CenterPoint Energy 2009 Annual Report Download - page 43

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Liability for Preexisting Conditions
Manufactured Gas Plant Sites. CERC and its predecessors operated manufactured gas plants (MGPs) in the past.
In Minnesota, CERC has completed remediation on two sites, other than ongoing monitoring and water treatment.
There are five remaining sites in CERC’s Minnesota service territory. CERC believes that it has no liability with
respect to two of these sites.
At December 31, 2009, CERC had accrued $14 million for remediation of these Minnesota sites and the
estimated range of possible remediation costs for these sites was $4 million to $35 million based on remediation
continuing for 30 to 50 years. The cost estimates are based on studies of a site or industry average costs for
remediation of sites of similar size. The actual remediation costs will be dependent upon the number of sites to be
remediated, the participation of other potentially responsible parties (PRPs), if any, and the remediation methods
used. CERC has utilized an environmental expense tracker mechanism in its rates in Minnesota to recover estimated
costs in excess of insurance recovery. As of December 31, 2009, CERC had collected $13 million from insurance
companies and rate payers to be used for future environmental remediation. In January 2010, as part of its
Minnesota rate case decision, the MPUC eliminated the environmental expense tracker mechanism and ordered
amounts previously collected from ratepayers and related carrying costs refunded to customers. As of December 31,
2009, the balance in the environmental expense tracker account was $8.7 million. The MPUC provided for the
inclusion in rates of approximately $285,000 annually to fund normal on-going remediation costs. CERC was not
required to refund to customers the amount collected from insurance companies, $4.6 million at December 31, 2009,
to be used to mitigate future environmental costs. The MPUC further gave assurance that any reasonable and
prudent environmental clean-up costs CERC incurs in the future will be rate-recoverable under normal regulatory
principles and procedures. This provision had no effect on earnings.
In addition to the Minnesota sites, the United States Environmental Protection Agency and other regulators have
investigated MGP sites that were owned or operated by CERC or may have been owned by one of its former
affiliates. CERC has been named as a defendant in a lawsuit filed in the United States District Court, District of
Maine, under which contribution is sought by private parties for the cost to remediate former MGP sites based on
the previous ownership of such sites by former affiliates of CERC or its divisions. CERC has also been identified as
a PRP by the State of Maine for a site that is the subject of the lawsuit. In June 2006, the federal district court in
Maine ruled that the current owner of the site is responsible for site remediation but that an additional evidentiary
hearing would be required to determine if other potentially responsible parties, including CERC, would have to
contribute to that remediation. In September 2009, the federal district court granted CERC’s motion for summary
judgment in the proceeding. Although it is likely that the plaintiff will pursue an appeal from that dismissal, further
action will not be taken until the district court disposes of claims against other defendants in the case. CERC
believes it is not liable as a former owner or operator of the site under CERCLA and applicable state statutes, and is
vigorously contesting the suit and its designation as a PRP. We and CERC do not expect the ultimate outcome to
have a material adverse impact on the financial condition, results of operations or cash flows of either us or CERC.
Mercury Contamination. Our pipeline and distribution operations have in the past employed elemental mercury in
measuring and regulating equipment. It is possible that small amounts of mercury may have been spilled in the
course of normal maintenance and replacement operations and that these spills may have contaminated the
immediate area with elemental mercury. We have found this type of contamination at some sites in the past, and we
have conducted remediation at these sites. It is possible that other contaminated sites may exist and that remediation
costs may be incurred for these sites. Although the total amount of these costs is not known at this time, based on
our experience and that of others in the natural gas industry to date and on the current regulations regarding
remediation of these sites, we believe that the costs of any remediation of these sites will not be material to our
financial condition, results of operations or cash flows.
Asbestos. Some facilities owned by us contain or have contained asbestos insulation and other asbestos-
containing materials. We or our subsidiaries have been named, along with numerous others, as a defendant in
lawsuits filed by a number of individuals who claim injury due to exposure to asbestos. Some of the claimants have
worked at locations owned by us, but most existing claims relate to facilities previously owned by our subsidiaries.
We anticipate that additional claims like those received may be asserted in the future. In 2004, we sold our
generating business, to which most of these claims relate, to Texas Genco LLC, which is now known as NRG Texas
LP. Under the terms of the arrangements regarding separation of the generating business from us and our sale to