CenterPoint Energy 2013 Annual Report Download - page 25

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Customers
CenterPoint Houston serves nearly all of the Houston/Galveston metropolitan area. At December 31, 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’s certificated service area. Each REP is licensed by, and must meet minimum creditworthiness criteria
established by, the Texas Utility Commission.
Sales to REPs that are affiliates of NRG Energy, Inc. (NRG) represented approximately 38%, 39% and 36% of CenterPoint
Houston’s transmission and distribution revenues in 2013, 2012 and 2011, respectively. Sales to REPs that are affiliates of Energy
Future Holdings Corp. (Energy Future Holdings) represented approximately 10%, 10% and 11% of CenterPoint Houston’s
transmission and distribution revenues in 2013, 2012 and 2011, respectively. CenterPoint Houston’s aggregate billed receivables
balance from REPs as of December 31, 2013 was $172 million. Approximately 38%, 8% and 8% of this amount was owed by
affiliates of NRG, Just Energy Group, Inc. and Energy Future Holdings, 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 May 2012, CenterPoint Houston substantially completed the deployment of an advanced metering system (AMS), having
installed approximately 2.2 million smart meters. This 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. To recover the
cost of the AMS, the Texas Utility Commission approved a monthly surcharge payable by REPs, initially over 12 years. For the
first 24 months, which began in February 2009, the surcharge for residential customers was $3.24 per month. Beginning in
February 2011, the surcharge was reduced to $3.05 per month. In September 2011, the surcharge duration was reduced from 12
years to approximately six years for residential customers and approximately eight years for commercial customers. The surcharge
amounts and duration are subject to adjustment in future proceedings to reflect actual costs incurred and to address required changes
in scope. Please read “ – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity
and Capital Resources – Regulatory Matters – CenterPoint Houston.”
CenterPoint Houston is also pursuing deployment of an electric distribution grid automation strategy that involves the
implementation of an “Intelligent Grid” (IG) which would 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 an improvement in grid planning, operations, maintenance and customer service for the CenterPoint Houston distribution
system. These improvements are expected to result in 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) selected CenterPoint Houston for a $200 million grant to help fund
its AMS and IG projects. CenterPoint Houston received substantially all of the $200 million of grant funding from the DOE by
2011 and used $150 million of it to accelerate completion of its deployment of advanced meters to 2012, instead of 2014 as
originally scheduled. CenterPoint Houston estimates that capital expenditures of approximately $660 million for the installation
of the advanced meters and corresponding communication and data management systems were incurred over the advanced meter
deployment period. CenterPoint Houston is using the other $50 million from the grant for an initial deployment of an IG that
covers approximately 12% of its service territory. This initial deployment is expected to be completed in 2014. It is expected that
the capital portion of the IG project subject to partial funding by the DOE will cost approximately $140 million.
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. Distributed generation (i.e., power generation located at or near
the point of consumption) could result in a reduction of demand for CenterPoint Houston’s electric distribution services but has
not been a significant factor to date.