CenterPoint Energy 2013 Annual Report Download - page 85

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matters and indemnified taxes until 30 days following the expiration of the applicable statute of limitations. Indemnification
obligations for authority and capitalization matters survive indefinitely.
Dodd-Frank Swaps Regulation
We use derivative instruments such as physical forward contracts, swaps and options to mitigate the impact of changes in
commodity prices and weather on our operating results and cash flows. In addition, Enable may also use such instruments from
time to time to manage its commodity and financial market risk. Following enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank) in July 2010, the Commodity Futures Trading Commission (CFTC) has promulgated
regulations to implement Dodd-Frank’s changes to the Commodity Exchange Act, including the definition of commodity-based
swaps subject to those regulations. The CFTC regulations are intended to implement new reporting and record keeping requirements
related to their swap transactions and a mandatory clearing and exchange-execution regime for various types, categories or classes
of swaps, subject to certain exemptions, including the trade-option and end-user exemptions. Although we anticipate that most,
if not all, of our swap transactions should qualify for an exemption to the clearing and exchange-execution requirements, we will
still be subject to record keeping and reporting requirements. Other changes to the Commodity Exchange Act made as a result of
Dodd-Frank and the CFTC’s implementing regulations could significantly increase the cost of entering into new swaps.
Collection of Receivables from REPs
CenterPoint Houston’s receivables from the distribution of electricity are collected from REPs that supply the electricity
CenterPoint Houston distributes to their customers. Adverse economic conditions, structural problems in the market served by
ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for CenterPoint Houston’s
services or could cause them to delay such payments. CenterPoint Houston depends on these REPs to remit payments on 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 suspend or revoke the certification of the REP. Applicable regulatory provisions require that
customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. However, CenterPoint
Houston remains at risk for payments not made prior to the shift to the replacement REP or the provider of last resort. If a REP
were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which
event such REP might seek to avoid honoring its obligations, and claims might be made against CenterPoint Houston involving
payments it had received from such REP. If a REP were to file for bankruptcy, CenterPoint Houston may not be successful in
recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, Texas
Utility Commission regulations authorize utilities, such as CEHE, to defer bad debts resulting from defaults by REPs for recovery
in future rate cases, subject to a review of reasonableness and necessity.
Other Factors that Could Affect Cash Requirements
In addition to the above factors, our liquidity and capital resources could be affected by:
• cash collateral requirements that could exist in connection with certain contracts, including our weather hedging
arrangements, and gas purchases, gas price and gas storage activities of our Natural Gas Distribution and Energy Services
business segments;
• acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased gas
prices and concentration of natural gas suppliers;
• increased costs related to the acquisition of natural gas;
• increases in interest expense in connection with debt refinancings and borrowings under credit facilities;
• various legislative or regulatory actions;
• incremental collateral, if any, that may be required due to regulation of derivatives;
• the ability of GenOn and its subsidiaries to satisfy their obligations in respect of GenOn’ s indemnity obligations to us
and our subsidiaries;