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30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in combination with our consolidated financial statements included in
Item 8 herein.
OVERVIEW
Background
We are a public utility holding company whose indirect wholly owned subsidiaries include:
• 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 Corp. 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.
Business Segments
In this Management’s Discussion and Analysis, we discuss our results from continuing operations on a consolidated basis and
individually for each of our business segments. We also discuss our liquidity, capital resources and certain critical accounting
policies. We are first and foremost an energy delivery company and it is our intention to remain focused on this segment of the
energy business. The results of our business operations are significantly impacted by weather, customer growth, economic
conditions, cost management, competition, rate proceedings before regulatory agencies and other actions of the various regulatory
agencies to whose jurisdiction we are subject. Our electric transmission and distribution services are subject to rate regulation and
are reported in the Electric Transmission & Distribution business segment, as are impacts of generation-related stranded costs and
other true-up balances recoverable by the regulated electric utility. Our natural gas distribution services are also subject to rate
regulation and are reported in the Natural Gas Distribution business segment. A summary of our reportable business segments as
of December 31, 2012 is set forth below:
Electric Transmission & Distribution
Our electric transmission and distribution operations provide electric transmission and distribution services to retail electric
providers (REPs) serving over two million metered customers in a 5,000-square-mile area of the Texas Gulf Coast that has a
population of approximately six million people and includes the city of Houston.
On behalf of REPs, CenterPoint Houston delivers electricity from power plants to substations, from one substation to another
and to retail electric customers in locations throughout CenterPoint Houston’s certificated service territory. The Electric Reliability
Council of Texas, Inc. (ERCOT) serves as the regional reliability coordinating council for member electric power systems in Texas.
ERCOT membership is open to consumer groups, investor and municipally-owned electric utilities, rural electric cooperatives,
independent generators, power marketers, river authorities and REPs. The ERCOT market represents approximately 85% of the
demand for power in Texas and is one of the nation’s largest power markets. Transmission and distribution services are provided
under tariffs approved by the Public Utility Commission of Texas (Texas Utility Commission).
Natural Gas Distribution
CERC owns and operates our regulated natural gas distribution business (Gas Operations), which engages in intrastate natural
gas sales to, and natural gas transportation for, approximately 3.3 million residential, commercial and industrial customers in
Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.
Competitive Natural Gas Sales and Services
CERC’s operations also include non-rate regulated natural gas sales to, and transportation services for, commercial and
industrial customers in 21 states in the central and eastern regions of the United States.