CenterPoint Energy 2009 Annual Report Download - page 24

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2
services by companies providing transmission and distribution service, such as CenterPoint Houston, would remain
regulated by the Public Utility Commission of Texas (Texas Utility Commission). The legislation provided for a
transition period to move to the new market structure and provided a true-up mechanism for the formerly integrated
electric utilities to recover stranded and certain other costs resulting from the transition to competition. Those costs
were recoverable after approval by the Texas Utility Commission either through the issuance of securitization bonds
or through the implementation of a competition transition charge (CTC) as a rider to the utility’s tariff.
CenterPoint Houston is our only business that continues to engage in electric utility operations. It is a
transmission and distribution electric utility that operates wholly within the state of Texas. Neither CenterPoint
Houston nor any other subsidiary of CenterPoint Energy makes retail or wholesale sales of electric energy, or owns
or operates any electric generating facilities.
Electric Transmission
On behalf of retail electric providers (REPs), CenterPoint Houston delivers electricity from power plants to
substations, from one substation to another and to retail electric customers taking power at or above 69 kilovolts
(kV) in locations throughout CenterPoint Houston’s certificated service territory. CenterPoint Houston constructs
and maintains transmission facilities and provides transmission services under tariffs approved by the Texas Utility
Commission.
Electric Distribution
In ERCOT, end users purchase their electricity directly from certificated REPs. CenterPoint Houston delivers
electricity for REPs in its certificated service area by carrying lower-voltage power from the substation to the retail
electric customer. CenterPoint Houston’s distribution network receives electricity from the transmission grid
through power distribution substations and delivers electricity to end users through distribution feeders. CenterPoint
Houston’s operations include construction and maintenance of distribution facilities, metering services, outage
response services and call center operations. CenterPoint Houston provides distribution services under tariffs
approved by the Texas Utility Commission. Texas Utility Commission rules and market protocols govern the
commercial operations of distribution companies and other market participants. Rates for these existing services are
established pursuant to rate proceedings conducted before municipalities that have original jurisdiction and the
Texas Utility Commission.
ERCOT Market Framework
CenterPoint Houston is a member of ERCOT. ERCOT serves as the regional reliability coordinating council for
member electric power systems in Texas. ERCOT membership is open to consumer groups, investor and
municipally-owned electric utilities, rural electric cooperatives, independent generators, power marketers and REPs.
The ERCOT market includes most of the State of Texas, other than a portion of the panhandle, portions of the
eastern part of the state bordering Arkansas and Louisiana and the area in and around El Paso. The ERCOT market
represents approximately 85% of the demand for power in Texas and is one of the nation’s largest power markets.
The ERCOT market includes an aggregate net generating capacity of approximately 76,000 megawatts (MW). There
are only limited direct current interconnections between the ERCOT market and other power markets in the
United States and Mexico.
The ERCOT market operates under the reliability standards set by the North American Electric Reliability
Corporation (NERC) and approved by the Federal Energy Regulatory Commission (FERC). These reliability
standards are administered by the Texas Regional Entity (TRE), a functionally independent division of ERCOT. The
Texas Utility Commission has primary jurisdiction over the ERCOT market to ensure the adequacy and reliability of
electricity supply across the state’s main interconnected power transmission grid. The ERCOT independent system
operator (ERCOT ISO) is responsible for operating the bulk electric power supply system in the ERCOT market. Its
responsibilities include ensuring that electricity production and delivery are accurately accounted for among the
generation resources and wholesale buyers and sellers. Unlike certain other regional power markets, the ERCOT
market is not a centrally dispatched power pool, and the ERCOT ISO does not procure energy on behalf of its
members other than to maintain the reliable operations of the transmission system. Members who sell and purchase