CenterPoint Energy 2008 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2008 CenterPoint Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

9
Gas Operations also provides unregulated services consisting of heating, ventilating and air conditioning (HVAC)
equipment and appliance repair, and sales of HVAC, hearth and water heating equipment in Minnesota.
The demand for intrastate natural gas sales to, and natural gas transportation for, residential, commercial and
industrial customers is seasonal. In 2008, approximately 71% of the total throughput of Gas Operations’ business
occurred in the first and fourth quarters. These patterns reflect the higher demand for natural gas for heating
purposes during those periods.
Gas Operations also suffered some damage to its system in Houston, Texas and in other portions of its service
territory across Texas and Louisiana as a result of Hurricane Ike. As of December 31, 2008, Gas Operations has
deferred approximately $4 million of costs related to Hurricane Ike for recovery as part of future natural gas
distribution rate proceedings.
Supply and Transportation. In 2008, Gas Operations purchased virtually all of its natural gas supply pursuant to
contracts with remaining terms varying from a few months to four years. Major suppliers in 2008 included BP
Canada Energy Marketing Corp. (13.4% of supply volumes), Tenaska Marketing Ventures (11.5%), Oneok Energy
Marketing (10.2%), Coral Energy Resources (6.6%) and Cargill, Inc. (5.8%). Numerous other suppliers provided
the remaining 52.5% of Gas Operations’ natural gas supply requirements. Gas Operations transports its natural gas
supplies through various intrastate and interstate pipelines, including those owned by our other subsidiaries, under
contracts with remaining terms, including extensions, varying from one to fifteen years. Gas Operations anticipates
that these gas supply and transportation contracts will be renewed or replaced prior to their expiration.
We actively engage in commodity price stabilization pursuant to annual gas supply plans presented to and/or filed
with each of our state regulatory authorities. These price stabilization activities include use of storage gas,
contractually establishing fixed prices with our physical gas suppliers and utilizing financial derivative instruments
to achieve a variety of pricing structures (e.g., fixed price, costless collars and caps). Our gas supply plans generally
call for 25-50% of winter supplies to be hedged in some fashion.
Generally, the regulations of the states in which Gas Operations operates allow it to pass through changes in the
cost of natural gas, including gains and losses on financial derivatives associated with the index-priced physical
supply, to its customers under purchased gas adjustment provisions in its tariffs. Depending upon the jurisdiction,
the purchased gas adjustment factors are updated periodically, ranging from monthly to semi-annually, using
estimated gas costs. The changes in the cost of gas billed to customers are subject to review by the applicable
regulatory bodies.
Gas Operations uses various third-party storage services or owned natural gas storage facilities to meet peak-day
requirements and to manage the daily changes in demand due to changes in weather and may also supplement
contracted supplies and storage from time to time with stored liquefied natural gas and propane-air plant production.
Gas Operations owns and operates an underground natural gas storage facility with a capacity of 7.0 billion cubic
feet (Bcf). It has a working capacity of 2.0 Bcf available for use during a normal heating season and a maximum
daily withdrawal rate of 50 million cubic feet (MMcf). It also owns nine propane-air plants with a total production
rate of 200 MMcf per day and on-site storage facilities for 12 million gallons of propane (1.0 Bcf natural gas
equivalent). It owns liquefied natural gas plant facilities with a 12 million-gallon liquefied natural gas storage tank
(1.0 Bcf natural gas equivalent) and a production rate of 72 MMcf per day.
On an ongoing basis, Gas Operations enters into contracts to provide sufficient supplies and pipeline capacity to
meet its customer requirements. However, it is possible for limited service disruptions to occur from time to time
due to weather conditions, transportation constraints and other events. As a result of these factors, supplies of natural
gas may become unavailable from time to time, or prices may increase rapidly in response to temporary supply
constraints or other factors.
Assets
As of December 31, 2008, Gas Operations owned approximately 70,000 linear miles of natural gas distribution
mains, varying in size from one-half inch to 24 inches in diameter. Generally, in each of the cities, towns and rural