Mr. McClanahan: CenterPoint Energy is a combined gas and electric utility. We do business in four segments: the electric transmission and distribution segment, the gas distribution segment, the interstate pipeline and gas gathering segment, and the electric generation segment. We were at one time part of Reliant Energy. In late 1999 or early 2000, Reliant decided to split its company into two pieces: one, all regulated businesses and the second, unregulated businesses. So CenterPoint Energy is the regulated businesses that were once part of Reliant Energy. The electric industry in Texas was deregulated with a law that was passed in 1999, and as part of that deregulation law, electric utilities in Texas needed to unbundle their company into three pieces: transmission and distribution, generation, and retail. Reliant Energy decided to take it a step further and actually legally separate those functions; that's how we came into being.
TWST: At this point, what are your regulated businesses and your
unregulated businesses?
Mr. McClanahan: I'll call them three primary regulated
businesses. We have CenterPoint Energy Houston Electric, which is
an electric delivery company that delivers energy in and around
Houston, Texas, with a 5,000 square mile service territory, but
we deliver about one-third of the energy that is transported in
Texas. We have no commodity exposure, i.e., we don't buy and
resell electricity; we simply deliver electricity and never take
title of it. In fact, under Texas law, we're prohibited from ever
taking title and reselling electricity. The second segment is our
gas distribution companies, and there are three companies.
There's CenterPoint Energy Arkla, CenterPoint Energy Entex, and
CenterPoint Energy Minnegasco. We serve in six different states,
almost 3 million customers, so it's a quite sizable collection of
gas LDCs. The third regulated segment is our interstate pipeline
business. There are actually two pipelines that serve primarily
the mid-continent part of the US. Those three segments are all
regulated. We currently own a company called Texas Genco. Texas
Genco holds the electric generating plants that were once
regulated in Texas. We're holding it until 2004, when we plan to
sell it. At that time, under Texas law, we can also determine if
we have any stranded investment. It is an unregulated subsidiary,
but it not part of our overall business strategy and won't be
with us much longer. Also, there are some special provisions
under the deregulation law where to the extent that we're not
earning a return that was forecasted to be earned by the Texas
Public Utility Commission, then we get to accrue a regulatory
asset and recover that asset as part of stranded investment. So
essentially, we continue to earn a regulated return on those
assets. The other piece of our business that's unregulated is our
gas gathering business in the mid-continent part of the US. It
was deregulated some years ago. And we sell natural gas, on an
unregulated basis, to large commercial and industrial customers.
Tickers included in this excerpt: CNP
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.