CenterPoint Energy 2013 Annual Report Download - page 45

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• modify or replace existing and proposed equipment; and
• clean up or decommission waste disposal areas, fuel storage and management facilities and other locations and facilities.
Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement
measures, including the assessment of monetary penalties, the imposition of remedial actions, and the issuance of orders enjoining
future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore
sites where hazardous substances have been disposed or otherwise released. Moreover, it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of
hazardous substances or other waste products into the environment.
The recent trend in environmental regulation has been to place more restrictions and limitations on activities that may affect
the environment, and thus there can be no assurance as to the amount or timing of future expenditures for environmental compliance
or remediation, and actual future expenditures may be greater than the amounts we currently anticipate.
Our insurance coverage may not be sufficient. Insufficient insurance coverage and increased insurance costs could adversely
impact our results of operations, financial condition and cash flows.
We currently have general liability and property insurance in place to cover certain of our facilities in amounts that we consider
appropriate. Such policies are subject to certain limits and deductibles and do not include business interruption coverage. Insurance
coverage may not be available in the future at current costs or on commercially reasonable terms, and the insurance proceeds
received for any loss of, or any damage to, any of our facilities may not be sufficient to restore the loss 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, because CenterPoint Houston believes it to be cost
prohibitive. In the future, CenterPoint Houston may not be able to recover the costs incurred in restoring its transmission and
distribution properties following hurricanes or other natural disasters through issuance of storm restoration bonds or a change in
its regulated rates or otherwise, or any such recovery may not be timely granted. Therefore, CenterPoint Houston may not be able
to restore any loss of, or damage to, any of its transmission and distribution properties without negative impact on its results of
operations, financial condition and cash flows.
We, CenterPoint Houston and CERC could incur liabilities associated with businesses and assets that we have transferred
to others.
Under some circumstances, we, CenterPoint Houston and CERC could incur liabilities associated with assets and businesses
we, CenterPoint Houston and CERC no longer own. These assets and businesses were previously owned by Reliant Energy,
Incorporated (Reliant Energy), a predecessor of CenterPoint Houston, directly or through subsidiaries and include:
• merchant energy, energy trading and REP businesses transferred to RRI or its subsidiaries in connection with the
organization and capitalization of RRI prior to its initial public offering in 2001 and now owned by affiliates of NRG;
and
• Texas electric generating facilities transferred to a subsidiary of Texas Genco Holdings, Inc. (Texas Genco) in 2002, later
sold to a third party and now owned by an affiliate of NRG.
In connection with the organization and capitalization of RRI (now GenOn), that company and its subsidiaries assumed
liabilities associated with various assets and businesses Reliant Energy transferred to them. RRI also agreed to indemnify, and
cause the applicable transferee subsidiaries to indemnify, us and our subsidiaries, including CenterPoint Houston and CERC, with
respect to liabilities associated with the transferred assets and businesses. These indemnity provisions were intended to place sole
financial responsibility on RRI and its subsidiaries for all liabilities associated with the current and historical businesses and
operations of RRI, regardless of the time those liabilities arose. If RRI (now GenOn) were unable to satisfy a liability that has
been so assumed in circumstances in which Reliant Energy and its subsidiaries were not released from the liability in connection
with the transfer, we, CenterPoint Houston or CERC could be responsible for satisfying the liability.
Prior to the distribution of our ownership in RRI to our shareholders, CERC had guaranteed certain contractual obligations
of what became RRI’s trading subsidiary. When the companies separated, RRI agreed to secure CERC against obligations under
the guarantees RRI had been unable to extinguish by the time of separation. Pursuant to such agreement, as amended in December
2007, RRI (now GenOn) agreed to provide to CERC cash or letters of credit as security against CERC’s obligations under its