CenterPoint Energy 2009 Annual Report Download - page 32

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10
the purchased gas adjustment factors are updated periodically, ranging from monthly to semi-annually, using
estimated gas costs. The changes in the cost of gas billed to customers are subject to review by the applicable
regulatory bodies.
Gas Operations uses various third-party storage services or owned natural gas storage facilities to meet peak-day
requirements and to manage the daily changes in demand due to changes in weather and may also supplement
contracted supplies and storage from time to time with stored liquefied natural gas and propane-air plant production.
Gas Operations owns and operates an underground natural gas storage facility with a capacity of 7.0 billion cubic
feet (Bcf). It has a working capacity of 2.0 Bcf available for use during a normal heating season and a maximum
daily withdrawal rate of 50 million cubic feet (MMcf). It also owns nine propane-air plants with a total production
rate of 200 Dekatherms (DTH) per day and on-site storage facilities for 12 million gallons of propane (1.0 Bcf
natural gas equivalent). It owns a liquefied natural gas plant facility with a 12 million-gallon liquefied natural gas
storage tank (1.0 Bcf natural gas equivalent) and a production rate of 72 DTH per day.
On an ongoing basis, Gas Operations enters into contracts to provide sufficient supplies and pipeline capacity to
meet its customer requirements. However, it is possible for limited service disruptions to occur from time to time
due to weather conditions, transportation constraints and other events. As a result of these factors, supplies of natural
gas may become unavailable from time to time, or prices may increase rapidly in response to temporary supply
constraints or other factors.
Gas Operations has entered into various asset management agreements associated with its utility distribution
service in Arkansas, Louisiana, Mississippi, Oklahoma and Texas. Generally, these asset management agreements
are contracts between Gas Operations and an asset manager that are intended to transfer the working capital
obligation and maximize the utilization of the assets. In these agreements, Gas Operations agreed to release
transportation and storage capacity to other parties to manage gas storage, supply and delivery arrangements for Gas
Operations and to use the released capacity for other purposes when it is not needed for Gas Operations. Gas
Operations is compensated by the asset manager through payments made over the life of the agreements based in
part on the results of the asset optimization. Gas Operations has received approval from the state regulatory
commissions in Arkansas, Louisiana, Mississippi and Oklahoma to retain a share of the asset management
agreement proceeds, although the percentage of payments to be retained by Gas Operations varies based on the
jurisdiction, with the majority of the payments to benefit customers. The agreements have varying terms, the longest
of which expires in 2016.
Assets
As of December 31, 2009, Gas Operations owned approximately 70,700 linear miles of natural gas distribution
mains, varying in size from one-half inch to 24 inches in diameter. Generally, in each of the cities, towns and rural
areas served by Gas Operations, it owns the underground gas mains and service lines, metering and regulating
equipment located on customers’ premises and the district regulating equipment necessary for pressure maintenance.
With a few exceptions, the measuring stations at which Gas Operations receives gas are owned, operated and
maintained by others, and its distribution facilities begin at the outlet of the measuring equipment. These facilities,
including odorizing equipment, are usually located on the land owned by suppliers.
Competition
Gas Operations competes primarily with alternate energy sources such as electricity and other fuel sources. In
some areas, intrastate pipelines, other gas distributors and marketers also compete directly for gas sales to end-users.
In addition, as a result of federal regulations affecting interstate pipelines, natural gas marketers operating on these
pipelines may be able to bypass Gas Operations’ facilities and market and sell and/or transport natural gas directly to
commercial and industrial customers.