Nueces Electric Co-op Engaged in Competitive Activities

Nueces Electric Co-opEngaged in Competitive Activities Avoiding Anticompetitive Activity NEC Code of Conduct Implementation Plan

Original Plan vs. Modified Plan • Complies with §25.275 of the PUCT Substantive Rules • Original Code Implementation filing September 6, 2001 under Docket No. 24627 • Plan modification - NEC will operate as a Bundled COOP. NEC shall not engage in the following anticompetitive practices: • Subsidize competitive activities directly or indirectly through rates charged for the provision of electric service; • Allow discriminatory access to transmission and distribution products and services; • Allow preferential access to transmission and distribution-related information; • Allow unauthorized access to confidential customer information; and • Allow employees performing transmission and distribution functions to provide leads to or promote the products of competitive affiliates or any persons providing competitive energy-related activities on behalf of a Bundled MOU/COOP.

NEC Organization Structure for Competitive Operation • NEC will conduct both DSP activities and competitive energy-related activities and therefore is considered a bundled COOP • NEC is not required to have structural or functional separation of DSP functions from competitive energy-related activities. • PURA §41.055 -it is the discretion of the NEC Board of Directors to determine whether to unbundle any energy-related activities, and whether to do so structurally or functionally. • NEC, as a bundled COOP will comply with §25.275, • subsection (b)(5) and (7)-(9), • subsection (n)(2)-(10), and • subsection (o) as required and stated in §25.275 (b)(2)(B).

NEC Organization Structure for Competitive Operation • NEC has developed a division, NEC Retail Division (NEC RD), which is NEC’s competitive affiliate. • NEC RD will provide services or sell products at retail in the competitive energy-related market in this state. • NEC RD utilizes the “back-office” services of South Texas Electric Cooperative (STEC) in Nursery, Texas to • process transactions for the competitive retail activities of NEC, • manage the NEC RD customer information system, • perform billing services for NEC RD customers outside of the NEC distribution service area, and • meet customer service needs that must be handled at the competitive retailer level. NEC RD back-office services are physically located in Nursery, Texas on STEC property, with their own dedicated employees. In addition, NEC RD maintains a completely separate customer information system (CIS), not tied to NEC’s existing CIS in any way. The systems have been developed independently, by two separate and distinct, CIS contractors. • Because of the unintentional “functional” and “structural” separation provided by the “back-office” arrangement with South Texas Electric Cooperative, the potential for anticompetitive activity is greatly reduced for NEC, as a bundled COOP

Informal Complaint Procedure • Informal complaint procedure is prerequisite for formal complaint procedure • Informal complaint procedure requires complaints to be in writing and referred to the Executive Manager, Nueces Electric Cooperative, P.O. Box 1032, Robstown, TX 78380. • Complaint should contain the following: • the name of the complainant; • a detailed factual report of complaint, including relevant dates, entities or divisions involved, employees involved, and the specific claim. • Complaint must be filed with NEC within 90 days of the date the complaining party knew violation occurred, but never more than three years after the violation occurred. • NEC executive manager will • acknowledge receipt of complaint in writing within five working days of receipt and • provide a written report communicating the results of the preliminary investigation to the complainant within 30 days after receipt of the complaint, including a description of any course of action that will be taken. • NEC will report to the commission regarding informal complaints in its annual report of code-related activities filed pursuant to subsection (d) of PUCT Substantive Rule §25.275. The information reported to the commission shall include • the name of the complainant • a summary report of the complaint, including all relevant dates, companies involved, employees involved, the specific claim, and any actions taken to address the complaint.

Formal Complaint Procedure • If NEC and the complainant are unable to resolve the complaint, the complainant may file a formal complaint with the commission. • If complainant does not consider the complaint fully resolved and advises NEC of this, NEC will notify complainant of his or her right to file a formal complaint with the commission (and provide them with the commission's address and telephone number) • After the informal process, a formal complaint may be filed with the commission • Must be filed with the commission within 30 days after the executive manager of NEC mails the written report communicating the results of the preliminary investigation to the complainant • Complaint must contain the name of the complainant and a detailed factual report of the complaint, including all relevant dates, those involved, and the specific claim. • Complaint must identify specific provisions of PUCT Substantive Rule §25.275 that are alleged to have been violated, • Complaint must contain a sworn affidavit that the facts alleged are true and correct • If the complainant is a corporation, complaint should include a statement from a corporate officer that he or she is authorized to file the complaint.

Formal Complaint Procedure • The commission will provide a copy of the complaint to NEC. • NEC will respond to the complaint in writing within 15 days. • NEC and the complainant shall make a good faith effort to resolve the complaint on an informal basis as promptly as practicable. • Upon request by NEC, commission staff shall conduct a settlement conference • NEC will have three months to cure the violation in accordance with an agreement arising from the settlement conference or following a hearing.

Commission Enforcement & Violation • In the event the commission finds there has been a violation which has not been reasonably cured, the commission may enforce the provisions below: • The commission may recommend actions to be taken by NEC within a prescribed time, and if such actions are not taken, the commission may: • seek an injunction to eliminate or remedy the violation or series or set of violations; or • limit or prohibit retail service outside the certificated retail service area NEC until the violation or violations are adequately remedied. This remedy shall not be applied in a manner that would interfere with or abrogate the rights or obligations of parties to a lawful contract. • In assessing enforcement remedies, the commission will consider the following factors: • the prior history of violations by NEC, if any, found by the commission after hearing; • the efforts made by NEC to comply with the commission's rules; • the nature and extent of economic benefit gained by NEC or NEC RD; • the damages or potential damages resulting from the violation or series or set of violations; • the size of the business of the competitive affiliate involved; and • such other factors deemed appropriate and material to the particular circumstances of the violation or series or set of violations. • The commission may conduct a compliance audit of affiliate activities to ensure compliance with the code of conduct.

Reporting & Auditing NEC will maintain and/or file the following information to ensure avoidance of anticompetitive activities as a result of its bundled operations. • Code Implementation Filing • Annual report of code-related activities • Following NEC’s full entry into the competitive retail electric market, a report of activities related to the plan will be filed annually with the commission under a control number designated by the commission. • The report will be filed by June 1 and will encompass the period from January 1 through December 31 of the preceding year. • The report will contain detailed information on how NEC met each of the provisions for transactional and informational safeguards and any deviations from the actions set forth in this initial code compliance filing. Commission staff shall review the annual report of code-related activities. • Filing is not subject to the contested hearings process, except upon complaint by an interested party or the commission staff. • Deviations from Code of Conduct • Deviations from the code of conduct plan necessary to ensure public safety or system reliability • Information regarding deviations will be summarized in the NEC annual report of code-related activities and • Within 30 days of each deviation relating to a competitive affiliate, NEC will conspicuously post the information on its Internet site or a public electronic bulletin board for 30 consecutive calendar days. The information reported will include the nature of the circumstances involved and the date of the deviation.

Reporting & Auditing • Aggregate Customer Information • NEC will aggregate non-proprietary customer information for a third party • NEC must make such aggregation service available to all non-affiliates and third parties under the same terms and conditions and at the same price or fully allocated cost as it is made available to any person providing competitive energy-related activities on behalf of NEC RD. • No later than 24 hours prior to NEC’s provision to its competitive affiliate of aggregate customer information, NEC will post a conspicuous notice on its Internet site or other public electronic bulletin board for at least 30 consecutive calendar days, providing the following information: • the name of the competitive affiliate to which the information will be provided, • the rate charged or cost allocated for the information, • a meaningful description of the information provided, and the procedures by which non-affiliates may obtain the same information under the terms and conditions. • NEC will maintain records of such disclosure information for a minimum of three years and will make such records available for third party review within 5 business days of a written request or at a time mutually agreeable to NEC and the third party.

Reporting & Auditing • Customer Proprietary Information Records • NEC will maintain records that include the date, time, and nature of information released when it releases customer proprietary information to another entity in accordance with this plan. • NEC will maintain records of such information for a minimum of three years and will make the records available for third party review within 3 business days of a written request or at a time mutually agreeable to NEC and the third party. • When the third party requesting review of the records is not the customer, commission, or Office of Public Utility Counsel, the records may be redacted in such a way as to protect the customer's identity. • If proprietary customer information is released to an independent organization or a provider of corporate support services, the independent organization or entity providing corporate support services is subject to the rules in PUCT Substantive Rule §25.275 with respect to releasing the information to other persons.

Reporting & Auditing • Copies of contracts or agreements • NEC is required to reduce to writing and file with this plan copies of any contracts or agreements it has with any persons providing competitive energy-related activities on behalf of NEC RD. • NEC does not have to produce any contracts it has with third parties if such contracts were negotiated on an arm's length basis. At this time, all contracts and agreements for NEC RD activities have been negotiated on an arm’s length basis. • If such contracts exist in the future, the contracts or agreements will be filed by June 1 of each year as attachments to NEC’s annual report of code-related activities. • In subsequent years, if no significant changes have been made to the contract or agreement, an amendment sheet will be filed in lieu of re-filing the entire contract or agreement. • Compliance audits • No later than one year after NEC becomes subject to this plan as set forth in PUCT Substantive Rule §25.275 (b)(1) and (2), and, at a minimum, every third year thereafter, NEC will have an audit prepared by independent auditors that verifies that NEC is in compliance with PUCT Substantive Rule §25.275. • NEC will file the results of each audit with the commission within one month of the audit's completion.

Confidential Information Protections • Confidential information includes, but is not limited to, • information relating to the interconnection of customers to NEC’s distribution system, • proprietary customer information, • trade secrets, • competitive information relating to internal manufacturing processes, and • information about NEC’s transmission or distribution system, operations, or plans for expansion. • Proprietary customer information includes any information compiled by NEC TDBU on a customer in the normal course of providing electric service that makes possible the identification of any individual customer by matching such information with the • customer's name • address • account number • type or classification of service • historical electricity usage • expected patterns of use • types of facilities used in providing service • individual contract terms and conditions • price • current charges • billing records • any other information that the customer has expressly requested not be disclosed. • Information that is redacted or organized in such a way as to make it impossible to identify the customer to whom the information relates does not constitute proprietary customer information.

Confidential Information Protections • NEC policy requires • customer authorization for release of information, or • in the case of mass customer listings, approval of the NEC Board of Directors and an invitation for customers to voluntarily be excluded from mass lists provided for CR marketing purposes (e.g. upon market entry as required in the Customer Protection Rules). • Release of customer information by NEC to NEC RD, requires • customer approval • exception is the initial population of the system for enrollment with NEC RD as the affiliate competitive retailer of NEC, which may be authorized by the NEC Board of Directors. • NEC RD will not release proprietary customer information, as defined in PUCT Substantive Rule §25.272(c)(5) (relating to Code of Conduct for Electric Utilities and Their Affiliates), to any other person without obtaining the customer's or applicant's verifiable authorization by means of one of the methods authorized in PUCT Substantive Rule §25.474 (relating to Selection of Retail Electric Provider).

Confidential Information Protections • The following informational safeguard provisions of PUCT Substantive Rule §25.275(o)(2) apply to NEC, as a bundled COOP. • Safeguards for Sharing of customer information prevent • transfer confidential information, • create of opportunity for preferential treatment or unfair competitive advantage, • lead to customer confusion, or • create significant opportunities for cross-subsidization. • Non-proprietary information possessed by NEC that is made available to NEC RD will likewise be made available to third parties providing competitive energy-related activities, at NEC’s cost to produce such information for the third party. • Proprietary customer information. • Upon request by the customer, NEC will provide a customer with the customer's proprietary customer information. • Unless NEC obtains prior affirmative written consent or other verifiable authorization from the customer or unless otherwise permitted in NEC policies, it will not release any proprietary customer information to a person providing competitive energy-related activities on behalf of NEC or to any other entity, other than the customer, an independent organization as defined by PURA §39.151, or a provider of corporate support services for the sole purpose of providing corporate support services.

Confidential Information Protections • NEC is permitted to release proprietary customer information under the same terms and conditions as a TDBU as set forth in subsections PUCT Substantive Rule §25.275 (l)(1)(A)-(E) of this section (see below) • NEC will maintain records that include the date, time, and nature of information released when it releases customer proprietary information to another entity in accordance with this plan. • NEC will maintain records of such information for a minimum of three years and will make the records available for third party review within three business days of a written request or at a time mutually agreeable to NEC and the third party. • When the third party requesting review of the records is not the customer, commission, or Office of Public Utility Counsel, the records may be redacted in such a way as to protect the customer's identity. • If proprietary customer information is released to an independent organization or a provider of corporate support services, the independent organization or entity providing corporate support services is subject to the rules in this subsection with respect to releasing the information to other persons. • Exceptions • Exception for law, regulation, or legal process. • Exception for release to governmental entity. NEC must take all reasonable actions to protect the confidentiality of such information, including, but not limited to, providing such information under a confidentiality agreement or protective order, and shall also promptly notify the affected customer in writing that such information has been requested. • Exception to facilitate transition to customer choice allows release of confidential information during the six-month period prior to implementation of customer choice, during the six-month period prior to implementation or expansion of a pilot project, or such additional periods as may be prescribed by the commission. • Exception for release to providers of last resort. • Exception for release to customer's selected competitive retailer. Subject to demonstration by the competitive retailer that the customer has selected that competitive retailer, NEC will release proprietary customer information for a particular customer to the competitive retailer chosen by that customer in connection with provision of metering data or otherwise in compliance with the Access Tariff applicable to NEC.

Confidential Information Protections • Nondiscriminatory availability of aggregate customer information. • NEC may aggregate non-proprietary customer information, including, but not limited to, information about NEC’s energy-related goods or services. • However, except in circumstances solely involving the provision of corporate support services, NEC will aggregate non-proprietary customer information for a third party or any person providing competitive energy-related activities only if NEC makes such aggregation service available to all non-affiliates and third parties under the same terms and conditions and at the same price or fully allocated cost as it is made available to any person providing competitive energy-related activities on behalf of NEC RD. • No later than 24 hours prior to NEC’s provision to its competitive affiliate of aggregate customer information, NEC will post a conspicuous notice on its CR Relations Internet site or other public electronic bulletin board for at least 30 consecutive calendar days, providing the following information: • the name of the competitive affiliate to which the information will be provided, • the rate charged or cost allocated for the information, • a meaningful description of the information provided, and the procedures by which non-affiliates may obtain the same information under the terms and conditions. • NEC will maintain records of such disclosure information for a minimum of three years and will make such records available for third party review within 5 business days of a written request or at a time mutually agreeable to NEC and the third party.

Confidential Information Protections • Requests for information. • If a customer or potential customer of NEC makes an unsolicited request for distribution service, competitive energy-related activities, products or services provided by NEC, or for information relating to such products or services, NEC must inform the customer that competitive energy-related activities are available not only from NEC RD, but also from other providers. • If NEC provides the customer or potential customer with information about competitive energy-related activities offered by NEC RD, NEC must record and allocate the costs associated with the provision of such information in the same manner as transactions involving the provision of competitive energy related activities, in accordance with PUCT Substantive Rule §25.275(o)(1)(C). • NEC cannot offer the customer or potential customer any opinion regarding the service of any other competitive energy service provider. • Upon request, NEC will make available to a customer a copy of the most recent list of competitive energy service providers as developed and maintained by the commission and may make available telephone numbers and other commonly available information. • This information will also be made available by NEC to its transmission and distribution customers at the time NEC undertakes marketing to those customers of its competitive energy-related activities. • No preferential access to transmission and distribution information. NEC will not allow preferential access by any person providing competitive energy-related activities for NEC RD to information about its transmission and distribution systems. • Other information. • Except as otherwise allowed in this plan by NEC’s Board of Directors and by PUCT Substantive Rule §25.275, NEC will not share information with competitive affiliates except for information required to perform allowed corporate support services. • NEC may provide other information if it can prove that the sharing will not compromise the public interest prior to any such sharing. Information that is publicly available, or that is unrelated in any way to utility activities, may be shared.

Confidential Information Protections • Requests for specific competitive affiliate information. • If a customer or potential customer makes an unsolicited request to NEC for information specifically about NEC RD, NEC may direct the consumer to the in-office display table maintained for competitive retailer enrollment kits or to a website address where the consumer may acquire online information. • NEC staff may also provide NEC RD’s address and telephone number, or transfer the consumer to a designated NEC employee or contractor dedicated primarily to NEC RD sales and/or service. • In the course of conducting business, when NEC staff provides the customer or potential customer with information about NEC RD, NEC staff will not promote NEC RD or its products or services, nor will it offer the customer or potential customer any opinion regarding the service of NEC RD or any other service provider. • Requests for general information about products or services offered by competitive affiliates and their competitors. • If a customer or potential customer requests general information from NEC about products or services provided by NEC RD or the competitors of NEC RD, NEC will not promote NEC RD or its products or services, nor will NEC offer the customer or potential customer any opinion regarding the service of the competitive affiliate or any other service provider. • NEC may direct the customer or potential customer to a telephone directory or to the appropriate choice customer education website, or provide the customer with a recent list of suppliers, but NEC may not refer the customer or potential customer to NEC RD, except as stated in this plan.

Corporate Support Services • Services allowed to be shared by NEC’s TDBU and NEC RD include joint corporate oversight governance, support systems, and personnel and these services will be monitored to prevent anticompetitive activity. • NEC DOES intend to share personnel and equipment to provide these services. • NEC understands that services that may not be shared (except as otherwise allowed under the terms of PUCT Substantive Rule §25.275) include engineering, purchasing of electric transmission facilities and service, transmission and distribution system operations, and marketing. Examples of services that may be shared between NEC and NEC RD

Corporate Support Services-Accounting • NEC will fully allocate costs, as appropriate, to NEC TDBU and NEC RD and will not subsidize its competitive activities with its TDBU revenues. • Fully allocated cost refers to the cost of a product, service, or asset based on book values for the component elements established through generally accepted accounting principles (GAAP); or • Alternatively, an internal transfer price based upon the actual or expected (budgeted) operating and maintenance expenses and a capital component, as appropriate, divided by the expected or actual units for the service or product produced may be utilized. • Such transfer prices may be set as needed but will not be used beyond a three year period without review. • Operating and maintenance expenses will be fully loaded with applicable overheads. • Capital components will consider the original cost of the associated assets and a reasonable return. • Such internal prices may include an allowance for transfers to a general fund at the discretion of NEC. • NEC will internally monitor interaction between its TDBU and NEC RD when a service, asset, product, property, right, or other item is transferred or received by either the TDBU or NEC RD. • In addition, NEC will conduct external audits of its Code of Conduct Implementation Plan as required in PUCT Substantive Rule §25.275 (an audit at the end of the first year, and every third year thereafter).

Corporate Support Services-Credit Support • NEC may share credit, investment, or financing arrangements with NEC RD if the NEC TDBU implements adequate safeguards precluding employees of a competitive affiliate from gaining access to information in a manner that would allow or provide a means to transfer confidential information from the TDBU to the competitive affiliate or lead to customer confusion. • Nothing in this section shall impair existing contracts, covenants, or obligations between NEC and its lenders and holders of bonds issued on behalf of or by NEC. NEC TDBU will not allow NEC RD to obtain credit under any arrangement that would include a specific pledge of assets reasonably necessary for NEC TDBU operations or a pledge of gross revenues of NEC TDBU.

Corporate Support Services-Collections • NEC and NEC RD may share accounts receivable collection services. • NEC will implement adequate safeguards precluding employees of a competitive affiliate from gaining access to information in a manner that would allow or provide a means to transfer confidential information from the TDBU to the competitive affiliate that may provide opportunities for preferential treatment or unfair competitive advantage, that undue customer confusion will be prevented, and that no significant opportunities for cross-subsidization of NEC RD operations are created.

Corporate Support Services-Shared Employees • NEC will implement procedures and safeguards governing the sharing of personnel, facilities, officers and directors, equipment, and corporate support services with persons providing competitive energy-related activities through NEC RD to ensure that confidential information is protected, that there are no opportunities for preferential treatment or unfair competitive advantage, that undue customer confusion will be prevented, and that no significant opportunities for cross-subsidization of NEC RD operations are created. • NEC will track and document the assignment of shared employees engaged in both transmission or distribution system operations and the provision of competitive energy-related activities. • For shared employees, the tracking documentation includes the employees' name, job title, scope of activities, and allocation of time to the transmission and distributions functions and competitive energy-related activities. • The tracking documentation for shared employees will be filed annually with the annual report of code-related activities required in PUCT Substantive Rule §25.275 (o)(3)(B). • NEC employees shared by both NEC and NEC RD, as well as those NEC TDBU employees that may have opportunity to convey anticompetitive information to consumers, shall receive annual code of conduct training and each will sign an annual statement indicating that they are aware of and understand the restrictions set forth in this plan and PUCT Substantive Rule §25.275. • NEC will post a conspicuous notice on its Internet site that includes names of employees who spend more than 50% of their business time on competitive activities for NEC. • Employees may be temporarily assigned to an affiliate TDBU to assist in restoring power in the event of a major service interruption or to assist in resolving emergency situations affecting system reliability. Any such deviation shall be reported and posted on the NEC Internet site or other public electronic bulletin board within 24 hours and for at least 30 consecutive calendar days.

Corporate Support Services-Billing • According to PURA § 41.057, NEC may continue to bill directly electric customers located in its certificated service area for all transmission and distribution services. • NEC may also bill directly for generation and customer services provided by the electric cooperative or its subsidiaries to those customers. • A customer served by NEC for transmission and distribution services and by a retail electric provider for retail service has the option of being billed directly by each service provider or receiving a single bill for distribution, transmission, and generation services from the electric cooperative. • NEC TDBU billing personnel will answer questions regarding billing charges for NEC transmission and distribution services which includes the following • TDBU rates, fees, charges • Metering & TDBU services • Energy usage -NEC • NEC will refer questions about energy usage (CR) and CR charges to the CR of record for the consumer. • As a bundled COOP, NEC will not circumvent the provisions of PURA §39.157(e) or PUCT Substantive Rule §25.275 by using any persons to provide information, services, products, or subsidies that would be prohibited by PUCT Substantive Rule §25.275 between persons providing transmission and distribution service on behalf of NEC and persons providing competitive energy-related activities on behalf of NEC. • NEC will make billing services to NEC RD customers available under the same terms and conditions as billing services will be available to non-affiliate competitive retailers

Corporate Support Services-Shared Office Space • NEC’s office space is mostly physically separate from the office space of NEC RD. • Physical separation is accomplished by having office space for NEC RD transaction processing on the STEC property in Nursery, Texas • For competitive services located in the same building as NEC separate accesses/entrances are offered for NEC and NEC RD.

Transactional Safeguards Relating toProvision of Products & Services • Tying arrangements are prohibited. • Products and services will be available on a non-discriminatory basis. • Cross-subsidization prohibited. • NEC will not create significant opportunities for cross subsidization of competitive energy-related activities with revenues from distribution and transmission rates. • Records of transactions involving competitive energy-related activities. • NEC will maintain segregated accounts and records of all transactions regarding the provision of competitive energy-related activities consistent with the FERC chart of accounts or a comparable tracking method. • In accordance with generally accepted accounting principles, NEC will separately record all transactions regarding the provision of competitive energy-related activities and all transactions relating to the transmission and distribution function. Such records will include all expenses, whether direct or indirect, and at the fully allocated cost to provide such competitive energy service. Such expenses will not be included in NEC’s transmission and distribution rates. • Each transaction between NEC and NEC RD, other than those involving corporate support services or transactions governed by tariffs of general applicability approved by NEC’s Board of Directors, will be reflected in a contemporaneous written record of the transaction including the date of the transaction, name of NEC TDBU employee knowledgeable about the transaction, and description of the transaction. Such records will be maintained for three years.

Transactional Safeguards Relating toProvision of Products & Services • Transfer or use of assets or products to provide competitive energy-related activities. • NEC will implement procedures and safeguards to ensure that the transfer or use of assets or products by a person providing competitive energy-related activities on behalf of NEC will be accomplished at pricing levels that are fair and reasonable to the customers of the transmission and distribution system of NEC and at pricing levels that do not include any preferential discounts, rebates, fee waivers or alternative tariff terms and conditions. • Provision of corporate support services. • The provision of corporate support services by NEC to provide competitive energy-related activities will be carried out in such a way as to comply with the provisions of paragraph PUCT Substantive Rule §25.275(o)(2)(A)-(D) regarding informational safeguards. This will prevent the opportunity for preferential treatment or unfair competitive advantage, customer confusion, or significant opportunities for cross-subsidization.

Marketing, Consumer Education, Corporate Communications & Advertising • NEC and NEC RD will share personnel to develop, produce, and arrange for distribution of member education information, corporate communications and advertising. • Shared corporate communications includes but is not limited to the • production and distribution of news releases, • designation of media contacts/spokespersons at NEC, • preparation of corporate and retail division reports and plans • NEC will also share advertising personnel that will adhere to limitations as detailed in this plan (e.g. no joint sales calls, inclusion of disclaimers, etc.). “Advertising” is not the same as “marketing” and NEC will conduct the advertising function while disassociating NEC TDBU and NEC RD where required, as indicated in this plan.

Marketing, Consumer Education, Corporate Communications & AdvertisingGeneral & Logo/Brand Use • NEC will implement procedures and safeguards relating to the marketing and advertising of NEC RD’s competitive energy-related activities to prevent favoritism being shown to NEC RD, to prevent customer confusion, to prevent the inappropriate sharing of customer information, and to prevent significant opportunities for cross-subsidization. • NEC RD will follow all rules for marketing, solicitation, disclosures and enrollments via the Internet, written, telephone, door-to-door, or in-person, as required of a bundled COOP and detailed in PUCT Substantive Rule §25.474. • NEC RD will also follow the record keeping, retention and right of rescission requirements practiced by all REPs in the retail market. • NEC RD, as a competitive division of NEC, may share the use of the NEC corporate trademark, name, brand, or logo to engage in joint marketing, advertising, or promotional activities in any context. Examples of such shared activities include, but are not limited to, • general cooperative member education activities • consumer education activities • public education activities • community and economic development activities

Marketing, Consumer Education, Corporate Communications & AdvertisingWritten/Auditory Disclaimer • If the activities promote or favor NEC RD products or services, any written or auditory advertisements of specific products or services to existing or potential residential or small commercial customers located within the NEC TDBU certificated service area, whether through radio or television, Internet-based, or other electronic format accessible to the public will include a disclaimer with the use of the NEC TDBU's corporate trademark, name, brand, or logo. • Such disclaimer of the corporate trademark, name, brand, or logo in the material distributed will be written in a bold and conspicuous manner or clearly audible, as appropriate for the communication medium, and will state the following: • "Nueces Electric Cooperative Retail Division (or NEC RD) is the competitive division of Nueces Electric Cooperative (or NEC) and you do not have to buy NEC RD power (or list products, services) to continue to receive quality services from Nueces Electric Cooperative." • Business cards and identification badges of employees that are shared between NEC and NEC RD will also include the disclaimer.

Marketing, Consumer Education, Corporate Communications & AdvertisingAdvertising Examples

Marketing, Consumer Education, Corporate Communications & AdvertisingShared Employee Activities • In regards to shared marketing activities, employees who dedicate 75% or more of their NEC time to competitive activities on behalf of NEC RD may perform the following activities (these activities may also be performed by contract labor): • provide or acquire leads on behalf of NEC RD; • appear/speak/act on behalf of NEC RD including the solicitation of new customers; • solicit business, make sales calls, or acquire information on behalf of NEC RD; • request authorization from its customers to pass on information exclusively to NEC RD.

Marketing, Consumer Education, Corporate Communications & AdvertisingShared Employee Activities • Other designated shared employees may perform the following activities (with safeguards in place to prevent the disclosure to NEC RD of proprietary customer information held by NEC TDBU, which may be used for competitive advantage): • appear/speak on behalf of NEC RD in connection with marketing, advertising or promotional activities; • in these events, the shared employees may NOT seek to acquire leads on behalf of NEC RD except to “take messages” or direct consumers to a sign-up form to request more information from NEC RD • this information may only include a name (contact and/or business) and a telephone number. The information will be forwarded to the appropriate designated personnel who may then follow-through on the inquiry on behalf of NEC RD • records of all “messages” and “forms” forwarded by these employees will be maintained for three years and include the date of the customer request, forwarding date, and description of action taken by NEC RD • assist with the development, production, and distribution of brochures, customer information, and advertising on behalf of NEC RD while implementing safeguards to protect proprietary and confidential information held by NEC TDBU;

Marketing, Consumer Education, Corporate Communications & AdvertisingShared Employee Activities • If prepared on behalf of NEC RD, market analysis reports or other types of non-publicly available reports relating to retail energy sales (e.g. market forecast, planning, or strategic reports) may be shared with NEC TDBU employees; • If prepared for NEC TDBU, and such reports are not available for general competitive retailer information, the reports may not be shared with NEC employees who spend 50% or more of their time on competitive NEC RD activities. • In any case, such reports may not be used in a manner that will provide NEC RD with a competitive advantage. If such information is made available to NEC RD, NEC will post the following information on its Internet site no less than 24 hours prior to the release: • the date of release, • the description of the information, • the name of the REP or affiliate to whom the information is to be released, • any costs incurred by the REP or affiliate, • instructions for other REPs to acquire the same information • Any NEC employee may “take messages,” in response to direct inquiries about NEC RD products or services. These messages may to be forwarded to the appropriate designated personnel who can then follow-through on the inquiry on behalf of NEC RD. • Any employee may also request authorization from NEC customers to pass on information generally to competitive retailers.

Marketing, Consumer Education, Corporate Communications & AdvertisingShared Employee Activities • NEC will not engage in joint marketing, advertising, or promotional activities of its products or services with those of a competitive affiliate in a manner that favors the competitive affiliate. Such joint marketing, advertising, or promotional activities include, but are not limited to, the following activities: • NEC will not act or appear to act on behalf of a competitive affiliate in any communications and contacts with any existing or potential customers (except as allowed in this plan); • NEC will not conduct joint sales calls; • NEC will not submit joint proposals to supply products or services, either as requests for proposals or responses to requests for proposals (with the exception of shared services and other activities as allowed in this plan); • NEC will not engage in joint promotional communications or correspondence; • except that NEC may allow a competitive affiliate access to displays of information (whether physical or electronic) or access to customer bill advertising inserts and NEC newsletters/magazines so long as access to such displays and media is made available on the same terms and conditions to non-affiliates offering similar services as the competitive affiliate;

Marketing, Consumer Education, Corporate Communications & Advertising • NEC will not participate in joint presentations at trade shows, conferences, or other marketing events within the state of Texas; • at NEC events that include a table or booth for NEC RD, NEC must promote the opportunity and make similar accommodations available on the same terms and conditions to non-affiliate competitive retailers. • NEC will not provide links from its Internet web site to a competitive affiliate's Internet web site unless a link (under the same terms and conditions) is offered to non-affiliate competitive retailers. • At a customer's unsolicited request, NEC may participate in meetings with a competitive affiliate to discuss technical or operational subjects regarding NEC’s provision of transmission or distribution services to the customer but only in the same manner and to the same extent NEC participates in such meetings with unaffiliated electric or energy services suppliers and their customers. • Representatives of NEC TDBU may be present during a sales discussion between a customer and NEC’s competitive affiliate but shall not participate in the discussion or purport to act on behalf of the competitive affiliate.

Marketing, Consumer Education, Corporate Communications & AdvertisingNew Service Processing • Because electric cooperatives maintain a relationship with their customers, NEC has identified that new service processing requires special safeguards to prevent anti-competitive activity. • NEC has developed a new service process that • provides consumers with available competitive retailer information (neutrally and in a non-promotional manner) as quickly as possible, to better serve the consumer. • simplifies the NEC members’ customer choice shopping experience so they can better exercise their right to choose a supplier. The safeguards include NEC’s provision of the following information to consumers/potential consumers. • Online • Eligible Provider List: NEC will provide a list of eligible provider options with sign-up phone numbers and website/e-mail information • on its website • in its office • publish the list in its monthly membership magazine, Texas Co-op Power. • Online CR Documentation: NEC will promote and make online files available containing the Electricity Facts Label, Terms of Service Document and printable enrollment application for any CR, or we will provide hyperlinks to such information. To participate, eligible CRs should send a compact disk with the information files to the attention of CR Relations at Nueces Electric Cooperative, P.O. Box 1032, Robstown, TX 78380 (or call 1-361-387-2581 for electronic submission instructions).

Marketing, Consumer Education, Corporate Communications & AdvertisingNew Service Processing • In the NEC office in Robstown, TX (709 E. Main Street) • NEC mails, or distributes in person, the current list of NEC qualified CR options upon request • NEC provides a table display for Competitive Retailers' enrollment information/kits for walk-in customers. • CRs may inspect this table and/or deliver or restock materials during normal business hours. • CR’s may mail materials to NEC and NEC will restock the table for a CR. However, the monitoring of the need to restock materials is the responsibility of the CR (e.g. CR may call NEC and inquire about stocking level, but NEC will not contact CR to report if materials are low or depleted). • Due to space limitations, NEC reserves the right to limit materials presented on this table, in a neutral and non-promotional manner • Fax Service: if a CR provides a printed enrollment form for the NEC in-office display table, NEC will provide fax service for new members if they choose an eligible CR while in our office. This is offered for member convenience. • NEC will offer to fax the member's enrollment application to a CR, then return the original form to the member. • The members will then be instructed to contact the CR once they return home to confirm receipt of the fax and to obtain further sign-up information and instructions • CRs should send printed display materials to the attention of CR Relations, Nueces Electric Co-op, P.O. Box 1032 or 709 E. Main Street, Robstown, TX 78380. Direct questions or concerns to NEC CR Relations.

Marketing, Consumer Education, Corporate Communications & AdvertisingChoice Education • Power To Choose education campaign • designed and built to service the competitive market demographics at initial market start and the participants in the IOU customer choice market. • after discussions with the PUCT regarding the (in)accuracy of the Power To Choose website/materials for MOU/EC customers who participate in customer choice, Nueces Electric Co-op decided to request a fee reduction on our System Benefit Fund in exchange for our acceptance of full responsibility to "educate customers about the retail electric market in a neutral and non-promotional manner" (Chapter 25.457(f)).

Marketing, Consumer Education, Corporate Communications & AdvertisingChoice Education • NEC has developed the methods below to educate NEC members and to ensure NEC conveys cooperative members’ options for power providers in a neutral and non-promotional manner. • The information will be available on the Nueces Electric Cooperative website (www.nueceselectric.org). • The education information will be packaged in the Customer Choice Welcome Kit. For the transition into competition, there will be three versions of this kit. • existing consumer kits mailed or delivered 30 days prior to the member’s transition into choice • a new consumer kit for those who move into the NEC area after “choice” begins • a new NEC consumers who are transferred to NEC’s service area from another TDBU area kits • The customer education information in the Welcome Kits issued by NEC may include, but is not limited to: • an explanation of retail electric competition • list of CRs eligible to provide electric service to the customer • a form that allows the customer to contact or select one or more of the listed REPs from which the customer desires to receive information or to be contacted • information on statewide Do Not Call List and indicate the fee for such placement

Marketing, Consumer Education, Corporate Communications & AdvertisingAffiliate CR Information to Customer • NEC RD, as the affiliate CR, will issue the following information to consumers (either as a bill insert or through a separate mailing) no later than 30 days after the commencement of customer choice for the consumers: • A terms of service document; • Your Rights as a Customer disclosure; and • An Electricity Facts Label for NEC RD (which may, at the discretion of NEC RD, be in a separate document or contained in the terms of service document). • An explanation of the price customer will be charged by NEC RD.

COC Implementation PlanMonitoring & Controls Summary • Documentation & logs • Internet postings • aggregate information to any CR along with terms of provision • deviations from plan • employee names if spend more than 50% of time on competitive activities • information provided from NEC DSP to NEC RD and to employees shared with NEC RD • aggregate information shared with any third party • customer proprietary information released in accordance with plan (date, time, information, third party) • deviations • NEC Board approval documentation in accordance with plan • copies of notices & list of requests to be excluded from mass customer lists • photographs of separate accesses at NEC • copies of customer education information (including photos of in-office displays) • copies of shared employee business cards/badges with disclaimer • copies of joint advertising conducted in accordance with this plan • documentation associated with joint presentations and instances when NEC employees act on behalf of NEC RD • documentation from surveillance/monitoring of customer service activities

COC Implementation PlanMonitoring & Controls Summary • Customer verification & service monitoring • third party and internal monitoring/surveillance of NEC DSP and NEC RD customer interactions • supervisor monitoring/verification • service verification by NEC DSP customers (employee protection –did not promote nor provide opinion) • service verification by NEC RD customers (employee protection – customer understands doesn’t have to choose NEC RD in order to receive quality distribution services from NEC) • Contracts, Agreements, & Policies • confidentiality agreements for third parties who receive proprietary customer information • contracts for provision of competitive activities • policies relating to • adoption/implementation of COC Plan • confidentiality

COC Implementation PlanMonitoring & Controls Summary • Human Resources • Employee training (all employees, and annually for shared employees) • Time-keeping records for shared employees (& temporary assignments of RD employees to DSP) • Supervision • Job redesign • Annual performance review accountability • NEC progressive disciplinary process • Information access restrictions • External compliance audits • Accounting Reports • Demonstration of no cross- subsidization of NEC RD by NEC DSP • Transfer/ use of assets (at original cost less depreciation)

NEC Capital Credit Process NEC Capital Credit Process NEC Capital Credit Process NEC Capital Credit Process Annual Margins for NEC DSP Annual Margins for NEC DSP Annual Margins for NEC DSP Annual Margins for NEC DSP Annual Margins for NEC RD Annual Margins for NEC RD Annual Margins for NEC RD Annual Margins for NEC RD All cost & revenue data for NEC, Inc. is given to C.H. Guernsey who develops a cost of service study for NEC to ensure that each rate classification is “self-supporting” and not subsidized by other rate classes. C.H. Guernsey reviews annual margins and cost of service study and determines capital credit allocation totals for each rate class. All cost & revenue data for NEC, Inc. is given to C.H. Guernsey who develops a cost of service study for NEC to ensure that each rate classification is “self-supporting” and not subsidized by other rate classes. C.H. Guernsey reviews annual margins and cost of service study and determines capital credit allocation totals for each rate class. All cost & revenue data for NEC, Inc. is given to C.H. Guernsey who develops a cost of service study for NEC to ensure that each rate classification is “self-supporting” and not subsidized by other rate classes. C.H. Guernsey reviews annual margins and cost of service study and determines capital credit allocation totals for each rate class. All cost & revenue data for NEC, Inc. is given to C.H. Guernsey who develops a cost of service study for NEC to ensure that each rate classification is “self-supporting” and not subsidized by other rate classes. C.H. Guernsey reviews annual margins and cost of service study and determines capital credit allocation totals for each rate class. All NEC Margins for Year are allocated to All Members for the Year, based on their individual revenue contributions for the year. Allocation notices are mailed to members. All NEC Margins for Year are allocated to All Members for the Year, based on their individual revenue contributions for the year. Allocation notices are mailed to members. All NEC Margins for Year are allocated to All Members for the Year, based on their individual revenue contributions for the year. Allocation notices are mailed to members. All NEC Margins for Year are allocated to All Members for the Year, based on their individual revenue contributions for the year. Allocation notices are mailed to members. NEC Board of Directors makes decision on when the allocated capital credits will be paid to the members based on financial health of the Cooperative. This is called “retiring” capital credits for that year. NEC Board of Directors makes decision on when the allocated capital credits will be paid to the members based on financial health of the Cooperative. This is called “retiring” capital credits for that year. NEC Board of Directors makes decision on when the allocated capital credits will be paid to the members based on financial health of the Cooperative. This is called “retiring” capital credits for that year. NEC Board of Directors makes decision on when the allocated capital credits will be paid to the members based on financial health of the Cooperative. This is called “retiring” capital credits for that year. Payment is issued as a check or bill credit to members of record for the year in which capital credits are being retired. Payment is issued as a check or bill credit to members of record for the year in which capital credits are being retired. Payment is issued as a check or bill credit to members of record for the year in which capital credits are being retired. Payment is issued as a check or bill credit to members of record for the year in which capital credits are being retired.

COC Implementation PlanCustomer Verification & Employee Protection Nueces Electric Cooperative, Inc. Member Choice Verification I (member’s name)_______________________________ understand that I have a choice of competitive retail electric providers (called my CR or REP) while I am a member/consumer receiving electric distribution services from Nueces Electric Cooperative, Inc. (NEC). I have received a list of available competitive providers from which I can choose to receive competitive retail electric services, or I have been given instructions on how to obtain this information online. As I obtained this information, NEC employees did not promote nor share their opinion regarding any of the providers on the list.  If this box is checked, I also affirm that I did obtain information about NEC RD, the NEC affiliate competitive retailer, on the date indicated below. As I obtained this information, NEC employees did not promote nor share their opinion of NEC RD. (Please initial here to confirm __________). Member/Applicant’s Signature ____________________________________ Date Signed ___________________________________________________ Employee’s Signature ___________________________________________

COC Implementation PlanOutline of Employee Training • Overview of NEC COC Implementation Plan • COC Implementation Plan & Modification • Org. Structure for Competition • Complaint Procedure • Reporting & Auditing • Confidential Info Protections • Corp. Support Services • Transactional Safeguards for Provision of Serv. • Marketing, Education, Corp. Comm & Advertising • Documentation & maintenance of logs • Internet postings • aggregate information to any CR along with terms of provision • deviations from plan • employee names if spend more than 50% of time on competitive activities • Documentation of information provided from NEC DSP to NEC RD and to employees shared with NEC RD • Documentation for aggregate information shared with any third party • Rules & documentation of customer proprietary information in accordance with plan (date, time, information, third party) • Reporting deviations • Shared employee business cards/badges with disclaimer & other responsibilities • documentation associated with joint presentations and instances when NEC employees act on behalf of NEC RD • documentation from surveillance/monitoring of customer service activities • Customer verification & service monitoring • third party and internal monitoring/surveillance of NEC DSP and NEC RD customer interactions • supervisor monitoring/verification • service verification by NEC DSP customers (employee protection –did not promote nor provide opinion) • service verification by NEC RD customers (employee protection – customer understands doesn’t have to choose NEC RD in order to receive quality distribution services from NEC) • Contracts, Agreements, & Policies • confidentiality agreements for third parties who receive proprietary customer information • contracts for provision of competitive activities • policies relating to • adoption/implementation of COC Plan • confidentiality • Human Resources • Documentation of Employee training (all employees, and annually for shared employees) • Time-keeping instructions for shared employees (& temporary assignments of RD employees to DSP) • Supervision • Jobs redesigned at NEC • Annual performance review accountability • NEC progressive disciplinary process • Information access restrictions • External compliance audits • Accounting Reports • Demonstration of no cross- subsidization of NEC RD by NEC DSP • Transfer/ use of assets (at original cost less depreciation)

COC Implementation PlanEmployee Violation of COC Plan NEC’s Progressive Disciplinary Procedure • Step l: Verbal Warning • A written notation of the nature and date of such verbal warning shall be placed in the employee's personnel file. The supervisor will meet with the employee and review the problem with them. If such warning does not improve the employee's conduct, then the employee shall be subject to discipline under Step 2. • Step 2: Written warning given to the employee • The immediate supervisor shall meet with the employee and review the problem with them. A copy of such written warning shall be placed in the employee's personnel file. If the employee's conduct is not corrected, then the employee shall be subject to discipline under Step 3. • Step 3: More severe disciplinary action • In the third step the Executive Manager, or Board of Directors, or those acting under its authority, shall determine the appropriate discipline including termination. In determining the appropriate discipline, the Executive Manager, or Board of Directors, or those acting under its authority, shall have the option of considering the employee's overall record.

The End

Nueces Electric Co-op Engaged in Competitive Activities