CenterPoint Energy 2014 Annual Report Download - page 50

Natural Gas Distribution
CERC owns and operates our regulated natural gas distribution business (NGD), which engages in intrastate natural gas sales to, and natural
gas transportation for, approximately 3.4 million residential, commercial and industrial customers in Arkansas, Louisiana, Minnesota,
Mississippi, Oklahoma and Texas.
Energy Services
CERC’s operations also include non-
rate regulated natural gas sales to, and transportation services for, commercial and industrial customers
in 23 states in the central United States.
Midstream Investments
We have a significant equity investment in Enable, an unconsolidated subsidiary that owns, operates and develops natural gas and crude oil
assets. Our Midstream Investments segment includes equity earnings associated with the operations of Enable and a 0.1% interest in Southeast
Supply Header, LLC (SESH) owned by CERC.
Other Operations
Our other operations business segment includes office buildings and other real estate used in our business operations and other corporate
operations which support all of our business operations.
EXECUTIVE SUMMARY
Factors Influencing Our Businesses
We are an energy delivery company. The majority of our revenues are generated from the sale of natural gas and the transmission and
delivery of electricity by our subsidiaries. We do not own or operate electric generating facilities or make retail sales to end-
use electric
customers. To assess our financial performance, our management primarily monitors operating income and cash flows from our business
segments. Within these broader financial measures, we monitor margins, operation and maintenance expense, interest expense, capital spending
and working capital requirements. In addition to these financial measures we also monitor a number of variables that management considers
important to the operation of our business segments, including the number of customers, throughput, use per customer, commodity prices and
heating and cooling degree days. We also monitor system reliability, safety factors and customer satisfaction to gauge our performance.
To the extent adverse economic conditions affect our suppliers and customers, results from our energy delivery businesses may
suffer. Reduced demand and lower energy prices could lead to financial pressure on some of our customers who operate within the energy
industry. Also, adverse economic conditions, coupled with concerns for protecting the environment, may cause consumers to use less energy or
avoid expansions of their facilities, resulting in less demand for our services.
Performance of our Electric Transmission & Distribution and Natural Gas Distribution business segments is significantly influenced by the
number of customers and energy usage per customer. Weather conditions can have a significant impact on energy usage, and we compare our
results on a weather adjusted basis. In 2012, we generally experienced normal weather in the summer months. However, every state in which we
distribute natural gas had the warmest winter on record. In 2013, we experienced a colder than normal spring and very cold weather in
November and December in Houston and all of the states in which we have gas customers. The cooler weather continued into 2014 and
throughout the year, resulting in a colder than normal January and February and milder temperatures for the rest of the year, including the
summer months, in the Houston area. Long term national trends indicate customers have reduced their energy consumption, and reduced
consumption can adversely affect our results. However, due to more affordable energy prices and continued economic improvement in the areas
we serve, the trend toward lower usage has slowed in some of the areas we serve. In addition, in many of our service areas, particularly in the
Houston area and in Minnesota, we have benefited from a growth in the number of customers that also tends to mitigate the effects of reduced
consumption. We anticipate that this trend will continue as the regions’
economies continue to grow. The profitability of our businesses is
influenced significantly by the regulatory treatment we receive from the various state and local regulators who set our electric and gas
distribution rates.
Our Energy Services business segment contracts with customers for transportation, storage and sales of natural gas on an unregulated
basis. Its operations serve customers in the central United States. The segment benefits from favorable price differentials, either on a geographic
basis or on a seasonal basis. While this business utilizes financial derivatives to hedge its exposure to price movements, it does not engage in
speculative or proprietary trading and maintains a low value at risk level, or
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