CenterPoint Energy 2013 Annual Report Download

Download and view the complete annual report

Please find the complete 2013 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 156

  • 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
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

 Annual Report
O
INT
ON

Table of contents

  • Page 1
    ON OINT 101 Annual Report

  • Page 2
    ... PERFORMANCE The following line graph compares the cumulative total return on the common stock of CenterPoint Energy with the cumulative total return of the S&P 500 Index and the S&P 500 Utilities Index for the period commencing December 31, 2008 and ending December 31, 2013. FIVE-YEAR CUMULATIVE...

  • Page 3
    ...time increase in our income tax expense and changed the way we account for midstream earnings. A description of these changes and a detailed comparison of our 2013 and 2012 net income results can be found on page 47 of our form 10-K. We encourage you to read it. As we review and manage our utilities...

  • Page 4
    ... reduced drilling activity in dry gas basins. In January 2014, Enable Midstream announced it had hired Lynn L. Bourdon III to be its president and CEO. Enable Midstream remains on track for an initial public offering in the first half of 2014. 2013 Highlights Our natural gas distribution business...

  • Page 5
    ... reduce debt and improve our balance sheet. Today, CenterPoint Energy is stronger and more financially secure than we have ever been. But where do we go from here? With the creation of Enable Midstream and the transition to our next generation of leadership, we felt the time was right to step back...

  • Page 6
    ...an estimate of when service will be restored. On the natural gas side of our business, we're deploying a new customer relationship management system that will allow us to provide faster, more personalized service. We plan to roll out a new, mobile-friendly website in 2014 as well. Taken together, we...

  • Page 7
    ... the company by selling our electric generating plants and, through the regulatory process, recovering our capital investments that had been "stranded" by the restructuring of the Texas electric market. Just as important, we had a vision to create America's leading energy delivery company based...

  • Page 8
    ... them to reï¬,ect our core natural gas and electric utility businesses. We believe this restated vision and a new corporate strategy, reï¬,ect the thinking that guides us, as we remain focused on domestic energy delivery and providing value to customers, communities and shareholders. Lead d the...

  • Page 9
    ... responsible energy delivery businesses • Utilize new and innovative technology to enhance performance Serve • Add value through superior customer service, new technology and innovation • Provide leadership in the communities we serve Grow • Develop a diverse and highly capable employee...

  • Page 10
    ... I N T CenterPoint Energy 2013 Annual Report Electric Transmission & Distribution "Thanks to the Houston area's exceptional growth, we're making our largest capital investment ever in our electric infrastructure. We lead the nation in grid automation, with a fully installed smart meter network and...

  • Page 11
    POINT O of SERVICE 9

  • Page 12
    ... T CenterPoint Energy 2013 Annual Report POINT OF SERV ICE ELECTRIC TRANSMISSION & DISTRIBUTION 2013 was a solid year for our electric transmission and distribution business. Steady growth in our service territory continued, with the addition of more than 44,000 metered customers. Operating income...

  • Page 13
    ... critical job areas, and we are creating new training programs to develop and enhance employee skillsets and foster knowledge transfer Continued construction of a redundant transmission control center to ensure compliance with applicable federal reliability standards Recognized as a leading utility...

  • Page 14
    O N P O I N T CenterPoint Energy 2013 Annual Report Natural Gas Distribution "Our natural gas distribution business is benefiting from continued growth in key parts of our service territory and is well positioned for long-term success. We have increased base rates and implemented rate recovery ...

  • Page 15
    13

  • Page 16
    ... offering rebates to both residential and business customers, our conservation improvement programs in Arkansas, Minnesota and Oklahoma encourage the purchase of energy-efficient equipment. In 2013, the programs saved approximately 1.92 billion cubic feet of natural gas, the amount used annually by...

  • Page 17
    ... in the J.D. Power and Associates 2013 Gas Utility Residential Customer Satisfaction Study SM Recorded more than $11 million in conservation improvement program rebates Grew sales volumes in Energy Services to more than 600 Bcf Plan to invest more than $520 million in capital in 2014 on system...

  • Page 18
    ... General Counsel and Chief Ethics and Compliance Officer KIMBERLY A. JOHNSTON, 46 Vice President, Tax CARLA A. KNEIPP, 42 Vice President, Investor Relations FLOYD J. LeBLANC, 54 Vice President, Corporate Communications and Public Affairs Company Leadership SCOTT E. DOYLE, 42 Senior Vice President...

  • Page 19
    ...OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 1-31447 _____ CenterPoint Energy, Inc. (Exact name of registrant as specified in its charter) Texas (State or other jurisdiction of incorporation or organization) 1111 Louisiana Houston, Texas 77002 (Address and zip code of principal...

  • Page 20
    7+,63$*(/()7,17(17,21$//

  • Page 21
    ..., Executive Officers and Corporate Governance...Executive Compensation...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...Certain Relationships and Related Transactions, and Director Independence...Principal Accounting Fees and Services ...PART...

  • Page 22
    ... our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about ... Item 1A and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors Affecting Future Earnings" and " - ...

  • Page 23
    ...file such reports with, or furnish them to, the Securities and Exchange Commission (SEC). Additionally, we make available free of charge on our Internet website our Code of Ethics for our Chief Executive Officer and Senior Financial Officers; our Ethics and Compliance Code; our Corporate Governance...

  • Page 24
    ... generation and retail electric sales are unregulated, but services provided by transmission and distribution companies, such as CenterPoint Houston, are regulated by the Texas Utility Commission. ERCOT serves as the regional reliability coordinating council for member electric power systems...

  • Page 25
    ..., 2013, CenterPoint Houston's customers consisted of approximately 70 REPs, which sell electricity to over two million metered customers in CenterPoint Houston's certificated service area, and municipalities, electric cooperatives and other distribution companies located outside CenterPoint Houston...

  • Page 26
    ... revenues generally being higher during the warmer months. Properties All of CenterPoint Houston's properties are located in Texas. Its properties consist primarily of high-voltage electric transmission lines and poles, distribution lines, substations, service centers, service wires and meters. Most...

  • Page 27
    ...natural gas transportation for, approximately 3.3 million residential, commercial and industrial customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. The largest metropolitan areas served in each state by Gas Operations are Houston, Texas; Minneapolis, Minnesota; Little Rock...

  • Page 28
    ... and industrial customers and electric and gas utilities through CenterPoint Energy Services, Inc. (CES) and its subsidiary, CenterPoint Energy Intrastate Pipelines, LLC (CEIP). In 2013, CES marketed approximately 600 Bcf of natural gas, related energy services and transportation to approximately...

  • Page 29
    ... retail gas marketers, including the marketing divisions of natural gas producers and utilities. In addition, CES competes with intrastate pipelines for customers and services in its market areas. Midstream Investments On March 14, 2013, CenterPoint Energy entered into a Master Formation Agreement...

  • Page 30
    ... Illinois. Enable's eight storage facilities in Oklahoma, Louisiana and Illinois have 86.5 Bcf of storage capacity. Enable generates revenue primarily by charging demand fees pursuant to applicable tariffs for the transportation and storage of natural gas on its system. Enable's interstate pipelines...

  • Page 31
    ...of the FERC's rules or orders. Our Energy Services business segment markets natural gas in interstate commerce pursuant to blanket authority granted by the FERC. CenterPoint Houston is not a "public utility" under the Federal Power Act and, therefore, is not generally regulated by the FERC, although...

  • Page 32
    ... their integrity management programs by August 2, 2011. Our natural gas distribution systems met this deadline. Pursuant to the 2002 Act and the 2006 Act, PHMSA has adopted a number of rules concerning, among other things, distinguishing between gathering lines and transmission facilities, requiring...

  • Page 33
    ...of the CEA. Intrastate Natural Gas Pipeline and Storage Regulation Enable's transmission lines are subject to state regulation of rates and terms of service. In Oklahoma, its intrastate pipeline system is subject to regulation by the Oklahoma Corporation Commission. Oklahoma has a non-discriminatory...

  • Page 34
    ... crude oil gathering system in North Dakota pursuant to a public tariff in accordance with FERC regulatory requirements. Crude oil gathering pipelines that provide interstate transportation service may be regulated as a common carrier by the FERC under the Interstate Commerce Act (ICA), the Energy...

  • Page 35
    ... from time to time to, among other activities construct or acquire new equipment; acquire permits for facility operations; modify, upgrade or replace existing and proposed equipment; and clean up or decommission waste disposal areas, fuel storage and management facilities and other locations and...

  • Page 36
    ... would require installation of new control technologies or a modification of its operations or would have the effect of reducing the consumption of natural gas. Our electric transmission and distribution business, in contrast to some electric utilities, does not generate electricity and thus is not...

  • Page 37
    ...On August 29, 2013, the EPA announced that it was reconsidering three issues related to the RICE MACT rule, but the agency has not subsequently issued a rule proposal. Compressors and back up electrical generators used by our Natural Gas Distribution segment are generally compliant. Additional rules...

  • Page 38
    ...The Minnesota Public Utilities Commission includes approximately $285,000 annually in rates to fund normal on-going remediation costs. As of December 31, 2013, CERC had collected $6.3 million from insurance companies to be used for future environmental remediation. In addition to the Minnesota sites...

  • Page 39
    ... 14, 2014) Name Age Title Milton Carroll Scott M. Prochazka Scott E. Rozzell Thomas R. Standish Gary L. Whitlock Tracy B. Bridge Joseph B. McGoldrick 63 47 64 64 64 55 60 Executive Chairman President and Chief Executive Officer and Director Executive Vice President, General Counsel and Corporate...

  • Page 40
    ... electricity and natural gas for Reliant Energy's Houston area from 1999 to August 2002. Gary L. Whitlock has served as Executive Vice President and Chief Financial Officer of CenterPoint Energy since September 2002. He served as Executive Vice President and Chief Financial Officer of the Delivery...

  • Page 41
    ...other charges, which could have a material adverse effect on CenterPoint Houston's results of operations, financial condition and cash flows. Risk Factors Affecting Our Natural Gas Distribution and Energy Services Businesses Rate regulation of CERC's business may delay or deny CERC's ability to earn...

  • Page 42
    ..., financial condition and cash flows. CERC's natural gas distribution and energy services businesses are subject to fluctuations in notional natural gas prices as well as geographic and seasonal natural gas price differentials, which could affect the ability of CERC's suppliers and customers to...

  • Page 43
    ...December 31, 2013, CenterPoint Houston had approximately $102 million aggregate principal amount of first mortgage bonds outstanding under the Mortgage. CenterPoint Houston may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the...

  • Page 44
    ... operations are subject to stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operator of natural gas pipelines and distribution systems, and electric transmission and distribution systems, we must comply with these laws and regulations at the...

  • Page 45
    ...or damage without negative impact on our results of operations, financial condition and cash flows. In common with other companies in its line of business that serve coastal regions, CenterPoint Houston does not have insurance covering its transmission and distribution system, other than substations...

  • Page 46
    ...a separation agreement in which Texas Genco assumed liabilities associated with the electric generation assets Reliant Energy transferred to it. Texas Genco also agreed to indemnify, and cause the applicable transferee subsidiaries to indemnify, us and our subsidiaries, including CenterPoint Houston...

  • Page 47
    security risks, any of which could have a material adverse effect on either our, or Enable's, results of operations, financial condition and cash flows. In addition, electrical distribution and transmission facilities and gas distribution and pipeline systems may be targets of terrorist activities ...

  • Page 48
    ... would require installation of new control technologies or a modification of its operations or would have the effect of reducing the consumption of natural gas. Our electric transmission and distribution business, in contrast to some electric utilities, does not generate electricity and thus is not...

  • Page 49
    ... be composed of an equal number of directors appointed by OGE and by us, the president and chief executive officer of Enable's general partner and up to three directors who are independent as defined under the independence standards established by the New York Stock Exchange. Accordingly, we are not...

  • Page 50
    ... Electric Power Company, Inc. (AEP) and Exxon Mobil Corporation (Exxon). Enable's interstate transportation and storage assets were designed and built to serve affiliates of CenterPoint Energy, Laclede, OGE and AEP. Enable-Mississippi River Transmission, LLC's (MRT) firm transportation and storage...

  • Page 51
    ... with wells currently connected to its systems will decline over time. To maintain or increase throughput levels on its gathering and transportation systems and the asset utilization rates at its natural gas processing plants, Enable's customers must continually obtain new natural gas and crude oil...

  • Page 52
    ... and its ability to make cash distributions. In addition, the construction of additions to existing gathering and transportation assets may require new rights-of-way prior to construction. Those rights-ofway to connect new natural gas supplies to existing gathering lines may be unavailable and...

  • Page 53
    ...business. In November 2013, Enable commenced initial operations on a new crude oil gathering pipeline system in North Dakota's Bakken shale formation, and Enable expects to place additional related assets in service in 2014. The gathering system, located in Dunn and McKenzie Counties in North Dakota...

  • Page 54
    ... and its ability to make cash distributions. Enable's operations are subject to all of the risks and hazards inherent in the gathering, processing, transportation and storage of natural gas and crude oil, including: • damage to pipelines and plants, related equipment and surrounding properties...

  • Page 55
    ... payable-affiliated companies due to CenterPoint Energy. Enable has a $1.4 billion revolving credit facility for working capital, capital expenditures and other partnership purposes, including acquisitions, of which $1.1 billion was available as of December 31, 2013. As of January 2014, Enable has...

  • Page 56
    ... and its ability to make cash distributions. Enable is subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, wildlife conservation, natural resources and health and safety that could, among other...

  • Page 57
    ... U.S. Department of Energy and the U.S. Department of the Interior, have evaluated or are evaluating various other aspects of hydraulic fracturing. President Obama created the Interagency Working Group on Unconventional Natural Gas and Oil by Executive Order on April 13, 2012, which is charged with...

  • Page 58
    ... applicable to intrastate natural and transportation services. The relevant states in which Enable operates include North Dakota, Oklahoma, Arkansas, Louisiana, Texas, Missouri, Kansas, Mississippi, Tennessee and Illinois. State and local regulations generally focus on safety, environmental...

  • Page 59
    ... other things develop a baseline plan to prioritize the assessment of a covered pipeline segment; identify and characterize applicable threats that could impact a high consequence area; improve data collection, integration, and analysis; repair and remediate pipelines as necessary; and implement...

  • Page 60
    ...of our electric lines and gas mains are located, pursuant to easements and other rights, on public roads or on land owned by others. Electric Transmission & Distribution For information regarding the properties of our Electric Transmission & Distribution business segment, please read "Business - Our...

  • Page 61
    ... Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of February 14, 2014, our common stock was held by approximately 37,137 shareholders of record. Our common stock is listed on the New York and Chicago Stock Exchanges and is traded under...

  • Page 62
    ...) return on true-up balance related to a portion of interest on the appealed true-up amount. Following the formation of Enable Midstream Partners LP (Enable) on May 1, 2013, Enable owns substantially all of our former Interstate Pipelines and Field Services business segments, except for our...

  • Page 63
    ... 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. 41

  • Page 64
    ... and other real estate used in our business operations and other corporate operations which support all of our business operations. EXECUTIVE SUMMARY Factors Influencing Our Businesses We are an energy delivery company. The majority of our revenues are generated from the sale of natural gas and the...

  • Page 65
    ... limited partnership that became Enable, (ii) CERC Corp. contributed to Enable its equity interests in each of CenterPoint Energy Gas Transmission Company, LLC, which has been subsequently renamed Enable Gas Transmission, LLC (EGT), CenterPoint Energy - Mississippi River Transmission, LLC, which...

  • Page 66
    ... description of our reportable business segments, see Note 17 to our consolidated financial statements. Debt Matters. In March 2013, CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) retired $450 million aggregate principal amount of its 5.70% general mortgage bonds at their maturity...

  • Page 67
    ... others, energy deregulation or re-regulation, pipeline integrity and safety, health care reform, financial reform, tax legislation and actions regarding the rates charged by our regulated businesses; state and federal legislative and regulatory actions or developments relating to the environment...

  • Page 68
    ...interstate pipelines; the demand for natural gas, NGLs and transportation and storage services; changes in tax status; access to growth capital; the availability and prices of raw materials for current and future construction projects; the timing and terms of Enable's planned initial public offering...

  • Page 69
    ... Year Ended December 31, 2013 2012 2011 Revenues ...$ Expenses...Operating Income...Gain on Marketable Securities ...Gain (Loss) on Indexed Debt Securities ...Interest and Other Finance Charges ...Interest on Transition and System Restoration Bonds ...Equity in Earnings of Unconsolidated Affiliates...

  • Page 70
    ... market prices. Operating Income (Loss) by Business Segment Year Ended December 31, 2013 2012 2011 Electric Transmission & Distribution ...$ Natural Gas Distribution ...Energy Services...Interstate Pipelines ...Field Services ...Other Operations ...Total Consolidated Operating Income...$ 607...

  • Page 71
    ... Transmission & Distribution business segment, CenterPoint Houston, for 2013, 2012 and 2011 (in millions, except throughput and customer data): Year Ended December 31, 2013 2012 2011 Revenues: Electric transmission and distribution utility...$ Transition and system restoration bond companies...

  • Page 72
    ... taxes. Increased expense related to energy efficiency programs ($17 million) and increased expense related to higher gross receipt taxes ($26 million) were offset by a corresponding increase in the related revenues. 2012 Compared to 2011. Our Natural Gas Distribution business segment reported...

  • Page 73
    ... numbers do not include approximately 8,800 and 12,700 natural gas customers as of December 31, 2013 and 2012, respectively, that are under residential and small commercial choice programs invoiced by their host utility. 2013 Compared to 2012. Our Energy Services business segment reported operating...

  • Page 74
    ... throughput data): Year Ended December 31, 2013 (1) 2012 2011 Revenues ...$ Expenses: Natural gas ...Operation and maintenance ...Depreciation and amortization...Taxes other than income taxes...Total expenses...Operating Income...$ Equity in earnings of unconsolidated affiliates...$ Transportation...

  • Page 75
    ... table provides summary data of our Field Services business segment for 2013, 2012 and 2011 (in millions, except throughput data): Year Ended December 31, 2013 (1) 2012 2011 Revenues ...$ Expenses: Natural gas ...Operation and maintenance ...Depreciation and amortization...Taxes other than income...

  • Page 76
    ... to 2012 primarily due to decreased operating income ($280 million), excluding the non-cash goodwill impairment charge of $252 million, decreased cash provided by net accounts receivable/payable ($108 million), cash related to gas storage inventory ($43 million), decreased net margin deposits ($37...

  • Page 77
    ..., debt service requirements, tax payments, working capital needs and various regulatory actions. Our principal anticipated cash requirements for 2014 include the following capital expenditures of approximately $1.4 billion; scheduled principal payments on transition and system restoration bonds of...

  • Page 78
    ... expenditures for currently identified or planned projects for 2014 through 2018 (in millions): 2013 2014 2015 2016 2017 2018 Electric Transmission & Distribution...$ Natural Gas Distribution ...Energy Services...Interstate Pipelines (1)...Field Services (1) ...Other Operations ...Total ...$ 759...

  • Page 79
    ... are expected. In December 2013, CenterPoint Houston filed an application at the Texas Utility Commission seeking (i) to reconcile approximately $473 million in Advanced Metering System costs incurred during the time period April 1, 2010 through September 30, 2013 and currently in rates, and...

  • Page 80
    ...Determinant Rate Adjustment Tariff (BDA) Filing. Gas Operations' Arkansas Division made its annual BDA filing with the Arkansas Public Service Commission (APSC) on March 27, 2013 to request recovery of a calendar year 2012 shortfall of $6.8 million. No exceptions were noted by the APSC staff and the...

  • Page 81
    ... provides natural gas transportation, natural gas storage and pipeline services to customers principally in Arkansas, Illinois and Missouri, made a rate filing with the Federal Energy Regulatory Commission (FERC) pursuant to Section 4 of the Natural Gas Act. In its filing, MRT requested an annual...

  • Page 82
    ... CenterPoint Houston's general mortgage bonds, CERC Corp.'s senior debt securities and CenterPoint Energy's senior debt securities and junior subordinated debt securities and an indeterminate number of CenterPoint Energy's shares of common stock, shares of preferred stock, as well as stock purchase...

  • Page 83
    ... below BBB+. CenterPoint Energy Services, Inc. (CES), a wholly owned subsidiary of CERC Corp. operating in our Energy Services business segment, provides comprehensive natural gas sales and services primarily to commercial and industrial customers and electric and gas utilities throughout the...

  • Page 84
    ... exceed $25 million, respectively. CenterPoint Energy's and OGE Energy's indemnification obligations under the omnibus agreement will survive (i) for permit matters until May 1, 2014, (ii) for environmental and title and rights of way matters until May 1, 2016 and (iii) for tax classification 62

  • Page 85
    ... a timely basis, and any delay or default in payment by REPs could adversely affect CenterPoint Houston's cash flows. In the event of a REP's default, CenterPoint Houston's tariff provides a number of remedies, including the option of CenterPoint Houston to request that the Texas Utility Commission...

  • Page 86
    ... and collected. Our Electric Transmission & Distribution business segment and our Natural Gas Distribution business segment apply this accounting guidance. Certain expenses and revenues subject to utility regulation or rate determination normally reflected in income are deferred on the balance sheet...

  • Page 87
    ... to our 2013 annual test. Unbilled Energy Revenues Revenues related to electricity delivery and natural gas sales and services are generally recognized upon delivery to customers. However, the determination of deliveries to individual customers is based on the reading of their meters, which is...

  • Page 88
    ... 31, 2013, the projected benefit obligation exceeded the market value of plan assets of our pension plans by $350 million. Changes in interest rates or the market values of the securities held by the plan during 2014 could materially, positively or negatively, change our funded status and affect...

  • Page 89
    ... match plan assets and liabilities. As of December 31, 2013, the projected benefit obligation was calculated assuming a discount rate of 4.80%, which is a 0.80% increase from the 4.00% discount rate assumed in 2012. The discount rate was determined by reviewing yields on high-quality bonds that...

  • Page 90
    ... 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 non-derivative physical purchases and sales of natural gas to which the hedges relate. Furthermore...

  • Page 91
    ... REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CenterPoint Energy, Inc. Houston, Texas We have audited the accompanying consolidated balance sheets of CenterPoint Energy, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related...

  • Page 92
    ...OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CenterPoint Energy, Inc. Houston, Texas We have audited the internal control over financial reporting of CenterPoint Energy, Inc. and subsidiaries (the "Company") as of December 31, 2013, based on criteria...

  • Page 93
    ... LLP, the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2013 which is included herein on page 70. /s/ SCOTT M. PROCHAZKA President and Chief Executive Officer /s/ GARY...

  • Page 94
    CENTERPOINT ENERGY, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME Year Ended December 31, 2013 2012 2011 (in millions, except per share amounts) Revenues ...$ Expenses: Natural gas ...Operation and maintenance ...Depreciation and amortization...Taxes other than income taxes...Goodwill ...

  • Page 95
    CENTERPOINT ENERGY, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME Year Ended December 31, 2013 2012 (in millions) 2011 Net income ...$ Other comprehensive income (loss): Adjustment to pension and other postretirement plans (net of tax of $25, $2 and $7)...Reclassification of...

  • Page 96
    CENTERPOINT ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2013 December 31, 2012 (in millions) ASSETS Current Assets: Cash and cash equivalents ($207 and $266 related to VIEs at December 31, 2013 and 2012, respectively)...Investment in marketable securities ...Accounts ...

  • Page 97
    ... debt securities ...Write-down of natural gas inventory...Equity in earnings of unconsolidated affiliates, net of distributions...Pension contributions ...Changes in other assets and liabilities: Accounts receivable and unbilled revenues, net ...Inventory ...Taxes receivable ...Accounts payable...

  • Page 98
    ... Ended December 31, 2013 Supplemental Disclosure of Cash Flow Information: Cash Payments: Interest, net of capitalized interest...$ Income taxes (refunds), net ...Non-cash transactions: Accounts payable related to capital expenditures ...Formation of Enable...2012 (in millions) 2011 475 35 74 4,252...

  • Page 99
    ... 2011 Amount Preference Stock, none outstanding ...Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares, none outstanding ...Common Stock, $0.01 par value; authorized 1,000,000,000 shares Balance, beginning of year ...Issuances related to benefit and investment plans ...Balance...

  • Page 100
    ...Electric, LLC (CenterPoint Houston), which engages in the electric transmission and distribution business in the Texas Gulf Coast area 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...

  • Page 101
    ... Waskom Gas Processing Company (Waskom), a Texas general partnership, which owns and operates a natural gas processing plant and natural gas gathering assets. On July 31, 2012, CenterPoint Energy purchased the 50% interest that it did not already own in Waskom, as well as other gathering and related...

  • Page 102
    ... of CenterPoint Energy's Energy Services business segment are also primarily valued at the lower of average cost or market. Natural gas inventories of CenterPoint Energy's Natural Gas Distribution business segment are primarily valued at weighted average cost. During 2013, 2012 and 2011, CenterPoint...

  • Page 103
    ... 31, 2013 and 2012, respectively, that was held by CenterPoint Energy's transition and system restoration bond subsidiaries solely to support servicing the transition and system restoration bonds. (o) New Accounting Pronouncements In February 2013, the Financial Accounting Standards Board (FASB...

  • Page 104
    ... 31, 2013 (in millions) 2012 Electric Transmission & Distribution...Natural Gas Distribution...Energy Services ...Interstate Pipelines...Field Services ...Other property ...Total ...Accumulated depreciation and amortization: Electric Transmission & Distribution ...Natural Gas Distribution ...Energy...

  • Page 105
    ... are as follows (in millions): December 31, 2011 Impairment Charge Waskom Acquisition (1) December 31, 2012 Contributed to Enable (1) December 31, 2013 Natural Gas Distribution ...$ Interstate Pipelines ...Energy Services...Field Services ...Other...Total ...$ (1) See Note 2(b). 746 579 335 25 11...

  • Page 106
    ..., CenterPoint Houston filed a true-up application with the Public Utility Commission of Texas (Texas Utility Commission) requesting recovery of $3.7 billion, excluding interest, as allowed under the Texas Electric Choice Plan. The legislation provided for a transition period to move to a new market...

  • Page 107
    ... earned over the performance cycle or vesting period. CenterPoint Energy issues new shares in order to satisfy stock-based payments related to LTIPs. CenterPoint Energy recorded LTIP compensation expense of $19 million, $18 million and $19 million for the years ended December 31, 2013, 2012 and 2011...

  • Page 108
    ... years. (b) Pension and Postretirement Benefits CenterPoint Energy maintains a non-contributory qualified defined benefit pension plan covering substantially all employees, with benefits determined using a cash balance formula. Under the cash balance formula, participants accumulate a retirement 86

  • Page 109
    ... compensation on which qualified plan benefits may be calculated. CenterPoint Energy provides certain healthcare and life insurance benefits for retired employees on both a contributory and non-contributory basis. Employees become eligible for these benefits if they have met certain age and service...

  • Page 110
    ... addition to expected inflation. The discount rate assumption was determined by matching the projected cash flows of CenterPoint Energy's plans against a hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from onehalf to 99 years...

  • Page 111
    ...trend rate of 5.50% in 2018. CenterPoint Energy's changes in accumulated comprehensive loss related to defined benefit, postretirement and other postemployment plans are as follows (in millions): Year Ended December 31, 2013 Beginning Balance ...$ Other comprehensive income before reclassifications...

  • Page 112
    ... periodic cost in 2014...$ 9 2 11 $ $ - - - The following table displays pension benefits related to CenterPoint Energy's pension plans that have accumulated benefit obligations in excess of plan assets: December 31, 2013 Pension Qualified Pension Non-qualified Pension Qualified 2012 Pension Non...

  • Page 113
    ... ...Cash received as collateral from securities lending ...U.S. government backed agencies bonds ...U.S. treasuries...Mortgage backed securities ...Asset backed securities...Municipal bonds ...Mutual funds (2) ...International government bonds ...Real estate...Obligation to return cash received as...

  • Page 114
    ... over-the-counter financial instruments such as futures, interest rate options and swaps that were marked to market daily with the gains/losses settled in the cash accounts. The pension plan did not include any holdings of CenterPoint Energy common stock as of December 31, 2013 or 2012. The changes...

  • Page 115
    ... CenterPoint Energy's common stock, the savings plan and its participants have market risk related to this investment. CenterPoint Energy's savings plan benefit expenses were $38 million, $36 million and $35 million in 2013, 2012 and 2011, respectively. (d) Postemployment Benefits CenterPoint Energy...

  • Page 116
    ..., retirement or death. Benefit payments are made from the general assets of CenterPoint Energy. CenterPoint Energy recorded benefit expense relating to these plans of $5 million for each of the years in 2013, 2012 and 2011. Included in "Benefit Obligations" in the accompanying Consolidated Balance...

  • Page 117
    ... Bcf. (2) The $28 million Derivative Current Asset includes $1 million related to physical forwards purchased from Enable. (3) Natural gas contracts are presented on a net basis in the Consolidated Balance Sheets. Natural gas contracts are subject to master netting arrangements. This netting applies...

  • Page 118
    ... on the Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default. For CenterPoint Energy's price stabilization activities of the Natural Gas Distribution business segment, the settled...

  • Page 119
    ... of costs in 2013, 2012 and 2011, respectively, associated with price stabilization activities of the Natural Gas Distribution business segment that will be ultimately recovered through purchased gas adjustments. (c) Credit Risk Contingent Features CenterPoint Energy enters into financial derivative...

  • Page 120
    ... utilized by CenterPoint Energy to determine such fair value. Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Netting (1) Adjustments Balance at December 31, 2013 Assets Corporate...

  • Page 121
    ... $ 5 _____ (1) During 2013, 2012 and 2011, CenterPoint Energy did not have Level 3 unrealized gains (losses) or settlements related to price stabilization activities of the Natural Gas Distribution business segment. (2) During 2013, 2012 and 2011, CenterPoint Energy did not have significant Level...

  • Page 122
    ... upon, substantial real estate assets and integral equipment. Real estate assets and integral equipment primarily includes gas transmission pipelines, compressor station equipment, rights of way, storage and processing assets and long-term customer contracts. Accordingly, CenterPoint Energy did not...

  • Page 123
    ... December 31, 2014, unless revised by mutual agreement with CenterPoint Energy, OGE and Enable prior to that date. CenterPoint Energy did not transfer any employees to Enable at formation of the partnership or at any time during the year ended December 31, 2013. CenterPoint Energy billed Enable for...

  • Page 124
    ...SESH. (2) On July 31, 2012, Waskom became a wholly owned subsidiary of CenterPoint Energy. Beginning on August 1, 2012, Waskom's operating results are consolidated on the Statements of Consolidated Income. On May 1, 2013, CenterPoint Energy contributed Waskom to Enable. Summarized income information...

  • Page 125
    ... by Enogex. Cash distributions received from Enable and SESH were approximately $106 million and $23 million, respectively, during the year ended December 31, 2013. (10) Indexed Debt Securities (ZENS) and Time Warner Securities (a) Investment in Time Warner Securities In 1995, CenterPoint Energy...

  • Page 126
    ... CenterPoint Energy's ZENS obligation (in millions). TW Securities Debt Component of ZENS Derivative Component of ZENS Balance at December 31, 2010 ...$ Accretion of debt component of ZENS ...2% interest paid ...Gain on indexed debt securities...Gain on TW Securities...Balance at December 31, 2011...

  • Page 127
    ... by first mortgage bonds of CenterPoint Houston. (4) $118 million of these series of debt were secured by general mortgage bonds of CenterPoint Houston at both December 31, 2013 and 2012. (5) These series of debt are secured by general mortgage bonds of CenterPoint Houston. (6) Classified as long...

  • Page 128
    ... restoration bonds are payable only through the imposition and collection of "transition" or "system restoration" charges, as defined in the Texas Public Utility Regulatory Act, which are irrevocable, non-bypassable charges payable by most of CenterPoint Houston's retail electric customers in order...

  • Page 129
    ... (excluding transition and system restoration bonds) to an amount not to exceed 65% of CenterPoint Energy's consolidated capitalization. The financial covenant limit will temporarily increase from 65% to 70% if CenterPoint Houston experiences damage from a natural disaster in its service territory...

  • Page 130
    ... Internal Revenue Service (IRS) of outstanding tax claims for the 2002 and 2003 audit cycles. CenterPoint Energy recorded a non-tax deductible impairment of goodwill of $252 million in September 2012. CenterPoint Energy recorded a net decrease in income tax expense of $28 million in 2012 related to...

  • Page 131
    In September 2013, the U.S. Treasury issued final regulations addressing the tax consequences associated with the acquisition, production and improvement of tangible property. CenterPoint Energy does not expect the adoption of the regulations to have a material impact on its financial position, ...

  • Page 132
    ... Agreements Gas Operations has asset management agreements (AMAs) associated with its utility distribution service in Arkansas, Louisiana, Mississippi, Oklahoma and Texas. Generally, these AMAs are contracts between Gas Operations and an asset manager that are intended to transfer the working...

  • Page 133
    ... 2013, 2012 and 2011, respectively. (d) Legal, Environmental and Other Regulatory Matters Legal Matters Gas Market Manipulation Cases. CenterPoint Energy, CenterPoint Houston or their predecessor, Reliant Energy, Incorporated (Reliant Energy), and certain of their former subsidiaries have been named...

  • Page 134
    ... The Minnesota Public Utilities Commission includes approximately $285,000 annually in rates to fund normal ongoing remediation costs. As of December 31, 2013, CERC had collected $6.3 million from insurance companies to be used for future environmental remediation. In addition to the Minnesota sites...

  • Page 135
    ... recorded related to the guarantees described above in the Consolidated Balance Sheets. (15) Earnings Per Share The following table reconciles numerators and denominators of CenterPoint Energy's basic and diluted earnings per share calculations: For the Year Ended December 31, 2013 2012 2011 (in...

  • Page 136
    ... (CenterPoint Houston) is reported in the Electric Transmission & Distribution business segment. Natural Gas Distribution consists of intrastate natural gas sales to, and natural gas transportation and distribution for, residential, commercial, industrial and institutional customers. Energy Services...

  • Page 137
    ...2012: Electric Transmission & Distribution .. $ Natural Gas Distribution ...Energy Services ...Interstate Pipelines (2) ...Field Services (3) ...Other ...Reconciling Eliminations...Consolidated ...$ As of and for the year ended December 31, 2011: Electric Transmission & Distribution .. $ Natural Gas...

  • Page 138
    ... related regulatory assets of $627 million, $832 million and $796 million, respectively. Revenues by Products and Services: 2013 Year Ended December 31, 2012 2011 Electric delivery...$ Retail gas sales ...Wholesale gas sales ...Gas transportation and processing...Energy products and services...

  • Page 139
    ...III Item 10. Directors, Executive Officers and Corporate Governance The information called for by Item 10, to the extent not set forth in "Executive Officers" in Item 1, will be set forth in the definitive proxy statement relating to CenterPoint Energy's 2014 annual meeting of shareholders pursuant...

  • Page 140
    ...in the financial statements: III, IV and V. (a)(3) Exhibits. See Index of Exhibits in CenterPoint Energy's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 26, 2014, which can be found on CenterPoint Energy's website at www...

  • Page 141
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CenterPoint Energy, Inc. Houston, Texas We have audited the consolidated financial statements of CenterPoint Energy, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and for ...

  • Page 142
    CENTERPOINT ENERGY, INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF CENTERPOINT ENERGY, INC. (PARENT COMPANY) STATEMENTS OF INCOME For the Year Ended December 31, 2013 2012 (in millions) 2011 Expenses: Operation and Maintenance Expenses ...$ Total...Other Income (Expense): Interest Income from...

  • Page 143
    .... SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF CENTERPOINT ENERGY, INC. (PARENT COMPANY) STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2013 2012 (in millions) 2011 Net income ...$ Other comprehensive income (loss): Adjustment to pension and other postretirement plans (net of tax of...

  • Page 144
    CENTERPOINT ENERGY, INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF CENTERPOINT ENERGY, INC. (PARENT COMPANY) BALANCE SHEETS December 31, 2013 (in millions) 2012 ASSETS Current Assets: Cash and cash equivalents...Notes receivable - subsidiaries ...Accounts receivable - subsidiaries ...Other ...

  • Page 145
    ...CONDENSED FINANCIAL INFORMATION OF CENTERPOINT ENERGY, INC. (PARENT COMPANY) STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2013 2012 (in millions) 2011 Operating Activities: Net income...$ Non-cash items included in net income: Equity income of subsidiaries ...Deferred income tax expense...

  • Page 146
    ... in the Annual Report on Form 10-K. Credit facilities at CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) and CenterPoint Energy Resources Corp., indirect wholly owned subsidiaries of CenterPoint Energy, limit debt, excluding transition and system restoration bonds, as a percentage...

  • Page 147
    CENTERPOINT ENERGY, INC. SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 31, 2013 Column A Column B Balance at Beginning of Period Description Column C Additions Charged to Income Charged to Other Accounts (in millions) Deductions From Reserves (1) Balance at End of...

  • Page 148
    ..., in the City of Houston, the State of Texas, on the 26th day of February, 2014. CENTERPOINT ENERGY, INC. (Registrant) By: /s/ Scott M. Prochazka Scott M. Prochazka President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed...

  • Page 149
    Exhibit 12 CENTERPOINT ENERGY, INC. AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (Millions of Dollars) 2013 (1) 2012 (1) 2011 (1) 2010 (1) 2009 (1) Income before extraordinary item...$ Equity in earnings of unconsolidated affiliates, net of distributions...Income taxes ......

  • Page 150
    7+,63$*(/()7,17(17,21$//

  • Page 151
    7+,63$*(/()7,17(17,21$//

  • Page 152
    7+,63$*(/()7,17(17,21$//

  • Page 153
    7+,63$*(/()7,17(17,21$//

  • Page 154
    7+,63$*(/()7,17(17,21$//

  • Page 155
    ... Office, Street Address CenterPoint Energy, Inc. 1111 Louisiana Street Houston, Texas 77002 Mailing Address P.O. Box 4567 Houston, Texas 77210-4567 Telephone: (713) 207-1111 Information Requests Call (888) 468-3020 toll free for additional copies of: 2013 Annual Report and Form 10-K 2014 Proxy...

  • Page 156
    1111 Louisiana Street Houston, TX 77002 CenterPointEnergy.com