CenterPoint Energy 2008 Annual Report Download - page 65

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2008 Compared to 2007. Our Natural Gas Distribution business segment reported operating income of
$215 million for 2008 compared to $218 million for 2007. Operating income declined due to a combination of non-
weather-related usage ($13 million), due in part to higher gas prices, higher customer-related and support services
costs ($9 million), higher bad debts and collection costs ($4 million), increased costs of materials and supplies
($4 million), and an increase in depreciation and amortization and taxes other than income taxes ($3 million)
resulting from increased investment in property, plant and equipment. The adverse impacts on operating income
were partially offset by the net impact of rate increases ($11 million), lower labor and benefits costs ($14 million),
and customer growth from the addition of approximately 25,000 customers in 2008 ($6 million).
2007 Compared to 2006. Our Natural Gas Distribution business segment reported operating income of
$218 million for 2007 compared to $124 million for 2006. Operating income improved as a result of increased usage
primarily due to a return to more normal weather in 2007 compared to the unusually mild weather in 2006
($33 million), growth from the addition of over 38,000 customers in 2007 ($9 million), the effect of the 2006
purchased gas cost write-off ($21 million), the effect of rate changes ($7 million) and reduced operation and
maintenance expenses ($15 million). Operation and maintenance expenses declined primarily as a result of costs
associated with staff reductions incurred in 2006 ($17 million) and settlement of certain rate case-related items
($9 million), partially offset by increases in bad debts and collection costs ($8 million) and other services
($5 million).
Competitive Natural Gas Sales and Services
The following table provides summary data of our Competitive Natural Gas Sales and Services business segment
for 2006, 2007 and 2008 (in millions, except throughput and customer data):
Year Ended December 31,
2006
2007
2008
Revenues ................................................................................................................................
$ 3,651
$ 3,579
$ 4,528
Expenses:
Natural gas ................................................................................................................................
3,540
3,467
4,423
Operation and maintenance ................................................................................................
30
31
39
Depreciation and amortization ................................................................................................
1
5
3
Taxes other than income taxes ................................................................................................
3
1
1
Total expenses ................................................................................................
3,574
3,504
4,466
Operating Income ................................................................................................
$ 77
$ 75
$ 62
Throughput (in Bcf) ................................................................................................
555
522
528
Number of customers at period end ................................................................................................
7,024
7,139
9,771
2008 Compared to 2007. Our Competitive Natural Gas Sales and Services business segment reported operating
income of $62 million for the year ended December 31, 2008 compared to $75 million for the year ended December
31, 2007. The decrease in operating income of $13 million primarily resulted from lower gains on sales of gas from
previously written down inventory ($24 million) and higher operation and maintenance costs ($6 million), which
were partially offset by improved margin as basis and summer/winter spreads increased ($12 million). In addition,
2008 included a gain from mark-to-market accounting ($13 million) and a write-down of natural gas inventory to the
lower of average cost or market ($30 million), compared to a charge to income from mark-to-market accounting for
non-trading derivatives ($10 million) and a write-down of natural gas inventory to the lower of average cost or
market ($11 million) for 2007. Our Competitive Natural Gas Sales and Services business segment purchases and
stores natural gas to meet certain future sales requirements and enters into derivative contracts to hedge the
economic value of the future sales.
2007 Compared to 2006. Our Competitive Natural Gas Sales and Services business segment reported operating
income of $75 million for 2007 compared to $77 million for 2006. The decrease in operating income of $2 million
was primarily due to reduced opportunities for optimization of pipeline and storage assets resulting from lower
locational and seasonal natural gas price differentials in the wholesale business ($10 million) offset by an increase in
sales to commercial and industrial customers in the retail business ($3 million). In addition, 2007 included a charge