CenterPoint Energy 2010 Annual Report Download - page 29

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and 12% of CenterPoint Houston’s transmission and distribution revenues in 2008, 2009 and 2010, respectively.
CenterPoint Houston’s billed receivables balance from REPs as of December 31, 2010 was $138 million.
Approximately 33% and 13% of this amount was owed by subsidiaries of NRG Retail and TXU Energy Retail,
respectively. CenterPoint Houston does not have long-term contracts with any of its customers. It operates using a
continuous billing cycle, with meter readings being conducted and invoices being distributed to REPs each business
day.
Advanced Metering System and Distribution Grid 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 is currently recovering 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, was $3.24 per month. Beginning in February 2011, the surcharge was 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 is also pursuing deployment of an electric distribution grid automation strategy that involves
the implementation of an ―Intelligent Grid‖ (IG) 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 AMS and IG projects. In March 2010, CenterPoint Houston and the DOE completed
negotiations and finalized the agreement. Under the terms of the agreement, the DOE has agreed to reimburse
CenterPoint Houston for 50% of its eligible costs until the total amount of the grant has been paid. Through
December 31, 2010, CenterPoint Houston has requested $100 million of grant funding from the DOE, of
which $90 million had been received. CenterPoint Houston estimates that capital expenditures of approximately
$645 million for the installation of the advanced meters and corresponding communication and data management
systems will be incurred over the deployment period. CenterPoint Houston is using $150 million of the grant
funding to accelerate completion of its current deployment of advanced meters to 2012, instead of 2014 as originally
scheduled. CenterPoint Houston will use the other $50 million from the grant to begin deployment of an IG in a
portion of its service territory over the next three years. It is expected that the portion of the IG project subject to
funding by the DOE will cost approximately $115 million.
In March 2010, the IRS announced through the issuance of Revenue Procedure 2010-20 that it was providing a
safe harbor to corporations that receive a Smart Grid Investment Grant. The IRS stated that it would not challenge a
corporation’s treatment of the grant as a non-taxable non-shareholder contribution to capital as long as the
corporation properly reduced the tax basis of specified property acquired.
Competition
There are no other electric transmission and distribution utilities in CenterPoint Houston’s service area. In order
for another provider of transmission and distribution services to provide such services in CenterPoint Houston’s
territory, it would be required to obtain a certificate of convenience and necessity from the Texas Utility
Commission and, depending on the location of the facilities, may also be required to obtain franchises from one or
more municipalities. We know of no other party intending to enter this business in CenterPoint Houston’s service
area at this time.