CenterPoint Energy 2008 Annual Report Download - page 57

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35
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in combination with our consolidated financial statements
included in Item 8 herein.
OVERVIEW
Background
We are a public utility holding company whose indirect wholly owned subsidiaries include:
• CenterPoint Energy Houston Electric, LLC (CenterPoint Houston), which engages in the electric
transmission and distribution business in a 5,000-square mile area of the Texas Gulf Coast that includes
Houston; and
• CenterPoint Energy Resources Corp. (CERC Corp. and, together with its subsidiaries, CERC), which owns
and operates natural gas distribution systems in six states. Subsidiaries of CERC Corp. own interstate
natural gas pipelines and gas gathering systems and provide various ancillary services. A wholly owned
subsidiary of CERC Corp. offers variable and fixed-price physical natural gas supplies primarily to
commercial and industrial customers and electric and gas utilities.
Business Segments
In this Management’s Discussion, we discuss our results from continuing operations on a consolidated basis and
individually for each of our business segments. We also discuss our liquidity, capital resources and certain critical
accounting policies. We are first and foremost an energy delivery company and it is our intention to remain focused
on this segment of the energy business. The results of our business operations are significantly impacted by weather,
customer growth, economic conditions, cost management, rate proceedings before regulatory agencies and other
actions of the various regulatory agencies to which we are subject. Our electric transmission and distribution
services are subject to rate regulation and are reported in the Electric Transmission & Distribution business segment,
as are impacts of generation-related stranded costs and other true-up balances recoverable by the regulated electric
utility. Our natural gas distribution services are also subject to rate regulation and are reported in the Natural Gas
Distribution business segment. A summary of our reportable business segments as of December 31, 2008 is set forth
below:
Electric Transmission & Distribution
Our electric transmission and distribution operations provide electric transmission and distribution services to
retail electric providers (REPs) serving over 2 million metered customers in a 5,000-square-mile area of the Texas
Gulf Coast that has a population of approximately 5.6 million people and includes Houston.
On behalf of REPs, CenterPoint Houston delivers electricity from power plants to substations, from one
substation to another and to retail electric customers in locations throughout CenterPoint Houston’s certificated
service territory. The Electric Reliability Council of Texas, Inc. (ERCOT) serves as the regional reliability
coordinating council for member electric power systems in Texas. ERCOT membership is open to consumer groups,
investor and municipally-owned electric utilities, rural electric cooperatives, independent generators, power
marketers and REPs. The ERCOT market represents approximately 85% of the demand for power in Texas and is
one of the nation’s largest power markets. Transmission and distribution services are provided under tariffs
approved by the Texas Utility Commission.
Natural Gas Distribution
CERC owns and operates our regulated natural gas distribution business (Gas Operations), which engages in
intrastate natural gas sales to, and natural gas transportation for, approximately 3.2 million residential, commercial
and industrial customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.