10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

____________________

FORM 10-Q

[√] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

― OR ―

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

____________________

Commission File Number 333-100240

Oncor Electric Delivery Company LLC

(Exact Name of Registrant as Specified in its Charter)

Delaware	75-2967830
(State of Organization)	(I.R.S. Employer Identification No.)
1616 Woodall Rodgers Fwy., Dallas, TX  75202	(214) 486-2000
(Address of Principal Executive Offices)	(Registrant’s Telephone Number)

____________________

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√No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes  √   No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ____    Accelerated filer ____    Non-Accelerated filer  √  

Smaller reporting company___ Emerging growth company ___

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes___ No___

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes___ No  √   

As of November 7, 2018, 80.25% of the outstanding membership interests in Oncor Electric Delivery Company LLC (Oncor) were directly held by Oncor Electric Delivery Holdings Company LLC and indirectly by Sempra Energy, and 19.75% of the outstanding membership interests were held by Texas Transmission Investment LLC.  None of the membership interests are publicly traded.

TABLE OF CONTENTS

	Page
GLOSSARY	3
PART I.      FINANCIAL INFORMATION	7
Item 1.        Financial Statements (Unaudited)	7
Condensed Statements of Consolidated Income — Three and Nine Months Ended September 30, 2018 and 2017	7
Condensed Statements of Consolidated Comprehensive Income — Three and Nine Months Ended September 30, 2018 and 2017	7
Condensed Statements of Consolidated Cash Flows — Nine Months Ended September 30, 2018 and 2017	8
Condensed Consolidated Balance Sheets — September 30, 2018 and December 31, 2017	9
Notes to Condensed Consolidated Financial Statements	10
Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.        Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.        Controls and Procedures	48
PART II.    OTHER INFORMATION	49
Item 1.        Legal Proceedings	49
Item 1A.     Risk Factors	49
Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.        Defaults Upon Senior Securities	49
Item 4.        MINE SAFETY DISCLOSURES	49
Item 5.        Other Information	49
Item 6.        Exhibits	50
SIGNATURE	51

Oncor Electric Delivery Company LLC’s (Oncor) 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 Oncor website at http://www.oncor.com as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission.  The information on Oncor’s website or available by hyperlink from the 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 we have filed as an exhibit to this quarterly report on Form 10-Q or that we have or may publicly file in the future may contain representations and warranties made by and to the parties thereto as of 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 Form 10-Q and other Securities and Exchange Commission filings of Oncor and its subsidiary occasionally make references to Oncor (or “we,” “our,” “us” or “the company”) when describing actions, rights or obligations of its subsidiary.  These references reflect the fact that the subsidiary is consolidated with Oncor for financial reporting purposes.  However, these references should not be interpreted to imply that Oncor is actually undertaking the action or has the rights or obligations of its subsidiary or that the subsidiary company is undertaking an action or has the rights or obligations of its parent company or of any other affiliate.

GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.
2017 Form 10-K	Oncor’s Annual Report on Form 10-K for the year ended December 31, 2017
AMS	advanced metering system
Contributed EFH Debtors	Certain EFH Debtors that became subsidiaries of Vistra and emerged from Chapter 11 at the time of the Vistra Spin-Off.
DCRF	distribution cost recovery factor
Debtors	EFH Corp. and the majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH but excluding the Oncor Ring-Fenced Entities.  Prior to the Vistra Spin-Off, also included the TCEH Debtors.
Deed of Trust	Deed of Trust, Security Agreement and Fixture Filing, dated as of May 15, 2008, made by Oncor to and for the benefit of The Bank of New York Mellon Trust Company, N.A. (as successor to The Bank of New York Mellon, formerly The Bank of New York), as collateral agent, as amended
EECRF	energy efficiency cost recovery factor
EFCH	Refers to Energy Future Competitive Holdings Company LLC, a direct, wholly-owned subsidiary of EFH Corp. and prior to the Vistra Spin-Off, the parent of TCEH, and/or its subsidiaries, depending on context.
EFH Bankruptcy Proceedings	Refers to voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code filed in U.S. Bankruptcy Court for the District of Delaware on April 29, 2014 by EFH Corp. and the substantial majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH.  The Oncor Ring-Fenced Entities are not parties to the EFH Bankruptcy Proceedings.
EFH Corp.	Refers to Energy Future Holdings Corp., a holding company, and/or its subsidiaries, depending on context.  Its major subsidiaries include Oncor and, prior to the closing of the Sempra Acquisition, TCEH.
EFH Debtors	EFH Corp. and its subsidiaries that are Debtors in the EFH Bankruptcy Proceedings, excluding the TCEH Debtors
EFIH	Refers to Energy Future Intermediate Holding Company LLC, a direct, wholly-owned subsidiary of EFH Corp. and the direct parent of Oncor Holdings prior to the closing of the Sempra Acquisition.
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
Fitch	Fitch Ratings, Ltd. (a credit rating agency)
GAAP	generally accepted accounting principles of the U.S.
InfraREIT	InfraREIT, Inc.
InfraREIT Acquisition	Refers to the transactions contemplated by the InfraREIT Merger Agreement, pursuant to which Oncor would acquire all of the equity interests of InfraREIT and InfraREIT Partners.
InfraREIT Merger Agreement	Refers to the Agreement and Plan of Merger, dated as of October 18, 2018, among Oncor, 1912 Merger Sub LLC (a wholly-owned subsidiary of Oncor), Oncor T&D Partners, LP (a wholly-owned indirect subsidiary of Oncor), InfraREIT and InfraREIT Partners.
InfraREIT Partners	InfraREIT Partners, LP, a subsidiary of InfraREIT
Investment LLC	Oncor Management Investment LLC, a limited liability company and former minority membership interest owner (approximately 0.22%) of Oncor, whose managing member is Oncor and whose Class B Interests were owned by certain members of the management team and independent directors of Oncor prior to the Sempra Acquisition.
kWh	kilowatt-hours
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
Luminant	Refers to subsidiaries of Vistra (which, prior to the Vistra Spin-Off were subsidiaries of TCEH) engaged in competitive market activities consisting of electricity generation and wholesale energy sales and purchases as well as commodity risk management and trading activities, all largely in Texas.
Moody’s	Moody’s Investors Service, Inc. (a credit rating agency)
Oncor	Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings
Oncor Holdings	Oncor Electric Delivery Holdings Company LLC, a direct, wholly-owned subsidiary of STIH and the direct majority owner (80.25% equity interest) of Oncor
Oncor OPEB Plans	Refers to plans sponsored by Oncor that offer certain postretirement health care and life insurance benefits to eligible current and former Oncor employees, certain eligible current and former EFH Corp. and Vistra employees, and their eligible dependents.
Oncor Retirement Plan	Refers to a defined benefit pension plan sponsored by Oncor.
Oncor Ring-Fenced Entities	Refers to Oncor Holdings and its direct and indirect subsidiaries, including Oncor.
OPEB	other postretirement employee benefits
PUCT	Public Utility Commission of Texas
PURA	Texas Public Utility Regulatory Act
REP	retail electric provider
S&P	Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. (a credit rating agency)
SDTS	Sharyland Distribution & Transmission Services, L.L.C., an indirect subsidiary of InfraREIT
SEC	U.S. Securities and Exchange Commission
Sempra	Sempra Energy
Sempra Acquisition	Refers to the transactions contemplated by that certain Agreement and Plan of Merger, dated as of August 21, 2017, by and between EFH Corp., EFIH, Sempra and one of Sempra’s wholly-owned subsidiaries, pursuant to which Sempra would acquire the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH. The transactions closed March 9, 2018.
Sharyland Asset Exchange	Refers to the asset swap consummated on November 9, 2017 pursuant to which Oncor received substantially all of the distribution assets and certain transmission assets of Sharyland Distribution & Transmission Services, L.L.C. and Sharyland Utilities, L.P. in exchange for certain of Oncor’s transmission assets and cash. The asset swap was completed pursuant to PUCT Docket No. 47469 and that certain Agreement and Plan of Merger, dated as of July 21, 2017, by and among SDTS, SU, SU AssetCo, L.L.C., a wholly-owned subsidiary of SU, and SDTS AssetCo, L.L.C., a wholly-owned subsidiary of SDTS, Oncor and Oncor AssetCo LLC, a wholly-owned subsidiary of Oncor created for the transaction.
Sponsor Group	Refers collectively to certain investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P., TPG Global, LLC and GS Capital Partners, an affiliate of Goldman, Sachs & Co., that controlled Texas Holdings.
STH	Sempra Texas Holdings Corp., a Texas corporation (formerly EFH Corp. prior to the closing of the Sempra Acquisition)
STIH	Sempra Texas Intermediate Holding Company LLC., a Delaware limited liability company (formerly EFIH prior to the closing of the Sempra Acquisition)
SU	Sharyland Utilities, L.P.
TCEH	Refers to Texas Competitive Electric Holdings Company LLC, a direct, wholly-owned subsidiary of EFCH and, prior to the Vistra Spin-Off, the parent company of the TCEH Debtors (other than the Contributed EFH Debtors), depending on the context, that were engaged in electricity generation and wholesale and retail energy market activities, and whose major subsidiaries included Luminant and TXU Energy.  Subsequent to the Vistra Spin-Off, Vistra continued substantially the same operations as TCEH.
TCEH Debtors	Refers to the subsidiaries of TCEH that were Debtors in the EFH Bankruptcy Proceedings (including Luminant and TXU Energy) and the Contributed EFH Debtors.
TCJA	“Tax Cuts and Jobs Act,” enacted on December 22, 2017
TCOS	transmission cost of service
TCRF	transmission cost recovery factor
Texas Holdings	Refers to Texas Energy Future Holdings Limited Partnership, a limited partnership controlled by the Sponsor Group that owned substantially all of the common stock of EFH Corp., prior to the closing of the Sempra Acquisition.
Texas Holdings Group	Refers to Texas Holdings and its direct and indirect subsidiaries other than the Oncor Ring-Fenced Entities.
Texas margin tax	A privilege tax imposed on taxable entities chartered/organized or doing business in the State of Texas that, for accounting purposes, is reported as an income tax.
Texas RE	Refers to Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with North American Electric Reliability Corporation standards and ERCOT protocols.
Texas Transmission	Refers to Texas Transmission Investment LLC, a limited liability company that owns a 19.75% equity interest in Oncor.  Texas Transmission is an entity indirectly owned by a private investment group led by OMERS Administration Corporation, acting through its infrastructure investment entity, OMERS Infrastructure Management Inc., and the Government of Singapore Investment Corporation, acting through its private equity and infrastructure arm, GIC Special Investments Pte Ltd.  Texas Transmission is not affiliated with Sempra, EFH Corp., any of their respective subsidiaries or any member of the Sponsor Group.
TXU Energy	Refers to TXU Energy Retail Company LLC, a direct, wholly-owned subsidiary of Vistra (and, prior to the Vistra Spin-Off, a direct subsidiary of TCEH) engaged in the retail sale of electricity to residential and business customers.  TXU Energy is a REP in competitive areas of ERCOT.
U.S.	United States of America
Vistra	Refers to Vistra Energy Corp. (formerly TCEH Corp.), and/or its subsidiaries, depending on context.  On October 3, 2016, the TCEH Debtors emerged from bankruptcy and became subsidiaries of TCEH Corp.  Subsequent to the Vistra Spin-Off, Vistra continued substantially the same operations as TCEH.
Vistra Retirement Plan	Refers to a defined benefit pension plan sponsored by an affiliate of Vistra, in which Oncor participates (formerly EFH Retirement Plan).
Vistra Spin-Off	Refers to the completion of the TCEH Debtors’ reorganization under the Bankruptcy Code and emergence from the EFH Bankruptcy Proceedings effective October 3, 2016. Following the Vistra Spin-Off, the TCEH Debtors ceased to be affiliates of Oncor.

1

PART I.  FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017(1)		2018		2017(1)
	(millions of dollars)
Operating revenues (Note 4)	$	1,095	$	1,068	$	3,106	$	2,967
Operating expenses:
Wholesale transmission service		237		230		719		690
Operation and maintenance (Note 11)		214		176		636		529
Depreciation and amortization		169		193		503		581
Provision in lieu of income taxes (Note 11)		54		97		134		209
Taxes other than amounts related to income taxes		128		120		374		340
Total operating expenses		802		816		2,366		2,349
Operating income		293		252		740		618
Other income and (deductions) - net (Note 12)		(13)		(13)		(63)		(35)
Nonoperating benefit in lieu of income taxes		(3)		(5)		(13)		(17)
Interest expense and related charges (Note 12)		89		87		264		257
Net income	$	194	$	157	$	426	$	343

________________

(1) As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

See Notes to Financial Statements.

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(millions of dollars)
Net income	$	194	$	157	$	426	$	343
Other comprehensive income (loss):
Cash flow hedges – derivative value net loss recognized in net income (net of tax)		-		-		2		1
Defined benefit pension plans (net of tax)		1		1		2		2
Total other comprehensive income		1		1		4		3
Comprehensive income	$	195	$	158	$	430	$	346

See Notes to Financial Statements.

2

ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2018		2017
	(millions of dollars)
Cash flows — operating activities:
Net income	$	426	$	343
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		589		618
Provision in lieu of deferred income taxes		37		250
Other – net		(1)		(2)
Changes in operating assets and liabilities:
Regulatory accounts related to reconcilable tariffs (Note 5)		130		30
Other operating assets and liabilities		(100)		(189)
Cash provided by operating activities		1,081		1,050
Cash flows — financing activities:
Issuances of long-term debt (Note 7)		800		600
Repayment of long-term debt (Note 7)		(825)		(324)
Change in short-term borrowings (Note 6)		149		128
Capital contributions from members (Note 9)		144		-
Distributions to members (Note 9)		(30)		(237)
Debt discount, premium, financing and reacquisition costs - net		(9)		(4)
Cash provided by financing activities		229		163
Cash flows — investing activities:
Capital expenditures (Note 11)		(1,345)		(1,234)
Other – net		15		10
Cash used in investing activities		(1,330)		(1,224)
Net change in cash and cash equivalents		(20)		(11)
Cash and cash equivalents — beginning balance		21		16
Cash and cash equivalents — ending balance	$	1	$	5

See Notes to Financial Statements.

3

ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	At September 30,		At December 31,
	2018		2017
	(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	1	$	21
Trade accounts receivable – net (Note 12)		688		635
Amounts receivable from members related to income taxes (Note 11)		-		26
Materials and supplies inventories — at average cost		115		91
Prepayments and other current assets		95		88
Total current assets		899		861
Investments and other property (Note 12)		121		113
Property, plant and equipment – net (Note 12)		15,782		14,879
Goodwill (Note 12)		4,064		4,064
Regulatory assets (Note 5)		1,850		2,180
Other noncurrent assets		20		23
Total assets	$	22,736	$	22,120
LIABILITIES AND MEMBERSHIP INTERESTS
Current liabilities:
Short-term borrowings (Note 6)	$	1,099	$	950
Long-term debt due currently (Note 7)		250		550
Trade accounts payable		253		242
Amounts payable to members related to income taxes (Note 11)		32		21
Accrued taxes other than amounts related to income		168		190
Accrued interest		92		83
Other current liabilities		190		188
Total current liabilities		2,084		2,224
Long-term debt, less amounts due currently (Note 7)		5,836		5,567
Liability in lieu of deferred income taxes (Note 11)		1,560		1,517
Regulatory liabilities (Note 5)		2,763		2,807
Employee benefit obligations and other (Notes 10 and 12)		2,046		2,102
Total liabilities		14,289		14,217
Commitments and contingencies (Note 8)
Membership interests (Note 9):
Capital account ― number of interests outstanding 2018 and 2017 – 635,000,000		8,544		8,004
Accumulated other comprehensive loss		(97)		(101)
Total membership interests		8,447		7,903
Total liabilities and membership interests	$	22,736	$	22,120

See Notes to Financial Statements.

4

ONCOR ELECTRIC DELIVERY COMPANY LLC

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 Oncor.  See “Glossary” for definition of terms and abbreviations.

We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to REPs that sell power in the north-central, eastern and western parts of Texas.  We are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of STIH, a direct wholly-owned subsidiary of STH. In connection with the Sempra Acquisition, on March 9, 2018, STH became an indirect wholly- owned subsidiary of Sempra.  Oncor Holdings owns 80.25% of our membership interests and Texas Transmission owns 19.75% of our membership interests.  We are managed as an integrated business; consequently, there are no separate reportable business segments.

Various “ring-fencing” measures that had been taken to enhance our credit quality and the separateness between the Oncor Ring-Fenced Entities and its majority owner (formerly the Texas Holdings Group and now Sempra) continue to remain in effect after the Sempra Acquisition.  These measures serve to mitigate our and Oncor Holdings’ credit exposure to Sempra and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be substantively consolidated with the assets and liabilities of Sempra in connection with a bankruptcy of one or more Sempra entities.  Such measures include, among other things: the 19.75% equity interest held by Texas Transmission; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support to or receiving credit support from Sempra entities.  The assets and liabilities of the Oncor Ring-Fenced Entities are separate and distinct from those of Sempra.  None of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of Sempra entities.  We do not bear any liability for debt or contractual obligations of Sempra, and vice versa.  Accordingly, our operations are conducted, and our cash flows are managed, independently from Sempra.  For more information on ring-fencing measures, see Note 2.

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

In April 2014, EFH Corp. and the substantial majority of its direct and indirect subsidiaries at the time, including EFIH, EFCH and TCEH, commenced proceedings under Chapter 11 of the U.S. Bankruptcy Code. The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  In connection with the plans of reorganization in the EFH Bankruptcy Proceedings, on March 9, 2018, Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH (Sempra Acquisition). See Note 2 for further information. 

Basis of Presentation

These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the 2017 Form 10-K.  In the opinion of Oncor management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been made.  All intercompany items and transactions have been eliminated in consolidation.  The results of operations for an interim period may not give a true indication of results for a full year due to seasonality.  All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

Preparation of our financial statements requires management to make 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.  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.  No material adjustments were made to previous estimates or assumptions during the current period.

Goodwill

We evaluate goodwill for impairment annually and whenever events or changes in circumstances indicate that an impairment may exist.  Beginning in 2018, we elected to change our annual goodwill assessment date from December 1 to October 1 to correspond with the assessment date of our new majority owner.  We do not believe this change in the assessment date is a material change.

Changes in Accounting Standards  

Since May 2014, the Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, along with other supplemental guidance (together, Topic 606).  Topic 606 introduced new, increased requirements for disclosure of revenue in financial statements and guidance intended to eliminate inconsistencies in the recognition of revenue.   We adopted Topic 606 effective January 1, 2018 using the modified retrospective approach and elected the practical expedient available that allows an entity to recognize revenue in the amount to which the entity has the right to invoice related to performance completed to date.  Our revenues are generally recognized when the underlying service has been provided in an amount prescribed by the related tariff.  The new guidance did not change this pattern of recognition and therefore the adoption did not have a material effect on our reported results of operations, financial position or cash flows.  Topic 606 also requires the separate presentation of “alternative revenue program” revenues on the income statement. We anticipate less than $20 million annually in alternative revenue program revenues related to our energy efficiency program and will disclose such activity in the notes to financial statements.  See Note 4 for additional disclosures about revenues from contracts with customers.

In February 2016, the FASB issued ASU 2016-02 which created FASB Topic 842, Leases (Topic 842).  Topic 842 amends previous GAAP to require the balance sheet recognition of substantially all lease assets and liabilities, including operating leases.  Operating lease liabilities are not classified as debt for GAAP purposes under Topic 842 and are not treated as debt for regulatory purposes.  Under current standards, all of Oncor’s existing leases meet the definition of an operating lease.  Under the new rules, the recognition of any finance leases (currently known as capital leases) on the balance sheet would be classified as debt for GAAP purposes and are expected to be defined as debt for our regulatory capital structure purposes (see Note 9 for details) similar to the current capital lease treatment.  We plan to adopt Topic 842 on January 1, 2019 and we expect to use certain practical expedients and policy elections available under the guidance including a practical expedient to not assess whether existing land easements that were not previously accounted for as leases are or contain a lease under Topic 842, an adoption method to not restate comparative periods and a policy election to forego the application of Topic 842 recognition requirements to short-term leases.  The initial adoption of Topic 842 will affect our balance sheet, as our contracts for office space and fleet vehicles are currently classified as operating leases.  Subsequent to adoption, to the extent Oncor enters into finance leases, its credit facility covenants and capitalization ratios could be impacted.  We continue to evaluate our contracts for proper treatment under the new standards and the estimated impact on our financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment to Topic 715, Compensation – Retirement Benefits.  ASU 2017-07 requires the non-service cost components of net retirement benefit plan costs be presented as non-operating in the income statement.  In addition, only the service cost component of net retirement benefit plan cost is eligible for capitalization as part of inventory or property, plant and equipment.  We adopted ASU 2017-07 on January 1, 2018.  The presentation of costs is required to be applied on a retrospective basis while the capitalization eligibility requirement is applied on a prospective basis.  The guidance allows a practical expedient that permits use of previously disclosed service costs and non-service costs of the Pension and OPEB Plans in the comparative periods as appropriate estimates when recasting the presentation of these costs in the income statements.  We have elected this practical expedient.  For cash flow purposes on a prospective basis, non-service costs will be reflected as a reduction to operating cash flows, offset by lower cash used in investing activities (lower capital expenditures).  The new guidance did not have a material effect on our results of operations, financial position or net change in total cash flows and we do not expect the guidance to have a material effect on our rate-making process.  For the three- and nine-month periods ended September 30, 2017, the adoption of ASU 2017-07 resulted in a reclassification of $8 million and $23 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $3 million and $9 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.  For the years 2015, 2016 and 2017, the reclassification amounts are $28 million, $28 million and $31 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $10 million, $10 million and $11 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income (AOCI) to capital accounts for stranded tax effects resulting from the TCJA which we expect to elect.  Under ASU 2018-02, an entity will be required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from AOCI.  Our stranded tax effects in AOCI are approximately $4 million and will increase our capital account upon reclassification.  ASU 2018-02 can be applied either as of the beginning of the period of adoption or retrospectively as of the date of enactment of the TCJA and to each period in which the effect of the TCJA is recognized.  ASU 2018-02 is effective for our 2019 annual reporting period, including interim periods therein, with early adoption permitted. We plan to adopt the standard on a prospective basis, January 1, 2019.

2.   EFH BANKRUPTCY PROCEEDINGS AND CHANGE IN INDIRECT OWNERSHIP OF ONCOR 

In April 2014, EFH Corp. and the substantial majority of its direct and indirect subsidiaries at the time, including EFIH, EFCH and TCEH, commenced proceedings under Chapter 11 of the U.S. Bankruptcy Code. The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  In 2016, pursuant to a plan of reorganization confirmed by the bankruptcy court, the TCEH Debtors exited bankruptcy pursuant to the Vistra Spin-Off.   As a result of the Vistra Spin-Off, Vistra and its subsidiaries, including Luminant and TXU Energy, ceased to be related parties of ours as of October 3, 2016.  See Note 11 for details of Oncor’s related-party transactions with members of the Texas Holdings Group.  In connection with the plans of reorganization in the EFH Bankruptcy Proceedings, on March 9, 2018, Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH (Sempra Acquisition), as discussed in further detail below. 

Prior to consummation of the Sempra Acquisition, EFH Corp. entered into various merger agreements, which failed to close, with other parties in connection with the EFH Bankruptcy Proceedings and the potential transfer of its indirect ownership interest in Oncor. For a summary of those merger agreements and related regulatory proceedings, please see Note 2 to Financial Statements in the 2017 Form 10-K.

Sempra Acquisition

In August 2017, EFH Corp. and EFIH entered into an Agreement and Plan of Merger (Sempra Merger Agreement) with Sempra and one of its wholly-owned subsidiaries (collectively, the Sempra Parties) that contemplated the Sempra Parties acquiring the ownership interests in Oncor that were indirectly held by EFH Corp.  The Sempra Acquisition closed on March 9, 2018. As a result of the Sempra Acquisition, EFH Corp. merged with an indirect subsidiary of Sempra, with EFH Corp. (renamed STH) continuing as the surviving company and an indirect, wholly-owned subsidiary of Sempra.  The Sempra Merger Agreement did not impose any conditions on the EFH Debtors regarding Texas Transmission’s minority interest in Oncor. Accordingly, the Sempra Merger Agreement provided for the acquisition by Sempra of the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH.  In accordance with the Sempra Merger Agreement, Sempra paid cash consideration of approximately $9.45 billion to acquire the indirect 80.03% outstanding membership interest in Oncor.  In addition, in a separate transaction, Oncor Holdings acquired 0.22% of the outstanding membership interests in Oncor from Investment LLC.  After the Sempra Acquisition, Texas Transmission continued to own 19.75% of Oncor’s outstanding membership interests.  The Sempra Merger Agreement was consummated on March 9, 2018 after obtaining the approval of the bankruptcy court in the EFH Bankruptcy Proceedings, the Federal Communications Commission and the PUCT. 

Pursuant to the terms of the Sempra Merger Agreement, in October 2017, Oncor and Sempra filed in PUCT Docket No 47675 a joint application with the PUCT seeking certain regulatory approvals with respect to the transactions contemplated by the amended joint plan of reorganization filed in September 2017 by the EFH Debtors (Sempra Plan). At its open meeting on March 8, 2018, the PUCT approved a final order adopting a settlement stipulation allowing the Sempra Acquisition to proceed.  For more information regarding the Sempra Settlement Stipulation and the proceedings in PUCT Docket No. 47675, see “Sempra PUCT Proceedings” below.

In connection with the closing of the Sempra Acquisition, Oncor’s Limited Liability Company Agreement was amended and restated in its entirety on March 9, 2018. The Limited Liability Company Agreement, among other things, provides for the management of Oncor by a board of directors consisting of 13 members, including seven “disinterested directors” (as defined in the Limited Liability Company Agreement), two directors designated indirectly by Sempra, two directors designated by Texas Transmission (subject to certain conditions) and two directors that are current or former officers of Oncor.

Management Equity Purchase     

On March 9, 2018, Oncor entered into an Interest Transfer Agreement (OMI Agreement) with Investment LLC, Oncor Holdings and Sempra. Pursuant to the 2008 Equity Interests Plan for Key Employees of Oncor Electric Delivery Company LLC and its affiliates, certain members of Oncor’s management, including Oncor’s executive officers and independent directors on Oncor’s board of directors, were granted the opportunity to purchase Class B equity interests (Class B Interests) in Investment LLC, an entity whose only assets consist of equity interests in Oncor. Investment LLC held 1,396,008 of the outstanding limited liability company interests in Oncor (the OMI Interests), which represented 0.22% of the outstanding membership interests in Oncor. For a description of the amounts of Class B Interests that were beneficially owned by members of Oncor’s board of directors and each of Oncor’s named executive officers, see “Security Ownership of Certain Beneficial Owners and Management and Related Equity Holder Matters – Security Ownership of Equity Interests of Oncor of Certain Beneficial Owners and Management.” in the 2017 Form 10-K.

Pursuant to the OMI Agreement, in connection with the closing of the Sempra Acquisition, Investment LLC transferred to Oncor Holdings all of the OMI Interests in exchange for $26 million in cash, which represents approximately $18.60 for each OMI Interest.

PUCT Matters Related to EFH Bankruptcy Proceedings

Previous Merger Agreement PUCT Proceedings

Prior to consummation of the Sempra Acquisition, EFH Corp. entered into various merger agreements, which failed to close, with other parties in connection with the EFH Bankruptcy Proceedings and the potential transfer of its indirect ownership interest in Oncor. For a summary of those merger agreements and related PUCT proceedings, please see Note 2 to Financial Statements in the 2017 Form 10-K.

Sempra PUCT Proceedings

Pursuant to the terms of the Sempra Merger Agreement, in October 2017 Oncor and Sempra filed in PUCT Docket No. 47675 a joint application with the PUCT seeking certain regulatory approvals with respect to the Sempra Plan.  In December 2017, Oncor and Sempra entered into a stipulation with the Staff of the PUCT, the Office of Public Utility Counsel, the Steering Committee of Cities Served by Oncor and the Texas Industrial Energy Consumers reflecting the parties’ settlement of all issues in the PUCT proceeding regarding the joint application. On January 5, 2018, Oncor, Sempra and the Staff of the PUCT made a joint filing with the PUCT requesting that the PUCT approve the acquisition, consistent with the governance, regulatory and operating commitments in a revised stipulation joined by two additional parties. On January 23, 2018, Oncor and Sempra filed an additional revision to the revised stipulation (Sempra Settlement Stipulation) and announced that two more parties had joined in the Sempra Settlement Stipulation. On February 2, 2018, Oncor and Sempra announced that all of the intervenors in PUCT Docket No. 47675 had signed on to the Sempra Settlement Stipulation. At its February 15, 2018 open meeting, the PUCT directed PUCT Staff to prepare an order based on the Sempra Settlement Stipulation for consideration by the PUCT at its open meeting on March 8, 2018. At the open meeting, the PUCT approved the final order.

The parties to the Sempra Settlement Stipulation agreed that Sempra’s acquisition of EFH Corp. was in the public interest and would bring substantial benefits.  The Sempra Settlement Stipulation requested that the PUCT approve the Sempra Acquisition.  The joint application filed with the PUCT and the Sempra Settlement Stipulation outline certain ring-fencing measures, governance mechanisms and restrictions that apply after the Sempra Acquisition. As a result of these ring-fencing measures, Sempra will not control Oncor, and the ring-fencing measures limit Sempra’s ability to direct the management, policies and operations of Oncor, including the deployment or disposition of Oncor’s assets, declarations of dividends, strategic planning and other important corporate issues and actions. These limitations include limited representation on the board of directors of Oncor.

Pursuant to the order issued by the PUCT in PUCT Docket No. 47675 with respect to its approval of the transaction contemplated by the Sempra Plan (Sempra Order), following the consummation of the Sempra Acquisition, the board of directors of Oncor is required to consist of thirteen members and be constituted as follows:

· seven members, which we refer to as disinterested directors, (i) shall be independent directors in all material respects under the rules of the New York Stock Exchange in relation to Sempra and its subsidiaries and affiliated entities and any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, and (ii) shall have no material relationship with Sempra or its affiliates or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings at the time of the Sempra Acquisition or within the previous ten years;

· two members shall be designated by Sempra (through Oncor Holdings);

· two members shall be appointed by Texas Transmission; and

· two members shall be current or former officers of Oncor (the Oncor Officer Directors), initially Robert S. Shapard and E. Allen Nye, Jr., who are the chair of the Oncor board and chief executive of Oncor, respectively.

In order for a current or former officer of Oncor to be eligible to serve as an Oncor Officer Director, such officer cannot have worked for Sempra or any of its affiliates (excluding Oncor Holdings and Oncor) or any other entity with a direct or indirect ownership interest in Oncor or Oncor Holdings in the ten-year period prior to such officer being employed by Oncor.  Oncor Holdings, at the direction of STIH (a subsidiary of STH), which is a wholly-owned indirect subsidiary of, and controlled by, Sempra following the Sempra Acquisition), has the right to nominate and/or seek the removal of the Oncor Officer Directors, with such nomination or removal subject to approval by a majority of the Oncor board of directors.

In addition, the Sempra Order provides that Oncor’s board cannot be overruled by the board of Sempra or any of its subsidiaries on dividend policy, the issuance of dividends or other distributions (except for contractual tax payments), debt issuance, capital expenditures, operation and maintenance expenditures, management and service fees, and appointment or removal of board members, provided that certain actions may also require the additional approval of the Oncor Holdings board of directors. The Sempra Order also provides that any changes to the size, composition, structure or rights of the board must first be approved by the PUCT. In addition, if Sempra acquires Texas Transmission’s interest in Oncor, the two board positions on Oncor’s board of directors that Texas Transmission is entitled to appoint shall be eliminated and the size of Oncor’s board of directors will be reduced by two.

Additional regulatory commitments, governance mechanisms and restrictions provided in the Sempra Order include, among others:

· A majority of the disinterested directors of Oncor must approve any annual or multi-year budget if the aggregate amount of capital expenditures or operating and maintenance expenditures in such budget is more than a 10% increase or decrease from the corresponding amounts of such expenditures in the budget for the preceding fiscal year or multi-year period, as applicable;

· Oncor will make minimum aggregate capital expenditures equal to at least $7.5 billion over the period from January 1, 2018 through December 31, 2022 (subject to certain possible adjustments);

· Sempra was required to make, within 60 days after the Sempra Acquisition, its proportionate share of the aggregate equity investment in Oncor in an amount necessary for Oncor to achieve a capital structure consisting of 57.5% long-term debt to 42.5% equity, as calculated for regulatory purposes;

Sempra contributed $117 million in cash commensurate with its ownership interest to Oncor on April 23, 2018, as discussed in further detail in Note 9.

· Oncor may not pay any dividends or make any other distributions (except for contractual tax payments) if a majority of its disinterested directors determines that it is in the best interests of Oncor to retain such amounts to meet expected future requirements;

· At all times, Oncor will remain in compliance with the debt-to-equity ratio established by the PUCT from time to time for ratemaking purposes, and Oncor will not pay dividends or other distributions (except for contractual tax payments), if that payment would cause its debt-to-equity ratio to exceed the debt-to-equity ratio approved by the PUCT;

· If the credit rating on Oncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT;

· Without the prior approval of the PUCT, neither Sempra nor any of its affiliates (excluding Oncor) will incur, guaranty or pledge assets in respect of any indebtedness that is dependent on the revenues of Oncor in more than a proportionate degree than the other revenues of Sempra or on the stock of Oncor, and there will be no debt at STH or STIH at any time following the closing of the Sempra Acquisition;

· Neither Oncor nor Oncor Holdings will lend money to or borrow money from Sempra or any of its affiliates (other than Oncor subsidiaries), or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, and neither Oncor nor Oncor Holdings will share credit facilities with Sempra or any of its affiliates (other than Oncor subsidiaries), or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings;

· Oncor will not seek recovery in rates of any expenses or liabilities related to EFH Corp.’s bankruptcy, or (1) any tax liabilities resulting from the Vistra Spin-Off, (2) any asbestos claims relating to non-Oncor operations of EFH Corp. or (3) any make-whole claims by holders of debt securities issued by EFH Corp. or EFIH, and Sempra was required to file with the PUCT a plan providing for the extinguishment of the liabilities described in items (1) through (3) above, which protects Oncor from any harm (which plan was filed with the PUCT on April 6, 2018 in PUCT Docket No. 48119);

· There must be maintained certain “separateness measures” that reinforce the financial separation of Oncor from STH and STH’s owners, including a requirement that dealings between Oncor, Oncor Holdings and their subsidiaries with Sempra, any of Sempra’s other affiliates or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, must be on an arm’s-length basis, limitations on affiliate transactions, separate recordkeeping requirements and a prohibition on pledging Oncor assets or stock for any entity other than Oncor;

· No transaction costs or transition costs related to the Sempra Acquisition (excluding Oncor employee time) will be borne by Oncor’s customers nor included in Oncor’s rates;

· Sempra will continue to hold indirectly at least 51% of the ownership interests in Oncor and Oncor Holdings for at least five years following the closing of the Sempra Acquisition, unless otherwise specifically authorized by the PUCT; and

· Oncor will provide bill credits to electric delivery rates for ultimate credits to customers in an amount equal to 90% of any interest rate savings achieved due to any improvement in its credit ratings or market spreads compared to those as of June 30, 2017 until final rates are set in the next Oncor base rate case filed after PUCT Docket No. 46957 (except that savings will not be included in credits if already realized in rates); and one year after the Sempra Acquisition, Oncor will provide bill credits to electric delivery rates for inclusion in customer bills equal to 90% of any synergy savings until final rates are set in the next Oncor base rate proceeding after the 2017 rate review (PUCT Docket No. 46957), at which time any total synergy savings shall be reflected in Oncor’s rates.  On September 7, 2018, Oncor filed its first semi-annual interest rate savings compliance report with the PUCT and began accruing a bill credit upon the issuance of its new debt in August 2018.

3.    REGULATORY MATTERS

DCRF (PUCT Docket No. 48231)

On April 5, 2018, we filed with the PUCT, as well as cities with original jurisdiction over Oncor’s rates, an application for approval of a distribution cost recovery factor (DCRF).  The DCRF will allow Oncor to recover, primarily through its tariff for retail delivery service, certain costs related to its 2017 distribution investments.  We requested a $19 million increase in annual distribution revenues in our DCRF application.  On June 13, 2018, we filed an unopposed stipulation that reduced the annual distribution revenue increase from $19 million to $15 million.  The PUCT approved the stipulation on August 30, 2018, and the distribution tariffs became effective September 1, 2018.

Application to Decrease Rates Based on the TCJA of 2017 (PUCT Docket No. 48325)

In 2018, we made filings to incorporate the impacts of the TCJA into our tariffs, including the reduced corporate income tax rate from 35% to 21% and amortization of excess deferred federal income taxes. In the filings, we proposed a total net decrease in the revenue requirement used to set transmission and distribution rates of approximately $181 million annually as compared to the revenue requirement approved in Oncor’s most recent rate review, PUCT Docket No. 46957. The proposal included annual rate reductions of $144 million related to the reduction in income tax expense currently included in rates and $37 million related to the amortization of excess deferred income taxes over the lives of related assets. In September 2018, we reached an unopposed stipulation regarding an overall settlement of the TCJA impacts. The settlement includes, on an annual basis, $144 million related to the reduction of income tax expense currently in rates and $75 million related to amortization of excess deferred federal income taxes. The settlement rates have been implemented as follows on an interim basis as we await final PUCT approval.

· For transmission customers, our TCOS rate incorporated the tax rate reduction beginning March 27, 2018. On July 1, 2018, a new interim TCOS rate was approved, subject to reconciliation, including a reduction due to amortization of excess deferred federal income taxes. The settlement results in a reduction of about $79 million of annualized transmission base revenue requirement as compared to the revenue requirement approved in PUCT Docket No. 46957.

· For distribution customers, interim rates implemented October 8, 2018 contain reductions for both the income tax expense currently in rates and the amortization of excess deferred tax expense. The settlement results in a reduction of about $140 million of annualized distribution base revenue requirement as compared to the revenue requirement approved in PUCT Docket No. 46957.

In addition, we agreed to refund the tax rate differential amounts collected and deferred since January 1, 2018, through the date the changed tariffs became effective. For transmission customers, we will refund tax amounts collected and deferred through March 26, 2018.  For distribution customers, we will refund tax amounts collected and deferred through October 7, 2018. We plan to refund the tax rate differential of approximately $75 million as a bill credit in December 2018.

The pass-through of the impacts of the TCJA to ratepayers is not expected to impact net income. Amortization of excess deferred taxes will result in lower cash inflows as a result of reduced rates to end-use customers.

4.   REVENUES

General

Our revenue is billed monthly under tariffs approved by the PUCT and the majority of revenues are related to providing electric delivery service to consumers.  Tariff rates are designed to recover the cost of providing electric delivery service to customers including a reasonable rate of return on invested capital.   As the units delivered can be directly measured, our revenues are recognized when the underlying service has been provided in an amount prescribed by the related tariff. We recognize revenue in the amount that we have the right to invoice.   Substantially all of our revenues are from contracts with customers (Topic 606 revenues) except for alternative revenue program revenues discussed below.

Reconcilable Tariffs

The PUCT has designated certain tariffs (primarily TCRF, EECRF and previously AMS surcharges) as reconcilable, which means the differences between amounts billed under these tariffs and the related incurred costs are deferred as either regulatory assets or regulatory liabilities.  Accordingly, at prescribed intervals, future tariffs are adjusted to either repay regulatory liabilities or collect regulatory assets. 

As a result of the 2017 rate review order effective November 27, 2017, the AMS surcharges ceased and AMS related expenses and return became recoverable through distribution base rates. 

Alternative Revenue Program

The PUCT has implemented an incentive program allowing us to earn performance bonuses by exceeding PUCT energy efficiency program targets. This incentive program is considered an “alternative revenue program” and the related performance bonus revenues are outside of the scope of Topic 606.  Annual performance bonuses are recognized as revenue when approved by the PUCT, typically in the third or fourth quarter each year. 

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Disaggregation of Revenues 

The following table reflects electric delivery revenues disaggregated by tariff for the three and nine months ended September 30, 2018:

	Three Months Ended September 30,		Nine Months Ended September 30,
Operating revenues	2018		2018
Revenues contributing to earnings:
Distribution base revenues	$	604	$	1,640
Transmission base revenues (TCOS revenues)
Billed to third-party wholesale customers		137		403
Billed to REPs serving Oncor distribution customers, through TCRF		77		234
Total transmission base revenues		214		637
Other miscellaneous revenues		17		48
Total revenues contributing to earnings		835		2,325
Revenues collected for pass-through expenses:
TCRF - third-party wholesale transmission service		237		719
EECRF and other regulatory charges		23		62
Revenues collected for pass-through expenses		260		781
Total operating revenues	$	1,095	$	3,106

Customers

Our distribution customers consist of approximately 90 REPs and certain electric cooperatives in our certificated service area.  The consumers of the electricity we deliver are free to choose their electricity supplier from REPs who compete for their business.  Our transmission base revenues are collected from load serving entities benefitting from our transmission system.  Our transmission customers consist of municipalities, electric cooperatives and other distribution companies.  REP subsidiaries of our two largest counterparties represented27% and 22% of our total operating revenues for the three months ended September 30, 2018, and 24% and 19% of our total operating revenues for the nine months ended September 30, 2018.  No other customer represented more than 10% of our total operating revenues.

Variability

Our revenues and cash flows are subject to seasonality, timing of customer billings, weather conditions and other electricity usage drivers, with revenues being highest in the summer. Payment is due 35 days after invoicing. Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by nonaffiliated REPs are recoverable as a regulatory asset. 

Pass-through expenses

Expenses which are allowed to be passed-through to customers (primarily, third party wholesale transmission service and energy efficiency program costs) are generally recognized as revenue at the time the costs are incurred.  Franchise taxes are assessed by local governmental bodies, based on kWh delivered and are not a “pass-through” item.  The rates we charge customers are intended to recover the franchise taxes, but we are not acting as an agent to collect the taxes from customers; therefore, franchise taxes are reported as a principal component of “taxes other than amounts related to income taxes” instead of a reduction to “revenues” in the income statement. 

5.    REGULATORY ASSETS AND LIABILITIES

Recognition of regulatory assets and liabilities and the periods over which they are to be recovered or refunded through rate regulation are determined by the PUCT.   Components of our regulatory assets and liabilities as of September 30, 2018 and December 31, 2017 are provided in the table below.  Amounts not earning a return through rate regulation are noted.

	Remaining Rate Recovery/Amortization Period at	Carrying Amount At
	September 30, 2018	September 30, 2018		December 31, 2017
Regulatory assets:
Employee retirement costs being amortized	10 years	$	305	$	331
Unrecovered employee retirement costs incurred since the last rate review period (a)	To be determined		30		30
Employee retirement liability (a)(b)(c)	To be determined		800		854
Employee retirement plans - non-service costs	Lives of related assets		33		-
Self-insurance reserve (primarily storm recovery costs) being amortized	10 years		362		394
Unrecovered self-insurance reserve incurred since the last rate review period (a)	To be determined		53		49
Securities reacquisition costs	Lives of related debt		10		12
Deferred conventional meter and metering facilities depreciation	3 years		42		57
Under-recovered AMS costs	10 years		190		206
Excess deferred income taxes			-		197
Energy efficiency performance bonus (b)	1 year or less		3		12
Other regulatory assets	Various		22		38
Total regulatory assets			1,850		2,180
Regulatory liabilities:
Estimated net removal costs	Lives of related assets		1,006		954
Excess deferred income taxes	Primarily over lives of related assets		1,587		1,789
Federal income taxes - over-collected due to TCJA rate change	1 year or less		75		-
Over-recovered wholesale transmission service expense (b)	1 year or less		73		47
Other regulatory liabilities	Various		22		17
Total regulatory liabilities			2,763		2,807
Net regulatory assets (liabilities)		$	(913)	$	(627)

____________

(a) Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.

(b) Not earning a return in the regulatory rate-setting process.

(c) Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.

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6.SHORT-TERM BORROWINGS

At September 30, 2018 and December 31, 2017, outstanding short-term borrowings under our commercial paper program (CP Program) and revolving credit facility (Credit Facility) consisted of the following:

	At September 30,		At December 31,
	2018		2017
Total borrowing capacity	$	2,000	$	2,000
Commercial paper outstanding (a)		(1,099)		-
Credit facility outstanding (b)		-		(950)
Letters of credit outstanding (c)		(9)		(9)
Available unused credit	$	892	$	1,041

____________

a) The weighted average interest rate for commercial paper at September 30, 2018 was 2.45%.

b) The weighted average interest rate for the credit facility at December 31, 2017 was 2.62%.

c) Interest rates on outstanding letters of credit at September 30, 2018 and December 31, 2017 were 1.200% and 1.325%, respectively, based on our credit ratings.

Commercial Paper Program

In March 2018, we established the CP Program, under which we may issue unsecured commercial paper notes (Notes) on a private placement basis up to a maximum aggregate face or principal amount outstanding at any time of $2.0 billion. We also entered into commercial paper dealer agreements (Dealer Agreements) with commercial paper dealers (Dealers).  The Dealer Agreements are substantially identical in all material respects except as to the parties thereto.  A national bank acts as the issuing and paying agent under the CP Program pursuant to the terms of an issuing and paying agent agreement.

The proceeds of Notes issued under the CP Program are used for working capital and general corporate purposes. The CP Program obtains liquidity support from our Credit Facility discussed below.  If at any time funds are not available on favorable terms under the CP Program, we may utilize the Credit Facility for funding. 

The Dealer Agreements provide the terms under which the Dealers will either purchase from us or arrange for the sale by us of Notes pursuant to an exemption from federal and state securities laws.  The Dealer Agreements contain customary representations, warranties, covenants and indemnification provisions.  The maturities of the Notes will vary, but may not exceed 364 days from the date of issue.  The Notes will be sold at a discount from par or, alternatively, will be sold at par and bear interest.  Interest rates will vary based upon market conditions at the time of issuance of the Notes and may be fixed or floating determined by reference to a base rate and spread.

From time to time, one or more of the Dealers and certain of their respective affiliates have provided, and may in the future provide, commercial banking, investment banking and other financial advisory services to us and our affiliates for which the Dealers have received or will receive customary fees and expenses.  In addition, certain of the Dealers or their affiliates are lenders under the Credit Facility.

Revolving Credit Facility

At September 30, 2018, we had a $2.0 billion unsecured revolving Credit Facility to be used for working capital and general corporate purposes, issuances of letters of credit and support for commercial paper issuances.  We may request increases in our borrowing capacity in increments of not less than $100 million, not to exceed $400 million in the aggregate provided certain conditions are met, including lender approvals. The Credit Facility has a five-year term expiring in November 2022 and gives us the option of requesting up to twoone-year extensions, with such extensions subject to certain conditions and lender approvals.  Borrowings are classified as short-term on the balance sheet.  At September 30, 2018, we had no outstanding borrowings under the Credit Facility.

Borrowings under the Credit Facility bear interest at per annum rates equal to, at our option, (i) LIBOR plus a spread ranging from 0.875% to 1.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt or (ii) an alternate base rate (the highest of (1) the prime rate of JPMorgan Chase, (2) the federal funds effective rate plus 0.50%, and (3) adjusted LIBOR plus 1.00%) plus a spread ranging from 0.00% to 0.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt.  At September 30, 2018, the applicable interest rate for any outstanding borrowings would have been LIBOR plus 1.00%.  Amounts borrowed under the Credit Facility, once repaid, can be borrowed again from time to time.

An unused commitment fee is payable quarterly in arrears and upon termination or commitment reduction at a rate equal to 0.075% to 0.225% (such spread depending on certain credit ratings assigned to our senior secured debt) of the daily unused commitments under the Credit Facility.  At September 30, 2018, a commitment fee (at a rate of 0.100% per annum) was payable on the unfunded commitments under the Credit Facility, based on our current credit ratings.

Letter of credit fees on the stated amount of letters of credit issued under the Credit Facility are payable to the lenders quarterly in arrears and upon termination at a rate per annum equal to the spread over adjusted LIBOR.  Customary fronting and administrative fees are also payable to letter of credit fronting banks.

Under the terms of the Credit Facility, the commitments of the lenders to make loans to us are several and not joint.  Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lender’s commitments under the facility.

The Credit Facility contains customary covenants for facilities of this type, restricting, subject to certain exceptions, us and our subsidiaries from, among other things: incurring certain additional liens (not including liens relating to obligations secured pursuant to our Deed of Trust, which are permitted); entering into mergers and consolidations; sales of substantial assets and acquisitions and investments in subsidiaries.  In addition, the Credit Facility requires that we maintain a consolidated senior debt-to-capitalization ratio of no greater than 0.65 to 1.00 and observe certain customary reporting requirements and other affirmative covenants.  For purposes of the ratio, debt is calculated as indebtedness defined in the Credit Facility (principally, the sum of long-term debt, any capital leases, short-term debt and debt due currently in accordance with GAAP).  Capitalization is calculated as membership interests determined in accordance with GAAP plus indebtedness described above.  At September 30, 2018, we were in compliance with this and all other covenants.

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7.    LONG-TERM DEBT

Our senior notes are secured by a first priority lien on certain transmission and distribution assets equally and ratably with all of Oncor’s other secured indebtedness.  See “Deed of Trust” below for additional information.  At September 30, 2018 and December 31, 2017, our long-term debt consisted of the following:

	September 30,		December 31,
	2018		2017
Secured:
6.80% Fixed Senior Notes due September 1, 2018	$	-	$	550
2.15% Fixed Senior Notes due June 1, 2019		250		250
5.75% Fixed Senior Notes due September 30, 2020		126		126
4.10% Fixed Senior Notes due June 1, 2022		400		400
7.00% Fixed Debentures due September 1, 2022		800		800
2.95% Fixed Senior Notes due April 1, 2025		350		350
3.70% Fixed Senior Notes due November 15, 2028		350		-
7.00% Fixed Senior Notes due May 1, 2032		500		500
7.25% Fixed Senior Notes due January 15, 2033		350		350
7.50% Fixed Senior Notes due September 1, 2038		300		300
5.25% Fixed Senior Notes due September 30, 2040		475		475
4.55% Fixed Senior Notes due December 1, 2041		400		400
5.30% Fixed Senior Notes due June 1, 2042		500		500
3.75% Fixed Senior Notes due April 1, 2045		550		550
3.80% Fixed Senior Notes due September 30, 2047		325		325
4.10% Fixed Senior Notes due November 15, 2048		450		-
Secured long-term debt		6,126		5,876
Unsecured:
Term loan credit agreement due no later than March 26, 2019		-		275
Total long-term debt		6,126		6,151
Unamortized discount and debt issuance costs		(40)		(34)
Less amount due currently		(250)		(550)
Long-term debt, less amounts due currently	$	5,836	$	5,567

Debt-Related Activity in 2018

Debt Repayments

Repayments of long-term debt in the nine months ended September 30, 2018 consisted of $275 million aggregate principal amount of the term loan credit agreement due March 26, 2019 and $550 million aggregate principal amount of our 6.80% senior secured notes due September 1, 2018 (2018 Notes).  The term loan agreement was repaid in full, and the 2018 Notes were defeased on August 10, 2018.

8

Debt Issuances

In August 2018, we issued $350 million aggregate principal amount of 3.70% senior secured notes due November 15, 2028 (the 2028 Notes) and $450 million aggregate principal amount of 4.10% senior secured notes due November 15, 2048 (the 2048 Notes and, together with the 2028 Notes, the New Notes). We used the proceeds (net of the initial purchasers’ discount, fees and expenses) of $791 million from the sale of the New Notes for general corporate purposes, including to pay the amount required for defeasance of our 2018 Notes, to repay the $131million outstanding under our term loan credit agreement, and to repay notes due under our CP Program. The New Notes are secured by a first priority lien, and are secured equally and ratably with all of our other secured indebtedness.

Interest on the New Notes is payable in cash semiannually in arrears on May 15 and November 15 of each year, and the first interest payment is due November 15, 2018.  Prior to August 15, 2028, in the case of the 2028 Notes, and May 15, 2048, in the case of the 2048 Notes, we may redeem such Notes at any time, in whole or in part, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a “make-whole” premium. On and after August 15, 2028, in the case of the 2028 Notes, and May 15, 2048, in the case of the 2048 Notes, we may redeem such New Notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of such New Notes, plus accrued and unpaid interest. The New Notes also contain customary events of default, including failure to pay principal or interest when due.

The New Notes were issued in a private placement and were not registered under the Securities Act of 1933.  We have agreed, subject to certain exceptions, to register with the SEC notes having substantially identical terms as the New Notes (except for provisions relating to the transfer restriction and payment of additional interest) as part of an offer to exchange freely tradable exchange notes for the New Notes.  We have agreed to use commercially reasonable efforts to cause the exchange offer to be completed within 315 days after the issue date of the New Notes.  If a registration statement for the exchange offer is not declared effective by the SEC within 270 days after the issue date of the New Notes or the exchange offer is not completed within 315 days after the issue date of the New Notes (an exchange default), then the annual interest rate on the 2028 Notes will increase 12.5 basis points per annum and the annual interest rate on the 2048 Notes will increase 15 basis points per annum until the earlier of the expiration of the exchange default or the second anniversary of the issue date of the New Notes.

Deed of Trust

Our secured indebtedness is secured equally and ratably by a first priority lien on property we acquired or constructed for the transmission and distribution of electricity.  The property is mortgaged under the Deed of Trust.  The Deed of Trust permits us to secure indebtedness (excluding borrowings under the CP Program and the Credit Facility) with the lien of the Deed of Trust up to the aggregate of (i) the amount of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain property additions that could be certified to the Deed of Trust collateral agent.  At September 30, 2018, the amount of available bond credits was $3.588 billion and the amount of future debt we could secure with property additions, subject to those property additions being certified to the Deed of Trust collateral agent, was $2.136 billion.

Fair Value of Long-Term Debt

At September 30, 2018 and December 31, 2017, the estimated fair value of our long-term debt (including current maturities) totaled $6.731 billion and $7.153 billion, respectively, and the carrying amount totaled $6.086 billion and $6.117 billion, respectively.  The fair value is estimated using observable market data, representing Level 2 valuations under accounting standards related to the determination of fair value.

8.    COMMITMENTS AND CONTINGENCIES

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

In April 2014, the Debtorscommenced the EFH Bankruptcy Proceedings.  The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  See Note 2for further information regarding the resolution of the EFH Bankruptcy Proceedings and the change in control of our indirect majority owner in connection with such proceedings and Note 11 for our related-party transactions involving members of the Texas Holdings Group.

Legal/Regulatory Proceedings

We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolution of which, in the opinion of management, should not have a material effect upon our financial position, results of operations or cash flows.  See Note 3 in this report and Note 8 to Financial Statements in our 2017 Form 10-K for additional information regarding our legal and regulatory proceedings. 

9.    MEMBERSHIP INTERESTS

Cash Distributions

Distributions are limited by our required regulatory capital structure to be at or below the assumed debt-to-equity ratio established periodically by the PUCT for ratemaking purposes, which is 57.5% debt to 42.5% equity effective November 27, 2017.  At September 30, 2018, $219 million was available for distribution to our members, as our regulatory capitalization ratio was 56.3% debt to 43.7% equity.  The PUCT has the authority to determine what types of debt and equity are included in a utility’s debt-to-equity ratio.  For purposes of this ratio, debt is calculated as long-term debt including capital leases plus unamortized gains on reacquired debt less unamortized issuance expenses, premiums and losses on reacquired debt.  Equity is calculated as membership interests determined in accordance with GAAP, excluding the effects of the acquisition accounting resulting from PUCT Docket No. 34077. 

In October2018, our board of directors declared a cash distribution of $180 million, which was paid to our members on November 6, 2018.  In July 2018, our board of directors declared a cash distribution of $30 million, which was paid to our members on August 1, 2018.

Cash Contributions

In November 2018, our members made capital contributions of $140 million. In April 2018, our members made capital contributions of $144 million.

9

Membership Interests

The following table presents the changes to membership interests during the nine months ended September 30, 2018 and 2017:

	Capital Accounts		Accumulated Other Comprehensive Income (Loss)		Total Membership Interests
Balance at December 31, 2017	$	8,004	$	(101)	$	7,903
Net income		426		-		426
Distributions		(30)		-		(30)
Capital contributions		144		-		144
Net effects of cash flow hedges (net of tax)		-		2		2
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2018	$	8,544	$	(97)	$	8,447
Balance at December 31, 2016	$	7,822	$	(111)	$	7,711
Net income		343		-		343
Distributions		(237)		-		(237)
Net effects of cash flow hedges (net of tax)		-		1		1
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2017	$	7,928	$	(108)	$	7,820

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes to accumulated other comprehensive income (loss) for the nine months ended September 30, 2018 and 2017:

	Cash Flow Hedges – Interest Rate Swap		Defined Benefit Pension and OPEB Plans		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	(18)	$	(83)	$	(101)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		2		-		2
Balance at September 30, 2018	$	(16)	$	(81)	$	(97)
Balance at December 31, 2016	$	(20)	$	(91)	$	(111)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		1		-		1
Balance at September 30, 2017	$	(19)	$	(89)	$	(108)

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10.    PENSION AND OPEB PLANS

Pension Plans

We sponsor the Oncor Retirement Plan and also have liabilities under the Vistra Retirement Plan, both of which are qualified pension plans under Section 401(a) of the Internal Revenue Code of 1986, as amended, and are subject to the provisions of ERISA.  Employees do not contribute to either plan.  We also have a supplemental pension plan for certain employees whose retirement benefits cannot be fully earned under the qualified retirement plans.  See Note 10 to Financial Statements in our 2017 Form 10-K for additional information regarding pension plans.

OPEB Plans

We currently sponsor the Oncor OPEB Plans. One plan covers our eligible current and future retirees, excluding certain eligible retirees of EFH Corp./Vistra whose employment service was assigned to both Oncor (or a predecessor regulated utility business) and a non-regulated business of EFH Corp./Vistra which are now part of a separate plan discussed below. 

Effective January 1, 2018, we established a second plan to cover retirees whose employment included service that has been assigned to both Oncor (or a predecessor regulated utility business) and non-regulated businesses of EFH Corp./Vistra.  Vistra is solely responsible for its portion of the liability for retiree benefits related to those retirees.  As we are not responsible for Vistra’s portion of the plan’s unfunded liability, that amount is not reported on our balance sheet.  The establishment of the plan is not expected to have an impact on our financial statements. 

See Note 10 to Financial Statements in our 2017 Form 10-K for additional information.

Pension and OPEB Costs

Our net costs related to pension plans and the Oncor OPEB Plans for the three and nine months ended September 30, 2018 and 2017 were comprised of the following:

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Components of net allocated pension costs:
Service cost	$	7	$	6	$	21	$	18
Interest cost		29		32		89		98
Expected return on assets		(29)		(28)		(89)		(86)
Amortization of net loss		12		11		36		33
Net pension costs		19		21		57		63
Components of net OPEB costs:
Service cost		2		1		6		5
Interest cost		11		12		33		36
Expected return on assets		(2)		(2)		(6)		(6)
Amortization of prior service cost		(8)		(5)		(21)		(15)
Amortization of net loss		14		8		41		24
Net OPEB costs		17		14		53		44
Total net pension and OPEB costs		36		35		110		107
Less amounts deferred principally as property or a regulatory asset		(17)		(25)		(52)		(76)
Net amounts recognized as expense	$	19	$	10	$	58	$	31

The discount rates reflected in net pension and OPEB costs in 2018 are 3.53%,  3.72% and 3.73% for the Oncor Retirement Plan, the Vistra Retirement Plan and the Oncor OPEB Plans, respectively.  The expected return on pension and OPEB plan assets reflected in the 2018 cost amounts are 5.13%,  4.78% and 6.20% for the Oncor Retirement Plan, the Vistra Retirement Plan and the Oncor OPEB Plans, respectively.

Pension and OPEB Plans Cash Contributions

We made cash contributions to the pension plans and Oncor OPEB Plans of $62 million and $31 million, respectively, during the nine months ended September 30, 2018.  We expect to make additional cash contributions to the pension plans  and Oncor OPEB Plans of $20 million and $4 million, respectively,during the remainder of 2018.  Our aggregate pension plans and Oncor OPEB Plans funding is expected to total approximately $480 million and $175 million, respectively, in the 2018 to 2022 period based on the latest actuarial projections.

11.   RELATED-PARTY TRANSACTIONS

The following represent our significant related-party transactions at September 30, 2018.  As a result of the Sempra Acquisition, Sempra became a related party and the Sponsor Group ceased to be a related party as of March 9, 2018. See Note 2 for information regarding the Sempra Acquisition.

· We are not a member of another entity’s consolidated tax group, but our owners’ federal income tax returns include their portion of our results.  Under the terms of a tax sharing agreement among us, Oncor Holdings, Texas Transmission and STH (as successor to EFH Corp.), we are generally obligated to make payments to our owners, pro rata in accordance with their respective membership interests, in an aggregate amount that is substantially equal to the amount of federal income taxes that we would have been required to pay if we were filing our own corporate income tax return.  STH will file a combined Texas Margin tax return which includes our results and our share of Texas margin tax payments, which are accounted for as income taxes and calculated as if we were filing our own return.  See discussion in Note 1 to Financial Statements in our 2017 Form 10-K under “Income Taxes.”  Under the “in lieu of” tax concept, all in lieu of tax assets and tax liabilities represent amounts that will eventually be settled with our members.  In the event such amounts are not paid under the tax sharing agreement, it is probable that this regulatory liability will continue to be included in Oncor’s rate setting processes.

Amounts payable to (receivable from) members related to income taxes under the tax sharing agreement and reported on our balance sheet consisted of the following:

	At September 30, 2018						At December 31, 2017
	STH		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes payable (receivable)	$	13	$	3	$	16	$	(21)	$	(5)	$	(26)
Texas margin taxes payable		16		-		16		21		-		21
Net payable (receivable)	$	29	$	3	$	32	$	-	$	(5)	$	(5)

Cash payments made to (received from) members related to income taxes consisted of the following:

	Nine Months Ended September 30, 2018								Nine Months Ended September 30, 2017
	STH		EFH Corp.		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes	$	41	$	(19)	$	6	$	28	$	(102)	$	(12)	$	(114)
Texas margin taxes		21		-		-		21		20		-		20
Total payments (receipts)	$	62	$	(19)	$	6	$	49	$	(82)	$	(12)	$	(94)

· Related parties of the Sponsor Group have (1) sold, acquired or participated in the offerings of our debt or debt securities in open market transactions or through loan syndications, and (2) performed various financial advisory, dealer, commercial banking and investment banking services for us and certain of our affiliates for which they have received or will receive customary fees and expenses.   

As of March 8, 2018, approximately 16% of the equity in an existing vendor of the company was owned by a member of the Sponsor Group.  During 2018 and 2017, this vendor performed transmission and distribution system construction and maintenance services for us.  Cash payments were made for such services to this vendor and/or its subsidiaries totaling $35 million dollars for the year-to-date period ended March 8, 2018, of which approximately $33 million was capitalized and $2 million was recorded as an operation and maintenance expense.

See Note 9 for information regarding distributions to and capital contributions from members.

12.   SUPPLEMENTARY FINANCIAL INFORMATION

Other Income and (Deductions)

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Professional fees	$	-	$	(4)		(4)		(12)
Sempra Acquisition related costs		-		-		(16)		-
Recoverable Pension and OPEB - non-service costs (a)		(13)		(8)		(40)		(23)
Non-recoverable pension and OPEB (Note 10)		(1)		(1)		(4)		(4)
Other, including interest income		1		-		1		4
Total other income and (deductions) - net	$	(13)	$	(13)	$	(63)	$	(35)

____________

(a) The prior periods have been adjusted to present non-service costs as a non-operating cost pursuant to ASU 2017-07.  See Note 1 for additional information.

Interest Expense and Related Charges

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Interest	$	90	$	89	$	268	$	263
Amortization of debt issuance costs and discounts		2		1		5		2
Less allowance for funds used during construction – capitalized interest portion		(3)		(3)		(9)		(8)
Total interest expense and related charges	$	89	$	87	$	264	$	257

Trade Accounts and Other Receivables

Trade accounts and other receivables reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Gross trade accounts and other receivables	$	691	$	638
Allowance for uncollectible accounts		(3)		(3)
Trade accounts receivable – net	$	688	$	635

At September 30, 2018, REP subsidiaries of our two largest counterparties represented approximately 16% and 13% of the trade accounts receivable balance and at December 31, 2017, represented approximately 12% and 10% of the trade accounts receivable balance.

Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by nonaffiliated REPs are recoverable as a regulatory asset. 

Investments and Other Property

Investments and other property reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Assets related to employee benefit plans, including employee savings   programs	$	111	$	111
Land and other investments		10		2
Total investments and other property	$	121	$	113

Property, Plant and Equipment

Property, plant and equipment reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Total assets in service	$	22,593	$	21,717
Less accumulated depreciation and amortization		7,497		7,255
Net of accumulated depreciation and amortization		15,096		14,462
Construction work in progress		671		402
Held for future use		15		15
Property, plant and equipment – net	$	15,782	$	14,879

Intangible Assets

Intangible assets (other than goodwill) reported on our balance sheet as part of property, plant and equipment consisted of the following:

	At September 30, 2018						At December 31, 2017
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
Identifiable intangible assets subject to amortization:
Land easements	$	456	$	99	$	357	$	453	$	96	$	357
Capitalized software		757		375		382		679		339		340
Total	$	1,213	$	474	$	739	$	1,132	$	435	$	697

Aggregate amortization expense for intangible assets totaled $13 million and $15 million for the three months ended September 30, 2018 and 2017, respectively, and $39 million and $44 million for the nine months ended September 30, 2018 and 2017, respectively.  The estimated aggregate amortization expense for each of the next five fiscal years is as follows:

Year	Amortization Expense
2018	$	50
2019		47
2020		45
2021		45
2022		45

At both September 30, 2018 and December 31, 2017, goodwill totaling $4.1 billion was reported on our balance sheet.  None of this goodwill is being deducted for tax purposes.

Employee Benefit Obligations and Other

Employee benefit obligations and other reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Retirement plans and other employee benefits	$	1,973	$	2,035
Investment tax credits		8		10
Other		65		57
Total employee benefit obligations and other	$	2,046	$	2,102

Supplemental Cash Flow Information        

	Nine Months Ended September 30,
	2018		2017
Cash payments (receipts) related to:
Interest	$	243	$	256
Less capitalized interest		(9)		(8)
Interest payments (net of amounts capitalized)	$	234	$	248
Amount in lieu of income taxes (a):
Federal	$	28	$	(114)
State		21		20
Total payments (receipts) in lieu of income taxes	$	49	$	(94)
Noncash construction expenditures (b)	$	136	$	103

____________

(a) See Note 11 for income tax related detail.

(b) Represents end-of-period accruals.

13.   INFRAREIT ACQUISITION

On October 18, 2018, we entered into the InfraREIT Merger Agreement, pursuant to which we will acquire all of the equity interests of InfraREIT and its subsidiary, InfraREIT Partners, subject to the conditions discussed below. The InfraREIT Acquisition will occur through the merger of InfraREIT with and into a newly formed wholly owned subsidiary of Oncor, followed by the merger of another newly formed wholly owned subsidiary of Oncor with and into InfraREIT Partners.  InfraREIT’s stockholders and the limited partners of InfraREIT Partners will receive $21.00 in cash per share of common stock or limited partnership unit, as applicable. Total purchase price based on the number of shares and partnership units of InfraREIT and InfraREIT Partners currently outstanding is approximately $1.275 billion, plus we will bear certain transaction costs incurred by InfraREIT (including a management agreement termination fee of approximately $40.5 million that InfraREIT has agreed to pay Hunt Consolidated, Inc. at closing). The acquisition also includes InfraREIT’s outstanding debt, which totaled an aggregate of approximately$945 million at September 30, 2018.

In connection with entering into the InfraREIT Merger Agreement, we have received a commitment letter from Sempra and certain indirect equity holders of Texas Transmission (collectively, Equity Commitment Parties), pursuant to which, subject to the terms and conditions set forth therein, the Equity Commitment Parties have committed to provide their pro rata share of capital contributions to us in an aggregate principal amount of up to $1.330 billion, to fund the cash consideration payable by us in the InfraREIT Acquisition and the payment of certain related fees and expenses. The funding provided for in the commitment letter is contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement, but is not a condition to the closing of the InfraREIT Acquisition.

As a condition to the InfraREIT Acquisition, InfraREIT’s subsidiary, SDTS and SDTS’s tenant, SU, will complete an asset exchange (SDTS-SU Asset Exchange) immediately prior to the closing of the InfraREIT Acquisition, pursuant to which SDTS will exchange its south Texas assets for certain assets owned by SU. As result, upon closing of the InfraREIT Acquisition, we will own all of SDTS and SU’s assets and projects in north, central and west Texas and SU will own its and SDTS’s assets in south Texas.

In addition, as a condition to the closing of the SDTS-SU Asset Exchange, Sempra will acquire an indirect 50 percent limited partnership interest in SU (Sempra-SU Transaction). As a result of the Sempra-SU Transaction, SU will be our affiliate for purposes of PUCT rules. The SDTS-SU Asset Exchange also contemplates that at closing we and SU will each enter into a future development agreement and, subject to receipt of certain PUCT approvals, an operation and maintenance agreement. The future development agreement addresses ownership and funding of potential future SU transmission projects under certain circumstances where at least one endpoint of the project is a legacy SDTS asset. Oncor and SU will each own and fund certain percentages of the project depending on the project type and location of the transmission project’s end points. The operation and maintenance agreement provides that Oncor will provide to SU certain operations and maintenance services with respect to the SU assets in south Texas. Such services will be provided by us to SU at cost without a markup or profit.

Closing of the InfraREIT Acquisition is subject to the satisfaction of customary closing conditions, including, among others, (i) obtaining the approval of InfraREIT stockholders, (ii) the absence of certain make-whole, prepayment, accelerated payment obligations, or events of default with respect to certain notes of InfraREIT subsidiaries and obtaining of consents to certain amendments to the terms of the applicable notes, (iii) the satisfaction of certain regulatory conditions, including the receipt of the approval of the PUCT and the FERC, (v) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (vi) clearance by the Committee on Foreign Investment in the United States.

Oncor, InfraREIT and InfraREIT Partners have agreed to use their respective reasonable best efforts, subject to certain exceptions, to consummate the InfraREIT Acquisition as promptly as practicable. The InfraREIT Merger Agreement provides, among other items, that no later than 45 days after October 18, 2018, the parties will submit to the PUCT a single, integrated Joint Application for Sale, Transfer or Merger and requests for other necessary approvals required to effect the InfraREIT Acquisition. The InfraREIT Merger Agreement also provides for a go-shop period until 11:59 PM Dallas time on November 17, 2018, during which period InfraREIT and certain of its subsidiaries and representatives may solicit alternative acquisition proposals.

11

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2018 and 2017 should be read in conjunction with the condensed financial statements and the notes to those statements herein as well as the consolidated financial statements and the notes to those statements and “Risk Factors” contained in our 2017 Form 10-K.

All dollar amounts in the tables in the following discussion and analysis are stated in millions of U.S. dollars unless otherwise indicated.

BUSINESS

We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to REPs that sell power in the north-central, eastern and western parts of Texas.  We are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of STIH, a direct wholly-owned subsidiary of STH. In connection with the Sempra Acquisition, on March 9, 2018, STH became an indirect wholly- owned subsidiary of Sempra.  Oncor Holdings owns 80.25% of our outstanding membership interests and Texas Transmission owns 19.75% of our outstanding membership interests.  We are managed as an integrated business; consequently, there are no separate reportable business segments.

Sempra has committed to certain ring-fencing measures effective with the closing of the Sempra Acquisition. For more information on the Sempra Acquisition and the related PUCT proceedings, see Note 2 to Financial Statements.

Significant Activities and Events

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor — See Note 2 to Financial Statements for information on the EFH Bankruptcy Proceedings and the Sempra Acquisition.

InfraREIT Acquisition —  On October 18, 2018, Oncor entered into the InfraREIT Merger Agreement, pursuant to which it will acquire all of the equity interests of InfraREIT and its subsidiary InfraREIT Partners. InfraREIT’s stockholders and the limited partners of InfraREIT Partners will receive $21.00 in cash per share of common stock or limited partnership unit, as applicable. Total purchase price based on the number of shares and partnership units of InfraREIT and InfraREIT Partners currently outstanding is approximately $1.275 billion, plus Oncor would bear certain transaction costs incurred by InfraREIT (including a management agreement termination fee of approximately $40.5 million that InfraREIT has agreed to pay Hunt Consolidated, Inc. at closing). The InfraREIT Acquisition also includes InfraREIT’s outstanding debt, which totaled an aggregate of approximately $945 million at September 30, 2018. Closing of the InfraREIT Acquisition is subject to the satisfaction of various closing conditions. See Note 13 to Financial Statements for more information on the InfraREIT Acquisition.

Matters with the PUCT—  See discussion below under “Regulation and Rates – Matters with the PUCT.”

12

RESULTS OF OPERATIONS      

Operating Data

	Three Months Ended September 30,				%		Nine Months Ended September 30,				%
	2018		2017		Change		2018		2017		Change
Operating statistics:
Electric energy volumes (gigawatt-hours):
Residential	14,486		13,750		5.4		36,310		32,238		12.6
Other (a)	23,677		21,555		9.8		63,946		57,534		11.1
Total electric energy volumes	38,163		35,305		8.1		100,256		89,772		11.7
Reliability statistics (b)(c):
System Average Interruption Duration Index (SAIDI) (nonstorm)								94.0		89.4		5.1
System Average Interruption Frequency Index (SAIFI) (nonstorm)								1.4		1.4		0.0
Customer Average Interruption Duration Index (CAIDI) (nonstorm)								69.5		62.0		12.1
Electricity points of delivery (end of period and in thousands):
Electricity distribution points of delivery (based on number of active meters)								3,607		3,483		3.6
	Three Months Ended September 30,				$		Nine Months Ended September 30,				$
		2018		2017	Change			2018		2017	Change
Operating revenues
Revenues contributing to earnings:
Distribution base revenues (d)	$	604	$	534	$	70	$	1,640	$	1,396	$	244
Transmission base revenues (TCOS revenues)
Billed to third-party wholesale customers		137		154		(17)		403		460		(57)
Billed to REPs serving Oncor distribution customers, through TCRF		77		83		(6)		234		250		(16)
Total transmission base revenues		214		237		(23)		637		710		(73)
AMS surcharge and other miscellaneous revenues (d)		17		52		(35)		48		136		(88)
Total revenues contributing to earnings		835		823		12		2,325		2,242		83
Revenues collected for pass-through expenses:
TCRF - third-party wholesale transmission service		237		230		7		719		690		29
EECRF and other regulatory charges		23		15		8		62		35		27
Total revenues collected for pass-through expenses		260		245		15		781		725		56
Total operating revenues	$	1,095	$	1,068	$	27	$	3,106	$	2,967	$	139

________________

(a) Includes small business, large commercial and industrial and all other non-residential distribution points of delivery.

(b) SAIDI is the average number of minutes electric service is interrupted per consumer in a year.  SAIFI is the average number of electric service interruptions per consumer in a year.  CAIDI is the average duration in minutes per electric service interruption in a year.  The statistics presented are based on twelve months ended September 30, 2018 and 2017 data.

(c) Excludes impacts of the Sharyland Asset Exchange.

(d) The separate reconcilable AMS surcharge ceased on November 27, 2017 and AMS-related expenses and returns became recoverable through distribution base revenues.

Financial Results — Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017   

Total operating revenues increased $27 million, or 3%, to $1.095 billion in 2018.  Revenue is billed under tariffs approved by the PUCT.  As a result of the PUCT’s order in our 2017 rate review (PUCT Docket No. 46957), we began deferring as a regulatory liability the amount collected through the approved tariffs representing the decrease in the corporate federal income tax rate resulting from the TCJA.  The regulatory liability balance at September 30, 2018 is $75 million.

Revenues that contribute to earnings increased $12 million during the three months ended September 30, 2018.The change reflected the following components:

· An Increase in Distribution Base Revenues — Distribution base rates are set periodically in a rate review docket initiated by either us or the PUCT.  The present distribution base rates became effective on November 27, 2017.  The PUCT allows utilities to file, under certain circumstances, once per year and up to four rate adjustments between comprehensive base rate proceedings to recover distribution investments and certain other related costs on an interim basis (DCRF). We filed our first DCRF on April 5, 2018 requesting a $19 million increase in annual distribution revenues.  On June 13, 2018, Oncor filed an unopposed stipulation that reduced the annual distribution revenue increase from $19 million to $15 million.  The PUCT approved the stipulation on August 30, 2018 and the distribution tariffs became effective September 1, 2018.The $70 million increase in distribution base rate revenues primarily reflects:

o $41 million higher authorized revenues resulting from the 2017 rate review, net of the TCJA federal income tax rate reduction of $23 million, including approximately $25 million that previously would have been collected in the AMS surcharge, as described below,    

o $28 million due to growth in points of delivery including the Sharyland Asset Exchange.

· A Decrease in Transmission Base Revenues — Transmission base revenues (or TCOS revenues) are collected from load serving entities benefitting from our transmission system.  REPs serving customers in our service territory are billed through the TCRF mechanism discussed below, while other load serving entities are billed directly.  In order to reflect changes in our invested transmission capital, PUCT rules allow us to update our TCOS rates by filing up to two interim TCOS rate adjustments in a calendar year.       The $23 million decrease in TCOS revenues for the three months ended September 30, 2018 compared to the 2017 period reflects a $17 million reduction due to the rate decrease from the 2017 rate review proceeding, including the impact of the Sharyland Asset Exchange and $12 million TCJA federal income tax rate reduction, and reflects a $6 million reduction due to amortization of excess deferred federal income taxes beginning July 1, 2018.  See TCOS Filings Table below for a listing of Transmission Interim Rate Update Applications and anticipated impacts on revenues for the three months ended September 30, 2018 and 2017, as well as filings and the anticipated impact to revenues for the year ended December 31, 2018.

TCOS Filings Table

Docket No.	Filed	Effective	Annual Revenue Impact		Third-Party Wholesale Transmission		Included in TCRF
48559	July 2018	October 2018	$	21	$	13	$	8
48325 (a)	May 2018	July 2018	$	(15)	$	(10)	$	(5)
47988 (b)	January 2018	March 2018	$	14	$	9	$	5
46957	March 2017	November 2017	$	(76)	$	(54)	$	(22)
46825	February 2017	March 2017	$	7	$	4	$	3
46210	July 2016	September 2016	$	14	$	9	$	5

______________

(a) Per the pending Docket No. 48325 settlement, the final July 1, 2018 TCOS rate reflects an additional $12 million annual revenue reduction, which has been netted in the Docket No. 48559 line above.  

(b) The annual revenue impact of the new rate is net of a $52 million revenue reduction to reflect the TCJA reduction in the corporate federal income tax rate to 21%.

· A Decrease in AMS Surcharge and other miscellaneous revenues — The PUCT previously authorized monthly per customer advanced meter cost recovery factors (AMS surcharge) designed to recover the cost of our initial AMS deployment over an eleven-year period ending in 2019.  Pursuant to the PUCT order in our 2017 rate review, the AMS reconcilable surcharge ceased on November 27, 2017 and AMS related expenses and returns became recoverable through distribution base rates.  Under the AMS surcharge we recognized revenues equal to reconcilable expenses plus a return component on our investment.  A $35 million decrease in AMS surcharge and other miscellaneous revenues is primarily due to a $25 million shift of AMS revenues to distribution base revenues and an $11 million energy efficiency program bonus recorded in the prior period.  

Revenues collected for pass-through expenses include the following components. While changes in these tariffs affect revenues and the timing of cash flows, they do not impact operating income and do not contribute to earnings. These revenues increased $15 million during the three-month periodended September 30 and the change reflected: 

· An Increase in TCRF – third-party wholesale transmission service (TCRF Third-Party) — TCRF is a reconcilable distribution rate charged to REPs to recover fees we pay to third-party transmission service providers under their TCOS rates and the retail portion of our own TCOS rate described above.The increase in our TCRF Third-Party revenue includes $7 million to pass through an increase in third-party wholesale transmission service expense.  At September 30, 2018, $73 million was deferred asover-recovered wholesale transmission service expense (see Note 5 to Financial Statements).  PUCT rules require us to update the TCRF component of our retail delivery rates on March 1 and September 1 each year.  See TCRF Filings Table below for a listing of TCRF filings and the anticipated impacts to cash flows for the three months ended September 30, 2018 and 2017, as well as filings and the anticipated impacts to cash flows for the year ended December 31, 2018.

TCRF Filings Table

			Billing Impact
			for Period Effective
Docket No.	Filed	Effective	Increase (Decrease)
48408	May 2018	September 2018 - February 2019	$	110
47824	December 2017	March 2018 - August 2018	$	(52)
46957	March 2017	December 2017 - February 2018	$	(28)
47234	June 2017	September 2017 - November 2017	$	39
46616	November 2016	March 2017 – August 2017	$	(86)

· An Increase in EECRF and Other Regulatory Surcharges — The EECRF is a reconcilable rate designed to recover current energy efficiency program costs and performance bonuses earned by exceeding PUCT targets in prior years and recover or refund any over/under recovery of our costs in prior years.  We recognize the performance bonuses in other miscellaneous revenues upon approval by the PUCT.  PUCT rules require us to file an annual EECRF tariff update by the first business day in June of each year for implementation on March 1 of the next calendar year.   The $8 million net increase includes  $5 million recovery of municipal franchise fees related to PUCT Docket No. 46884 and$1 million recovery of rate case expenses, which are offset in taxes other than income taxes and in operation and maintenance expense, respectively. The recovery of municipal franchise fees arises from the Texas Supreme Court mandate regarding our 2008 rate review,  which is discussed in more detail in Note 3 in our 2017 Form 10-K.  See EECRF Filings Table below for a listing of EECRF filings impacting revenues for the three months ended September 30, 2018 and 2017, as well as filings that will impact revenues for the year ended December 31, 2018.

EECRF Filings Table

Docket No.	Filed	Effective	Average Monthly Charge per Residential Customer (a)		Program Costs		Performance Bonus		Under-/  (Over)- Recovery
48421	June 2018	March 2019	$	0.91	$	50	$	7	$	-
47235	June 2017	March 2018	$	0.91	$	50	$	12	$	(6)
46013	June 2016	March 2017	$	0.94	$	49	$	10	$	(4)
44784	June 2015	March 2016	$	1.19	$	61	$	10	$	(4)

__________

(a) Monthly charges are for a residential customer using an assumed 1,200 kWh.

Wholesale transmission service expense increased $7 million, or 3%, to $237 million in 2018 due to higher fees paid to third-party transmission entities including the impact of increased distribution load due to the Sharyland Asset Exchange.

Operation and maintenance expense increased $38 million, or 22%, to $214 million in 2018.  Operation and maintenance expense increased primarily due to the 2017 rate review order approving an increased level of recovery for employee benefit plans, the self-insurance reserve and rate case expenses of $23 million, higher labor-related costs of $5 million,  higher vegetation management costs of $5 million and higher other costs of $5 million including materials and transportation expenses.

Depreciation and amortization decreased $24 million to $169 million in 2018.  The decrease is primarily due to an estimated $38 million decrease in depreciation of property, plant, and equipment as a result of the 2017 rate review, partially offset by an estimated $14 million increase attributable to ongoing investments in property, plant and equipment.

Provision in lieu of income taxes totaled $51 million (including a $3 million benefit related to nonoperating income) in 2018 compared to $92 million (including a $5 million benefit related to nonoperating income) in 2017. 

The U.S. federal statutory income tax rate was lowered by the TCJA to 21% in 2018 from 35% in 2017.  The effective income tax rate of 20.8% and 36.9% for the years 2018 and 2017, respectively, on pretax income differs from these rates primarily due to the effect of the Texas margin tax which, in 2018,  is offset by the amortization of the regulatory liability for excess deferred taxes as a result of the TCJA.

As a result of the PUCT’s order in our 2017 rate review, we agreed to defer as a regulatory liability the amount collected through approved tariffs representing the decrease in statutory tax rates until those tariffs were adjusted. The “Federal income taxes − over-collected due to TCJA rate change” regulatory liability has a balance of $75 million at September 30, 2018.

Taxes other than income taxes increased $8 million, or 7%, to $128 million in 2018.  The change is primarily due to an $8 million increase in local franchise taxes. The increase in local franchise fees includes $5 million for recovery of certain local franchise fees resulting from the Texas Supreme Court mandate regarding our 2008 rate review, which is discussed in more detail in Note 3 in our 2017 Form 10-K.

Other income and (deductions) - net was unchanged in 2018 compared to 2017.  The current period activity included a $5 million increase in recoverable employee benefit plan non-service costs, offset by a $4 million decrease in professional fees and a $1 million increase in interest income.  See Note 12 to Financial Statements for more information.

Interest expense and related charges was $89 million and $87 million for 2018 and 2017, respectively.  The current period includes a $3 million increase due to higher average borrowings and $1 million higher debt issuance cost amortization, partially offset by a $2 million decrease attributable to lower average interest rates.

Net income was $37 million higher than the prior period driven by the impacts of the 2017 rate review and growth in points of delivery, partially offset by higher operation and maintenance expense.

13

Financial Results — Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017   

Total operating revenues increased $139 million, or  5%, to $3.106 billion in 2018. 

Revenues that contribute to earnings increased $83 million during the nine months ended September 30. The change reflected the following components:

· An Increase in Distribution Base Revenues —The $244 million increase in distribution base rate revenues reflects:

o $67 million due to higher consumption, primarily driven by weather,

o $73 million due to growth in points of delivery including the Sharyland Asset Exchange and,

o $104 million higher authorized revenues resulting from the 2017 rate review, net of the TCJA federal income tax rate reduction of $59million, including approximately $79 million that previously would have been collected in the AMS surcharge as described below.    

· A Decrease in Transmission Base Revenues  —The $73 million decrease in TCOS revenues for the nine months ended September 30, 2018 compared to the 2017 period reflects a $67 million reduction due to the rate decrease from the 2017 rate review proceeding, including the impact of the Sharyland Asset Exchange and $35 million TCJA federal income tax rate reduction, and reflects a reduction of $6 million due to amortization of excess deferred federal income taxes beginning July 1, 2018.  See TCOS Filings Table above for a listing of Transmission Interim Rate Update Applications and anticipated impacts on revenues for the nine months ended September 30, 2018 and 2017.

· A Decrease in AMS Surcharge and other miscellaneous revenues —The $88 million decrease in AMS surcharge and other miscellaneous revenues is primarily due to a $79 million shift of AMS revenues to distribution base rates and an $11 million energy efficiency program bonus recorded in the prior period. 

Revenues collected for pass-through expenses include the following components. These revenues increased $56 million during the nine-month period ended September 30 and the change reflected: 

· An Increase in TCRF —The increase in our TCRF Third-Party revenue includes $29 million to pass through an increase in third-party wholesale transmission service expense.  See TCRF Filings Table above for a listing of TCRF filings and the anticipated impacts to cash flows for the nine months ended September 30, 2018 and 2017.

· An Increase in EECRF and Other Regulatory Surcharges — The $27 million net increase primarily consists of $20 million recovery of municipal franchise fees related to PUCT Docket No. 46884 and $4 million recovery of rate case expenses, which are offset in taxes other than income taxes and in operation and maintenance expense, respectively.  See EECRF Filings Table above for a listing of EECRF filings impacting revenues for the nine months ended September 30, 2018 and 2017.

Wholesale transmission service expense increased $29 million, or 4%, to $719 million in 2018 due to higher fees paid to third-party transmission entities including the impact of increased distribution load due to the Sharyland Asset Exchange.

Operation and maintenance expenseincreased $107 million, or 20%, to $636 million in 2018.  Operation and maintenance expense increased primarily due to the 2017 rate review order approving an increased level of recovery for employee benefit plans, the self-insurance reserve and rate case expenses of $68 million, higher labor-related costs of $16 million, higher contractor costs of $5 million, higher vegetation management cost of $4 million and higher other costs of $14 million including materials, transportation, energy efficiency program costs and injury and damage claims.  

Depreciation and amortization decreased $78 million to $503 million in 2018.  The decrease is primarily due to an estimated $115 million decrease in depreciation of property, plant, and equipment primarily as a result of the 2017 rate review, partially offset by an estimated $37 million increase attributable to ongoing investments in property, plant and equipment.

Provision in lieu of income taxes totaled $121 million (including a $13 million benefit related to nonoperating income) in 2018 compared to $192 million (including a $17 million benefit related to nonoperating income) in 2017. 

The U.S. federal statutory income tax rate was lowered by the TCJA to 21% in 2018 from 35% in 2017.  The effective income tax rate of 22.1% and 35.9% for the years 2018 and 2017, respectively, on pretax income differs from these rates primarily due to the effect of the Texas margin tax which, in 2017, was mostly offset by the release of taxes and interest on uncertain tax positions and by non-taxable gains on employee benefit plans  and,  in 2018, was partially offset by the amortization of the regulatory liability for excess deferred taxes as a result of the TCJA and also by non-taxable gains on employee benefit plans.

Taxes other than income taxes increased $34 million, or 10%, to $374 million in 2018.  The change is primarily due to a$27 million increase in local franchise taxes and an $7 million increase in property taxes.  The increase in local franchise fees includes $20 million for recovery of certain local franchise fees resulting from the Texas Supreme Court mandate regarding our 2008 rate review, which is discussed in more detail in Note 3 in our 2017 Form 10-K.

Other income and (deductions) - net was unfavorable by $28 million in 2018 compared to 2017.  The variances are primarily due to an increase of $17 million in recoverable employee benefit plan non-service costs and $16 million of costs associated with the Sempra Acquisition, partially offset by an $8 million decrease in professional fees.  See Note 12 to Financial Statements for more information.

Interest expense and related chargesincreased $7 million to $264 million in 2018.  The current period includes a $12 million increase due to higher average borrowings and $3 million higher debt issuance cost amortization, partially offset by an  $8 million decrease attributable to lower average interest rates.

Net income was $83 million higher than the prior period driven by the impacts of the 2017 rate review,  growth in points of delivery and weather, partially offset by higher operation and maintenance expense and costs associated with the Sempra Acquisition, which are not recoverable.

14

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows — Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017

Cash provided by operating activities totaled $1.081  billion and $1.050billion in 2018 and 2017, respectively. The $31 million increase is primarily the result of a $253 million increase in transmission and distribution receipts (including $75 million over-collected due to the TCJA rate change)and a $53 million decrease in employee benefit plan funding, partially offset by $143 million difference in tax payments in the current period compared to net tax refunds from members under the tax sharing agreement in the prior period, increased materials and supply purchases of $62 million, increased payments to third party transmission providers of $23 million,  a $19 million increase in local franchise and property taxes payments,$15 million in payments related to Sempra acquisition costs and  an $8 million increase in mutual assistance costs.  The large prior year tax refund is primarily related to estimated tax payments made in a prior period before the enactment of bonus depreciation on a retroactive basis.

Cash provided by financing activities totaled $229 million and $163 million for 2018 and 2017, respectively.  The $66 million increase includes a decrease in distributions to our members of $207 million, an increase in debt issuances of $200 million, a capital contribution of $144 million and an increase in short-term borrowing of $21 million, partially offset by debt repayments of $501 million.  The capital contributions and decreases in distributions reflect measures to achieve our debt-to-equity ratio established by the PUCT in our 2017 rate review.  See Note 9 to Financial Statements for additional information regarding distributions to our members.

Cash used in investing activities, which consist primarily of capital expenditures, totaled $1.330billion and $1.224billion in 2018 and 2017, respectively.  Both the 2018 and 2017 activity primarily reflects capital expenditures for transmission and distribution facilities to serve new customers and infrastructure capital maintenance spending.

Depreciation and amortization expense reported in the statements of consolidated cash flows was $86 million and $37 million more than the amounts reported in the statements of consolidated income in the nine months ended September 30, 2018 and 2017, respectively.  The differences result from certain regulatory asset amortization reported in operation and maintenance expense and taxes other than income taxes.

Long-Term Debt Activity

In August 2018, we issued the 2028 Notes and the 2048 Notes.  Repayments of long-term debt in the nine months ending September 30, 2018 consisted of $275 million aggregate principal amount of the term loan credit agreement due March 2019 and $550 million aggregate principal amount of the 2018 Notes. The term loan credit agreement was repaid in full, and the 2018 Notes were defeased in August 2018.  See Note 7 to Financial Statements for additional information regarding the repayments and senior secure notes issuances.

Available Liquidity/Commercial Paper Program/Credit Facility

Available Liquidity — Our primary source of liquidity, aside from operating cash flows, has been our ability to borrow under our revolving credit facility, which also supports our CP Program.  Because the commercial paper program is supported by the Credit Facility, commercial paper outstanding is a reduction to the available borrowing capacity.  Cash and cash equivalents totaled $1 million and $21 million at September 30, 2018 and December 31, 2017, respectively.  Considering commercial paper and letters of credit outstanding, available liquidity (cash and available Credit Facility capacity) at September 30, 2018 totaled $893 million, reflecting a decrease of $169 million from December 31, 2017 primarily due to capital spending.

Commercial Paper Program — As we discuss in Note 6 to Financial Statements, on March 26, 2018 we established the CP Program, under which we may issue unsecured commercial paper notes (Notes) on a private placement basis up to a maximum aggregate amount outstanding at any time of $2.0 billion.  A national bank acts as the issuing and paying agent under the CP Program pursuant to the terms of an issuing and paying agent agreement.  Under the CP Program, we issue Notes from time to time, and the proceeds of the Notes are used for short-term financing of our business operations.  At September 30, 2018, we had $1.099 billion of Notes outstanding under the CP Program.     

The CP Program obtains liquidity support from our Credit Facility discussed below.  If at any time funds are not available on favorable terms under the CP Program, we may utilize the Credit Facility for funding.See Note 6 to Financial Statements for additional information regarding the CP Program.

Credit Facility —  At September 30, 2018, we had a $2.0 billion unsecured revolving credit facility that we entered into on November 17, 2017 (Credit Facility) with a five-year term expiring in November 2022.  We have the option of requesting up to two one-year extensions and an option to request an increase in our borrowing capacity of $400 million, in increments of not less than $100 million, provided certain conditions are met, including lender approvals.  At September 30, 2018, we had no outstanding borrowings under the Credit Facility.

Because the CP Program is supported by the Credit Facility, commercial paper outstanding reduces the available borrowing capacity.  Considering the commercial paper outstanding and the limitations described below, available borrowing capacity under the Credit Facility totaled $892 million and $1.041 billion at September 30, 2018 and December 31, 2017, respectively. 

The Credit Facility contains a senior debt-to-capitalization ratio covenant that effectively limits our ability to incur indebtedness in the future.  At September 30, 2018, we were in compliance with the covenant.  See “Credit Rating Provisions, Covenants and Cross Default Provisions” below for additional information on this covenant and the calculation of this ratio.

Under the terms of the Credit Facility, the commitments of the lenders to make loans to us are several and not joint.  Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lender’s commitments under the facility.  See Note 6 to Financial Statements for additional information regarding the Credit Facility.

Regulatory Capital Structure —We have committed to the PUCT to maintain a regulatory capital structure at or below the assumed debt-to-equity ratio established periodically by the PUCT for ratemaking purposes, which is 57.5% debt to 42.5% equity as of September 30, 2018.  Our current regulatory assumed debt-to-equity ratio went into effect on November 27, 2017 as part of the PUCT order issued in the 2017 rate review we filed in PUCT Docket No. 46957.  The PUCT order required us to record a regulatory liability from November 27, 2017 until the new authorized regulatory capital structure was met to reflect our actual capitalization prior to achieving the authorized capital structure. Our authorized regulatory capital structure was met in May 2018, and therefore we ceased accruing amounts to the capital structure refund regulatory liability as of May 2018.  The regulatory liability of $6 million was approved in PUCT Docket No. 48522 and returned to customers in September 2018 through the capital structure refund mechanism approved in the PUCT order issued in the 2017 rate review. Our regulatory capitalization ratio was 56.3% debt to 43.7% equity at September 30, 2018. See Note 9 to Financial Statements for discussion of the regulatory capitalization ratio.  Our ability to incur additional long-term debt will be limited by our regulatory capital structure, and we are able to issue future long-term debt only to the extent that we will be in compliance therewith.

Liquidity Needs, Including Capital Expenditures —Our board of directors, which annually approves capital expenditure estimates for the following year, has approved capital expenditures totaling $1.8 billion in 2018 and $2.0 billion in 2019.Management currently expects to recommend to our board of directors capital expenditures of $2.1 billion to $2.2 billion in each of the years 2020 through 2023, based on the long-term plan presented to our board of directors. These capital expenditures are expected to be used for investment in transmission and distribution infrastructure.

We expect cash flows from operations, combined with availability under the commercial paper program and revolving credit facility, to provide sufficient liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending for at least the next twelve months.  Should additional liquidity or capital requirements arise, we may need to access capital markets, generate equity capital or preserve equity through reductions or suspension of distributions to members.  In addition, we may also consider new debt issuances, repurchases, exchange offers and other transactions in order to refinance or manage our long-term debt.  The inability to raise capital on favorable terms or failure of counterparties to perform under credit or other financial agreements, particularly during any uncertainty in the financial markets, could impact our ability to sustain and grow the business and would likely increase capital costs that may not be recoverable through rates.

We continuously evaluate opportunities to make selective strategic acquisitions involving regulated assets. Additional equity or debt capital may be required to complete any acquisition, including the InfraREIT Acquisition.  In addition, any acquisition may be structured in such a manner that would result in the assumption of secured or unsecured debt and other liabilities. The InfraREIT Acquisition includes InfraREIT’s outstanding debt, which totaled an aggregate of approximately $945 million at September 30, 2018.  Such debt includes revolving credit and term loans which can be refinanced or prepaid without penalty (except for customary LIBOR breakage costs) and secured notes (with an average weighted interest rate of 4.537% at September 30, 2018 and maturity dates in 2020, 2025, 2026, 2029 and 2030), which can also be refinanced or prepaid except that in certain circumstances the terms of such secured notes would require customary make-whole payments in connection with such prepayments or refinancings unless waived. The InfraREIT Acquisition requires PUCT and other regulatory approvals.  For more information on the InfraREIT Acquisition, see Note 13 to Financial Statements.

See “REGULATION AND RATES – Matters with the PUCT – Application to Decrease Rates Based on the TCJA of 2017 (PUCT Docket No. 48325)” below for a discussion of potential impacts to cash flows from this proceeding.

Distributions —In October2018, our board of directors declared a cash distribution of $180 million, which was paid to our members on November 6, 2018.  In July 2018, our board of directors declared a cash distribution of $30 million, which was paid to our members on August 1, 2018.  See Note 9 to Financial Statements for a discussion of distribution restrictions.

Contributions —In November 2018, our members made capital contributions of $140 million.  In April 2018, our members made capital contributions of $144 million.

Pension and OPEB Plan Funding — Our funding for the pension plans and Oncor OPEB Plans in the calendar year 2018 is expected to total $82 million and $35 million, respectively.  In the nine months ended September 30, 2018, we made cash contributions to the pension plans and the Oncor OPEB Plans of $62 million and $31 million, respectively.

Credit Rating Provisions, Covenants and Cross Default Provision

Impact on Liquidity of Credit Ratings — The rating agencies assign credit ratings to certain of our debt securities.  Our access to capital markets and cost of debt could be directly affected by our credit ratings.  Any adverse action with respect to our credit ratings could generally cause borrowing costs to increase and the potential pool of investors and funding sources to decrease.  In the event any adverse action with respect to our credit ratings takes place and causes borrowing costs to increase, we may not be able to recover such increased costs if they exceed our PUCT-approved cost of debt determined in our most recent rate review or subsequent rate reviews.

Most of our large suppliers and counterparties require an expected level of creditworthiness in order for them to enter into transactions with us.  If our credit ratings decline, the costs to operate our business could increase because counterparties could require the posting of collateral in the form of cash-related instruments, or counterparties could decline to do business with us.

Presented below are the credit ratings assigned for our debt securities at November 7, 2018.  In March 2018, as a result of the completion of the Sempra Acquisition, the rating agencies took ratings actions on Oncor resulting in upgraded ratings and changed outlooks.  S&P upgraded our rating to A+ from A and changed our outlook to stable from positive.  Moody’s upgraded our rating to A2 from A3 and changed our outlook to stable from positive.  Fitch upgraded our rating to A from BBB+ and changed our outlook to stable from rating watch positive.  Also in March 2018 regarding our CP Program ratings, Fitch upgraded our rating to F2 from F3, S&P assigned an A-1 short-term rating and Moody’s assigned a Prime-2 short-term rating.  See Note 2 to Financial Statements for information regarding the Sempra Acquisition.

	Senior Secured	Commercial Paper
S&P	A+	A-1
Moody’s	A2	Prime-2
Fitch	A	F2

As described in Note 6 to Financial Statements, we established the CP Program in March 2018.  The CP Program obtains liquidity support from our Credit Facility.  As described in Note 7 to Financial Statements, our long-term debtis currently secured pursuant to the Deed of Trust by a first priority lien on certain of our transmission and distribution assets and is considered senior secured debt. 

A rating reflects only the view of a rating agency, and is not a recommendation to buy, sell or hold securities.  Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Material Credit Rating Covenants — The Credit Facility contains terms pursuant to which the interest rates charged under the agreement may be adjusted depending on credit ratings.  Borrowings under the Credit Facility bear interest at per annum rates equal to, at our option, (i) adjusted LIBOR plus a spread ranging from 0.875% to 1.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt or (ii) an alternate base rate (the highest of (1) the prime rate of JPMorgan Chase, (2) the federal funds effective rate plus 0.50%, and (3) adjusted LIBOR plus 1.00%) plus a spread ranging from 0.00% to 0.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt.  Based on the ratings assigned to our senior secured debt securities at November 7, 2018, our borrowings are generally LIBOR-based and will bear interest at LIBOR plus 1.00%.  A decline in credit ratings would increase the cost of borrowings under the Credit Facility and likely increase the cost of any debt issuances and additional credit facilities.  The CP Program requires prompt notice to the dealer of any notice of intended or potential downgrade of our credit ratings.

Material Financial Covenants—Our Credit Facility contains a financial covenant that requires maintenance of a consolidated senior debt-to-capitalization ratio of no greater than 0.65 to 1.00.  For purposes of this ratio, debt is calculated as indebtedness defined in the Credit Facility (principally, the sum of long-term debt, any capital leases, short-term debt and debt due currently in accordance with GAAP).  Capitalization is calculated as membership interests determined in accordance with GAAP plus indebtedness described above.  At September 30, 2018, we were in compliance with this covenant and all other covenants under the Credit Facility.   

Material Cross Default Provisions — Certain financing arrangements contain provisions that may result in an event of default if there was a failure under other financing arrangements to meet payment terms or to observe other covenants that could result in an acceleration of payments due.  Such provisions are referred to as “cross default” provisions.

Under the Credit Facility, a default by us or any subsidiary in respect of indebtedness in a principal amount in excess of $100 million or any judgments for the payment of money in excess of $100 million that are not discharged within 60 days may cause the maturity of outstanding balances (zero dollars in short-term borrowings and $9 million in letters of credit at November 7) under that facility to be accelerated.

Under the Deed of Trust, an event of default under our indentures would permit the holders of our senior secured notes to exercise their remedies under the Deed of Trust.

Guarantees — At September 30, 2018, we did not have any material guarantees.

OFF-BALANCE SHEET ARRANGEMENTS

At September 30, 2018, we did not have any material off-balance sheet arrangements with special purpose entities or variable interest entities.

COMMITMENTS AND CONTINGENCIES

See Note 8 to Financial Statements for discussion of commitments and contingencies.

CHANGES IN ACCOUNTING STANDARDS

See Note 1 to Financial Statements for discussion of changes in accounting standards.

REGULATION AND RATES

Matters with the PUCT

DCRF (PUCT Docket No. 48231)  —On April 5, 2018, Oncor filed with the PUCT, as well as cities with original jurisdiction over Oncor’s rates, an application for approval of a distribution cost recovery factor (DCRF).  The DCRF will allow Oncor to recover, primarily through its tariff for retail delivery service, certain costs related to its 2017 distribution investments.  The DCRF application we filed requested a $19 million increase in annual distribution revenues. On June 13, 2018, Oncor filed an unopposed stipulation that reduced the annual distribution revenue increase from $19 million to $15 million.The PUCT approved the stipulation August 30, 2018 and the distribution tariffs became effective September 1, 2018.

Application to Decrease Rates Based on the TCJA of 2017 (PUCT Docket No. 48325) — In September 2018, we reached an unopposed stipulation regarding an overall settlement of the TCJA impacts.  The settlement includes, on an annual basis, $144 million related to the reduction of income tax expense currently in rates and $75 million related to amortization of excess deferred federal income taxes. In addition, we agreed to refund the tax rate differential amounts collected and deferred since January 1, 2018 of approximately $75 million in the aggregate as a bill credit in December 2018. The settlement rates have been implemented on an interim basis as we await final PUCT approval.  The pass-through of the impacts of the TCJA to ratepayers is not expected to impact net income. Amortization of excess deferred taxes will result in lower cash inflows as a result of reduced rates to end-use customers. For more information see Note 3 to Financial Statements.

Summary

We cannot predict future regulatory or legislative actions or any changes in economic and securities market conditions.  Such actions or changes could significantly alter our financial position, results of operations or cash flows.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Market risk is the risk that we may experience a loss in value as a result of changes in market conditions such as interest rates that may be experienced in the ordinary course of business.  We may transact in financial instruments to hedge interest rate risk related to our debt, but there are currently no such hedges in place.  All of our long-term debt at September 30, 2018and December 31, 2017 carried fixed interest rates.

The Credit Facility contains terms pursuant to which the interest rates charged under the agreement may be adjusted depending on credit ratings.  The CP Program borrowings may bear interest on a fixed rate or floating rate basis and will vary based on market conditions at the time of borrowings. For information on our interest rates charged under the CP Program and Credit Facility, see Note 6 to Financial Statements.

Except as discussed below, the information required hereunder is not significantly different from the information set forth in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2017 Form 10-K and is therefore not presented herein.

Credit Risk

Credit risk relates to the risk of loss associated with nonperformance by counterparties.  Our customers consist primarily of REPs.  As a prerequisite for obtaining and maintaining certification, a REP must meet the financial resource standards established by the PUCT.  Meeting these standards does not guarantee that a REP will be able to perform its obligations.  REP certificates granted by the PUCT are subject to suspension and revocation for significant violation of PURA and PUCT rules.  Significant violations include failure to timely remit payments for invoiced charges to a transmission and distribution utility pursuant to the terms of tariffs approved by the PUCT.  We believe PUCT rules that allow for the recovery of uncollectible amounts due from nonaffiliated REPs through rates significantly reduce our credit risk.

Our exposure to credit risk associated with trade accounts receivable totaled $691 million at September 30, 2018.  The receivable balance is before the allowance for uncollectible accounts, which totaled $3 million at September 30, 2018.  The exposure includes trade accounts receivable from REPs totaling $557 million, which are almost entirely noninvestment grade.  At September 30, 2018, REP subsidiaries of our two largest counterparties represented approximately 16% and 13% of the trade receivable balance, respectively.  No other parties represented 10% or more of the total trade accounts receivable balance.  We view our exposure to these customers to be within an acceptable level of risk tolerance considering PUCT rules and regulations; however, this concentration increases the risk that a default could have a material effect on cash flows.

15

FORWARD-LOOKING STATEMENTS

This report and other presentations made by us contain “forward-looking statements.”  All statements, other than statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise, that address activities, events or developments that we expect or anticipate to occur in the future, including such matters as projections, capital allocation, future capital expenditures, business strategy, competitive strengths, goals, future acquisitions or dispositions, development or operation of facilities, market and industry developments and the growth of our business and operations (often, but not always, through the use of words or phrases such as “intends,” “plans,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “should,” “projection,” “target,” “goal,” “objective” and “outlook”), are forward-looking statements.  Although we believe that in making any such forward-looking statement our expectations are based on reasonable assumptions, any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to the discussion of risk factors under “Item 1A.  Risk Factors” and “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2017 Form 10-K, “Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this report and the following important factors, among others, that could cause actual results to differ materially from those projected in such forward-looking statements:

· prevailing governmental policies and regulatory actions, including those of the U.S. Congress, the President of the U.S., the Texas Legislature, the Governor of Texas, the U.S. Federal Energy Regulatory Commission, the PUCT, the North American Electric Reliability Corporation, the Texas RE, Inc., the Environmental Protection Agency, and the Texas Commission on Environmental Quality, with respect to:

- allowed rate of return;

- permitted capital structure;

- industry, market and rate structure;

- recovery of investments;

- acquisition and disposal of assets and facilities;

- operation and construction of facilities;

- changes in tax laws and policies, including the impact of the TCJA; and

- changes in and compliance with environmental, reliability and safety laws and policies;

· legal and administrative proceedings and settlements, including the exercise of equitable powers by courts;

· weather conditions and other natural phenomena;

· acts of sabotage, wars or terrorist or cyber security threats or activities;

· economic conditions, including the impact of a recessionary environment;

· unanticipated population growth or decline, or changes in market demand and demographic patterns, particularly in ERCOT;

· changes in business strategy, development plans or vendor relationships;

· unanticipated changes in interest rates or rates of inflation;

· unanticipated changes in operating expenses, liquidity needs and capital expenditures;

· inability of various counterparties to meet their financial obligations to us, including failure of counterparties to perform under agreements;

· general industry trends;

· hazards customary to the industry and the possibility that we may not have adequate insurance to cover losses resulting from such hazards;

· changes in technology used by and services offered by us;

· significant changes in our relationship with our employees, including the availability of qualified personnel, and the potential adverse effects if labor disputes or grievances were to occur;

· changes in assumptions used to estimate costs of providing employee benefits, including pension and OPEB, and future funding requirements related thereto;

· significant changes in critical accounting policies material to us;

· commercial bank and financial market conditions, access to capital, the cost of such capital, and the results of financing and refinancing efforts, including availability of funds in the capital markets and the potential impact of disruptions in U.S. credit markets;

· circumstances which may contribute to future impairment of goodwill, intangible or other long-lived assets;

· financial restrictions under our revolving credit facility and indentures governing our debt instruments;

· our ability to generate sufficient cash flow to make interest payments on our debt instruments;

· actions by credit rating agencies; and

· our ability to effectively execute our operational strategy.

In addition, such forward-looking statements include, but are not limited to, statements about the timing of the anticipated transaction contemplated by the InfraREIT Acquisition, and any of the applicable parties’ post-acquisition plans and intentions, and other statements that are not historical facts. The following important factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements:

· the satisfaction of conditions to closing the definitive agreement for the InfraREIT Acquisition;

· obtaining required governmental, regulatory and lender approvals that may delay the InfraREIT Acquisition or result in the imposition of conditions that could cause the parties to abandon the transaction or be onerous to us;

· the expected timing to consummate the proposed InfraREIT Acquisition;

· the risk that the businesses will not be integrated successfully;

· the risk that any potential cost savings and any other potential synergies from the InfraREIT Acquisition may not be fully realized or may take longer to realize than expected; and

· the diversion of management time and attention to issues related to the InfraREIT Acquisition.

Any forward-looking statement speaks only at the date on which it is made, and, except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and it is not possible for us to predict all of them; nor can we assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.  As such, you should not unduly rely on such forward-looking statements.

ITEM 4.   CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures in effect at the end of the current period included in this quarterly report.  Based on the evaluation performed, our management, including the principal executive officer and principal financial officer, concluded that the disclosure controls and procedures were effective.  During the most recent fiscal quarter covered by this report, no changes in internal controls over financial reporting have occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

16

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Reference is made to the discussion in Notes 2, 3 and 8 to Financial Statements regarding legal and regulatory proceedings.

ITEM 1A.   RISK FACTORS

There are numerous factors that affect our business and results of operations, many of which are beyond our control.  In addition to the other information set forth in this report, including “Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations,” you should carefully consider the factors discussed in “Part I, Item 1A.  Risk Factors” in our 2017 Form 10-K and the risk factors set forth below, which could materially affect our business, financial condition or future results.  The risks described in such reports are not the only risks we face.

The InfraREIT Acquisition is subject to various closing conditions, including the receipt of governmental, regulatory and lender approvals that may delay the transaction or result in the imposition of conditions that could cause the parties to abandon the transaction or be onerous to Oncor. Even if the InfraREIT Acquisition is consummated, we may not be able to integrate the business of InfraREIT successfully with our own or realize the anticipated benefits of the acquisition.

On October 18, 2018, we entered into a definitive agreement to acquire InfraREIT and its subsidiary, InfraREIT Partners. Consummation of the acquisition is subject to customary conditions to closing, including the receipt of required governmental, regulatory and lender approvals that may delay the transaction or result in the imposition of conditions that could cause the parties to abandon the transaction or be onerous to Oncor. If any condition to the closing of the acquisition is not satisfied or waived, the acquisition will not be completed. We and InfraREIT may also terminate the InfraREIT Merger Agreement under certain circumstances. Any or all of the preceding could jeopardize our ability to consummate the acquisition on the already negotiated terms. To the extent the InfraREIT Acquisition is not completed for any reason, we would have devoted substantial resources and management attention to the transaction without realizing the accompanying benefits expected by our management.

The InfraREIT Acquisition involves the combination of two companies that currently operate as independent companies. If the InfraREIT Acquisition is consummated, we would expect to be required to devote significant management attention and resources to integrating our business practices with those of InfraREIT. We may encounter difficulties in the integration process that could have an adverse impact on Oncor, and any potential cost savings and any other potential synergies from the transaction may not be fully realized or may take longer to realize than expected.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.   OTHER INFORMATION

None.

17

ITEM 6.   EXHIBITS

(a)   Exhibits provided as part of Part II are:
Exhibits	Previously Filed*	As
	With File Number	Exhibit
(4)	Instruments Defining the Rights of Security Holders, Including Indentures.
4(a)	333-100240 Form 8-K (filed August 14, 2018)	4.1		Officer’s Certificate, dated August 10, 2018, establishing the terms of Oncor’s 3.70% Senior Secured Notes due 2028 and 4.10% Senior Secured Notes due 2048.
4(b)	333-100240 Form 8-K (filed August 14, 2018)	4.2		Registration Rights Agreement, dated August 10, 2018, among Oncor and the representatives of the initial purchasers of the Notes.
(31)	Rule 13a – 14(a)/15d – 14(a) Certifications.
31(a)			—	Certification of E. Allen Nye, Jr., chief executive of Oncor Electric Delivery Company LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)			—	Certification of Don J. Clevenger, senior vice president and chief financial officer of Oncor Electric Delivery Company LLC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)	Section 1350 Certifications.
32(a)			—	Certification of E. Allen Nye, Jr., chief executive of Oncor Electric Delivery Company LLC, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32(b)		—	Certification of Don J. Clevenger, senior vice president and chief financial officer of Oncor Electric Delivery Company LLC, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99)	Additional Exhibits.
99		—	Condensed Statement of Consolidated Income – Twelve Months Ended September 30, 2018.

	XBRL Data Files.
101.INS		—	XBRL Instance Document
101.SCH		—	XBRL Taxonomy Extension Schema Document
101.CAL		—	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		—	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		—	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		—	XBRL Taxonomy Extension Presentation Linkbase Document

__________________

*   Incorporated herein by reference.

18

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ONCOR ELECTRIC DELIVERY COMPANY LLC

!!
By:	/s/ Don J. Clevenger
	Don J. Clevenger
	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

Date:  November 7, 2018

19

EX-31.A

Exhibit 31(a)

ONCOR ELECTRIC DELIVERY COMPANY LLC

Certificate of Chief Executive Officer

Pursuant to Section 302 of Sarbanes – Oxley Act of 2002

I, E. Allen Nye, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Qof Oncor Electric Delivery Company LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 7, 2018		/s/ E. Allen Nye, Jr.
	Name:	E. Allen Nye, Jr.
	Title:	Chief Executive

EX-31.B

Exhibit 31(b)

ONCOR ELECTRIC DELIVERY COMPANY LLC

Certificate of Chief Financial Officer

Pursuant to Section 302 of Sarbanes – Oxley Act of 2002

I, Don J. Clevenger,  certify that:

1. I have reviewed this quarterly report on Form 10-Q of Oncor Electric Delivery Company LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 7, 2018		/s/ Don J. Clevenger
	Name:	Don J. Clevenger
	Title:	Senior Vice President and Chief Financial Officer

EX-32.A

Exhibit 32(a)

ONCOR ELECTRIC DELIVERY COMPANY LLC

Certificate of Chief Executive Officer

Pursuant to Section 906of Sarbanes – Oxley Act of 2002

The undersigned, E. Allen Nye, Jr.,  Chief Executive of Oncor Electric Delivery Company LLC (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s QuarterlyReport on Form 10-Q for the period ended September 30, 2018 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 7thday of November,2018.

	/s/ E. Allen Nye, Jr.
Name:	E. Allen Nye, Jr.
Title:	Chief Executive

A signed original of this written statement required by Section 906 has been provided to Oncor Electric Delivery Company LLC and will be retained by Oncor Electric Delivery Company LLC and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.B

Exhibit 32(b)

ONCOR ELECTRIC DELIVERY COMPANY LLC

Certificate of Chief Financial Officer

Pursuant to Section 906of Sarbanes – Oxley Act of 2002

The undersigned, Don J. Clevenger, Senior Vice President and Chief Financial Officer of Oncor Electric Delivery Company LLC (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2018 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 7thday of November, 2018.

	/s/ Don J. Clevenger
Name:	Don J. Clevenger
Title:	Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Oncor Electric Delivery Company LLC and will be retained by Oncor Electric Delivery Company LLC and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99

Exhibit 99

ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED STATEMENT OF CONSOLIDATED INCOME

(Unaudited)

	Twelve Months Ended
	September 30,2018(1)
	(millions of dollars)
Operating revenues	$	4,097
Operating expenses:
Wholesale transmission service		958
Operation and maintenance		838
Depreciation and amortization		684
Provision in lieu of income taxes		191
Taxes other than amounts related to income taxes		496
Total operating expenses		3,167
Operating income		930
Other income and (deductions) - net		(74)
Nonoperating provision in lieu of income taxes		5
Interest expense and related charges		349
Net income	$	502

________________

(1) As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1 to Financial Statements.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 07, 2018
Entity Registrant Name	ONCOR ELECTRIC DELIVERY CO LLC
Entity Central Index Key	0001193311
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		0
Oncor Electric Delivery Holdings Company LLC [Member]
Entity Outstanding Membership Interests		80.25%
Texas Transmission Investment LLC [Member]
Entity Outstanding Membership Interests		19.75%

XML

Condensed Statements Of Consolidated Income - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	[1]	Sep. 30, 2018	Sep. 30, 2017
Condensed Statements Of Consolidated Income [Abstract]
Operating revenues (Note 4)	$ 1,095	$ 1,068		$ 3,106	$ 2,967
Operating expenses:
Wholesale transmission service	237	230		719	690
Operation and maintenance (Note 11)	214	176		636	529
Depreciation and amortization	169	193		503	581
Provision in lieu of income taxes (Note 11)	54	97		134	209
Taxes other than amounts related to income taxes	128	120		374	340
Total operating expenses	802	816		2,366	2,349
Operating income	293	252		740	618
Other income and (deductions) - net (Note 12)	(13)	(13)		(63)	(35)
Nonoperating benefit in lieu of income taxes	(3)	(5)		(13)	(17)
Interest expense and related charges (Note 12)	89	87		264	257
Net income	$ 194	$ 157		$ 426	$ 343

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

XML

Condensed Statements Of Consolidated Comprehensive Income - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017		Sep. 30, 2018	Sep. 30, 2017
Condensed Statements Of Consolidated Comprehensive Income [Abstract]
Net income	$ 194	$ 157	[1]	$ 426	$ 343
Other comprehensive income (loss):
Cash flow hedges – derivative value net loss recognized in net income (net of tax)				2	1
Defined benefit pension plans (net of tax)	1	1		2	2
Total other comprehensive income	1	1		4	3
Comprehensive income	$ 195	$ 158		$ 430	$ 346

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

XML

Condensed Statements Of Consolidated Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows - operating activities:
Net income	$ 426	$ 343
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	589	618
Provision in lieu of deferred income taxes	37	250
Other - net	(1)	(2)
Changes in operating assets and liabilities:
Regulatory accounts related to reconcilable tariffs (Note 5)	130	30
Other operating assets and liabilities	(100)	(189)
Cash provided by operating activities	1,081	1,050
Cash flows - financing activities:
Issuances of long-term debt (Note 7)	800	600
Repayment of long-term debt (Note 7)	(825)	(324)
Change in short-term borrowings (Note 6)	149	128
Capital contributions from members (Note 9)	144
Distributions to members (Note 9)	(30)	(237)
Debt discount, premium, financing and reacquisition costs - net	(9)	(4)
Cash provided by financing activities	229	163
Cash flows - investing activities:
Capital expenditures (Note 11)	(1,345)	(1,234)
Other - net	15	10
Cash used in investing activities	(1,330)	(1,224)
Net change in cash and cash equivalents	(20)	(11)
Cash and cash equivalents - beginning balance	21	16
Cash and cash equivalents - ending balance	$ 1	$ 5

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 1	$ 21
Trade accounts receivable - net (Note 12)	688	635
Amounts receivable from members related to income taxes (Note 11)		26
Materials and supplies inventories - at average cost	115	91
Prepayments and other current assets	95	88
Total current assets	899	861
Investments and other property (Note 12)	121	113
Property, plant and equipment - net (Note 12)	15,782	14,879
Goodwill (Note 12)	4,064	4,064
Regulatory assets (Note 5)	1,850	2,180
Other noncurrent assets	20	23
Total assets	22,736	22,120
Current liabilities:
Short-term borrowings (Note 6)	1,099	950
Long-term debt due currently (Note 7)	250	550
Trade accounts payable	253	242
Amounts payable to members related to income taxes (Note 11)	32	21
Accrued taxes other than amounts related to income	168	190
Accrued interest	92	83
Other current liabilities	190	188
Total current liabilities	2,084	2,224
Long-term debt, less amounts due currently (Note 7)	5,836	5,567
Liability in lieu of deferred income taxes (Note 11)	1,560	1,517
Regulatory liabilities (Note 5)	2,763	2,807
Employee benefit obligations and other (Notes 10 and 12)	2,046	2,102
Total liabilities	14,289	14,217
Commitments and contingencies (Note 8)
Membership interests (Note 9):
Capital account — number of interests outstanding 2018 and 2017 - 635,000,000	8,544	8,004
Accumulated other comprehensive loss	(97)	(101)
Total membership interests	8,447	7,903
Total liabilities and membership interests	$ 22,736	$ 22,120

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Condensed Consolidated Balance Sheets (Parenthetical) - shares	Sep. 30, 2018	Dec. 31, 2017
Condensed Consolidated Balance Sheets [Abstract]
Capital account, interests outstanding	635,000,000	635,000,000

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Business and Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Business and Significant Accounting Policies [Abstract]

BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

1.    BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

References in this report to “we,” “our,” “us” and “the company” are to Oncor.  See “Glossary” for definition of terms and abbreviations.

We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to REPs that sell power in the north-central, eastern and western parts of Texas.  We are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of STIH, a direct wholly-owned subsidiary of STH. In connection with the Sempra Acquisition, on March 9, 2018, STH became an indirect wholly- owned subsidiary of Sempra.  Oncor Holdings owns 80.25% of our membership interests and Texas Transmission owns 19.75% of our membership interests.  We are managed as an integrated business; consequently, there are no separate reportable business segments.

Various “ring-fencing” measures that had been taken to enhance our credit quality and the separateness between the Oncor Ring-Fenced Entities and its majority owner (formerly the Texas Holdings Group and now Sempra) continue to remain in effect after the Sempra Acquisition.  These measures serve to mitigate our and Oncor Holdings’ credit exposure to Sempra and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be substantively consolidated with the assets and liabilities of Sempra in connection with a bankruptcy of one or more Sempra entities.  Such measures include, among other things: the 19.75% equity interest held by Texas Transmission; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support to or receiving credit support from Sempra entities.  The assets and liabilities of the Oncor Ring-Fenced Entities are separate and distinct from those of Sempra.  None of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of Sempra entities.  We do not bear any liability for debt or contractual obligations of Sempra, and vice versa.  Accordingly, our operations are conducted, and our cash flows are managed, independently from Sempra.  For more information on ring-fencing measures, see Note 2.

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

In April 2014, EFH Corp. and the substantial majority of its direct and indirect subsidiaries at the time, including EFIH, EFCH and TCEH, commenced proceedings under Chapter 11 of the U.S. Bankruptcy Code. The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  In connection with the plans of reorganization in the EFH Bankruptcy Proceedings, on March 9, 2018, Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH (Sempra Acquisition). See Note 2 for further information. 

Basis of Presentation

These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the 2017 Form 10-K.  In the opinion of Oncor management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been made.  All intercompany items and transactions have been eliminated in consolidation.  The results of operations for an interim period may not give a true indication of results for a full year due to seasonality.  All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use of Estimates

Preparation of our financial statements requires management to make 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.  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.  No material adjustments were made to previous estimates or assumptions during the current period.

Goodwill

We evaluate goodwill for impairment annually and whenever events or changes in circumstances indicate that an impairment may exist.  Beginning in 2018, we elected to change our annual goodwill assessment date from December 1 to October 1 to correspond with the assessment date of our new majority owner.  We do not believe this change in the assessment date is a material change.

Changes in Accounting Standards  

Since May 2014, the Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, along with other supplemental guidance (together, Topic 606).  Topic 606 introduced new, increased requirements for disclosure of revenue in financial statements and guidance intended to eliminate inconsistencies in the recognition of revenue.   We adopted Topic 606 effective January 1, 2018 using the modified retrospective approach and elected the practical expedient available that allows an entity to recognize revenue in the amount to which the entity has the right to invoice related to performance completed to date.  Our revenues are generally recognized when the underlying service has been provided in an amount prescribed by the related tariff.  The new guidance did not change this pattern of recognition and therefore the adoption did not have a material effect on our reported results of operations, financial position or cash flows.  Topic 606 also requires the separate presentation of “alternative revenue program” revenues on the income statement. We anticipate less than $20 million annually in alternative revenue program revenues related to our energy efficiency program and will disclose such activity in the notes to financial statements.  See Note 4 for additional disclosures about revenues from contracts with customers.

In February 2016, the FASB issued ASU 2016-02 which created FASB Topic 842, Leases (Topic 842).  Topic 842 amends previous GAAP to require the balance sheet recognition of substantially all lease assets and liabilities, including operating leases.  Operating lease liabilities are not classified as debt for GAAP purposes under Topic 842 and are not treated as debt for regulatory purposes.  Under current standards, all of Oncor’s existing leases meet the definition of an operating lease.  Under the new rules, the recognition of any finance leases (currently known as capital leases) on the balance sheet would be classified as debt for GAAP purposes and are expected to be defined as debt for our regulatory capital structure purposes (see Note 9 for details) similar to the current capital lease treatment.  We plan to adopt Topic 842 on January 1, 2019 and we expect to use certain practical expedients and policy elections available under the guidance including a practical expedient to not assess whether existing land easements that were not previously accounted for as leases are or contain a lease under Topic 842, an adoption method to not restate comparative periods and a policy election to forego the application of Topic 842 recognition requirements to short-term leases.  The initial adoption of Topic 842 will affect our balance sheet, as our contracts for office space and fleet vehicles are currently classified as operating leases.  Subsequent to adoption, to the extent Oncor enters into finance leases, its credit facility covenants and capitalization ratios could be impacted.  We continue to evaluate our contracts for proper treatment under the new standards and the estimated impact on our financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment to Topic 715, Compensation – Retirement Benefits.  ASU 2017-07 requires the non-service cost components of net retirement benefit plan costs be presented as non-operating in the income statement.  In addition, only the service cost component of net retirement benefit plan cost is eligible for capitalization as part of inventory or property, plant and equipment.  We adopted ASU 2017-07 on January 1, 2018.  The presentation of costs is required to be applied on a retrospective basis while the capitalization eligibility requirement is applied on a prospective basis.  The guidance allows a practical expedient that permits use of previously disclosed service costs and non-service costs of the Pension and OPEB Plans in the comparative periods as appropriate estimates when recasting the presentation of these costs in the income statements.  We have elected this practical expedient.  For cash flow purposes on a prospective basis, non-service costs will be reflected as a reduction to operating cash flows, offset by lower cash used in investing activities (lower capital expenditures).  The new guidance did not have a material effect on our results of operations, financial position or net change in total cash flows and we do not expect the guidance to have a material effect on our rate-making process.  For the three- and nine-month periods ended September 30, 2017, the adoption of ASU 2017-07 resulted in a reclassification of $8 million and $23 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $3 million and $9 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.  For the years 2015, 2016 and 2017, the reclassification amounts are $28 million, $28 million and $31 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $10 million, $10 million and $11 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income (AOCI) to capital accounts for stranded tax effects resulting from the TCJA which we expect to elect.  Under ASU 2018-02, an entity will be required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from AOCI.  Our stranded tax effects in AOCI are approximately $4 million and will increase our capital account upon reclassification.  ASU 2018-02 can be applied either as of the beginning of the period of adoption or retrospectively as of the date of enactment of the TCJA and to each period in which the effect of the TCJA is recognized.  ASU 2018-02 is effective for our 2019 annual reporting period, including interim periods therein, with early adoption permitted.  We plan to adopt the standard on a prospective basis, January 1, 2019.

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EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

9 Months Ended

Sep. 30, 2018

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor [Abstract]

EFH BANKRUPTCY PROCEEDINGS AND CHANGE IN INDIRECT OWNERSHIP OF ONCOR

2.   EFH BANKRUPTCY PROCEEDINGS AND CHANGE IN INDIRECT OWNERSHIP OF ONCOR 

In April 2014, EFH Corp. and the substantial majority of its direct and indirect subsidiaries at the time, including EFIH, EFCH and TCEH, commenced proceedings under Chapter 11 of the U.S. Bankruptcy Code. The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  In 2016, pursuant to a plan of reorganization confirmed by the bankruptcy court, the TCEH Debtors exited bankruptcy pursuant to the Vistra Spin-Off.   As a result of the Vistra Spin-Off, Vistra and its subsidiaries, including Luminant and TXU Energy, ceased to be related parties of ours as of October 3, 2016.  See Note 11 for details of Oncor’s related-party transactions with members of the Texas Holdings Group.  In connection with the plans of reorganization in the EFH Bankruptcy Proceedings, on March 9, 2018, Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH (Sempra Acquisition), as discussed in further detail below. 

Prior to consummation of the Sempra Acquisition, EFH Corp. entered into various merger agreements, which failed to close, with other parties in connection with the EFH Bankruptcy Proceedings and the potential transfer of its indirect ownership interest in Oncor. For a summary of those merger agreements and related regulatory proceedings, please see Note 2 to Financial Statements in the 2017 Form 10-K.

Sempra Acquisition

In August 2017, EFH Corp. and EFIH entered into an Agreement and Plan of Merger (Sempra Merger Agreement) with Sempra and one of its wholly-owned subsidiaries (collectively, the Sempra Parties) that contemplated the Sempra Parties acquiring the ownership interests in Oncor that were indirectly held by EFH Corp.  The Sempra Acquisition closed on March 9, 2018. As a result of the Sempra Acquisition, EFH Corp. merged with an indirect subsidiary of Sempra, with EFH Corp. (renamed STH) continuing as the surviving company and an indirect, wholly-owned subsidiary of Sempra.  The Sempra Merger Agreement did not impose any conditions on the EFH Debtors regarding Texas Transmission’s minority interest in Oncor. Accordingly, the Sempra Merger Agreement provided for the acquisition by Sempra of the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH.  In accordance with the Sempra Merger Agreement, Sempra paid cash consideration of approximately $9.45 billion to acquire the indirect 80.03% outstanding membership interest in Oncor.  In addition, in a separate transaction, Oncor Holdings acquired 0.22% of the outstanding membership interests in Oncor from Investment LLC.  After the Sempra Acquisition, Texas Transmission continued to own 19.75% of Oncor’s outstanding membership interests.  The Sempra Merger Agreement was consummated on March 9, 2018 after obtaining the approval of the bankruptcy court in the EFH Bankruptcy Proceedings, the Federal Communications Commission and the PUCT. 

Pursuant to the terms of the Sempra Merger Agreement, in October 2017, Oncor and Sempra filed in PUCT Docket No 47675 a joint application with the PUCT seeking certain regulatory approvals with respect to the transactions contemplated by the amended joint plan of reorganization filed in September 2017 by the EFH Debtors (Sempra Plan). At its open meeting on March 8, 2018, the PUCT approved a final order adopting a settlement stipulation allowing the Sempra Acquisition to proceed.  For more information regarding the Sempra Settlement Stipulation and the proceedings in PUCT Docket No. 47675, see “Sempra PUCT Proceedings” below.

In connection with the closing of the Sempra Acquisition, Oncor’s Limited Liability Company Agreement was amended and restated in its entirety on March 9, 2018. The Limited Liability Company Agreement, among other things, provides for the management of Oncor by a board of directors consisting of 13 members, including seven “disinterested directors” (as defined in the Limited Liability Company Agreement), two directors designated indirectly by Sempra, two directors designated by Texas Transmission (subject to certain conditions) and two directors that are current or former officers of Oncor.

Management Equity Purchase     

On March 9, 2018, Oncor entered into an Interest Transfer Agreement (OMI Agreement) with Investment LLC, Oncor Holdings and Sempra. Pursuant to the 2008 Equity Interests Plan for Key Employees of Oncor Electric Delivery Company LLC and its affiliates, certain members of Oncor’s management, including Oncor’s executive officers and independent directors on Oncor’s board of directors, were granted the opportunity to purchase Class B equity interests (Class B Interests) in Investment LLC, an entity whose only assets consist of equity interests in Oncor. Investment LLC held 1,396,008 of the outstanding limited liability company interests in Oncor (the OMI Interests), which represented 0.22% of the outstanding membership interests in Oncor. For a description of the amounts of Class B Interests that were beneficially owned by members of Oncor’s board of directors and each of Oncor’s named executive officers, see “Security Ownership of Certain Beneficial Owners and Management and Related Equity Holder Matters – Security Ownership of Equity Interests of Oncor of Certain Beneficial Owners and Management.” in the 2017 Form 10-K.

Pursuant to the OMI Agreement, in connection with the closing of the Sempra Acquisition, Investment LLC transferred to Oncor Holdings all of the OMI Interests in exchange for $26 million in cash, which represents approximately $18.60 for each OMI Interest.

PUCT Matters Related to EFH Bankruptcy Proceedings

Previous Merger Agreement PUCT Proceedings

Prior to consummation of the Sempra Acquisition, EFH Corp. entered into various merger agreements, which failed to close, with other parties in connection with the EFH Bankruptcy Proceedings and the potential transfer of its indirect ownership interest in Oncor. For a summary of those merger agreements and related PUCT proceedings, please see Note 2 to Financial Statements in the 2017 Form 10-K.

Sempra PUCT Proceedings

Pursuant to the terms of the Sempra Merger Agreement, in October 2017 Oncor and Sempra filed in PUCT Docket No. 47675 a joint application with the PUCT seeking certain regulatory approvals with respect to the Sempra Plan.  In December 2017, Oncor and Sempra entered into a stipulation with the Staff of the PUCT, the Office of Public Utility Counsel, the Steering Committee of Cities Served by Oncor and the Texas Industrial Energy Consumers reflecting the parties’ settlement of all issues in the PUCT proceeding regarding the joint application. On January 5, 2018, Oncor, Sempra and the Staff of the PUCT made a joint filing with the PUCT requesting that the PUCT approve the acquisition, consistent with the governance, regulatory and operating commitments in a revised stipulation joined by two additional parties. On January 23, 2018, Oncor and Sempra filed an additional revision to the revised stipulation (Sempra Settlement Stipulation) and announced that two more parties had joined in the Sempra Settlement Stipulation. On February 2, 2018, Oncor and Sempra announced that all of the intervenors in PUCT Docket No. 47675 had signed on to the Sempra Settlement Stipulation. At its February 15, 2018 open meeting, the PUCT directed PUCT Staff to prepare an order based on the Sempra Settlement Stipulation for consideration by the PUCT at its open meeting on March 8, 2018. At the open meeting, the PUCT approved the final order.

The parties to the Sempra Settlement Stipulation agreed that Sempra’s acquisition of EFH Corp. was in the public interest and would bring substantial benefits.  The Sempra Settlement Stipulation requested that the PUCT approve the Sempra Acquisition.  The joint application filed with the PUCT and the Sempra Settlement Stipulation outline certain ring-fencing measures, governance mechanisms and restrictions that apply after the Sempra Acquisition. As a result of these ring-fencing measures, Sempra will not control Oncor, and the ring-fencing measures limit Sempra’s ability to direct the management, policies and operations of Oncor, including the deployment or disposition of Oncor’s assets, declarations of dividends, strategic planning and other important corporate issues and actions. These limitations include limited representation on the board of directors of Oncor.

Pursuant to the order issued by the PUCT in PUCT Docket No. 47675 with respect to its approval of the transaction contemplated by the Sempra Plan (Sempra Order), following the consummation of the Sempra Acquisition, the board of directors of Oncor is required to consist of thirteen members and be constituted as follows:

· seven members, which we refer to as disinterested directors, (i) shall be independent directors in all material respects under the rules of the New York Stock Exchange in relation to Sempra and its subsidiaries and affiliated entities and any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, and (ii) shall have no material relationship with Sempra or its affiliates or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings at the time of the Sempra Acquisition or within the previous ten years;

· two members shall be designated by Sempra (through Oncor Holdings);

· two members shall be appointed by Texas Transmission; and

· two members shall be current or former officers of Oncor (the Oncor Officer Directors), initially Robert S. Shapard and E. Allen Nye, Jr., who are the chair of the Oncor board and chief executive of Oncor, respectively.

In order for a current or former officer of Oncor to be eligible to serve as an Oncor Officer Director, such officer cannot have worked for Sempra or any of its affiliates (excluding Oncor Holdings and Oncor) or any other entity with a direct or indirect ownership interest in Oncor or Oncor Holdings in the ten-year period prior to such officer being employed by Oncor.  Oncor Holdings, at the direction of STIH (a subsidiary of STH), which is a wholly-owned indirect subsidiary of, and controlled by, Sempra following the Sempra Acquisition), has the right to nominate and/or seek the removal of the Oncor Officer Directors, with such nomination or removal subject to approval by a majority of the Oncor board of directors.

In addition, the Sempra Order provides that Oncor’s board cannot be overruled by the board of Sempra or any of its subsidiaries on dividend policy, the issuance of dividends or other distributions (except for contractual tax payments), debt issuance, capital expenditures, operation and maintenance expenditures, management and service fees, and appointment or removal of board members, provided that certain actions may also require the additional approval of the Oncor Holdings board of directors. The Sempra Order also provides that any changes to the size, composition, structure or rights of the board must first be approved by the PUCT. In addition, if Sempra acquires Texas Transmission’s interest in Oncor, the two board positions on Oncor’s board of directors that Texas Transmission is entitled to appoint shall be eliminated and the size of Oncor’s board of directors will be reduced by two.

Additional regulatory commitments, governance mechanisms and restrictions provided in the Sempra Order include, among others:

· A majority of the disinterested directors of Oncor must approve any annual or multi-year budget if the aggregate amount of capital expenditures or operating and maintenance expenditures in such budget is more than a 10% increase or decrease from the corresponding amounts of such expenditures in the budget for the preceding fiscal year or multi-year period, as applicable;

· Oncor will make minimum aggregate capital expenditures equal to at least $7.5 billion over the period from January 1, 2018 through December 31, 2022 (subject to certain possible adjustments);

· Sempra was required to make, within 60 days after the Sempra Acquisition, its proportionate share of the aggregate equity investment in Oncor in an amount necessary for Oncor to achieve a capital structure consisting of 57.5% long-term debt to 42.5% equity, as calculated for regulatory purposes;

Sempra contributed $117 million in cash commensurate with its ownership interest to Oncor on April 23, 2018, as discussed in further detail in Note 9.

· Oncor may not pay any dividends or make any other distributions (except for contractual tax payments) if a majority of its disinterested directors determines that it is in the best interests of Oncor to retain such amounts to meet expected future requirements;

· At all times, Oncor will remain in compliance with the debt-to-equity ratio established by the PUCT from time to time for ratemaking purposes, and Oncor will not pay dividends or other distributions (except for contractual tax payments), if that payment would cause its debt-to-equity ratio to exceed the debt-to-equity ratio approved by the PUCT;

· If the credit rating on Oncor’s senior secured debt by any of the three major rating agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT;

· Without the prior approval of the PUCT, neither Sempra nor any of its affiliates (excluding Oncor) will incur, guaranty or pledge assets in respect of any indebtedness that is dependent on the revenues of Oncor in more than a proportionate degree than the other revenues of Sempra or on the stock of Oncor, and there will be no debt at STH or STIH at any time following the closing of the Sempra Acquisition;

· Neither Oncor nor Oncor Holdings will lend money to or borrow money from Sempra or any of its affiliates (other than Oncor subsidiaries), or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, and neither Oncor nor Oncor Holdings will share credit facilities with Sempra or any of its affiliates (other than Oncor subsidiaries), or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings;

· Oncor will not seek recovery in rates of any expenses or liabilities related to EFH Corp.’s bankruptcy, or (1) any tax liabilities resulting from the Vistra Spin-Off, (2) any asbestos claims relating to non-Oncor operations of EFH Corp. or (3) any make-whole claims by holders of debt securities issued by EFH Corp. or EFIH, and Sempra was required to file with the PUCT a plan providing for the extinguishment of the liabilities described in items (1) through (3) above, which protects Oncor from any harm (which plan was filed with the PUCT on April 6, 2018 in PUCT Docket No. 48119);

· There must be maintained certain “separateness measures” that reinforce the financial separation of Oncor from STH and STH’s owners, including a requirement that dealings between Oncor, Oncor Holdings and their subsidiaries with Sempra, any of Sempra’s other affiliates or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, must be on an arm’s-length basis, limitations on affiliate transactions, separate recordkeeping requirements and a prohibition on pledging Oncor assets or stock for any entity other than Oncor;

· No transaction costs or transition costs related to the Sempra Acquisition (excluding Oncor employee time) will be borne by Oncor’s customers nor included in Oncor’s rates;

· Sempra will continue to hold indirectly at least 51% of the ownership interests in Oncor and Oncor Holdings for at least five years following the closing of the Sempra Acquisition, unless otherwise specifically authorized by the PUCT; and

· Oncor will provide bill credits to electric delivery rates for ultimate credits to customers in an amount equal to 90% of any interest rate savings achieved due to any improvement in its credit ratings or market spreads compared to those as of June 30, 2017 until final rates are set in the next Oncor base rate case filed after PUCT Docket No. 46957 (except that savings will not be included in credits if already realized in rates); and one year after the Sempra Acquisition, Oncor will provide bill credits to electric delivery rates for inclusion in customer bills equal to 90% of any synergy savings until final rates are set in the next Oncor base rate proceeding after the 2017 rate review (PUCT Docket No. 46957), at which time any total synergy savings shall be reflected in Oncor’s rates.  On September 7, 2018, Oncor filed its first semi-annual interest rate savings compliance report with the PUCT and began accruing a bill credit upon the issuance of its new debt in August 2018.

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Regulatory Matters

9 Months Ended

Sep. 30, 2018

Regulatory Matters [Abstract]

REGULATORY MATTERS

3.    REGULATORY MATTERS

DCRF (PUCT Docket No. 48231)

On April 5, 2018, we filed with the PUCT, as well as cities with original jurisdiction over Oncor’s rates, an application for approval of a distribution cost recovery factor (DCRF).  The DCRF will allow Oncor to recover, primarily through its tariff for retail delivery service, certain costs related to its 2017 distribution investments.  We requested a $19 million increase in annual distribution revenues in our DCRF application.  On June 13, 2018, we filed an unopposed stipulation that reduced the annual distribution revenue increase from $19 million to $15 million.  The PUCT approved the stipulation on August 30, 2018, and the distribution tariffs became effective September 1, 2018.

Application to Decrease Rates Based on the TCJA of 2017 (PUCT Docket No. 48325)

In 2018, we made filings to incorporate the impacts of the TCJA into our tariffs, including the reduced corporate income tax rate from 35% to 21% and amortization of excess deferred federal income taxes. In the filings, we proposed a total net decrease in the revenue requirement used to set transmission and distribution rates of approximately $181 million annually as compared to the revenue requirement approved in Oncor’s most recent rate review, PUCT Docket No. 46957. The proposal included annual rate reductions of $144 million related to the reduction in income tax expense currently included in rates and $37 million related to the amortization of excess deferred income taxes over the lives of related assets. In September 2018, we reached an unopposed stipulation regarding an overall settlement of the TCJA impacts. The settlement includes, on an annual basis, $144 million related to the reduction of income tax expense currently in rates and $75 million related to amortization of excess deferred federal income taxes. The settlement rates have been implemented as follows on an interim basis as we await final PUCT approval.

· For transmission customers, our TCOS rate incorporated the tax rate reduction beginning March 27, 2018. On July 1, 2018, a new interim TCOS rate was approved, subject to reconciliation, including a reduction due to amortization of excess deferred federal income taxes. The settlement results in a reduction of about $79 million of annualized transmission base revenue requirement as compared to the revenue requirement approved in PUCT Docket No. 46957.

· For distribution customers, interim rates implemented October 8, 2018 contain reductions for both the income tax expense currently in rates and the amortization of excess deferred tax expense. The settlement results in a reduction of about $140 million of annualized distribution base revenue requirement as compared to the revenue requirement approved in PUCT Docket No. 46957.

In addition, we agreed to refund the tax rate differential amounts collected and deferred since January 1, 2018, through the date the changed tariffs became effective. For transmission customers, we will refund tax amounts collected and deferred through March 26, 2018.  For distribution customers, we will refund tax amounts collected and deferred through October 7, 2018.  We plan to refund the tax rate differential of approximately $75 million as a bill credit in December 2018.

The pass-through of the impacts of the TCJA to ratepayers is not expected to impact net income. Amortization of excess deferred taxes will result in lower cash inflows as a result of reduced rates to end-use customers.

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Revenues

9 Months Ended

Sep. 30, 2018

Revenues [Abstract]

REVENUES

4.   REVENUES

General

Our revenue is billed monthly under tariffs approved by the PUCT and the majority of revenues are related to providing electric delivery service to consumers.  Tariff rates are designed to recover the cost of providing electric delivery service to customers including a reasonable rate of return on invested capital.   As the units delivered can be directly measured, our revenues are recognized when the underlying service has been provided in an amount prescribed by the related tariff. We recognize revenue in the amount that we have the right to invoice.   Substantially all of our revenues are from contracts with customers (Topic 606 revenues) except for alternative revenue program revenues discussed below.

Reconcilable Tariffs

The PUCT has designated certain tariffs (primarily TCRF, EECRF and previously AMS surcharges) as reconcilable, which means the differences between amounts billed under these tariffs and the related incurred costs are deferred as either regulatory assets or regulatory liabilities.  Accordingly, at prescribed intervals, future tariffs are adjusted to either repay regulatory liabilities or collect regulatory assets. 

As a result of the 2017 rate review order effective November 27, 2017, the AMS surcharges ceased and AMS related expenses and return became recoverable through distribution base rates. 

Alternative Revenue Program

The PUCT has implemented an incentive program allowing us to earn performance bonuses by exceeding PUCT energy efficiency program targets. This incentive program is considered an “alternative revenue program” and the related performance bonus revenues are outside of the scope of Topic 606.  Annual performance bonuses are recognized as revenue when approved by the PUCT, typically in the third or fourth quarter each year. 

Disaggregation of Revenues 

The following table reflects electric delivery revenues disaggregated by tariff for the three and nine months ended September 30, 2018:

	Three Months Ended September 30,		Nine Months Ended September 30,
Operating revenues	2018		2018
Revenues contributing to earnings:
Distribution base revenues	$	604	$	1,640
Transmission base revenues (TCOS revenues)
Billed to third-party wholesale customers		137		403
Billed to REPs serving Oncor distribution customers, through TCRF		77		234
Total transmission base revenues		214		637
Other miscellaneous revenues		17		48
Total revenues contributing to earnings		835		2,325
Revenues collected for pass-through expenses:
TCRF - third-party wholesale transmission service		237		719
EECRF and other regulatory charges		23		62
Revenues collected for pass-through expenses		260		781
Total operating revenues	$	1,095	$	3,106

Customers

Our distribution customers consist of approximately 90 REPs and certain electric cooperatives in our certificated service area.  The consumers of the electricity we deliver are free to choose their electricity supplier from REPs who compete for their business.  Our transmission base revenues are collected from load serving entities benefitting from our transmission system.  Our transmission customers consist of municipalities, electric cooperatives and other distribution companies.  REP subsidiaries of our two largest counterparties represented 27% and 22% of our total operating revenues for the three months ended September 30, 2018, and 24% and 19% of our total operating revenues for the nine months ended September 30, 2018.  No other customer represented more than 10% of our total operating revenues.

Variability

Our revenues and cash flows are subject to seasonality, timing of customer billings, weather conditions and other electricity usage drivers, with revenues being highest in the summer. Payment is due 35 days after invoicing. Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by nonaffiliated REPs are recoverable as a regulatory asset. 

Pass-through expenses

Expenses which are allowed to be passed-through to customers (primarily, third party wholesale transmission service and energy efficiency program costs) are generally recognized as revenue at the time the costs are incurred.  Franchise taxes are assessed by local governmental bodies, based on kWh delivered and are not a “pass-through” item.  The rates we charge customers are intended to recover the franchise taxes, but we are not acting as an agent to collect the taxes from customers; therefore, franchise taxes are reported as a principal component of “taxes other than amounts related to income taxes” instead of a reduction to “revenues” in the income statement. 

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Regulatory Assets and Liabilities

9 Months Ended

Sep. 30, 2018

Regulatory Assets and Liabilities [Abstract]

REGULATORY ASSETS AND LIABILITIES

5.    REGULATORY ASSETS AND LIABILITIES

Recognition of regulatory assets and liabilities and the periods over which they are to be recovered or refunded through rate regulation are determined by the PUCT.   Components of our regulatory assets and liabilities as of September 30, 2018 and December 31, 2017 are provided in the table below.  Amounts not earning a return through rate regulation are noted.

	Remaining Rate Recovery/Amortization Period at	Carrying Amount At
	September 30, 2018	September 30, 2018		December 31, 2017
Regulatory assets:
Employee retirement costs being amortized	10 years	$	305	$	331
Unrecovered employee retirement costs incurred since the last rate review period (a)	To be determined		30		30
Employee retirement liability (a)(b)(c)	To be determined		800		854
Employee retirement plans - non-service costs	Lives of related assets		33		-
Self-insurance reserve (primarily storm recovery costs) being amortized	10 years		362		394
Unrecovered self-insurance reserve incurred since the last rate review period (a)	To be determined		53		49
Securities reacquisition costs	Lives of related debt		10		12
Deferred conventional meter and metering facilities depreciation	3 years		42		57
Under-recovered AMS costs	10 years		190		206
Excess deferred income taxes			-		197
Energy efficiency performance bonus (b)	1 year or less		3		12
Other regulatory assets	Various		22		38
Total regulatory assets			1,850		2,180
Regulatory liabilities:
Estimated net removal costs	Lives of related assets		1,006		954
Excess deferred income taxes	Primarily over lives of related assets		1,587		1,789
Federal income taxes - over-collected due to TCJA rate change	1 year or less		75		-
Over-recovered wholesale transmission service expense (b)	1 year or less		73		47
Other regulatory liabilities	Various		22		17
Total regulatory liabilities			2,763		2,807
Net regulatory assets (liabilities)		$	(913)	$	(627)

____________

(a) Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.

(b) Not earning a return in the regulatory rate-setting process.

(c) Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.

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Short-Term Borrowings

9 Months Ended

Sep. 30, 2018

Short-Term Borrowings [Abstract]

SHORT-TERM BORROWINGS

6.SHORT-TERM BORROWINGS

At September 30, 2018 and December 31, 2017, outstanding short-term borrowings under our commercial paper program (CP Program) and revolving credit facility (Credit Facility) consisted of the following:

	At September 30,		At December 31,
	2018		2017
Total borrowing capacity	$	2,000	$	2,000
Commercial paper outstanding (a)		(1,099)		-
Credit facility outstanding (b)		-		(950)
Letters of credit outstanding (c)		(9)		(9)
Available unused credit	$	892	$	1,041

____________

a) The weighted average interest rate for commercial paper at September 30, 2018 was 2.45%.

b) The weighted average interest rate for the credit facility at December 31, 2017 was 2.62%.

c) Interest rates on outstanding letters of credit at September 30, 2018 and December 31, 2017 were 1.200% and 1.325%, respectively, based on our credit ratings.

Commercial Paper Program

In March 2018, we established the CP Program, under which we may issue unsecured commercial paper notes (Notes) on a private placement basis up to a maximum aggregate face or principal amount outstanding at any time of $2.0 billion. We also entered into commercial paper dealer agreements (Dealer Agreements) with commercial paper dealers (Dealers).  The Dealer Agreements are substantially identical in all material respects except as to the parties thereto.  A national bank acts as the issuing and paying agent under the CP Program pursuant to the terms of an issuing and paying agent agreement.

The proceeds of Notes issued under the CP Program are used for working capital and general corporate purposes. The CP Program obtains liquidity support from our Credit Facility discussed below.  If at any time funds are not available on favorable terms under the CP Program, we may utilize the Credit Facility for funding. 

The Dealer Agreements provide the terms under which the Dealers will either purchase from us or arrange for the sale by us of Notes pursuant to an exemption from federal and state securities laws.  The Dealer Agreements contain customary representations, warranties, covenants and indemnification provisions.  The maturities of the Notes will vary, but may not exceed 364 days from the date of issue.  The Notes will be sold at a discount from par or, alternatively, will be sold at par and bear interest.  Interest rates will vary based upon market conditions at the time of issuance of the Notes and may be fixed or floating determined by reference to a base rate and spread.

From time to time, one or more of the Dealers and certain of their respective affiliates have provided, and may in the future provide, commercial banking, investment banking and other financial advisory services to us and our affiliates for which the Dealers have received or will receive customary fees and expenses.  In addition, certain of the Dealers or their affiliates are lenders under the Credit Facility.

Revolving Credit Facility

At September 30, 2018, we had a $2.0 billion unsecured revolving Credit Facility to be used for working capital and general corporate purposes, issuances of letters of credit and support for commercial paper issuances.  We may request increases in our borrowing capacity in increments of not less than $100 million, not to exceed $400 million in the aggregate provided certain conditions are met, including lender approvals. The Credit Facility has a five-year term expiring in November 2022 and gives us the option of requesting up to twoone-year extensions, with such extensions subject to certain conditions and lender approvals.  Borrowings are classified as short-term on the balance sheet.  At September 30, 2018, we had no outstanding borrowings under the Credit Facility.

Borrowings under the Credit Facility bear interest at per annum rates equal to, at our option, (i) LIBOR plus a spread ranging from 0.875% to 1.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt or (ii) an alternate base rate (the highest of (1) the prime rate of JPMorgan Chase, (2) the federal funds effective rate plus 0.50%, and (3) adjusted LIBOR plus 1.00%) plus a spread ranging from 0.00% to 0.50% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt.  At September 30, 2018, the applicable interest rate for any outstanding borrowings would have been LIBOR plus 1.00%.  Amounts borrowed under the Credit Facility, once repaid, can be borrowed again from time to time.

An unused commitment fee is payable quarterly in arrears and upon termination or commitment reduction at a rate equal to 0.075% to 0.225% (such spread depending on certain credit ratings assigned to our senior secured debt) of the daily unused commitments under the Credit Facility.  At September 30, 2018, a commitment fee (at a rate of 0.100% per annum) was payable on the unfunded commitments under the Credit Facility, based on our current credit ratings.

Letter of credit fees on the stated amount of letters of credit issued under the Credit Facility are payable to the lenders quarterly in arrears and upon termination at a rate per annum equal to the spread over adjusted LIBOR.  Customary fronting and administrative fees are also payable to letter of credit fronting banks.

Under the terms of the Credit Facility, the commitments of the lenders to make loans to us are several and not joint.  Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lender’s commitments under the facility.

The Credit Facility contains customary covenants for facilities of this type, restricting, subject to certain exceptions, us and our subsidiaries from, among other things: incurring certain additional liens (not including liens relating to obligations secured pursuant to our Deed of Trust, which are permitted); entering into mergers and consolidations; sales of substantial assets and acquisitions and investments in subsidiaries.  In addition, the Credit Facility requires that we maintain a consolidated senior debt-to-capitalization ratio of no greater than 0.65 to 1.00 and observe certain customary reporting requirements and other affirmative covenants.  For purposes of the ratio, debt is calculated as indebtedness defined in the Credit Facility (principally, the sum of long-term debt, any capital leases, short-term debt and debt due currently in accordance with GAAP).  Capitalization is calculated as membership interests determined in accordance with GAAP plus indebtedness described above.  At September 30, 2018, we were in compliance with this and all other covenants.

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Long-Term Debt

9 Months Ended

Sep. 30, 2018

Long-Term Debt [Abstract]

LONG-TERM DEBT

7.    LONG-TERM DEBT

Our senior notes are secured by a first priority lien on certain transmission and distribution assets equally and ratably with all of Oncor’s other secured indebtedness.  See “Deed of Trust” below for additional information.  At September 30, 2018 and December 31, 2017, our long-term debt consisted of the following:

	September 30,		December 31,
	2018		2017
Secured:
6.80% Fixed Senior Notes due September 1, 2018	$	-	$	550
2.15% Fixed Senior Notes due June 1, 2019		250		250
5.75% Fixed Senior Notes due September 30, 2020		126		126
4.10% Fixed Senior Notes due June 1, 2022		400		400
7.00% Fixed Debentures due September 1, 2022		800		800
2.95% Fixed Senior Notes due April 1, 2025		350		350
3.70% Fixed Senior Notes due November 15, 2028		350		-
7.00% Fixed Senior Notes due May 1, 2032		500		500
7.25% Fixed Senior Notes due January 15, 2033		350		350
7.50% Fixed Senior Notes due September 1, 2038		300		300
5.25% Fixed Senior Notes due September 30, 2040		475		475
4.55% Fixed Senior Notes due December 1, 2041		400		400
5.30% Fixed Senior Notes due June 1, 2042		500		500
3.75% Fixed Senior Notes due April 1, 2045		550		550
3.80% Fixed Senior Notes due September 30, 2047		325		325
4.10% Fixed Senior Notes due November 15, 2048		450		-
Secured long-term debt		6,126		5,876
Unsecured:
Term loan credit agreement due no later than March 26, 2019		-		275
Total long-term debt		6,126		6,151
Unamortized discount and debt issuance costs		(40)		(34)
Less amount due currently		(250)		(550)
Long-term debt, less amounts due currently	$	5,836	$	5,567

Debt-Related Activity in 2018

Debt Repayments

Repayments of long-term debt in the nine months ended September 30, 2018 consisted of $275 million aggregate principal amount of the term loan credit agreement due March 26, 2019 and $550 million aggregate principal amount of our 6.80% senior secured notes due September 1, 2018 (2018 Notes).  The term loan agreement was repaid in full, and the 2018 Notes were defeased on August 10, 2018.

Debt Issuances

In August 2018, we issued $350 million aggregate principal amount of 3.70% senior secured notes due November 15, 2028 (the 2028 Notes) and $450 million aggregate principal amount of 4.10% senior secured notes due November 15, 2048 (the 2048 Notes and, together with the 2028 Notes, the New Notes).  We used the proceeds (net of the initial purchasers’ discount, fees and expenses) of $791 million from the sale of the New Notes for general corporate purposes, including to pay the amount required for defeasance of our 2018 Notes, to repay the $131 million outstanding under our term loan credit agreement, and to repay notes due under our CP Program.  The New Notes are secured by a first priority lien, and are secured equally and ratably with all of our other secured indebtedness.

Interest on the New Notes is payable in cash semiannually in arrears on May 15 and November 15 of each year, and the first interest payment is due November 15, 2018.  Prior to August 15, 2028, in the case of the 2028 Notes, and May 15, 2048, in the case of the 2048 Notes, we may redeem such Notes at any time, in whole or in part, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a “make-whole” premium.  On and after August 15, 2028, in the case of the 2028 Notes, and May 15, 2048, in the case of the 2048 Notes, we may redeem such New Notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of such New Notes, plus accrued and unpaid interest. The New Notes also contain customary events of default, including failure to pay principal or interest when due.

The New Notes were issued in a private placement and were not registered under the Securities Act of 1933.  We have agreed, subject to certain exceptions, to register with the SEC notes having substantially identical terms as the New Notes (except for provisions relating to the transfer restriction and payment of additional interest) as part of an offer to exchange freely tradable exchange notes for the New Notes.  We have agreed to use commercially reasonable efforts to cause the exchange offer to be completed within 315 days after the issue date of the New Notes.  If a registration statement for the exchange offer is not declared effective by the SEC within 270 days after the issue date of the New Notes or the exchange offer is not completed within 315 days after the issue date of the New Notes (an exchange default), then the annual interest rate on the 2028 Notes will increase 12.5 basis points per annum and the annual interest rate on the 2048 Notes will increase 15 basis points per annum until the earlier of the expiration of the exchange default or the second anniversary of the issue date of the New Notes.

Deed of Trust

Our secured indebtedness is secured equally and ratably by a first priority lien on property we acquired or constructed for the transmission and distribution of electricity.  The property is mortgaged under the Deed of Trust.  The Deed of Trust permits us to secure indebtedness (excluding borrowings under the CP Program and the Credit Facility) with the lien of the Deed of Trust up to the aggregate of (i) the amount of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain property additions that could be certified to the Deed of Trust collateral agent.  At September 30, 2018, the amount of available bond credits was $3.588 billion and the amount of future debt we could secure with property additions, subject to those property additions being certified to the Deed of Trust collateral agent, was $2.136 billion.

Fair Value of Long-Term Debt

At September 30, 2018 and December 31, 2017, the estimated fair value of our long-term debt (including current maturities) totaled $6.731 billion and $7.153 billion, respectively, and the carrying amount totaled $6.086 billion and $6.117 billion, respectively.  The fair value is estimated using observable market data, representing Level 2 valuations under accounting standards related to the determination of fair value.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

8.    COMMITMENTS AND CONTINGENCIES

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

In April 2014, the Debtorscommenced the EFH Bankruptcy Proceedings.  The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  See Note 2for further information regarding the resolution of the EFH Bankruptcy Proceedings and the change in control of our indirect majority owner in connection with such proceedings and Note 11 for our related-party transactions involving members of the Texas Holdings Group.

Legal/Regulatory Proceedings

We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolution of which, in the opinion of management, should not have a material effect upon our financial position, results of operations or cash flows.  See Note 3 in this report and Note 8 to Financial Statements in our 2017 Form 10-K for additional information regarding our legal and regulatory proceedings. 

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Membership Interests

9 Months Ended

Sep. 30, 2018

Membership Interests [Abstract]

MEMBERSHIP INTERESTS

9.    MEMBERSHIP INTERESTS

Cash Distributions

Distributions are limited by our required regulatory capital structure to be at or below the assumed debt-to-equity ratio established periodically by the PUCT for ratemaking purposes, which is 57.5% debt to 42.5% equity effective November 27, 2017.  At September 30, 2018, $219 million was available for distribution to our members, as our regulatory capitalization ratio was 56.3% debt to 43.7% equity.  The PUCT has the authority to determine what types of debt and equity are included in a utility’s debt-to-equity ratio.  For purposes of this ratio, debt is calculated as long-term debt including capital leases plus unamortized gains on reacquired debt less unamortized issuance expenses, premiums and losses on reacquired debt.  Equity is calculated as membership interests determined in accordance with GAAP, excluding the effects of the acquisition accounting resulting from PUCT Docket No. 34077. 

In October2018, our board of directors declared a cash distribution of $180 million, which was paid to our members on November 6, 2018.  In July 2018, our board of directors declared a cash distribution of $30 million, which was paid to our members on August 1, 2018.

Cash Contributions

In November 2018, our members made capital contributions of $140 million.  In April 2018, our members made capital contributions of $144 million.

Membership Interests

The following table presents the changes to membership interests during the nine months ended September 30, 2018 and 2017:

	Capital Accounts		Accumulated Other Comprehensive Income (Loss)		Total Membership Interests
Balance at December 31, 2017	$	8,004	$	(101)	$	7,903
Net income		426		-		426
Distributions		(30)		-		(30)
Capital contributions		144		-		144
Net effects of cash flow hedges (net of tax)		-		2		2
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2018	$	8,544	$	(97)	$	8,447
Balance at December 31, 2016	$	7,822	$	(111)	$	7,711
Net income		343		-		343
Distributions		(237)		-		(237)
Net effects of cash flow hedges (net of tax)		-		1		1
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2017	$	7,928	$	(108)	$	7,820

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes to accumulated other comprehensive income (loss) for the nine months ended September 30, 2018 and 2017:

	Cash Flow Hedges – Interest Rate Swap		Defined Benefit Pension and OPEB Plans		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	(18)	$	(83)	$	(101)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		2		-		2
Balance at September 30, 2018	$	(16)	$	(81)	$	(97)
Balance at December 31, 2016	$	(20)	$	(91)	$	(111)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		1		-		1
Balance at September 30, 2017	$	(19)	$	(89)	$	(108)

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Pension and OPEB Plans

9 Months Ended

Sep. 30, 2018

Pension And OPEB Plans [Abstract]

PENSION AND OPEB PLANS

10.    PENSION AND OPEB PLANS

Pension Plans

We sponsor the Oncor Retirement Plan and also have liabilities under the Vistra Retirement Plan, both of which are qualified pension plans under Section 401(a) of the Internal Revenue Code of 1986, as amended, and are subject to the provisions of ERISA.  Employees do not contribute to either plan.  We also have a supplemental pension plan for certain employees whose retirement benefits cannot be fully earned under the qualified retirement plans.  See Note 10 to Financial Statements in our 2017 Form 10-K for additional information regarding pension plans.

OPEB Plans

We currently sponsor the Oncor OPEB Plans. One plan covers our eligible current and future retirees, excluding certain eligible retirees of EFH Corp./Vistra whose employment service was assigned to both Oncor (or a predecessor regulated utility business) and a non-regulated business of EFH Corp./Vistra which are now part of a separate plan discussed below. 

Effective January 1, 2018, we established a second plan to cover retirees whose employment included service that has been assigned to both Oncor (or a predecessor regulated utility business) and non-regulated businesses of EFH Corp./Vistra.  Vistra is solely responsible for its portion of the liability for retiree benefits related to those retirees.  As we are not responsible for Vistra’s portion of the plan’s unfunded liability, that amount is not reported on our balance sheet.  The establishment of the plan is not expected to have an impact on our financial statements. 

See Note 10 to Financial Statements in our 2017 Form 10-K for additional information.

Pension and OPEB Costs

Our net costs related to pension plans and the Oncor OPEB Plans for the three and nine months ended September 30, 2018 and 2017 were comprised of the following:

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Components of net allocated pension costs:
Service cost	$	7	$	6	$	21	$	18
Interest cost		29		32		89		98
Expected return on assets		(29)		(28)		(89)		(86)
Amortization of net loss		12		11		36		33
Net pension costs		19		21		57		63
Components of net OPEB costs:
Service cost		2		1		6		5
Interest cost		11		12		33		36
Expected return on assets		(2)		(2)		(6)		(6)
Amortization of prior service cost		(8)		(5)		(21)		(15)
Amortization of net loss		14		8		41		24
Net OPEB costs		17		14		53		44
Total net pension and OPEB costs		36		35		110		107
Less amounts deferred principally as property or a regulatory asset		(17)		(25)		(52)		(76)
Net amounts recognized as expense	$	19	$	10	$	58	$	31

The discount rates reflected in net pension and OPEB costs in 2018 are 3.53%,  3.72% and 3.73% for the Oncor Retirement Plan, the Vistra Retirement Plan and the Oncor OPEB Plans, respectively.  The expected return on pension and OPEB plan assets reflected in the 2018 cost amounts are 5.13%,  4.78% and 6.20% for the Oncor Retirement Plan, the Vistra Retirement Plan and the Oncor OPEB Plans, respectively.

Pension and OPEB Plans Cash Contributions

We made cash contributions to the pension plans and Oncor OPEB Plans of $62 million and $31 million, respectively, during the nine months ended September 30, 2018.  We expect to make additional cash contributions to the pension plans and Oncor OPEB Plans of $20 million and $4 million, respectively,  during the remainder of 2018.  Our aggregate pension plans and Oncor OPEB Plans funding is expected to total approximately $480 million and $175 million, respectively, in the 2018 to 2022 period based on the latest actuarial projections.

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Related-Party Transactions

9 Months Ended

Sep. 30, 2018

Related-Party Transactions [Abstract]

RELATED-PARTY TRANSACTIONS

11.   RELATED-PARTY TRANSACTIONS

The following represent our significant related-party transactions at September 30, 2018.  As a result of the Sempra Acquisition, Sempra became a related party and the Sponsor Group ceased to be a related party as of March 9, 2018. See Note 2 for information regarding the Sempra Acquisition.

· We are not a member of another entity’s consolidated tax group, but our owners’ federal income tax returns include their portion of our results.  Under the terms of a tax sharing agreement among us, Oncor Holdings, Texas Transmission and STH (as successor to EFH Corp.), we are generally obligated to make payments to our owners, pro rata in accordance with their respective membership interests, in an aggregate amount that is substantially equal to the amount of federal income taxes that we would have been required to pay if we were filing our own corporate income tax return.  STH will file a combined Texas Margin tax return which includes our results and our share of Texas margin tax payments, which are accounted for as income taxes and calculated as if we were filing our own return.  See discussion in Note 1 to Financial Statements in our 2017 Form 10-K under “Income Taxes.”  Under the “in lieu of” tax concept, all in lieu of tax assets and tax liabilities represent amounts that will eventually be settled with our members. In the event such amounts are not paid under the tax sharing agreement, it is probable that this regulatory liability will continue to be included in Oncor’s rate setting processes.

Amounts payable to (receivable from) members related to income taxes under the tax sharing agreement and reported on our balance sheet consisted of the following:

	At September 30, 2018						At December 31, 2017
	STH		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes payable (receivable)	$	13	$	3	$	16	$	(21)	$	(5)	$	(26)
Texas margin taxes payable		16		-		16		21		-		21
Net payable (receivable)	$	29	$	3	$	32	$	-	$	(5)	$	(5)

Cash payments made to (received from) members related to income taxes consisted of the following:

	Nine Months Ended September 30, 2018								Nine Months Ended September 30, 2017
	STH		EFH Corp.		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes	$	41	$	(19)	$	6	$	28	$	(102)	$	(12)	$	(114)
Texas margin taxes		21		-		-		21		20		-		20
Total payments (receipts)	$	62	$	(19)	$	6	$	49	$	(82)	$	(12)	$	(94)

· Related parties of the Sponsor Group have (1) sold, acquired or participated in the offerings of our debt or debt securities in open market transactions or through loan syndications, and (2) performed various financial advisory, dealer, commercial banking and investment banking services for us and certain of our affiliates for which they have received or will receive customary fees and expenses.   

As of March 8, 2018, approximately 16% of the equity in an existing vendor of the company was owned by a member of the Sponsor Group.  During 2018 and 2017, this vendor performed transmission and distribution system construction and maintenance services for us.  Cash payments were made for such services to this vendor and/or its subsidiaries totaling $35 million dollars for the year-to-date period ended March 8, 2018, of which approximately $33 million was capitalized and $2 million was recorded as an operation and maintenance expense.

See Note 9 for information regarding distributions to and capital contributions from members.

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Supplementary Financial Information

9 Months Ended

Sep. 30, 2018

Supplementary Financial Information [Abstract]

SUPPLEMENTARY FINANCIAL INFORMATION

12.   SUPPLEMENTARY FINANCIAL INFORMATION

Other Income and (Deductions)

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Professional fees	$	-	$	(4)		(4)		(12)
Sempra Acquisition related costs		-		-		(16)		-
Recoverable Pension and OPEB - non-service costs (a)		(13)		(8)		(40)		(23)
Non-recoverable pension and OPEB (Note 10)		(1)		(1)		(4)		(4)
Other, including interest income		1		-		1		4
Total other income and (deductions) - net	$	(13)	$	(13)	$	(63)	$	(35)

____________

(a) The prior periods have been adjusted to present non-service costs as a non-operating cost pursuant to ASU 2017-07.  See Note 1 for additional information.

Interest Expense and Related Charges

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Interest	$	90	$	89	$	268	$	263
Amortization of debt issuance costs and discounts		2		1		5		2
Less allowance for funds used during construction – capitalized interest portion		(3)		(3)		(9)		(8)
Total interest expense and related charges	$	89	$	87	$	264	$	257

Trade Accounts and Other Receivables

Trade accounts and other receivables reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Gross trade accounts and other receivables	$	691	$	638
Allowance for uncollectible accounts		(3)		(3)
Trade accounts receivable – net	$	688	$	635

At September 30, 2018, REP subsidiaries of our two largest counterparties represented approximately 16% and 13% of the trade accounts receivable balance and at December 31, 2017, represented approximately 12% and 10% of the trade accounts receivable balance.

Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by nonaffiliated REPs are recoverable as a regulatory asset. 

Investments and Other Property

Investments and other property reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Assets related to employee benefit plans, including employee savings   programs	$	111	$	111
Land and other investments		10		2
Total investments and other property	$	121	$	113

Property, Plant and Equipment

Property, plant and equipment reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Total assets in service	$	22,593	$	21,717
Less accumulated depreciation and amortization		7,497		7,255
Net of accumulated depreciation and amortization		15,096		14,462
Construction work in progress		671		402
Held for future use		15		15
Property, plant and equipment – net	$	15,782	$	14,879

Intangible Assets

Intangible assets (other than goodwill) reported on our balance sheet as part of property, plant and equipment consisted of the following:

	At September 30, 2018						At December 31, 2017
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
Identifiable intangible assets subject to amortization:
Land easements	$	456	$	99	$	357	$	453	$	96	$	357
Capitalized software		757		375		382		679		339		340
Total	$	1,213	$	474	$	739	$	1,132	$	435	$	697

Aggregate amortization expense for intangible assets totaled $13 million and $15 million for the three months ended September 30, 2018 and 2017, respectively, and $39 million and $44 million for the nine months ended September 30, 2018 and 2017, respectively.  The estimated aggregate amortization expense for each of the next five fiscal years is as follows:

Year	Amortization Expense
2018	$	50
2019		47
2020		45
2021		45
2022		45

At both September 30, 2018 and December 31, 2017, goodwill totaling $4.1billion was reported on our balance sheet.  None of this goodwill is being deducted for tax purposes.

Employee Benefit Obligations and Other

Employee benefit obligations and other reported on our balance sheet consisted of the following:

	At September 30,		At December 31,
	2018		2017
Retirement plans and other employee benefits	$	1,973	$	2,035
Investment tax credits		8		10
Other		65		57
Total employee benefit obligations and other	$	2,046	$	2,102

Supplemental Cash Flow Information        

	Nine Months Ended September 30,
	2018		2017
Cash payments (receipts) related to:
Interest	$	243	$	256
Less capitalized interest		(9)		(8)
Interest payments (net of amounts capitalized)	$	234	$	248
Amount in lieu of income taxes (a):
Federal	$	28	$	(114)
State		21		20
Total payments (receipts) in lieu of income taxes	$	49	$	(94)
Noncash construction expenditures (b)	$	136	$	103

____________

(a) See Note 11 for income tax related detail.

(b) Represents end-of-period accruals.

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Infrareit Acquisition

9 Months Ended

Sep. 30, 2018

Infrareit Acquisition [Abstract]

INFRAREIT ACQUISITION

13.   INFRAREIT ACQUISITION

On October 18, 2018, we entered into the InfraREIT Merger Agreement, pursuant to which we will acquire all of the equity interests of InfraREIT and its subsidiary, InfraREIT Partners, subject to the conditions discussed below. The InfraREIT Acquisition will occur through the merger of InfraREIT with and into a newly formed wholly owned subsidiary of Oncor, followed by the merger of another newly formed wholly owned subsidiary of Oncor with and into InfraREIT Partners.  InfraREIT’s stockholders and the limited partners of InfraREIT Partners will receive $21.00 in cash per share of common stock or limited partnership unit, as applicable. Total purchase price based on the number of shares and partnership units of InfraREIT and InfraREIT Partners currently outstanding is approximately $1.275 billion, plus we will bear certain transaction costs incurred by InfraREIT (including a management agreement termination fee of approximately $40.5 million that InfraREIT has agreed to pay Hunt Consolidated, Inc. at closing). The acquisition also includes InfraREIT’s outstanding debt, which totaled an aggregate of approximately$945 million at September 30, 2018.

In connection with entering into the InfraREIT Merger Agreement, we have received a commitment letter from Sempra and certain indirect equity holders of Texas Transmission (collectively, Equity Commitment Parties), pursuant to which, subject to the terms and conditions set forth therein, the Equity Commitment Parties have committed to provide their pro rata share of capital contributions to us in an aggregate principal amount of up to $1.330 billion, to fund the cash consideration payable by us in the InfraREIT Acquisition and the payment of certain related fees and expenses. The funding provided for in the commitment letter is contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement, but is not a condition to the closing of the InfraREIT Acquisition.

As a condition to the InfraREIT Acquisition, InfraREIT’s subsidiary, SDTS and SDTS’s tenant, SU, will complete an asset exchange (SDTS-SU Asset Exchange) immediately prior to the closing of the InfraREIT Acquisition, pursuant to which SDTS will exchange its south Texas assets for certain assets owned by SU. As result, upon closing of the InfraREIT Acquisition, we will own all of SDTS and SU’s assets and projects in north, central and west Texas and SU will own its and SDTS’s assets in south Texas.

In addition, as a condition to the closing of the SDTS-SU Asset Exchange, Sempra will acquire an indirect 50 percent limited partnership interest in SU (Sempra-SU Transaction). As a result of the Sempra-SU Transaction, SU will be our affiliate for purposes of PUCT rules. The SDTS-SU Asset Exchange also contemplates that at closing we and SU will each enter into a future development agreement and, subject to receipt of certain PUCT approvals, an operation and maintenance agreement. The future development agreement addresses ownership and funding of potential future SU transmission projects under certain circumstances where at least one endpoint of the project is a legacy SDTS asset. Oncor and SU will each own and fund certain percentages of the project depending on the project type and location of the transmission project’s end points. The operation and maintenance agreement provides that Oncor will provide to SU certain operations and maintenance services with respect to the SU assets in south Texas. Such services will be provided by us to SU at cost without a markup or profit.

Closing of the InfraREIT Acquisition is subject to the satisfaction of customary closing conditions, including, among others, (i) obtaining the approval of InfraREIT stockholders, (ii) the absence of certain make-whole, prepayment, accelerated payment obligations, or events of default with respect to certain notes of InfraREIT subsidiaries and obtaining of consents to certain amendments to the terms of the applicable notes, (iii) the satisfaction of certain regulatory conditions, including the receipt of the approval of the PUCT and the FERC, (v) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (vi) clearance by the Committee on Foreign Investment in the United States.

Oncor, InfraREIT and InfraREIT Partners have agreed to use their respective reasonable best efforts, subject to certain exceptions, to consummate the InfraREIT Acquisition as promptly as practicable. The InfraREIT Merger Agreement provides, among other items, that no later than 45 days after October 18, 2018, the parties will submit to the PUCT a single, integrated Joint Application for Sale, Transfer or Merger and requests for other necessary approvals required to effect the InfraREIT Acquisition. The InfraREIT Merger Agreement also provides for a go-shop period until 11:59 PM Dallas time on November 17, 2018, during which period InfraREIT and certain of its subsidiaries and representatives may solicit alternative acquisition proposals.

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Business and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Business and Significant Accounting Policies [Abstract]

Description Of Business

Description of Business

References in this report to “we,” “our,” “us” and “the company” are to Oncor.  See “Glossary” for definition of terms and abbreviations.

We are a regulated electricity transmission and distribution company principally engaged in providing delivery services to REPs that sell power in the north-central, eastern and western parts of Texas.  We are a direct, majority-owned subsidiary of Oncor Holdings, which is a direct, wholly-owned subsidiary of STIH, a direct wholly-owned subsidiary of STH. In connection with the Sempra Acquisition, on March 9, 2018, STH became an indirect wholly- owned subsidiary of Sempra.  Oncor Holdings owns 80.25% of our membership interests and Texas Transmission owns 19.75% of our membership interests.  We are managed as an integrated business; consequently, there are no separate reportable business segments.

Various “ring-fencing” measures that had been taken to enhance our credit quality and the separateness between the Oncor Ring-Fenced Entities and its majority owner (formerly the Texas Holdings Group and now Sempra) continue to remain in effect after the Sempra Acquisition.  These measures serve to mitigate our and Oncor Holdings’ credit exposure to Sempra and to reduce the risk that our assets and liabilities or those of Oncor Holdings would be substantively consolidated with the assets and liabilities of Sempra in connection with a bankruptcy of one or more Sempra entities.  Such measures include, among other things: the 19.75% equity interest held by Texas Transmission; maintenance of separate books and records for the Oncor Ring-Fenced Entities; our board of directors being comprised of a majority of independent directors; and prohibitions on the Oncor Ring-Fenced Entities providing credit support to or receiving credit support from Sempra entities.  The assets and liabilities of the Oncor Ring-Fenced Entities are separate and distinct from those of Sempra.  None of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or contractual obligations of Sempra entities.  We do not bear any liability for debt or contractual obligations of Sempra, and vice versa.  Accordingly, our operations are conducted, and our cash flows are managed, independently from Sempra.  For more information on ring-fencing measures, see Note 2.

EFH Bankruptcy Proceedings And Change In Indirect Ownership Of Oncor

EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor

In April 2014, EFH Corp. and the substantial majority of its direct and indirect subsidiaries at the time, including EFIH, EFCH and TCEH, commenced proceedings under Chapter 11 of the U.S. Bankruptcy Code. The Oncor Ring-Fenced Entities were not parties to the EFH Bankruptcy Proceedings.  In connection with the plans of reorganization in the EFH Bankruptcy Proceedings, on March 9, 2018, Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH (Sempra Acquisition). See Note 2 for further information. 

Basis Of Presentation

Basis of Presentation

These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the 2017 Form 10-K.  In the opinion of Oncor management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been made.  All intercompany items and transactions have been eliminated in consolidation.  The results of operations for an interim period may not give a true indication of results for a full year due to seasonality.  All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.

Use Of Estimates

Use of Estimates

Preparation of our financial statements requires management to make 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.  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.  No material adjustments were made to previous estimates or assumptions during the current period.

Goodwill

Goodwill

We evaluate goodwill for impairment annually and whenever events or changes in circumstances indicate that an impairment may exist.  Beginning in 2018, we elected to change our annual goodwill assessment date from December 1 to October 1 to correspond with the assessment date of our new majority owner.  We do not believe this change in the assessment date is a material change.

Changes In Accounting Standards

Changes in Accounting Standards  

Since May 2014, the Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, along with other supplemental guidance (together, Topic 606).  Topic 606 introduced new, increased requirements for disclosure of revenue in financial statements and guidance intended to eliminate inconsistencies in the recognition of revenue.   We adopted Topic 606 effective January 1, 2018 using the modified retrospective approach and elected the practical expedient available that allows an entity to recognize revenue in the amount to which the entity has the right to invoice related to performance completed to date.  Our revenues are generally recognized when the underlying service has been provided in an amount prescribed by the related tariff.  The new guidance did not change this pattern of recognition and therefore the adoption did not have a material effect on our reported results of operations, financial position or cash flows.  Topic 606 also requires the separate presentation of “alternative revenue program” revenues on the income statement. We anticipate less than $20 million annually in alternative revenue program revenues related to our energy efficiency program and will disclose such activity in the notes to financial statements.  See Note 4 for additional disclosures about revenues from contracts with customers.

In February 2016, the FASB issued ASU 2016-02 which created FASB Topic 842, Leases (Topic 842).  Topic 842 amends previous GAAP to require the balance sheet recognition of substantially all lease assets and liabilities, including operating leases.  Operating lease liabilities are not classified as debt for GAAP purposes under Topic 842 and are not treated as debt for regulatory purposes.  Under current standards, all of Oncor’s existing leases meet the definition of an operating lease.  Under the new rules, the recognition of any finance leases (currently known as capital leases) on the balance sheet would be classified as debt for GAAP purposes and are expected to be defined as debt for our regulatory capital structure purposes (see Note 9 for details) similar to the current capital lease treatment.  We plan to adopt Topic 842 on January 1, 2019 and we expect to use certain practical expedients and policy elections available under the guidance including a practical expedient to not assess whether existing land easements that were not previously accounted for as leases are or contain a lease under Topic 842, an adoption method to not restate comparative periods and a policy election to forego the application of Topic 842 recognition requirements to short-term leases.  The initial adoption of Topic 842 will affect our balance sheet, as our contracts for office space and fleet vehicles are currently classified as operating leases.  Subsequent to adoption, to the extent Oncor enters into finance leases, its credit facility covenants and capitalization ratios could be impacted.  We continue to evaluate our contracts for proper treatment under the new standards and the estimated impact on our financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment to Topic 715, Compensation – Retirement Benefits.  ASU 2017-07 requires the non-service cost components of net retirement benefit plan costs be presented as non-operating in the income statement.  In addition, only the service cost component of net retirement benefit plan cost is eligible for capitalization as part of inventory or property, plant and equipment.  We adopted ASU 2017-07 on January 1, 2018.  The presentation of costs is required to be applied on a retrospective basis while the capitalization eligibility requirement is applied on a prospective basis.  The guidance allows a practical expedient that permits use of previously disclosed service costs and non-service costs of the Pension and OPEB Plans in the comparative periods as appropriate estimates when recasting the presentation of these costs in the income statements.  We have elected this practical expedient.  For cash flow purposes on a prospective basis, non-service costs will be reflected as a reduction to operating cash flows, offset by lower cash used in investing activities (lower capital expenditures).  The new guidance did not have a material effect on our results of operations, financial position or net change in total cash flows and we do not expect the guidance to have a material effect on our rate-making process.  For the three- and nine-month periods ended September 30, 2017, the adoption of ASU 2017-07 resulted in a reclassification of $8 million and $23 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $3 million and $9 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.  For the years 2015, 2016 and 2017, the reclassification amounts are $28 million, $28 million and $31 million from operation and maintenance expense to other income and (deductions), respectively, and a corresponding reclassification of $10 million, $10 million and $11 million, respectively, from provision in lieu of income taxes to nonoperating provision in lieu of income taxes.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income (AOCI) to capital accounts for stranded tax effects resulting from the TCJA which we expect to elect.  Under ASU 2018-02, an entity will be required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from AOCI.  Our stranded tax effects in AOCI are approximately $4 million and will increase our capital account upon reclassification.  ASU 2018-02 can be applied either as of the beginning of the period of adoption or retrospectively as of the date of enactment of the TCJA and to each period in which the effect of the TCJA is recognized.  ASU 2018-02 is effective for our 2019 annual reporting period, including interim periods therein, with early adoption permitted.  We plan to adopt the standard on a prospective basis, January 1, 2019.

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Revenues (Tables)

9 Months Ended

Sep. 30, 2018

Revenues [Abstract]

Disaggregation Of Revenues

	Three Months Ended September 30,		Nine Months Ended September 30,
Operating revenues	2018		2018
Revenues contributing to earnings:
Distribution base revenues	$	604	$	1,640
Transmission base revenues (TCOS revenues)
Billed to third-party wholesale customers		137		403
Billed to REPs serving Oncor distribution customers, through TCRF		77		234
Total transmission base revenues		214		637
Other miscellaneous revenues		17		48
Total revenues contributing to earnings		835		2,325
Revenues collected for pass-through expenses:
TCRF - third-party wholesale transmission service		237		719
EECRF and other regulatory charges		23		62
Revenues collected for pass-through expenses		260		781
Total operating revenues	$	1,095	$	3,106

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Regulatory Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Regulatory Assets and Liabilities [Abstract]

Components Of Regulatory Assets And Liabilities

	Remaining Rate Recovery/Amortization Period at	Carrying Amount At
	September 30, 2018	September 30, 2018		December 31, 2017
Regulatory assets:
Employee retirement costs being amortized	10 years	$	305	$	331
Unrecovered employee retirement costs incurred since the last rate review period (a)	To be determined		30		30
Employee retirement liability (a)(b)(c)	To be determined		800		854
Employee retirement plans - non-service costs	Lives of related assets		33		-
Self-insurance reserve (primarily storm recovery costs) being amortized	10 years		362		394
Unrecovered self-insurance reserve incurred since the last rate review period (a)	To be determined		53		49
Securities reacquisition costs	Lives of related debt		10		12
Deferred conventional meter and metering facilities depreciation	3 years		42		57
Under-recovered AMS costs	10 years		190		206
Excess deferred income taxes			-		197
Energy efficiency performance bonus (b)	1 year or less		3		12
Other regulatory assets	Various		22		38
Total regulatory assets			1,850		2,180
Regulatory liabilities:
Estimated net removal costs	Lives of related assets		1,006		954
Excess deferred income taxes	Primarily over lives of related assets		1,587		1,789
Federal income taxes - over-collected due to TCJA rate change	1 year or less		75		-
Over-recovered wholesale transmission service expense (b)	1 year or less		73		47
Other regulatory liabilities	Various		22		17
Total regulatory liabilities			2,763		2,807
Net regulatory assets (liabilities)		$	(913)	$	(627)

____________

(a) Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.

(b) Not earning a return in the regulatory rate-setting process.

(c) Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.

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Short-Term Borrowings (Tables)

9 Months Ended

Sep. 30, 2018

Short-Term Borrowings [Abstract]

Schedule Of Short-Term Borrowings

	At September 30,		At December 31,
	2018		2017
Total borrowing capacity	$	2,000	$	2,000
Commercial paper outstanding (a)		(1,099)		-
Credit facility outstanding (b)		-		(950)
Letters of credit outstanding (c)		(9)		(9)
Available unused credit	$	892	$	1,041

____________

a) The weighted average interest rate for commercial paper at September 30, 2018 was 2.45%.

b) The weighted average interest rate for the credit facility at December 31, 2017 was 2.62%.

c) Interest rates on outstanding letters of credit at September 30, 2018 and December 31, 2017 were 1.200% and 1.325%, respectively, based on our credit ratings.

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2018

Long-Term Debt [Abstract]

Schedule Of Long-Term Debt

	September 30,		December 31,
	2018		2017
Secured:
6.80% Fixed Senior Notes due September 1, 2018	$	-	$	550
2.15% Fixed Senior Notes due June 1, 2019		250		250
5.75% Fixed Senior Notes due September 30, 2020		126		126
4.10% Fixed Senior Notes due June 1, 2022		400		400
7.00% Fixed Debentures due September 1, 2022		800		800
2.95% Fixed Senior Notes due April 1, 2025		350		350
3.70% Fixed Senior Notes due November 15, 2028		350		-
7.00% Fixed Senior Notes due May 1, 2032		500		500
7.25% Fixed Senior Notes due January 15, 2033		350		350
7.50% Fixed Senior Notes due September 1, 2038		300		300
5.25% Fixed Senior Notes due September 30, 2040		475		475
4.55% Fixed Senior Notes due December 1, 2041		400		400
5.30% Fixed Senior Notes due June 1, 2042		500		500
3.75% Fixed Senior Notes due April 1, 2045		550		550
3.80% Fixed Senior Notes due September 30, 2047		325		325
4.10% Fixed Senior Notes due November 15, 2048		450		-
Secured long-term debt		6,126		5,876
Unsecured:
Term loan credit agreement due no later than March 26, 2019		-		275
Total long-term debt		6,126		6,151
Unamortized discount and debt issuance costs		(40)		(34)
Less amount due currently		(250)		(550)
Long-term debt, less amounts due currently	$	5,836	$	5,567

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Membership Interests (Tables)

9 Months Ended

Sep. 30, 2018

Membership Interests [Abstract]

Schedule Of Changes To Membership Interests

	Capital Accounts		Accumulated Other Comprehensive Income (Loss)		Total Membership Interests
Balance at December 31, 2017	$	8,004	$	(101)	$	7,903
Net income		426		-		426
Distributions		(30)		-		(30)
Capital contributions		144		-		144
Net effects of cash flow hedges (net of tax)		-		2		2
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2018	$	8,544	$	(97)	$	8,447
Balance at December 31, 2016	$	7,822	$	(111)	$	7,711
Net income		343		-		343
Distributions		(237)		-		(237)
Net effects of cash flow hedges (net of tax)		-		1		1
Defined benefit pension plans (net of tax)		-		2		2
Balance at September 30, 2017	$	7,928	$	(108)	$	7,820

Schedule Of Changes To Accumulated Other Comprehensive Income (Loss)

	Cash Flow Hedges – Interest Rate Swap		Defined Benefit Pension and OPEB Plans		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	(18)	$	(83)	$	(101)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		2		-		2
Balance at September 30, 2018	$	(16)	$	(81)	$	(97)
Balance at December 31, 2016	$	(20)	$	(91)	$	(111)
Defined benefit pension plans (net of tax)		-		2		2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges		1		-		1
Balance at September 30, 2017	$	(19)	$	(89)	$	(108)

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Pension and OPEB Plans (Tables)

9 Months Ended

Sep. 30, 2018

Pension And OPEB Plans [Abstract]

Schedule Of Pension And OPEB Plan Costs

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Components of net allocated pension costs:
Service cost	$	7	$	6	$	21	$	18
Interest cost		29		32		89		98
Expected return on assets		(29)		(28)		(89)		(86)
Amortization of net loss		12		11		36		33
Net pension costs		19		21		57		63
Components of net OPEB costs:
Service cost		2		1		6		5
Interest cost		11		12		33		36
Expected return on assets		(2)		(2)		(6)		(6)
Amortization of prior service cost		(8)		(5)		(21)		(15)
Amortization of net loss		14		8		41		24
Net OPEB costs		17		14		53		44
Total net pension and OPEB costs		36		35		110		107
Less amounts deferred principally as property or a regulatory asset		(17)		(25)		(52)		(76)
Net amounts recognized as expense	$	19	$	10	$	58	$	31

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Related-Party Transactions (Tables)

9 Months Ended

Sep. 30, 2018

Related-Party Transactions [Abstract]

Schedule Of Trade Accounts And Other Receivables From Related Parties

	At September 30, 2018						At December 31, 2017
	STH		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes payable (receivable)	$	13	$	3	$	16	$	(21)	$	(5)	$	(26)
Texas margin taxes payable		16		-		16		21		-		21
Net payable (receivable)	$	29	$	3	$	32	$	-	$	(5)	$	(5)

Schedule Of Related Party Transactions

	Nine Months Ended September 30, 2018								Nine Months Ended September 30, 2017
	STH		EFH Corp.		Texas Transmission		Total		EFH Corp.		Texas Transmission		Total
Federal income taxes	$	41	$	(19)	$	6	$	28	$	(102)	$	(12)	$	(114)
Texas margin taxes		21		-		-		21		20		-		20
Total payments (receipts)	$	62	$	(19)	$	6	$	49	$	(82)	$	(12)	$	(94)

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Supplementary Financial Information (Tables)

9 Months Ended

Sep. 30, 2018

Supplementary Financial Information [Abstract]

Schedule Of Other Income And (Deductions)

	Three Months Ended  September 30,				Nine Months Ended  September 30,
	2018		2017		2018		2017
Professional fees	$	-	$	(4)		(4)		(12)
Sempra Acquisition related costs		-		-		(16)		-
Recoverable Pension and OPEB - non-service costs (a)		(13)		(8)		(40)		(23)
Non-recoverable pension and OPEB (Note 10)		(1)		(1)		(4)		(4)
Other, including interest income		1		-		1		4
Total other income and (deductions) - net	$	(13)	$	(13)	$	(63)	$	(35)

____________

(a) The prior periods have been adjusted to present non-service costs as a non-operating cost pursuant to ASU 2017-07.  See Note 1 for additional information.

Schedule Of Interest Expense And Related Charges

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Interest	$	90	$	89	$	268	$	263
Amortization of debt issuance costs and discounts		2		1		5		2
Less allowance for funds used during construction – capitalized interest portion		(3)		(3)		(9)		(8)
Total interest expense and related charges	$	89	$	87	$	264	$	257

Schedule Of Trade Accounts And Other Receivables

	At September 30,		At December 31,
	2018		2017
Gross trade accounts and other receivables	$	691	$	638
Allowance for uncollectible accounts		(3)		(3)
Trade accounts receivable – net	$	688	$	635

Summary of Investments And Other Property

	At September 30,		At December 31,
	2018		2017
Assets related to employee benefit plans, including employee savings   programs	$	111	$	111
Land and other investments		10		2
Total investments and other property	$	121	$	113

Schedule Of Property, Plant And Equipment

	At September 30,		At December 31,
	2018		2017
Total assets in service	$	22,593	$	21,717
Less accumulated depreciation and amortization		7,497		7,255
Net of accumulated depreciation and amortization		15,096		14,462
Construction work in progress		671		402
Held for future use		15		15
Property, plant and equipment – net	$	15,782	$	14,879

Schedule Of Intangible Assets

	At September 30, 2018						At December 31, 2017
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
Identifiable intangible assets subject to amortization:
Land easements	$	456	$	99	$	357	$	453	$	96	$	357
Capitalized software		757		375		382		679		339		340
Total	$	1,213	$	474	$	739	$	1,132	$	435	$	697

Schedule Of Estimated Aggregate Amortization Expenses

Year	Amortization Expense
2018	$	50
2019		47
2020		45
2021		45
2022		45

Schedule Of Employee Benefit Obligations And Other

	At September 30,		At December 31,
	2018		2017
Retirement plans and other employee benefits	$	1,973	$	2,035
Investment tax credits		8		10
Other		65		57
Total employee benefit obligations and other	$	2,046	$	2,102

Schedule Of Supplemental Cash Flow Information

	Nine Months Ended September 30,
	2018		2017
Cash payments (receipts) related to:
Interest	$	243	$	256
Less capitalized interest		(9)		(8)
Interest payments (net of amounts capitalized)	$	234	$	248
Amount in lieu of income taxes (a):
Federal	$	28	$	(114)
State		21		20
Total payments (receipts) in lieu of income taxes	$	49	$	(94)
Noncash construction expenditures (b)	$	136	$	103

____________

(a) See Note 11 for income tax related detail.

(b) Represents end-of-period accruals.

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Business and Significant Accounting Policies (Narrative) (Details) $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended		12 Months Ended
	Nov. 30, 2008	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) segment entity	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Mar. 09, 2018
Business And Significant Accounting Polices [Line Items]
Number of reportable business segments | segment			0
Number of entities that would possibly be bankrupt | entity			1
Percentage of equity interest sold in the event of bankruptcy	19.75%
Accounting Standards Update 2017-07 [Member]
Business And Significant Accounting Polices [Line Items]
Reclassification from operation and maintenance expense to other income and (deductions)		$ 8		$ 23	$ 31	$ 28	$ 28
Increase in provision in lieu of income taxes and decrease in non-operating provision in lieu of income taxes		$ 3		$ 9	$ 11	$ 10	$ 10
Accounting Standards Update 2018-02 [Member]
Business And Significant Accounting Polices [Line Items]
Reclassification from AOCI to membership interests for stranded tax effects			$ 4
Oncor Holdings [Member] | Oncor [Member]
Business And Significant Accounting Polices [Line Items]
Ownership interests acquired								0.22%
Sempra Energy [Member] | Oncor [Member]
Business And Significant Accounting Polices [Line Items]
Ownership interests acquired								80.03%
Oncor Holdings [Member]
Business And Significant Accounting Polices [Line Items]
Ownership			80.25%
Texas Transmission [Member]
Business And Significant Accounting Polices [Line Items]
Percentage of membership interest owned by non-controlling owners			19.75%
Maximum [Member] | Accounting Standards Update 2014-09 [Member]
Business And Significant Accounting Polices [Line Items]
Alternative revenue program			$ 20

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EFH Bankruptcy Proceedings and Change in Indirect Ownership of Oncor (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions			9 Months Ended
	Mar. 09, 2018	Nov. 27, 2017	Sep. 30, 2018	Apr. 23, 2018
Bankruptcy [Line Items]
Regulatory capitalization ratio, debt	57.50%	57.50%	56.30%
Regulatory capitalization ratio, equity	42.50%	42.50%	43.70%
Percent of savings for bill credits			90.00%
Texas Holdings Group [Member]
Bankruptcy [Line Items]
Percentage of membership interest owned by non-controlling owners	19.75%
Oncor [Member] | Sempra Energy [Member]
Bankruptcy [Line Items]
Purchase price	$ 9,450
Percent increase or decrease for disinterested directors to approve any budget			10.00%
Minimum aggregate capital expenditures			$ 7,500
Number of days for proportionate share of aggregate equity investment			60 days
Transaction or transition costs				$ 117
Ownership interests acquired	80.03%
Oncor [Member] | Oncor Holdings [Member]
Bankruptcy [Line Items]
Ownership interests acquired	0.22%
OMI Agreement [Member] | Oncor [Member] | Sempra Energy [Member]
Bankruptcy [Line Items]
Cash paid	$ 26
Share price	$ 18.60
OMI Agreement [Member] | Oncor [Member] | Oncor Holdings [Member]
Bankruptcy [Line Items]
Shares acquired	1,396,008
Minimum [Member] | Oncor [Member] | Sempra Energy [Member]
Bankruptcy [Line Items]
Ownership percentage			51.00%
Required time for holding owndership interests			5 years

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Regulatory Matters (Narrative) (Details) - USD ($) $ in Millions		1 Months Ended	9 Months Ended	12 Months Ended
	Jul. 01, 2018	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017	Oct. 08, 2018	Sep. 01, 2018	Jun. 13, 2018
Public Utilities, General Disclosures [Line Items]
DCRF increase						$ 19	$ 15
U.S. federal statutory rate			21.00%	35.00%
Requested base rate revenue	$ 79
Decrease in revenue requirement			$ 181
Annual rate reductions related to reduction in income taxes			144
Reduction related to amortization of excess deferred income taxes			37
Reduction of income tax expense			144
Reduction to income tax expense related to amortization of excess deferred federal income taxes			$ 75
Scenario, Forecast [Member]
Public Utilities, General Disclosures [Line Items]
Refund of tax rate differential		$ 75
Subsequent Event [Member]
Public Utilities, General Disclosures [Line Items]
Decrease in revenue requirement					$ 140

XML

Revenues (Narrative) (Details) - item	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Number of REPS		90
REP Subsidiary One [Member] | Sales Revenue, Net [Member]
Disaggregation of Revenue [Line Items]
Concentration Risk, Percentage	27.00%	24.00%
REP Subsidiary Two [Member] | Sales Revenue, Net [Member]
Disaggregation of Revenue [Line Items]
Concentration Risk, Percentage	22.00%	19.00%

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Revenues (Disaggregation Of Revenues) (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	[1]	Sep. 30, 2018	Sep. 30, 2017
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	$ 835			$ 2,325
Revenues collected for pass-through expenses	260			781
Total operating revenues	1,095	$ 1,068		3,106	$ 2,967
Distribution Base Revenues [Member]
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	604			1,640
Transmission Base Revenues (TCOS Revenues) [Member]
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	214			637
Transmission Base Revenues (TCOS Revenues) [Member] | Third-Party Wholesale Customers [Member]
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	137			403
Transmission Base Revenues (TCOS Revenues) [Member] | REPS Serving Oncor Distribution Customers, Through TCRF [Member]
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	77			234
Other Miscellaneous Revenues [Member]
Disaggregation of Revenue [Line Items]
Total revenues contributing to earnings	17			48
TCRF - Third-party Wholesale Transmission Service [Member]
Disaggregation of Revenue [Line Items]
Revenues collected for pass-through expenses	237			719
EECRF And Other Regulatory Charges [Member]
Disaggregation of Revenue [Line Items]
Revenues collected for pass-through expenses	$ 23			$ 62

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

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Regulatory Assets And Liabilities (Components Of Regulatory Assets And Liabilities) (Details) - USD ($) $ in Millions		9 Months Ended
		Sep. 30, 2018	Dec. 31, 2017
Regulatory Assets And Liabilities [Line Items]
Carrying Amount, Regulatory Assets		$ 1,850	$ 2,180
Carrying Amount, Regulatory Liabilities		2,763	2,807
Net regulatory assets (liabilities)		$ (913)	(627)
Estimated Net Removal Costs [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Lives of related assets
Carrying Amount, Regulatory Liabilities		$ 1,006	954
Excess Deferred Income Taxes [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Primarily over lives of related assets
Carrying Amount, Regulatory Liabilities		$ 1,587	1,789
Federal Income Taxes - Over-collected Due To TCJA Rate Change [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		1 year or less
Carrying Amount, Regulatory Liabilities		$ 75
Over-Recovered Wholesale Transmission Service Expense [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period	[1]	1 year or less
Carrying Amount, Regulatory Liabilities	[1]	$ 73	47
Other Regulatory Liabilities [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Various
Carrying Amount, Regulatory Liabilities		$ 22	17
Employee Retirement Costs Being Amortized [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		10 years
Carrying Amount, Regulatory Assets		$ 305	331
Unrecovered Employee Retirement Costs Incurred Since The Last Rate Review Period [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period	[2]	To be determined
Carrying Amount, Regulatory Assets	[2]	$ 30	30
Employee Retirement Liability [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period	[1],[2],[3]	To be determined
Carrying Amount, Regulatory Assets	[1],[2],[3]	$ 800	854
Employee Retirement Plans - Non-service Costs [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Lives of related assets
Carrying Amount, Regulatory Assets		$ 33
Self-Insurance Reserve (Primarily Storm Recovery Costs) Being Amortized [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		10 years
Carrying Amount, Regulatory Assets		$ 362	394
Unrecovered Self-Insurance Reserve Incurred Since The Last Rate Review Period [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period	[2]	To be determined
Carrying Amount, Regulatory Assets	[2]	$ 53	49
Securities Reacquisition Costs [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Lives of related debt
Carrying Amount, Regulatory Assets		$ 10	12
Deferred Conventional Meter And Metering Facilities Depreciation [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		3 years
Carrying Amount, Regulatory Assets		$ 42	57
Under-recovered AMS Costs [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		10 years
Carrying Amount, Regulatory Assets		$ 190	206
Excess Deferred Income Taxes [Member]
Regulatory Assets And Liabilities [Line Items]
Carrying Amount, Regulatory Assets			197
Energy Efficiency Performance Bonus [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period	[1]	1 year or less
Carrying Amount, Regulatory Assets	[1]	$ 3	12
Other Regulatory Assets [Member]
Regulatory Assets And Liabilities [Line Items]
Remaining Rate Recovery/Amortization Period		Various
Carrying Amount, Regulatory Assets		$ 22	$ 38

[1] Not earning a return in the regulatory rate-setting process.

[2] Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.

[3] Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.

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Short-Term Borrowings (Narrative) (Details)		9 Months Ended
		Sep. 30, 2018 USD ($) contract	Dec. 31, 2017 USD ($)
Line of Credit Facility [Line Items]
Borrowing capacity available under the credit facility		$ 2,000,000,000	$ 2,000,000,000
Letter of Credit [Member]
Line of Credit Facility [Line Items]
Outstanding borrowing under the revolving credit facility	[1]	9,000,000	9,000,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity		$ 2,000,000,000
Number of revolving credit facilities extension options | contract		2
Extension period for revolving line of credit		1 year
Credit facility, term		5 years
Expiration of revolving credit facility		Nov. 01, 2022
Outstanding borrowing under the revolving credit facility		$ 0	$ 950,000,000	[2]
Commitment fee		0.10%
Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Additional increase in borrowing capacity amount		$ 400,000,000
Commitment fee		0.225%
Debt-to-capitalization ratio		1.00
Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Additional increase in borrowing capacity amount		$ 100,000,000
Commitment fee		0.075%
Debt-to-capitalization ratio		0.65
Commercial Paper [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity		$ 2,000,000,000
Outstanding borrowing under the revolving credit facility	[3]	$ 1,099,000,000
London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		1.00%
London Interbank Offered Rate (LIBOR) [Member] | Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		1.50%
London Interbank Offered Rate (LIBOR) [Member] | Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		0.875%
Federal Funds Effective Rate [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		0.50%
One-Month London Interbank Offered Rate [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		1.00%
One-Month London Interbank Offered Rate [Member] | Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		0.50%
One-Month London Interbank Offered Rate [Member] | Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Spread over variable rate		0.00%

[1] Interest rates on outstanding letters of credit at September 30, 2018 and December 31, 2017 were 1.200% and 1.325%, respectively, based on our credit ratings.

[2] The weighted average interest rate for the credit facility at December 31, 2017 was 2.62%.

[3] The weighted average interest rate for commercial paper at September 30, 2018 was 2.45%.

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Short-Term Borrowings (Schedule Of Short-Term Borrowings) (Details) - USD ($)		Sep. 30, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Total borrowing capacity		$ 2,000,000,000	$ 2,000,000,000
Available unused credit		892,000,000	1,041,000,000
Commercial Paper [Member]
Short-term Debt [Line Items]
Outstanding	[1]	$ (1,099,000,000)
Interest Rate		2.45%
Revolving Credit Facility [Member]
Short-term Debt [Line Items]
Outstanding		$ 0	$ (950,000,000)	[2]
Interest Rate			2.62%
Letter of Credit [Member]
Short-term Debt [Line Items]
Outstanding	[3]	$ (9,000,000)	$ (9,000,000)
Interest Rate		1.20%	1.325%

[1] The weighted average interest rate for commercial paper at September 30, 2018 was 2.45%.

[2] The weighted average interest rate for the credit facility at December 31, 2017 was 2.62%.

[3] Interest rates on outstanding letters of credit at September 30, 2018 and December 31, 2017 were 1.200% and 1.325%, respectively, based on our credit ratings.

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Long-Term Debt (Narrative) (Details) - USD ($)	1 Months Ended	9 Months Ended
	Aug. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Long-Term Debt [Line Items]
Repayments of long-term debt		$ 825,000,000	$ 324,000,000
Proceeds from sale of Notes	$ 791,000,000
Redemption percentage		100.00%
Estimated fair value of our long-term debt including current maturities		$ 6,731,000,000		$ 7,153,000,000
Carrying amount		6,086,000,000		$ 6,117,000,000
Term Loan Credit Agreement Due No Later Than March 26, 2019 [Member]
Long-Term Debt [Line Items]
Repayments of long-term debt		$ 275,000,000
3.70% Fixed Senior Notes Due November 15, 2028 [Member]
Long-Term Debt [Line Items]
Increase in basis points per annum		12.50%
4.10% Fixed Senior Notes Due November 15, 2048 [Member]
Long-Term Debt [Line Items]
Increase in basis points per annum		15.00%
CP Progam [Member]
Long-Term Debt [Line Items]
Debt principal amount	$ 131,000,000
Secured Debt [Member]
Long-Term Debt [Line Items]
Percentage of fair value of cost of property additions certified to the Deed of Trust collateral agent		85.00%
Available bond credits		$ 3,588,000,000
Future debt subject to property additions to the Deed of Trust		$ 2,136,000,000

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Long-Term Debt (Schedule Of Long-Term Debt) (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Jun. 30, 2018
Debt Instrument [Line Items]
Total long-term debt	$ 6,126	$ 6,151
Unamortized discount and debt issuance costs	(40)	(34)
Less amount due currently	(250)	(550)
Long-term debt, less amounts due currently	5,836	5,567
Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 6,126	5,876
Unsecured Debt [Member]
Debt Instrument [Line Items]
Term loan		$ 275
6.80% Fixed Senior Notes Due September 1, 2018 [Member]
Debt Instrument [Line Items]
Interest percentage	6.80%	6.80%
Due date	Sep. 01, 2018	Sep. 01, 2018
6.80% Fixed Senior Notes Due September 1, 2018 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt		$ 550
2.15% Fixed Senior Notes Due June 1, 2019 [Member]
Debt Instrument [Line Items]
Interest percentage	2.15%	2.15%
Due date	Jun. 01, 2019	Jun. 01, 2019
2.15% Fixed Senior Notes Due June 1, 2019 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 250	$ 250
5.75% Fixed Senior Notes Due September 30, 2020 [Member]
Debt Instrument [Line Items]
Interest percentage		5.75%	5.75%
5.75% Fixed Senior Notes Due September 30, 2020 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	126	$ 126
4.10% Fixed Senior Notes Due June 1, 2022 [Member]
Debt Instrument [Line Items]
Interest percentage		4.10%	4.10%
4.10% Fixed Senior Notes Due June 1, 2022 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	400	$ 400
7.00% Fixed Debentures Due September 1, 2022 [Member]
Debt Instrument [Line Items]
Interest percentage		7.00%	7.00%
7.00% Fixed Debentures Due September 1, 2022 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	800	$ 800
2.95% Fixed Senior Notes Due April 1, 2025 [Member]
Debt Instrument [Line Items]
Interest percentage		2.95%	2.95%
2.95% Fixed Senior Notes Due April 1, 2025 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 350	$ 350
3.70% Fixed Senior Notes Due November 15, 2028 [Member]
Debt Instrument [Line Items]
Interest percentage	3.70%	3.70%
Due date	Nov. 15, 2028	Nov. 15, 2028
3.70% Fixed Senior Notes Due November 15, 2028 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 350
7.00% Fixed Senior Notes Due May 1, 2032 [Member]
Debt Instrument [Line Items]
Interest percentage		7.00%	7.00%
7.00% Fixed Senior Notes Due May 1, 2032 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	500	$ 500
7.25% Fixed Senior Notes Due January 15, 2033 [Member]
Debt Instrument [Line Items]
Interest percentage		7.25%	7.25%
7.25% Fixed Senior Notes Due January 15, 2033 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	350	$ 350
7.50% Fixed Senior Notes Due September 1, 2038 [Member]
Debt Instrument [Line Items]
Interest percentage		7.50%	7.50%
7.50% Fixed Senior Notes Due September 1, 2038 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	300	$ 300
5.25% Fixed Senior Notes Due September 30, 2040 [Member]
Debt Instrument [Line Items]
Interest percentage		5.25%	5.25%
5.25% Fixed Senior Notes Due September 30, 2040 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	475	$ 475
4.55% Fixed Senior Notes Due December 1, 2041 [Member]
Debt Instrument [Line Items]
Interest percentage		4.55%	4.55%
4.55% Fixed Senior Notes Due December 1, 2041 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	400	$ 400
5.30% Fixed Senior Notes Due June 1, 2042 [Member]
Debt Instrument [Line Items]
Interest percentage		5.30%	5.30%
5.30% Fixed Senior Notes Due June 1, 2042 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 500	$ 500
3.75% Fixed Senior Notes Due April 1, 2045 [Member]
Debt Instrument [Line Items]
Interest percentage		3.75%	3.75%
Due date	Apr. 01, 2045	Apr. 01, 2045
3.75% Fixed Senior Notes Due April 1, 2045 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 550	$ 550
3.80% Fixed Senior Notes Due September 30, 2047 [Member]
Debt Instrument [Line Items]
Interest percentage		3.80%	3.80%
Due date	Sep. 30, 2047	Sep. 30, 2047
3.80% Fixed Senior Notes Due September 30, 2047 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 325	$ 325
4.10% Fixed Senior Notes Due November 15, 2048 [Member]
Debt Instrument [Line Items]
Interest percentage	4.10%	4.10%
Due date	Nov. 15, 2048	Nov. 15, 2048
4.10% Fixed Senior Notes Due November 15, 2048 [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Secured long-term debt	$ 450
Term Loan Credit Agreement Due No Later Than March 26, 2019 [Member]
Debt Instrument [Line Items]
Due date	Mar. 26, 2019

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Membership Interests (Narrative) (Details) - USD ($) $ in Millions			1 Months Ended				9 Months Ended
	Mar. 09, 2018	Nov. 27, 2017	Nov. 30, 2018	Oct. 31, 2018	Jul. 31, 2018	Apr. 30, 2018	Sep. 30, 2018
Subsequent Event [Line Items]
Cash available for distribution under the capital structure restriction							$ 219
Regulatory capitalization ratio, debt	57.50%	57.50%					56.30%
Regulatory capitalization ratio, equity	42.50%	42.50%					43.70%
Members contribution						$ 144	$ 144
Contingent equity distribution					$ 30
Subsequent Event [Member]
Subsequent Event [Line Items]
Members contribution			$ 140
Contingent equity distribution				$ 180

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Membership Interests (Schedule Of Changes To Membership Interests) (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended			9 Months Ended
	Apr. 30, 2018	Sep. 30, 2018	Sep. 30, 2017		Sep. 30, 2018	Sep. 30, 2017
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Balance					$ 7,903	$ 7,711
Net income		$ 194	$ 157	[1]	426	343
Distributions					(30)	(237)
Capital contributions	$ 144				144
Net effects of cash flow hedges (net of tax)					2	1
Defined benefit pension plans (net of tax)		1	1		2	2
Balance		8,447	7,820		8,447	7,820
Capital Accounts [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Balance					8,004	7,822
Net income					426	343
Distributions					(30)	(237)
Capital contributions					144
Net effects of cash flow hedges (net of tax)
Defined benefit pension plans (net of tax)
Balance		8,544	7,928		8,544	7,928
Accumulated Other Comprehensive Income (Loss) [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Balance					(101)	(111)
Net income
Distributions
Capital contributions
Net effects of cash flow hedges (net of tax)					2	1
Defined benefit pension plans (net of tax)					2	2
Balance		$ (97)	$ (108)		$ (97)	$ (108)

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

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Membership Interests (Schedule Of Changes To Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	$ (101)
Balance at end of period	(97)
Cash Flow Hedges - Interest Rate Swap [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(18)	$ (20)
Defined benefit pension plans (net of tax)
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges	2	1
Balance at end of period	(16)	(19)
Defined Benefit Pension and OPEB Plans [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(83)	(91)
Defined benefit pension plans (net of tax)	2	2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges
Balance at end of period	(81)	(89)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(101)	(111)
Defined benefit pension plans (net of tax)	2	2
Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges	2	1
Balance at end of period	$ (97)	$ (108)

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Pension And OPEB Plans (Narrative) (Details) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Oncor Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.53%
Expected return on plan assets	5.13%
Vistra Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.72%
Expected return on plan assets	4.78%
Pension Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Cash contributions	$ 62
Additional cash contributions	20
Additional cash contributions, next five years	$ 480
OPEB Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.73%
Expected return on plan assets	6.20%
Cash contributions	$ 31
Additional cash contributions	4
Additional cash contributions, next five years	$ 175

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Pension And OPEB Plans (Schedule Of Pension And OPEB Plan Costs) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Defined Benefit Plan Disclosure [Line Items]
Net costs	$ 36	$ 35	$ 110	$ 107
Less amounts deferred principally as property or a regulatory asset	(17)	(25)	(52)	(76)
Net amounts recognized as expense	19	10	58	31
Pension Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	7	6	21	18
Interest cost	29	32	89	98
Expected return on assets	(29)	(28)	(89)	(86)
Amortization of net loss	12	11	36	33
Net costs	19	21	57	63
OPEB Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	2	1	6	5
Interest cost	11	12	33	36
Expected return on assets	(2)	(2)	(6)	(6)
Amortization of prior service cost	(8)	(5)	(21)	(15)
Amortization of net loss	14	8	41	24
Net costs	$ 17	$ 14	$ 53	$ 44

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Related-Party Transactions (Narrative) (Details) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
	Mar. 08, 2018	Sep. 30, 2018	Sep. 30, 2017	[1]	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Transformer maintenance revenue		$ 1,095	$ 1,068		$ 3,106	$ 2,967
Wholesale transmission service		$ 237	$ 230		$ 719	$ 690
Sponsor Group [Member]
Related Party Transaction [Line Items]
Equity in existing vendor	16.00%
Cash payments to vendors related to Texas margin taxes	$ 35
Sponsor Group [Member] | Capitalized [Member]
Related Party Transaction [Line Items]
Cash payments to vendors related to Texas margin taxes	33
Sponsor Group [Member] | Operation And Maintenance Expense [Member]
Related Party Transaction [Line Items]
Cash payments to vendors related to Texas margin taxes	$ 2

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

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Related-Party Transactions (Schedule Of Trade Accounts And Other Receivables From Related Parties) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Related Party Transaction [Line Items]
Trade accounts receivable from TCEH (affiliated)		$ (26)
Texas margin taxes payable	$ 32	21
Net payable (receivable)	32	(5)
Texas [Member]
Related Party Transaction [Line Items]
Texas margin taxes payable	16	21
Federal [Member]
Related Party Transaction [Line Items]
Trade accounts receivable from TCEH (affiliated)	16	(26)
Sempra Texas Holdings [Member]
Related Party Transaction [Line Items]
Net payable (receivable)	29
Sempra Texas Holdings [Member] | Texas [Member]
Related Party Transaction [Line Items]
Texas margin taxes payable	16
Sempra Texas Holdings [Member] | Federal [Member]
Related Party Transaction [Line Items]
Trade accounts receivable from TCEH (affiliated)	13
EFH Corp [Member] | Texas [Member]
Related Party Transaction [Line Items]
Texas margin taxes payable		21
EFH Corp [Member] | Federal [Member]
Related Party Transaction [Line Items]
Trade accounts receivable from TCEH (affiliated)		(21)
Texas Transmission Investment LLC [Member]
Related Party Transaction [Line Items]
Net payable (receivable)	3	(5)
Texas Transmission Investment LLC [Member] | Federal [Member]
Related Party Transaction [Line Items]
Trade accounts receivable from TCEH (affiliated)	$ 3	$ (5)

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Related-Party Transactions (Schedule Of Related Party Transactions) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Federal income taxes	$ 28	$ (114)
Texas margin taxes	21	20
Total payments (receipts)	49	(94)
Sempra Texas Holdings [Member]
Related Party Transaction [Line Items]
Federal income taxes	41
Texas margin taxes	21
Total payments (receipts)	62
EFH Corp [Member]
Related Party Transaction [Line Items]
Federal income taxes	(19)	(102)
Texas margin taxes		20
Total payments (receipts)	(19)	(82)
Texas Transmission Investment LLC [Member]
Related Party Transaction [Line Items]
Federal income taxes	6	(12)
Total payments (receipts)	$ 6	$ (12)

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Supplementary Financial Information (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Supplemental Financial Information [Line Items]
Aggregate amortization expenses	$ 13	$ 15	$ 39	$ 44
Goodwill	$ 4,064		$ 4,064		$ 4,064
Trade Accounts Receivable [Member] | Nonaffiliated REP [Member]
Supplemental Financial Information [Line Items]
Concentration risk percentage			16.00%		12.00%
Trade Accounts Receivable [Member] | Second Nonaffiliated REP [Member]
Supplemental Financial Information [Line Items]
Concentration risk percentage			13.00%		10.00%

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Supplementary Financial Information (Schedule Of Other Income And (Deductions)) (Details) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017		Sep. 30, 2018	Sep. 30, 2017
Supplementary Financial Information [Abstract]
Professional fees			$ (4)		$ (4)	$ (12)
Sempra Acquisition related costs					(16)
Recoverable pension and OPEB - non-service costs	[1]	$ (13)	(8)		(40)	(23)
Non-recoverable pension and OPEB (Note 10)		(1)	(1)		(4)	(4)
Other, including interest income		1			1	4
Total other income and (deductions) - net		$ (13)	$ (13)	[2]	$ (63)	$ (35)

[1] The prior periods have been adjusted to present non-service costs as a non-operating cost pursuant to ASU 2017-07. See Note 1 for additional information.

[2] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

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Supplementary Financial Information (Schedule Of Interest Expense And Related Charges) (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017		Sep. 30, 2018	Sep. 30, 2017
Supplementary Financial Information [Abstract]
Interest	$ 90	$ 89		$ 268	$ 263
Amortization of debt issuance costs and discounts	2	1		5	2
Less allowance for funds used during construction — capitalized interest portion	(3)	(3)		(9)	(8)
Total interest expense and related charges	$ 89	$ 87	[1]	$ 264	$ 257

[1] As adjusted for the retrospective adoption of ASU 2017-07, as discussed in Note 1.

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Supplementary Financial Information (Schedule Of Trade Accounts And Other Receivables) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Supplementary Financial Information [Abstract]
Gross trade accounts and other receivables	$ 691	$ 638
Allowance for uncollectible accounts	(3)	(3)
Trade accounts receivable - net	$ 688	$ 635

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Supplementary Financial Information (Summary of Investments And Other Property) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Supplementary Financial Information [Abstract]
Assets related to employee benefit plans, including employee savings programs	$ 111	$ 111
Land and other investments	10	2
Total investments and other property	$ 121	$ 113

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Supplementary Financial Information (Schedule Of Property, Plant And Equipment) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Supplementary Financial Information [Abstract]
Total assets in service	$ 22,593	$ 21,717
Less accumulated depreciation and amortization	7,497	7,255
Net of accumulated depreciation and amortization	15,096	14,462
Construction work in progress	671	402
Held for future use	15	15
Property, plant and equipment - net	$ 15,782	$ 14,879

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Supplementary Financial Information (Schedule Of Intangible Assets) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,213	$ 1,132
Accumulated Amortization	474	435
Net	739	697
Land Easements [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	456	453
Accumulated Amortization	99	96
Net	357	357
Capitalized Software [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	757	679
Accumulated Amortization	375	339
Net	$ 382	$ 340

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Supplementary Financial Information (Schedule Of Estimated Aggregate Amortization Expenses) (Details) $ in Millions	Sep. 30, 2018 USD ($)
Supplementary Financial Information [Abstract]
2018	$ 50
2019	47
2020	45
2021	45
2022	$ 45

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Supplementary Financial Information (Schedule Of Employee Benefit Obligations And Other) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Supplementary Financial Information [Abstract]
Retirement plans and other employee benefits	$ 1,973	$ 2,035
Investment tax credits	8	10
Other	65	57
Total employee benefit obligations and other	$ 2,046	$ 2,102

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Supplementary Financial Information (Schedule Of Supplemental Cash Flow Information) (Details) - USD ($) $ in Millions		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017
Supplementary Financial Information [Abstract]
Interest		$ 243	$ 256
Less capitalized interest		(9)	(8)
Interest payments (net of amounts capitalized)		234	248
Federal	[1]	28	(114)
State	[1]	21	20
Total payments (receipts) in lieu of income taxes	[1]	49	(94)
Noncash construction expenditures	[2]	$ 136	$ 103

[1] See Note 11 for income tax related detail.

[2] Represents end-of-period accruals.

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Infrareit Acquisition (Narrative) (Details) - InfraREIT [Member] - USD ($) $ / shares in Units, $ in Millions	Oct. 18, 2018	Sep. 30, 2018
Business Acquisition [Line Items]
Outstanding debt acquired		$ 945.0
Subsequent Event [Member]
Business Acquisition [Line Items]
Price per share of common stock to stockholders and limited partners	$ 21.00
Purchase price	$ 1,275.0
Management agreement termination fee	$ 40.5
Subsequent Event [Member] | Sempra Texas Holdings [Member]
Business Acquisition [Line Items]
Partnership interest	50.00%
Subsequent Event [Member] | Sempra Texas Holdings [Member]
Business Acquisition [Line Items]
Partner capital contribution for business combination	$ 1,330.0