CenterPoint Energy 2014 Annual Report Download - page 38

its tariff rates even if regulatory agencies permit it to do so. The regulatory agencies that regulate Enable’
s systems periodically implement new
rules, regulations and terms and conditions of services subject to their jurisdiction. New initiatives or orders may adversely affect the rates
charged for Enable’
s services or otherwise adversely affect its financial condition, results of operations and cash flows and its ability to make
cash distributions.
A change in the jurisdictional characterization of some of Enable’
s assets by federal, state or local regulatory agencies or a change in
policy by those agencies may result in increased regulation of its assets, which may cause its revenues to decline and operating expenses to
increase.
Enable’
s natural gas gathering and intrastate transportation operations are generally exempt from the jurisdiction of the FERC under the
NGA, but FERC regulation may indirectly impact these businesses and the markets for products derived from these businesses. The FERC
’
s
policies and practices across the range of its oil and natural gas regulatory activities, including, for example, its policies on interstate open access
transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets. In recent years, the FERC has
pursued pro-
competitive policies in its regulation of interstate oil and natural gas pipelines. However, we cannot assure you that the FERC will
continue to pursue this approach as it considers matters such as pipeline rates and rules and policies that may indirectly affect the intrastate
natural gas transportation business. Although the FERC has not made a formal determination with respect to all of Enable’
s facilities it considers
to be gathering facilities, Enable believes that its natural gas gathering pipelines meet the traditional tests that the FERC has used to determine
that a pipeline is a gathering pipeline and are therefore not subject to FERC jurisdiction. The distinction between FERC-
regulated transmission
services and federally unregulated gathering services, however, has been the subject of substantial litigation, and the FERC determines whether
facilities are gathering facilities on a case-by-case basis, so the classification and regulation of Enable’
s gathering facilities is subject to change
based on future determinations by the FERC, the courts or Congress. If the FERC were to consider the status of an individual facility and
determine that the facility and/or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides
interstate service, the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by the FERC under
the NGA or the NGPA. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, could
adversely affect Enable’
s financial condition, results of operations and cash flows and its ability to make cash distributions. In addition, if any of
Enable’
s facilities were found to have provided services or otherwise operated in violation of the NGA or NGPA, this could result in the
imposition of substantial civil penalties, as well as a requirement to disgorge revenues collected for such services in excess of the maximum rates
established by the FERC.
Natural gas gathering may receive greater regulatory scrutiny at the state level; therefore, Enable’
s natural gas gathering operations could be
adversely affected should they become subject to the application of state regulation of rates and services. Enable’
s gathering operations could
also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement and maintenance of
gathering facilities. We cannot predict what effect, if any, such changes might have on Enable’
s operations, but Enable could be required to incur
additional capital expenditures and increased costs depending on future legislative and regulatory changes.
Enable may incur significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs.
The DOT has adopted regulations requiring pipeline operators to develop integrity management programs for transportation pipelines
located in “high consequence areas,”
which are those areas where a leak or rupture could do the most harm. The regulations require operators,
including Enable, to, among other things:
Although many of Enable’
s pipelines fall within a class that is currently not subject to these requirements, it may incur significant cost and
liabilities associated with repair, remediation, preventive or mitigation measures associated with its non-
exempt pipelines. Should Enable fail to
comply with DOT or comparable state regulations, it could be subject to penalties and
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•
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 preventive and mitigating action.