CenterPoint Energy 2009 Annual Report Download - page 85

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63
Equity Market Value Risk
We are exposed to equity market value risk through our ownership of 7.2 million shares of TW Common,
1.8 million shares of TWC Common and 0.7 million shares of AOL Common, which we hold to facilitate our ability
to meet our obligations under the ZENS. Please read Note 6 to our consolidated financial statements for a discussion
of our ZENS obligation. A decrease of 10% from the December 31, 2009 aggregate market value of these shares
would result in a net loss of approximately $5 million, which would be recorded as an unrealized loss in our
Statements of Consolidated Income.
Commodity Price Risk From Non-Trading Activities
We use derivative instruments as economic hedges to offset the commodity price exposure inherent in our
businesses. The stand-alone commodity risk created by these instruments, without regard to the offsetting effect of
the underlying exposure these instruments are intended to hedge, is described below. We measure the commodity
risk of our non-trading energy derivatives using a sensitivity analysis. The sensitivity analysis performed on our
non-trading energy derivatives measures the potential loss in fair value based on a hypothetical 10% movement in
energy prices. At December 31, 2009, the recorded fair value of our non-trading energy derivatives was a net
liability of $134 million (before collateral). The net liability consisted of a net liability of $143 million associated
with price stabilization activities of our Natural Gas Distribution business segment and a net asset of $9 million
related to our Competitive Natural Gas Sales and Services business segment. Net assets or liabilities related to the
price stabilization activities correspond directly with net over/under recovered gas cost liabilities or assets on the
balance sheet. A decrease of 10% in the market prices of energy commodities from their December 31, 2009 levels
would have increased the fair value of our non-trading energy derivatives net liability by $31 million. However, the
consolidated income statement impact of this same 10% decrease in market prices would be an increase in income
of $3 million.
The above analysis of the non-trading energy derivatives utilized for commodity price risk management purposes
does not include the favorable impact that the same hypothetical price movement would have on our physical
purchases and sales of natural gas to which the hedges relate. Furthermore, the non-trading energy derivative
portfolio is managed to complement the physical transaction portfolio, reducing overall risks within limits.
Therefore, the adverse impact to the fair value of the portfolio of non-trading energy derivatives held for hedging
purposes associated with the hypothetical changes in commodity prices referenced above is expected to be
substantially offset by a favorable impact on the underlying hedged physical transactions.