CenterPoint Energy 2012 Annual Report Download - page 40

Download and view the complete annual report

Please find page 40 of the 2012 CenterPoint Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

18
options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations, and claims
might be made by creditors involving payments CenterPoint Houston had received from such REP.
Rate regulation of CenterPoint Houston’s business may delay or deny CenterPoint Houston’s ability to earn a reasonable
return and fully recover its costs.
CenterPoint Houston’s rates are regulated by certain municipalities and the Texas Utility Commission based on an analysis
of its invested capital and its expenses in a test year. Thus, the rates that CenterPoint Houston is allowed to charge may not match
its expenses at any given time. The regulatory process by which rates are determined may not always result in rates that will
produce full recovery of CenterPoint Houston’s costs and enable CenterPoint Houston to earn a reasonable return on its invested
capital.
Disruptions at power generation facilities owned by third parties could interrupt CenterPoint Houston’s sales of transmission
and distribution services.
CenterPoint Houston transmits and distributes to customers of REPs electric power that the REPs obtain from power generation
facilities owned by third parties. CenterPoint Houston does not own or operate any power generation facilities. If power generation
is disrupted or if power generation capacity is inadequate, CenterPoint Houston’s sales of transmission and distribution services
may be diminished or interrupted, and its results of operations, financial condition and cash flows could be adversely affected.
CenterPoint Houston’s revenues and results of operations are seasonal.
A significant portion of CenterPoint Houston’s revenues is derived from rates that it collects from each REP based on the
amount of electricity it delivers on behalf of such REP. Thus, CenterPoint Houston’s revenues and results of operations are subject
to seasonality, weather conditions and other changes in electricity usage, with revenues generally being higher during the warmer
months.
CenterPoint Houston could be subject to higher costs and fines or other sanctions as a result of mandatory reliability
standards.
The FERC has jurisdiction with respect to ensuring the reliability of electric transmission service, including transmission
facilities owned by CenterPoint Houston and other utilities within ERCOT. The FERC has designated the NERC as the ERO to
promulgate standards, under FERC oversight, for all owners, operators and users of the bulk power system. The FERC has approved
the delegation by the NERC of authority for reliability in ERCOT to the TRE, a functionally independent division of ERCOT.
Compliance with the mandatory reliability standards may subject CenterPoint Houston to higher operating costs and may result
in increased capital expenditures. In addition, if CenterPoint Houston were to be found to be in noncompliance with applicable
mandatory reliability standards, it could be subject to sanctions, including substantial monetary penalties.
The AMS deployed throughout CenterPoint Houston's service territory may experience unexpected problems with respect
to the timely receipt of accurate metering data.
CenterPoint Houston has deployed an AMS throughout its service territory. The deployment consisted, among other elements,
of replacing existing meters with new electronic meters that record metering data at 15-minute intervals and wirelessly communicate
that information to CenterPoint Houston over a bi-directional communications system installed for that purpose. The AMS
integrates equipment and computer software from various vendors in order to eliminate the need for physical meter readings to
be taken at consumers' premises, such as monthly readings for billing purposes and special readings associated with a customer's
change in REPs or the connection or disconnection of electric service. Unanticipated difficulties could be encountered during the
operation of the AMS, including failures or inadequacy of equipment or software, difficulties in integrating the various components
of the AMS, changes in technology, cyber-security issues and factors outside the control of CenterPoint Houston, which could
result in delayed or inaccurate metering data that might lead to delays or inaccuracies in the calculation and imposition of delivery
or other charges, which could have a material adverse affect on CenterPoint Houston's results of operations, financial condition
and cash flows.