RELATED–PARTY TRANSACTIONS

The following represent our significant related-party transactions in addition to the investment in EFH Corp. and TCEH debt securities discussed in Note 3:

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EFH Corp. files consolidated federal income tax and Texas state margin tax returns, and under a tax sharing agreement, allocates income tax liabilities to us substantially as if we were filing our own corporate income tax returns. Our amounts payable to EFH Corp. related to income taxes totaled $1 million and $119 million at September 30, 2012 and December 31, 2011, respectively. The income tax payable at September 30, 2012 was reported as current since cash and projected cash interest income from investments in long-term debt of affiliates and distributions from Oncor Holdings are expected to be sufficient to cover interest payments on our debt and current income tax payable. The income tax payable at December 31, 2011 was reported as noncurrent because we did not expect to pay it until mid-2013, and we have the ability to defer such payments. Our income tax payments to EFH Corp. totaled $172 million and $30 million in the nine months ended September 30, 2012 and 2011, respectively. See discussion below in this note regarding allocation of income tax liabilities to Oncor Holdings and Oncor.

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At September 30, 2012 and December 31, 2011, EFH Corp. had demand notes payable to TCEH totaling $689 million and $1.592 billion, respectively, arising from borrowings used to fund EFH Corp. debt principal and interest payments (P&I Note) and net borrowings for general corporate purposes (SG&A Note). The reduction in the balance of the notes in the nine months ended September 30, 2012 was funded by debt issued by EFIH, and EFH Corp. agreed to settle the balance of the notes by January 2013 with the proceeds from EFIH and EFIH Finance debt issuances in August 2012 (see Note 4). The notes are guaranteed by EFCH and EFIH on an unsecured basis. In connection with debt-related transactions entered into by EFH Corp. in April 2011, EFH Corp. agreed (i) to not make any additional borrowings under the SG&A Note, which totaled $233 million at September 30, 2012, (ii) to cap borrowings under the P&I Note to no more than $2 billion and (iii) that the sum of (a) the outstanding debt (including guarantees) of EFH Corp. or any of its subsidiaries (including EFIH) that is secured by a second-priority lien on the equity interest that EFIH owns in Oncor Holdings (the EFIH Second-Priority Debt) and (b) the aggregate outstanding amount of the intercompany notes will not exceed, at any time, the maximum amount of EFIH Second-Priority Debt permitted by the indenture governing the EFH Corp. 10% Senior Secured Notes due 2020.

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In the nine months ended September 30, 2012, fees paid to Goldman, Sachs & Co. (Goldman), an affiliate of GS Capital Partners, related to debt issuances totaled $10 million, described as follows: (i) Goldman acted as a joint book-running manager and initial purchaser in the February 2012 issuance of $1.150 billion principal amount of EFIH 11.750% Senior Secured Second Lien Notes (see Note 4) for which it received fees totaling $7 million; (ii) Goldman acted as joint book-running manager and initial purchaser in the August 2012 issuance of $600 million principal amount of 11.750% Senior Secured Second Lien Notes and $250 million principal amount of EFIH 6.875% Senior Secured Notes (see Note 4) for which it received fees totaling $3 million. In the October 2012 issuance of $253 million EFIH 6.875% Notes, Goldman acted as joint book-running manager and initial purchaser for which it was paid $1 million. A broker-dealer affiliate of KKR served as a co-manager and initial purchaser and an affiliate of TPG Management, L.P. (TPG) served as an advisor in all of these transactions, for which they each received a total of $4 million.


•	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.

See Note 4 regarding guarantees and push-down of certain EFH Corp. debt and Note 6 regarding noncash settlement of certain income taxes payable.

Significant related-party transactions between Oncor Holdings (including its consolidated subsidiary Oncor) and EFH Corp., other affiliates of EFH Corp. and the Sponsor Group are as follows:

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Oncor receives payments from TCEH for services it provides, principally the delivery of electricity. Revenues recorded by Oncor for these services totaled $281 million and $309 million in the three months ended September 30, 2012 and 2011, respectively, and $746 million and $798 million in the nine months ended September 30, 2012 and 2011, respectively. The fees are based on rates regulated by the PUCT that apply to all REPs. These revenues from TCEH represented 29% and 34% of Oncor Holdings' operating revenues in the nine months ended September 30, 2012 and 2011, respectively. Oncor Holdings' balance sheets at September 30, 2012 and December 31, 2011 reflect receivables from TCEH totaling $154 million and $138 million, respectively, primarily related to these electricity delivery fees.

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In August 2012, TCEH and Oncor agreed to settle at a discount two agreements related to securitization (transition) bonds issued by Oncor's bankruptcy-remote financing subsidiary in 2003 and 2004 to recover generation-related regulatory assets. Under the agreements, TCEH had been reimbursing Oncor as described immediately below. Under the settlement, TCEH paid, and Oncor received, $159 million in cash. The settlement was executed by EFIH acquiring the right to reimbursement under the agreements from Oncor and then selling these rights for the same amount to TCEH. The transaction resulted in a decrease of approximately $2 million (after tax) in Oncor's membership interests in the three months ended September 30, 2012 in accordance with accounting rules for related party transactions. Accordingly, the transaction resulted in a decrease of approximately $1 million (reflecting our 80% interest in Oncor) in our investment in unconsolidated subsidiary with an offsetting decrease in equity.

Under an interest reimbursement agreement, TCEH has reimbursed Oncor on a monthly basis for interest expense on the transition bonds. The remaining interest to be paid through 2016 under the agreement totaled $53 million at the settlement date. Only the monthly accrual of interest under this agreement was reported as a receivable by Oncor. This interest income totaled $2 million and $8 million in the three months ended September 30, 2012 and 2011, respectively, and $16 million and $24 million in the nine months ended September 30, 2012 and 2011, respectively.

Oncor collects transition surcharges from its customers to recover the transition bond payment obligations. Oncor's incremental income taxes related to the transition surcharges it collects have been reimbursed by TCEH quarterly under a noninterest bearing note payable to Oncor maturing in 2016. The note balance at the settlement date totaled $159 million.


•	Oncor pays EFH Corp. subsidiaries for certain administrative services and shared facilities at cost. These costs, which are primarily reported in operation and maintenance expenses, totaled $10 million and $10 million in the three months ended September 30, 2012 and 2011, respectively, and $27 million and $28 million in the nine months ended September 30, 2012 and 2011, respectively.

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Under Texas regulatory provisions, the trust fund for decommissioning the Comanche Peak nuclear generation facility is funded by a delivery fee surcharge collected from REPs by Oncor and remitted monthly to TCEH, with the intent that the trust fund assets (reported in TCEH's balance sheet) will be sufficient to fund the decommissioning liability (also reported in TCEH's balance sheet). The delivery fee surcharges remitted to TCEH totaled $5 million in each of the three month periods ended September 30, 2012 and 2011 and $12 million and $13 million in the nine months ended September 30, 2012 and 2011, respectively. Income and expenses associated with the trust fund and the decommissioning liability recorded by TCEH are offset by a net change in the intercompany receivable/payable between Oncor and TCEH, which in turn results in a change in Oncor's reported net regulatory asset/liability. The regulatory liability and a receivable from TCEH in the same amount, which totaled $286 million and $225 million at September 30, 2012 and December 31, 2011, respectively, represent the excess of the trust fund balance over the net decommissioning liability.

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EFH Corp. files a consolidated federal income tax return that includes Oncor Holdings' results. Oncor is not a member of EFH Corp.'s consolidated tax group, but EFH Corp.'s consolidated federal income tax return includes EFH Corp.'s portion of Oncor's results as a result of EFH Corp.'s equity ownership in Oncor. EFH Corp. also files a consolidated Texas state margin tax return that includes all of Oncor Holdings' and Oncor's results. However, under a tax sharing agreement Oncor Holdings and Oncor record their federal income and Texas state margin taxes substantially as if Oncor Holdings and Oncor were filing their own corporate income tax returns. Oncor Holdings and Oncor had a current combined payable to EFH Corp. related to income taxes of $17 million and $2 million at September 30, 2012 and December 31, 2011, respectively. Oncor Holdings and Oncor made income tax net payments to EFH Corp. totaling $27 million and received income tax net refunds from EFH Corp totaling $89 million in the nine months ended September 30, 2012 and 2011, respectively.

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Oncor has PUCT-approved tariffs in place to assure adequate credit worthiness of any REP to support the REP's obligation to collect transition bond-related charges on behalf of Oncor Electric Delivery Transition Bond Company LLC. Under these tariffs, as a result of TCEH's credit rating being below investment grade, TCEH is required to post collateral support in an amount equal to estimated transition charges over specified time periods. Accordingly, at September 30, 2012 and December 31, 2011, TCEH had posted letters of credit in the amount of $11 million and $12 million, respectively, for Oncor's benefit.

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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 rating below investment grade.

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Affiliates of the Sponsor Group have, and from time-to-time in the future, may (1) sell, acquire or participate in the offerings of Oncor's debt or debt securities in open market transactions or through loan syndications, and (2) perform various financial advisory, dealer, commercial banking and investment banking services for Oncor and certain of its affiliates for which they have received or will receive customary fees and expenses.

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Oncor participates in plans sponsored by EFH Corp. that provide pension, health care and other retiree benefits. Accordingly, Oncor Holdings' consolidated financial statements reflect allocations to Oncor of amounts related to these retiree benefit plans. Certain regulatory provisions allow for the recovery by Oncor of retiree benefit costs for all applicable former employees of EFH Corp.'s regulated predecessor integrated electric utility, which in addition to Oncor's active and retired employees consists largely of active and retired personnel engaged in TCEH's activities, related to service of those additional personnel prior to the deregulation and disaggregation of EFH Corp.'s businesses effective January 1, 2002. Accordingly, Oncor and TCEH entered into an agreement whereby Oncor assumed responsibility for applicable retiree benefit costs related to those personnel.

In August 2012, EFH Corp. approved certain amendments to its pension plan. These amendments will result, in part, in the splitting off of the assets and liabilities under the plan associated with employees of Oncor and all retirees and terminated vested employees of EFH Corp. and its subsidiaries (including discontinued businesses) to a new plan that is expected to be sponsored and administered by Oncor (the Oncor Plan). These actions are expected to be completed in the fourth quarter 2012. In connection with this action, EFH Corp. intends to fully fund the obligations being assumed by the Oncor Plan that relate to participants' benefits not recoverable by Oncor. Transition to and implementation of the Oncor Plan is not expected to materially affect Oncor's reported results of operations, financial condition or cash flows.