CenterPoint Energy 2014 Annual Report Download - page 15

Financial Information About Segments
For financial information about our segments, see Note 17 to our consolidated financial statements, which note is incorporated herein by
reference.
REGULATION
We are subject to regulation by various federal, state and local governmental agencies, including the regulations described below.
Federal Energy Regulatory Commission
The FERC has jurisdiction under the Natural Gas Act and the Natural Gas Policy Act of 1978, as amended, to regulate the transportation of
natural gas in interstate commerce and natural gas sales for resale in interstate commerce that are not first sales. The FERC regulates, among
other things, the construction of pipeline and related facilities used in the transportation and storage of natural gas in interstate commerce,
including the extension, expansion or abandonment of these facilities. The FERC has authority to prohibit market manipulation in connection
with FERC-regulated transactions and to impose significant civil and criminal penalties for statutory violations and violations of the FERC’
s
rules or orders. Our Energy Services business segment markets natural gas in interstate commerce pursuant to blanket authority granted by the
FERC.
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 FERC has certain responsibilities with respect to ensuring the reliability
of electric transmission service, including transmission facilities owned by CenterPoint Houston and other utilities within ERCOT. 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 (a) impose fines and other sanctions
on Electric Entities that fail to comply with approved standards and (b) 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.
As a public utility holding company, under the Public Utility Holding Company Act of 2005, we and our consolidated subsidiaries are
subject to reporting and accounting requirements and are required to maintain certain books and records and make them available for review by
the FERC and state regulatory authorities in certain circumstances.
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 municipalities 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 20 to 40 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 transmission and distribution services. This regulated delivery charge includes
the transmission and distribution rate (which includes municipal franchise fees), a nuclear decommissioning charge associated with
decommissioning the South Texas nuclear generating facility, an energy efficiency cost recovery charge, 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 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.
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