CenterPoint Energy 2009 Annual Report Download - page 29

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the storm restoration costs (including a carrying charge of 11.075%). The beginning balance of the ADFIT related to
storm restoration costs was approximately $207 million and will decline over the life of the system restoration bonds
as taxes are paid on the system restoration tariffs. The ADFIT Credit will reduce operating income in 2010 by
approximately $24 million.
In accordance with the orders discussed above, as of December 31, 2009, CenterPoint Houston has recorded $651
million associated with distribution-related storm restoration costs as a net regulatory asset and $20 million
associated with transmission-related storm restoration costs, of which $18 million is recorded in property, plant and
equipment and $2 million of related carrying costs is recorded in regulatory assets. These amounts reflect carrying
costs of $60 million related to distribution and $2 million related to transmission through December 31, 2009, based
on the 11.075% cost of capital approved by the Texas Utility Commission. The carrying costs have been bifurcated
into two components: (i) return of borrowing costs and (ii) an allowance for earnings on shareholders’ investment.
During the year ended December 31, 2009, the component representing a return of borrowing costs of $23 million
has been recognized and is included in other income in our Statements of Consolidated Income. The component
representing an allowance for earnings on shareholders’ investment of $39 million is being deferred and will be
recognized as it is collected through rates.
Customers
CenterPoint Houston serves nearly all of the Houston/Galveston metropolitan area. CenterPoint Houston’s
customers consist of approximately 80 REPs, which sell electricity to over 2 million metered customers in
CenterPoint Houston’s certificated service area, and municipalities, electric cooperatives and other distribution
companies located outside CenterPoint Houston’s certificated service area. Each REP is licensed by, and must meet
minimum creditworthiness criteria established by, the Texas Utility Commission. Sales to REPs that are subsidiaries
of NRG Retail LLC (formerly subsidiaries of RRI) represented approximately 51%, 48% and 44% of CenterPoint
Houston’s transmission and distribution revenues in 2007, 2008 and 2009, respectively. CenterPoint Houston’s
billed receivables balance from REPs as of December 31, 2009 was $139 million. Approximately 41% of this
amount was owed by subsidiaries of NRG Retail LLC. CenterPoint Houston does not have long-term contracts with
any of its customers. It operates on a continuous billing cycle, with meter readings being conducted and invoices
being distributed to REPs each business day.
Advanced Metering System and Distribution Automation (Intelligent Grid)
In December 2008, CenterPoint Houston received approval from the Texas Utility Commission to deploy an
advanced metering system (AMS) across its service territory over the next five years. CenterPoint Houston began
installing advanced meters in March 2009. This innovative technology should encourage greater energy
conservation by giving Houston-area electric consumers the ability to better monitor and manage their electric use
and its cost in near real time. CenterPoint Houston will recover the cost for the AMS through a monthly surcharge to
all REPs over 12 years. The surcharge for each residential consumer for the first 24 months, which began in
February 2009, is $3.24 per month; thereafter, the surcharge is scheduled to be reduced to $3.05 per month. These
amounts are subject to upward or downward adjustment in future proceedings to reflect actual costs incurred and to
address required changes in scope. CenterPoint Houston projects capital expenditures of approximately
$640 million for the installation of the advanced meters and corresponding communication and data management
systems over the five-year deployment period.
CenterPoint Houston is also pursuing deployment of an electric distribution grid automation strategy that involves
the implementation of an “Intelligent Grid” which would make use of CenterPoint Houston’s facilities to provide
on-demand data and information about the status of facilities on its system. Although this technology is still in the
developmental stage, CenterPoint Houston believes it has the potential to provide a significant improvement in grid
planning, operations, maintenance and customer service for the CenterPoint Houston distribution system. These
improvements are expected to contribute to fewer and shorter outages, better customer service, improved operations
costs, improved security and more effective use of our workforce. We expect to include the costs of the deployment
in future rate proceedings before the Texas Utility Commission.
In October 2009, the U.S. Department of Energy (DOE) notified CenterPoint Houston that it had been selected
for a $200 million grant for its advanced metering system and intelligent grid projects. The award is contingent on