TRADE ACCOUNTS RECEIVABLE AND ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM

On October 29, 2013, we terminated the Accounts Receivable Securitization Program, described in the following paragraphs, and repaid all outstanding obligations under the program. In connection with the termination of the program, TXU Energy repurchased $491 million in accounts receivable from TXU Energy Receivables Company LLC (TXU Energy Receivables Company) for an aggregate purchase price of $474 million, TXU Energy Receivables Company paid TXU Energy $11 million, constituting repayment in full of its outstanding obligations under its subordinated note with TXU Energy, and TXU Energy Receivables Company repaid all of its borrowings from a financial institution providing the financing for the program totaling $126 million.

Under the Accounts Receivable Securitization Program, TXU Energy (originator) sold all of its trade accounts receivable to TXU Energy Receivables Company, which was an entity created for the special purpose of purchasing receivables from the originator and is a consolidated, wholly owned, bankruptcy-remote subsidiary of TCEH. TXU Energy Receivables Company borrowed funds from a financial institution using the accounts receivable as collateral.

The trade accounts receivable amounts under the program are reported in the financial statements as pledged balances, and the related funding amounts are reported as short-term borrowings.

The maximum funding amount available under the program at September 30, 2013 was $200 million, which approximated the expected usage and applied only to receivables related to non-executory retail sales contracts. Program funding increased to $172 million at September 30, 2013 from $82 million at December 31, 2012. Because TCEH's credit ratings were lower than Ba3/BB-, under the terms of the program available funding was reduced by the amount of customer deposits held by the originator, which totaled $33 million at September 30, 2013.

TXU Energy Receivables Company issued a subordinated note payable to the originator in an amount equal to the difference between the face amount of the accounts receivable purchased, less a discount, and cash paid to the originator. Because the subordinated note was limited to 25% of the uncollected accounts receivable purchased, and the amount of borrowings was limited by terms of the financing agreement, any additional funding to purchase the receivables was sourced from cash on hand, which totaled $37 million at September 30, 2013, and/or capital contributions from TCEH. Under the program, the subordinated note issued by TXU Energy Receivables Company was subordinated to the security interests of the financial institution. The balance of the subordinated note payable, which was eliminated in consolidation, totaled $93 million and $97 million at September 30, 2013 and December 31, 2012, respectively.

All new trade receivables under the program generated by the originator were continuously purchased by TXU Energy Receivables Company with the proceeds from collections of receivables previously purchased and, as necessary, increased borrowings or funding sources as described immediately above. Changes in the amount of borrowings by TXU Energy Receivables Company reflected seasonal variations in the level of accounts receivable, changes in collection trends and other factors such as changes in sales prices and volumes.

The discount from face amount on the purchase of receivables from the originator principally funded program fees paid to the financial institution. The program fees consisted primarily of interest costs on the underlying financing and are reported as interest expense and related charges. The discount also funded a servicing fee, which is reported as SG&A expense, paid by TXU Energy Receivables Company to TXU Energy, which provided recordkeeping services and was the collection agent under the program.

Program fee amounts were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Program fees	$	3		$	2		$	6		$	6
Program fees as a percentage of average funding (annualized)	5.1		%	4.9		%	5.8		%	6.2		%

Activities of TXU Energy Receivables Company and its predecessor, TXU Receivables Company, were as follows:



	Nine Months Ended September 30,
	2013			2012
Cash collections on accounts receivable	$	3,200		$	3,501
Face amount of new receivables purchased (a)	(3,328		)	(3,571		)
Discount from face amount of purchased receivables	29			8
Program fees paid to financial institution	(6		)	(6		)
Servicing fees paid for recordkeeping and collection services	—			(2		)
Decrease in subordinated notes payable	(4		)	(10		)
Increase in cash held	17			—
Other — net	2			—
Cash flows provided to originator under the program	$	(90	)	$	(80	)

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(a)	Net of allowance for uncollectible accounts.

Trade Accounts Receivable



	September 30, 2013			December 31, 2012
Wholesale and retail trade accounts receivable	$	813		$	719
Allowance for uncollectible accounts	(17		)	(9		)
Trade accounts receivable — reported in balance sheet, including $573 and $445 in pledged retail receivables	$	796		$	710

Gross trade accounts receivable at September 30, 2013 and December 31, 2012 included unbilled revenues of $272 million and $260 million, respectively.

Allowance for Uncollectible Accounts Receivable



	Nine Months Ended September 30,
	2013			2012
Allowance for uncollectible accounts receivable at beginning of period	$	9		$	27
Increase for bad debt expense	23			20
Decrease for account write-offs	(15		)	(32		)
Allowance for uncollectible accounts receivable at end of period	$	17		$	15