CenterPoint Energy 2009 Annual Report Download - page 94

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72
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Background
CenterPoint Energy, Inc. (CenterPoint Energy) is a public utility holding company. CenterPoint Energy’s
operating subsidiaries own and operate electric transmission and distribution facilities, natural gas distribution
facilities, interstate pipelines and natural gas gathering, processing and treating facilities. As of December 31, 2009,
CenterPoint Energy’s indirect wholly owned subsidiaries included:
• CenterPoint Energy Houston Electric, LLC (CenterPoint Houston), which engages in the electric
transmission and distribution business in a 5,000-square mile area of the Texas Gulf Coast that includes the
city of Houston; and
• CenterPoint Energy Resources Corp. (CERC Corp. and, together with its subsidiaries, CERC), which owns
and operates natural gas distribution systems in six states. Subsidiaries of CERC own interstate natural gas
pipelines and gas gathering systems and provide various ancillary services. A wholly owned subsidiary of
CERC Corp. offers variable and fixed-price physical natural gas supplies primarily to commercial and
industrial customers and electric and gas utilities.
For a description of CenterPoint Energy’s reportable business segments, see Note 14.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
(b) Principles of Consolidation
The accounts of CenterPoint Energy and its wholly owned and majority owned subsidiaries are included in the
consolidated financial statements. All intercompany transactions and balances are eliminated in consolidation.
CenterPoint Energy uses the equity method of accounting for investments in entities in which CenterPoint Energy
has an ownership interest between 20% and 50% and exercises significant influence. CenterPoint Energy’s
investments in unconsolidated affiliates include a 50% ownership interest in Southeast Supply Header, LLC (SESH)
which owns and operates a 270-mile interstate natural gas pipeline and a 50% interest in Waskom Gas Processing
Company, a Texas general partnership, which owns and operates a natural gas processing plant. Other investments,
excluding marketable securities, are carried at cost. During 2009, CenterPoint Energy invested $137 million in
SESH and received a capital distribution of $23 million from SESH.
(c) Revenues
CenterPoint Energy records revenue for electricity delivery and natural gas sales and services under the accrual
method and these revenues are recognized upon delivery to customers. Electricity deliveries not billed by month-end
are accrued based on daily supply volumes, applicable rates and analyses reflecting significant historical trends and
experience. Natural gas sales not billed by month-end are accrued based upon estimated purchased gas volumes,
estimated lost and unaccounted for gas and currently effective tariff rates. The Interstate Pipelines and Field Services
business segments record revenues as transportation and processing services are provided.