CenterPoint Energy 2009 Annual Report Download - page 37

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15
are normally allowed to become effective after a suspension period and, in some cases, are subject to refund under
applicable law until such time as the FERC issues an order on the allowable level of rates.
CenterPoint Houston is not a “public utility” under the Federal Power Act and, therefore, is not generally
regulated by the FERC, although certain of its transactions are subject to limited FERC jurisdiction. The Energy Act
conferred new jurisdiction and responsibilities on the FERC with respect to ensuring the reliability of electric
transmission service, including transmission facilities owned by CenterPoint Houston and other utilities within
ERCOT. Under this authority, the FERC has designated the NERC as the Electric Reliability Organization (ERO) to
promulgate standards, under FERC oversight, for all owners, operators and users of the bulk power system (Electric
Entities). The ERO and the FERC have authority to impose fines and other sanctions on Electric Entities that fail to
comply with approved standards and audit compliance with approved standards. The FERC has approved the
delegation by the NERC of authority for reliability in ERCOT to the TRE. CenterPoint Houston does not anticipate
that the reliability standards proposed by the NERC and approved by the FERC will have a material adverse impact
on its operations. To the extent that CenterPoint Houston is required to make additional expenditures to comply with
these standards, it is anticipated that CenterPoint Houston will seek to recover those costs through the transmission
charges that are imposed on all distribution service providers within ERCOT for electric transmission provided.
Under the Public Utility Holding Company Act of 2005 (PUHCA 2005), the FERC has authority to require
holding companies and their subsidiaries to maintain certain books and records and make them available for review
by the FERC and state regulatory authorities in certain circumstances. In December 2005, the FERC issued rules
implementing PUHCA 2005. Pursuant to those rules, in June 2006, we filed with the FERC the required notification
of our status as a public utility holding company. In October 2006 and December 2009, the FERC adopted
additional rules regarding maintenance of books and records by utility holding companies and additional reporting
and accounting requirements for centralized service companies that provide non-power goods and services to public
utilities, natural gas companies or both, in the same holding company system.
State and Local Regulation
Electric Transmission & Distribution
CenterPoint Houston conducts its operations pursuant to a certificate of convenience and necessity issued by the
Texas Utility Commission that covers its present service area and facilities. The Texas Utility Commission and those
municipalities that have retained original jurisdiction have the authority to set the rates and terms of service provided
by CenterPoint Houston under cost of service rate regulation. CenterPoint Houston holds non-exclusive franchises
from the incorporated municipalities in its service territory. In exchange for 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.
CenterPoint Houston’s distribution rates charged to REPs for residential customers are primarily based on
amounts of energy delivered, whereas distribution rates for a majority of commercial and industrial customers are
primarily based on peak demand. All REPs in CenterPoint Houston’s service area pay the same rates and other
charges for the same transmission and distribution services. This regulated delivery charge includes the transmission
and distribution rate (which includes municipal franchise fees), a system benefit fund fee imposed by the Texas
electric restructuring law, a nuclear decommissioning charge associated with decommissioning the South Texas
nuclear generating facility, a surcharge related to the implementation of AMS and charges associated with
securitization of regulatory assets, stranded costs and restoration costs relating to Hurricane Ike. Transmission rates
charged to other distribution companies are based on amounts of energy transmitted under “postage stamp” rates
that do not vary with the distance the energy is being transmitted. All distribution companies in ERCOT pay
CenterPoint Houston the same rates and other charges for transmission services.
Recovery of True-Up Balance. For a discussion of CenterPoint Houston’s true-up proceedings, see “— Our
Business — Electric Transmission & Distribution — Recovery of True-Up Balance” above.