CenterPoint Energy 2014 Annual Report Download - page 72

exchange-
execution requirements, we will still be subject to record keeping and reporting requirements. Other changes to the Commodity
Exchange Act made as a result of Dodd-Frank and the CFTC’s implementing regulations could increase the cost of entering into new swaps.
Collection of Receivables from REPs
CenterPoint Houston’
s receivables from the distribution of electricity are collected from REPs that supply the electricity CenterPoint
Houston distributes to their customers. Adverse economic conditions, structural problems in the market served by ERCOT or financial
difficulties of one or more REPs could impair the ability of these REPs to pay for CenterPoint Houston’
s services or could cause them to delay
such payments. CenterPoint Houston depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs
could adversely affect CenterPoint Houston’s cash flows. In the event of a REP’s default, CenterPoint Houston’
s tariff provides a number of
remedies, including the option for CenterPoint Houston to request that the Texas Utility Commission suspend or revoke the certification of the
REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely
payments. However, CenterPoint Houston remains at risk for payments related to services provided prior to the shift to the replacement REP or
the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the
bankruptcy laws, in which event such REP might seek to avoid honoring its obligations, and claims might be made against CenterPoint Houston
involving payments it had received from such REP. If a REP were to file for bankruptcy, CenterPoint Houston may not be successful in
recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, Texas Utility
Commission regulations authorize utilities, such as CEHE, to defer bad debts resulting from defaults by REPs for recovery in future rate cases,
subject to a review of reasonableness and necessity.
Other Factors that Could Affect Cash Requirements
In addition to the above factors, our liquidity and capital resources could be affected by:
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•
cash collateral requirements that could exist in connection with certain contracts, including our weather hedging arrangements, and gas
purchases, gas price and gas storage activities of our Natural Gas Distribution and Energy Services business segments;
•
acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased gas prices and
concentration of natural gas suppliers;
•
increased costs related to the acquisition of natural gas;
•
increases in interest expense in connection with debt refinancings and borrowings under credit facilities;
•
various legislative or regulatory actions;
•
incremental collateral, if any, that may be required due to regulation of derivatives;
• the ability of GenOn and its subsidiaries to satisfy their obligations in respect of GenOn’
s indemnity obligations to us and our
subsidiaries;
•
the ability of REPs, including REP affiliates of NRG Energy, Inc. and Energy Future Holdings Corp., to satisfy their obligations to us
and our subsidiaries;
• slower customer payments and increased write-
offs of receivables due to higher gas prices or changing economic conditions;
•
the outcome of litigation brought by and against us;
•
contributions to pension and postretirement benefit plans;
•
restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such
restoration costs; and
• various other risks identified in “Risk Factors”
in Item 1A of Part I of this report.