CenterPoint Energy 2015 Annual Report Download - page 7

arerepaidthroughchargesimposedoncustomersinCenterPointHouston’sserviceterritory.AsofDecember31,2015,approximately$2.3 billionaggregate
principalamountoftransitionbondswereoutstanding.
Customers
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CenterPointHouston servesnearlyall oftheHouston/Galveston metropolitanarea.At December31,2015,CenterPoint Houston’scustomers consistedof
approximately69REPs,whichsellelectricitytoover2.3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.
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Sales to REPs that are affiliates of NRG Energy, Inc. (NRG) represented approximately 35%, 37% and 38% of CenterPoint Houston’s transmission and
distribution revenues in 2015, 2014 and 2013, respectively.  Sales to REPs that are affiliates of Energy Future Holdings Corp. (Energy Future Holdings)
represented approximately 10% of CenterPoint Houston’s transmission and distribution revenues in each of 2015, 2014 and 2013.  CenterPoint Houston’s
aggregatebilledreceivablesbalancefromREPsasofDecember31,2015was$195million.Approximately34%and11%ofthisamountwasowedbyaffiliates
of NRG 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.
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Advanced Metering System and Distribution Grid Automation (Intelligent Grid)
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In May 2012, CenterPoint Houston substantially completed the deployment of an advanced metering system (AMS), having installed approximately 2.2
millionsmartmeters.TorecoverthecostoftheAMS,theTexasUtilityCommissionapprovedamonthlysurchargepayablebyREPs,initiallyover12yearsand
laterreducedtosixyearsasaresultofU.S.DepartmentofEnergy(DOE)grantfunds.Thesurchargeexpiredin2015forresidentialcustomersandissettoexpire
in2016to2017fornon-residential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.
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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.Weexpecttoincludethecostsofthedeploymentinfuture
rateproceedingsbeforetheTexasUtilityCommission.
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In October 2009, the 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.CenterPointHoustonusedtheother$50millionfromthegrantforaninitialdeploymentofanIGthatcoversapproximately12%ofitsservice
territory.TheDOE-fundedportionoftheIGprojectwassubstantiallycompletedin2015,andthecapitalportionoftheIGprojectsubjecttopartialfundingbythe
DOEcostapproximately$140million.
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Competition
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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.
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Seasonality
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AsignificantportionofCenterPointHouston’srevenuesisderivedfromratesthatitcollectsfromeachREPbasedontheamountofelectricityitdeliverson
behalfofsuchREP.Thus,CenterPointHouston’srevenuesandresultsofoperationsaresubjecttoseasonality,weatherconditionsandotherchangesinelectricity
usage,withrevenuesgenerallybeinghigherduringthewarmermonths.
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