CenterPoint Energy 2008 Annual Report Download - page 32

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10
areas served by Gas Operations, it owns the underground gas mains and service lines, metering and regulating
equipment located on customers’ premises and the district regulating equipment necessary for pressure maintenance.
With a few exceptions, the measuring stations at which Gas Operations receives gas are owned, operated and
maintained by others, and its distribution facilities begin at the outlet of the measuring equipment. These facilities,
including odorizing equipment, are usually located on the land owned by suppliers.
Competition
Gas Operations competes primarily with alternate energy sources such as electricity and other fuel sources. In
some areas, intrastate pipelines, other gas distributors and marketers also compete directly for gas sales to end-users.
In addition, as a result of federal regulations affecting interstate pipelines, natural gas marketers operating on these
pipelines may be able to bypass Gas Operations’ facilities and market and sell and/or transport natural gas directly to
commercial and industrial customers.
Competitive Natural Gas Sales and Services
CERC offers variable and fixed-priced physical natural gas supplies primarily to commercial and industrial
customers and electric and gas utilities through CenterPoint Energy Services, Inc. (CES) and its subsidiary,
CenterPoint Energy Intrastate Pipelines, LLC (CEIP).
In 2008, CES marketed approximately 528 Bcf of natural gas, transportation and related energy services to
approximately 9,700 customers (including approximately 9 Bcf to affiliates). CES customers vary in size from small
commercial customers to large utility companies in the central and eastern regions of the United States, and are
served from offices located in Arkansas, Illinois, Indiana, Louisiana, Minnesota, Missouri, Pennsylvania, Texas and
Wisconsin. The business has three operational functions: wholesale, retail and intrastate pipelines, which are further
described below.
Wholesale Operations. CES offers a portfolio of physical delivery services and financial products designed to
meet wholesale customers’ supply and price risk management needs. These customers are served directly through
interconnects with various inter- and intra-state pipeline companies, and include gas utilities, large industrial
customers and electric generation customers.
Retail Operations. CES offers a variety of natural gas management services to smaller commercial and industrial
customers, municipalities, educational institutions and hospitals, whose facilities are located downstream of natural
gas distribution utility city gate stations. These services include load forecasting, supply acquisition, daily swing
volume management, invoice consolidation, storage asset management, firm and interruptible transportation
administration and forward price management. CES manages transportation contracts and energy supply for retail
customers in sixteen states.
Intrastate Pipeline Operations. CEIP primarily provides transportation services to shippers and end-users and
contracts out approximately 2.3 Bcf of storage at its Pierce Junction facility in Texas.
CES currently transports natural gas on over 32 interstate and intrastate pipelines within states located throughout
the central and eastern United States. CES maintains a portfolio of natural gas supply contracts and firm
transportation and storage agreements to meet the natural gas requirements of its customers. CES aggregates supply
from various producing regions and offers contracts to buy natural gas with terms ranging from one month to over
five years. In addition, CES actively participates in the spot natural gas markets in an effort to balance daily and
monthly purchases and sales obligations. Natural gas supply and transportation capabilities are leveraged through
contracts for ancillary services including physical storage and other balancing arrangements.
As described above, CES offers its customers a variety of load following services. In providing these services,
CES uses its customers’ purchase commitments to forecast and arrange its own supply purchases, storage and
transportation services to serve customers’ natural gas requirements. As a result of the variance between this forecast
activity and the actual monthly activity, CES will either have too much supply or too little supply relative to its
customers’ purchase commitments. These supply imbalances arise each month as customers’ natural gas
requirements are scheduled and corresponding natural gas supplies are nominated by CES for delivery to those