As Texas took the bold step to restructure the power sector eight years ago, culminating in full retail competition on January 1, 2007, customers looked forward to the same investment, efficiency, and innovation in the electricity markets that competition has brought to other industries.
One of the main advantages of deregulation was shifting the embedded risks from the consumer to the power companies competing in the state.
Like most in the industry, TXU initially stumbled in tackling the challenges posed by the uncertainty of the competitive markets. By 2003, aggressive acquisitions and leverage left TXU with insufficient financial flexibility for the commodity risk we faced. This precarious position was exacerbated by the fact that our businesses were operating at mediocre levels. We had poor returns, too much debt, costly operations, and poor customer service. We were under-delivering to our customers, shareholders, employees, and public stakeholders.
To turn TXU around, we had to focus on the fundamentals. In 2004, we implemented a three-phase plan to meet our obligations to all stakeholders. In Phase 1, we repaired the balance sheet and aggressively restructured the company to focus on our core power business in Texas. Phase 2 implemented a continuous performance-improvement program across the core businesses that resulted in record power production and substantially better customer service and product innovation. During Phase 3, we continued to drive three to five percent annual long-term improvement in reliability, efficiency, and service through our power generation, electric delivery, and retail operations. We also focused on our growth strategy to power the future of Texas.
