The Electric Reliability Council of Texas, Inc., or ERCOT, market represents approximately 85% of the demand for power in Texas, covering the whole state with the exception of the far west (El Paso), a large part of the Texas Panhandle and two small areas in the Eastern part of the state, and is one of the nation's largest and fastest growing power markets. From 1994 through 2004, peak hourly demand in the ERCOT market grew at a compound annual rate of 3.2%, compared to a compound annual rate of growth of 2.2% in the U.S. for the same period. For 2004, hourly demand ranged from a low of 20,232 MW to a high of 58,095 MW. The demand for power in the ERCOT market is seasonal, with higher demand occurring during the warmer weather.

As of September 2004, aggregate net generation capacity of approximately 81,000 MW existed in the ERCOT market, of which 73% was natural gas-fired. The ERCOT market has experienced significant construction of new generation plants in recent years, with over 20,000 MW of mostly natural gas-fired combined cycle generation capacity added to the market since 2000. However, in 2004 the ERCOT market continued to have a relatively small proportion of lower marginal cost generation capacity such as coal, lignite and nuclear plants (approximately 20,000 MW or 24% of the ERCOT market's net generation capacity).

The ERCOT market operates under the reliability standards set by the North American Electric Reliability Council. The Texas Utility Commission has primary jurisdiction over the ERCOT market to ensure the adequacy and reliability of power supply across the state's main interconnected power transmission grid. The ERCOT ISO is responsible for facilitating reliable operations of the bulk electric power supply system in the ERCOT market. Its responsibilities include ensuring that power production and delivery are accurately accounted for among the generation resources and wholesale buyers and sellers. Unlike power pools with independent operators in other regions of the country, the ERCOT market is not a centrally dispatched power pool and the ERCOT ISO does not procure power on behalf of its members other than to maintain the reliable operations of the transmission system. The ERCOT ISO also serves as agent for procuring ancillary services for those who elect not to provide their own ancillary services.

The Company currently owns 48 operating generation units at nine power generation plants located in Texas, including an undivided 44.0% interest in STP, a nuclear generation plant consisting of two generation units representing aggregate generation capacity of 2,560 MW. As of May 20, 2005, the aggregate net generation capacity of the Company’s portfolio of operating assets was 11,122 MW, which represents approximately 14% of the total net generation capacity serving the ERCOT market.

The Company has a central support facility that it uses to support its generation plants. This facility includes office space, maintenance shops, chemical labs, warehouse facilities and a fleet maintenance garage. As part of its workforce optimization plan the Company has outsourced the chemical lab and fleet maintenance garage functions, and it has decentralized the warehouse facilities services function.

The Company entered into a transition services agreement at the closing of the Initial Acquisition whereby CenterPoint Energy, Inc. provides certain treasury, corporate, information technology (including enterprise business systems operations and support), telecommunications services and support, records management, accounting and tax services. As of May 31, 2005, this agreement was limited to the provision of certain information technology services. This agreement will terminate on June 13, 2005 with provision for extension by mutual agreement. The Company entered into a technical services agreement pursuant to which Reliant Energy, Inc. is obligated to provide systems, technical, programming and consulting support services and hardware maintenance, excluding plant-specific hardware, necessary to provide generation system planning, dispatch and settlement and communication with the ERCOT ISO, which expires in December 31, 2005. This services agreement enables the Company to transition these functions to its own facilities. This agreement also includes a permanent license for certain software used in providing these services, subject to payment of fees under the agreement.

Revenues for the three months ended March 31, 2005 were $503.1 million on 10,257,733 MWh sold, which included capacity revenues for solid-fuel baseload products, energy revenues and $62.9 million related to the amortization of contractual obligation.

Fuel and purchased power expenses were $228.8 million for the three months ended March 31, 2005.

Operations and maintenance expenses of $110.0 million for the three months ended March 31, 2005.

Interest expense of $39.5 million for the three months ended March 31, 2005 reflects the combination of interest on debt and $7.1 million in fees and amortization of deferred loan cost.