CenterPoint Energy 2009 Annual Report Download - page 128

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to the indemnification obligation, RRI is defending CenterPoint Energy and its subsidiaries to the extent named in
these lawsuits. A large number of lawsuits were filed against numerous gas market participants in a number of
federal and western state courts in connection with the operation of the natural gas markets in 2000-2002.
CenterPoint Energy’s former affiliate, RRI, was a participant in gas trading in the California and Western markets.
These lawsuits, many of which have been filed as class actions, allege violations of state and federal antitrust laws.
Plaintiffs in these lawsuits are seeking a variety of forms of relief, including, among others, recovery of
compensatory damages (in some cases in excess of $1 billion), a trebling of compensatory damages, full
consideration damages and attorneys’ fees. CenterPoint Energy and/or Reliant Energy were named in approximately
30 of these lawsuits, which were instituted between 2003 and 2009. CenterPoint Energy and its affiliates have been
released or dismissed from all but two of such cases. CenterPoint Energy Services, Inc. (CES), a subsidiary of
CERC Corp., is a defendant in a case now pending in federal court in Nevada alleging a conspiracy to inflate
Wisconsin natural gas prices in 2000-2002. Additionally, CenterPoint Energy was a defendant in a lawsuit filed in
state court in Nevada that was dismissed in 2007, but the plaintiffs have indicated that they will appeal the dismissal.
CenterPoint Energy believes that neither it nor CES is a proper defendant in these remaining cases and will continue
to pursue dismissal from those cases. CenterPoint Energy does not expect the ultimate outcome of these remaining
matters to have a material impact on its financial condition, results of operations or cash flows.
On May 1, 2009, RRI completed the previously announced sale of its Texas retail business to NRG Retail LLC, a
subsidiary of NRG Energy, Inc. In connection with the sale, RRI changed its name to RRI Energy, Inc. and no
longer provides service as a REP in CenterPoint Houston’s service territory. The sale does not alter RRI’s
contractual obligations to indemnify CenterPoint Energy and its subsidiaries, including CenterPoint Houston, for
certain liabilities, including their indemnification regarding certain litigation, nor does it affect the terms of existing
guaranty arrangements for certain RRI gas transportation contracts.
Natural Gas Measurement Lawsuits. CERC Corp. and certain of its subsidiaries, along with 76 other natural gas
pipelines, their subsidiaries and affiliates, were defendants in a lawsuit filed in 1997 under the Federal False Claims
Act alleging mismeasurement of natural gas produced from federal and Indian lands. The suit sought undisclosed
damages, along with statutory penalties, interest, costs and fees. This case was consolidated, together with the other
similar False Claims Act cases, in the federal district court in Cheyenne, Wyoming. In October 2006, the judge
considering this matter granted the defendants’ motion to dismiss the suit on the ground that the court lacked subject
matter jurisdiction over the claims asserted. The plaintiff sought review of that dismissal from the Tenth Circuit
Court of Appeals, which affirmed the district court’s dismissal in March 2009. Following dismissal of the plaintiff’s
motion to the Tenth Circuit for rehearing, the plaintiff sought review by the United States Supreme Court, but his
petition for certiorari was denied in October 2009.
In addition, CERC Corp. and certain of its subsidiaries are defendants in two mismeasurement lawsuits brought
against approximately 245 pipeline companies and their affiliates pending in state court in Stevens County, Kansas.
In one case (originally filed in May 1999 and amended four times), the plaintiffs purport to represent a class of
royalty owners who allege that the defendants have engaged in systematic mismeasurement of the volume of natural
gas for more than 25 years. The plaintiffs amended their petition in this suit in July 2003 in response to an order
from the judge denying certification of the plaintiffs’ alleged class. In the amendment, the plaintiffs dismissed their
claims against certain defendants (including two CERC Corp. subsidiaries), limited the scope of the class of
plaintiffs they purport to represent and eliminated previously asserted claims based on mismeasurement of the
British thermal unit (Btu) content of the gas. The same plaintiffs then filed a second lawsuit, again as representatives
of a putative class of royalty owners in which they assert their claims that the defendants have engaged in systematic
mismeasurement of the Btu content of natural gas for more than 25 years. In both lawsuits, the plaintiffs seek
compensatory damages, along with statutory penalties, treble damages, interest, costs and fees. In September 2009,
the district court in Stevens County, Kansas, denied plaintiffs’ request for class certification of their case. The
plaintiffs are seeking reconsideration of that denial.
CERC believes that there has been no systematic mismeasurement of gas and that these lawsuits are without
merit. CERC and CenterPoint Energy do not expect the ultimate outcome of the lawsuits to have a material impact
on the financial condition, results of operations or cash flows of either CenterPoint Energy or CERC.
Gas Cost Recovery Litigation. In October 2004, a lawsuit was filed by certain CERC ratepayers in Texas and
Arkansas in circuit court in Miller County, Arkansas against CenterPoint Energy, CERC Corp., certain other