CenterPoint Energy 2014 Annual Report Download - page 9

Customers
CenterPoint Houston serves nearly all of the Houston/Galveston metropolitan area. At December 31, 2014, CenterPoint Houston’
s
customers consisted of approximately 70 REPs, which sell electricity to over two million metered customers in CenterPoint Houston’
s
certificated service area, and municipalities, electric cooperatives and other distribution companies located outside CenterPoint Houston’
s
certificated service area. Each REP is licensed by, and must meet minimum creditworthiness criteria established by, the Texas Utility
Commission.
Sales to REPs that are affiliates of NRG Energy, Inc. (NRG) represented approximately 37%, 38% and 39% of CenterPoint Houston’
s
transmission and distribution revenues in 2014, 2013 and 2012, respectively. Sales to REPs that are affiliates of Energy Future Holdings Corp.
(Energy Future Holdings) represented approximately 10% of CenterPoint Houston’
s transmission and distribution revenues in each of 2014,
2013 and 2012. CenterPoint Houston’
s aggregate billed receivables balance from REPs as of December 31, 2014 was $195
million. Approximately 36% and 10% of this amount was owed by affiliates of NRG and Energy Future Holdings, respectively. CenterPoint
Houston does not have long-
term contracts with any of its customers. It operates using a continuous billing cycle, with meter readings being
conducted and invoices being distributed to REPs each business day.
Advanced Metering System and Distribution Grid Automation (Intelligent Grid)
In May 2012, CenterPoint Houston substantially completed the deployment of an advanced metering system (AMS), having installed
approximately 2.2 million smart meters. To recover the cost of the AMS, the Texas Utility Commission approved a monthly surcharge payable
by REPs, initially over 12 years and later reduced to six years as a result of U.S. Department of Energy (DOE) grant funds. The surcharge is
currently set to expire in 2015 for residential customers and in 2016 to 2017 for non-
residential customers. The surcharge amounts and duration
are subject to adjustment in future proceedings to reflect actual costs incurred and to address required changes in scope.
CenterPoint Houston is also pursuing deployment of an electric distribution grid automation strategy that involves the implementation of an
“Intelligent Grid” (IG) which would provide on-
demand data and information about the status of facilities on its system. We expect to include
the costs of the deployment in future rate proceedings before the Texas Utility Commission.
In October 2009, the DOE selected CenterPoint Houston for a $200 million grant to help fund its AMS and IG projects. CenterPoint
Houston received substantially all of the $200 million of grant funding from the DOE by 2011 and used $150 million of it to accelerate
completion of its deployment of advanced meters to 2012. CenterPoint Houston is using the other $50 million from the grant for an initial
deployment of an IG that covers approximately 12% of its service territory. The DOE-
funded portion of the IG project is expected to be
completed in 2015, and the capital portion of the IG project subject to partial funding by the DOE will cost approximately $140 million.
Competition
There are no other electric transmission and distribution utilities in CenterPoint Houston’
s service area. In order for another provider of
transmission and distribution services to provide such services in CenterPoint Houston’
s territory, it would be required to obtain a certificate of
convenience and necessity from the Texas Utility Commission and, depending on the location of the facilities, may also be required to obtain
franchises from one or more municipalities. We know of no other party intending to enter this business in CenterPoint Houston’
s service area at
this time. Distributed generation (i.e., power generation located at or near the point of consumption) could result in a reduction of demand for
CenterPoint Houston’s electric distribution services but has not been a significant factor to date.
Seasonality
A significant portion of CenterPoint Houston’
s revenues is derived from rates that it collects from each REP based on the amount of
electricity it delivers on behalf of such REP. Thus, CenterPoint Houston’
s revenues and results of operations are subject to seasonality, weather
conditions and other changes in electricity usage, with revenues generally being higher during the warmer months.
Properties
All of CenterPoint Houston’s properties are located in Texas. Its properties consist primarily of high-
voltage electric transmission lines and
poles, distribution lines, substations, service centers, service wires and meters. Most of CenterPoint Houston’s
3