CenterPoint Energy 2008 Annual Report Download - page 29

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7
Customers
CenterPoint Houston serves nearly all of the Houston/Galveston metropolitan area. CenterPoint Houston’s
customers consist of 79 REPs, which sell electricity to over 2 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 minimal creditworthiness
criteria established by, the Texas Utility Commission. Two of the REPs in CenterPoint Houston’s service area are
subsidiaries of RRI. Sales to subsidiaries of RRI represented approximately 56%, 51% and 48% of CenterPoint
Houston’s transmission and distribution revenues in 2006, 2007 and 2008, respectively. CenterPoint Houston’s
billed receivables balance from REPs as of December 31, 2008 was $141 million. Approximately 46% of this
amount was owed by subsidiaries of RRI. CenterPoint Houston does not have long-term contracts with any of its
customers. It operates on a continuous billing cycle, with meter readings being conducted and invoices being
distributed to REPs each business day.
Advanced Metering System and Distribution Automation (Intelligent Grid)
In December 2008, CenterPoint Houston received approval from the Texas Utility Commission to deploy an
advanced metering system (AMS) across its service territory over the next five years. CenterPoint Houston plans to
begin installing advanced meters in March 2009. This innovative technology should encourage greater energy
conservation by giving Houston-area electric consumers the ability to better monitor and manage their electric use
and its cost in near real time. CenterPoint Houston will recover the cost for the AMS through a monthly surcharge to
all REPs over 12 years. The surcharge for each residential consumer for the first 24 months, beginning in February
2009, will be $3.24 per month; thereafter, the surcharge is scheduled to be reduced to $3.05 per month. These
amounts are subject to upward or downward adjustment in future proceedings to reflect actual costs incurred and to
address required changes in scope. CenterPoint Houston projects capital expenditures of approximately
$640 million for the installation of the advanced meters and corresponding communication and data management
systems over the five-year deployment period.
CenterPoint Houston is also pursuing possible deployment of an electric distribution grid automation strategy that
involves the implementation of an ―Intelligent Grid‖ which would make use of CenterPoint Houston’s facilities to
provide on-demand data and information about the status of facilities on its system. Although this technology is still
in the developmental stage, CenterPoint Houston believes it has the potential to provide a significant improvement
in grid planning, operations and maintenance of the CenterPoint Houston distribution system. These improvements
would be expected to contribute to fewer and shorter outages, better customer service, improved operations costs,
improved security and more effective use of our workforce. Texas Utility Commission approval and appropriate rate
treatment would be sought in connection with any actual deployment of this technology.
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.
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 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 wires and meters. Most of CenterPoint