CenterPoint Energy 2008 Annual Report Download - page 33

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customers. CES’ processes and risk control environment are designed to measure and value imbalances on a real-
time basis to ensure that CES’ exposure to commodity price risk is kept to a minimum. The value assigned to these
imbalances is calculated daily and is known as the aggregate Value at Risk (VaR). In 2008, CES’ VaR averaged
$1.5 million with a high of $2.8 million.
The CenterPoint Energy risk control policy, governed by our Risk Oversight Committee, defines authorized and
prohibited trading instruments and trading limits. CES is a physical marketer of natural gas and uses a variety of
tools, including pipeline and storage capacity, financial instruments and physical commodity purchase contracts to
support its sales. The CES business optimizes its use of these various tools to minimize its supply costs and does not
engage in proprietary or speculative commodity trading. The VaR limits within which CES operates are consistent
with its operational objective of matching its aggregate sales obligations (including the swing associated with load
following services) with its supply portfolio in a manner that minimizes its total cost of supply.
Assets
CEIP owns and operates approximately 227 miles of intrastate pipeline in Louisiana and Texas and holds storage
facilities of approximately 2.3 Bcf in Texas under long-term leases. In addition, CES leases transportation capacity
of approximately 1.1 Bcf per day on various inter- and intrastate pipelines and approximately 8.8 Bcf of storage to
service its customer base.
Competition
CES competes with regional and national wholesale and retail gas marketers including the marketing divisions of
natural gas producers and utilities. In addition, CES competes with intrastate pipelines for customers and services in
its market areas.
Interstate Pipelines
CERC’s pipelines business operates interstate natural gas pipelines with gas transmission lines primarily located
in Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas. CERC’s interstate pipeline operations are primarily
conducted by two wholly owned subsidiaries that provide gas transportation and storage services primarily to
industrial customers and local distribution companies:
• CenterPoint Energy Gas Transmission Company (CEGT) is an interstate pipeline that provides natural gas
transportation, natural gas storage and pipeline services to customers principally in Arkansas, Louisiana,
Oklahoma and Texas; and
• CenterPoint Energy-Mississippi River Transmission Corporation (MRT) is an interstate pipeline that
provides natural gas transportation, natural gas storage and pipeline services to customers principally in
Arkansas and Missouri.
The rates charged by CEGT and MRT for interstate transportation and storage services are regulated by the
FERC. Our interstate pipelines business operations may be affected by changes in the demand for natural gas, the
available supply and relative price of natural gas in the Mid-continent and Gulf Coast natural gas supply regions and
general economic conditions.
In 2008, approximately 15% of CEGT and MRT’s total operating revenue was attributable to services provided to
Gas Operations, an affiliate, and approximately 7% was attributable to services provided to Laclede Gas Company
(Laclede), an unaffiliated distribution company, that provides natural gas utility service to the greater St. Louis
metropolitan area in Illinois and Missouri. Services to Gas Operations and Laclede are provided under several long-
term firm storage and transportation agreements. Effective April 1, 2008, MRT signed a 5-year extension of its firm
transportation and storage contracts with Laclede. Agreements for firm transportation, ―no notice‖ transportation
service and storage services in certain of Gas Operations’ service areas (Arkansas, Louisiana, Oklahoma and Texas)
will expire in 2012.