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 30, 2016

— OR —

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

Commission File Number 001-34543

Energy Future Competitive Holdings Company LLC

(Exact name of registrant as specified in its charter)




Delaware	75-1837355
(State 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 2, 2016, the outstanding membership interest in Energy Future Competitive Holdings Company LLC was directly held by Energy Future Holdings Corp.

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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 Comprehensive Loss — Three and Six Months Ended June 30, 2016 and 2015	1
	Condensed Statements of Consolidated Cash Flows — Six Months Ended June 30, 2016 and 2015	2
	Condensed Consolidated Balance Sheets — June 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	56
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	72
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	73
Item 1A.	Risk Factors	73
Item 4.	Mine Safety Disclosures	73
Item 6.	Exhibits	74
SIGNATURE		76

Energy Future Competitive Holdings Company LLC's (EFCH) 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 Energy Future Holdings Corp. (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. EFCH also from time to time makes available to the public, free of charge, on the EFH Corp. website certain financial statements of its wholly owned subsidiary, Texas Competitive Electric Holdings Company LLC. 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 EFCH has filed as an exhibit to this quarterly report on Form 10-Q, or that EFCH has 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 EFCH and its subsidiaries occasionally make references to EFCH, TCEH, TXU Energy or Luminant (or "we," "our," "us" or "the Company") 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		EFCH'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

Consolidated EBITDA		Consolidated EBITDA means TCEH EBITDA adjusted to exclude noncash items, unusual items and other adjustments allowable under the agreement governing the 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 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.

CSAPR		the final Cross-State Air Pollution Rule issued by the EPA in July 2011
DIP Facility		Refers to the TCEH DIP Facility. See Note 9 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

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 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

EFCH		Energy Future Competitive Holdings Company LLC, a direct, wholly owned subsidiary of EFH Corp. and the direct parent of TCEH, and/or its subsidiaries, depending on context

EFH Corp.		Energy Future Holdings Corp. and/or its subsidiaries, depending on context, whose major subsidiaries include TCEH and Oncor

EFH Debtors		EFH Corp. and its subsidiaries that are Debtors in the Chapter 11 Cases, excluding the TCEH Debtors

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 Inc., a direct, wholly owned subsidiary of EFIH

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 Agreement		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, executed in May 2012 but effective as of January 2010. See Note 5 to the Financial Statements and Management's Discussion and Analysis, under Financial Condition.

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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 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

NO_X		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

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		Amended Joint Plan of Reorganization filed by the Debtors with the Bankruptcy Court in May 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

iii

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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.

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

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 an indirect subsidiary of EFH Corp., and/or its subsidiaries, depending on context, that are engaged in electricity generation and wholesale and retail energy market activities, and whose major subsidiaries include Luminant and TXU Energy

TCEH Debtors		EFCH, TCEH and the subsidiaries of TCEH that are Debtors in the Chapter 11 Cases

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 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 Senior Secured Notes		TCEH's and TCEH Finance's $1.750 billion principal amount of 11.5% First Lien Senior Secured Notes

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 and 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 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 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 COMPETITIVE HOLDINGS COMPANY LLC

A DEBTOR-IN-POSSESSION

CONDENSED STATEMENTS OF CONSOLIDATED LOSS

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(millions of dollars)
Operating revenues	$	1,233		$	1,256		$	2,283		$	2,527
Fuel, purchased power costs and delivery fees	(654		)	(646		)	(1,208		)	(1,259		)
Net gain (loss) from commodity hedging and trading activities	(118		)	20			(53		)	123
Operating costs	(255		)	(217		)	(474		)	(410		)
Depreciation and amortization	(164		)	(219		)	(302		)	(434		)
Selling, general and administrative expenses	(155		)	(161		)	(319		)	(321		)
Impairment of goodwill (Note 4)	—			—			—			(700		)
Impairment of long-lived assets (Note 6)	—			—			—			(676		)
Other income (Note 16)	11			8			13			11
Other deductions (Note 16)	(26		)	(2		)	(47		)	(61		)
Interest expense and related charges (Note 7)	(344		)	(322		)	(680		)	(639		)
Reorganization items (Note 8)	(30		)	(40		)	(52		)	(114		)
Loss before income taxes	(502		)	(323		)	(839		)	(1,953		)
Income tax (expense) benefit (Note 5)	1			107			(3		)	400
Net loss	$	(501	)	$	(216	)	$	(842	)	$	(1,553	)

See Notes to the Financial Statements.

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE LOSS

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(millions of dollars)
Net loss	$	(501	)	$	(216	)	$	(842	)	$	(1,553	)
Other comprehensive income, net of tax effects – 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
Comprehensive loss	$	(500	)	$	(216	)	$	(841	)	$	(1,552	)

See Notes to the Financial Statements.

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ENERGY FUTURE COMPETITIVE HOLDINGS COMPANY LLC A DEBTOR-IN-POSSESSION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)

	Six Months Ended June 30,
	2016			2015
	(millions of dollars)
Cash flows — operating activities:
Net loss	$	(842	)	$	(1,553	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	349			507
Deferred income tax benefit, net	(3		)	(417		)
Impairment of goodwill (Note 4)	—			700
Impairment of long-lived assets (Note 6)	—			676
Contract claims adjustments (Note 8)	3			28
Unrealized net (gain) loss from mark-to-market valuations of commodity positions	253			(74		)
Write-off of intangible and other assets (Note 16)	41			59
Other, net	32			29
Changes in operating assets and liabilities:
Margin deposits, net	(133		)	46
Other operating assets and liabilities, including liabilities subject to compromise	(114		)	(217		)
Cash used in operating activities	(414		)	(216		)
Cash flows — financing activities:
Borrowings under DIP Revolving Credit Facility (Note 9)	1,115			—
Repayments/repurchases of debt (Note 9)	(7		)	(11		)
Cash provided by (used in) financing activities	1,108			(11		)
Cash flows — investing activities:
Advances to affiliates	3			—
Capital expenditures	(168		)	(209		)
Nuclear fuel purchases	(11		)	(11		)
Lamar and Forney acquisition - net of cash acquired (Note 3)	(1,343		)	—
Changes in restricted cash	(9		)	(4		)
Proceeds from sales of nuclear decommissioning trust fund securities (Note 16)	155			73
Investments in nuclear decommissioning trust fund securities (Note 16)	(163		)	(81		)
Other, net	7			9
Cash used in investing activities	(1,529		)	(223		)
Net change in cash and cash equivalents	(835		)	(450		)
Cash and cash equivalents — beginning balance	1,400			1,843
Cash and cash equivalents — ending balance	$	565		$	1,393

See Notes to the Financial Statements.

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ENERGY FUTURE COMPETITIVE HOLDINGS COMPANY LLC A DEBTOR-IN-POSSESSION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30, 2016			December 31, 2015
	(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	565		$	1,400
Restricted cash (Note 16)	528			519
Trade accounts receivable — net (Note 16)	658			533
Advances to parent (Note 15)	6			6
Inventories (Note 16)	420			428
Commodity and other derivative contractual assets (Note 14)	363			465
Margin deposits related to commodity contracts	23			6
Other current assets	65			65
Total current assets	2,628			3,422
Restricted cash (Note 16)	507			507
Advances to parent (Note 15)	15			18
Investments (Note 16)	1,009			962
Property, plant and equipment — net (Note 16)	10,464			9,349
Goodwill (Note 4)	152			152
Identifiable intangible assets — net (Note 4)	1,163			1,179
Commodity and other derivative contractual assets (Note 14)	15			10
Other noncurrent assets	39			29
Total assets	$	15,992		$	15,628

LIABILITIES AND MEMBERSHIP INTERESTS
Current liabilities:
Borrowings under debtor-in-possession credit facility (Note 9)	$	2,540		$	1,425
Long-term debt due currently (Note 9)	29			31
Trade accounts payable	397			394
Trade accounts and other payables to affiliates	125			119
Commodity and other derivative contractual liabilities (Note 14)	315			203
Margin deposits related to commodity contracts	36			152
Accrued income taxes payable to parent (Note 15)	2			10
Accrued taxes other than income	98			98
Accrued interest	122			120
Other current liabilities	246			274
Total current liabilities	3,910			2,826
Long-term debt, less amounts due currently (Note 9)	19			23
Liabilities subject to compromise (Note 10)	33,777			33,776
Accumulated deferred income taxes	212			213
Commodity and other derivative contractual liabilities (Note 14)	71			1
Other noncurrent liabilities and deferred credits (Note 16)	1,835			1,779
Total liabilities	39,824			38,618
Commitments and Contingencies (Note 11)
Membership interests (Note 12):	(23,832		)	(22,990		)
Total liabilities and membership interests	$	15,992		$	15,628

See Notes to the Financial Statements.

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ENERGY FUTURE COMPETITIVE HOLDINGS COMPANY LLC

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 EFCH and/or its subsidiaries, as apparent in the context. See Glossary for defined terms.

EFCH, a Delaware limited liability company and a wholly owned subsidiary of EFH Corp., is a Dallas, Texas-based holding company. We conduct our operations almost entirely through our wholly owned subsidiary, TCEH. TCEH is 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. Key management activities, including commodity risk management and electricity sourcing for our retail and wholesale customers, are performed on an integrated basis; consequently, there are no 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). See Note 2 for further discussion regarding the Chapter 11 Cases.

Basis of Presentation, Including Application of Bankruptcy Accounting

The condensed consolidated financial statements have been prepared in accordance with US GAAP. The condensed consolidated financial statements have been prepared as if EFCH 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 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 8 and 10 for discussion of these accounting and reporting changes.

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.

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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 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 2016, the Debtors filed the Plan of Reorganization and the Disclosure Statement with the Bankruptcy Court. In July 2016, in connection with the Merger Agreement (as described below), each of the EFH Debtors and NextEra Energy, Inc. (NEE) agreed to certain amendments to the Plan of Reorganization with respect to the EFH Debtors (the Amended Plan). Pursuant to the terms of the EFH Debtors Plan Support Agreement (as described below), it is expected that the Debtors will file the Amended Plan with the Bankruptcy Court and seek confirmation of the Amended Plan.

The Plan of Reorganization provides (and the Amended Plan will provide) that the confirmation and effective date of the Plan of Reorganization with respect to the TCEH Debtors may occur separate from, and independent of, the confirmation and effective date of the Plan of Reorganization with respect to the EFH Debtors.

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 provide for, among other things, the acquisition by NEE of the EFH Debtors (as reorganized) after the Reorganized TCEH Spin-Off pursuant to the Merger Agreement (as described below).

Information contained in the Plan of Reorganization (including when amended by the Amended Plan) and the Disclosure Statement is subject to change, whether as a result of amendments to such documents, requirements by the Bankruptcy Court, actions of third parties or otherwise.

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 of 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.

The EFH Debtors and the TCEH Debtors, respectively, will emerge from bankruptcy if and when, in each case, a 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.

Plan Support Agreement and EFH Debtors Plan Support Agreement

In August 2015 (as amended in September 2015 and November 2015), in connection with the Terminated Plan, each of the Debtors entered into a Plan Support Agreement (Plan Support Agreement) with, among other parties, various of their respective creditors, the Sponsor Group and the official committee of TCEH unsecured creditors in order to effect an agreed upon restructuring of the Debtors pursuant to the Terminated Plan or, upon certain events, an Alternative Restructuring (as defined in the Plan Support Agreement) pursuant to another plan of reorganization. The Bankruptcy Court approved the Debtors' entry into the Plan Support Agreement in September 2015.

In 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).

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The parties' obligations with respect to an Alternative Restructuring, which remain in effect (including with respect to the Plan of Reorganization (including as to be amended by the Amended Plan)), may be terminated upon the occurrence of certain events described in the Plan Support Agreement. In addition, under the Plan Support Agreement, the supporting parties have committed to support the inclusion of releases with respect to the claims described in the Settlement Agreement (described below) in the context of an alternative plan (which would become effective when a plan of reorganization contemplating an Alternative Restructuring, such as the Plan of Reorganization (including as to be amended by the Amended Plan), becomes effective).

In July 2016, the EFH Debtors and NEE entered into a plan support agreement (the EFH Debtors Plan Support Agreement) to effect an agreed upon restructuring of the EFH Debtors pursuant to the Amended Plan. The EFH Debtors Plan Support Agreement has not yet been approved by the Bankruptcy Court.

Settlement Agreement

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 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.

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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 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, and, separately, 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 remaining EFH Debtors. Pursuant to such scheduling order, 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 of Reorganization is scheduled to commence on August 17, 2016. In June 2016, the Bankruptcy Court entered a supplement to its May 2016 order adjourning the schedule solely with respect to the EFH Debtors' schedule. We expect that the Bankruptcy Court will set a revised schedule relating to the EFH Debtors beginning in the third quarter of 2016.

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 2014, EFH Corp. 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 2016, we received the Private Letter Ruling. 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, 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.

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. The Debtors 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.

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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 DIP Facility described in Note 9, our ability to obtain new debtor in possession financing in the event the DIP 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 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), the Debtors have received approximately 41,300 filed pre-petition claims, including approximately 30,900 in filed asbestos claims. The Debtors 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 2, 2016, approximately 5,700 of those claims have been settled, withdrawn or expunged. We continue to work with creditors regarding certain 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 loss as they are resolved. The resolution of such claims could result in material adjustments to our financial statements.

Certain claims filed or reflected in the Debtors schedules of assets and liabilities will be resolved on the applicable effective date 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.

Separation of the EFH Debtors and the TCEH Debtors

Upon 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.

Unaudited Condensed Combined Debtor Financial Statements

The condensed combined financial statements presented below represent the financial statements of the TCEH Debtors. EFCH's non-debtor subsidiaries, 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 (loss) 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 TCEH Debtors have been eliminated in consolidation in these financial statements.

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Condensed statements of combined loss of the TCEH Debtors for the three and six months ended June 30, 2016 and 2015 are presented below:



	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	(136		)	(218		)	(274		)	(432		)
Selling, general and administrative expenses	(152		)	(161		)	(315		)	(321		)
Impairment of goodwill	—			—			—			(700		)
Impairment of long-lived assets	—			—			—			(676		)
Other income (deductions) and interest income	(15		)	—			(34		)	(56		)
Interest expense and related charges	(345		)	(321		)	(679		)	(638		)
Reorganization items	(30		)	(40		)	(52		)	(114		)
Loss before income taxes and equity in earnings of non-debtor entities	(477		)	(333		)	(816		)	(1,967		)
Income tax (expense) benefit	(8		)	111			(11		)	405
Equity in earnings (loss) of non-debtor entities (net of tax)	(16		)	6			(15		)	9
Net loss	$	(501	)	$	(216	)	$	(842	)	$	(1,553	)

Condensed statements of combined comprehensive loss of the TCEH Debtors for the three and six months ended June 30, 2016 and 2015 are presented below:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net loss	$	(501	)	$	(216	)	$	(842	)	$	(1,553	)
Other comprehensive loss (net of tax)	1			—			1			1
Comprehensive loss	$	(500	)	$	(216	)	$	(841	)	$	(1,552	)

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



	Six Months Ended June 30,
	2016			2015
Cash used in operating activities	$	(462	)	$	(211	)
Cash flows — financing activities:
Borrowings under DIP Revolving Credit Facility	1,115			—
Repayments/repurchases of debt	(4		)	(5		)
Cash provided by (used in) financing activities	1,111			(5		)
Cash flows — investing activities:
Advances to non-debtor affiliates	(4		)	(2		)
Investment in non-debtor affiliates	(1,324		)	(9		)
Capital expenditures	(136		)	(209		)
Nuclear fuel purchases	(11		)	(11		)
Proceeds from sales of nuclear decommissioning trust fund securities	155			73
Investments in nuclear decommissioning trust fund securities	(163		)	(81		)
Other, net	(3		)	(5		)
Cash used in investing activities	(1,486		)	(244		)
Net change in cash and cash equivalents	(837		)	(460		)
Cash and cash equivalents — beginning balance	1,390			1,842
Cash and cash equivalents — ending balance	$	553		$	1,382

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



	June 30, 2016			December 31, 2015
ASSETS
Total current assets	$	2,577		$	3,412
Restricted cash	507			507
Advances to parent and non-debtor entities	17			20
Investment in non-debtor entities	1,458			135
Other investments	1,006			958
Property, plant and equipment — net	9,059			9,262
Goodwill	152			152
Identifiable intangible assets — net	1,158			1,182
Commodity and other derivative contractual assets	12			10
Other noncurrent assets	38			29
Total assets	$	15,984		$	15,667
LIABILITIES AND MEMBERSHIP INTERESTS
Total current liabilities	$	3,905		$	2,818
Accumulated deferred income taxes	259			256
Commodity and other derivative contractual liabilities	20			1
Long-term debt, less amounts due currently	19			23
Liabilities subject to compromise	33,777			33,776
Other noncurrent liabilities and deferred credits	1,836			1,783
Total liabilities	39,816			38,657
Total membership interests	(23,832		)	(22,990		)
Total liabilities and membership interests	$	15,984		$	15,667

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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 to diversify our fuel mix and increases the dispatch flexibility in our 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 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 DIP Facility totaling $1.1 billion. After completing the acquisition, we repaid approximately $230 million of borrowings under the DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. La Frontera and its subsidiaries are subsidiary guarantors under the DIP Facility.

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 13). 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 purchase price allocation is subject to change based on final working capital adjustments.



Cash paid to seller at close	$	603
Preliminary net working capital adjustments	(8		)
Consideration paid to seller	595
Cash paid to repay project financing at close	950
Total cash paid related to acquisition	$	1,545
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	19
Total liabilities assumed	72
Identifiable net assets acquired	$	1,545

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 months ended June 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,
	2016			2015
Revenues	$	2,425		$	3,044
Net loss	$	(858	)	$	(1,465	)

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 DIP Facility in lieu of interest expense incurred prior to the acquisition.

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4. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Goodwill

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



Goodwill before impairment charges	$	18,322
Accumulated noncash impairment charges	(18,170		)
Balance at June 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 March 31, 2015, we experienced an impairment indicator related to decreases in forward wholesale electricity prices when compared to those prices reflected in our December 1, 2014 goodwill impairment testing analysis. As a result, the likelihood of a goodwill impairment had increased, and we initiated further testing of goodwill. Our testing of goodwill for impairment as of March 31, 2015 resulted in an impairment charge totaling $700 million.

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
Identifiable Intangible Asset	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Retail customer relationship	$	463	$	448	$	15	$	463	$	442	$	21
Software and other technology-related assets	405		252		153		385		224		161
Other identifiable intangible assets (a)	53		18		35		72		35		37
Total identifiable intangible assets subject to amortization	$	921	$	718	203		$	920	$	701	219
Retail trade name (not subject to amortization)					955						955
Mineral interests (not currently subject to amortization)					5						5
Total identifiable intangible assets					$	1,163					$	1,179

____________


(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 months ended June 30, 2015 related to other identifiable intangible assets.

At June 30, 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 loss line item) consisted of:



Identifiable Intangible Asset	Condensed Statements of Consolidated Loss Line	Three Months Ended June 30,				Six Months Ended June 30,
Identifiable Intangible Asset	Condensed Statements of Consolidated Loss Line	2016		2015		2016		2015
Retail customer relationship	Depreciation and amortization	$	3	$	4	$	6	$	9
Software and other technology-related assets	Depreciation and amortization	14		15		29		28
Other identifiable intangible assets	Operating revenues/fuel, purchased power costs and delivery fees/depreciation and amortization	—		7		3		12
Total amortization expense (a)		$	17	$	26	$	38	$	49

_______________


(a)	Amounts recorded in depreciation and amortization totaled $18 million and $22 million for the three months ended June 30, 2016 and 2015, respectively, and $38 million and $39 million for the six months ended June 30, 2016 and 2015, respectively.

Intangible Impairments

The impairments of our generation facilities in March 2015 (see Note 6) 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 13). Accordingly, in the three months ended March 31, 2015, we recorded noncash impairment charges of $51 million (before deferred income tax benefit) in other deductions (see Note 16) related to our existing environmental allowances and credits intangible asset.

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 (before deferred income tax benefit) in other deductions (see Note 16).

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	$	82
2017	$	59
2018	$	35
2019	$	17
2020	$	9

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5.	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. 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 upon the effective date of the plan, as it relates to the TCEH Debtors, that the TCEH Debtors will reject this agreement. Additionally, under the terms of the Settlement Agreement, no further cash payments among the Debtors will be made in respect of federal income taxes. EFH Corp. has 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 continue to be settled.

The calculation of our effective tax rate is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Loss before income taxes	$	(502	)	$	(323	)	$	(839	)	$	(1,953	)
Income tax (expense) benefit	$	1		$	107		$	(3	)	$	400
Effective tax rate	0.2		%	33.1		%	(0.4		)%	20.5		%

For the three months ended June 30, 2016, the effective tax rate of 0.2% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to a valuation allowance recorded against deferred tax assets in 2016. For the three months ended June 30, 2015, the effective tax rate of 33.1% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to the 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. As of June 30, 2016 the valuation allowance against deferred tax assets totaled $452 million.

For the six months ended June 30, 2016, the effective tax rate of (0.4)% related to our income tax expense was lower than the US Federal statutory rate of 35% due primarily to a valuation allowance against deferred tax assets and Texas margin tax expense on pretax losses in 2016. For the six months ended June 30, 2015, the effective tax rate of 20.5% 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 4) 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 4 and 6) and the tax benefit recognized due to the Texas margin tax rate reduction in the three months ended June 30, 2015.

Liability for Uncertain Tax Positions

In June 2016, EFH Corp. 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.

In March 2016, EFH Corp. signed a final agreed RAR with the IRS for the 2014 tax year. No financial statement impacts resulted from the signing of the 2014 RAR.

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6.	IMPAIRMENT OF LONG-LIVED ASSETS

Impairment of Lignite/Coal Fueled Generation and Mining Assets

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 13). 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 other generation facilities if forward wholesale electricity prices continue to decline or forecasted costs of producing electricity at our generation facilities increase, including increased costs of compliance with proposed environmental regulations.

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7. INTEREST EXPENSE AND RELATED CHARGES



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Interest paid/accrued on debtor-in-possession financing	$	22		$	16		$	38		$	31
Adequate protection amounts paid/accrued	324			307			646			609
Interest paid/accrued on pre-petition debt	1			2			2			4
Capitalized interest	(3		)	(3		)	(6		)	(6		)
Other	—			—			—			1
Total interest expense and related charges	$	344		$	322		$	680		$	639

Interest expense for the three and six months ended June 30, 2016 and 2015 reflects interest paid and accrued on debtor-in-possession financing (see Note 9), 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 14), in exchange for their consent to the senior secured, super-priority liens contained in the DIP Facility and any diminution in value of their interests in the pre-petition collateral from the Petition Date. The interest rate applicable to the adequate protection amounts paid/accrued for the six months ended June 30, 2016 was 4.93% (one-month LIBOR plus 4.50%). The 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 be re-characterized as payments of principal.

The Bankruptcy Code generally restricts payment of interest on pre-petition debt, subject to certain exceptions. Additional interest payments may also be made upon approval by the Bankruptcy Court. 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 $205 million and $227 million for the three months ended June 30, 2016 and 2015, respectively, and $428 million and $452 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 14) 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.



	Three Months Ended June 30, 2016						Three Months Ended June 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFCH	$	—	$	—	$	—	$	2	$	—	$	2
TCEH	513		308		205		516		291		$	225
Total	$	513	$	308	$	205	$	518	$	291	$	227



	Six Months Ended June 30, 2016						Six Months Ended June 30, 2015
Entity:	Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued		Contractual Interest on Debt Classified as LSTC		Adequate Protection Paid/Accrued		Contractual Interest on Debt Classified as LSTC Not Paid/Accrued
EFCH	$	—	$	—	$	—	$	3	$	—	$	3
TCEH	1,043		615		428		1,029		580		449
Total	$	1,043	$	615	$	428	$	1,032	$	580	$	452

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8.	REORGANIZATION ITEMS

Expenses and income directly associated with the Chapter 11 Cases are reported separately in the condensed statements of consolidated 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 months ended June 30, 2016 and 2015 as reported in the condensed statements of consolidated loss:



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Expenses related to legal advisory and representation services	$	14	$	24		$	27	$	50
Expenses related to other professional consulting and advisory services	13		17			20		33
Contract claims adjustments	2		(2		)	3		28
Other	1		1			2		3
Total reorganization items	$	30	$	40		$	52	$	114

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9.	DEBTOR-IN-POSSESSION BORROWING FACILITY AND LONG-TERM DEBT NOT SUBJECT TO COMPROMISE

DIP Facility — The Bankruptcy Court approved the DIP Facility in June 2014. The 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 (DIP Revolving Credit Facility) and a term loan facility of up to $1.425 billion (DIP Term Loan Facility). The 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 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 DIP Facility are reported as current liabilities. The maturity date of the 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 DIP Facility must be repaid in full prior to the TCEH Debtors' emergence from the Chapter 11 Cases.



	June 30, 2016
DIP Facility	Facility Limit		Available Cash Borrowing Capacity		Available Letter of Credit Capacity
DIP Revolving Credit Facility (a)	$	1,950	$	835	$	—
DIP Term Loan Facility (b)	1,425		—		272
Total 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 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.

At June 30, 2016, $1.115 billion of the DIP Revolving Credit Facility has been borrowed. As discussed in Note 3, the Lamar and Forney Acquisition in April 2016 was funded by cash-on-hand and $1.1 billion in additional cash borrowings under the DIP Revolving Credit Facility. After completing the acquisition, we repaid approximately $230 million of borrowings under the DIP Revolving Credit Facility primarily utilizing cash acquired in the transaction. At December 31, 2015, no amounts were borrowed under the DIP Revolving Credit Facility.

At both June 30, 2016 and December 31, 2015, all $1.425 billion of the DIP Term Loan Facility has been borrowed. Of this borrowing, $800 million represents amounts that support issuances of letters of credit and have been funded to a collateral account. Of the collateral account amount at June 30, 2016, $272 million is reported as cash and cash equivalents and $528 million is reported as restricted cash, which represents the amount of outstanding letters of credit.

Amounts borrowed under the DIP Revolving Credit Facility bear interest based on applicable LIBOR rates plus 2.50%, and the weighted average interest rate on outstanding borrowings was 2.98% at June 30, 2016. Amounts borrowed under the DIP Term Loan Facility bear interest based on applicable LIBOR rates, subject to a 0.75% floor, plus 3%, and the interest rate on outstanding borrowings was 3.75% at both June 30, 2016 and December 31, 2015. The DIP Facility also provides 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 DIP Facility.

The TCEH Debtors' obligations under the DIP Facility are secured by a lien covering substantially all of the TCEH Debtors' assets, rights and properties (including the assets acquired in the Lamar and Forney Acquisition), subject to certain exceptions set forth in the DIP Facility. The 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 DIP 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 DIP Facility along with substantially all of TCEH’s subsidiaries, including all subsidiaries that are Debtors in the Chapter 11 Cases.

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

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In June 2014, 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 DIP Facility that will enable the RCT to be paid before the DIP Facility lenders.

The DIP Facility provides for affirmative and negative covenants applicable to the TCEH Debtors, including affirmative covenants requiring the TCEH Debtors to provide financial information, budgets and other information to the agents under the 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 DIP Facility. The TCEH Debtors' ability to borrow under the DIP Facility is subject to the satisfaction of certain customary conditions precedent set forth therein.

The 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 DIP Facility or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against the TCEH Debtors. The agreement governing the DIP Facility includes a covenant that requires the Consolidated Superpriority Secured Net 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 DIP Facility less unrestricted cash. As of June 30, 2016, we are in compliance with this financial covenant. Upon the existence of an event of default, the 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.

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
EFCH
9.58% Fixed Notes due in annual installments through December 4, 2019 (a)	$	13		$	13
8.254% Fixed Notes due in quarterly installments through December 31, 2021 (a)	21			24
Unamortized fair value discount (b)	(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	4			5
Other	2			2
Unamortized discount	—			(1		)
Total TCEH	16			19
Total EFCH consolidated	48			54
Less amounts due currently	(29		)	(31		)
Total long-term debt not subject to compromise	$	19		$	23

____________


(a)	Approved by the Bankruptcy Court for repayment.


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


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

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10.	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 30, 2016 and December 31, 2015:



	June 30, 2016		December 31, 2015
Notes, loans and other debt per the following table	$	31,707	$	31,707
Accrued interest on notes, loans and other debt	648		648
Net liability under terminated TCEH interest rate swap and natural gas hedging agreements (Note 14)	1,243		1,243
Trade accounts payable and other expected allowed claims	178		177
Advances and other payables to affiliates	1		1
Total liabilities subject to compromise	$	33,777	$	33,776

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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
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
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:
Other	1		1
Total TCEH	31,668		31,668
EFCH (parent entity)
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
Subtotal	9		9

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	June 30, 2016		December 31, 2015

EFH Corp. pre-petition debt pushed down (a)
10.875% Fixed Senior Notes due November 1, 2017	$	16	$	16
11.25%/12.00% Senior Toggle Notes due November 1, 2017	14		14
Subtotal — EFH Corp. debt pushed down	30		30
Total EFCH (parent entity)	39		39
Total EFCH consolidated notes, loans and other debt	$	31,707	$	31,707

____________


(a)	Represents 50% of the amount of these EFH Corp. securities guaranteed by, and pushed down to (pushed-down debt), EFCH (parent entity) per the discussion below under "Guarantees and Push Down of EFH Corp. Pre-Petition Debt."

Guarantees and Push Down of EFH Corp. Pre-Petition Debt

Merger-related debt of EFH Corp. and its subsidiaries consists of debt issued or existing at the time of the Merger. Debt issued in exchange for Merger-related debt is considered Merger-related. Debt issuances for cash are considered Merger-related debt to the extent the proceeds are used to repurchase Merger-related debt. EFCH and EFIH (excluding their subsidiaries) fully and unconditionally guarantee on a joint and several basis the Merger-related debt of EFH Corp. (parent). Such debt was pushed down in accordance with SEC Staff Accounting Bulletin Topic 5-J, prior to being rescinded, and as a result, a portion of such debt and related interest expense is reflected in our financial statements. Merger-related debt of EFH Corp. held by its subsidiaries is not subject to push down.

Debt guaranteed and subject to push down at June 30, 2016 totals $60 million and consists of $33 million principal amount of EFH Corp. 10.875% Senior Notes and $27 million principal amount of EFH Corp. 11.25%/12.00% Senior Toggle Notes. The amount reflected in our condensed consolidated balance sheets as pushed down pre-petition debt ($30 million at both June 30, 2016 and December 31, 2015, as shown in the debt table above) represents 50% of the principal amount of the EFH Corp. Merger-related debt guaranteed. This percentage reflects the fact that at the time of the Merger, the equity investments of EFCH and EFIH in their respective operating subsidiaries were essentially equal amounts. Because payment of principal and interest on the debt is the responsibility of EFH Corp., we record the settlement of such amounts as noncash capital contributions from EFH Corp.

There were no payments of interest by EFH Corp. on pre-petition debt pushed down for the three or six months ended June 30, 2016 or 2015.

TCEH Letter of Credit Facility Activity

Borrowings under the TCEH Letter of Credit Facility have been recorded by TCEH as restricted cash that supports 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 to the default under the pre-petition TCEH Senior Secured Facilities, the letter of credit capacity is no longer available.

Information Regarding Significant Pre-Petition Debt

See Note 12 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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11. 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 9 and 10 for discussion of guarantees and security for certain of our post-petition and pre-petition debt.

Letters of Credit

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


•	$386 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;


•	$63 million to support executory contracts and insurance agreements;


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


•	$24 million for other credit support requirements.

The automatic stay under the Bankruptcy Code does not apply to letters of credit issued under the pre-petition credit facility and third parties may draw if the terms of a particular letter of credit so provide.

Litigation

Aurelius Derivative Claim — Aurelius Capital Master, Ltd. and ACP Master, Ltd. (Aurelius) filed a lawsuit in March 2013, amended in May 2013, in the US District Court for the Northern District of Texas (Dallas Division) against EFCH as a nominal defendant and each of the current directors and a former director of EFCH. In the lawsuit, Aurelius, as a creditor under the TCEH Senior Secured Facilities and certain TCEH secured bonds, both of which are guaranteed by EFCH, filed a derivative claim against EFCH and its directors. Aurelius alleged that the directors of EFCH breached their fiduciary duties to EFCH and its creditors, including Aurelius, by permitting TCEH to make certain loans "without collecting fair and reasonably equivalent value." The lawsuit sought recovery for the benefit of EFCH. In January 2014, the district court granted EFCH's and the directors' motion to dismiss and in February 2014 dismissed the lawsuit. Aurelius has appealed the district court's judgment to the US Court of Appeals for the Fifth Circuit (Fifth Circuit Court). The appeal was automatically stayed as a result of the Bankruptcy Filing. We cannot predict the outcome of this proceeding, including the financial effects, if any.

Litigation Related to EPA Reviews — In June 2008, the EPA issued an initial request for information to TCEH under the EPA's authority under Section 114 of the Clean Air Act (CAA). The stated purpose of the request is to obtain information necessary to determine compliance with the CAA, including New Source Review Standards and air permits issued by the TCEQ for the Big Brown, Monticello and Martin Lake generation facilities. In April 2013, we received an additional information request from the EPA under Section 114 related to the Big Brown, Martin Lake and Monticello facilities as well as an initial information request related to the Sandow 4 generation facility.

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.

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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 is scheduled for 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).

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.

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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.

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. 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.

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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 is scheduled to be completed by the 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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12. MEMBERSHIP INTERESTS

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

The agreement governing the DIP Facility 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.

Membership Interests

The following tables present the changes to membership interests for the six months ended June 30, 2016 and 2015:



Six Months Ended June 30, 2016
	Capital Account			Accumulated Other Comprehensive Loss			Total Membership Interests
Balance at December 31, 2015	$	(22,957	)	$	(33	)	$	(22,990	)
Net loss	(842		)	—			(842		)
Net effect of cash flow hedges	—			1			1
Other	(1		)	—			(1		)
Balance at June 30, 2016	$	(23,800	)	$	(32	)	$	(23,832	)



Six Months Ended June 30, 2015
	Capital Account			Accumulated Other Comprehensive Loss			Total Membership Interests
Balance at December 31, 2014	$	(18,439	)	$	(35	)	$	(18,474	)
Net loss	(1,553		)	—			(1,553		)
Net effect of cash flow hedges	—			1			1
Effect of debt push-down from EFH Corp. (a)	11			—			11
Balance at June 30, 2015	$	(19,981	)	$	(34	)	$	(20,015	)

____________


(a)	Represents the interest and income tax effects of debt pushed down from EFH Corp. (Note 10).

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13. 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.

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 an EFH Corp. centralized risk management group that reports to the EFH Corp. 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 14 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.

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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.

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
	Level 1		Level 2		Level 3 (a)		Reclassification (b)		Total
Assets:
Commodity contracts	$	239	$	50	$	74	$	15	$	378
Nuclear decommissioning trust – equity securities (c)	396		—		—		—		396
Nuclear decommissioning trust – debt securities (c)	—		342		—		—		342
Subtotal	$	635	$	392	$	74	$	15	$	1,116
Assets measured at net asset value (d):
Nuclear decommissioning trust - equity securities (c)									228
Total assets									$	1,344
Liabilities:
Commodity contracts	$	168	$	120	$	83	$	15	$	386
Total liabilities	$	168	$	120	$	83	$	15	$	386



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 investments line in the condensed consolidated balance sheets. See Note 16.


(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

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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 14 for further discussion regarding derivative instruments.

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 30, 2016 and December 31, 2015:



June 30, 2016
	Fair Value
Contract Type (a)	Assets		Liabilities			Total			Valuation Technique	Significant Unobservable Input	Range (b)
Electricity purchases and sales	$	3	$	(33	)	$	(30	)	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 $60/MWh

Electricity spread options	32		(45		)	(13		)	Option Pricing Model	Gas to power correlation (f)	50% to 100%
										Power volatility (g)	10% to 45%

Electricity congestion revenue rights	34		(4		)	30			Market Approach (h)	Illiquid price differences between settlement points (i)	$0 to $10/MWh

Other (i)	5		(1		)	4

Total	$	74	$	(83	)	$	(9	)

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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 (i)	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.


(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 months ended June 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 months ended June 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.

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net asset balance at beginning of period	$	25		$	60		$	37		$	35
Total unrealized valuation gains (losses)	1			(2		)	(4		)	14
Purchases, issuances and settlements (a):
Purchases	12			13			26			32
Issuances	(4		)	(2		)	(16		)	(5		)
Settlements	(17		)	(17		)	(27		)	(25		)
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)	(27		)	—			(27		)	—
Net change (c)	(34		)	(16		)	(46		)	9
Net asset (liability) balance at end of period	$	(9	)	$	44		$	(9	)	$	44
Unrealized valuation gains (losses) relating to instruments held at end of period	$	(5	)	$	1		$	(8	)	$	9

____________


(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 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.

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14. COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES

Strategic Use of Derivatives

We transact in derivative instruments, such as options, swaps, futures and forward contracts, to manage commodity price risk. See Note 13 for a discussion of the fair value of derivatives.

Commodity Hedging and Trading Activity — TCEH has natural gas hedging positions 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. 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 loss in net gain (loss) from commodity hedging and trading activities.

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 is subject to the terms of settlement of 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 been receiving, adequate protection payments related to their claims as permitted by TCEH's cash collateral order approved by the Bankruptcy Court (see Note 7).

Financial Statement Effects of Derivatives

Substantially all derivative contractual assets and liabilities arise from 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 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
	Derivative Assets			Derivative Liabilities			Total			Derivative Assets		Derivative Liabilities			Total
Current assets	$	355		$	8		$	363		$	465	$	—		$	465
Noncurrent assets	15			—			15			10		—			10
Current liabilities	—			(315		)	(315		)	—		(203		)	(203		)
Noncurrent liabilities	(7		)	(64		)	(71		)	—		(1		)	(1		)
Net assets (liabilities)	$	363		$	(371	)	$	(8	)	$	475	$	(204	)	$	271

At June 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 million in net losses and $26 million in net gains in the three months ended June 30, 2016 and 2015, respectively, and $45 million in net losses and $151 million in net gains in the six months ended June 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 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.

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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 months ended June 30, 2016 and 2015. There were no amounts recognized in OCI for the three and six months ended June 30, 2016 and 2015.

Accumulated other comprehensive income related to cash flow hedges at June 30, 2016 and December 31, 2015 totaled $32 million and $33 million, respectively, in net losses (after-tax), 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 30, 2016 will be reclassified into net income during the next twelve months as the related hedged transactions affect net income.

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.

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 June 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
	Amounts Presented in Balance Sheet			Offsetting Instruments (a)			Financial Collateral (Received) Pledged (b)			Net Amounts
Derivative assets:
Commodity contracts	$	378		$	(249	)	$	(32	)	$	97
Derivative liabilities:
Commodity contracts	(386		)	249			—			(137		)
Net amounts	$	(8	)	$	—		$	(32	)	$	(40	)



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 30, 2016 and December 31, 2015:



	June 30, 2016	December 31, 2015
Derivative type	Notional Volume		Unit of Measure
Natural gas (a)	1,773	1,489	Million MMBtu
Electricity	95,732	58,022	GWh
Congestion Revenue Rights (b)	121,748	106,260	GWh
Coal	5	10	Million US tons
Fuel oil	21	35	Million gallons
Uranium	375	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.

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 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 million and $58 million, respectively. The liquidity exposure associated with these liabilities was reduced by cash and letter of credit postings with counterparties totaling $43 million and $31 million at June 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 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 30, 2016 and December 31, 2015, the fair value of derivative liabilities subject to such cross-default provisions totaled $42 million and $1 million, respectively. At both June 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 million and $59 million at June 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.

Concentrations of Credit Risk Related to Derivatives

We have concentrations of credit risk with the counterparties to our derivative contracts. At June 30, 2016, total credit risk exposure to all counterparties related to derivative contracts totaled $474 million (including associated accounts receivable). The net exposure to those counterparties totaled $132 million at June 30, 2016 after taking into effect netting arrangements, setoff provisions and collateral, with the largest net exposure to a single counterparty totaling $46 million. At June 30, 2016, the credit risk exposure to the banking and financial sector represented 74% of the total credit risk exposure and 49% of the net exposure.

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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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15. RELATED-PARTY TRANSACTIONS

The following represent our significant related-party transactions.

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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 trade accounts and other payables to affiliates) largely related to these electricity delivery fees.

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Contributions to the EFH Corp. retirement plan by both Oncor and TCEH in 2014 and 2015 resulted in the EFH Corp. retirement plan being fully funded as calculated under the provisions of the Employee Retirement Income Security Act of 1974, as amended. As a result of the Bankruptcy Filing, participants in the EFH Corp. retirement plan who choose to retire would not be eligible for the lump sum payout option under the retirement plan unless the EFH Corp. retirement plan was fully funded. The payments by TCEH were accounted for as an advance to EFH Corp. that will be settled as pension expense is allocated to TCEH in the normal course. The balance of the advance totaled $21 million at June 30, 2016, with $6 million recorded as a current asset and $15 million recorded as a noncurrent asset. The balance of the advance totaled $24 million at December 31, 2015, with $6 million recorded as a current asset and $18 million recorded as a noncurrent asset.

Receivables from affiliates are measured at historical cost and primarily have consisted of notes receivable for cash loaned to EFH Corp. for debt principal and interest payments and other general corporate purposes of EFH Corp. as discussed above. EFCH reviews economic conditions, counterparty credit scores and historical payment activity to assess the overall collectability of its affiliated receivables. There were no credit loss allowances at June 30, 2016 and December 31, 2015.

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A subsidiary of EFH Corp. bills our subsidiaries for information technology, financial, accounting and other administrative services at cost. These charges, which are largely settled in cash and primarily reported in SG&A expenses, 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 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 for contribution to the trust fund with the intent that the trust fund assets, reported in 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 $4 million for both the three months ended June 30, 2016 and 2015, and $8 million for both the six months ended June 30, 2016 and 2015. Income and expenses associated with the trust fund and the decommissioning liability incurred by 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 June 30, 2016 and December 31, 2015, the excess of the trust fund balance over the decommissioning liability resulted in a payable totaling $443 million and $409 million, respectively, and is reported in noncurrent liabilities.

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EFH Corp. files consolidated federal income tax and Texas state margin tax returns that include our results; however, under a Federal and State Income Tax Allocation Agreement, our federal income tax and Texas margin tax expense and related balance sheet amounts, including income taxes payable to or receivable from EFH Corp., are recorded as if we file our own corporate income tax return. As of June 30, 2016 and December 31, 2015, we had current income tax liabilities of $2 million and $10 million, respectively. We made tax payments to EFH Corp. of $14 million and $24 million for the six months ended June 30, 2016 and 2015, respectively. See Note 5 for discussion of cessation of payment of federal income taxes pursuant to the Settlement Agreement.

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•	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.

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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.

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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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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.

See Notes 9 and 10 for discussion of guarantees and push down of certain EFH Corp. debt.

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16. SUPPLEMENTARY FINANCIAL INFORMATION

Other Income and Deductions



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Other income:
Insurance settlement	$	9	$	—	$	9	$	—
Sale of land	—		6		—		6
All other	2		2		4		5
Total other income	$	11	$	8	$	13	$	11
Other deductions:
Write-off of generation equipment	$	21

Energy Future Competitive Holdings Co LLC 10-Q