CenterPoint Energy 2008 Annual Report Download - page 35

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13
Competition
Our field services business competes with other companies in the natural gas gathering, treating, and processing
business. The principal elements of competition are rates, terms of service and reliability of services. Our field
services business competes indirectly with other forms of energy, including electricity, coal and fuel oils. The
primary competitive factor is price. Changes in the availability of energy and pipeline capacity, the level of business
activity, conservation and governmental regulations, the capability to convert to alternative fuels, and other factors,
including weather, affect the demand for natural gas in areas we serve and the level of competition for gathering,
treating, and processing services. In addition, competition among forms of energy is impacted by commodity pricing
levels and influences the level of drilling activity and demand for our gathering operations.
Other Operations
Our Other Operations business segment includes office buildings and other real estate used in our business
operations and other corporate operations that support all of our business operations.
Financial Information About Segments
For financial information about our segments, see Note 14 to our consolidated financial statements, which note is
incorporated herein by reference.
REGULATION
We are subject to regulation by various federal, state and local governmental agencies, including the regulations
described below.
Federal Energy Regulatory Commission
The FERC has jurisdiction under the Natural Gas Act and the Natural Gas Policy Act of 1978, as amended, to
regulate the transportation of natural gas in interstate commerce and natural gas sales for resale in intrastate
commerce that are not first sales. The FERC regulates, among other things, the construction of pipeline and related
facilities used in the transportation and storage of natural gas in interstate commerce, including the extension,
expansion or abandonment of these facilities. The rates charged by interstate pipelines for interstate transportation
and storage services are also regulated by the FERC. The Energy Policy Act of 2005 (Energy Act) expanded the
FERC’s authority to prohibit market manipulation in connection with FERC-regulated transactions and gave the
FERC additional authority to impose significant civil and criminal penalties for statutory violations and violations of
the FERC’s rules or orders and also expanded criminal penalties for such violations. Our competitive natural gas
sales and services subsidiary markets natural gas in interstate commerce pursuant to blanket authority granted by the
FERC.
Our natural gas pipeline subsidiaries may periodically file applications with the FERC for changes in their
generally available maximum rates and charges designed to allow them to recover their costs of providing service to
customers (to the extent allowed by prevailing market conditions), including a reasonable rate of return. These rates
are normally allowed to become effective after a suspension period and, in some cases, are subject to refund under
applicable law until such time as the FERC issues an order on the allowable level of rates.
CenterPoint Houston is not a ―public utility‖ under the Federal Power Act and, therefore, is not generally
regulated by the FERC, although certain of its transactions are subject to limited FERC jurisdiction. The Energy Act
conferred new jurisdiction and responsibilities on the FERC with respect to ensuring the reliability of electric
transmission service, including transmission facilities owned by CenterPoint Houston and other utilities within
ERCOT. Under this authority, the FERC has designated the NERC as the Electric Reliability Organization (ERO) to
promulgate standards, under FERC oversight, for all owners, operators and users of the bulk power system (Electric
Entities). The ERO and the FERC have authority to impose fines and other sanctions on Electric Entities that fail to
comply with the standards. The FERC has approved the delegation by the NERC of authority for reliability in
ERCOT to the TRE. CenterPoint Houston does not anticipate that the reliability standards proposed by the NERC
and approved by the FERC will have a material adverse impact on its operations. To the extent that CenterPoint