CenterPoint Energy 2009 Annual Report Download - page 31

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Substations. As of December 31, 2009, CenterPoint Houston owned 230 major substation sites having a total
installed rated transformer capacity of 51,557 megavolt amperes.
Service Centers. CenterPoint Houston operates 14 regional service centers located on a total of 291 acres of land.
These service centers consist of office buildings, warehouses and repair facilities that are used in the business of
transmitting and distributing electricity.
Franchises
CenterPoint Houston holds non-exclusive franchises from the incorporated municipalities in its service territory.
In exchange for the payment of fees, these franchises give CenterPoint Houston the right to use the streets and
public rights-of way of these municipalities to construct, operate and maintain its transmission and distribution
system and to use that system to conduct its electric delivery business and for other purposes that the franchises
permit. The terms of the franchises, with various expiration dates, typically range from 30 to 50 years.
Natural Gas Distribution
CERC Corp.’s natural gas distribution business (Gas Operations) engages in regulated 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. The largest metropolitan areas served in each
state by Gas Operations are Houston, Texas; Minneapolis, Minnesota; Little Rock, Arkansas; Shreveport, Louisiana;
Biloxi, Mississippi; and Lawton, Oklahoma. In 2009, approximately 43% of Gas Operations’ total throughput was to
residential customers and approximately 57% was to commercial and industrial customers.
Gas Operations also provides unregulated services consisting of heating, ventilating and air conditioning (HVAC)
equipment and appliance repair, and sales of HVAC, hearth and water heating equipment in Minnesota.
The demand for intrastate natural gas sales to, and natural gas transportation for, residential, commercial and
industrial customers is seasonal. In 2009, approximately 70% of the total throughput of Gas Operations’ business
occurred in the first and fourth quarters. These patterns reflect the higher demand for natural gas for heating
purposes during those periods.
Gas Operations also suffered some damage to its system in Houston, Texas and in other portions of its service
territory across Texas and Louisiana as a result of Hurricane Ike. As of December 31, 2009, Gas Operations has
deferred approximately $3 million of costs related to Hurricane Ike for recovery as part of future natural gas
distribution rate proceedings.
Supply and Transportation. In 2009, Gas Operations purchased virtually all of its natural gas supply pursuant to
contracts with remaining terms varying from a few months to four years. Major suppliers in 2009 included BP
Canada Energy Marketing Corp. (20.5% of supply volumes), Coral Energy Resources (8.3%), Tenaska Marketing
Ventures (8.2%), Kinder Morgan (8.0%), ConocoPhillips Company (7.4%), and Cargill, Inc. (5.7%). Numerous
other suppliers provided the remaining 41.9% of Gas Operations’ natural gas supply requirements. Gas Operations
transports its natural gas supplies through various intrastate and interstate pipelines, including those owned by our
other subsidiaries, under contracts with remaining terms, including extensions, varying from one to fifteen years.
Gas Operations anticipates that these gas supply and transportation contracts will be renewed or replaced prior to
their expiration.
We actively engage in commodity price stabilization pursuant to annual gas supply plans presented to and/or filed
with each of our state regulatory authorities. These price stabilization activities include use of storage gas,
contractually establishing fixed prices with our physical gas suppliers and utilizing financial derivative instruments
to achieve a variety of pricing structures (e.g., fixed price, costless collars and caps). Our gas supply plans generally
call for 25-50% of winter supplies to be hedged in some fashion.
Generally, the regulations of the states in which Gas Operations operates allow it to pass through changes in the
cost of natural gas, including gains and losses on financial derivatives associated with the index-priced physical
supply, to its customers under purchased gas adjustment provisions in its tariffs. Depending upon the jurisdiction,