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Gas Operations Support CenterPoint During 1Q

CenterPoint Energy Inc. first quarter earnings were squeezed by one-time charges and reduced power deliveries in its utility unit. However, the company benefited from "solid performance" in its natural gas businesses. Increased conservation by consumers is being felt in the gas and power businesses, executives said.

The Houston-based company reported net income of $67 million, or 19 cents/share, for the first quarter of 2009 compared to $122 million, or 36 cents/share, for the same period of 2008. Operating income for the first quarter was $285 million compared to $336 million for the same period of 2008.

"A number of charges recorded this quarter masked what would have otherwise been good operating performance by our businesses given the current economic conditions," said CEO David M. McClanahan. "We expect that these charges will effectively turn around as the year progresses. While reduced deliveries at our electric utility also had a negative impact on our first quarter earnings, our gas utilities, interstate pipelines, field services and competitive gas sales and services units turned in solid performances."

On both the gas and power side CenterPoint is seeing increased conservation by consumers, both residential and commercial/industrial, McClanahan said.

"About $18 million of revenues were lost from reduced usage, [and] probably about $3 million or $4 million of that is related to our commercial and industrial class," he said. "We've seen along the [Houston] Ship Channel some cutbacks by our big industrial users...The other $13 million or $14 million is in the residential class. We can explain part of that with weather but not all of it with weather."

Last winter was "very dry" and there was "lots of space between cold days," he said. "We tend to not have as much heating load because of that. I would say at least half of it is conservation-related, and it could be a little bit more."

The second and third quarters will reveal more about conservation on the power side, McClanahan said. Last year when power prices spiked to 15-17 cents/kWh there was "some response from customers," he said. With prices currently around 12 cents/kWh for residentials, that response could be less this year. Regardless, "once it reaches 95 [degrees] and 90% humidity, I think the air conditioners stay on," McClanahan said.

CenterPoint is at the beginning of a smart meter rollout that will take place over five years. This year the company plans to install 1,450,000 two-way meters that with the participation of retail electricity providers will allow for real-time pricing and consumer response to the same. McClanahan said CenterPoint pursued an open architecture strategy when making its smart meter technology decisions. This will allow for interchangeability among product vendors, he said.

The utility recently applied to the Public Utility Commission of Texas to recover $678 million in costs associated with Hurricane Ike. The recovery amount includes about $70 million in regulatory and other expenses. The move follows the signing of cost recovery-enabling legislation signed earlier this year by Texas Gov. Rick Perry.

Business segment results:

CenterPoint reaffirmed 2009 earnings guidance of $1.05-1.15/share.

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