the Effective Date, the substantial majority of identifiable intangible assets were removed from the condensed consolidated balance sheet in conjunction with the separation of the EFH Debtors from the TCEH Debtors and the Contributed EFH Debtors.

Intangible Impairments

The impairments of our generation facilities in March and September 2015 (see Note 7) resulted in the impairment of the SO2 allowances under the Clean Air Act's acid rain cap-and-trade program that are associated with those facilities to the extent they are not projected to be used at other sites. The fair market values of the SO2 allowances were estimated to be de minimis based on Level 3 fair value estimates (see Note 14). We also impaired certain of our SO2 allowances under the Cross-State Air Pollution Rule (CSAPR) related to the impaired generation facilities. Accordingly, in the three and nine months ended ~~March 31~~September 30, 2015, we recorded noncash impairment charges of $514 million and $55 million, respectively, in our Competitive Electric segment (before deferred income tax benefit) in other deductions (see Note 18) related to our existing environmental allowances and credits intangible asset. SO2 emission allowances granted to us under the acid rain cap-and-trade program were recorded as intangible assets at fair value in connection with purchase accounting related to the Merger in 2007. Additionally, the impairments of our generation and related mining facilities in September 2015 resulted in our recording noncash impairment charges of $19 million in our Competitive Electric segment (before deferred income tax benefit) in other deductions (see Note 18) related to mine development costs (included in other identifiable intangible assets in the table above) at the facilities.

During the three months ended March 31, 2015, we determined that certain intangible assets related to favorable power purchase contracts should be evaluated for impairment. That conclusion was based on further declines in wholesale electricity prices in ERCOT experienced during the three months ended March 31, 2015. Our fair value measurement was based on a discounted cash flow analysis of the contracts that compared the contractual price and terms of the contract to forecasted wholesale electricity and renewable energy credit (REC) prices in ERCOT. As a result of the analysis, we recorded a noncash impairment charge of $8 million in our Competitive Electric segment (before deferred income tax benefit) in other deductions (see Note 18).

Estimated Amortization of Identifiable Intangible Assets

The estimated aggregate amortization expense of identifiable intangible assets for each of the next five fiscal years is as follows:

Year	Estimated Amortization Expense
2016	$	74
2017	$	53
2018	$	33
2019	$	16
2020	$	9

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6.	INCOME TAXES

EFH Corp. files a US federal income tax return that includes the results of EFCH, EFIH, Oncor Holdings and TCEH. EFH Corp. is the corporate member of the EFH Corp. consolidated group, while each of EFIH, Oncor Holdings, EFCH and TCEH is classified as a disregarded entity for US federal income tax purposes. Oncor is a partnership for US federal income tax purposes and is not a corporate member of the EFH Corp. consolidated group. Pursuant to applicable US Treasury regulations and published guidance of the IRS, corporations that are members of a consolidated group have joint and several liability for the taxes of such group. Subsequent to the Effective Date, the TCEH Debtors and the Contributed EFH Debtors will no longer be included in the consolidated income tax return and will be included in an income tax return with Reorganized TCEH.

Prior to the Effective Date, EFH Corp. and certain of its subsidiaries (including EFCH, EFIH, and TCEH, but not including Oncor Holdings and Oncor) ~~are~~were parties to a Federal and State Income Tax Allocation Agreement, which ~~provides~~provided, among other things, that any corporate member or disregarded entity in the EFH Corp. group iswas required to make payments to EFH Corp. in an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. ~~The~~Pursuant ~~Plan~~to ~~of Reorganization provides that upon~~ the ~~effective~~Plan ~~date~~ of ~~the plan~~Reorganization, ~~as it relates to~~ the TCEH Debtors, ~~that~~and the ~~TCEH~~Contributed EFH Debtors ~~will~~rejected ~~reject~~ this agreement on the Effective Date. Additionally, ~~under~~since the ~~terms~~date of the Settlement Agreement, no further cash payments among the Debtors ~~will~~were be made in respect of federal income taxes. We have elected to continue to allocate federal income taxes among the entities that are parties to the Federal and State Income Tax Allocation Agreement. The Settlement Agreement did not alter the allocation and payment for state income taxes, which ~~will~~continued ~~continue~~ to be settled prior to the Effective Date.

EFH Corp., Oncor Holdings, Oncor and Oncor's minority investors are parties to a separate Federal and State Income Tax Allocation Agreement, which governs the computation of federal income tax liability among such parties, and similarly provides, among other things, that each of Oncor Holdings and Oncor will pay EFH Corp. its share of an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. The Settlement Agreement had no impact on the tax sharing agreement among EFH, Oncor Holdings and Oncor.

The calculation of our effective tax rate is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Loss before income taxes and equity in earnings of unconsolidated subsidiaries	$	(586	)	$	(424	)	$	(1,024	)	$	(2,427	)
Income (loss) before income taxes and equity in earnings of unconsolidated subsidiaries	$	81		$	(2,039	)	$	(943	)	$	(4,467	)
Income tax benefit	$	171		$	137		$	298		$	537
Income tax benefit (expense)	$	(42	)	$	452		$	256		$	990
Effective tax rate	2951.29		%	3222.32		%	2927.1		%	22.12		%

For the three months ended ~~June~~September 30, 2016, the effective tax rate of 2951.29% related to our income tax ~~benefit~~expense was ~~lower~~higher than the US Federal statutory rate of 35% due primarily to nondeductible legal and other professional services costs related to the Chapter 11 Cases, partially offset by the tax benefit recognized from the settlement agreement with the Texas Comptroller of Public Accounts (Comptroller). For the three months ended ~~June~~September 30, 2015, the effective tax rate of 3222.32% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to the nondeductible goodwill impairment charge (see Note 5) and nondeductible legal and other professional services costs related to the Chapter 11 Cases~~, partially offset by the tax benefit recognized due to the Texas margin tax rate reduction in 2015~~.

For the ~~six~~nine months ended ~~June~~September 30, 2016, the effective tax rate of 2927.1% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to nondeductible legal and other professional services costs related to the Chapter 11 Cases~~, partially offset by the difference in the forecasted effective tax rate and the statutory rate applied to unrealized losses from mark-to-market hedging activities~~. For the ~~six~~nine months ended ~~June~~September 30, 2015, the effective tax rate of 22.12% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to the nondeductible goodwill impairment ~~charge~~charges (see Note 5) and nondeductible legal and other professional services costs related to the Chapter 11 Cases, partially offset by the difference in the forecasted effective tax rate and the statutory rate applied to long-lived and intangible asset impairment charges (see Notes 5 and 7) and the Texas margin tax rate reduction in 2015.

Liability for Uncertain Tax Positions

In June 2016, we received a final agreed Revenue Agent Report (RAR) from the IRS and associated documentation for the 2010 through 2013 tax years. The RAR was signed in July 2016. As a result of the final RAR, we reduced the liability for uncertain tax positions by $1 million, resulting in a reclassification to the accumulated deferred income tax liability. Total cash payment to be assessed by the IRS for tax years 2010 through 2013, but not expected to be paid during the pendency of the Chapter 11 Cases, is approximately $15 million, plus any interest that may be assessed.

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InLiability ~~March 2016, we signed a final agreed RAR with the IRS~~ for ~~the~~Uncertain ~~2014~~Tax ~~tax year. No material financial statement impacts resulted from the signing of the 2014 RAR.~~Positions

In ~~June~~September ~~2015~~2016, weEFH ~~signed~~Corp. aentered ~~final~~into ~~agreed~~a ~~RAR~~settlement agreement with the ~~IRS~~Texas ~~and~~Comptroller ~~associated~~of ~~documentation~~Public ~~for~~Accounts ~~the~~(Comptroller) ~~2008~~whereby ~~and~~the ~~2009~~Comptroller ~~tax~~agreed ~~years. The~~to ~~Bankruptcy~~release ~~Court~~all ~~approved~~claims ~~our~~and ~~signing~~liabilities ofrelated to the ~~RAR~~EFH ~~in July 2015~~Corp. As aconsolidated ~~result~~group's ofstate ~~the final RAR~~taxes, weincluding ~~reduced~~sales ~~the liability for uncertain~~ tax, ~~positions~~gross byreceipts ~~$23~~utility ~~million~~tax, ~~resulting~~franchise intax aand ~~$20~~direct ~~million~~pay ~~reclassification~~tax, tothrough the ~~accumulated~~agreement ~~deferred~~date, ~~income~~in ~~tax~~exchange ~~liability~~for ~~and~~a ~~the~~release ~~recording~~ of aall $3refund ~~million~~claims ~~income~~and ~~tax~~a ~~benefit~~one-time ~~recorded~~payment inof ~~the~~$12 ~~Competitive Electric segment results~~million. ~~Total~~This ~~cash~~settlement ~~payment~~was toentered beand ~~assessed~~approved by the ~~IRS~~Bankruptcy ~~for~~Court ~~tax~~in ~~years~~September ~~2008~~2016. As ~~and~~a ~~2009,~~result ~~but not paid during the pendency~~ of the ~~Chapter 11 Cases~~settlement, iswe ~~approximately~~reduced ~~$15~~the ~~million,~~liability ~~plus~~for ~~any~~state ~~interest~~uncertain ~~that~~tax ~~may~~positions beby ~~assessed~~$26 million.

In July 2016, we executed a Revenue Agent Report (RAR) with the IRS and associated documentation for the 2010 through 2013 tax years. As a result of the RAR, we reduced our liability for uncertain tax positions by $1 million, resulting in a reclassification to the accumulated deferred income tax liability. Total cash payment to be assessed by the IRS for tax years 2010 through 2013, but not expected to be paid during the pendency of the Chapter 11 Cases of the EFH Debtors, is approximately $15 million, plus any interest that may be assessed.

In March 2016, we signed a RAR with the IRS for the 2014 tax year. No material financial statement impacts resulted from the signing of the 2014 RAR.

In June 2015, we signed a RAR with the IRS and associated documentation for the 2008 and 2009 tax years. The Bankruptcy Court approved our signing of the RAR in July 2015. As a result of this RAR, we reduced our liability for uncertain tax positions by $23 million, resulting in a $20 million reclassification to the accumulated deferred income tax liability and the recording of a $3 million income tax benefit recorded in the Competitive Electric segment results. Total cash payment to be assessed by the IRS for tax years 2008 and 2009, but not paid during the pendency of the Chapter 11 Cases of the EFH Debtors, is approximately $15 million, plus any interest that may be assessed.


7.	IMPAIRMENT OF LONG-LIVED ASSETS

Impairment of Lignite/Coal Fueled Generation and Mining Assets

We evaluated our generation assets for impairment during September 2015 as a result of an impairment indicator related to the continued decline in forecasted wholesale electricity prices in ERCOT. Our evaluation concluded that impairments existed at our Martin Lake, Sandow 4 and Sandow 5 generation facilities, and the carrying value for those facilities and related mining facilities were reduced in total by $1.295 billion.

We evaluated our generation assets for impairment during March 2015 as a result of an impairment indicator related to the continued decline in forecasted wholesale electricity prices in ERCOT. Our evaluation concluded that an impairment existed, and the carrying value at our Big Brown generation facility and related mining facility was reduced by $676 million.

Our fair value measurement for these assets was determined based on an income approach that utilized probability-weighted estimates of discounted future cash flows, which were Level 3 fair value measurements (see Note 14). Key inputs into the fair value measurement for these assets included current forecasted wholesale electricity prices in ERCOT, forecasted fuel prices, capital and operating expenditure forecasts and discount rates.

Additional material impairments may occur in the future for ~~our~~Reorganized TCEH's other generation facilities if forward wholesale electricity prices continue to decline or forecasted costs of producing electricity at ~~our~~Reorganized TCEH's generation facilities increase, including increased costs of compliance with proposed environmental regulations.

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8.	INTEREST EXPENSE AND RELATED CHARGES

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Interest paid/accrued on debtor-in-possession financing	$	8097		$	74		$	~~154~~250		$	~~146~~221
Adequate protection amounts paid/accrued	~~324~~331			~~306~~311			~~646~~977			~~609~~919
Interest paid/accrued on pre-petition debt (a)	14			3—			38			~~239~~243
Capitalized interest	(3		)	(3		)	(6		)	(6		)
Amortization of debt issuance, amendment and extension costs and discounts	5			—			6			—
Total interest expense and related charges	$	402		$	380		$	797		$	988
Capitalized interest	(2		)	(2		)	(9		)	(8		)
Total interest expense and related charges	$	435		$	383		$	1,232		$	1,375

____________

(a) For the ~~six~~nine months ended ~~June~~September 30, 2015, amount includes $235 million in post-petition interest related to the EFIH Second Lien Notes (see Note 11). For the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, includes interest paid/accrued on long-term debt not subject to compromise.

Interest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 reflects interest paid and accrued on debtor-in-possession financing (see Note 10), adequate protection amounts paid and accrued, as approved by the Bankruptcy Court in June 2014 for the benefit of secured creditors of (a) $22.616 billion principal amount of outstanding borrowings from the TCEH Senior Secured Facilities, (b) $1.750 billion principal amount of outstanding TCEH Senior Secured Notes and (c) the $1.243 billion net liability related to the TCEH first lien interest rate swaps and natural gas hedging positions terminated shortly after the Bankruptcy Filing (see Note 15), in exchange for their consent to the senior secured, super-priority liens contained in the TCEH DIP Facility and any diminution in value of their interests in the pre-petition collateral from the Petition Date, and interest paid on the EFIH Second Lien Notes as approved by the Bankruptcy Court in March 2015 (see Note 11). The interest rate applicable to the adequate protection amounts paid/accrued for the ~~six~~nine months ended ~~June~~September 30, 2016 was 4.9395% (one-month LIBOR plus 4.50%). ~~The~~Upon amount of adequate protection payments may be adjusted to reflect the valuation of the TCEH Debtors determined in connection with confirmation of the Plan of Reorganization with respect to the TCEH Debtors by the Bankruptcy Court. In addition, upon completion of the Plan of Reorganization with respect to the TCEH Debtors, amounts of adequate protection payments ~~may~~were be re-characterized as payments of principal.

19The Bankruptcy Code generally restricts payment of interest on pre-petition debt, subject to certain exceptions. The Bankruptcy Court approved post-petition interest payments on the EFIH Second Lien Notes in March 2015 as discussed in Note 11. Additional interest payments may also be made upon approval by the Bankruptcy Court (see Note 12). Other than amounts ordered or approved by the Bankruptcy Court, effective on the Petition Date, we discontinued recording interest expense on outstanding pre-petition debt classified as LSTC. The table below shows contractual interest amounts, which are amounts due under the contractual terms of the outstanding debt, including debt subject to compromise during the Chapter 11 Cases. Interest expense reported in the condensed statements of consolidated income (loss) does not include contractual interest on pre-petition debt classified as LSTC totaling $325 million and $327 million for the three months ended September 30, 2016 and 2015, respectively, and $978 million and $943 million for the nine months ended September 30, 2016 and 2015, respectively, which has been stayed by the Bankruptcy Court effective on the Petition Date. Adequate protection paid/accrued presented below excludes interest paid/accrued on the TCEH first-lien interest rate and commodity hedge claims (see Note 15) totaling $16 million and $15 million for the three months ended September 30, 2016 and 2015, respectively, and $47 million and $44 million for the nine months ended September 30, 2016 and 2015, respectively, as such amounts are not included in contractual interest amounts below.



	Three Months Ended September 30, 2016								Three Months Ended September 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC			Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFH Corp.	$	11	$	—	$	—	$	11	$	31		$	—	$	—	$	31
EFIH	101		—		—		101		101			—		—		101
EFCH	—		—		—		—		2			—		—		2
TCEH	528		315		—		213		520			296		—		224
Eliminations (b)	—		—		—		—		(31		)	—		—		(31		)
Total	$	640	$	315	$	—	$	325	$	623		$	296	$	—	$	327

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The Bankruptcy Code generally restricts payment of interest on pre-petition debt, subject to certain exceptions. The Bankruptcy Court approved post-petition interest payments on the EFIH Second Lien Notes in March 2015 as discussed in Note 11. Additional interest payments may also be made upon approval by the Bankruptcy Court (see Note 12). Other than amounts ordered or approved by the Bankruptcy Court, effective on the Petition Date, we discontinued recording interest expense on outstanding pre-petition debt classified as LSTC. The table below shows contractual interest amounts, which are amounts due under the contractual terms of the outstanding debt, including debt subject to compromise during the Chapter 11 Cases. Interest expense reported in the condensed statements of consolidated loss does not include contractual interest on pre-petition debt classified as LSTC totaling $317 million and $328 million for the three months ended June 30, 2016 and 2015, respectively, and $652 million and $616 million for the six months ended June 30, 2016 and 2015, respectively, which has been stayed by the Bankruptcy Court effective on the Petition Date. Adequate protection paid/accrued presented below excludes interest paid/accrued on the TCEH first-lien interest rate and commodity hedge claims (see Note 15) totaling $16 million and $15 million for the three months ended June 30, 2016 and 2015, respectively, and $31 million and $29 million for the six months ended June 30, 2016 and 2015, respectively, as such amounts are not included in contractual interest amounts below.



	Nine Months Ended September 30, 2016								Nine Months Ended September 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC			Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued (a)		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFH Corp.	$	33	$	—	$	—	$	33	$	94		$	—	$	—	$	94
EFIH	304		—		—		304		314			—		50		264
EFCH	1		—		—		1		5			—		—		5
TCEH	1,570		930		—		640		1,548			875		—		673
Eliminations (b)	—		—		—		—		(93		)	—		—		(93		)
Total	$	1,908	$	930	$	—	$	978	$	1,868		$	875	$	50	$	943

	Three Months Ended June 30, 2016								Three Months Ended June 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC			Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFH Corp.	$	11	$	—	$	—	$	11	$	31		$	—	$	—	$	31
EFIH	101		—		—		101		101			—		—		101
EFCH	—		—		—		—		2			—		—		2
TCEH	513		308		—		205		516			291		—		225
Eliminations (b)	—		—		—		—		(31		)	—		—		(31		)
Total	$	625	$	308	$	—	$	317	$	619		$	291	$	—	$	328

	Six Months Ended June 30, 2016								Six Months Ended June 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC			Adequate Protection Paid/Accrued		Approved Interest Paid/Accrued (a)		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFH Corp.	$	22	$	—	$	—	$	22	$	63		$	—	$	—	$	63
EFIH	202		—		—		202		213			—		50		163
EFCH	—		—		—		—		3			—		—		3
TCEH	1,043		615		—		428		1,029			580		—		449
Eliminations (b)	—		—		—		—		(62		)	—		—		(62		)
Total	$	1,267	$	615	$	—	$	652	$	1,246		$	580	$	50	$	616

___________

(a) For the ~~six~~nine months ended ~~June~~September 30, 2015 represents portion of interest related to the EFIH Second Lien Notes that was repaid based on the approval of the Bankruptcy Court; however, excludes $185 million of post-petition interest paid in 2015 that contractually related to 2014 and default interest (see Note 11).


(b)	Represents contractual interest on affiliate debt held by EFH Corp. and EFIH that is classified as LSTC.

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9.	REORGANIZATION ITEMS

Expenses and income directly associated with the Chapter 11 Cases are reported separately in the condensed statements of consolidated income (loss) as reorganization items as required by ASC 852, Reorganizations. Reorganization items also include adjustments to reflect the carrying value of LSTC at their estimated allowed claim amounts, as such adjustments are determined. The following table presents reorganization items incurred in the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 as reported in the condensed statements of consolidated income (loss):

	Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
Expenses related to legal advisory and representation services	$	2941	$	5246		$	60101	$	~~102~~148
Expenses related to other professional consulting and advisory services	2126		1722			4470		4669
Contract claims adjustments	210		(2		)	313		2826
Fees associated with extension of EFIH DIP Facility	—		—			14		—
Fees associated with repayment of EFIH Second Lien Notes (Note 11)	—		—			—		28
Other	—7		12			18		34
Total reorganization items	$	5284	$	68		$	~~122~~206	$	~~207~~275

10. DEBTOR-IN-POSSESSION BORROWING FACILITIES AND LONG-TERM DEBT NOT SUBJECT TO COMPROMISE

TCEH DIP Facility — The Bankruptcy Court approved the TCEH DIP Facility in June 2014. The TCEH DIP Facility currently provides for up to $3.375 billion in senior secured, super-priority financing consisting of a revolving credit facility of up to $1.950 billion (TCEH DIP Revolving Credit Facility) and a term loan facility of up to $1.425 billion (TCEH DIP Term Loan Facility). The TCEH DIP Facility is a Senior Secured, Super-Priority Credit Agreement by and among the TCEH Debtors, the lenders that are party thereto from time to time and an administrative and collateral agent.

The TCEH DIP Facility and related available capacity at June 30, 2016 are presented below. In the June 30, 2016 condensed consolidated balance sheet, the borrowings under the TCEH DIP Facility are reported as current liabilities. The maturity date of the TCEH DIP Facility is the earlier of (a) November 2016 or (b) the effective date of any plan of reorganization of TCEH. In June 2016, the TCEH Debtors extended their use of cash collateral to September 30, 2016, provided that the TCEH Debtors do not otherwise cause an event of default under the cash collateral order. The TCEH DIP Facility must be repaid in full prior to the TCEH Debtors' emergence from the Chapter 11 Cases.

	June 30, 2016
TCEH DIP Facility	FacilityLimit		Available CashBorrowing Capacity		Available Letter of Credit Capacity
TCEH DIP Revolving Credit Facility (a)	$	1,950	$	835	$	—
TCEH DIP Term Loan Facility (b)	1,425		—		272
Total TCEH DIP Facility	$	3,375	$	835	$	272

___________

(a) Facility used for general corporate purposes. Pursuant to an order of the Bankruptcy Court, the TCEH Debtors may not have more than $1.650 billion of TCEH DIP Revolving Credit Facility cash borrowings outstanding without written consent of the TCEH committee of unsecured creditors and the ad hoc group of TCEH unsecured noteholders or further order of the Bankruptcy Court.

(b) Facility used for general corporate purposes, including but not limited to, $800 million for issuing letters of credit.

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~~At June 30, 2016, $1~~10.~~115~~ ~~billion of the TCEH DIP Revolving Credit Facility has been borrowed. As discussed in Note 3, the Lamar and Forney Acquisition in April 2016 was funded by cash~~DEBTOR-onIN-~~hand~~POSSESSION ~~and~~BORROWING ~~$1.1~~FACILITIES ~~billion~~AND inLONG-TERM ~~additional~~DEBT ~~cash~~NOT ~~borrowings~~SUBJECT ~~under~~TO the TCEH DIP Revolving Credit Facility. After completing the acquisition, we repaid approximately $230 million of borrowings under the TCEH DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. At December 31, 2015, no amounts were borrowed under the TCEH DIP Revolving Credit Facility.COMPROMISE

AtTCEH ~~both~~DIP ~~June~~Roll ~~30,~~Facilities ~~2016~~— ~~and~~In ~~December~~August 312016, ~~2015,~~TCEH ~~all~~entered into the TCEH DIP Roll Facilities. The facilities provided for up to $14.~~425~~250 billion in senior secured, super-priority financing consisting of ~~the~~a revolving credit facility of up to $750 million (TCEH DIP ~~Term~~Roll ~~Loan~~Revolving Credit Facility), ~~has~~a ~~been~~term ~~borrowed. Of~~loan ~~this~~letter ~~borrowing,~~of credit facility of up to $~~800~~650 million ~~represents~~(TCEH ~~amounts~~DIP ~~that~~Roll ~~support~~Term ~~issuances~~Loan Letter of ~~letters~~Credit Facility) and a term loan facility of up to $2.850 billion (TCEH DIP Roll Term Loan Facility). The TCEH DIP Roll Facilities were senior secured, super-priority debtor-in-possession credit agreements by and ~~have~~among ~~been~~the ~~funded~~TCEH Debtors, the lenders that are party thereto from time to atime and an administrative and collateral ~~account~~agent. OfThe maturity date of the ~~collateral~~TCEH ~~account~~DIP ~~amount~~Roll atFacilities ~~June 30~~was the earlier of (a) October 31, ~~2016~~2017 or (b) the Effective Date. On the Effective Date, ~~$272~~the ~~million~~TCEH isDIP ~~reported~~Roll asFacilities ~~cash~~converted ~~and~~to ~~cash~~senior ~~equivalents~~secured ~~and~~exit ~~$528~~facilities ~~million~~with ismaturity ~~reported~~dates asof ~~restricted~~August ~~cash,~~2021 ~~which~~for ~~represents~~the revolving credit facility and August 2023 for the ~~amount~~term ofloan ~~outstanding~~facilities ~~letters~~(see Note 2). The other terms of ~~credit~~the exit facilities are substantially the same as the TCEH DIP Roll Facilities.

~~Amounts~~Net ~~borrowed~~proceeds ~~under~~from the TCEH DIP ~~Revolving~~Roll ~~Credit~~Facilities ~~Facility~~totaled ~~bear~~$3.465 ~~interest~~billion ~~based~~and onwere ~~applicable~~used ~~LIBOR~~to ~~rates,~~repay ~~plus~~ $2.~~50%,~~65 ~~and~~billion ~~the weighted average interest rate on~~ outstanding ~~borrowings was 2.98% at June 30, 2016. Amounts borrowed~~ under the former TCEH DIP ~~Term Loan~~ Facility, ~~bear~~fund ~~interest~~a ~~based~~$650 onmillion ~~applicable~~collateral ~~LIBOR~~account ~~rates,~~used ~~subject~~ to abackstop ~~0.75%~~the ~~floor,~~issuances ~~plus~~of ~~3%,~~letters ~~and~~of ~~the~~credit ~~interest~~and ~~rate~~pay on$107 ~~outstanding~~million ~~borrowings~~of ~~was~~issuance 3costs.~~75%~~ The atremaining ~~both~~balance ~~June~~was ~~30,~~used ~~2016~~for ~~and~~general ~~December~~corporate ~~31, 2015~~purposes. ~~The~~Additionally, ~~TCEH~~$800 ~~DIP~~million ~~Facility~~of ~~also~~cash ~~provides~~from ~~for~~collateral ~~certain~~accounts ~~additional~~under ~~fees~~the ~~payable~~former toTCEH ~~the~~DIP ~~agents~~Facility ~~and~~that ~~lenders,~~were asused ~~well~~to asbackstop ~~availability~~letters ~~fees~~of ~~payable~~credit ~~with~~were ~~respect~~released to ~~any~~TCEH ~~unused~~to ~~portions~~be ofused ~~the~~for ~~available~~general ~~TCEH~~corporate ~~DIP Facility~~purposes.

The TCEH ~~Debtors' obligations under the TCEH~~ DIP ~~Facility~~Roll ~~are~~Facilities ~~secured by a lien covering substantially all of the TCEH Debtors' assets, rights~~ and ~~properties~~related ~~(including~~available ~~the~~capacity ~~assets~~at ~~acquired in the Lamar and Forney Acquisition)~~September 30, ~~subject~~2016 toare ~~certain~~presented ~~exceptions set forth in the TCEH DIP Facility~~below. ~~The~~In ~~TCEH DIP Facility provides that all obligations thereunder constitute administrative expenses in~~ the ~~Chapter 11 Cases~~September 30, ~~with~~2016 ~~administrative~~condensed ~~priority~~consolidated ~~and~~balance ~~senior secured status under the Bankruptcy Code and~~sheet, ~~subject to certain exceptions set forth in~~ the ~~TCEH~~borrowings ~~DIP~~under ~~Facility, have priority over any and all administrative expense claims, unsecured claims and costs and expenses in~~ the ~~Chapter 11 Cases. EFCH is a guarantor to the agreement governing the~~ TCEH DIP ~~Facility~~Roll ~~along~~Facilities ~~with substantially all of TCEH’s subsidiaries, including all subsidiaries that~~ are ~~Debtors~~reported inas ~~the~~noncurrent ~~Chapter 11 Cases~~liabilities.

The TCEH DIP Facility also permits certain hedging agreements to be secured on a pari-passu basis with the TCEH DIP Facility in the event those hedging agreements meet certain criteria set forth in the TCEH DIP Facility.



	September 30, 2016
TCEH DIP Roll Facilities	Facility Limit		Cash Borrowings (d)		Available Credit Capacity
TCEH DIP Roll Revolving Credit Facility (a)	$	750	$	—	$	750
TCEH DIP Roll Term Loan Letter of Credit Facility (b)	650		650		—
TCEH DIP Roll Term Loan Facility (c)	2,850		2,850		—
Total TCEH DIP Roll Facilities	$	4,250	$	3,500	$	750

The RCT agreed to accept a collateral bond from TCEH of up to $1.1 billion to secure mining land reclamation obligations. The collateral bond is a $1.1 billion carve-out from the super-priority liens under the TCEH DIP Facility that will enable the RCT to be paid before the TCEH DIP Facility lenders.___________

~~The~~(a) ~~TCEH DIP~~ Facility ~~provides for affirmative and negative covenants applicable~~ to ~~the~~be ~~TCEH~~used ~~Debtors,~~for ~~including~~general ~~affirmative~~corporate covenants requiring the TCEH Debtors to provide financial information, budgets and other information to the agents under the TCEH DIP Facility, and negative covenants restricting the TCEH Debtors' ability to incur additional indebtedness, grant liens, dispose of assets, make investments, pay dividends or take certain other actions, in each case except as permitted in the TCEH DIP Facilitypurposes. ~~The TCEH Debtors' ability to borrow under the TCEH DIP Facility is subject to the satisfaction of certain customary conditions precedent set forth therein.~~

~~The~~(b) ~~TCEH DIP~~ Facility ~~provides~~used for ~~certain~~issuing ~~customary~~letters ~~events~~ of ~~default,~~credit ~~including~~for ~~events~~general ofcorporate ~~default~~purposes. ~~resulting~~Borrowings from non-payment of principal, interest or other amounts when due, material breaches of representations and warranties, material breaches of covenants in the TCEH DIP Facility or ancillary loan documents, cross-defaults under ~~other~~this ~~agreements~~facility orwere ~~instruments~~funded ~~and~~to ~~the entry of material judgments against the TCEH Debtors. The agreement governing the TCEH DIP Facility includes~~ a ~~covenant~~collateral account that ~~requires~~is ~~the~~reported ~~Consolidated~~as ~~Superpriority~~restricted ~~Secured~~cash ~~Net~~in ~~Debt to Consolidated EBITDA ratio not exceed 3.50 to 1.00. Consolidated Superpriority Secured Net Debt consists of outstanding term loans and revolving credit exposure under~~ the ~~TCEH~~condensed ~~DIP~~consolidated ~~Facility~~balance ~~less unrestricted cash~~sheet. As ofAt ~~June~~ September 30, 2016, wethe ~~are~~restricted incash ~~compliance~~supports ~~with~~$546 ~~this~~million ~~financial~~in ~~covenant. Upon~~letters ~~the existence~~ of ancredit ~~event~~outstanding of(see ~~default,~~Note ~~the TCEH DIP Facility provides that all principal~~12), ~~interest~~leaving ~~and~~$104 ~~other~~million ~~amounts~~in ~~due~~available ~~thereunder~~letter ~~will become immediately due and payable, either automatically or at the election~~ of ~~specified~~credit ~~lenders~~capacity.


(c)	Facility used to repay all amounts outstanding under the former TCEH DIP Facility and issuance costs for the TCEH DIP Roll Facilities, with the remaining balance used for general corporate purposes.


(d)	Borrowings under debtor-in-possession credit facilities in the condensed consolidated balance sheets are presented net of debt issuance costs of $79 million and debt discounts of $34 million.

Amounts borrowed under the TCEH DIP Roll Revolving Credit Facility bore interest based on applicable LIBOR rates, plus 3.25%, and there were no outstanding borrowings at September 30, 2016. Amounts borrowed under the TCEH DIP Roll Term Loan Letter of Credit Facility bore interest based on applicable LIBOR rates, subject to a 1% floor, plus 4%, and the rate outstanding on outstanding borrowings was 5.00% at September 30, 2016. Amounts borrowed under the TCEH DIP Roll Term Loan Facility bore interest based on applicable LIBOR rates, subject to a 1% floor, plus 4%, and the interest rate on outstanding borrowings was 5.00% at September 30, 2016. The TCEH DIP Roll Facilities also provided for certain additional fees payable to the agents and lenders, as well as availability fees payable with respect to any unused portions of the available TCEH DIP Roll Facilities.

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~~EFIH~~TCEH DIP Facility, ~~EFIH~~— ~~First~~The ~~Lien~~TCEH ~~Notes~~DIP ~~Settlement~~Facility ~~and~~provided ~~EFIH~~for ~~Second~~up ~~Lien~~to ~~Notes~~$3.375 ~~Repayment~~billion —in ~~The~~senior ~~Bankruptcy~~secured, ~~Court~~super-priority ~~approved~~financing ~~the~~consisting ~~EFIH~~of a revolving credit facility of up to $1.950 billion (TCEH DIP Revolving Credit Facility) inand ~~June~~a ~~2014~~term loan facility of up to $1.425 billion (TCEH DIP Term Loan Facility). The ~~EFIH~~TCEH DIP Facility ~~provides~~was ~~for~~ a ~~$5.4~~senior, ~~billion~~secured, ~~first~~super-~~lien~~priority ~~debtor-in-possession~~credit ~~financing~~agreement ~~facility~~by and among the TCEH Debtors, the lenders that were party thereto from time to time and an administrative and collateral agent. InAt ~~March~~December 31, 2015, all $~~750~~1.425 ~~million~~billion of ~~cash~~the ~~borrowings~~TCEH DIP Term Loan Facility were ~~used~~borrowed toat ~~repay~~an interest rate of 3.75%. Of this amount, $~~445~~800 million ~~principal~~represented ~~amount~~amounts that supported issuances of ~~EFIH~~letters ~~Second~~of ~~Lien~~credit ~~Notes~~that ~~(including~~were ~~accrued~~funded ~~and~~to ~~unpaid~~a ~~pre-petition~~collateral ~~interest~~account. Of ofthe collateral account at December 31, 2015, $55281 million was reported as cash and ~~post-petition~~cash ~~interest~~equivalents ofand $~~235~~519 million) ~~and~~was ~~certain~~reported ~~fees~~as ~~(see~~restricted ~~Note~~cash, ~~11)~~which represented the amounts of outstanding letters of credit. At December 31, 2015, no amounts were borrowed under the TCEH DIP Revolving Credit Facility. As discussed above, in August 2016, all amounts under the TCEH DIP Facility were repaid using proceeds from the TCEH DIP Roll Facilities.

~~As of June 30, 2016, remaining cash on hand from borrowings under the~~ EFIH DIP Facility, ~~net~~and ofEFIH ~~fees,~~Second ~~totaled~~Lien ~~approximately~~Notes ~~$275~~Repayment ~~million,~~— ~~which~~As ~~was~~of ~~held as cash and cash equivalents. In the June~~September 30, 2016 ~~condensed consolidated balance sheet~~, the ~~borrowings under the~~ EFIH DIP Facility ~~are~~provided ~~reported~~for asa ~~current liabilities~~$5. In4 ~~January~~billion ~~2016,~~first-lien ~~the~~debtor-in-possession ~~EFIH~~financing ~~Debtors~~facility. In ~~paid~~March a2015, $14750 million ~~extension fee to extend the maturity date~~ of ~~the~~cash ~~EFIH~~borrowings ~~DIP~~were ~~Facility~~used to ~~December~~repay ~~2016. The~~$445 ~~terms~~million ofprincipal ~~the~~amount of EFIH ~~DIP~~Second ~~Facility~~Lien ~~were~~Notes ~~otherwise~~(including ~~unchanged. The~~accrued ~~EFIH~~and ~~DIP~~unpaid ~~Facility~~pre-petition ~~must~~interest beof ~~repaid~~$55 inmillion ~~full~~and ~~prior~~post-petition tointerest ~~the~~of ~~EFIH~~$235 ~~Debtors~~million) ~~emergence~~and ~~from~~certain ~~the~~fees ~~Chapter~~(see 11Note ~~Cases~~11).

~~The~~As ~~principal~~of ~~amounts~~September 30, ~~outstanding~~2016, remaining cash on hand from borrowings under the EFIH DIP Facility, ~~bear~~net ~~interest~~of ~~based~~fees, ontotaled ~~applicable~~approximately ~~LIBOR~~$256 ~~rates~~million, ~~subject~~which towas aheld 1%as ~~floor,~~cash ~~plus~~and 3cash equivalents.~~25%.~~ AtIn ~~both~~the ~~June~~ September 30, 2016 ~~and~~condensed ~~December~~consolidated ~~31,~~balance ~~2015~~sheet, ~~outstanding~~the borrowings under the EFIH DIP Facility ~~totaled~~are $5reported as current liabilities.4 In ~~billion~~January at2016, anthe ~~annual~~EFIH ~~interest~~Debtors ~~rate~~paid ofa ~~4.25%.~~$14 ~~The~~million extension fee to extend the maturity date of the EFIH DIP Facility isto aDecember ~~non-amortizing~~2016. The ~~loan~~terms ~~that~~of ~~may,~~the ~~subject~~EFIH toDIP ~~certain~~Facility ~~limitations,~~were beotherwise ~~voluntarily~~unchanged. The ~~prepaid~~EFIH byDIP ~~the~~Facility ~~EFIH~~must ~~Debtors,~~be repaid in ~~whole~~full orprior into ~~part,~~the ~~without~~EFIH ~~any~~Debtors ~~premium~~emergence orfrom ~~penalty~~the Chapter 11 Cases.

In October 2016, the EFIH DIP Facility was amended, in part, to extend the maturity date of the facility and to increase the borrowings under the facility by $75 million. The EFH Debtors paid fees and expenses of $10 million in connection with the amendment. Further, the EFIH DIP Facility will now mature on the earlier of (a) the effective date of any plan of reorganization as it relates to the EFH Debtors, (b) upon the event of the sale of substantially all of EFIH's assets or (c) ~~December~~June ~~2016~~2017, subject to the right of the EFH Debtors, upon the payment of certain extension fees, to extend the maturity an additional six months.

The principal amounts outstanding under the EFIH DIP Facility bear interest based on applicable LIBOR rates, subject to a 1% floor, plus 3.25%. At both September 30, 2016 and December 31, 2015, outstanding borrowings under the EFIH DIP Facility totaled $5.4 billion at an annual interest rate of 4.25%. The EFIH DIP Facility is a non-amortizing loan that may, subject to certain limitations, be voluntarily prepaid by the EFIH Debtors, in whole or in part, without any premium or penalty.

EFIH's obligations under the EFIH DIP Facility are secured by a first lien covering substantially all of EFIH's assets, rights and properties, subject to certain exceptions set forth in the EFIH DIP Facility. The EFIH DIP Facility provides that all obligations thereunder constitute administrative expenses in the Chapter 11 Cases, with administrative priority and senior secured status under the Bankruptcy Code and, subject to certain exceptions set forth in the EFIH DIP Facility, will have priority over any and all administrative expense claims, unsecured claims and costs and expenses in the Chapter 11 Cases.

The EFIH DIP Facility provides for affirmative and negative covenants applicable to EFIH and EFIH Finance, including affirmative covenants requiring EFIH and EFIH Finance to provide financial information, budgets and other information to the agents under the EFIH DIP Facility, and negative covenants restricting EFIH's and EFIH Finance's ability to incur additional indebtedness, grant liens, dispose of assets, pay dividends or take certain other actions, in each case except as permitted in the EFIH DIP Facility. The EFIH DIP Facility also includes a minimum liquidity covenant pursuant to which EFIH cannot allow the amount of its unrestricted cash (as defined in the EFIH DIP Facility) to be less than $150 million. As of ~~June~~September 30, 2016, EFIH was in compliance with this minimum liquidity covenant. The Oncor Ring-Fenced Entities are not restricted subsidiaries for purposes of the EFIH DIP Facility.

The EFIH DIP Facility provides for certain customary events of default, including events of default resulting from non-payment of principal, interest or other amounts when due, material breaches of representations and warranties, material breaches of covenants in the EFIH DIP Facility or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against EFIH. Upon the existence of an event of default, the EFIH DIP Facility provides that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders.

The EFIH DIP Facility permits, subject to certain terms, conditions and limitations set forth in the EFIH DIP Facility, EFIH to incur incremental junior lien subordinated debt in an aggregate amount not to exceed $3 billion.

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Long-Term Debt Not Subject to Compromise — Amounts presented in the table below represent pre-petition liabilities that are not subject to compromise due to the debt being fully collateralized or specific orders from the Bankruptcy Court approving repayment of the debt.

	June 30, 2016			December 31, 2015
	September 30, 2016			December 31, 2015
EFH Corp. (parent entity)
8.82% Non-Debtor Building Financing due semiannually through February 11, 2022	$	3331		$	35
Unamortized fair value premium (a)	5			6
Total EFH Corp.	3836			41
EFCH
9.58% Fixed Notes due in annual installments through December 4, 2019 (b)	13—			13
8.254% Fixed Notes due in quarterly installments through December 31, 2021 (b)	21—			24
Unamortized fair value discount (a)	(2—		)	(2		)
Total EFCH	32—			35
TCEH
7.48% Fixed Secured Facility Bonds with amortizing payments through January 2017 (c)	10—			13
Capital lease obligations	42			5
Other	2			2
Unamortized discount	—			(1		)
Total TCEH	164			19
Total EFH Corp. consolidated	8640			95
Less amounts due currently	(349		)	(35		)
Total long-term debt not subject to compromise	$	5231		$	60

____________


(a)	Amount represents unamortized fair value adjustments recorded under purchase accounting.


(b)	Approved by the Bankruptcy Court for repayment.


(c)	Debt issued by trust and secured by assets held by the trust.

Pursuant to the Plan of Reorganization, in September 2016, we repaid all outstanding EFCH fixed notes, including $3 million in prepayment, legal and other related fees.

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11.	LIABILITIES SUBJECT TO COMPROMISE (LSTC)

The amounts classified as LSTC reflect the company's estimate of pre-petition liabilities and other expected allowed claims to be addressed in the Chapter 11 Cases and may be subject to future adjustment as the Chapter 11 Cases proceed. Amounts classified to LSTC do not include pre-petition liabilities that are fully collateralized by letters of credit or cash deposits. The following table presents LSTC as reported in the condensed consolidated balance sheets at ~~June~~September 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Notes, loans and other debt per the following table	$	35,560	$	35,560
Accrued interest on notes, loans and other debt	745		745
Net liability under terminated TCEH interest rate swap and natural gas hedging agreements (Note 15)	1,243		1,243
Trade accounts payable and other expected allowed claims	~~240~~267		238
Total liabilities subject to compromise	$	37,~~788~~815	$	37,786

On the Effective Date, the TCEH Debtors (together with the Contributed EFH Debtors) emerged from the Chapter 11 Cases and discharged approximately $33.7 billion in LSTC.

Pre-Petition Notes, Loans and Other Debt Reported as LSTC

Amounts presented below represent principal amounts of pre-petition notes, loans and other debt reported as LSTC.

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
EFH Corp. (parent entity)
9.75% Fixed Senior Notes due October 15, 2019	$	2	$	2
10% Fixed Senior Notes due January 15, 2020	3		3
10.875% Fixed Senior Notes due November 1, 2017	33		33
11.25% / 12.00% Senior Toggle Notes due November 1, 2017	27		27
5.55% Fixed Series P Senior Notes due November 15, 2014	89		89
6.50% Fixed Series Q Senior Notes due November 15, 2024	198		198
6.55% Fixed Series R Senior Notes due November 15, 2034	288		288
Total EFH Corp.	640		640
EFIH
11% Fixed Senior Secured Second Lien Notes due October 1, 2021	322		322
11.75% Fixed Senior Secured Second Lien Notes due March 1, 2022	1,389		1,389
11.25% / 12.25% Senior Toggle Notes due December 1, 2018	1,530		1,530
9.75% Fixed Senior Notes due October 15, 2019	2		2
Total EFIH	3,243		3,243
EFCH
Floating Rate Junior Subordinated Debentures, Series D due January 30, 2037	1		1
8.175% Fixed Junior Subordinated Debentures, Series E due January 30, 2037	8		8
Total EFCH	9		9
TCEH
Senior Secured Facilities:
TCEH Floating Rate Term Loan Facilities due October 10, 2014	3,809		3,809
TCEH Floating Rate Letter of Credit Facility due October 10, 2014	42		42
TCEH Floating Rate Revolving Credit Facility due October 10, 2016	2,054		2,054
TCEH Floating Rate Term Loan Facilities due October 10, 2017	15,691		15,691
TCEH Floating Rate Letter of Credit Facility due October 10, 2017	1,020		1,020
11.5% Fixed Senior Secured Notes due October 1, 2020	~~1,750~~$	1,750	~~1,750~~$	1,750
15% Fixed Senior Secured Second Lien Notes due April 1, 2021	336		336
15% Fixed Senior Secured Second Lien Notes due April 1, 2021, Series B	1,235		1,235
10.25% Fixed Senior Notes due November 1, 2015	1,833		1,833

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	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
10.25% Fixed Senior Notes due November 1, 2015, Series B	$	1,292	$	1,292
15% Fixed Senior Secured Second Lien Notes due April 1, 2021	336		336
15% Fixed Senior Secured Second Lien Notes due April 1, 2021, Series B	1,235		1,235
10.25% Fixed Senior Notes due November 1, 2015	1,833		1,833
10.25% Fixed Senior Notes due November 1, 2015, Series B	1,292		1,292
10.50% / 11.25% Senior Toggle Notes due November 1, 2016	1,749		1,749
Pollution Control Revenue Bonds:
Brazos River Authority:
5.40% Fixed Series 1994A due May 1, 2029	39		39
7.70% Fixed Series 1999A due April 1, 2033	111		111
7.70% Fixed Series 1999C due March 1, 2032	50		50
8.25% Fixed Series 2001A due October 1, 2030	71		71
8.25% Fixed Series 2001D-1 due May 1, 2033	171		171
6.30% Fixed Series 2003B due July 1, 2032	39		39
6.75% Fixed Series 2003C due October 1, 2038	52		52
5.40% Fixed Series 2003D due October 1, 2029	31		31
5.00% Fixed Series 2006 due March 1, 2041	100		100
Sabine River Authority of Texas:
6.45% Fixed Series 2000A due June 1, 2021	51		51
5.20% Fixed Series 2001C due May 1, 2028	70		70
5.80% Fixed Series 2003A due July 1, 2022	12		12
6.15% Fixed Series 2003B due August 1, 2022	45		45
Trinity River Authority of Texas:
6.25% Fixed Series 2000A due May 1, 2028	14		14
Other	1		1
Total TCEH	31,668		31,668
Total EFH Corp. consolidated notes, loans and other debt	$	35,560	$	35,560

TCEH Letter of Credit Facility Activity

Borrowings under the TCEH Letter of Credit Facility ~~have~~had been recorded by TCEH as restricted cash that ~~supports~~supported issuances of letters of credit. At ~~both June 30, 2016 and~~ December 31, 2015, the restricted cash related to the pre-petition TCEH Letter of Credit Facility totaled $507 million, and there were no outstanding letters of credit related to the pre-petition TCEH Letter of Credit Facility. ~~Due~~Pursuant to the ~~default~~confirmation ~~under~~of the ~~pre-petition~~Plan of Reorganization in August 2016 with respect to the TCEH ~~Senior~~Debtors ~~Secured~~and ~~Facilities~~the Contributed EFH Debtors, the ~~letter~~restricted ofcash ~~credit~~was ~~capacity~~reclassified isto nocash ~~longer~~and ~~available~~cash equivalents.

Repayment of EFIH Notes

In March 2015, with the approval of the Bankruptcy Court, EFIH used some of its cash to repay (Repayment) $735 million, including interest at contractual rates, in amounts outstanding under EFIH's pre-petition 11.00% Fixed Senior Secured Second Lien Notes due October 1, 2021 (11.00% Notes) and 11.75% Fixed Senior Secured Second Lien Notes due March 1, 2022 (11.75% Notes) and $15 million in certain fees and expenses of the trustee for such notes. The Repayment resulted in an $84 million reduction in the principal amount of the 11.00% Notes, a $361 million reduction in the principal amount of the 11.75% Notes and the payment of $235 million and $55 million of accrued and unpaid post-petition and pre-petition interest, respectively, at contractual rates. The Repayment required the requisite consent of the lenders under EFIH's DIP Facility. EFIH received such consent from approximately 97% of the lenders under the EFIH DIP Facility in consideration of an aggregate consent fee equal to approximately $13 million.

Information Regarding Significant Pre-Petition Debt

See Note 13 to the Financial Statements in our 2015 Form 10-K for information regarding our pre-petition debt. There have been no changes in pre-petition debt since December 31, 2015.

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12.	COMMITMENTS AND CONTINGENCIES

Guarantees

We have entered into contracts that contain guarantees to unaffiliated parties that could require performance or payment under certain conditions. Material guarantees are discussed below.

See Notes 10 and 11 for discussion of guarantees and security for certain of our post-petition and pre-petition debt.

Letters of Credit

At ~~June~~September 30, 2016, TCEH had outstanding letters of credit under the TCEH DIP ~~Facility~~Roll Facilities totaling $~~528~~546 million as follows:

• $~~386~~399 million to support commodity risk management and trading collateral requirements in the normal course of business, including over-the-counter and exchange-traded hedging transactions and collateral postings with ERCOT;

• $6364 million to support executory contracts and insurance agreements;


•	$55 million to support TCEH's REP financial requirements with the PUCT, and

• $2428 million for other credit support requirements.

~~The~~On ~~automatic stay under~~ the ~~Bankruptcy~~Effective ~~Code~~Date, ~~does~~all ~~not~~of ~~apply~~TCEH's tooutstanding letters of credit ~~issued~~ under the ~~pre-petition~~TCEH ~~credit~~DIP ~~facility~~Roll ~~and~~Facilities ~~third~~became ~~parties~~obligations ~~may~~under ~~draw~~Reorganized ifTCEH's ~~the~~exit ~~terms~~facility of(see aNote ~~particular letter of credit so provide~~10).

Litigation

~~Aurelius~~Make-whole ~~Derivative~~Claims ~~Claim~~ — ~~Aurelius~~In ~~Capital~~May ~~Master~~2014, ~~Ltd.~~the ~~and~~indenture ~~ACP~~trustee ~~Master,~~for ~~Ltd.~~the ~~(Aurelius)~~EFIH ~~filed~~10% aFirst ~~lawsuit~~Lien inNotes ~~March~~initiated ~~2013,~~litigation ~~amended~~ in ~~May~~the ~~2013~~Bankruptcy Court seeking, inamong ~~the~~other USthings, ~~District~~a ~~Court~~declaratory ~~for~~judgment ~~the~~that ~~Northern~~EFIH ~~District~~is ofobligated ~~Texas~~to ~~(Dallas~~pay ~~Division)~~a ~~against~~make-whole ~~EFCH~~premium asin aconnection ~~nominal~~with ~~defendant~~the ~~and~~cash ~~each~~repayment of the ~~current~~EFIH ~~directors~~First ~~and~~Lien aNotes ~~former~~and ~~director~~that ofsuch ~~EFCH. In~~make-whole ~~the~~premium ~~lawsuit,~~is ~~Aurelius,~~an asallowed asecured ~~creditor~~claim, ~~under~~or in the ~~TCEH~~alternative, ~~Senior~~an ~~Secured~~allowed ~~Facilities~~secured ~~and~~or ~~certain~~unsecured ~~TCEH~~claim ~~secured~~for ~~bonds,~~breach ~~both~~ of ~~which~~contract ~~are~~(EFIH ~~guaranteed~~First byLien ~~EFCH,~~Make-whole ~~filed~~Claims). The aindenture ~~derivative~~trustee ~~claim~~has ~~against~~alleged ~~EFCH~~that ~~and~~the ~~its~~EFIH ~~directors. Aurelius~~First ~~alleged~~Lien ~~that~~Make-whole ~~the~~Claims ~~directors~~are ofvalued ~~EFCH~~at ~~breached~~approximately ~~their~~$432 ~~fiduciary~~million ~~duties~~plus toreimbursement ~~EFCH~~of ~~and~~expenses. In ~~its~~separate ~~creditors,~~rulings ~~including~~in ~~Aurelius,~~March byand ~~permitting~~July ~~TCEH~~2015, tothe ~~make~~Bankruptcy ~~certain~~Court ~~loans~~found ~~"without~~that ~~collecting~~no ~~fair~~make-whole ~~and~~premium ~~reasonably~~is ~~equivalent~~due ~~value." The~~with ~~lawsuit~~respect ~~sought~~to ~~recovery~~the ~~for~~EFIH ~~the~~10% ~~benefit~~First ofLien ~~EFCH~~Notes. In ~~January~~February ~~2014~~2016, the ~~district~~US ~~court~~District ~~granted~~Court ~~EFCH's~~for ~~and~~ the ~~directors'~~District ~~motion~~of toDelaware ~~dismiss~~affirmed ~~and~~the inBankruptcy ~~February~~Court's ~~2014 dismissed the lawsuit~~rulings. ~~Aurelius~~In ~~has~~September ~~appealed~~2016, the ~~district court's judgment to the~~ US Court of Appeals for the ~~Fifth~~Third Circuit ~~(Fifth~~heard ~~Circuit~~oral argument in the Indenture Trustee's appeal of the District Court)'s ruling. The ~~appeal~~EFIH ~~was~~Debtors ~~automatically~~intend ~~stayed~~to asvigorously adefend ~~result~~against ofthis ~~the Bankruptcy Filing~~appeal. We cannot predict the outcome or timing of this ~~proceeding, including the financial effects, if any~~appeal.

~~Make-whole Claims —~~ In ~~May~~June 2014, the indenture trustee for the EFIH ~~10%~~Second ~~First~~ Lien Notes initiated litigation in the Bankruptcy Court seeking similar relief as the trustee of the EFIH 10% First Lien Notes with respect to the EFIH Second Lien Notes, including among other things, ~~a declaratory judgment~~ that EFIH is obligated to pay a make-whole premium in connection with ~~the~~any ~~cash~~ repayment of the EFIH ~~First~~Second Lien Notes and that such make-whole premium iswould be an allowed secured claim, or in the alternative, an allowed secured or unsecured claim for breach of contract (the EFIH ~~First~~Second Lien Make-whole Claims). ~~The~~If, ~~indenture~~as ~~trustee~~of ~~has~~September 30, ~~alleged~~2016, ~~that~~ the EFIH ~~First~~Second Lien Make-whole Claims ~~are~~were ~~valued~~allowed, atthe amount of such claims would have been approximately $~~432~~270 million plus reimbursement of expenses. In ~~separate~~October ~~rulings in March and July~~ 2015, the Bankruptcy Court ~~found~~issued a finding that no make-whole premium is due with respect to the EFIH ~~10%~~Second ~~First~~ Lien Notes. In ~~February~~April 2016, the US District Court for the District of Delaware ~~affirmed~~issued a ruling and order affirming the Bankruptcy Court's ~~rulings~~decision. InThe ~~February~~indenture ~~2016,~~trustee ~~the~~has ~~Indenture Trustee~~ appealed ~~the~~that ~~District~~decision ~~Court's ruling~~ to the US Court of Appeals for the Third Circuit~~. Oral~~, ~~argument~~and that court has ~~been~~consolidated ~~scheduled~~the appeal with the appeal filed by the indenture trustee for the EFIH 10% First Lien Notes described above for the purposes of oral argument and final disposition. In September 272016, ~~2016~~the appeals court heard oral argument in the appeal. The EFIH Debtors intend to vigorously defend against this appeal. We cannot predict the outcome or timing of this appeal.

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In ~~June~~July ~~2014~~2015, the ~~indenture~~EFIH ~~trustee~~Debtors ~~for~~filed ~~the~~a ~~EFIH~~claim ~~Second~~objection ~~Lien~~with ~~Notes~~the ~~initiated~~Bankruptcy ~~litigation~~Court inregarding the ~~Bankruptcy~~EFIH ~~Court~~PIK ~~seeking~~noteholders' ~~similar~~claims ~~relief~~for asa ~~the~~redemption ~~trustee~~or ofmake-whole ~~the~~premium ~~EFIH~~and ~~10%~~post-petition ~~First~~interest ~~Lien~~at ~~Notes~~the ~~with~~contract ~~respect~~rate tounder the EFIH ~~Second~~PIK ~~Lien~~ Notes. In October 2015, ~~including~~the ~~among~~Bankruptcy ~~other~~Court ~~things,~~issued ~~that~~opinions in favor of the EFIH isDebtors. One ~~obligated~~opinion tofound ~~pay~~that ano make-whole premium inis ~~connection~~due with ~~any~~respect ~~repayment~~to of the EFIH ~~Second~~PIK ~~Lien~~ Notes. The ~~and~~second ~~that~~opinion ~~such~~found ~~make-whole~~that ~~premium~~the ~~would~~EFIH bePIK annoteholders' allowed ~~secured~~ claim, ordoes innot, ~~the~~as ~~alternative,~~a anmatter ~~allowed~~of ~~secured~~law, orinclude ~~unsecured~~post-petition ~~claim~~interest ~~for~~whether ~~breach~~at ofthe contract ~~(the~~rate ~~EFIH~~or ~~Second~~the ~~Lien~~Federal ~~Make-whole~~Judgment ~~Claims)~~Rate. IfThis opinion did find, ashowever, that, in connection with the confirmation of ~~June 30,~~a ~~2016~~plan of reorganization, the ~~EFIH~~Bankruptcy ~~Second~~Court ~~Lien~~could, ~~Make~~at its discretion, grant post-~~whole~~petition ~~Claims~~interest ~~were~~as ~~allowed,~~part of the ~~amount~~EFIH ofPIK ~~such~~noteholders' ~~claims~~allowed ~~would~~claim ~~have~~under ~~been~~general ~~approximately~~principals ~~$317~~of ~~million~~equity ~~plus~~and ~~reimbursement~~that ofsuch ~~expenses. In~~grant ~~October~~could ~~2015,~~be at the ~~Bankruptcy~~contract ~~Court~~rate, ~~issued~~the aFederal ~~finding~~Judgment ~~that~~Rate noor ~~make-whole~~any ~~premium~~other isamount ~~due~~that ~~with~~the ~~respect~~Bankruptcy Court determines to ~~the~~be equitable. The EFIH ~~Second~~PIK ~~Lien~~Noteholders ~~Notes. In~~have ~~April~~appealed ~~2016,~~both rulings to the US District Court for the District of Delaware. The ~~issued~~parties aagreed ~~ruling~~to and ~~order~~completed ~~affirming~~a ~~the~~briefing ~~Bankruptcy~~schedule; ~~Court's~~however, ~~decision. The~~the ~~indenture~~US ~~trustee~~District ~~has~~Court ~~appealed~~for ~~that decision to~~ the USDistrict ~~Court~~ of ~~Appeals~~Delaware ~~for~~has ~~the~~not ~~Third~~scheduled ~~Circuit,~~oral ~~and~~arguments ~~that~~or ~~court~~otherwise ~~has~~issued ~~consolidated~~a ~~the~~ruling. The appeal ~~with~~of the ~~appeal~~post-petition ~~filed~~interest ruling has been stayed by the ~~indenture~~US ~~trustee~~District Court for the ~~EFIH~~District ~~10%~~of ~~First~~Delaware ~~Lien~~pending ~~Notes~~an ~~described~~equitable ~~above~~proceeding ~~for~~suggested by the ~~purposes~~Bankruptcy ofCourt's ~~oral~~second ~~argument and final disposition~~opinion. ~~Oral~~No ~~argument~~briefing schedule has been ~~scheduled~~set for ~~September~~that ~~27,~~equitable ~~2016~~proceeding. The EFIH Debtors intend to vigorously defend against ~~this~~the ~~appeal~~appeals and the award of post-petition interest at a rate higher than the Federal Judgment Rate. We cannot predict the outcome of ~~this~~either ~~appeal~~of these appeals or any equitable proceeding seeking the award of post-petition interest.

In ~~July~~October 2015, ~~the~~EFH ~~EFIH~~Corp. ~~Debtors~~ filed a claim objection with the Bankruptcy Court ~~regarding~~with ~~the~~respect ~~EFIH~~to ~~PIK~~the ~~noteholders'~~EFH ~~claims~~Corp. ~~for~~Series aP, ~~redemption~~Q ~~or make-whole premium~~ and ~~post-petition~~R ~~interest~~Senior ~~at the contract rate under the EFIH PIK~~ Notes~~. In~~ ~~October 2015~~(collectively, the ~~Bankruptcy~~EFH ~~Court~~Legacy ~~issued opinions in favor of the EFIH Debtors. One opinion found that no make-whole premium is due with respect to the EFIH PIK~~ Notes~~. The~~) ~~second opinion found that the EFIH PIK~~ noteholders' ~~allowed~~claims ~~claim does not~~for, asamong aother ~~matter~~things, ofmake-whole ~~law,~~premiums ~~include~~and post-petition interest ~~whether at the contract rate or the Federal Judgment Rate~~. ~~This opinion did find~~If, ~~however,~~as ~~that, in connection with the confirmation~~ of ~~a plan of reorganization~~September 30, ~~the Bankruptcy Court could~~2016, ata ~~its~~make-whole ~~discretion,~~claim ~~grant~~and a post-petition interest asclaim ~~part~~were ~~of the EFIH PIK noteholders'~~ allowed, ~~claim under general principals of equity and that~~ such ~~grant~~claims ~~could~~would be at$254 ~~the~~million ~~contract~~and ~~rate~~$98 million, ~~the Federal Judgment Rate or any other amount that the Bankruptcy Court determines to be equitable~~respectively. ~~The~~In ~~EFIH~~October ~~PIK~~2015, ~~Noteholders have appealed both rulings to~~ the USindenture ~~District~~trustee ~~Court~~ for the ~~District~~EFH ofLegacy ~~Delaware. With~~Notes ~~respect~~filed toa ~~the~~response ~~make-whole premium dispute, the parties have agreed~~ to athis ~~briefing~~claim ~~schedule that will conclude in August 2016~~objection. ~~The~~No ~~appeal~~argument ofdate ~~the post-petition interest ruling~~ has been ~~stayed~~set by the USBankruptcy ~~District~~ Court ~~for~~regarding the ~~District~~EFH ofLegacy ~~Delaware~~Notes ~~pending~~claim ~~an equitable proceeding suggested by the Bankruptcy Court's second opinion~~objection. NoEFH ~~briefing schedule has been set for that equitable proceeding~~Corp. ~~The~~ ~~EFIH~~intends ~~Debtors intend~~ to vigorously ~~defend~~pursue ~~against~~its ~~the~~claim ~~appeals and the award of post-petition interest at a rate higher than the Federal Judgment Rate~~objection. We cannot predict the outcome of ~~either~~this ~~of these appeals or any equitable~~ proceeding ~~seeking the award of post-petition interest~~.

In October 2015, EFH Corp. filed a claim objection with the Bankruptcy Court with respect to the EFH Corp. ~~Series~~10.875% P,Senior QNotes and R11.25%/12% Senior Toggle Notes (collectively, the EFH ~~Legacy~~LBO Notes) noteholders' claims for, among other things, ~~make-whole~~optional ~~premiums~~redemption payment and post-petition interest. If, as of ~~June~~September 30, 2016, a ~~make-whole~~redemption claim and a post-petition interest claim were allowed, such claims would be ~~$265~~zero ~~million~~ and $8720 million, respectively. InThe ~~October 2015, the~~ indenture trustee for the EFH ~~Legacy~~LBO Notes has not yet filed a response to this claim objection. No argument date has been set by the Bankruptcy Court regarding the EFH ~~Legacy~~LBO Notes claim objection. EFH Corp. intends to vigorously pursue its claim objection. We cannot predict the outcome of this proceeding.

In October 2015, EFH Corp. filed a claim objection with the Bankruptcy Court with respect to the EFH Corp. 10.875% Senior Notes and 11.25%/12% Senior Toggle Notes (collectively, the EFH LBO Notes) noteholders' claims for, among other things, optional redemption payment and post-petition interest. If, as of June 30, 2016, a redemption claim and a post-petition interest claim were allowed, such claims would be zero and $17 million, respectively. The indenture trustee for the EFH LBO Notes has not yet filed a response to this claim objection. No argument date has been set by the Bankruptcy Court regarding the EFH LBO Notes claim objection. EFH Corp. intends to vigorously pursue its claim objection. We cannot predict the outcome of this proceeding.

In addition, creditors may make additional claims in the Chapter 11 Cases for make-whole or redemption premiums in connection with repayments or settlement of other pre-petition debt. These claims could be material. There can be no assurance regarding the outcome of any of the litigation regarding the validity or, if deemed valid, the amount of these make-whole or redemption claims.

~~Adversary~~Litigation ~~Complaint~~Related ~~against~~to ~~Texas~~EPA ~~Transmission~~Reviews — In ~~October~~June ~~2015~~2008, ~~EFH Corp. filed with~~ the ~~Bankruptcy~~EPA ~~Court~~issued an ~~adversary~~initial ~~complaint~~request ~~against~~for ~~Texas~~information ~~Transmission~~to ~~seeking~~TCEH aunder ~~judgment from~~ the ~~Bankruptcy~~EPA's ~~Court~~authority ~~regarding the obligations of Texas Transmission~~ under anSection ~~investor~~114 ~~rights agreement to participate in a sale~~ of ~~EFH~~the ~~Corp.'s~~Clean ~~interests~~Air inAct ~~Oncor~~(CAA). InThe ~~April~~stated ~~2016,~~purpose of the ~~Bankruptcy~~request ~~Court~~is ~~announced~~to itobtain ~~would~~information ~~approve~~necessary ~~EFH~~to ~~Corp.'s~~determine ~~motion~~compliance ~~for~~with ~~summary~~the ~~judgment~~CAA, inincluding ~~full~~New ~~and~~Source ~~denied~~Review ~~Texas~~Standards ~~Transmission's~~and ~~motion~~air ~~for~~permits aissued ~~determination~~by ~~that~~ the ~~court~~TCEQ ~~lacks~~for ~~authority~~the toBig ~~enter~~Brown, aMonticello ~~final~~and ~~judgment~~Martin orLake ~~order~~generation ~~in the proceeding~~facilities. In ~~May~~April ~~2016~~2013, ~~the~~we ~~Bankruptcy~~received ~~Court~~an ~~entered~~additional aninformation ~~order~~request ~~dismissing~~from the ~~proceeding~~EPA asunder noSection ~~longer~~114 ~~relevant~~related asto athe ~~result~~Big ofBrown, ~~the~~Martin ~~termination~~Lake ofand ~~the~~Monticello ~~merger~~facilities ~~agreement~~as ~~relating~~well toas ~~the~~an ~~proposed~~initial ~~sale~~information ofrequest ~~EFH~~related ~~Corp.'s~~to ~~ownership~~the inSandow ~~Oncor~~4 generation facility.

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~~Litigation Related to EPA Reviews —~~ In ~~June~~July ~~2008~~2012, the EPA ~~issued~~sent anus ~~initial~~a ~~request~~notice ~~for~~of ~~information~~violation toalleging ~~TCEH~~noncompliance ~~under~~with the ~~EPA~~CAA's ~~authority~~New ~~under~~Source ~~Section~~Review ~~114~~Standards ofand the ~~Clean~~air ~~Air~~permits ~~Act~~at ~~(CAA)~~our Martin Lake and Big Brown generation facilities. ~~The~~In ~~stated~~July ~~purpose~~2013, of the ~~request~~EPA issent tous ~~obtain~~a ~~information~~second ~~necessary~~notice toof ~~determine~~violation ~~compliance~~alleging noncompliance with the CAA,'s ~~including~~ New Source Review Standards at our Martin Lake and ~~air~~Big ~~permits~~Brown ~~issued~~generation byfacilities, which the ~~TCEQ~~EPA said "superseded" its July 2012 notice. In August 2013, the US Department of Justice, acting as the attorneys for the EPA, filed a civil enforcement lawsuit against Luminant Generation Company LLC and Big Brown Power Company LLC in federal district court in Dallas, ~~Monticello~~alleging violations of the CAA at our Big Brown and Martin Lake generation facilities. In ~~April~~August ~~2013~~2015, wethe ~~received~~district court issued its ruling on our motion to dismiss and granted the motion as to seven of the nine claims asserted by the EPA in the lawsuit. In August 2016, the EPA filed an ~~additional~~amended ~~information~~complaint, eliminating one of the two remaining claims and withdrawing a request ~~from~~for civil penalties in the other remaining claim. The EPA also filed a motion for entry of final judgment. In September 2016, we filed a motion opposing the EPA's motion for entry of final judgment. In October 2016, the district court denied the EPA's motion for entry of final judgment. Presently, the part of the one remaining claim remains before the district court, and it is currently scheduled for trial in October 2017. We believe that we have complied with all requirements of the CAA and intend to vigorously defend against the remaining allegations. The lawsuit requests the maximum civil penalties available under ~~Section~~the ~~114~~CAA ~~related~~to the government of up to $32,500 to $37,500 per day for each alleged violation, depending on the ~~Big~~date ~~Brown~~of the alleged violation, ~~Martin~~and ~~Lake~~injunctive relief, including an order requiring the installation of best available control technology at the affected units. An adverse outcome could require substantial capital expenditures that cannot be determined at this time and ~~Monticello~~could ~~facilities~~possibly asrequire ~~well~~the aspayment anof ~~initial~~substantial ~~information~~penalties. We ~~request~~cannot ~~related~~predict tothe outcome of these proceedings, including the ~~Sandow~~financial 4effects, ~~generation~~if ~~facility~~any.

In July 2012, the EPA sent us a notice of violation alleging noncompliance with the CAA's New Source Review Standards and the air permits at our Martin Lake and Big Brown generation facilities. In July 2013, the EPA sent us a second notice of violation alleging noncompliance with the CAA's New Source Review Standards at our Martin Lake and Big Brown generation facilities, which the EPA said "superseded" its July 2012 notice. In August 2013, the US Department of Justice, acting as the attorneys for the EPA, filed a civil enforcement lawsuit against Luminant Generation Company LLC and Big Brown Power Company LLC in federal district court in Dallas, alleging violations of the CAA at our Big Brown and Martin Lake generation facilities. In August 2015, the district court issued its ruling on our motion to dismiss and granted the motion as to seven of the nine claims asserted by the EPA in the lawsuit. Two claims remain before the district court, and those are currently scheduled for trial in October 2017. We believe that we have complied with all requirements of the CAA and intend to vigorously defend against the remaining allegations. The lawsuit requests the maximum civil penalties available under the CAA to the government of up to $32,500 to $37,500 per day for each alleged violation, depending on the date of the alleged violation, and injunctive relief, including an order requiring the installation of best available control technology at the affected units. An adverse outcome could require substantial capital expenditures that cannot be determined at this time and could possibly require the payment of substantial penalties. We cannot predict the outcome of these proceedings, including the financial effects, if any.

Greenhouse Gas Emissions

In August 2015, the EPA finalized rules to address greenhouse gas (GHG) emissions from new, modified and reconstructed units, and existing electricity generation plants. The rule for existing facilities would establish state-specific emissions rate goals to reduce nationwide carbon dioxide emissions related to affected electricity generation units by over 30% from 2012 emission levels by 2030. A number of parties, including Luminant, filed petitions for review in the US Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) for the rule for new, modified and reconstructed plants. In addition, a number of petitions for review of the rule for existing plants were filed in the D.C. Circuit Court by various parties and groups, including challenges from twenty-seven different states opposed to the rule as well as those from, among others, certain power generating companies, various business groups and some labor unions. Luminant also filed its own petition for review. In January 2016, a coalition of states, industry (including Luminant) and other parties filed applications with the US Supreme Court asking that the court stay the rule while the court reviews the legality of the rule for existing plants. In February 2016, the US Supreme Court stayed the rule pending the conclusion of legal challenges on the rule before the D.C. Circuit Court and until the US Supreme Court disposes of any subsequent petition for review. Oral argument on the merits of the legal challenges to the rule iswas ~~scheduled~~heard ~~for~~in September 2016 before the entire D.C. Circuit Court. While we cannot predict the outcome of this rulemaking and legal proceedings on our results of operations, liquidity or financial condition, the impacts could be material.

In August 2015, the EPA proposed model rules and federal plan requirements for states to consider as they develop state plans to comply with the rules for GHG emissions. A federal plan would then be finalized for a state if a state fails to submit a state plan by the deadlines established in the CAA for existing plants or if the EPA disapproves a submitted state plan. We filed comments on the federal plan proposal in January 2016. While we cannot predict the timing or outcome of this rulemaking and legal proceedings on our results of operations, liquidity or financial condition, the impacts could be material.

Cross-State Air Pollution Rule (CSAPR)

In July 2011, the EPA issued the CSAPR, compliance with which would have required significant additional reductions of sulfur dioxide (SO₂) and nitrogen oxide (NO_x) emissions from our fossil fueled generation units. In February 2012, the EPA released a final rule (Final Revisions) and a proposed rule revising certain aspects of the CSAPR, including increases in the emissions budgets for Texas and our generation assets as compared to the July 2011 version of the rule. In June 2012, the EPA finalized the proposed rule (Second Revised Rule).

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The CSAPR became effective January 1, 2015. In July 2015, following a remand of the case from the US Supreme Court to consider further legal challenges, the D.C. Circuit Court unanimously ruled in favor of us and other petitioners, holding that the CSAPR emissions budgets over-controlled Texas and other states. The D.C. Circuit Court remanded those states' budgets to the EPA for prompt reconsideration. While we planned to participate in the EPA's reconsideration process to develop increased budgets that do not over-control Texas, the EPA instead responded to the remand by updating the NO_X ozone season budget for the 2008 ozone standard with a new rulemaking without explicitly addressing the issues of over-control of the 1997 standard. Comments on the EPA's proposal were submitted by Luminant in February 2016. In June 2016, the EPA issued a memorandum describing the EPA's proposed approach for responding to the D.C. Circuit Court's remand for reconsideration of the CSAPR SO₂ emission budgets for Texas and three other states that had been remanded to the EPA by the D.C. Circuit Court. In the memorandum, the EPA stated that those four states could either voluntarily participate in the CSAPR by submitting a SIP revision adopting the SO₂ budgets that had been previously held invalid by the D.C. Circuit Court and the current annual NOx budgets or, if the state chooses not to participate in the CSAPR, the EPA could withdraw the CSAPR FIPs by the fall of 2016 for those states and address any interstate transport and regional haze obligations on a state-by-state basis. While we cannot predict the outcome of future proceedings related to the CSAPR, including the EPA's recent actions concerning the CSAPR annual emissions budgets for affected states and participating in the CSAPR program, based upon our current operating plans we do not believe that the CSAPR will cause any material operational, financial or compliance issues. We are currently evaluating the EPA's recent proposed actions regarding SO₂ budgets for Texas.

Regional Haze

The Regional Haze Program of the CAA establishes "as a national goal the prevention of any future, and the remedying of any existing, impairment of visibility in mandatory Class I federal areas, like national parks, which impairment results from man-made pollution." There are two components to the Regional Haze Program. First, states must establish goals for reasonable progress for Class I federal areas within the state and establish long-term strategies to reach those goals and to assist Class I federal areas in neighboring states to achieve reasonable progress set by those states towards a goal of natural visibility by 2064. Second, electricity generation units built between 1962 and 1977 are subject to best available retrofit technology (BART) standards designed to improve visibility. BART reductions of SO₂ and NO_X are required either on a unit-by-unit basis or are deemed satisfied by state participation in an EPA-approved regional trading program such as the CSAPR. In February 2009, the TCEQ submitted a State Implementation Plan (SIP) concerning regional haze (Regional Haze SIP) to the EPA. In December 2011, the EPA proposed a limited disapproval of the Regional Haze SIP due to its reliance on the Clean Air Interstate Rule (CAIR) instead of the EPA's replacement CSAPR program. In August 2012, we filed a petition for review in the Fifth Circuit Court challenging the EPA's limited disapproval of the Regional Haze SIP on the grounds that the CAIR continued in effect pending the D.C. Circuit Court's decision in the CSAPR litigation. In September 2012, we filed a petition to intervene in a case filed by industry groups and other states and private parties in the D.C. Circuit Court challenging the EPA's limited disapproval and issuance of a Federal Implementation Plan (FIP) regarding the regional haze BART program. The Fifth Circuit Court case has since been transferred to the D.C. Circuit Court and consolidated with other pending BART program regional haze appeals. Briefing in the D.C. Circuit Court is scheduled to be completed by March 2017.

In response to a lawsuit by environmental groups, the D.C. Circuit Court issued a consent decree in March 2012 that required the EPA to propose a decision on the Regional Haze SIP by May 2012 and finalize that decision by November 2012. The consent decree requires a FIP for any provisions that the EPA disapproves. The D.C. Circuit Court has amended the consent decree several times to extend the dates for the EPA to propose and finalize a decision on the Regional Haze SIP. The consent decree was modified in December 2015 to extend the deadline for the EPA to finalize action on the determination and adoption of requirements for BART for electricity generation. Under the amended consent decree the EPA has until December 2016 to finalize a FIP for BART for Texas electricity generation sources, if the EPA determines that BART requirements have not been met.

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In June 2014, the EPA issued requests for information under Section 114 of the CAA to Luminant and other generators in Texas. After releasing a proposed rule in November 2014 and receiving comments from a number of parties, including Luminant and the State of Texas in April 2015, the EPA released a final rule in January 2016 approving in part and disapproving in part Texas' SIP for Regional Haze and issuing a FIP for Regional Haze. In the rule, the EPA asserts that the Texas SIP does not show reasonable progress in improving visibility for two areas in Texas and that its long-term strategy fails to make emission reductions needed to achieve reasonable progress in improving visibility in the Wichita Mountains of Oklahoma. Unlike the proposed rule and inconsistent with how the EPA has applied Regional Haze rules to other states, the EPA's final rule does not treat Texas's compliance with the CSAPR as satisfying its obligations under the BART portion of the Regional Haze Program. The EPA concluded that it would not be appropriate to finalize that determination at this time given the remand of the CSAPR budgets. In our view, the EPA's proposed FIP for Texas goes beyond the requirements of the CAA and sets emission limits on a unit-by-unit basis for 15 electricity generation units in Texas. The EPA's proposed emission limits assume additional control equipment for specific coal fueled generation units across Texas, including new flue gas desulfurization systems (scrubbers) at seven generation units and upgrades to existing scrubbers at seven generation units. Specifically for Luminant, the EPA's emission limitations are based on new scrubbers at Big Brown Units 1 and 2 and Monticello Units 1 and 2 and scrubber upgrades at Martin Lake Units 1, 2 and 3, Monticello Unit 3 and Sandow Unit 4. Luminant is continuing to evaluate the requirements and potential financial and operational impacts of the rule, but new scrubbers at the Big Brown and Monticello units necessary to achieve the emission limits required by the FIP (if those limits are possible to attain), along with the existence of low wholesale power prices in ERCOT, would likely challenge the long-term economic viability of those units. Under the terms of the rule, the scrubber upgrades will be required by February 2019, and the new scrubbers will be required by February 2021. In March 2016, Luminant and a number of other parties, including the State of Texas, filed petitions for review in the US Fifth Circuit Court challenging the FIP on Texas. Luminant and other parties also filed motions to stay the FIP while the court reviews the legality of the EPA's action. In July 2016, the Fifth Circuit Court denied the EPA's motion to dismiss our challenge to the FIP and denied the EPA's motion to transfer the challenges Luminant, the other industry petitioners and the State of Texas filed to the D.C. Circuit Court. In addition, the Fifth Circuit Court granted the motions to stay filed by Luminant, the other industry petitioners and the State of Texas pending final review of the petitions for review. The case is currently abated until the end of November 2016 in order to allow the parties to pursue settlement discussions. While we cannot predict the outcome of the rulemaking and legal proceedings, the result may have a material impact on our results of operations, liquidity or financial condition.

State Implementation Plan (SIP)

In February 2013, in response to a petition for rulemaking filed by the Sierra Club, the EPA proposed a rule requiring certain states to replace SIP exemptions for excess emissions during malfunctions with an affirmative defense. Texas was not included in that original proposal since it already had an EPA-approved affirmative defense provision in its SIP. In 2014, as a result of a D.C. Circuit Court decision striking down an affirmative defense in another EPA rule, the EPA revised its 2013 proposal to extend the EPA's proposed findings of inadequacy to states that have affirmative defense provisions, including Texas. The EPA's revised proposal would require Texas to remove or replace its EPA-approved affirmative defense provisions for excess emissions during startup, shutdown and maintenance events. In May 2015, the EPA finalized the proposal. In June 2015, we filed a petition for review in the Fifth Circuit Court challenging certain aspects of the EPA's final rule as they apply to the Texas SIP. The State of Texas and other parties have also filed similar petitions in the Fifth Circuit Court. In August 2015, the Fifth Circuit Court transferred the petitions that Luminant and other parties filed to the D.C. Circuit Court, and in October 2015 the petitions were consolidated with the pending petitions challenging the EPA's action in the D.C. Circuit Court. Briefing in the D.C. Circuit Court on the challenges iswas ~~scheduled to be~~ completed byin ~~the~~October ~~end of September~~ 2016. We cannot predict the timing or outcome of this proceeding.

In June 2014, the Sierra Club filed a petition in the D.C. Circuit Court seeking review of several EPA regulations containing affirmative defenses for malfunctions, including the Mercury and Air Toxics Standard (MATS) rule for power plants. In the petition, the Sierra Club contends this affirmative defense is no longer permissible in light of a D.C. Circuit Court decision regarding similar defenses applicable to the cement industry. Luminant filed a motion to intervene in this case. In July 2014, the D.C. Circuit Court ordered the case stayed pending the EPA's consideration of a petition for administrative reconsideration of the regulations at issue. In December 2014, the EPA signed a proposal to make technical corrections to the MATS rule. We filed comments on this proposal in April 2015. In March 2016, the EPA finalized the MATS technical corrections, including the removal of affirmative defense for malfunctions. Except as set forth above, we cannot predict the timing or outcome of future proceedings related to this petition, the petition for administrative reconsideration that is pending before the EPA or the financial effects of these proceedings, if any.

Other Matters

We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolutions of which, in the opinion of management, are not anticipated to have a material effect on our results of operations, liquidity or financial condition.

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Other Matters


13.	EQUITY

EFH Corp. has not declared or paid any dividends since the Merger. The agreement governing the TCEH DIP ~~Facility~~Roll Facilities generally restricts TCEH's ability to make distributions or loans to any of its parent companies or their subsidiaries unless such distributions or loans are expressly permitted under the agreement governing such facility. The agreement governing the EFIH DIP Facility generally restricts EFIH's ability to make distributions or loans to any of its parent companies or their subsidiaries unless such distributions or loans are expressly permitted under the agreement governing such facility.

Under applicable law, we are prohibited from paying any dividend to the extent that immediately following payment of such dividend, there would be no statutory surplus or we would be insolvent. ~~In addition, due to the Chapter 11 Cases, no dividends are eligible to be paid without the approval of the Bankruptcy Court.~~

Equity

The following table presents the changes to equity for the ~~six~~nine months ended ~~June~~September 30, 2016:

	EFH Corp. Shareholders’ Equity
	Common Stock (a)		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Equity
Balance at December 31, 2015	$	2	$	7,968	$	(32,905	)	$	(126	)	$	(25,061	)
Net loss	—		—		(~~579~~413		)	—			(~~579~~413		)
Change in unrecognized losses related to pension and OPEB plans	—		—		—			(35		)	(35		)
Net effects of cash flow hedges	—		—		—			1			1
Net effects related to Oncor	—		—		—			12			12
Balance at June 30, 2016	$	2	$	7,968	$	(33,484	)	$	(127	)	$	(25,641	)
Balance at September 30, 2016	$	2	$	7,968	$	(33,318	)	$	(128	)	$	(25,476	)

________________

(a) Authorized shares totaled 2,000,000,000 at ~~June~~September 30, 2016. Outstanding shares totaled 1,669,861,379 at both ~~June~~September 30, 2016 and December 31, 2015.

The following table presents the changes to equity for the ~~six~~nine months ended ~~June~~September 30, 2015:

	EFH Corp. Shareholders’ Equity
	Common Stock (a)		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Equity
Balance at December 31, 2014	$	2	$	7,968	$	(27,563	)	$	(130	)	$	(19,723	)
Net loss	—		—		(13,~~739~~199		)	—			(13,~~739~~199		)
Change in unrecognized losses related to pension and OPEB plans	—		—		—			(23		)	(23		)
Net effects of cash flow hedges	—		—		—			1			1
Net effects related to Oncor	—		—		—			12			12
Balance at June 30, 2015	$	2	$	7,968	$	(29,302	)	$	(130	)	$	(21,462	)
Balance at September 30, 2015	$	2	$	7,968	$	(30,762	)	$	(130	)	$	(22,922	)

________________

(a) Authorized shares totaled 2,000,000,000 at ~~June~~September 30, 2015. Outstanding shares totaled 1,669,861,379 at both ~~June~~September 30, 2015 and December 31, 2014.

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Accumulated Other Comprehensive Loss

The following table presents the changes to accumulated other comprehensive income (loss) for the ~~six~~nine months ended ~~June~~September 30, 2016. There was no other comprehensive income (loss) before reclassification for the period.

	Dedesignated Cash Flow Hedges – Interest Rate Swaps (Note 15)			Pension and Other Postretirement Employee Benefit Liabilities Adjustments			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2015	$	(50	)	$	(76	)	$	(126	)
Amounts reclassified from accumulated other comprehensive loss and reported in:
Operating costs	—			(24		)	(24		)
Depreciation and amortization	1			—			1
Selling, general and administrative expenses	—			(34		)	(34		)
Income tax benefit	—			23			23
Equity in earnings of unconsolidated subsidiaries (net of tax)	1			—1			12
Total amount reclassified from accumulated other comprehensive loss during the period	2			(34		)	(12		)
Balance at June 30, 2016	$	(48	)	$	(79	)	$	(127	)
Balance at September 30, 2016	$	(48	)	$	(80	)	$	(128	)

The following table presents the changes to accumulated other comprehensive income (loss) for the ~~six~~nine months ended ~~June~~September 30, 2015. There was no other comprehensive income (loss) before reclassification for the period.

	Dedesignated Cash Flow Hedges – Interest Rate Swaps (Note 15)			Pension and Other Postretirement Employee Benefit Liabilities Adjustments			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2014	$	(53	)	$	(77	)	$	(130	)
Amounts reclassified from accumulated other comprehensive loss and reported in:
Operating costs	—			(12		)	(12		)
Depreciation and amortization	1			—			1
Selling, general and administrative expenses	—			(23		)	(23		)
Income tax benefit	—			12			12
Equity in earnings of unconsolidated subsidiaries (net of tax)	1			—1			12
Total amount reclassified from accumulated other comprehensive loss during the period	2			(2		)	—
Balance at June 30, 2015	$	(51	)	$	(79	)	$	(130	)
Balance at September 30, 2015	$	(51	)	$	(79	)	$	(130	)


14.	FAIR VALUE MEASUREMENTS

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 willing 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 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.

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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. Our Level 1 assets and liabilities include exchange-traded commodity contracts. For example, some of our derivatives are NYMEX or ICE futures and swaps transacted through clearing brokers for which prices are actively quoted.

•

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 mathematical 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. For example, our Level 2 assets and liabilities include forward commodity positions at locations for which over-the-counter broker quotes are available.

•

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. For example, our Level 3 assets and liabilities include certain derivatives with values derived from pricing models that utilize multiple inputs to the valuations, including inputs that are not observable or easily corroborated through other means. See further discussion below.

Our valuation policies and procedures are developed, maintained and validated by a centralized risk management group that reports to the Chief Financial Officer, who also functions as the Chief Risk Officer. Risk management functions include commodity price reporting and validation, valuation model validation, risk analytics, risk control, credit risk management and risk reporting.

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. These methods include, among others, the use of broker quotes and statistical relationships between different price curves.

In utilizing broker quotes, we attempt to obtain multiple quotes from brokers (generally non-binding) that are active in the commodity markets in which we participate (and require at least one quote from two brokers to determine a pricing input as observable); however, not all pricing inputs are quoted by brokers. The number of broker quotes received for certain pricing inputs varies depending on the depth of the trading market, each individual broker's publication policy, recent trading volume trends and various other factors.

Probable loss from default by either us or our counterparties is considered in determining the fair value of derivative assets and liabilities. These non-performance risk adjustments take into consideration credit enhancements and the credit risks associated with our credit standing and the credit standing of our counterparties (see Note 15 for additional information regarding credit risk associated with our derivatives). We utilize credit ratings and default rate factors in calculating these fair value measurement adjustments.

Certain derivatives and financial instruments are valued utilizing option pricing models that take into consideration multiple inputs including, but not limited to, commodity prices, volatility factors, discount rates and other market based factors. Additionally, when there is not a sufficient amount of observable market data, valuation models are developed that incorporate proprietary views of market factors. Significant unobservable inputs used to develop the valuation models include volatility curves, correlation curves, illiquid pricing locations and credit/non-performance risk assumptions. Those valuation models are generally used in developing long-term forward price curves for certain commodities. We believe the development of such curves is consistent with industry practice; however, the fair value measurements resulting from such curves are classified as Level 3.

The significant unobservable inputs and valuation models are developed by employees trained and experienced in market operations and fair value measurements and validated by the company's risk management group, which also further analyzes any significant changes in Level 3 measurements. Significant changes in the unobservable inputs could result in significant upward or downward changes in the fair value measurement.

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With respect to amounts presented in the following fair value hierarchy tables, the fair value measurement of an asset or liability (e.g., a contract) is required to fall in its entirety in one level, based on the lowest level input that is significant to the fair value measurement. Certain assets and liabilities would be classified in Level 2 instead of Level 3 of the hierarchy except for the effects of credit reserves and non-performance risk adjustments, respectively. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability being measured.

Assets and liabilities measured at fair value on a recurring basis consisted of the following:

June 30, 2016
September 30, 2016
	Level 1		Level 2		Level 3 (a)		Reclassification (b)		Total
Assets:
Commodity contracts	$	~~239~~118	$	5097	$	74109	$	154	$	~~378~~328
Nuclear decommissioning trust – equity securities (c)	~~396~~410		—		—		—		~~396~~410
Nuclear decommissioning trust – debt securities (c)	—		~~342~~348		—		—		~~342~~348
Sub-total	$	~~635~~528	$	~~392~~445	$	74109	$	154	1,~~116~~086
Assets measured at net asset value (d):
Nuclear decommissioning trust – equity securities (c)									~~228~~237
Total assets									$	1,~~344~~323
Liabilities:
Commodity contracts	$	~~168~~97	$	~~120~~17	$	8312	$	154	$	~~386~~130
Total liabilities	$	~~168~~97	$	~~120~~17	$	8312	$	154	$	~~386~~130



December 31, 2015
	Level 1		Level 2		Level 3 (a)		Reclassification (b)		Total
Assets:
Commodity contracts	$	385	$	41	$	49	$	—	$	475
Nuclear decommissioning trust – equity securities (c)	380		219		—		—		599
Nuclear decommissioning trust – debt securities (c)	—		319		—		—		319
Total assets	$	765	$	579	$	49	$	—	$	1,393
Liabilities:
Commodity contracts	$	128	$	64	$	12	$	—	$	204
Total liabilities	$	128	$	64	$	12	$	—	$	204

____________


(a)	See table below for description of Level 3 assets and liabilities.


(b)	Fair values are determined on a contract basis, but certain contracts result in a current asset and a noncurrent liability, or vice versa, as presented in the condensed consolidated balance sheets.


(c)	The nuclear decommissioning trust investment is included in the other investments line in the condensed consolidated balance sheets. See Note 18.

(d)

Certain investments measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. This presentation is only allowed for periods beginning after December 15, 2015. The fair value amounts presented in this line are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

Commodity contracts consist primarily of natural gas, electricity, fuel oil, uranium and coal agreements and include financial instruments entered into for hedging purposes as well as physical contracts that have not been designated normal purchases or sales. See Note 15 for further discussion regarding derivative instruments.

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Nuclear decommissioning trust assets represent securities held for the purpose of funding the future retirement and decommissioning of our nuclear generation facility. These investments include equity, debt and other fixed-income securities consistent with investment rules established by the NRC and the PUCT.

The following tables present the fair value of the Level 3 assets and liabilities by major contract type and the significant unobservable inputs used in the valuations at ~~June~~September 30, 2016 and December 31, 2015:

June 30, 2016
September 30, 2016
	Fair Value
Contract Type (a)	Assets		Liabilities			Total			Valuation Technique	Significant Unobservable Input	Range (b)
Electricity purchases and sales	$	339	$	(331	)	$	~~(30~~38	)	Valuation Model	Hourly price curve shape (d)	$0 to $35/ MWh
										Illiquid delivery periods for ERCOT hub power prices and heat rates (e)	$30 to $6070/ MWh
Electricity spread options	3231		(454		)	~~(13~~27		)	Option Pricing Model	Gas to power correlation (f)	50% to ~~100~~95%
										Power volatility (g)	10% to 4560%
Electricity congestion revenue rights	3432		(46		)	3026			Market Approach (h)	Illiquid price differences between settlement points (i)	$0 to $10/MWh
Other (j)	57		(1		)	46
Total	$	74109	$	(8312	)	$	(997	)



December 31, 2015
	Fair Value
Contract Type (a)	Assets		Liabilities			Total			Valuation Technique	Significant Unobservable Input	Range (b)
Electricity purchases and sales	$	1	$	(1	)	$	—		Valuation Model	Illiquid pricing locations (c)	$15 to $35/ MWh
										Hourly price curve shape (d)	$15 to $45/ MWh
Electricity spread options	2		(7		)	(5		)	Option Pricing Model	Gas to power correlation (f)	35% to 80%
										Power volatility (g)	10% to 35%
Electricity congestion revenue rights	39		(4		)	35			Market Approach (h)	Illiquid price differences between settlement points (i)	$0 to $10/MWh
Other (j)	7		—			7
Total	$	49	$	(12	)	$	37

____________


(a)	Electricity purchase and sales contracts include power and heat rate hedging positions in the ERCOT regions. Electricity spread options contracts consist of physical electricity call options. Electricity congestion revenue rights contracts consist of forward purchase contracts (swaps and options) used to hedge electricity price differences between settlement points within ERCOT.


(b)	The range of the inputs may be influenced by factors such as time of day, delivery period, season and location.


(c)	Based on the historical range of forward average monthly ERCOT hub and load zone prices.


(d)	Based on the historical range of forward average hourly ERCOT North Hub prices.


(e)	Based on historical forward ERCOT power price and heat rate variability.


(f)	Estimate of the historical range based on forward natural gas and on-peak power prices for the ERCOT hubs most relevant to our spread options.


(g)	Based on historical forward price changes.


(h)	While we use the market approach, there is insufficient market data to consider the valuation liquid.


(i)	Based on the historical price differences between settlement points within the ERCOT hubs and load zones.

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(j)	Other includes contracts for ancillary services, natural gas, power options, coal and coal options.

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. See the table of changes in fair values of Level 3 assets and liabilities below for discussion of transfers between Level 2 and Level 3 for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. During the three months ended June 30, 2016, in conjunction with the Lamar and Forney Acquisition, we assumed certain electricity spread options that are classified in Level 3 of the fair value hierarchy.

The following table presents the changes in fair value of the Level 3 assets and liabilities for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015.

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net asset balance at beginning of period	$	25		$	60		$	37		$	35
Net asset (liability) balance at beginning of period	$	(9	)	$	44		$	37		$	35
Total unrealized valuation gains (losses)	1126			(21		)	(4122		)	1413
Purchases, issuances and settlements (a):
Purchases	1211			135			2637			3237
Issuances	(4		)	(2		)	(1620		)	(57		)
Settlements	(1724		)	(1719		)	(2751		)	(2544		)
Transfers into Level 3 (b)	1—			—			1			—
Transfers out of Level 3 (b)	—			(8—		)	1			(7		)
Net liabilities assumed in the Lamar and Forney Acquisition (Note 3)	(273		)	—			(2730		)	—
Net change (c)	~~(34~~106		)	(1617		)	~~(46~~60		)	9(8		)
Net asset (liability) balance at end of period	$	(9	)	$	44		$	(9	)	$	44
Net asset balance at end of period	$	97		$	27		$	97		$	27
Unrealized valuation gains (losses) relating to instruments held at end of period	$	(5	)	$	1		$	(8	)	$	9
Unrealized valuation gains relating to instruments held at end of period	$	92		$	1		$	98		$	1

____________


(a)	Settlements reflect reversals of unrealized mark-to-market valuations previously recognized in net income. Purchases and issuances reflect option premiums paid or received.


(b)	Includes transfers due to changes in the observability of significant inputs. Transfers in and out occur at the end of each quarter, which is when the assessments are performed. All Level 3 transfers during the periods presented are in and out of Level 2.

(c) Substantially all changes in values of commodity contracts (excluding net liabilities assumed in the Lamar and Forney Acquisition) are reported in the condensed statements of consolidated income (loss) in net gain ~~(loss)~~ from commodity hedging and trading activities. Activity excludes changes in fair value in the month the positions settled as well as amounts related to positions entered into and settled in the same quarter.


15.	COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES

Strategic Use of Derivatives

WeTCEH ~~transact~~transacts in derivative instruments, such as options, swaps, futures and forward contracts, to manage commodity price risk. See Note 14 for a discussion of the fair value of derivatives.

Commodity Hedging and Trading Activity — TCEH ~~has~~utilizes natural gas derivatives as hedging ~~positions~~instruments designed to reduce exposure to changes in future electricity prices due to changes in the price of natural gas, thereby hedging future revenues from electricity sales from our ~~lignite/coal and nuclear fueled~~ generation assets. In ERCOT, the wholesale price of electricity has generally moved with the price of natural gas. TCEH also enters into derivatives, including electricity, natural gas, fuel oil, uranium, emission and coal instruments, generally for short-term hedging purposes. Consistent with existing Bankruptcy Court orders, to a limited extent, TCEH also enters into derivative transactions for proprietary trading purposes, principally in natural gas and electricity markets. Unrealized gains and losses arising from changes in the fair value of hedging and trading instruments as well as realized gains and losses upon settlement of the instruments are reported in the condensed statements of consolidated income (loss) in net gain ~~(loss)~~ from commodity hedging and trading activities.

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Termination of Commodity Hedges and Interest Rate Swaps — Commodity hedges and interest rate swaps entered into prior to the Petition Date are deemed to be forward contracts under the Bankruptcy Code. The Bankruptcy Filing constituted an event of default under these arrangements, and in accordance with the contractual terms, counterparties terminated certain positions shortly after the Bankruptcy Filing. The positions terminated consisted almost entirely of natural gas hedging positions and interest rate swaps that were secured by a first-lien interest in the same assets of TCEH on a pari passu basis with the TCEH Senior Secured Facilities and the TCEH Senior Secured Notes.

Entities with a first-lien security interest included counterparties to both our natural gas hedging positions and interest rate swaps, which had entered into master agreements that provided for netting and setoff of amounts related to these positions. Additionally, certain counterparties to only our interest rate swaps hold the same first-lien security interest. The total net liability of $1.243 billion isas ~~subject to the terms~~ of ~~settlement~~September 30, of2016 ~~TCEH's first-lien claims ultimately approved by the Bankruptcy Court and~~ is reported in the condensed consolidated balance sheets as a liability subject to compromise. Additionally, counterparties associated with the net liability are allowed, and, ~~have~~prior to the Effective Date, had been receiving, adequate protection payments related to their claims as permitted by TCEH's cash collateral order approved by the Bankruptcy Court (see Note 8).

Financial Statement Effects of Derivatives

Substantially all derivative contractual assets and liabilities ~~arise~~are ~~from~~accounted for under mark-to-market accounting consistent with accounting standards related to derivative instruments and hedging activities. The following tables provide detail of derivative contractual assets and liabilities as reported in the condensed consolidated balance sheets at ~~June~~September 30, 2016 and December 31, 2015. Derivative asset and liability totals represent the net value of the contract, while the balance sheet totals represent the gross value of the contract. All amounts relate to commodity contracts.

	June 30, 2016									December 31, 2015
	September 30, 2016									December 31, 2015
	Derivative Assets			Derivative Liabilities			Total			Derivative Assets		Derivative Liabilities			Total
Current assets	$	~~355~~256		$	8—		$	~~363~~256		$	465	$	—		$	465
Noncurrent assets	1572			—			1572			10		—			10
Current liabilities	—(4		)	(~~315~~121		)	(~~315~~125		)	—		(203		)	(203		)
Noncurrent liabilities	(7—		)	(645		)	(715		)	—		(1		)	(1		)
Net assets (liabilities)	$	~~363~~324		$	(~~371~~126	)	$	(8198	)	$	475	$	(204	)	$	271

At ~~June~~September 30, 2016 and December 31, 2015, there were no derivative positions accounted for as cash flow or fair value hedges.

The pretax effect of derivatives on net income (loss), including realized and unrealized effects, totaled $~~100~~239 million ~~in net losses~~ and $26130 million in net gains in the three months ended ~~June~~September 30, 2016 and 2015, respectively, and $45194 million ~~in net losses~~ and $~~151~~281 million in net gains in the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively, all of which related to commodity contracts reported in net gain ~~(loss)~~ from commodity hedging and trading activities in the condensed statements of consolidated income (loss). Amounts represent changes in fair value of positions in the derivative portfolio during the period, as realized amounts related to positions settled are assumed to equal reversals of previously recorded unrealized amounts.

The pretax effect (all losses) on net income and other comprehensive income (OCI) of derivative instruments previously accounted for as cash flow hedges was immaterial in both the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. There were no amounts recognized in OCI for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015.

Accumulated other comprehensive income related to cash flow hedges (excluding Oncor's interest rate hedges) at ~~June~~September 30, 2016 and December 31, 2015 totaled $33 million and $34 million in net losses (after-tax), respectively, substantially all of which relates to interest rate swaps previously accounted for as cash flow hedges. We expect that $2 million of net losses (after-tax) related to cash flow hedges included in accumulated other comprehensive income at ~~June~~September 30, 2016 will be reclassified into net income during the next twelve months as the related hedged transactions affect net income. Since all of these amounts related to hedging activity conducted by TCEH, as of the Effective Date, these amounts in accumulated other comprehensive income were removed from the condensed consolidated balance sheet in conjunction with the separation of the EFH Debtors from the TCEH Debtors and the Contributed EFH Debtors.

Balance Sheet Presentation of Derivatives

Consistent with elections under US GAAP to present amounts on a gross basis, we report derivative assets and liabilities in the condensed consolidated balance sheets without taking into consideration netting arrangements we have with counterparties. We may enter into offsetting positions with the same counterparty, resulting in both assets and liabilities. Volatility in underlying commodity prices can result in significant changes in assets and liabilities presented from period to period.

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~~Margin~~Balance ~~deposits~~Sheet ~~that~~Presentation contractually offset these derivative instruments are reported separately in the condensed consolidated balance sheets. Margin deposits received from counterparties are either used for working capital or other general corporate purposes or, if there are restrictions on the use of ~~cash, amounts are deposited in a separate restricted cash account. At June 30, 2016 and December 31, 2015, essentially all margin deposits held were unrestricted.~~Derivatives

Margin deposits that contractually offset these derivative instruments are reported separately in the condensed consolidated balance sheets. Margin deposits received from counterparties are either used for working capital or other general corporate purposes or, if there are restrictions on the use of cash, amounts are deposited in a separate restricted cash account. At September 30, 2016 and December 31, 2015, essentially all margin deposits held were unrestricted.

We maintain standardized master netting agreements with certain counterparties that allow for the netting of positive and negative exposures. These agreements contain credit enhancements that allow for the right to offset assets and liabilities and collateral received in order to reduce credit exposure between us and the counterparty. These agreements contain specific language related to margin requirements, monthly settlement netting, cross-commodity netting and early termination netting, which is negotiated with the contract counterparty.

The following tables reconcile our derivative assets and liabilities as presented in the condensed consolidated balance sheets to net amounts after taking into consideration netting arrangements with counterparties and financial collateral:

June 30, 2016
September 30, 2016
	Amounts Presented in Balance Sheet			Offsetting Instruments (a)			Financial Collateral (Received) Pledged (b)			Net Amounts
Derivative assets:
Commodity contracts	$	~~378~~328		$	(~~249~~126	)	$	(3233	)	$	97169
Derivative liabilities:
Commodity contracts	(~~386~~130		)	~~249~~126			—			(~~137~~4		)
Net amounts	$	(8198	)	$	—		$	(3233	)	$	~~(40~~165	)



December 31, 2015
	Amounts Presented in Balance Sheet			Offsetting Instruments (a)			Financial Collateral (Received) Pledged (b)			Net Amounts
Derivative assets:
Commodity contracts	$	475		$	(145	)	$	(147	)	$	183
Derivative liabilities:
Commodity contracts	(204		)	145			6			(53		)
Net amounts	$	271		$	—		$	(141	)	$	130

____________


(a)	Amounts presented exclude trade accounts receivable and payable related to settled financial instruments.


(b)	Financial collateral consists entirely of cash margin deposits.

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Derivative Volumes

The following table presents the gross notional amounts of derivative volumes at ~~June~~September 30, 2016 and December 31, 2015:

	June 30, 2016	December 31, 2015
	September 30, 2016	December 31, 2015
Derivative type	Notional Volume		Unit of Measure
Natural gas (a)	1,~~773~~464	1,489	Million MMBtu
Electricity	9585,~~732~~019	58,022	GWh
Congestion Revenue Rights (b)	~~121~~114,~~748~~474	106,260	GWh
Coal	56	10	Million US tons
Fuel oil	21	35	Million gallons
Uranium	~~375~~200	75	Thousand pounds

____________


(a)	Represents gross notional forward sales, purchases and options transactions, locational basis swaps and other natural gas transactions.


(b)	Represents gross forward purchases associated with instruments used to hedge electricity price differences between settlement points within ERCOT.

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Credit Risk-Related Contingent Features of Derivatives

The agreements that govern our derivative instrument transactions may contain certain credit risk-related contingent features that could trigger liquidity requirements in the form of cash collateral, letters of credit or some other form of credit enhancement. Certain of these agreements require the posting of collateral if our credit rating is downgraded by one or more credit rating agencies~~; however, due to the Chapter 11 Cases, substantially all of such collateral posting requirements have already been effective~~.

At ~~June~~September 30, 2016 and December 31, 2015, the fair value of liabilities related to derivative instruments under agreements with credit risk-related contingent features that were not fully collateralized totaled $~~121~~11 million and $58 million, respectively. The liquidity exposure associated with these liabilities was reduced by cash and letter of credit postings with counterparties totaling $434 million and $31 million at ~~June~~September 30, 2016 and December 31, 2015, respectively. If all the credit risk-related contingent features related to these derivatives had been triggered, including cross-default provisions, ~~the~~ remaining liquidity requirements would be immaterial at both ~~June~~September 30, 2016 and December 31, 2015.

In addition, certain derivative agreements include cross-default provisions that could result in the settlement of such contracts if there were a failure under other financing arrangements to meet payment terms or to comply with other covenants that could result in the acceleration of such indebtedness. At ~~June~~September 30, 2016 and December 31, 2015, the fair value of derivative liabilities subject to such cross-default provisions ~~totaled~~were ~~$42 million and $1 million, respectively~~immaterial. At both ~~June~~September 30, 2016 and December 31, 2015, no cash collateral or letters of credit were posted with these counterparties, and there was no liquidity exposure associated with these liabilities.

As discussed immediately above, the aggregate fair values of liabilities under derivative agreements with credit risk-related contingent features, including cross-default provisions, totaled $~~163~~12 million and $59 million at ~~June~~September 30, 2016 and December 31, 2015, respectively. These amounts are before consideration of cash and letter of credit collateral posted, net accounts receivable and derivative assets under netting arrangements and assets subject to related liens.

Some commodity derivative contracts contain credit risk-related contingent features that do not provide for specific amounts to be posted if the features are triggered. These provisions include material adverse change, performance assurance, and other clauses that generally provide counterparties with the right to request additional credit enhancements. The amounts disclosed above exclude credit risk-related contingent features that do not provide for specific amounts or exposure calculations.

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Concentrations of Credit Risk Related to Derivatives

We have concentrations of credit risk with the counterparties to our derivative contracts. At ~~June~~September 30, 2016, total credit risk exposure to all counterparties related to derivative contracts totaled $~~474~~460 million (including associated accounts receivable). The net exposure to those counterparties totaled $~~132~~268 million at ~~June~~September 30, 2016 after taking into effect netting arrangements, setoff provisions and collateral, with the largest net exposure to a single counterparty totaling $46114 million. At ~~June~~September 30, 2016, the credit risk exposure to the banking and financial sector represented 7465% of the total credit risk exposure and 4957% of the net exposure.

Exposure to banking and financial sector counterparties is considered to be within an acceptable level of risk tolerance because all of this exposure is with counterparties with investment grade credit ratings. However, this concentration increases the risk that a default by any of these counterparties would have a material effect on our financial condition, results of operations and liquidity. The transactions with these counterparties contain certain provisions that would require the counterparties to post collateral in the event of a material downgrade in their credit rating.

We maintain credit risk policies with regard to our counterparties to minimize overall credit risk. These policies authorize specific risk mitigation tools including, but not limited to, use of standardized master agreements that allow for netting of positive and negative exposures associated with a single counterparty. Credit enhancements such as parent guarantees, letters of credit, surety bonds, liens on assets and margin deposits are also utilized. Prospective material changes in the payment history or financial condition of a counterparty or downgrade of its credit quality result in the reassessment of the credit limit with that counterparty. The process can result in the subsequent reduction of the credit limit or a request for additional financial assurances. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts are owed to the counterparties related to the derivative contracts or delays in receipts of expected settlements if the counterparties owe amounts to us.

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16.	RELATED PARTY TRANSACTIONS

The following represent our significant related-party transactions. As of the Effective Date, pursuant to the Plan of Reorganization, EFH, EFIH, Oncor Holdings and Oncor ceased being affiliates of Reorganized TCEH and its subsidiaries, including the TCEH Debtors and the Contributed EFH Debtors.

• Previously, we accrued a management fee payable to the Sponsor Group under the terms of a management agreement. Related amounts expensed and reported as SG&A expense totaled $10 million and $2030 million for the three and ~~six~~nine months ended ~~June~~September 30, 2015, respectively. No payments were made in the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. We had previously paid these fees on a quarterly basis; however, beginning with the quarterly management fee due December 31, 2013, the Sponsor Group, while reserving the right to receive the fees, directed EFH Corp. to suspend payments of the management fees for an indefinite period. Effective with the Petition Date, EFH Corp. suspended allocations of such fees to TCEH and EFIH. Fees accrued as of the Petition Date were reclassified to LSTC, and fees accrued after the Petition Date were reported in other noncurrent liabilities and deferred credits. Pursuant to the Settlement Agreement approved by the Bankruptcy Court in December 2015, the Sponsor Group has agreed to forego any and all claims under the management agreement in exchange for releases of alleged liabilities against the Debtors.

•

In 2007, TCEH entered into the TCEH Senior Secured Facilities with syndicates of financial institutions and other lenders. These syndicates included affiliates of GS Capital Partners, which is a member of the Sponsor Group. Affiliates of each member of the Sponsor Group have from time to time engaged in commercial banking transactions with us and/or provided financial advisory services to us, in each case in the normal course of business.


•	Affiliates of GS Capital Partners were parties to certain commodity and interest rate hedging transactions with us in the normal course of business.


•	Affiliates of the Sponsor Group have sold or acquired, and in the future may sell or acquire, debt or debt securities issued by us in open market transactions or through loan syndications.

• TCEH's retail operations pay Oncor for services it provides, principally the delivery of electricity. Expenses recorded for these services, reported in fuel, purchased power costs and delivery fees, totaled $216 million and $224 million for the three months ended June 30, 2016 and 2015, respectively, and $436 million and $460 million for the six months ended June 30, 2016 and 2015, respectively. The fees are based on rates regulated by the PUCT that apply to all REPs. The condensed consolidated balance sheets at June 30, 2016 and December 31, 2015 reflect amounts due currently to Oncor totaling $124 million and $118 million, respectively (included in net payables due to unconsolidated subsidiary), largely related to these electricity delivery fees. Also see discussion below regarding receivables from Oncor under a Federal and State Income Tax Allocation Agreement.

• A subsidiary of EFH Corp. bills Oncor for financial and other administrative services and shared facilities at cost. Such amounts reduced reported SG&A expense by less than $1 million and $5 million for the three months ended June 30, 2016 and 2015, respectively, and $1 million and $10 million for the six months ended June 30, 2016 and 2015, respectively.

• A subsidiary of EFH Corp. bills TCEH subsidiaries for information technology, financial, accounting and other administrative services at cost. These charges totaled $46 million and $47 million for the three months ended June 30, 2016 and 2015, respectively, and $106 million and $98 million for the six months ended June 30, 2016 and 2015, respectively.

• For the three months ended March 31, 2016, TCEH settled a $2 million payable related to information technology assets purchased from a subsidiary of EFH Corp. in December 2015. For the three months ended March 31, 2015, TCEH settled a $15 million payable related to information technology assets purchased from a subsidiary of EFH Corp. in 2014. For the three months ended June 30, 2015, TCEH purchased and settled $12 million of additional assets. The assets are substantially for the use of TCEH and its subsidiaries.

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• ~~Under~~TCEH's ~~Texas~~retail ~~regulatory~~operations ~~provisions,~~pay ~~the~~Oncor ~~trust fund~~ for ~~decommissioning~~services ~~the~~it ~~Comanche~~provides, ~~Peak~~principally ~~nuclear~~the ~~generation facility is funded by a~~ delivery ~~fee~~of ~~surcharge~~electricity. ~~billed~~Expenses torecorded ~~REPs by Oncor, as collection agent, and remitted monthly to TCEH~~ for ~~contribution~~these ~~to the trust fund with the intent that the trust fund assets~~services, reported in ~~other investments in our condensed consolidated balance sheets~~fuel, ~~will~~purchased ~~ultimately~~power becosts ~~sufficient~~and todelivery ~~fund the future decommissioning liability~~fees, ~~reported~~totaled in$265 ~~noncurrent~~million ~~liabilities~~and ~~in our condensed consolidated balance sheets. The delivery fee surcharges remitted to TCEH totaled~~ $4279 million for ~~both~~ the three months ended ~~June~~September 30, 2016 and 2015, respectively, and $8700 million ~~for~~and ~~both~~$739 million for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively. ~~Income~~The ~~and~~fees ~~expenses~~are ~~associated~~based ~~with~~on ~~the~~rates ~~trust~~regulated ~~fund~~by ~~and~~ the ~~decommissioning~~PUCT ~~liability~~that ~~incurred~~apply byto ~~TCEH~~all ~~are~~REPs. ~~offset~~The bycondensed aconsolidated ~~net~~balance ~~change~~sheets inat aSeptember ~~receivable/payable~~30, ~~that~~2016 ~~ultimately~~and ~~will~~December be31, ~~settled~~2015 ~~through~~reflect ~~changes~~amounts indue currently to Oncor's ~~delivery~~totaling ~~fee~~$146 ~~rates.~~million Atand ~~June~~$118 30million, ~~2016~~respectively ~~and~~(included ~~December~~in ~~31,~~net ~~2015,~~payables ~~the~~due ~~excess~~to ofunconsolidated ~~the~~subsidiary), ~~trust~~largely ~~fund~~related ~~balance~~to ~~over~~these ~~the~~electricity ~~decommissioning~~delivery ~~liability~~fees. ~~resulted~~Also insee adiscussion ~~payable~~below ~~totaling~~regarding ~~$443~~receivables ~~million~~from ~~and~~Oncor ~~$409~~under ~~million,~~a ~~respectively,~~Federal and isState ~~reported~~Income inTax ~~noncurrent~~Allocation ~~liabilities~~Agreement.

•

A former subsidiary of EFH Corp. (and following the Effective Date, a subsidiary of Reorganized TCEH) bills Oncor for financial and other administrative services and shared facilities at cost. Such amounts reduced reported SG&A expense less than $1 million and $6 million for the three months ended September 30, 2016 and 2015, respectively, and $1 million and $16 million for the nine months ended September 30, 2016 and 2015, respectively.

•

A former subsidiary of EFH Corp. (and following the Effective Date, a subsidiary of Reorganized TCEH) bills TCEH subsidiaries for information technology, financial, accounting and other administrative services at cost. These charges totaled $51 million and $52 million for the three months ended September 30, 2016 and 2015, respectively, and $157 million and $151 million for the nine months ended September 30, 2016 and 2015, respectively.

•

For the three months ended March 31, 2016, TCEH settled a $2 million payable related to information technology assets purchased from a subsidiary of EFH Corp. in December 2015. For the three months ended March 31, 2015, TCEH settled a $15 million payable related to information technology assets purchased from a subsidiary of EFH Corp. in 2014. For the three months ended June 30, 2015, TCEH purchased and settled $12 million of additional assets. Following the Effective Date, the assets are substantially for the use of Reorganized TCEH and its subsidiaries.

•

Under Texas regulatory provisions, the trust fund for decommissioning the Comanche Peak nuclear generation facility is funded by a delivery fee surcharge billed to REPs by Oncor, as collection agent, and remitted monthly to TCEH (and following the Effective Date, a subsidiary of Reorganized TCEH) for contribution to the trust fund with the intent that the trust fund assets, reported in other investments in our condensed consolidated balance sheets, will ultimately be sufficient to fund the future decommissioning liability, reported in noncurrent liabilities in our condensed consolidated balance sheets. The delivery fee surcharges remitted to TCEH totaled $6 million and $5 million for the three months ended September 30, 2016 and 2015, respectively, and $15 million and $13 million for the nine months ended September 30, 2016 and 2015, respectively. Income and expenses associated with the trust fund and the decommissioning liability incurred by TCEH (and following the Effective Date, a subsidiary of Reorganized TCEH) are offset by a net change in a receivable/payable that ultimately will be settled through changes in Oncor's delivery fee rates. At September 30, 2016 and December 31, 2015, the excess of the trust fund balance over the decommissioning liability resulted in a payable totaling $465 million and $409 million, respectively, and is reported in noncurrent liabilities.

•

We file a consolidated federal income tax return that includes Oncor Holdings' results. Oncor is not a member of our consolidated tax group, but our consolidated federal income tax return includes our portion of Oncor's results due to our equity ownership in Oncor. We also file a consolidated Texas state margin tax return that includes all of Oncor Holdings' and Oncor's results. However, under a Federal and State Income Tax Allocation Agreement, Oncor Holdings' and Oncor's federal income tax and Texas margin tax expense and related balance sheet amounts, including our income taxes receivable from or payable to Oncor Holdings and Oncor, are recorded as if Oncor Holdings and Oncor file their own corporate income tax returns.

At ~~June~~September 30, 2016, our net current amount payable to Oncor Holdings related to federal and state income taxes (reported in net payables due to unconsolidated subsidiary) totaled $7964 million, $8469 million of which related to Oncor. The $8469 million net payable to Oncor included aan $9584 million federal income tax payable and ana $1115 million state margin tax receivable. Additionally, at ~~June~~September 30, 2016, we had a noncurrent tax payable to Oncor of $65 million recorded in other noncurrent liabilities and deferred credits and a noncurrent tax receivable from Oncor Holdings of $2 million recorded in other noncurrent assets. At December 31, 2015, our net current amount payable to Oncor Holdings related to federal and state income taxes totaled $87 million, $89 million of which related to Oncor. The $89 million net payable to Oncor included a $109 million federal income tax payable offset by a $20 million state margin tax receivable. Additionally, at December 31, 2015, we had a noncurrent tax payable to Oncor of $65 million recorded in other noncurrent liabilities and deferred credits and a noncurrent tax receivable from Oncor Holdings of $2 million recorded in other noncurrent assets.

For the six months ended June 30, 2016, EFH Corp. received income tax payments from Oncor Holdings and Oncor totaling $10 million and $18 million, respectively. For the six months ended June 30, 2015, EFH Corp. received income tax payments from Oncor Holdings and Oncor totaling $12 million and $22 million, respectively.

• Oncor collected transition surcharges from its customers to recover the payment obligations related to its securitization (transition) bonds issued to recover generation-related regulatory assets. As of June 30, 2016, Oncor had over-collected transition charges of approximately $2 million that is expected to be refunded to TCEH upon PUCT approval.

• Oncor had requirements in place to assure adequate creditworthiness to support TCEH's obligation to collect securitization bond-related (transition) charges on its behalf. Under these requirements, as a result of TCEH's credit rating being below investment grade, TCEH was required to post collateral support in an amount equal to estimated transition charges over specified time periods. Accordingly, at December 31, 2015, TCEH had posted letters of credit and/or cash in the amount of $6 million for the benefit of Oncor. In May 2016, the last series of Oncor's securitization bonds matured and the letters of credit were released.

• In December 2012, Oncor became the sponsor of a new pension plan (the Oncor Plan), the participants in which consist of all of Oncor's active employees and all retirees and terminated vested participants of EFH Corp. and its subsidiaries (including discontinued businesses). Oncor had previously contractually agreed to assume responsibility for pension liabilities that are recoverable by Oncor under regulatory rate-setting provisions. As part of the pension plan actions, EFH Corp. fully funded the non-recoverable pension liabilities under the Oncor Plan. After the pension plan actions, participants remaining in the EFH Corp. pension plan consist of active employees under collective bargaining agreements (union employees). Oncor continues to be responsible for the recoverable portion of pension obligations to these union employees. Under ERISA, EFH Corp. and Oncor remain jointly and severally liable for the funding of the EFH Corp. and Oncor pension plans.

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•For ~~Oncor~~the ~~and~~nine ~~Texas~~months ~~Holdings~~ended ~~agreed~~September 30, to2016, ~~the~~EFH ~~terms~~Corp. ofreceived aincome ~~stipulation~~tax ~~with~~payments ~~major~~from ~~interested~~Oncor ~~parties~~Holdings toand ~~resolve~~Oncor ~~all~~totaling ~~outstanding~~$16 ~~issues~~million inand ~~the~~$20 ~~PUCT~~million, ~~review~~respectively. For ~~related to~~ the ~~Merger.~~nine Asmonths ~~part~~ended ofSeptember 30, ~~this stipulation~~2015, ~~TCEH~~EFH ~~would~~Corp. bereceived ~~required~~income totax ~~post~~payments afrom ~~letter~~Oncor ofHoldings ~~credit~~and inOncor antotaling ~~amount equal to~~ $~~170~~20 million toand ~~secure~~$63 ~~its payment obligations to Oncor in the event~~million, ~~which has not occurred, two or more rating agencies downgrade Oncor's credit rating below investment grade~~respectively.


•	Oncor collected transition surcharges from its customers to recover the payment obligations related to its securitization (transition) bonds issued to recover generation-related regulatory assets. As of September 30, 2016, Oncor had over-collected transition charges of approximately $1 million that is expected to be refunded to Reorganized TCEH upon PUCT approval.

•

Oncor had requirements in place to assure adequate creditworthiness to support TCEH's obligation to collect securitization bond-related (transition) charges on its behalf. Under these requirements, as a result of TCEH's credit rating being below investment grade, TCEH was required to post collateral support in an amount equal to estimated transition charges over specified time periods. Accordingly, at December 31, 2015, TCEH had posted letters of credit and/or cash in the amount of $6 million for the benefit of Oncor. In May 2016, the last series of Oncor's securitization bonds matured and the letters of credit were released.

•

In December 2012, Oncor became the sponsor of a new pension plan (the Oncor Plan), the participants in which consist of all of Oncor's active employees and all retirees and terminated vested participants of EFH Corp. and its subsidiaries (including discontinued businesses). Oncor had previously agreed to assume responsibility for pension liabilities that are recoverable by Oncor under regulatory rate-setting provisions. As part of the pension plan actions, EFH Corp. fully funded the non-recoverable pension liabilities under the Oncor Plan. After the pension plan actions, participants remaining in the EFH Corp. pension plan consist of active employees under collective bargaining agreements (union employees). After the Effective Date, the EFH Corp. pension plan was transferred and assigned to Reorganized TCEH. Oncor continues to be responsible for the recoverable portion of pension obligations to these union employees. Under ERISA, EFH Corp. and Oncor remain jointly and severally liable for the funding of the EFH Corp. and Oncor pension plans.

•

In September 2016, a cash contribution totaling $2 million was made to the EFH Corp. retirement plan, all of which was contributed by TCEH, which resulted in the EFH Corp. retirement plan continuing to be fully funded as calculated under the provisions of ERISA. As a result of the Bankruptcy Filing, participants in the EFH Corp. retirement plan who chose to retire would not have been eligible for the lump sum payout option under the retirement plan unless the EFH Corp. retirement plan was fully funded.

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17.	SEGMENT INFORMATION

~~Our~~Prior to the Effective Date, our operations ~~are~~were aligned into two reportable business segments: Competitive Electric and Regulated Delivery. The segments ~~are~~were managed separately because they ~~are~~were strategic business units that offer different products or services and involve different risks.

The Competitive Electric segment iswas engaged in competitive market activities consisting of electricity generation, wholesale energy sales and purchases, commodity risk management and trading activities, and retail electricity operations for residential and business customers, all largely in the ERCOT market. ~~These~~Prior to the Effective Date, these activities ~~are~~were conducted by TCEH.

The Regulated Delivery segment consists largely of our investment in Oncor. Oncor is engaged in regulated electricity transmission and distribution operations in Texas. These activities are conducted by Oncor, including its wholly owned bankruptcy-remote financing subsidiary. See Note 4 for discussion of the reporting of Oncor Holdings and, accordingly, the Regulated Delivery segment, as an equity method investment. See Note 16 for discussion of material transactions with Oncor, including payment to Oncor of electricity delivery fees, which are based on rates regulated by the PUCT.

Corporate and Other represents the remaining non-segment operations consisting primarily of discontinued businesses, general corporate expenses and interest and other expenses related to EFH Corp., EFIH and EFCH.

The business segment results reflect the application of ASC 852, Reorganizations. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 1 to the Financial Statements in our 2015 Form 10-K. Our chief operating decision maker uses more than one measure to assess segment performance, including reported segment net income (loss), which is the measure most comparable to consolidated net income (loss) prepared based on GAAP. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices or regulated rates. Certain shared services costs are allocated to the segments.

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Operating revenues (all Competitive Electric)	$	1,~~233~~690		$	1,~~256~~737		$	23,~~283~~973		$	24,~~527~~265
Equity in earnings of unconsolidated subsidiaries (net of tax) — Regulated Delivery (net of noncontrolling interests of $22, $20, $38 and $39)	$	85		$	75		$	147		$	151
Equity in earnings of unconsolidated subsidiaries (net of tax) — Regulated Delivery (net of noncontrolling interests of $33, $33, $71 and $72)	$	127		$	127		$	274		$	278
Net income (loss):
Competitive Electric	$	~~(500~~187	)	$	(~~214~~1,517	)	$	(~~843~~656	)	$	(13,~~551~~068	)
Regulated Delivery	85127			75127			~~147~~274			~~151~~278
Corporate and Other	85(148		)	(7370		)	~~117~~(31		)	(~~339~~409		)
Consolidated net loss	$	(330	)	$	(212	)	$	(579	)	$	(1,739	)
Consolidated net income (loss)	$	166		$	(1,460	)	$	(413	)	$	(3,199	)

4344

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18.	SUPPLEMENTARY FINANCIAL INFORMATION

Other Income and Deductions

	Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Other income:
Office space rental income (a)	$	3	$	3	$	69	$	68
Insurance settlement (b)	9—		—		9		—
Sale of land (b)	—2		6—		—2		6
All other	45		35		612		713
Total other income	$	1610	$	128	$	2132	$	1927
Other deductions:
Write-off of generation equipment (b)	$	21	$	—	$	41	$	—
Adjustment to asbestos liability (c)	$	23	$	—	$	23	$	—
Fees associated with TCEH DIP Roll Facilities (b)	5		—		5		—
Write-off of generation equipment (b)	4		—		45		—
Impairment of favorable purchase contracts (Note 5) (b)	—		—		—		8
Impairment of emission allowances (Note 5) (b)	—		—4		—		5155
All other	6		2		7		2
Impairment of mining development costs (Note 5) (b)	—		19		—		19
Total other deductions	$	27	$	2	$	48	$	61
All other	12		3		19		4
Total other deductions	$	44	$	26	$	92	$	86

____________


(a)	Reported in Corporate and Other.


(b)	Reported in Competitive Electric segment.


(c)	Includes $12 million reported in Corporate and Other and $11 million in Competitive Electric segment.

Restricted Cash

	June 30, 2016				December 31, 2015
	September 30, 2016				December 31, 2015
	Current Assets		Noncurrent Assets		Current Assets		Noncurrent Assets
Amounts related to TCEH's DIP Facility (Note 10)	$	528	$	—	$	519	$	—
Amounts related to TCEH's DIP Roll Facility (Note 10)	$	—	$	650	$	—	$	—
Amounts related to TCEH's pre-petition Letter of Credit Facility (Note 11)	—		507		—		507
Amounts related to TCEH's DIP Facility (Note 10)	—		—		519		—
Other	5		—		5		—
Amounts related to TCEH's pre-petition Letter of Credit Facility (Note 11)	—		—		—		507
Total restricted cash	$	533	$	507	$	524	$	507
Amounts related to margin deposits held	12		—		—		—
Other	4		—		5		—
Total restricted cash	$	16	$	650	$	524	$	507

Trade Accounts Receivable

	June 30, 2016			December 31, 2015
	September 30, 2016			December 31, 2015
Wholesale and retail trade accounts receivable	$	~~665~~764		$	542
Allowance for uncollectible accounts	(713		)	(9		)
Trade accounts receivable — net	$	~~658~~751		$	533

Gross trade accounts receivable at ~~June~~September 30, 2016 and December 31, 2015 included unbilled revenues of $~~263~~245 million and $231 million, respectively.

~~Allowance for Uncollectible Accounts Receivable~~45

	Six Months Ended June 30,
	2016			2015
Allowance for uncollectible accounts receivable at beginning of period	$	9		$	15
Increase for bad debt expense	10			16
Decrease for account write-offs	(12		)	(19		)
Allowance for uncollectible accounts receivable at end of period	$	7		$	12

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Allowance for Uncollectible Accounts Receivable



	Nine Months Ended September 30,
	2016			2015
Allowance for uncollectible accounts receivable at beginning of period	$	9		$	15
Increase for bad debt expense	20			29
Decrease for account write-offs	(16		)	(28		)
Allowance for uncollectible accounts receivable at end of period	$	13		$	16

Inventories by Major Category

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Materials and supplies	$	~~232~~235	$	226
Fuel stock	~~162~~119		170
Natural gas in storage	2620		32
Total inventories	$	~~420~~374	$	428

Other Investments

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Nuclear plant decommissioning trust	$	~~966~~995	$	918
Land	36		36
Miscellaneous other	30		30
Total other investments	$	1,~~032~~061	$	984

Nuclear Decommissioning Trust — Investments in a trust that will be used to fund the costs to decommission the Comanche Peak nuclear generation plant are carried at fair value. Decommissioning costs are being recovered from Oncor's customers as a delivery fee surcharge over the life of the plant and deposited by TCEH in the trust fund. Income and expense associated with the trust fund and the decommissioning liability are offset by a corresponding change in a receivable/payable (currently a payable reported in noncurrent liabilities) that will ultimately be settled through changes in Oncor's delivery fees rates (see Note 16). The nuclear decommissioning trust fund iswas not a debtor ~~under~~in the Chapter 11 Cases. A summary of investments in the fund follows:

	June 30, 2016
	September 30, 2016
	Cost (a)		Unrealized gain		Unrealized loss			Fair marketvalue
Debt securities (b)	$	~~320~~327	$	2322	$	(1	)	$	~~342~~348
Equity securities (c)	~~302~~306		~~330~~347		(86		)	~~624~~647
Total	$	~~622~~633	$	~~353~~369	$	(97	)	$	~~966~~995



	December 31, 2015
	Cost (a)		Unrealized gain		Unrealized loss			Fair market value
Debt securities (b)	$	310	$	11	$	(2	)	$	319
Equity securities (c)	291		315		(7		)	599
Total	$	601	$	326	$	(9	)	$	918

____________


(a)	Includes realized gains and losses on securities sold.

(b) The investment objective for debt securities is to invest in a diversified tax efficient portfolio with an overall portfolio rating of AA or above as graded by S&P or Aa2 by Moody's Investors Services, Inc. The debt securities are heavily weighted with municipal bonds. The debt securities had an average coupon rate of 3.5756% and 3.68% at ~~June~~September 30, 2016 and December 31, 2015, respectively, and an average maturity of 8 years at both ~~June~~September 30, 2016 and December 31, 2015.


(c)	The investment objective for equity securities is to invest tax efficiently and to match the performance of the S&P 500 Index.

~~Debt securities held at June 30, 2016 mature as follows: $133 million in one to five years, $69 million in five to ten years and $140 million after ten years.~~46

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Debt securities held at September 30, 2016 mature as follows: $109 million in one to five years, $82 million in five to ten years and $157 million after ten years.

The following table summarizes proceeds from sales of available-for-sale securities and the related realized gains and losses from such sales.

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Realized gains	$	(13	)	$	1		$	—3		$	12
Realized losses	$	1(2	)	$	—(2	)	$	—(2	)	$	(13	)
Proceeds from sales of securities	$	8846		$	50242		$	~~155~~201		$	73315
Investments in securities	$	(9252	)	$	(54247	)	$	(~~163~~215	)	$	(81328	)

Property, Plant and Equipment

At ~~June~~September 30, 2016 and December 31, 2015, property, plant and equipment of $10.~~537~~427 billion and $9.430 billion, respectively, is stated net of accumulated depreciation and amortization of $4.~~456~~624 billion and $4.151 billion, respectively.

Asset Retirement and Mining Reclamation Obligations

These liabilities primarily relate to nuclear generation plant decommissioning, land reclamation related to lignite mining, removal of lignite/coal fueled plant ash treatment facilities and generation plant asbestos removal and disposal costs. There is no earnings impact with respect to changes in the nuclear plant decommissioning liability, as all costs are recoverable through the regulatory process as part of Oncor's delivery fees.

The following table summarizes the changes to these obligations, reported in other current liabilities and other noncurrent liabilities and deferred credits in the condensed consolidated balance sheets, for the ~~six~~nine months ended ~~June~~September 30, 2016:

	Nuclear Plant Decommissioning		Mining Land Reclamation			Other			Total
Liability at December 31, 2015	$	508	$	215		$	107		$	830
Additions:
Accretion	1522		1116			35			2943
Adjustment for new cost estimate	—		—			1			1
Incremental reclamation costs	—		14			12			26
Reductions:
Payments	—		(2737		)	—(3		)	(2740		)
Liability at June 30, 2016	523		213			122			858
Liability at September 30, 2016	530		208			122			860
Less amounts due currently	—		(5550		)	(1		)	(5651		)
Noncurrent liability at June 30, 2016	$	523	$	158		$	121		$	802
Noncurrent liability at September 30, 2016	$	530	$	158		$	121		$	809

Other Noncurrent Liabilities and Deferred Credits

The balance of other noncurrent liabilities and deferred credits consists of the following:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Uncertain tax positions, including accrued interest	$	39—	$	40
Retirement plan and other employee benefits	~~171~~172		169
Asset retirement and mining reclamation obligations	~~802~~809		764
Unfavorable purchase and sales contracts	~~531~~525		543
Nuclear decommissioning fund excess over asset retirement obligation (Note 16)	~~443~~465		409
Other	~~106~~113		107
Total other noncurrent liabilities and deferred credits	$	2,~~092~~084	$	2,032

Unfavorable Purchase and Sales Contracts — The amortization of unfavorable purchase and sales contracts totaled $6 million for both the three months ended June 30, 2016 and 2015 and $12 million for both the six months ended June 30, 2016 and 2015. See Note 5 for intangible assets related to favorable purchase and sales contracts.47

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~~The~~Unfavorable ~~estimated~~Purchase and Sales Contracts — The amortization of unfavorable purchase and sales contracts totaled $6 million for ~~each~~both ofthe three months ended September 30, 2016 and 2015 and $18 million and $17 million for the ~~next~~nine ~~five~~months ~~fiscal~~ended ~~years~~September is30, as2016 ~~follows:~~and 2015, respectively. See Note 5 for intangible assets related to favorable purchase and sales contracts.

Year	Amount
2016	$	24
2017	$	24
2018	$	24
2019	$	24
2020	$	24

As of the Effective Date, unfavorable purchase and sales contracts were removed from the condensed consolidated balance sheet in conjunction with the separation of the EFH Debtors from the TCEH Debtors and the Contributed EFH Debtors.

Fair Value of Debt

	June 30, 2016				December 31, 2015
	September 30, 2016				December 31, 2015
Debt:	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Borrowings under debtor-in-possession credit facilities (Note 10)	$	78,~~940~~787	$	78,~~906~~967	$	6,825	$	6,804
Long-term debt not subject to compromise, excluding capital lease obligations (Note 10)	$	8238	$	7833	$	90	$	89

We determine fair value in accordance with accounting standards as discussed in Note 14, and at ~~June~~September 30, 2016, our debt fair value represents Level 2 valuations. We obtain security pricing from an independent party who uses broker quotes and third-party pricing services to determine fair values. Where relevant, these prices are validated through subscription services such as Bloomberg. The fair value estimates of our pre-petition notes, loans and other debt reported as liabilities subject to compromise have been excluded from the table above. As a result of our ongoing Chapter 11 Cases, obtaining the fair value estimates of our pre-petition debt subject to compromise is impractical, and the fair values will ultimately be decided through the Chapter 11 Cases.

Supplemental Cash Flow Information

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Cash payments related to:
Interest paid (a)	$	~~800~~1,246		$	1,~~052~~440
Capitalized interest	(69		)	(68		)
Interest paid (net of capitalized interest) (a)	$	~~794~~1,237		$	1,~~046~~432
Income taxes	$	3443		$	4651
Reorganization items (b)	$	~~130~~197		$	~~155~~229
Noncash investing and financing activities:
Construction expenditures (c)	$	6654		$	5964
Income tax adjustment related to AMT utilization (d)	$	—		$	3

____________


(a)	This amount includes amounts paid for adequate protection.


(b)	Represents cash payments for legal and other consulting services, including amounts paid on behalf of third parties pursuant to contractual obligations approved by the Bankruptcy Court.


(c)	Represents end-of-period accruals for ongoing construction projects.

47(d) Represents a reduction to EFH Corp.'s investment in Oncor Holdings due to an income tax adjustment related to alternative minimum tax utilization by Oncor.

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Item 2.	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 three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 should be read in conjunction with our condensed consolidated financial statements and the notes to those statements. Results are impacted by the effects of the Bankruptcy Filing and the application of Financial Accounting Standards Board Accounting Standards Codification (ASC) 852, Reorganizations.

All dollar amounts in the tables in the following discussion and analysis are stated in millions of US dollars unless otherwise indicated.

Business

EFH Corp., a Texas corporation, is a Dallas-based holding company that conducts its operations principally through its ~~TCEH and~~ Oncor ~~subsidiaries. EFH Corp. is a~~ subsidiary ~~of Texas Holdings~~and, ~~which~~prior isto ~~controlled~~October ~~by the Sponsor Group. TCEH is a holding company for subsidiaries engaged in competitive electricity market activities largely in Texas~~3, ~~including~~2016 ~~electricity~~(the ~~generation,~~Effective ~~wholesale energy sales and purchases~~Date), ~~commodity~~its ~~risk~~TCEH ~~management, and retail electricity operations~~subsidiaries. ~~TCEH~~EFH isCorp. ~~a wholly owned subsidiary of EFCH, which~~ is a ~~holding company and a wholly owned~~ subsidiary of ~~EFH Corp. Oncor is engaged in regulated electricity transmission and distribution operations in~~ Texas~~. Oncor~~ ~~provides distribution services to REPs, including subsidiaries of TCEH, which sell electricity to residential, business and other consumers. Oncor~~ Holdings, ~~a holding company that holds an approximately 80% equity interest in Oncor, is a wholly owned subsidiary of EFIH,~~ which is acontrolled ~~holding~~by ~~company~~the ~~and~~Sponsor ~~a wholly owned subsidiary of EFH Corp~~Group.

~~Various~~Prior ~~ring-fencing measures have been taken~~ to ~~enhance~~ the ~~credit~~Effective ~~quality~~Date, ofTCEH ~~Oncor. See~~was ~~Notes~~a 1holding ~~and~~company ~~4 to the Financial Statements~~ for asubsidiaries ~~discussion~~engaged ofin ~~the~~competitive ~~reporting~~electricity ofmarket ~~our~~activities ~~investment~~largely in ~~Oncor~~Texas, ~~(and~~including ~~Oncor~~electricity ~~Holdings)~~generation, aswholesale anenergy ~~equity~~sales ~~method investment~~ and apurchases, ~~description~~commodity ofrisk ~~the~~management, ~~ring-fencing~~and ~~measures~~retail ~~implemented~~electricity ~~with respect to Oncor~~operations. ~~These~~On ~~measures~~the ~~were~~Effective ~~put~~Date, insubsidiaries ~~place~~of toTCEH ~~mitigate Oncor's exposure to~~ (the ~~Texas~~TCEH ~~Holdings~~Debtors) ~~Group~~and ~~with~~certain ~~the~~EFH ~~intent~~Corp. tosubsidiaries ~~minimize~~ (the ~~risk~~Contributed ~~that~~EFH aDebtors) ~~court~~emerged ~~would~~from ~~order~~the ~~any~~Chapter of11 ~~the~~Cases ~~assets~~as ~~and~~subsidiaries ~~liabilities~~ of ~~the~~a ~~Oncor Ring~~newly-~~Fenced~~formed ~~Entities~~company, toReorganized beTCEH. On ~~substantively consolidated with those of any member of~~ the ~~Texas~~Effective ~~Holdings~~Date, ~~Group~~Reorganized inTCEH ~~the~~was ~~event~~spun-off ~~any~~from ~~such~~EFH ~~member~~Corp. ~~were to become a debtor~~ in a ~~bankruptcy case. Consistent with these ring~~tax-~~fencing~~free ~~measures,~~transaction ~~the~~to ~~assets and liabilities of~~ the ~~Oncor~~former ~~Ring-Fenced~~first ~~Entities~~lien ~~have~~creditors ~~not~~of ~~been,~~TCEH ~~and~~(see ~~are~~Note ~~not~~2 ~~expected~~ to ~~be, substantively consolidated with~~ the ~~assets~~Financial ~~and liabilities of the Debtors in the Chapter 11 Cases~~Statements).

Various ring-fencing measures have been taken to enhance the credit quality of Oncor. See Notes 1 and 4 to the Financial Statements for a discussion of the reporting of our investment in Oncor (and Oncor Holdings) as an equity method investment and a description of the ring-fencing measures implemented with respect to Oncor. These measures were put in place to mitigate Oncor's exposure to the Texas Holdings Group with the intent to minimize the risk that a court would order any of the assets and liabilities of the Oncor Ring-Fenced Entities to be substantively consolidated with those of any member of the Texas Holdings Group in the event any such member were to become a debtor in a bankruptcy case. Consistent with these ring-fencing measures, the assets and liabilities of the Oncor Ring-Fenced Entities have not been, and are not expected to be, substantively consolidated with the assets and liabilities of the EFH Debtors in the Chapter 11 Cases.

Operating Segments

~~Our~~Prior to the Effective Date, our operations ~~are~~were aligned into two reportable business segments: Competitive Electric and Regulated Delivery. The Competitive Electric segment ~~consists~~consisted largely of TCEH. The Regulated Delivery segment consists largely of our investment in Oncor.

See Note 17 to the Financial Statements for further information regarding reportable business segments.

Significant Activities and Events and Items Influencing Future Performance

Filing under Chapter 11 of the United States Bankruptcy Code — On April 29, 2014 (the Petition Date), EFH Corp. and the substantial majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities, (the Debtors) filed voluntary petitions for relief (the Bankruptcy Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). During the pendency of the Bankruptcy Filing (the Chapter 11 Cases), the Debtors have operated ~~and will continue to operate~~ their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

For additional discussion of the Bankruptcy Filing and its effects, see Note 2 to the Financial Statements.

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Lamar and Forney Acquisition — In April 2016, Luminant purchased all of the membership interests in La Frontera Holdings, LLC, the indirect owner of two natural gas fueled generation facilities representing nearly 3,000 MW of capacity located in ERCOT, from a subsidiary of NextEra Energy, Inc. The facility in Forney, Texas has a capacity of 1,912 MW and the facility in Paris, Texas has a capacity of 1,076 MW. The aggregate purchase price was approximately $1.313 billion, which included the repayment of approximately $950 million of existing project financing indebtedness, plus approximately $240 million for cash and net working capital subject to final settlement. The purchase price was funded by cash-on-hand and additional borrowings under the TCEH DIP Facility totaling $1.1 billion. After completing the acquisition, we repaid approximately $230 million of borrowings under the TCEH DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. See Note 3 to the Financial Statements for further discussion of the acquisition.

TCEH Debt Commitment Letter — TCEH has executed a debt commitment letter (the Debt Commitment Letter), dated May 31, 2016, with Deutsche Bank AG New York Branch (DBNY) and Deutsche Bank Securities Inc. (DBSI and, together with DBNY, DB), Barclays Bank PLC (Barclays), Citigroup Global Markets Inc., Citibank N.A., Citicorp USA, Inc., Citicorp North America, Inc. (and any of its affiliates it deems appropriate, Citi), Credit Suisse AG (acting through such of its affiliates and branches it deems appropriate, CS) and Credit Suisse Securities (USA) LLC (acting through such of its affiliates and branches it deems appropriate, CS Securities and together with CS and their respective affiliates, Credit Suisse), Royal Bank of Canada (Royal Bank) and RBC Capital Markets (RBCCM and, together with Royal Bank, RBC), UBS AG, Stamford Branch (UBS Stamford) and UBS Securities LLC (UBSS and, together with UBS Stamford, UBS), and Natixis, New York Branch (Natixis NY and, together with DB, Barclays, Citi, Credit Suisse, RBC and UBS, the Commitment Parties), pursuant to which, subject to the conditions set forth therein, the Commitment Parties committed to provide secured financing consisting of either (1) a senior secured first lien credit facility in an aggregate principal amount of $750 million (the Senior Revolving Credit Facility), a senior secured term loan facility in an aggregate principal amount of $2.85 billion (the Senior Term Loan B Facility) and a senior secured term loan facility in an aggregate principal amount of $650 million (the Senior Term Loan C Facility, and together with the Senior Revolving Credit Facility and Senior Term Loan B Facility, the Senior Facilities), or (2) a senior secured superpriority debtor-in-possession and exit credit agreement consisting of a superpriority senior secured first lien revolving credit facility in an aggregate principal amount of $750 million (the DIP Roll Revolving Credit Facility), a superpriority senior secured term loan facility in an aggregate principal amount of $2.85 billion (the DIP Roll Term Loan B Facility), and a superpriority senior secured term loan facility in an aggregate principal amount of $650 million (the DIP Roll Term Loan C Facility, and together with the DIP Roll Revolving Credit Facility and the DIP Roll Term Loan B Facility, the DIP Roll Facilities), which DIP Roll Facilities will, subject to the conditions set forth in the Debt Commitment Letter, convert to longer term facilities on the Conversion Date (as defined in the Debt Commitment Letter). There can be no assurances that such conditions will be satisfied or waived (if applicable).

The commitments of the Commitment Parties to provide the Senior Facilities or the DIP Roll Facilities, as applicable, are subject to certain conditions set forth in the Debt Commitment Letter. There can be no assurances that such conditions will be satisfied or waived (if applicable).

Extension of EFIH DIP Facility — In January 2016, the EFIH Debtors paid a $14 million extension fee and extended the maturity date of the EFIH DIP Facility to the earlier of (a) December 2016 or (b) the effective date of any reorganization plan of EFIH. The terms of the facility were otherwise unchanged by the extension. We expect to extend or refinance the EFIH DIP Facility before its maturity in December 2016; however, we cannot predict whether any such extension or refinancing would be successful or on favorable terms. See Note 10 to the Financial Statements for discussion of the DIP Facilities.

Overall Hedged Generation Position — Taking together forward wholesale and retail electricity sales with all hedging positions, at June 30, 2016 we had effectively hedged an estimated 94% and 72%, respectively, of the price exposure, on a natural gas equivalent basis, related to our expected generation output for the remainder of 2016 and 2017 (assuming an 8.5 market heat rate), as compared to 94% and 18%, respectively, at December 31, 2015.

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~~Commodity~~In ~~Price~~August ~~Sensitivities~~2016, —the ~~The~~Bankruptcy ~~following~~Court ~~sensitivity~~entered ~~table~~an ~~provides~~order ~~estimates~~confirming of the ~~potential~~Debtors' ~~impact~~Third ~~(in~~Amended $Joint ~~millions)~~Plan of ~~movements~~Reorganization ~~in natural gas prices and market heat rates on realized pretax earnings for~~ (the ~~periods~~Plan ~~presented. The estimates related to price sensitivity are based on our unhedged position and forward prices at June 30, 2016, which for natural gas reflects estimates~~ of ~~electricity~~Reorganization) ~~generation~~solely ~~less~~as ~~amounts~~it ~~under~~pertains ~~existing~~to ~~wholesale~~the ~~and~~TCEH ~~retail~~Debtors ~~sales contracts~~ and ~~amounts related to hedging positions. On a rolling basis, generally twelve-months,~~ the ~~substantial~~Contributed ~~majority~~EFH ~~of retail sales under month-to-month arrangements are deemed to be under contract~~Debtors.

	Balance 2016	2017
$1.00/MMBtu change in natural gas price (a)(b)	$ ~12	$ ~115
0.1/MMBtu/MWh change in market heat rate (c)	$ ~1	$ ~10

On October 3, 2016 (the Effective Date), the Plan of Reorganization solely with respect to the TCEH Debtors and the Contributed EFH Debtors became effective and the TCEH Debtors and the Contributed EFH Debtors completed their reorganization under the Bankruptcy Code and emerged from the Chapter 11 Cases.

~~___________~~For additional discussion of the Bankruptcy Filing, the emergence of the TCEH Debtors and the Contributed EFH Debtors and their related effects, see Note 2 to the Financial Statements.

~~(a)~~Lamar ~~Balance~~and ofForney Acquisition — In April 2016, isLuminant purchased all of the membership interests in La Frontera Holdings, LLC, the indirect owner of two natural gas fueled generation facilities representing nearly 3,000 MW of capacity located in ERCOT, from ~~August~~a subsidiary of NextEra Energy, Inc. The facility in Forney, Texas has a capacity of 1,912 ~~2016~~MW ~~through~~and ~~December~~the 31facility in Paris, ~~2016~~Texas has a capacity of 1,076 MW. The aggregate purchase price was approximately $1.313 billion, which included the repayment of approximately $950 million of existing project financing indebtedness, plus approximately $236 million for cash and net working capital subject to final settlement. The purchase price was funded by cash-on-hand and additional borrowings under the TCEH DIP Facility totaling $1.1 billion. After completing the acquisition, we repaid approximately $230 million of borrowings under the TCEH DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. See Note 3 to the Financial Statements for further discussion of the acquisition.

~~(b)~~TCEH ~~Assumes~~DIP ~~conversion~~Roll ofFacilities ~~electricity~~— ~~positions~~In ~~based~~August on2016, anTCEH ~~approximate~~entered ~~8.5~~into ~~market~~the ~~heat~~TCEH ~~rate~~DIP ~~with~~Roll ~~natural~~Facilities. Prior ~~gas~~to ~~generally~~the ~~being~~Effective onDate, the ~~margin~~facility ~~70%~~provided for up to ~~90%~~$4.250 billion in senior secured, super-priority financing consisting of ~~the~~a ~~time~~revolving incredit ~~the~~facility ~~ERCOT~~of ~~market~~up (ito $750 million, a term loan letter of credit facility of up to $650 million and a term loan facility of up to $2.e850 billion., Approximately ~~when~~$2.65 ~~coal~~billion isof ~~forecast~~the net proceeds from the TCEH DIP Roll Term Loan Facility were used to berepay onall amounts outstanding under the ~~margin~~former TCEH DIP Credit Facility, noand ~~natural~~the ~~gas~~remaining ~~position~~net isproceeds ~~assumed~~were used for general corporate purposes. Upon the Effective Date, the TCEH DIP Roll Facilities converted to bea ~~generated)~~senior secured exit facility with maturity dates of August 2021 for the revolving credit facility and August 2023 for the term loan facilities. See ~~Excludes~~Note 10 to the ~~impact~~Financial Statements for discussion of ~~economic~~the ~~backdown~~TCEH DIP Roll Facilities.

Extension of EFIH DIP Facility — In October 2016, the EFIH DIP Facility was amended, in part, to extend the maturity date of the facility and to increase the borrowings under the facility by $75 million to $5.475 billion. The EFH Debtors paid fees and expenses of $10 million in connection with the amendment. Further, the EFIH DIP Facility will now mature on the earlier of (ca) ~~Based~~the oneffective ~~Houston~~date ~~Ship~~of ~~Channel~~any ~~natural~~plan ~~gas~~of ~~prices~~reorganization atas it relates to the EFH Debtors, (b) upon the event of the sale of substantially all of EFIH's assets or (c) June 302017, ~~2016~~subject to the right of the EFH Debtors, upon the payment of certain extension fees, to extend the maturity an additional six months. See Note 10 to the Financial Statements for discussion of the EFIH DIP Facility.

Environmental Matters — See Note 12 to Financial Statements for a discussion of greenhouse gas emissions, the CSAPR, regional haze, state-implementation plan and other recent EPA actions as well as related litigation.

Oncor 2008 Rate Review Filing (PUCT Docket No. 35717) — Oncor filed a petition for review with the Texas Supreme Court in February 2015 regarding previous opinions issued by the Texas Third Court of Appeals (Austin Court of Appeals) related to Oncor's June 2008 rate review filing. The issues in the appeal pertain to the Austin Court of Appeals affirming the PUCT's disallowance of certain franchise fees, affirming the PUCT's decision that the Texas Public Utility Regulatory Act (PURA) no longer requires imposition of a rate discount for state colleges and universities and remanding to the PUCT the calculation of the consolidated tax savings adjustment arising out of EFH Corp.'s ability to offset Oncor's taxable income against losses from other investments. The Texas Supreme Court granted the petition for review, and ~~the~~heard ~~date for~~ oral arguments ~~has~~in ~~been set for~~ September 2016. There is no deadline for the court to act. If Oncor's appeals efforts are unsuccessful and the proposed consolidated tax savings adjustment is implemented, Oncor estimates that on remand the impact on earnings of the consolidated tax savings adjustment's value could range from zero, as originally determined by the PUCT in Docket No. 35717, to a $135 million loss (after-tax) including interest. Interest accrues at the PUCT approved rate for over-collections, which is 0.18% for 2016. Oncor does not believe that any of the other issues ruled upon by the Austin Court of Appeals would result in a material impact to its results of operations or financial condition.

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RESULTS OF OPERATIONS

Consolidated Financial Results — Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2016 Compared to Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2015

Net income (loss) before income taxes and equity in earnings of unconsolidated subsidiaries by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 are presented below:

	Three Months Ended June 30,									Six Months Ended June 30,
	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
Competitive Electric segment	$	~~(501~~184	)	$	(~~321~~1,934	)	$	~~(180~~2,118	)	$	(~~837~~653	)	$	(13,~~950~~884	)	$	13,~~113~~231
Corporate and Other	(85103		)	(~~103~~105		)	182			(~~187~~290		)	(~~477~~583		)	~~290~~293
Net loss before income taxes and equity in earnings of unconsolidated subsidiaries	(586		)	(424		)	(162		)	(1,024		)	(2,427		)	1,403
Net income (loss) before income taxes and equity in earnings of unconsolidated subsidiaries	81			(2,039		)	2,120			(943		)	(4,467		)	3,524
Income tax benefit	171			137			34			298			537			(239		)
Income tax benefit (expense)	(42		)	452			(494		)	256			990			(734		)
Equity in earnings of unconsolidated subsidiaries (net of tax) (Regulated Delivery segment)	85127			75127			10—			~~147~~274			~~151~~278			(4		)
Net loss	$	(330	)	$	(212	)	$	(118	)	$	(579	)	$	(1,739	)	$	1,160
Net income (loss)	$	166		$	(1,460	)	$	1,626		$	(413	)	$	(3,199	)	$	2,786

~~Consolidated~~A favorable change of $2.12 billion in consolidated net income (loss) before income taxes and equity in earnings of unconsolidated subsidiaries for EFH Corp. ~~increased by $162 million to $586 million~~ in the three months ended ~~June~~September 30, 2016 compared to the three months ended ~~June~~September 30, 2015~~. The~~ ~~increase~~ primarily reflected ~~net~~$1.295 ~~losses~~billion in ~~commodity~~noncash ~~hedging~~impairments ~~and~~of ~~trading~~certain ~~activities,~~long-lived ~~lower~~assets ~~operating~~in ~~revenues~~2015 and ana ~~increase~~$700 inmillion ~~operating~~noncash ~~costs,~~impairment ~~partially~~of ~~offset~~goodwill byin ~~lower depreciation and amortization expenses~~2015.

Consolidated net loss before income taxes and equity in earnings of unconsolidated subsidiaries for EFH Corp. decreased by $13.~~403~~524 billion ~~to $1.024 billion~~ in the ~~six~~nine months ended ~~June~~September 30, 2016 compared to the ~~six~~nine months ended ~~June~~September 30, 2015. The decrease primarily reflected a $~~700~~1.971 ~~million~~billion in noncash ~~impairment~~impairments of ~~goodwill~~certain long-lived assets in 2015, $~~676~~1.4 ~~million~~billion in noncash impairments of ~~certain~~goodwill ~~long-lived assets~~ in 2015 and a $~~191~~143 million decrease in interest expense reflecting the payment of post-petition interest related to the EFIH Second Lien Notes in 2015.

See Competitive Electric Segment – Financial Results below for a discussion of significant variances in financial results for the three and ~~six~~nine months ended ~~June~~September 30, 2016 when compared to the three and ~~six~~nine months ended ~~June~~September 30, 2015. See Note 18 to the Financial Statements for details of other income and deductions. See Note 8 to the Financial Statements for details of interest expense and related charges. See Note 9 to the Financial Statements for details of reorganization items. See Note 6 to the Financial Statements for reconciliation of comparable effective tax rates to the US federal statutory rate.

Non-GAAP Earnings Measures

In communications with investors, we use a non-GAAP earnings measure that reflects adjustments to earnings reported in accordance with US GAAP in order to review and analyze underlying operating performance. These adjustments, which are generally noncash, consist of unrealized mark-to-market gains and losses, impairment charges, debt extinguishment gains and other charges, and credits or gains that are unusual or nonrecurring. All such items and related amounts are disclosed in our annual report on Form 10-K and quarterly reports on Form 10-Q. Our communications with investors also reference "Consolidated EBITDA," which is a non-GAAP measure used in calculation of ratios under certain debt securities covenants.

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Competitive Electric Segment

Revenue, Sales Volume and Customer Count Data

	Three Months Ended June 30,						% Change		Six Months Ended June 30,						% Change
	Three Months Ended September 30,						% Change		Nine Months Ended September 30,						% Change
	2016			2015					2016			2015
Operating revenues:
Retail electricity revenues:
Residential	$	~~628~~903		$	~~674~~997		(69.84	)%	$	12,~~181~~084		$	12,~~365~~362		(1311.58	)%
Business markets	~~350~~396			~~377~~438			(79.26	)%	~~674~~1,070			~~739~~1,177			(89.81	)%
Total retail electricity revenues	~~978~~1,299			1,~~051~~435			(6.9.5	)%	13,~~855~~154			23,~~104~~539			(1110.89	)%
Wholesale electricity revenues (a)(b)	~~204~~326			~~152~~238			3437.20	%	~~323~~649			~~300~~539			720.74	%
Other operating revenues	5165			5364			(31.86	)%	~~105~~170			~~123~~187			(149.61	)%
Total operating revenues	$	1,~~233~~690		$	1,~~256~~737		(12.87	)%	$	23,~~283~~973		$	24,~~527~~265		(96.78	)%
Sales volumes:
Retail electricity sales volumes – (GWh):
Residential	57,~~033~~359			47,~~990~~569			0(2.98	)%	916,~~261~~619			1017,~~098~~667			(85.39	)%
Business markets	45,~~748~~385			45,~~798~~634			(14.04	)%	814,~~969~~354			914,~~162~~796			(23.10	)%
Total retail electricity	912,~~781~~744			913,~~788~~203			(03.15	)%	1830,~~230~~973			1932,~~260~~463			(54.36	)%
Wholesale electricity sales volumes (b)	812,~~049~~058			56,~~256~~901			5374.17	%	1325,~~504~~563			1017,~~625~~526			2745.19	%
Total sales volumes	1724,~~830~~802			1520,~~044~~104			1823.54	%	3156,~~734~~536			2949,~~885~~989			613.21	%
Weather (North Texas average) – percent of normal (c):
Cooling degree days	95106.06		%	86111.18		%	10(4.37	)%	96102.18		%	87102.18		%	~~10.3~~—	%
Heating degree days	~~87.9~~—		%	~~95.8~~—		%	~~(8.2~~—	)%	81.9		%	118.9		%	(31.1	)%
Retail customer counts:
Retail electricity customers (end of period, in thousands) (d):
Residential									1,483			1,~~495~~493			(0.87	)%
Business markets									196			~~204~~205			(34.94	)%
Total retail electricity customers									1,679			1,~~699~~698			(1.21	)%

____________

(a) Upon settlement, physical derivative commodity contracts that we mark-to-market in net income, such as certain electricity sales and purchase agreements and coal purchase contracts, wholesale electricity revenues and fuel and purchased power costs, are reported at approximated market prices, as required by accounting rules, rather than contract price. The offsetting differences between contract and market prices are reported in net gain ~~(loss)~~ from commodity hedging and trading activities.


(b)	Includes net amounts related to sales and purchases of balancing energy in the ERCOT real-time market.


(c)	Weather data is obtained from Weatherbank, Inc., an independent company that collects and archives weather data from reporting stations of the National Oceanic and Atmospheric Administration (a federal agency under the US Department of Commerce). Normal is defined as the average over the 10-year period from 2000 to 2010.


(d)	Based on number of meters. Typically, large business and other customers have more than one meter; therefore, number of meters does not reflect the number of individual customers.

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Competitive Electric Segment

Production, Purchased Power and Delivery Cost Data

	Three Months Ended June 30,						% Change		Six Months Ended June 30,						% Change
	Three Months Ended September 30,						% Change		Nine Months Ended September 30,						% Change
	2016			2015					2016			2015
Fuel, purchased power costs and delivery fees ($ millions):
Fuel for nuclear facilities	$	2631		$	3940		(3322.35	)%	$	6192		$	78118		(2122.80	)%
Fuel for lignite/coal facilities	~~171~~236			~~184~~236			~~(7.1~~—	)%	~~312~~548			~~324~~560			(32.71	)%
Total nuclear and lignite/coal facilities (a)	~~197~~267			~~223~~276			(113.73	)%	~~373~~640			~~402~~678			(75.26	)%
Fuel for natural gas facilities and purchased power costs (a)	~~112~~150			6077			8694.78	%	~~159~~310			~~122~~199			3055.38	%
Other costs	3241			3649			(1116.13	)%	68108			78128			(1215.86	)%
Fuel and purchased power costs	~~341~~458			~~319~~402			613.9	%	~~600~~1,058			~~602~~1,005			(05.3	)%
Delivery fees	~~313~~416			~~327~~429			(4.3.0	)%	~~608~~1,024			~~657~~1,085			(7.5.6	)%
Total	$	~~654~~874		$	~~646~~831		15.2	%	$	12,~~208~~082		$	12,~~259~~090		(40.14	)%
Fuel and purchased power costs (which excludes generation facilities operating costs) per MWh:
Nuclear facilities	$	65.0780		$	7.4759		(1823.76	)%	$	6.2912		$	7.3644		(1417.57	)%
Lignite/coal facilities (b)	$	2017.6157		$	2720.8538		(2613.08	)%	$	2019.5420		$	2422.2659		(15.30	)%
Natural gas facilities and purchased power (c)	$	2226.9279		$	5043.3416		(5437.59	)%	$	26.5365		$	4745.9698		(4442.70	)%
Delivery fees per MWh	$	3132.8846		$	3332.2138		~~(4.~~0.2	)%	$	3332.1989		$	33.9531		(21.23	)%
Production and purchased power volumes (GWh):
Nuclear facilities	45,~~373~~310			5,~~239~~309			~~(16.5~~—	)%	915,~~695~~005			1015,~~521~~830			(75.92	)%
Lignite/coal facilities (d)	914,~~253~~630			913,~~259~~727			(06.16	)%	1731,~~235~~865			1831,~~057~~784			(40.63	)%
Total nuclear and lignite/coal facilities	1319,~~626~~940			1419,~~498~~036			(64.07	)%	2646,~~930~~870			2847,~~578~~614			(51.86	)%
Natural gas facilities (e)	4,~~059~~452			81548			—	%	48,~~086~~539			~~141~~689			—	%
Purchased power (f)	~~145~~410			~~465~~520			(6821.82	)%	~~718~~1,127			1,~~166~~686			(3833.42	)%
Total energy supply volumes	1724,~~830~~802			1520,~~044~~104			1823.54	%	3156,~~734~~536			2949,~~885~~989			613.21	%
Capacity factors:
Nuclear facilities	87104.16		%	104.35		%	~~(16~~0.51	)%	9699.52		%	105.31		%	(85.46	)%
Lignite/coal facilities (d)	5282.86		%	5277.95		%	(06.26	)%	4960.25		%	5160.95		%	~~(5.2~~—	)%
Total	6087.5		%	6483.36		%	(54.97	)%	5969.81		%	6370.84		%	(61.38	)%

____________


(a)	See note (a) to the Revenue, Sales Volume and Customer Count Data table on previous page.


(b)	Includes depreciation and amortization of lignite mining assets, which is reported in the depreciation and amortization expense line item, but is part of overall fuel costs and excludes unrealized amounts as discussed in footnote (a) to the Revenue, Sales Volume and Customer Count Data table on the previous page.


(c)	Excludes volumes related to line loss and power imbalances and unrealized amounts referenced in footnote (a) to the Revenue, Sales Volume and Customer Count Data table on previous page.

(d) Includes the estimated effects of economic backdown (including seasonal operations) of lignite/coal fueled units totaling 52,~~310~~390 GWh and 43,~~930~~210 GWh for the three months ended ~~June~~September 30, 2016 and 2015, respectively and 1214,~~030~~420 GWh and 1215,~~090~~300 GWh for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively.

(e) The percent changes between the periods presented have been excluded because they are not meaningful due to the addition of the Lamar and Forney natural gas fueled generation facilities in 2016.


(f)	Includes amounts related to line loss and power imbalances.

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Competitive Electric Segment — Financial Results — Three Months Ended ~~June~~September 30, 2016 Compared to Three Months Ended ~~June~~September 30, 2015

The overall $~~180~~2.118 ~~million~~billion ~~increase~~improvement in income (loss) before income taxes primarily reflected the noncash impairment of goodwill and the noncash impairments of certain long-lived assets in 2015 and higher net ~~losses~~gains in commodity hedging ~~and~~activities ~~trading~~in ~~activities~~2016. In 2015, ~~lower~~a ~~operating~~noncash ~~revenues~~impairment of goodwill totaling $700 million and annoncash ~~increase~~impairments inof ~~operating~~certain ~~costs,~~long-lived ~~partially~~assets ~~offset~~totaling by$1.295 ~~lower~~billion ~~depreciation~~were recorded as discussed in Notes 5 and ~~amortization~~7 ~~expenses~~to the Financial Statements.

Operating revenues decreased $2347 million driven by decreases in retail electricity revenues, partially offset by an increase in wholesale electricity revenues. Retail electricity revenues decreased $73136 million ~~driven~~reflecting bylower aaverage 7pricing of 6% ~~overall~~and ~~average~~a ~~price~~4% ~~decline~~decrease in ~~residential~~sales ~~and~~volumes ~~business~~due ~~markets~~to mild weather. Wholesale electricity revenues increased $5288 million due to a 24,~~793~~808 GWh increase in generation volumes driven by the Lamar and Forney Acquisition in April 2016, partially offset by lower average prices.

Following is an analysis of amounts reported as net gain ~~(loss)~~ from commodity hedging and trading activities. Results are primarily related to natural gas and power hedging activity.

	Three Months Ended June 30,
	Three Months Ended September 30,
Net gain (loss) from commodity hedging and trading activities	2016			2015			Change
Net gain from commodity hedging and trading activities	2016			2015			Change
Realized net gains	$	95122		$	4970		$	4652
Unrealized net losses	(213		)	(29		)	(184		)
Unrealized net gains	214			33			181
Total	$	~~(118~~336	)	$	20103		$	~~(138~~233	)

Decreases in operating revenues were offset by a $4652 million increase in realized gains during 2016 which reflected higher settled gains due to declining market prices~~. These~~ ~~gains~~on ~~were primarily related to~~ natural gas and power positions.

The $~~184~~181 million increase in unrealized ~~net~~gains ~~losses~~ reflected a larger reversal of previously recorded unrealized ~~net~~losses ~~gains~~ on settled positions in 2016 and higher unrealized net ~~losses~~gains recorded in 2016 due to anunrealized ~~increase~~gains inon ~~forward~~heat ~~natural~~rate ~~gas~~ and power ~~prices~~hedges ondue ~~hedge~~to ~~positions~~decreases in forward prices.

~~The~~Fuel, ~~$38~~purchased ~~million~~power ~~increase in operating~~ costs ~~reflected~~and ~~higher~~delivery ~~nuclear~~fees ~~maintenance~~increased ~~costs~~$43 ~~due~~million todriven aby ~~spring~~an ~~nuclear~~$80 ~~outage~~million increase in ~~2016~~fuel ascosts ~~compared~~for tonatural agas ~~fall~~facilities, ~~outage~~which inreflected ~~2015~~the Lamar and ~~incremental~~Forney ~~maintenance~~Acquisition, ~~costs~~partially ~~associated~~offset ~~with~~by ~~the~~lower ~~Lamar~~delivery fees and ~~Forney~~lower ~~Acquisition~~nuclear and lignite/coal facilities fuel costs.

Depreciation and amortization expenses decreased $5543 million, driven by the effect of noncash impairments of certain long-lived assets recorded in 2015, partially offset by incremental depreciation associated with the Lamar and Forney Acquisition.

For the three months ended ~~June~~September 30, 2016, results include $167 million of severance expense, primarily reported in fuel, purchased power and delivery fees and operating costs, associated with certain actions taken to reduce costs related to our mining and lignite/coal generation operations.

Competitive Electric Segment — Financial Results — ~~Six~~Nine Months Ended ~~June~~September 30, 2016 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2015

The overall $13.~~113~~231 billion decrease in loss before income taxes primarily reflected the noncash impairment of goodwill and the noncash impairments of certain long-lived assets in 2015, partially offset by lower operating revenues. In 2015, a noncash impairment of goodwill totaling $~~700~~1.4 ~~million~~billion and noncash impairments of certain long-lived assets totaling $~~676~~1.971 ~~million~~billion were recorded as discussed in Notes 5 and 7 to the Financial Statements.

Operating revenues decreased $~~244~~292 million driven by decreases in retail electricity revenues, partially offset by an increase in wholesale electricity revenues. Retail electricity revenues decreased $~~249~~385 million in 2016 reflecting a $223 million decrease due to a 7% ~~overall~~lower average ~~price~~pricing ~~decline~~and ina ~~residential~~$162 ~~and~~million ~~business~~decrease ~~markets~~due ~~and~~to a 5% ~~reduction~~decrease in ~~retail~~sales ~~electricity~~ volumes ~~reflecting~~driven ~~the~~by ~~effect of~~ milder weather. Wholesale electricity revenues increased $23110 million due to a 27,~~879~~106 GWh increase in generation volumes driven by the Lamar and Forney Acquisition in April 2016, partially offset by lower average wholesale electricity prices.

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Following is an analysis of amounts reported as net gain ~~(loss)~~ from commodity hedging and trading activities. Results are primarily related to natural gas and power hedging activity.

	Six Months Ended June 30,
	Nine Months Ended September 30,
Net gain (loss) from commodity hedging and trading activities	2016			2015		Change
Net gain from commodity hedging and trading activities	2016			2015		Change
Realized net gains (losses)	$	200		$	51	$	149
Realized net gains	$	320		$	121	$	199
Unrealized net gains (losses)	(~~253~~38		)	72105		(~~325~~143		)
Total	$	~~(53~~282	)	$	~~123~~226	$	~~(176~~56	)

Decreases in operating revenues were partially offset by a $~~149~~199 million increase in realized net gains during 2016 which reflected settled gains due to declining market prices. These gains were primarily related to natural gas positions.

The $~~325~~143 million ~~decrease~~unfavorable change in net unrealized gains (losses) reflected a larger reversal of previously recorded unrealized net gains on settled positions in 2016 and higher unrealized net ~~losses~~gains recorded in ~~2016~~2015 due to an increase in forward natural gas and power prices on hedge positions.

The $518 million decrease in fuel, purchased power costs and delivery fees in 2016 ~~was~~reflected ~~driven by~~ a $4961 million decrease in delivery fees, ~~and~~ $2938 million in lower nuclear and lignite/coal facilities fuel costs and $28 million in lower purchased power costs, partially offset by a $37139 million increase in fuel costs for natural gas facilities, which ~~reflected~~reflects impacts of the Lamar and Forney Acquisition.

The $6466 million increase in operating costs reflected higher nuclear maintenance costs due to a spring nuclear outage in 2016 compared to a fall outage in 2015 and incremental operating and maintenance costs associated with the Lamar and Forney Acquisition.

Depreciation and amortization expenses decreased $~~132~~175 million, driven by the effect of noncash impairments of certain long-lived assets recorded in 2015, partially offset by incremental expense associated with the Lamar and Forney Acquisition.

For the ~~six~~nine months ended ~~June~~September 30, 2016, results include $2532 million of severance expense, primarily reported in fuel, purchased power and delivery fees and operating costs, associated with certain actions taken to reduce costs related to our mining and lignite/coal generation operations.

Competitive Electric Segment — Energy-Related Commodity Contracts and Mark-to-Market Activities

The table below summarizes the changes in commodity contract assets and liabilities for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. The net change in these assets and liabilities, excluding "other activity" as described below, reflects $~~253~~38 million in unrealized net losses in 2016 and $72105 million in unrealized net gains in 2015 arising from mark-to-market accounting for positions in the commodity contract portfolio.

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Commodity contract net asset at beginning of period	$	271		$	180
Settlements/termination of positions (a)	(~~208~~232		)	(79176		)
Changes in fair value of positions in the portfolio (b)	~~(45~~194		)	~~151~~281
Other activity (c)	(2635		)	(1126		)
Commodity contract net asset (liability) at end of period	$	(8	)	$	241
Commodity contract net asset at end of period	$	198		$	259

____________


(a)	Represents reversals of previously recognized unrealized gains and losses upon settlement/termination (offsets realized gains and losses recognized in the settlement period). Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into and settled in the same month.


(b)	Represents unrealized net gains (losses) recognized, reflecting the effect of changes in fair value. Excludes changes in fair value in the month the position settled as well as amounts related to positions entered into and settled in the same month.


(c)	These amounts do not represent unrealized gains or losses. Includes fair value of acquired commodity contracts as of the date of the Lamar and Forney Acquisition (see Note 3 to the Financial Statements). Also includes initial values of positions involving the receipt or payment of cash or other consideration, generally related to options purchased/sold.

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Maturity Table — The following table presents the net commodity contract ~~liability~~asset arising from recognition of fair values at ~~June~~September 30, 2016, scheduled by the source of fair value and contractual settlement dates of the underlying positions.

	Maturity dates of unrealized commodity contract net liability at June 30, 2016
	Maturity dates of unrealized commodity contract net asset at September 30, 2016
Source of fair value	Less than1 year			1-3 years			4-5 years			Total
Prices actively quoted	$	8028		$	(106	)	$	(1	)	$	7121
Prices provided by other external sources	~~(52~~57		)	~~(18~~23		)	—			~~(70~~80		)
Prices based on models	2953			~~(16~~40		)	~~(22~~4		)	(997		)
Total	$	57138		$	~~(44~~57	)	$	~~(21~~3	)	$	(8198	)

Regulated Delivery Segment — Three Months Ended ~~June~~September 30, 2016 Compared to Three Months Ended ~~June~~September 30, 2015

Equity in earnings of our Oncor Holdings unconsolidated subsidiary (net of tax) ~~increased~~totaled $10127 million toin ~~$85~~both ~~million~~2016 inand ~~2016~~2015. ~~The~~Equity ~~increase in equity~~ earnings of Oncor primarily reflected ~~higher~~increased ~~distribution~~revenues ~~base~~due ~~revenues~~to ~~driven~~growth byin ~~warmer~~points ~~weather~~of ~~conditions~~delivery and ~~higher~~increases in transmission ~~base~~investment, offset by decreased revenues due to ~~increased~~lower ~~investment~~consumption, ~~partially~~primarily ~~offset~~driven by ~~higher~~milder ~~income~~summer ~~taxes~~weather conditions. See Note 4 to the Financial Statements.

Regulated Delivery Segment — ~~Six~~Nine Months Ended ~~June~~September 30, 2016 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2015

Equity in earnings of our Oncor Holdings unconsolidated subsidiary (net of tax) decreased $4 million to $~~147~~274 million in 2016. The decrease in equity earnings of Oncor primarily reflected decreased revenues due to lower ~~distribution~~consumption, ~~base~~primarily ~~revenues~~driven ~~and~~by ~~higher~~milder ~~depreciation~~winter, spring and ~~amortization~~summer ~~expense~~weather conditions, partially offset by ~~higher~~increased ~~transmission~~revenues ~~base~~due ~~revenues~~to growth in points of delivery and increases in transmission investment. See Note 4 to the Financial Statements.

Corporate and Other Activity — Three Months Ended ~~June~~September 30, 2016 Compared to Three Months Ended ~~June~~September 30, 2015

Net loss before income taxes and equity in earnings of unconsolidated subsidiaries from Corporate and Other activities decreased $182 million in 2016 to $85103 million. The change primarily reflects:

• a $914 million decrease in SG&A expenses primarily due to Sponsor Group management fees accrued in 2015 (see Note 16 to the Financial Statements), and

• aan $69 million decrease in the Corporate and Other portion of reorganization items in 2016.,

~~Corporate~~partially ~~and~~offset ~~Other Activity — Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~by:

~~Net~~• ~~loss~~a ~~before~~$15 ~~income~~million ~~taxes~~increase ~~and equity~~ in ~~earnings~~other ofdeductions ~~unconsolidated~~primarily ~~subsidiaries~~due ~~from~~to ~~Corporate~~adjustment ~~and~~of ~~Other~~asbestos ~~activities~~related ~~decreased~~liabilities ~~$290~~(see ~~million~~Notes in2 ~~2016~~and 18 to ~~$187~~the ~~million. The~~Financial ~~change primarily reflects:~~Statements).

•Corporate aand ~~$235~~Other ~~million~~Activity ~~decrease~~— inNine ~~interest~~Months ~~expense~~Ended ~~reflecting~~September 30, ~~the~~2016 ~~payment~~Compared ~~of post-petition interest related~~ to ~~the~~Nine ~~EFIH~~Months ~~Second~~Ended ~~Lien~~September 30, ~~Notes in~~ 2015 ~~(see Note 11 to the Financial Statements);~~

•Net aloss ~~$33~~before ~~million~~income ~~decrease~~taxes inand ~~SG&A~~equity ~~expenses primarily due to Sponsor Group management fees accrued~~ in ~~2015~~earnings ~~(see~~of ~~Note~~unconsolidated 16subsidiaries tofrom ~~the~~Corporate ~~Financial~~and ~~Statements)~~Other ~~and~~activities ~~lower~~decreased ~~technology~~$293 ~~costs~~million ~~and~~in ~~functional~~2016 ~~costs~~to ~~for~~$290 ~~support~~million. The ~~groups,~~change ~~and~~primarily reflects:

• a $23228 million decrease in ~~the~~interest ~~Corporate~~expense ~~and~~reflecting ~~Other~~the ~~portion~~payment of ~~reorganization~~post-petition ~~items~~interest related to the EFIH Second Lien Notes in ~~2016.~~2015 (see Note 11 to the Financial Statements);


•	a $47 million decrease in SG&A expenses primarily due to Sponsor Group management fees accrued in 2015 (see Note 16 to the Financial Statements) and lower technology costs and functional costs for support groups, and


•	a $33 million decrease in the Corporate and Other portion of reorganization items in 2016,

partially offset by a $18 million increase in other deductions primarily due to adjustment of asbestos related liabilities (see Notes 2 and 18 to the Financial Statements).

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FINANCIAL CONDITION

Cash Flows — ~~Six~~Nine Months Ended ~~June~~September 30, 2016 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2015 — Cash used in operating activities totaled $~~512~~328 million and $~~572~~123 million in 2016 and 2015, respectively. The ~~decrease~~increase in cash used of $60205 million was primarily driven by ~~$252 million in lower cash interest payments as~~ a ~~result of the repayment of certain EFIH Second Lien Notes in 2015 (see Note 11 to the Financial Statements), partially offset by a~~ $~~179~~232 million decrease in cash provided by margin deposits.

Depreciation and amortization expense reported in the condensed statements of consolidated cash flows exceeded the amount reported in the condensed statements of consolidated income (loss) by $4872 million and $74114 million for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, respectively. The difference primarily represents amortization of nuclear fuel, which is reported as fuel costs in the condensed statements of consolidated income (loss) consistent with industry practice.

Cash provided by financing activities totaled $1.~~088~~855 billion in 2016 compared to cash used in financing activities of $~~484~~497 million in 2015. Activity in 2016 reflected $12.~~115~~040 billion in net borrowings under the TCEH DIP Roll Facilities and the TCEH DIP Facility, including $870 million in net borrowings to fund the Lamar and Forney Acquisition (see Note 3 to the Financial Statements). Activity in 2016 also reflected $112 million in fees related to the issuance of the TCEH DIP Roll Facilities, $14 million in fees related to the ~~extension~~extensions of the EFIH DIP Facility and $1359 million in debt repayments. Activity in 2015 reflected the repayment of $445 million principal amount of EFIH Second Lien Notes and $28 million in fees related to the repayment (see Note 11 to the Financial Statements).

Cash used in investing activities totaled $1.~~534~~247 billion and $~~209~~307 million in 2016 and 2015, respectively. Cash used in 2016 reflected payments of $1.343 billion related to the Lamar and Forney Acquisition net of cash acquired (see Note 3 to the Financial Statements) and capital expenditures (including nuclear fuel purchases) totaling $263 million, partially offset by a $365 million decrease in restricted cash used to backstop letters of credit.

Debt Activity — See Notes 10 and 11 to the Financial Statements for details of debtor-in-possession borrowing facilities and pre-petition debt.

Available Liquidity — The following table summarizes changes in available liquidity for the ~~six~~nine months ended ~~June~~September 30, 2016:

	Available Liquidity
	June 30, 2016		December 31, 2015		Change
	September 30, 2016		December 31, 2015		Change
Cash and cash equivalents – EFH Corp. and other	$	~~488~~481	$	532	$	(4451	)
Cash and cash equivalents – EFIH	~~275~~256		354		(7998		)
Cash and cash equivalents – TCEH (a)	~~565~~1,829		1,400		~~(835~~429		)
Total cash and cash equivalents	12,~~328~~566		2,286		~~(958~~280		)
TCEH DIP Revolving Credit Facility (b)	835		1,950		(1,115		)
TCEH DIP Roll Revolving Credit Facility	750		—		750
Total liquidity (b)	$	2,163	$	4,236	$	(2,073	)
TCEH DIP Revolving Credit Facility	—		1,950		(1,950		)
Total liquidity	$	3,316	$	4,236	$	(920	)

___________

(a) Cash and cash equivalents at ~~June~~September 30, 2016 and December 31, 2015 exclude $~~1.035~~650 ~~billion~~million and $1.026 billion, respectively, of restricted cash held for letter of credit support. The ~~June~~September 30, 2016 restricted cash balance ~~includes~~represents ~~$507~~borrowings ~~million~~ under the TCEH ~~pre-petition~~DIP Roll Term Loan Letter of Credit Facility ~~and~~held in a collateral account that supports $~~528~~546 million ~~under~~in ~~the~~letters ~~TCEH~~of ~~DIP~~credit ~~Facility~~outstanding, leaving $104 million in available letter of credit capacity (see Note 10).

~~(b)~~The ~~Pursuant~~decrease toin anavailable ~~order~~liquidity of $920 million in the ~~Bankruptcy~~nine ~~Court~~months ended September 30, ~~the~~2016 ~~TCEH~~compared ~~Debtors~~to ~~may~~December 31, ~~not~~2015 ~~have~~was ~~more~~primarily ~~than~~driven by $12.~~650~~040 billion ofin ~~cash~~net borrowings ~~outstanding~~ under the TCEH DIP ~~Revolving~~Roll ~~Credit~~Facilities and the TCEH DIP Facility, ~~without~~including ~~written~~$870 ~~consent~~million ofin ~~the~~net ~~TCEH~~borrowings ~~committee~~to offund ~~unsecured~~the ~~creditors~~Lamar and Forney Acquisition (see Note 3 to the adFinancial ~~hoc~~Statements), ~~group~~$1.246 billion in cash interest payments (including adequate protection payments), $263 million in capital expenditures (including nuclear fuel purchases) and $197 million of ~~TCEH~~cash ~~unsecured~~used ~~noteholders~~to orpay ~~further~~for ~~order~~reorganization expenses, partially offset by a $365 million decrease in restricted cash used to backstop letters of ~~the~~credit ~~Bankruptcy~~and ~~Court~~$135 million of cash received in distributions from Oncor Holdings.

The decrease in available liquidity of $2.073 billion in the six months ended June 30, 2016 compared to December 31, 2015 was primarily driven by $1.115 billion in net borrowings under the TCEH DIP Facility, including $870 million in net borrowings to fund the Lamar and Forney Acquisition (see Note 3 to the Financial Statements), $800 million in cash interest payments (including adequate protection payments), $180 million in capital expenditures (including nuclear fuel purchases) and $130 million of cash used to pay for reorganization expenses, partially offset by $86 million of cash received in distributions from Oncor Holdings.

We have incurred and expect to continue to incur significant costs associated with the Chapter 11 Cases and our reorganization, but we cannot accurately predict the effect the Chapter 11 Cases will have on our operations, liquidity, financial position and results of operations. Based upon our current internal financial forecasts, we believe that we will have sufficient amounts available under the DIP Facilities, plus cash generated from operations, to fund our anticipated cash requirements through at least the maturity dates of the DIP Facilities.

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~~Debt~~We ~~Capacity~~have —incurred ~~The~~and ~~TCEH~~expect ~~DIP~~to ~~Facility~~continue ~~permits,~~to ~~subject~~incur tosignificant ~~certain~~costs ~~terms,~~associated ~~conditions~~with the Chapter 11 Cases and ~~limitations~~our reorganization, ~~TCEH~~but towe ~~request~~cannot ~~additional~~accurately ~~term~~predict ~~loans~~the oreffect ~~increases~~the inChapter ~~the~~11 ~~amount~~Cases ofwill ~~the~~have ~~revolving~~on ~~credit~~our ~~commitment~~operations, ~~not~~liquidity, tofinancial ~~exceed~~position ~~$750~~and ~~million~~results of operations. ~~The~~Based ~~EFIH~~upon ~~DIP~~our ~~Facility~~current ~~permits~~internal financial forecasts, ~~subject~~we tobelieve ~~certain~~that ~~terms,~~we ~~conditions~~will ~~and~~have ~~limitations,~~sufficient amounts available under the EFIH DIP Facility to ~~incur~~fund ~~incremental~~our ~~junior~~anticipated ~~lien~~cash ~~subordinated~~requirements ~~debt~~through inat anleast ~~aggregate~~the ~~amount~~maturity ~~not~~date toof ~~exceed~~the $3EFIH ~~billion~~DIP Facility.

~~Distributions~~Debt ofCapacity ~~Earnings from Oncor Holdings and Related Considerations~~ — ~~Oncor~~The ~~Holdings'~~EFIH ~~distributions~~DIP ofFacility ~~earnings~~permits, subject to uscertain ~~totaled $86 million and $120 million for the six months ended June 30~~terms, ~~2016~~conditions and ~~2015~~limitations, ~~respectively. In~~EFIH ~~July 2016, Oncor Holdings' board of directors declared a cash distribution expected~~ to beincur upincremental tojunior ~~approximately~~lien ~~$49~~subordinated ~~million~~debt ~~with~~in ~~the~~an ~~exact~~aggregate amount tonot ~~be determined by Oncor's management. See Note 4~~ to ~~the~~exceed ~~Financial~~$3 ~~Statements for discussion of limitations on amounts Oncor can distribute to its members~~billion.

Distributions of Earnings from Oncor Holdings and Related Considerations — Oncor Holdings' distributions of earnings to us totaled $135 million and $206 million for the nine months ended September 30, 2016 and 2015, respectively. In October 2016, Oncor Holdings' board of directors declared a cash distribution expected to be up to approximately $28 million with the exact amount to be determined by Oncor's management. See Note 4 to the Financial Statements for discussion of limitations on amounts Oncor can distribute to its members.

~~Liquidity~~Income ~~Effects~~Tax ofMatters ~~Commodity~~— ~~Hedging~~EFH ~~and~~Corp. ~~Trading~~files ~~Activities~~a —US Wefederal ~~have~~income ~~entered~~tax ~~into~~return ~~commodity~~that ~~hedging~~includes the results of EFCH, EFIH, Oncor Holdings and ~~trading~~TCEH. EFH ~~transactions~~Corp. ~~that~~(parent ~~require~~entity) usis toa ~~post~~corporate ~~collateral~~member ifof the ~~forward~~EFH ~~price~~Corp. consolidated group, while each of ~~the~~EFIH, ~~underlying~~Oncor ~~commodity~~Holdings, ~~moves~~EFCH ~~such~~and ~~that~~TCEH ~~the~~is ~~hedging~~classified oras ~~trading~~a ~~instrument~~disregarded weentity ~~hold~~for ~~has~~US ~~declined~~federal inincome ~~value~~tax purposes. ~~TCEH~~Oncor ~~uses~~is ~~cash,~~a ~~letters~~partnership offor ~~credit~~US federal income tax purposes and ~~other~~is ~~forms~~not ofa ~~credit~~corporate ~~support~~member toof ~~satisfy~~the ~~such~~EFH ~~collateral~~Corp. ~~posting~~consolidated ~~obligations~~group. ~~See~~Pursuant ~~Note~~to 10applicable toUS Treasury regulations and published guidance of the ~~Financial~~IRS, ~~Statements~~corporations that are members of a consolidated group have joint and several liability for ~~discussion~~the taxes of such group. Subsequent to the Effective Date, the TCEH ~~DIP~~Debtors ~~Facility~~and the Contributed EFH Debtors will no longer be included in the consolidated income tax return and will be included in an income tax return with Reorganized TCEH.

AtPrior ~~June 30~~to the Effective Date, ~~2016~~EFH Corp. and certain of its subsidiaries (including EFCH, EFIH, and TCEH, ~~received~~but not including Oncor Holdings and Oncor) were parties to a Federal and State Income Tax Allocation Agreement, which provided, among other things, that any corporate member or ~~posted~~disregarded ~~cash~~entity in the EFH Corp. group was required to make payments to EFH Corp. in an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. Pursuant to the Plan of Reorganization, the TCEH Debtors and ~~letters~~the Contributed EFH Debtors rejected this agreement on the Effective Date. Additionally, since the date of ~~credit~~the ~~for~~Settlement ~~commodity~~Agreement, ~~hedging~~no further cash payments among the Debtors were made in respect of federal income taxes. We have elected to continue to allocate federal income taxes among the entities that are parties to the Federal and ~~trading~~State ~~activities~~Income asTax ~~follows:~~Allocation Agreement. The Settlement Agreement did not alter the allocation and payment for state income taxes, which will continue to be settled prior to the Effective Date.

•EFH ~~$23~~Corp., ~~million~~Oncor inHoldings, ~~cash~~Oncor ~~has~~and ~~been~~Oncor's ~~posted~~third-party ~~with~~minority ~~counterparties~~investors asare ~~compared~~parties to $6a ~~million~~separate ~~posted~~Federal atand ~~December~~State 31Income Tax Allocation Agreement, ~~2015;~~which governs the computation of federal income tax liability among such parties, and similarly provides, among other things, that each of Oncor Holdings and Oncor will pay EFH Corp. its share of an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. This agreement is expected to be rejected by the EFH Debtors upon the effective date of the Plan of Reorganization with respect to the EFH Debtors. The Settlement Agreement had no impact on the tax sharing agreement among EFH Corp., Oncor Holdings and Oncor.

•The ~~$36~~TCEH ~~million~~Debtors inand ~~cash~~the ~~has~~Contributed ~~been~~EFH ~~received~~Debtors emerged from ~~counterparties~~the asChapter ~~compared~~11 Cases on the Effective Date in a tax-free spin-off from EFH Corp. The tax-free spin-off generated a taxable gain that will be largely offset with available net operating losses (NOLs), substantially reducing the NOLs that will be available to ~~$152~~EFH ~~million~~Corp. ~~received~~after atthe transaction. The EFH Corp. consolidated group's NOLs as of December 31, ~~2015;~~2016 (including current year losses and prior year carryforwards) prior to taking into account the emergence transaction impacts are estimated to be approximately $7.4 billion, and we expect that approximately $5.5 billion to $6.0 billion of those losses will be used to offset taxable gain from the emergence transaction.

•With ~~$386~~respect ~~million~~to inthe ~~letters~~EFH ofDebtors, ~~credit~~the ~~have~~Plan ~~been~~of ~~posted~~Reorganization, ~~with~~subject ~~counterparties~~to ascertain ~~compared~~conditions toand ~~$230~~certain ~~million~~regulatory ~~posted~~approvals, atprovides ~~December 31~~for, ~~2015~~among other things, ~~and~~the acquisition by affiliates of NextEra Energy Inc. (NEE) of the EFH Debtors (as reorganized).

•Income Tax Payments — In the next twelve months, income tax payments related to Texas margin tax are expected to total approximately $621 million, inand ~~letters~~no payments or refunds of ~~credit~~federal ~~have~~income ~~been~~taxes ~~received~~are ~~from~~expected. Income ~~counterparties~~tax aspayments ~~compared~~totaled to$43 million and $351 million ~~received~~(all atof ~~December~~which 31related to Texas Margin tax) for the nine months ended September 30, 2016 and 2015, respectively.

Income Tax Matters — EFH Corp. files a US federal income tax return that includes the results of EFCH, EFIH, Oncor Holdings and TCEH. EFH Corp. (parent entity) is a corporate member of the EFH Corp. consolidated group, while each of EFIH, Oncor Holdings, EFCH and TCEH is classified as a disregarded entity for US federal income tax purposes. Oncor is a partnership for US federal income tax purposes and is not a corporate member of the EFH Corp. consolidated group. Pursuant to applicable US Treasury regulations and published guidance of the IRS, corporations that are members of a consolidated group have joint and several liability for the taxes of such group.

EFH Corp. and certain of its subsidiaries (including EFCH, EFIH, and TCEH, but not including Oncor Holdings and Oncor) are parties to a Federal and State Income Tax Allocation Agreement, which provides, among other things, that any corporate member or disregarded entity in the EFH Corp. group is required to make payments to EFH Corp. in an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. The Plan of Reorganization provides that the TCEH Debtors will reject this agreement at the effective time of the Plan of Reorganization as it relates to the TCEH Debtors. Under the terms of the Settlement Agreement, no further cash payments among the Debtors will be made in respect of federal income taxes. However, the EFH Corp. group continues to allocate federal income taxes among the entities that are parties to the Federal and State Income Tax Allocation Agreement. The Settlement Agreement did not alter the allocation and payment for state income taxes, which will continue to be settled.

EFH Corp., Oncor Holdings, Oncor and Oncor's third-party minority investors are parties to a separate Federal and State Income Tax Allocation Agreement, which governs the computation of federal income tax liability among such parties, and similarly provides, among other things, that each of Oncor Holdings and Oncor will pay EFH Corp. its share of an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return. The Settlement Agreement had no impact on the tax sharing agreement among EFH Corp., Oncor Holdings and Oncor.

Income Tax Payments — In the next twelve months, income tax payments related to Texas margin tax are expected to total approximately $35 million, and no payments or refunds of federal income taxes are expected. Income tax payments totaled $34 million and $46 million (all of which related to Texas Margin tax) for the six months ended June 30, 2016 and 2015, respectively.

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Financial Covenants — The Bankruptcy Filing constituted an event of default and automatic acceleration under the agreements governing the pre-petition debt of EFH Corp. and its subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities. The creditors are, however, stayed from taking any action against the Debtors as a result of such defaults and accelerations under the Bankruptcy Code.

The agreement governing the TCEH DIP Facility includes a covenant that requires the Consolidated Superpriority Secured Net Debt to Consolidated EBITDA ratio not exceed 3.50 to 1.00. The ratio was 1.79 to 1.00 at June 30, 2016, and TCEH is in compliance with this covenant. Consolidated Superpriority Secured Net Debt consists of outstanding term loans and revolving credit exposure under the TCEH DIP Facility less unrestricted cash. TCEH's Consolidated EBITDA (as used in the covenant contained in the agreement governing the TCEH DIP Facility) for the six and twelve months ended June 30, 2016 totaled $699 million and $1.712 billion, respectively. See Exhibit 99(b) for a reconciliation of TCEH's net income (loss) to Consolidated EBITDA. The EFIH DIP Facility ~~also~~ includes a minimum liquidity covenant pursuant to which EFIH cannot allow unrestricted cash (as defined in the EFIH DIP Facility) to be less than $150 million. EFIH is in compliance with this covenant. Based on the current and projected liquidity requirements of EFIH, EFIH's liquidity may fall beneath the amount required by the minimum liquidity covenant in the EFIH DIP Facility, and if this were to occur, it would be in default of the EFIH DIP Facility unless it obtains a waiver from the required lenders under such facility. However, such a default would not constitute a cross default under the TCEH DIP Facility.

See Note 10 to the Financial Statements for discussion of other covenants related to the EFIH DIP ~~Facilities~~Facility.

~~Collateral~~Material ~~Support~~Cross ~~Obligations~~Default/Acceleration Provisions — ~~The~~Certain ~~RCT~~of ~~has~~our ~~rules~~financing inarrangements ~~place~~contain toprovisions ~~assure~~ that ~~parties~~result ~~can~~in ~~meet~~an ~~their~~event ~~mining reclamation obligations. In June 2014, the RCT agreed to a collateral bond from TCEH~~ of updefault toif ~~$1.1~~there ~~billion~~were ~~to support its reclamation obligations. The collateral bond is~~ a ~~$1.1~~failure ~~billion carve out from the super-priority liens~~ under ~~the~~other ~~TCEH~~financing ~~DIP~~arrangements ~~Facility~~to ~~that~~meet ~~will~~payment ~~enable~~terms ~~the~~or ~~RCT~~ to beobserve ~~paid~~other ~~before~~covenants ~~the~~that ~~TCEH~~could ~~DIP~~or ~~Facility~~does ~~lenders~~result in ~~the~~an ~~event~~acceleration of apayments ~~liquidation of TCEH's assets~~due. ~~Collateral~~Such ~~support~~provisions ~~relates~~are referred to ~~land~~as ~~mined~~"cross default" or ~~being~~"cross ~~mined~~acceleration" ~~and~~provisions. The ~~not~~Bankruptcy ~~yet~~Filing ~~reclaimed~~triggered asdefaults ~~well~~on asour ~~land~~pre-petition ~~for~~debt ~~which~~obligations, ~~permits have been obtained~~ but ~~mining~~pursuant ~~activities~~to ~~have~~the ~~not~~Bankruptcy ~~yet~~Code, ~~begun~~the ~~and~~creditors ~~land~~are ~~already~~stayed ~~reclaimed~~from ~~but~~taking ~~not~~any ~~released~~actions ~~from~~against ~~regulatory~~the ~~obligations~~EFH byDebtors ~~the~~as ~~RCT,~~a ~~and~~result ~~includes~~of ~~cost~~such ~~contingency amounts~~defaults.

The PUCT has rules in place to assure adequate creditworthiness of each REP, including the ability to return customer deposits, if necessary. Under these rules, at June 30, 2016, TCEH posted letters of credit in the amount of $55 million, which is subject to adjustments.

ERCOT has rules in place to assure adequate creditworthiness of parties that participate in the day-ahead, real-time and congestion revenue rights markets operated by ERCOT. Under these rules, TCEH has posted collateral support, in the form of letters of credit, totaling $85 million at June 30, 2016 (which is subject to daily adjustments based on settlement activity with ERCOT).

Oncor and Texas Holdings agreed to the terms of a stipulation with major interested parties to resolve all outstanding issues in the PUCT review related to the Merger. As part of this stipulation, TCEH would be required to post a letter of credit in an amount equal to $170 million to secure its payment obligations to Oncor in the event, which has not occurred, two or more rating agencies downgrade Oncor's credit ratings below investment grade.

Material Cross Default/Acceleration Provisions — Certain of our financing arrangements contain provisions that result in an event of default if there were a failure under other financing arrangements to meet payment terms or to observe other covenants that could or does result in an acceleration of payments due. Such provisions are referred to as "cross default" or "cross acceleration" provisions. The Bankruptcy Filing triggered defaults on our pre-petition debt obligations, but pursuant to the Bankruptcy Code, the creditors are stayed from taking any actions against the Debtors as a result of such defaults.

Guarantees — See Note 12 to the Financial Statements for discussion of guarantees.

OFF–BALANCE SHEET ARRANGEMENTS

See Notes 4 and 12 to the Financial Statements regarding VIEs and guarantees, respectively.

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COMMITMENTS AND CONTINGENCIES

See Note 12 to the Financial Statements for discussion of commitments and contingencies.

CHANGES IN ACCOUNTING STANDARDS

~~See~~There ~~Note~~have 1been tono ~~the~~recently ~~Financial~~issued ~~Statements~~accounting ~~for~~standards ~~discussion~~effective ofafter ~~changes~~September 30, in2016 ~~accounting~~that ~~standards~~are expected to materially impact our financial statements.

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Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~All~~Market ~~dollar~~risk ~~amounts~~is the risk that in the ~~tables~~ordinary course of business we may experience a loss in value as a result of changes in market conditions that affect economic factors such as interest rates. The principal amounts outstanding under the ~~following~~EFIH ~~discussion~~DIP ~~and~~Facility ~~analysis~~bear ~~are~~interest ~~stated~~based on applicable LIBOR rates, subject to a 1% floor, plus 3.25%. We expect LIBOR rates to remain below the 1% interest rate floor specified in ~~millions~~the ofEFIH USDIP ~~dollars~~Facility ~~unless~~during ~~otherwise~~the ~~indicated~~remainder of the Chapter 11 Cases.

~~Market~~Credit risk is the risk that in the ordinary course of business we may experience a loss in value as a result of changes in market conditions that affect economic factors such as commodity prices, interest rates and counterparty credit. Our exposure to market risk is affected by a number of factors, including the size, duration and composition of our energy and financial portfolio, as well as the volatility and liquidity of markets. Instruments used to manage this exposure include interest rate swaps to hedge debt costs, as well as exchange-traded, over-the-counter contracts and other contractual arrangements to hedge commodity prices.Risk

Oncor's Credit Risk ~~Oversight~~— Credit risk relates to the risk of loss associated with nonperformance by counterparties. Oncor's 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 Texas Public Utility Regulatory Act 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. PUCT rules allow for the recovery of uncollectible amounts from nonaffiliated REPs, reducing the credit risk of such receivables.

WeAt ~~manage~~September 30, ~~the~~2016, ~~commodity~~Oncor's ~~price,~~exposure ~~counterparty~~to credit ~~and commodity-related operational~~ risk ~~related~~associated towith ~~the~~accounts ~~competitive~~receivable ~~energy~~from ~~business~~nonaffiliate ~~within~~customers ~~limitations~~totaled ~~established~~$454 ~~by senior management and in accordance with overall risk management policies~~million. ~~Interest~~The ~~rate~~nonaffiliated ~~risk~~customer isreceivable ~~managed~~amount ~~centrally~~is bybefore the ~~corporate~~allowance ~~treasury~~for ~~function. Market~~uncollectible ~~risks~~accounts, ~~are~~which ~~monitored~~totaled by$4 ~~risk~~million, ~~management~~and ~~groups~~includes ~~that~~trade ~~operate~~accounts ~~independently~~receivable offrom ~~the~~REPs ~~wholesale~~totaling ~~commercial~~$349 ~~operations~~million, ~~utilizing~~which ~~defined~~are ~~practices~~almost ~~and~~entirely ~~analytical~~noninvestment ~~methodologies~~grade. ~~These~~At ~~techniques~~September 30, ~~measure~~2016, ~~the~~REP ~~risk~~subsidiaries of ~~change~~one innonaffiliated ~~value~~entity ofcollectively ~~the~~represented ~~portfolio~~approximately 17% of ~~contracts and~~ the ~~hypothetical~~nonaffiliated ~~effect~~trade onreceivable ~~this~~amount. No ~~value~~other ~~from~~nonaffiliated ~~changes~~parties inrepresented ~~market~~10% ~~conditions~~or ~~and~~more ~~include,~~of ~~but~~the ~~are~~total ~~not limited to, position review, Value at Risk (VaR) methodologies and stress test scenarios~~exposure. ~~Key~~Oncor ~~risk~~views ~~control~~its ~~activities~~exposure ~~include,~~to ~~but~~this ~~are~~customer ~~not limited~~ to, ~~transaction~~be ~~review~~within ~~and~~an ~~approval~~acceptable ~~(including~~level ~~credit~~of ~~review), operational and market~~ risk ~~measurement,~~tolerance ~~transaction~~considering ~~authority~~PUCT ~~oversight,~~rules ~~validation~~and ofregulations; ~~transaction capture~~however, ~~market~~this ~~price~~concentration ~~validation~~increases ~~and~~the ~~reporting,~~risk ~~and~~that ~~portfolio~~a ~~valuation~~default ~~and~~would ~~reporting,~~have ~~including~~a ~~mark-to-market~~material ~~valuation,~~effect ~~VaR~~on ~~and~~cash ~~other risk measurement metrics~~flows.

WeSee ~~have~~Note a16 ~~corporate~~to ~~risk management organization that is headed by~~ the ~~Chief~~ Financial ~~Officer,~~Statements ~~who~~for ~~also~~discussion ~~functions~~of astransactions ~~the~~between ~~Chief~~Oncor ~~Risk Officer. The Chief Risk Officer, through his designees, enforces applicable risk limits, including the respective policies~~ and ~~procedures~~TCEH ~~to ensure compliance with such limits,~~ and ~~evaluates~~EFH ~~the risks inherent in our businesses~~Corp.

Commodity Price Risk

The competitive business is subject to the inherent risks of market fluctuations in the price of electricity, natural gas and other energy-related products it markets or purchases. We actively manage the portfolio of generation assets, fuel supply and retail sales load to mitigate the near-term impacts of these risks on results of operations. Similar to other participants in the market, we cannot fully manage the long-term value impact of structural declines or increases in natural gas and power prices.

In managing energy price risk, we enter into a variety of market transactions including, but not limited to, short- and long-term contracts for physical delivery, exchange-traded and over-the-counter financial contracts and bilateral contracts with customers. Activities include hedging, the structuring of long-term contractual arrangements and proprietary trading. We continuously monitor the valuation of identified risks and adjust positions based on current market conditions. We strive to use consistent assumptions regarding forward market price curves in evaluating and recording the effects of commodity price risk.

VaR Methodology — A VaR methodology is used to measure the amount of market risk that exists within the portfolio under a variety of market conditions. The resultant VaR produces an estimate of a portfolio's potential for loss given a specified confidence level and considers, among other things, market movements utilizing standard statistical techniques given historical and projected market prices and volatilities.

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A Monte Carlo simulation methodology is used to calculate VaR and is considered by management to be the most effective way to estimate changes in a portfolio's value based on assumed market conditions for liquid markets. The use of this method requires a number of key assumptions, such as use of (i) an assumed confidence level; (ii) an assumed holding period (i.e., the time necessary for management action, such as to liquidate positions); and (iii) historical estimates of volatility and correlation data. The tables below detail certain VaR measures related to various portfolios of contracts; however, we have excluded a table for proprietary trading activity due to the de minimis size of that activity.

VaR for Energy-Related Contracts Subject to Mark-to-Market (MtM) Accounting — This measurement estimates the potential loss in fair value, due to changes in market conditions, of all contracts marked-to-market in net income, based on a 95% confidence level and an assumed holding period of 60 days.

	June 30, 2016		December 31, 2015
Month-end average MtM VaR:	$	63	$	68
Month-end high MtM VaR:	$	118	$	97
Month-end low MtM VaR:	$	30	$	49

Earnings at Risk (EaR) — This measurement estimates the potential reduction of pretax earnings for the periods presented, due to changes in market conditions, of all contracts marked-to-market in net income and contracts not marked-to-market in net income that are expected to be settled within the fiscal year, based on a 95% confidence level and an assumed holding period of 60 days.

	June 30, 2016		December 31, 2015
Month-end average EaR:	$	39	$	45
Month-end high EaR:	$	92	$	92
Month-end low EaR:	$	7	$	26

The increase in the month-end high MtM VaR risk measure reflected increased commodity positions, higher natural gas prices and increased price volatility during the second quarter of 2016.

Credit Risk

Credit risk relates to the risk of loss associated with nonperformance by counterparties. We maintain credit risk policies with regard to our counterparties to minimize overall credit risk. These policies prescribe practices for evaluating a potential counterparty's financial condition, credit rating and other quantitative and qualitative credit criteria and authorize specific risk mitigation tools including, but not limited to, use of standardized master agreements that allow for netting of positive and negative exposures associated with a single counterparty. We have processes for monitoring and managing credit exposure of our businesses including methodologies to analyze counterparties' financial strength, measurement of current and potential future exposures and contract language that provides rights for netting and setoff. Credit enhancements such as parental guarantees, letters of credit, surety bonds, margin deposits and customer deposits are also utilized. Additionally, individual counterparties and credit portfolios are managed to assess overall credit exposure.

Credit Exposure — Our gross exposure to credit risk associated with trade accounts receivable (retail and wholesale) and net asset positions (before collateral) arising from commodity contracts and hedging and trading activities totaled $629 million at June 30, 2016. The components of this exposure are discussed in more detail below.

Assets subject to credit risk at June 30, 2016 include $461 million in retail trade accounts receivable before taking into account cash deposits held as collateral for these receivables totaling $52 million. The risk of material loss (after consideration of bad debt allowances) from nonperformance by these customers is unlikely based upon historical experience. Allowances for uncollectible accounts receivable are established for the potential loss from nonpayment by these customers based on historical experience, market or operational conditions and changes in the financial condition of large business customers.

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The remaining credit exposure arises from wholesale trade receivables and amounts associated with derivative instruments related to hedging and trading activities. Counterparties to these transactions include energy companies, financial institutions, electric utilities, independent power producers, oil and gas producers, local distribution companies and energy marketing companies. At June 30, 2016, the exposure to credit risk from these counterparties totaled $168 million consisting of accounts receivable of $82 million and net asset positions related to commodity contracts of $86 million, after taking into account the netting provisions of the master agreements described above, but before taking into account $34 million in collateral (cash, letters of credit and other credit support). The net exposure (after collateral) of $134 million decreased $80 million in the six months ended June 30, 2016.

Of this $134 million net exposure, 93% is with investment grade customers and counterparties, as determined by our internal credit evaluation process which includes publicly available information including major rating agencies' published ratings as well as internal credit methodologies and credit scoring models. The company routinely monitors and manages credit exposure to these customers and counterparties based on, but not limited to, the assigned credit rating, margining and collateral management.

The following table presents the distribution of credit exposure at June 30, 2016. This credit exposure largely represents wholesale trade accounts receivable and net asset positions related to commodity contracts and hedging and trading activities recognized as derivative assets in the condensed consolidated balance sheets, after taking into consideration netting provisions within each contract, setoff provisions in the event of default and any master netting contracts with counterparties. Credit collateral includes cash and letters of credit, but excludes other credit enhancements such as liens on assets. See Note 15 to the Financial Statements for further discussion of portions of this exposure related to activities marked-to-market in the financial statements.

	ExposureBefore CreditCollateral			CreditCollateral		NetExposure
Investment grade	$	157		$	33	$	124
Below investment grade or no rating	11			1		10
Totals	$	168		$	34	$	134
Investment grade	93.5		%			92.5		%
Below investment grade or no rating	6.5		%			7.5		%

In addition to the exposures in the table above, contracts classified as "normal" purchase or sale and non-derivative contractual commitments are not marked-to-market in the financial statements. Such contractual commitments may contain pricing that is favorable considering current market conditions and therefore represent economic risk if the counterparties do not perform. Nonperformance could have a material impact on future results of operations, liquidity and financial condition.

Significant (10% or greater) concentration of credit exposure exists with three counterparties, which represented 34%, 29% and 17% of the $134 million net exposure. We view exposure to these counterparties to be within an acceptable level of risk tolerance due to the counterparties' credit ratings, each of which is rated as investment grade, the counterparties' market role and deemed creditworthiness and the importance of our business relationship with the counterparties. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts such as margin deposits are owed to the counterparties or delays in receipts of expected settlements owed to us. While the potential concentration of risk with these counterparties is viewed to be within an acceptable risk tolerance, the exposure to hedge counterparties is managed through the various ongoing risk management measures described above.

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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 may occur in the future, including such matters as activities related to our bankruptcy, financial or operational projections, capital allocation, future capital expenditures, business strategy, competitive strengths, goals, ~~future~~and ~~acquisitions or dispositions, development or operation of power generation assets,~~ market and industry developments ~~and the growth of our businesses and operations~~ (often, but not always, through the use of words or phrases such as "intends," "plans," "will likely," "unlikely," "expected," "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 in our 2015 Form 10-K and our Form 10-Q for the period ended March 31, 2016 and the discussion under Item 2, 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 our actual results to differ materially from those projected in such forward-looking statements:

• the fact that the TCEH Debtors (and the Contributed EFH Debtors) ~~are~~emerged ~~likely to emerge~~ from the Chapter 11 Cases prior to the EFH Debtors emerging from the Chapter 11 Cases, and, as a result, the companies will no longer be affiliated entities;

• our ability to obtain the requisite vote from the applicable stakeholders confirming acceptance of the ~~plan~~Plan of ~~reorganization~~Reorganization and the Bankruptcy Court confirming the ~~plan~~Plan of ~~reorganization~~Reorganization with respect to the EFH Debtors;


•	our ability to obtain Bankruptcy Court approval with respect to our motions in the Chapter 11 Cases, including such approvals not being overturned on appeal or being stayed for any extended period of time;

• our ability to consummate the transactions contemplated by the Merger Agreement (as described in Note 2 to the Financial Statements), including obtaining the applicable regulatory approvals contemplated thereunder;

• the filing of an alternative plan of reorganization by one or more creditors of the EFH Debtors;

• the breach by one or more of ~~our~~the counterparties under the EFH Debtors' Plan Support Agreement;


•	the effectiveness of the overall restructuring activities pursuant to the Chapter 11 Cases, including the Plan of Reorganization, and any additional strategies we employ to address our liquidity and capital resources;

• ~~the~~difficulties ~~extent~~we tomay ~~which~~face ~~the~~since ~~Chapter 11 Cases cause customers, suppliers and others with whom~~ we have ~~commercial~~no ~~relationships to lose confidence in us, which may make it more difficult for us to obtain and maintain such commercial relationships on competitive terms~~employees;

• ~~difficulties~~our wereliance ~~may~~on ~~face~~Reorganized inTCEH ~~retaining~~to ~~and~~provide ~~motivating~~transition ~~our~~services ~~key~~to ~~employees~~EFH ~~through~~Corp. ~~the bankruptcy process,~~ and ~~difficulties we may face in attracting new employees~~EFIH;

• ~~the~~our ~~significant~~ability ~~time~~to ~~and~~remain ~~effort~~in ~~required~~compliance towith bethe ~~spent~~requirements byof ~~our~~the ~~senior~~EFIH ~~management~~DIP inFacility, ~~dealing~~particularly ~~with~~ the ~~bankruptcy~~liquidity ~~and~~covenant ~~restructuring~~contained ~~activities~~in ~~rather~~the ~~than~~EFIH ~~focusing~~DIP ~~exclusively on business operations~~Facility;

• our ability to ~~remain~~maintain inor ~~compliance~~obtain ~~with~~sufficient financing sources for our operations during the ~~requirements~~remainder of the ~~DIP~~Chapter ~~Facilities,~~11 ~~particularly~~Cases ~~the~~and ~~liquidity~~our ~~covenant~~ability ~~contained~~to inobtain ~~the~~sufficient ~~EFIH~~exit ~~DIP~~financing ~~Facility~~to fund any Chapter 11 plan of reorganization;

• our ability to maintain or obtain sufficient financing sources for our operations during the pendency of the Chapter 11 Cases and our ability to obtain sufficient exit financing to fund any Chapter 11 plan of reorganization;

• limitations on our ability to utilize previously incurred federal net operating losses or alternative minimum tax credits;


•	the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases or reorganization that may be inconsistent with, or interfere with, our business and/or plans;


•	the duration and related costs of the Chapter 11 Cases;

• ~~the~~restrictions ~~actions~~on ~~and~~our ~~decisions~~operations due to the terms of ~~regulatory~~our ~~authorities~~debt ~~relative~~agreements, toincluding ~~any~~the ~~plan~~EFIH ofDIP ~~reorganization~~Facility, and restrictions imposed by the Bankruptcy Court;

• restrictions on our operations due to the terms of our debt agreements, including the DIP Facilities, and restrictions imposed by the Bankruptcy Court;


•	our ability to obtain any required regulatory consent necessary to implement any Chapter 11 plan of reorganization;


•	the outcome of current or potential litigation regarding whether holders are entitled to make-whole or redemption premiums and/or post-petition interest in connection with the treatment of their claims in bankruptcy;

• prevailing governmental policies and regulatory actions, including those of the Texas Legislature, the Governor of Texas, the US Congress, the FERC, ~~the North American Electric Reliability Corporation, the Texas Reliability Entity, Inc., the PUCT, the RCT, the NRC, the EPA, the TCEQ, the US Mine Safety~~ and ~~Health Administration and~~ the ~~US Commodity Futures Trading Commission, with respect to, among other things:~~PUCT;

◦ allowed prices;

◦ allowed rates of return;

◦ permitted capital structure;

◦ industry, market and rate structure;

◦ purchased power and recovery of investments;

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◦ operations of nuclear generation facilities;

◦ operations of fossil fueled generation facilities;

◦ operations of mines;

◦ self-bonding requirements;

◦ acquisition and disposal of assets and facilities;

◦ development, construction and operation of facilities;

◦ decommissioning costs;

◦ present or prospective wholesale and retail competition;

◦ changes in tax laws and policies;

◦ changes in and compliance with environmental and safety laws and policies, including the CSAPR, the MATS, regional haze program implementation and greenhouse gas and other climate change initiatives, and

◦ clearing over-the-counter derivatives through exchanges and posting of cash collateral therewith;


•	legal and administrative proceedings and settlements, including the legal proceedings arising out of the Chapter 11 Cases;


•	general industry trends;


•	economic conditions, including the impact of an economic downturn;

• our ability to collect trade receivables from counterparties;

• our ability to attract and retain profitable customers;

• our ability to profitably serve our customers;

• restrictions on competitive retail pricing;

• changes in wholesale electricity prices or energy commodity prices, including the price of natural gas;

• changes in prices of transportation of natural gas, coal, fuel oil and other refined products;

• changes in the ability of vendors to provide or deliver commodities as needed;

• changes in market heat rates in the ERCOT electricity market;

• our ability to effectively hedge against unfavorable commodity prices, including the price of natural gas, market heat rates and interest rates;


•	weather conditions, including drought and limitations on access to water, and other natural phenomena, and acts of sabotage, wars or terrorist or cyber security threats or activities;

• ~~population~~changes ~~growth~~in orinterest ~~decline~~rates, orrates ~~changes~~of ininflation ~~market supply~~ or ~~demand~~foreign ~~and~~exchange ~~demographic patterns, particularly in ERCOT~~rates;

• ~~access~~changes toin ~~adequate~~operating ~~transmission~~expenses ~~facilities~~and toliquidity ~~meet changing demands~~needs;

• changes in interest rates, commodity prices, rates of inflation or foreign exchange rates;

• changes in operating expenses, liquidity needs and capital expenditures;


•	commercial bank market and capital market conditions and the potential impact of disruptions in US and international credit markets;


•	access to capital, the cost of such capital, and the results of financing and refinancing efforts, including availability of funds in capital markets;

• our ability to generate sufficient cash flow to make interest ~~or adequate protection~~ payments, or refinance, our debt instruments, including the EFIH DIP ~~Facilities;~~Facility, and

• competition for new energy development and other business opportunities;

• inability of various counterparties to meet their obligations with respect to our financial instruments;

• changes in technology (including large scale electricity storage) used by and services offered by us;

• changes in electricity transmission that allow additional electricity generation to compete with our generation assets;

• 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 medical and dental benefits, pension and OPEB, and future funding requirements related thereto, including joint and several liability exposure under ERISA;

• hazards customary to the industry and the possibility that we may not have adequate insurance to cover losses resulting from such hazards, and


•	actions by credit rating agencies.

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 or circumstances. 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.61

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INDUSTRY AND MARKET INFORMATION

The industry and market data and other statistical information used throughout this report are based on independent industry publications, government publications, reports by market research firms or other published independent sources, including certain data published by ERCOT, the PUCT and NYMEX. We did not commission any of these publications or reports. Some data is also based on good faith estimates, which are derived from our review of internal surveys, as well as the independent sources listed above. Independent industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified such data and make no representation as to the accuracy of such information. Forecasts are particularly likely to be inaccurate, especially over long periods of time, and we do not know what assumptions regarding general economic growth are used in preparing the forecasts included in this report. Similarly, while we believe that such internal and external research is reliable, it has not been verified by any independent sources, and we make no assurances that the predictions contained therein are accurate.


Item 4.	CONTROLS AND PROCEDURES

As of the Effective Date, Reorganized TCEH began providing accounting and financial reporting services to EFH Corp. in conjunction with the Transition Services Agreement. 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 the end of the current period included in this quarterly report on Form 10-Q. Based on the evaluation performed, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective. During the most recent fiscal quarter covered by this quarterly report, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 1.	LEGAL PROCEEDINGS

Reference is made to the discussion in Note 12 to the Financial Statements regarding legal proceedings.


Item 1A.	RISK FACTORS

There have been no material changes from the risk factors discussed in Part I, Item 1A. Risk Factors in our 2015 Form 10-K and Part II, Item 1A. Risk Factors in our Form 10-Q for the period ended March 31, 2016, except for the information disclosed elsewhere in this quarterly report on Form 10-Q that provides factual updates to risk factors contained in our 2015 Form 10-K and our Form 10-Q for the period ended March 31, 2016. The risks described in such reports are not the only risks facing our company.


Item 4.	MINE SAFETY DISCLOSURES

WeReorganized TCEH currently ~~own~~owns and ~~operate~~operates 12 surface lignite coal mines in Texas to provide fuel for ~~our~~its electricity generation facilities. These mining operations are regulated by the US Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977, as amended (the Mine Act), as well as other federal and state regulatory agencies such as the RCT and Office of Surface Mining. The MSHA inspects US mines, including ~~ours~~Reorganized TCEH's mines, on a regular basis, and if it believes a violation of the Mine Act or any health or safety standard or other regulation has occurred, it may issue a citation or order, generally accompanied by a proposed fine or assessment. Such citations and orders can be contested and appealed, which often results in a reduction of the severity and amount of fines and assessments and sometimes results in dismissal. Disclosure of MSHA citations, orders and proposed assessments are provided in Exhibit 95(a) to this quarterly report on Form 10-Q.

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Item 6.	EXHIBITS


(a)	Exhibits filed or furnished as part of Part II are:

Exhibits	Previously Filed With File Number*	AsExhibit
(2)	Merger Agreement
2(a)	1-12833Form 8-K (filed ~~July~~August 2930, 2016)	102(ba)	—	~~Merger~~Order ~~Agreement~~Confirming the Third Amended Joint Plan of Reorganization of Energy Future Holdings Corp., et al., pursuant to Chapter 11 of the Bankruptcy Code as it applies to the TCEH Debtors and the Contributed EFH Debtors
2(b)			—	Fourth Amended Joint Plan of Reorganization of EFH Corp., et al., pursuant to Chapter 11 of the Bankruptcy Code
2(c)	1-12833Form 8-K (filed July 29, 2016)	10(b)	—	Agreement and Plan of Merger, dated July 29, 2016, by and among NextEra Energy, Inc., EFH Merger Co., LLC, EFIH and EFH Corp.
2(d)	1-12833Form 8-K (filed September 20, 2016)	10(a)	—	Amendment No. 1 to Agreement and Plan of Merger, dated September 19, 2016, by and among NextEra Energy, Inc., EFH Merger Co., LLC, EFIH and EFH Corp.
(3(i))	Articles of Incorporation
3(a)	1-12833Form 10-Q (Quarter ended March 31, 2013) (filed May 2, 2013)	3(a)	—	Restated Certificate of Formation of ~~Energy~~EFH ~~Future Holdings~~ Corp.
(3(ii))	By-laws
3(b)	1-12833Form 10-Q (Quarter ended March 31, 2013) (filed May 2, 2013)	3(b)	—	Amended and Restated Bylaws of ~~Energy~~EFH ~~Future Holdings~~ Corp.
(10)	Material Contracts
10 (a)	1-12833Form 8-K (filed ~~July~~October 2920, 2016)	10~~(a)~~.1	—	~~Plan~~Extension ~~Support~~and Increase Amendment to Senior Secured Superpriority Debtor-in Possession Credit Agreement, dated as of October 20, 2016, by and among EFIH, EFIH Finance, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the lenders party thereto
10(b)	1-12833Form 8-K (filed September 20, 2016)	10(b)	—	Amended and Restated Plan Support Agreement, dated September 19, 2016, by and among NextEra Energy, Inc., EFIH, EFIH, EFIH Finance and EFH Corp.'s other direct and indirect subsidiaries thereto
10(c)	1-12833Form 8-K (filed October 4, 2016)	10.1	—	Separation Agreement, dated October 3, 2016, by and among EFH Corp., Reorganized TCEH and TEX Operations Company, LLC
10(d)	1-12833Form 8-K (filed October 4, 2016)	10.2	—	Tax Matters Agreement, dated October 3, 2016, by and among EFH Corp., EFIH, EFIH Finance, Reorganized TCEH and EFH Merger Co., LLC
10(e)	1-12833Form 8-K (filed October 4, 2016)	10.4	—	Transition Services Agreement, dated October 3, 2016, by and among EFH Corp. and Tex Operations Company, LLC
10(f)	1-12833Form 8-K (filed October 4, 2016)	10.5	—	Consulting Agreement dated as of October 4, 2016 by and between EFH Corp. and Donald L. Evans
10(g)	1-12833Form 8-K (filed October 4, 2016)	10.6	—	Consulting Agreement dated as of October 4, 2016 by and between EFH Corp. and Anthony R. Horton

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Exhibits	Previously Filed With File Number*	AsExhibit
10(h)	1-12833Form 8-K (filed October 4, 2016)	10.7	—	Consulting Agreement dated as of October 4, 2016 by and between EFH Corp. and Paul M. Keglevic
10(i)	1-12833Form 8-K (filed October 4, 2016)	10.8	—	Consulting Agreement dated as of October 4, 2016 by and between EFH Corp. and Andrew M. Wright
(31)	Rule 13a - 14(a)/15d-14(a) Certifications
31(a)			—	Certification of ~~John~~Paul FM. ~~Young~~Keglevic, principal executive officer of ~~Energy~~EFH ~~Future Holdings~~ Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)			—	Certification of ~~Paul~~Anthony MR. ~~Keglevic~~Horton, principal financial officer of ~~Energy~~EFH ~~Future Holdings~~ Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)	Section 1350 Certifications
32(a)			—	Certification of ~~John~~Paul FM. ~~Young~~Keglevic, principal executive officer of ~~Energy~~EFH ~~Future Holdings~~ Corp., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)			—	Certification of ~~Paul~~Anthony MR. ~~Keglevic~~Horton, principal financial officer of ~~Energy~~EFH ~~Future Holdings~~ Corp., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(95)	Mine Safety Disclosures
95(a)			—	Mine Safety Disclosures
(99)	Additional Exhibits
99(a)			—	Condensed Statement of Consolidated Loss – Twelve Months Ended ~~June~~September 30, 2016.
99(b)			—	Texas Competitive Electric Holdings Company LLC Consolidated EBITDA reconciliation for the six and twelve months ended June 30, 2016 and 2015
99(c)	1-12833Form 8-K (filed May 11, 2016)	99.1	—	Plan of Reorganization
99(d)	1-12833Form 8-K (filed May 11, 2016)	99.2	—	Disclosure Statement
99(e)	1-12833Form 8-K (filed June 1, 2016)	99.1	—	Debt Commitment Letter
	XBRL Data Files
101.INS			—	XBRL Instance Document
101.SCH			—	XBRL Taxonomy Extension Schema Document
101.CAL			—	XBRL Taxonomy Extension Calculation Document
101.DEF			—	XBRL Taxonomy Extension Definition Document
101.LAB			—	XBRL Taxonomy Extension Labels Document
101.PRE			—	XBRL Taxonomy Extension Presentation Document

____________________


*	Incorporated herein by reference

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Energy Future Holdings Corp. By: /s/ ~~TERRY~~PAUL LM. ~~NUTT~~KEGLEVIC Name: ~~Terry~~Paul LM. ~~Nutt~~Keglevic Title: ~~Senior~~President, ~~Vice~~Chief ~~President~~Executive Officer, Chief Restructuring Officer and ~~Controller~~Chief Accounting Officer (Principal Accounting Officer)

Date: ~~August~~November 21, 2016

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