CenterPoint Energy 2014 Annual Report Download - page 124

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. As of December 31, 2014 , CERC had collected
$4 million
from insurance companies to be used for future environmental remediation.
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 and CenterPoint Energy do not expect the
ultimate outcome of these investigations to have a material adverse effect on the financial condition, results of operations or cash flows of either
CenterPoint Energy or CERC.
Asbestos. Some facilities owned by CenterPoint Energy contain or have contained asbestos insulation and other asbestos-
containing
materials. CenterPoint Energy or its 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 subsidiaries of CenterPoint
Energy, but most existing claims relate to facilities previously owned by CenterPoint Energy’
s subsidiaries, some of which are currently owned
by an affiliate of NRG. In 2004 and early 2005, CenterPoint Energy sold its generating business, to which most of these claims relate, to a
company which is now an affiliate of NRG. Under the terms of the arrangements regarding separation of the generating business from
CenterPoint Energy and its sale of that business, ultimate financial responsibility for uninsured losses from claims relating to the
generating
business has been assumed by the NRG affiliate, but CenterPoint Energy has agreed to continue to defend such claims to the extent they are
covered by insurance maintained by CenterPoint Energy, subject to reimbursement of the costs of such defense by the NRG affiliate.
CenterPoint Energy anticipates that additional claims like those received may be asserted in the future. Although their ultimate outcome cannot
be predicted at this time, CenterPoint Energy intends to continue vigorously contesting claims that it does not consider to have merit and, based
on its experience to date, does not expect these matters, either individually or in the aggregate, to have a material adverse effect on CenterPoint
Energy’s financial condition, results of operations or cash flows.
Other Environmental.
From time to time CenterPoint Energy identifies the presence of environmental contaminants on property where its
subsidiaries conduct or have conducted operations. Other such sites involving contaminants may be identified in the future. CenterPoint Energy
has and expects to continue to remediate identified sites consistent with its legal obligations. From time to time CenterPoint Energy has received
notices from regulatory authorities or others regarding its status as a PRP in connection with sites found to require remediation due to the
presence of environmental contaminants. In addition, CenterPoint Energy has been named from time to time as a defendant in litigation related
to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, CenterPoint Energy does not expect, based on its
experience to date, these matters, either individually or in the aggregate, to have a material adverse effect on CenterPoint Energy’
s financial
condition, results of operations or cash flows.
Other Proceedings
CenterPoint Energy is involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions
and governmental agencies regarding matters arising in the ordinary course of business. From time to time, CenterPoint Energy is also a
defendant in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry.
Some of these proceedings involve substantial amounts. CenterPoint Energy regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters. CenterPoint Energy does not expect the disposition of these matters
to have a material adverse effect on CenterPoint Energy’s financial condition, results of operations or cash flows.
(e) Guarantees
Prior to the distribution of CenterPoint Energy’
s ownership in RRI to its shareholders, CERC had guaranteed certain contractual obligations
of what became RRI’
s trading subsidiary. When the companies separated, RRI agreed to secure CERC against obligations under the guarantees
RRI had been unable to extinguish by the time of separation. Pursuant to such agreement, as amended in December 2007, RRI (now GenOn)
agreed to provide to CERC cash or letters of credit as security against CERC’
s obligations under its remaining guarantees for demand charges
under certain gas transportation agreements if and to the extent changes in market conditions expose CERC to a risk of loss on those guarantees
based on an annual calculation, with any required collateral to be posted each December. The undiscounted maximum potential payout of the
demand charges under these transportation contracts, which will be in effect until 2018, was approximately $42 million as of
December 31,
2014
. Based on market conditions in the fourth quarter of 2014 at the time the most recent annual calculation was made under the agreement,
GenOn was not obligated to post any security. If GenOn should fail to perform the contractual obligations, CERC could have to honor its
guarantee and, in such event, any collateral then provided as security may be insufficient to satisfy CERC’s obligations.
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