##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO .
 
 Commission file number 1-13265
 CENTERPOINT ENERGY RESOURCES CORP.
  Delaware
    
    76-0511406(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1111 LouisianaHouston, Texas 77002
    
    (713) 207-1111(Address and zip code of principal executive offices)
    
    (Registrants telephone number, including area code)
 
 CenterPoint Energy Resources Corp. meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
 þ o
  o o þ
 o þ




---



##### 



CENTERPOINT ENERGY RESOURCES CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2007
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Condensed Statements of Consolidated Income
Three Months and Six Months Ended June 30, 2006 and 2007 (unaudited)
    
    
    1Condensed Consolidated Balance Sheets
December 31, 2006 and June 30, 2007 (unaudited)
    
    
    2Condensed Statements of Consolidated Cash Flows
Six Months Ended June 30, 2006 and 2007 (unaudited)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    16Item 4. Controls and Procedures
    
    
    26PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Second Amended & Restated Credit AgreementComputation of Ratios of Earnings to Fixed ChargesCertification Pursuant to Rule 13a-14(a)Certification Pursuant to Rule 13a-14(a)Certification Pursuant to Section 1350Certification Pursuant to Section 1350Items Incorporated by Reference from Form 10-K




---



##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    
    state and federal legislative and regulatory actions or developments, including
deregulation, re-regulation, changes in or application of laws or regulations applicable to
the various aspects of our business;
    
    timely and appropriate rate actions and increases, allowing recovery of costs and a
reasonable return on investment;
    
    industrial, commercial and residential growth in our service territory and changes in
market demand and demographic patterns;
    
    the timing and extent of changes in commodity prices, particularly natural gas;
    
    the timing and extent of changes in the supply of natural gas;
    
    the timing and extent of changes in natural gas basis differentials;
    
    changes in interest rates or rates of inflation;
    
    weather variations and other natural phenomena;
    
    commercial bank and financial market conditions, our access to capital, the cost of
such capital, and the results of our financing and refinancing efforts, including
availability of funds in the debt capital markets;
    
    actions by rating agencies;
    
    effectiveness of our risk management activities;
    
    inability of various counterparties to meet their obligations to us;
    
    the ability of Reliant Energy, Inc. (RRI) to satisfy its obligations to us in
connection with the contractual arrangements pursuant to which we are their guarantor;
    
    the outcome of litigation brought by or against us;
    
    our ability to control costs;
    
    the investment performance of CenterPoint Energy, Inc.s employee benefit plans;
 ii




---



##### Table of Contents




    
    our potential business strategies, including acquisitions or dispositions of
assets or businesses, which we cannot assure will be completed or will have the anticipated
benefits to us; and
    
    other factors we discuss in Risk Factors in Item 1A of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2006, which is incorporated herein by
reference, in Risk Factors in Item 1A of Part II of this Quarterly Report on Form 10-Q
and in other reports we file from time to time with the Securities and Exchange Commission.
  iii




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
 
 CONDENSED STATEMENTS OF CONSOLIDATED INCOME
 (Millions of Dollars)
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    1,384
    
    
    $
    1,566
    
    
    $
    4,074
    
    
    $
    4,263Expenses:Natural gas
    
    
    1,035
    
    
    
    1,208
    
    
    
    3,228
    
    
    
    3,358Operation and maintenance
    
    
    199
    
    
    
    188
    
    
    
    396
    
    
    
    386Depreciation and amortization
    
    
    50
    
    
    
    52
    
    
    
    100
    
    
    
    103Taxes other than income taxes
    
    
    35
    
    
    
    35
    
    
    
    85
    
    
    
    83Total
    
    
    1,319
    
    
    
    1,483
    
    
    
    3,809
    
    
    
    3,930Operating Income
    
    
    65
    
    
    
    83
    
    
    
    265
    
    
    
    333Other Income (Expense):Interest and other finance charges
    
    
    (42
    )
    
    
    (45
    )
    
    
    (82
    )
    
    
    (84
    )Other, net
    
    
    5
    
    
    
    4
    
    
    
    8
    
    
    
    7Total
    
    
    (37
    )
    
    
    (41
    )
    
    
    (74
    )
    
    
    (77
    )Income Before Income Taxes
    
    
    28
    
    
    
    42
    
    
    
    191
    
    
    
    256Income tax expense
    
    
    (5
    )
    
    
    (12
    )
    
    
    (71
    )
    
    
    (95
    )Net Income
    
    $
    23
    
    
    $
    30
    
    
    $
    120
    
    
    $
    161
  1




---



##### Table of Contents



CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
(Unaudited)
 ASSETS
 December 31,
    
    
    June 30,2006
    
    
    2007Current Assets:Cash and cash equivalents
    
    $
    5
    
    
    $
    4Accounts and notes receivable, net
    
    
    846
    
    
    
    641Accrued unbilled revenue
    
    
    356
    
    
    
    115Accounts and notes receivable  affiliated companies
    
    
    198
    
    
    
    44Materials and supplies
    
    
    31
    
    
    
    34Natural gas inventory
    
    
    305
    
    
    
    288Non-trading derivative assets
    
    
    98
    
    
    
    42Taxes receivable
    
    
    
    
    
    
    76Deferred tax asset
    
    
    2
    
    
    
    Prepaid expenses and other current assets
    
    
    360
    
    
    
    268Total current assets
    
    
    2,201
    
    
    
    1,512Property, Plant and Equipment:Property, plant and equipment
    
    
    5,336
    
    
    
    5,570Less accumulated depreciation and amortization
    
    
    (697
    )
    
    
    (679
    )Property, plant and equipment, net
    
    
    4,639
    
    
    
    4,891Other Assets:Goodwill
    
    
    1,709
    
    
    
    1,709Non-trading derivative assets
    
    
    21
    
    
    
    16Other
    
    
    245
    
    
    
    218Total other assets
    
    
    1,975
    
    
    
    1,943Total Assets
    
    $
    8,815
    
    
    $
    8,346
  2




---



##### Table of Contents



CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS  (Continued)
(Millions of Dollars)
(Unaudited)
 LIABILITIES AND STOCKHOLDERS EQUITY
 December 31,
    
    
    June 30,2006
    
    
    2007Current Liabilities:Short-term borrowings
    
    $
    187
    
    
    $
    225Current portion of long-term debt
    
    
    7
    
    
    
    307Accounts payable
    
    
    928
    
    
    
    561Accounts and notes payable  affiliated companies
    
    
    386
    
    
    
    256Taxes accrued
    
    
    115
    
    
    
    76Interest accrued
    
    
    48
    
    
    
    52Customer deposits
    
    
    62
    
    
    
    56Non-trading derivative liabilities
    
    
    141
    
    
    
    71Other
    
    
    305
    
    
    
    202Total current liabilities
    
    
    2,179
    
    
    
    1,806Other Liabilities:Accumulated deferred income taxes, net
    
    
    662
    
    
    
    679Non-trading derivative liabilities
    
    
    80
    
    
    
    21Benefit obligations
    
    
    138
    
    
    
    132Other
    
    
    669
    
    
    
    636Total other liabilities
    
    
    1,549
    
    
    
    1,468Long-term Debt
    
    
    2,155
    
    
    
    1,998Commitments and Contingencies (Note 10)Stockholders Equity:Common stock
    
    
    
    
    
    
    Paid-in capital
    
    
    2,403
    
    
    
    2,405Retained earnings
    
    
    505
    
    
    
    666Accumulated other comprehensive income
    
    
    24
    
    
    
    3Total stockholders equity
    
    
    2,932
    
    
    
    3,074Total Liabilities and Stockholders Equity
    
    $
    8,815
    
    
    $
    8,346
  3




---



##### Table of Contents



CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
 
 CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
 (Millions of Dollars)
 (Unaudited)
 Six Months Ended June 30,2006
    
    
    2007Cash Flows from Operating Activities:Net income
    
    $
    120
    
    
    $
    161Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    100
    
    
    
    103Amortization of deferred financing costs
    
    
    4
    
    
    
    4Deferred income taxes
    
    
    1
    
    
    
    23Write-down of natural gas inventory
    
    
    30
    
    
    
    6Changes in other assets and liabilities:Accounts receivable and unbilled revenues, net
    
    
    784
    
    
    
    446Accounts receivable/payable, affiliates
    
    
    (9
    )
    
    
    12Inventory
    
    
    59
    
    
    
    8Taxes receivable
    
    
    (40
    )
    
    
    Accounts payable
    
    
    (684
    )
    
    
    (277
    )Fuel cost recovery
    
    
    76
    
    
    
    (39
    )Interest and taxes accrued
    
    
    (8
    )
    
    
    (33
    )Non-trading derivatives, net
    
    
    12
    
    
    
    12Margin deposits, net
    
    
    (113
    )
    
    
    80Other current assets
    
    
    (81
    )
    
    
    (112
    )Other current liabilities
    
    
    2
    
    
    
    (43
    )Other assets
    
    
    (29
    )
    
    
    (12
    )Other liabilities
    
    
    7
    
    
    
    (65
    )Other, net
    
    
    (2
    )
    
    
    (1
    )Net cash provided by operating activities
    
    
    229
    
    
    
    273Cash Flows from Investing Activities:Capital expenditures
    
    
    (166
    )
    
    
    (419
    )Other, net
    
    
    (9
    )
    
    
    (47
    )Net cash used in investing activities
    
    
    (175
    )
    
    
    (466
    )Cash Flows from Financing Activities:Increase in short-term borrowings, net
    
    
    
    
    
    
    38Proceeds from issuance of long-term debt
    
    
    324
    
    
    
    150Payments of long-term debt
    
    
    (6
    )
    
    
    (7
    )Increase (decrease) in notes payable to affiliates
    
    
    (289
    )
    
    
    11Debt issuance costs
    
    
    (1
    )
    
    
    (2
    )Contribution from parent
    
    
    112
    
    
    
    Other, net
    
    
    1
    
    
    
    2Net cash provided by financing activities
    
    
    141
    
    
    
    192Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    195
    
    
    
    (1
    )Cash and Cash Equivalents at Beginning of Period
    
    
    31
    
    
    
    5Cash and Cash Equivalents at End of Period
    
    $
    226
    
    
    $
    4Supplemental Disclosure of Cash Flow Information:Cash Payments:Interest, net of capitalized interest
    
    $
    78
    
    
    $
    85Income taxes (refunds), net
    
    
    (9
    )
    
    
    167Non-cash transactions:Increase in accounts payable related to capital expenditures
    
    
    13
    
    
    
    
  4




---



##### Table of Contents



CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1) Background and Basis of Presentation
 General.
 Background.
  Basis of Presentation.
   (2) New Accounting Pronouncements
   5




---



##### Table of Contents



(3) Employee Benefit Plans
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in millions)Service cost
    
    $
    1
    
    
    $
    
    
    
    $
    1
    
    
    $
    Interest cost
    
    
    1
    
    
    
    2
    
    
    
    3
    
    
    
    4Expected return on plan assets
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Amortization of prior service cost
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Other
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net periodic cost
    
    $
    2
    
    
    $
    3
    
    
    $
    5
    
    
    $
    5
  (4) Regulatory Matters
 (a) Rate Cases
 Arkansas.
  Texas.
 6




---



##### Table of Contents



Minnesota.
  (b) APSC Affiliate Transaction Rulemaking Proceeding
   (5) Derivative Instruments
  7




---



##### Table of Contents



Non-Trading Activities
 Cash Flow Hedges.
  Other Derivative Instruments.
 (6) Goodwill
  Natural Gas Distribution
    
    $
    746Interstate Pipelines
    
    
    579Competitive Natural Gas Sales and Services
    
    
    339Field Services
    
    
    25Other Operations
    
    
    20Total
    
    $
    1,709
 8




---



##### Table of Contents



(7) Comprehensive Income
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in millions)Net income
    
    $
    23
    
    
    $
    30
    
    
    $
    120
    
    
    $
    161Other comprehensive income (loss):Adjustment to pension and other
postretirement plans (net of
tax of $-0-)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net deferred gain (loss) from
cash flow hedges (net of tax of
($1), $4, ($2) and $4)
    
    
    (2
    )
    
    
    5
    
    
    
    (5
    )
    
    
    5Reclassification of deferred
loss (gain) from cash flow
hedges realized in net income
(net of tax of $2, ($3) and
($17))
    
    
    5
    
    
    
    
    
    
    
    (4
    )
    
    
    (27
    )Total
    
    
    3
    
    
    
    5
    
    
    
    (9
    )
    
    
    (21
    )Comprehensive income
    
    $
    26
    
    
    $
    35
    
    
    $
    111
    
    
    $
    140
  December 31,
    
    
    June 30,2006
    
    
    2007(in millions)SFAS No. 158 incremental effect
    
    $
    (2
    )
    
    $
    (1
    )Net deferred gain from cash flow hedges
    
    
    26
    
    
    
    4Total accumulated other comprehensive income (loss)
    
    $
    24
    
    
    $
    3
 (8) Related Party Transactions
    (9) Short-term Borrowings and Long-term Debt
 (a) Short-term Borrowings
  9




---



##### Table of Contents



(b) Long-term Debt
 Senior Notes.
 Revolving Credit Facility.
   (10) Commitments and Contingencies
 (a) Natural Gas Supply Commitments
  (b) Legal, Environmental and Other Regulatory Matters
 Legal Matters
 Natural Gas Measurement Lawsuits.
  10




---



##### Table of Contents



Gas Cost Recovery Litigation. . .
 Storage Facility Litigation.
 11




---



##### Table of Contents



Environmental Matters
 Hydrocarbon Contamination.
 I
 Manufactured Gas Plant Sites.
   12




---



##### Table of Contents



Mercury Contamination.
 Asbestos.
 Other Environmental.
 Other Proceedings
  Guaranties
  13




---



##### Table of Contents



(11) Income Taxes
  January 1, 2007
    
    June 30, 2007Liability (receivable) for uncertain tax positions
    
    $
    0.7
    
    
    $
    (5.4
    )Portion of liability for uncertain tax positions that,
if recognized, would reduce the effective income tax
rate
    
    
    9.0
    
    
    
    1.4Interest accrued on uncertain tax positions
    
    
    1.3
    
    
    
    (0.7
    )
 (12) Reportable Business Segments
    14




---



##### Table of Contents



For the Three Months Ended June 30, 2006Revenues from
    
    
    NetExternal
    
    
    Intersegment
    
    
    OperatingCustomers
    
    
    Revenues
    
    
    Income (Loss)Natural Gas Distribution
    
    $
    546
    
    
    $
    3
    
    
    $
    (2
    )Competitive Natural Gas Sales and Services
    
    
    742
    
    
    
    8
    
    
    
    7Interstate Pipelines
    
    
    69
    
    
    
    35
    
    
    
    40Field Services
    
    
    27
    
    
    
    7
    
    
    
    21Other Operations
    
    
    
    
    
    
    2
    
    
    
    (1
    )Eliminations
    
    
    
    
    
    
    (55
    )
    
    
    Consolidated
    
    $
    1,384
    
    
    $
    
    
    
    $
    65
 For the Three Months Ended June 30, 2007Revenues from
    
    
    NetExternal
    
    
    Intersegment
    
    
    OperatingCustomers
    
    
    Revenues
    
    
    Income (Loss)Natural Gas Distribution
    
    $
    573
    
    
    $
    3
    
    
    $
    8Competitive Natural Gas Sales and Services
    
    
    874
    
    
    
    7
    
    
    
    (4
    )Interstate Pipelines
    
    
    88
    
    
    
    33
    
    
    
    52Field Services
    
    
    30
    
    
    
    12
    
    
    
    27Other Operations
    
    
    1
    
    
    
    
    
    
    
    Eliminations
    
    
    
    
    
    
    (55
    )
    
    
    Consolidated
    
    $
    1,566
    
    
    $
    
    
    
    $
    83
 For the Six Months Ended June 30, 2006Revenues from
    
    
    Net
    
    
    
    
    
    
    Total AssetsExternal
    
    
    Intersegment
    
    
    Operating
    
    
    as of December 31,Customers
    
    
    Revenues
    
    
    Income (Loss)
    
    
    2006Natural Gas Distribution
    
    $
    2,023
    
    
    $
    6
    
    
    $
    101
    
    
    $
    4,463Competitive Natural Gas Sales and Services
    
    
    1,868
    
    
    
    45
    
    
    
    32
    
    
    
    1,501Interstate Pipelines
    
    
    125
    
    
    
    68
    
    
    
    89
    
    
    
    2,738Field Services
    
    
    58
    
    
    
    17
    
    
    
    45
    
    
    
    608Other Operations
    
    
    
    
    
    
    4
    
    
    
    (2
    )
    
    
    1,086Eliminations
    
    
    
    
    
    
    (140
    )
    
    
    
    
    
    
    (1,581
    )Consolidated
    
    $
    4,074
    
    
    $
    
    
    
    $
    265
    
    
    $
    8,815
 For the Six Months Ended June 30, 2007Revenues from
    
    
    NetExternal
    
    
    Intersegment
    
    
    Operating
    
    
    Total AssetsCustomers
    
    
    Revenues
    
    
    Income (Loss)
    
    
    as of June 30, 2007Natural Gas Distribution
    
    $
    2,137
    
    
    $
    6
    
    
    $
    137
    
    
    $
    4,050Competitive Natural Gas Sales and Services
    
    
    1,921
    
    
    
    24
    
    
    
    52
    
    
    
    1,256Interstate Pipelines
    
    
    147
    
    
    
    64
    
    
    
    96
    
    
    
    2,836Field Services
    
    
    58
    
    
    
    23
    
    
    
    49
    
    
    
    618Other Operations
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    460Eliminations
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    (874
    )Consolidated
    
    $
    4,263
    
    
    $
    
    
    
    $
    333
    
    
    $
    8,346
 15




---



##### Table of Contents



Item 2. MANAGEMENTS NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
 The following narrative analysis should be read in combination with our Interim Condensed
Financial Statements contained in Item 1 of this report.
  EXECUTIVE SUMMARY
 Recent Events
 Refinancing Transactions
  Interstate Pipeline Expansion
 Carthage to Perryville.
  16




---



##### Table of Contents



CONSOLIDATED RESULTS OF OPERATIONS
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in millions)Revenues
    
    $
    1,384
    
    
    $
    1,566
    
    
    $
    4,074
    
    
    $
    4,263Expenses:Natural gas
    
    
    1,035
    
    
    
    1,208
    
    
    
    3,228
    
    
    
    3,358Operation and maintenance
    
    
    199
    
    
    
    188
    
    
    
    396
    
    
    
    386Depreciation and amortization
    
    
    50
    
    
    
    52
    
    
    
    100
    
    
    
    103Taxes other than income taxes
    
    
    35
    
    
    
    35
    
    
    
    85
    
    
    
    83Total Expenses
    
    
    1,319
    
    
    
    1,483
    
    
    
    3,809
    
    
    
    3,930Operating Income
    
    
    65
    
    
    
    83
    
    
    
    265
    
    
    
    333Interest and Other Finance Charges
    
    
    (42
    )
    
    
    (45
    )
    
    
    (82
    )
    
    
    (84
    )Other Income, net
    
    
    5
    
    
    
    4
    
    
    
    8
    
    
    
    7Income Before Income Taxes
    
    
    28
    
    
    
    42
    
    
    
    191
    
    
    
    256Income Tax Expense
    
    
    (5
    )
    
    
    (12
    )
    
    
    (71
    )
    
    
    (95
    )Net Income
    
    $
    23
    
    
    $
    30
    
    
    $
    120
    
    
    $
    161
 RESULTS OF OPERATIONS BY BUSINESS SEGMENT
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in millions)Natural Gas Distribution
    
    $
    (2
    )
    
    $
    8
    
    
    $
    101
    
    
    $
    137Competitive Natural Gas Sales and Services
    
    
    7
    
    
    
    (4
    )
    
    
    32
    
    
    
    52Interstate Pipelines
    
    
    40
    
    
    
    52
    
    
    
    89
    
    
    
    96Field Services
    
    
    21
    
    
    
    27
    
    
    
    45
    
    
    
    49Other Operations
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )Total Consolidated Operating Income
    
    $
    65
    
    
    $
    83
    
    
    $
    265
    
    
    $
    333
 17




---



##### Table of Contents



Natural Gas Distribution
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    549
    
    
    $
    576
    
    
    $
    2,029
    
    
    $
    2,143Expenses:Natural gas
    
    
    343
    
    
    
    366
    
    
    
    1,489
    
    
    
    1,578Operation and maintenance
    
    
    142
    
    
    
    135
    
    
    
    292
    
    
    
    282Depreciation and amortization
    
    
    37
    
    
    
    38
    
    
    
    75
    
    
    
    76Taxes other than income taxes
    
    
    29
    
    
    
    29
    
    
    
    72
    
    
    
    70Total expenses
    
    
    551
    
    
    
    568
    
    
    
    1,928
    
    
    
    2,006Operating Income (Loss)
    
    $
    (2
    )
    
    $
    8
    
    
    $
    101
    
    
    $
    137Throughput (in Bcf):Residential
    
    
    17
    
    
    
    20
    
    
    
    84
    
    
    
    106Commercial and industrial
    
    
    44
    
    
    
    44
    
    
    
    116
    
    
    
    126Total Throughput
    
    
    61
    
    
    
    64
    
    
    
    200
    
    
    
    232Average number of customers:Residential
    
    
    2,871,107
    
    
    
    2,925,120
    
    
    
    2,882,008
    
    
    
    2,935,661Commercial and industrial
    
    
    243,420
    
    
    
    247,550
    
    
    
    244,475
    
    
    
    246,564Total
    
    
    3,114,527
    
    
    
    3,172,670
    
    
    
    3,126,483
    
    
    
    3,182,225
 Three months ended June 30, 2007 compared to three months ended June 30, 2006
  Six months ended June 30, 2007 compared to six months ended June 30, 2006
  18




---



##### Table of Contents



Competitive Natural Gas Sales and Services
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    750
    
    
    $
    881
    
    
    $
    1,913
    
    
    $
    1,945Expenses:Natural gas
    
    
    735
    
    
    
    877
    
    
    
    1,864
    
    
    
    1,875Operation and maintenance
    
    
    7
    
    
    
    7
    
    
    
    15
    
    
    
    16Depreciation and amortization
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Taxes other than income taxes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Total expenses
    
    
    743
    
    
    
    885
    
    
    
    1,881
    
    
    
    1,893Operating Income (Loss)
    
    $
    7
    
    
    $
    (4
    )
    
    $
    32
    
    
    $
    52Throughput (in Bcf):Wholesale  third parties
    
    
    72
    
    
    
    74
    
    
    
    161
    
    
    
    168Wholesale  affiliates
    
    
    8
    
    
    
    2
    
    
    
    19
    
    
    
    5Retail and Pipeline
    
    
    41
    
    
    
    44
    
    
    
    99
    
    
    
    102Total Throughput
    
    
    121
    
    
    
    120
    
    
    
    279
    
    
    
    275Average number of customers:Wholesale
    
    
    132
    
    
    
    248
    
    
    
    138
    
    
    
    235Retail and Pipeline
    
    
    6,604
    
    
    
    6,829
    
    
    
    6,639
    
    
    
    6,797Total
    
    
    6,736
    
    
    
    7,077
    
    
    
    6,777
    
    
    
    7,032
 Three months ended June 30, 2007 compared to three months ended June 30, 2006
  Six months ended June 30, 2007 compared to six months ended June 30, 2006
  19




---



##### Table of Contents



Interstate Pipelines
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    104
    
    
    $
    121
    
    
    $
    193
    
    
    $
    211Expenses:Natural gas
    
    
    14
    
    
    
    24
    
    
    
    12
    
    
    
    28Operation and maintenance
    
    
    38
    
    
    
    29
    
    
    
    65
    
    
    
    56Depreciation and amortization
    
    
    8
    
    
    
    11
    
    
    
    18
    
    
    
    21Taxes other than income taxes
    
    
    4
    
    
    
    5
    
    
    
    9
    
    
    
    10Total expenses
    
    
    64
    
    
    
    69
    
    
    
    104
    
    
    
    115Operating Income
    
    $
    40
    
    
    $
    52
    
    
    $
    89
    
    
    $
    96Throughput (in Bcf):Transportation
    
    
    240
    
    
    
    274
    
    
    
    514
    
    
    
    568
 Three months ended June 30, 2007 compared to three months ended June 30, 2006
  Six months ended June 30, 2007 compared to six months ended June 30, 2006
  Field Services
 Form 10-Q.
 20




---



##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    34
    
    
    $
    42
    
    
    $
    75
    
    
    $
    81Expenses:Natural gas
    
    
    (4
    )
    
    
    (4
    )
    
    
    (3
    )
    
    
    (7
    )Operation and maintenance
    
    
    14
    
    
    
    16
    
    
    
    27
    
    
    
    32Depreciation and amortization
    
    
    2
    
    
    
    3
    
    
    
    5
    
    
    
    6Taxes other than income taxes
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    1Total expenses
    
    
    13
    
    
    
    15
    
    
    
    30
    
    
    
    32Operating Income
    
    $
    21
    
    
    $
    27
    
    
    $
    45
    
    
    $
    49Throughput (in Bcf):Gathering
    
    
    94
    
    
    
    100
    
    
    
    182
    
    
    
    193
 Three months ended June 30, 2007 compared to three months ended June 30, 2006
   Six months ended June 30, 2007 compared to six months ended June 30, 2006
   CERTAIN FACTORS AFFECTING FUTURE EARNINGS
  LIQUIDITY AND CAPITAL RESOURCES
   21




---



##### Table of Contents



Arkansas Public Service Commission (APSC), Affiliate Transaction Rulemaking Proceeding.
  Off-Balance Sheet Arrangements.
   22




---



##### Table of Contents



Credit and Receivables Facilities.
  Amount Utilized atDate Executed
    
    Company
    
    Type of Facility
    
    Size of Facility
    
    July 31, 2007
    
    Termination DateJune 29, 2007
    
    CERC Corp.
    
    Revolver
    
    
    950
    
    
    $
    19
    (1)
    
    June 29, 2012October 31, 2006
    
    CERC
    
    Receivables
    
    
    200
    
    
    
    198
    
    
    October 30, 2007
 
 (1)
    
    Represents outstanding letters of credit.    Securities Registered with the SEC.
 Temporary Investments.
 Money Pool.
 Impact on Liquidity of a Downgrade in Credit Ratings.
 Moodys
    
    S&P
    
    FitchRating
    
    Outlook(1)
    
    Rating
    
    Outlook(2)
    
    Rating
    
    Outlook(3)Baa3
    
    Stable
    
    BBB
    
    Positive
    
    BBB
    
    Stable
 
 (1)
    
    A stable outlook from Moodys indicates that Moodys does not expect to put the
rating on review for an upgrade or downgrade within 18 months from when the outlook was
assigned or last affirmed.(2)
    
    An S&P rating outlook assesses the potential direction of a long-term credit rating
over the intermediate to longer term.(3)
    
    A stable outlook from Fitch encompasses a one-to-two year horizon as to the likely
ratings direction. 23




---



##### Table of Contents



Cross Defaults.
 Other Factors that Could Affect Cash Requirements.
 
    
    cash collateral requirements that could exist in connection with certain
contracts, including gas purchases, gas price hedging and gas storage activities of our
Natural Gas Distribution and Competitive Natural Gas Sales and Services business segments,
particularly given gas price levels and volatility;
    
    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;
 24




---



##### Table of Contents




    
    increased costs related to the acquisition of natural gas;
    
    increases in interest expense in connection with debt refinancings and borrowings under credit facilities;
    
    various regulatory actions;
    
    the ability of RRI and its subsidiaries to satisfy their obligations to us or
in connection with the contractual arrangement pursuant to which we are a guarantor;
    
    slower customer payments and increased write-offs of receivables due to higher
gas prices or changing economic conditions;
    
    the outcome of litigation brought by and against us;
    
    contributions to benefit plans;
    
    restoration costs and revenue losses resulting from natural disasters such as hurricanes; and
    
    various other risks identified in Risk Factors in Item 1A of the CERC Corp.
Form 10-K and Risk Factors in Item 1A of Part II of this Quarterly Report on Form 10-Q.
 Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money.
 Relationship with CenterPoint Energy.
 CRITICAL ACCOUNTING POLICIES
  Impairment of Long-Lived Assets and Intangibles
  25




---



##### Table of Contents



Asset Retirement Obligations
   
    
    Inflation adjustment  The estimated cash flows are adjusted for inflation
estimates for labor, equipment, materials, and other disposal costs;
    
    Discount rate  The estimated cash flows include contingency factors that
were used as a proxy for the market risk premium; and
    
    Third-party markup adjustments  Internal labor costs included in the cash
flow calculation were adjusted for costs that a third party would incur in performing the
tasks necessary to retire the asset.
  Unbilled Revenues
  NEW ACCOUNTING PRONOUNCEMENTS
  
 Item 4. CONTROLS AND PROCEDURES
  26




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The states in which we provide regulated local gas distribution may, either through legislation or
rules, adopt restrictions similar to those under the Public Utility Holding Company Act of 1935
Act (1935 Act) regarding organization, financing and affiliate transactions that could have
significant adverse effects on our ability to operate our utility operations.
   We and CenterPoint Energy could incur liabilities associated with businesses and assets that we
have transferred to others.
   27




---



##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
   Report or
    
    SEC File orExhibit
    
    
    
    
    
    Registration
    
    Registration
    
    ExhibitNumber
    
    Description
    
    Statement
    
    Number
    
    Reference3.1.1
    
    
    
    
    Certificate of Incorporation of RERC
Corp.
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3(a
    )(1)3.1.2
    
    
    
    
    Certificate of Merger merging former
NorAm Energy Corp. with and into HI Merger, Inc.
dated August 6, 1997
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3(a
    )(2)3.1.3
    
    
    
    
    Certificate of Amendment changing the
name to Reliant Energy Resources Corp.
    
    Form 10-K for the year ended
December 31, 1998
    
    1-13265
    
    
    3(a
    )(3)3.1.4
    
    
    
    
    Certificate of Amendment changing the
name to CenterPoint Energy Resources Corp.
    
    Form 10-Q for the quarter ended
June 30, 2003
    
    1-13265
    
    
    3(a
    )(4)3.2
    
    
    
    
    Bylaws of RERC Corp.
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3
    (b)+4.1
    
    
    
    
    $950,000,000 Second Amended and Restated
Credit Agreement dated as of June 29, 2007, among
CERC Corp., as Borrower, and the banks named
therein4.2
    
    
    
    
    Indenture, dated as of February 1, 1998,
between Reliant Energy Resources Corp. and Chase
Bank of Texas, National Association, as Trustee
    
    CERC Corp.s Form 8-K dated
February 5, 1998
    
    1-13265
    
    
    4.14.3
    
    
    
    
    Supplemental Indenture No. 10 to Exhibit
4.6, dated as of February 6, 2007, providing for
the issuance of CERC Corp.s 6.25% Senior Notes due
2037
    
    CenterPoint Energys Form 10-K
for the year ended December
31, 2006
    
    1-31447
    
    
    4(f
    )(11)+12
    
    
    
    
    Computation of Ratios of Earnings to
Fixed Charges
 28




---



##### Table of Contents



Report or
    
    SEC File orExhibit
    
    
    
    
    
    Registration
    
    Registration
    
    ExhibitNumber
    
    Description
    
    Statement
    
    Number
    
    Reference+31.1
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification
of David M. McClanahan+31.2
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification
of Gary L. Whitlock+32.1
    
    
    
    
    Section 1350 Certification of David M.
McClanahan+32.2
    
    
    
    
    Section 1350 Certification of Gary L.
Whitlock+99.1
    
    
    
    
    Items incorporated by reference from the
CERC Corp. Form 10-K. Item 1A Risk Factors.
 29




---



##### Table of Contents



SIGNATURES
  CENTERPOINT ENERGY RESOURCES CORP.By:
    /s/ James S. BrianJames S. BrianSenior Vice President and Chief Accounting Officer  30




---



##### Table of Contents



EXHIBIT INDEX
  Report or
    
    SEC File orExhibit
    
    
    
    
    
    Registration
    
    Registration
    
    ExhibitNumber
    
    Description
    
    Statement
    
    Number
    
    Reference3.1.1
    
    
    
    
    Certificate of Incorporation of RERC
Corp.
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3(a
    )(1)3.1.2
    
    
    
    
    Certificate of Merger merging former
NorAm Energy Corp. with and into HI Merger, Inc.
dated August 6, 1997
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3(a
    )(2)3.1.3
    
    
    
    
    Certificate of Amendment changing the
name to Reliant Energy Resources Corp.
    
    Form 10-K for the year ended
December 31, 1998
    
    1-13265
    
    
    3(a
    )(3)3.1.4
    
    
    
    
    Certificate of Amendment changing the
name to CenterPoint Energy Resources Corp.
    
    Form 10-Q for the quarter ended
June 30, 2003
    
    1-13265
    
    
    3(a
    )(4)3.2
    
    
    
    
    Bylaws of RERC Corp.
    
    Form 10-K for the year ended
December 31, 1997
    
    1-13265
    
    
    3
    (b)+4.1
    
    
    
    
    $950,000,000 Second Amended and Restated
Credit Agreement dated as of June 29, 2007, among
CERC Corp., as Borrower, and the banks named
therein4.2
    
    
    
    
    Indenture, dated as of February 1, 1998,
between Reliant Energy Resources Corp. and Chase
Bank of Texas, National Association, as Trustee
    
    CERC Corp.s Form 8-K dated
February 5, 1998
    
    1-13265
    
    
    4.14.3
    
    
    
    
    Supplemental Indenture No. 10 to Exhibit
4.6, dated as of February 6, 2007, providing for
the issuance of CERC Corp.s 6.25% Senior Notes due
2037
    
    CenterPoint Energys Form 10-K
for the year ended December
31, 2006
    
    1-31447
    
    
    4(f
    )(11)+12
    
    
    
    
    Computation of Ratios of Earnings to
Fixed Charges




---



##### Table of Contents



Report or
    
    SEC File orExhibit
    
    
    
    
    
    Registration
    
    Registration
    
    ExhibitNumber
    
    Description
    
    Statement
    
    Number
    
    Reference+31.1
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification
of David M. McClanahan+31.2
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification
of Gary L. Whitlock+32.1
    
    
    
    
    Section 1350 Certification of David M.
McClanahan+32.2
    
    
    
    
    Section 1350 Certification of Gary L.
Whitlock+99.1
    
    
    
    
    Items incorporated by reference from the
CERC Corp. Form 10-K. Item 1A Risk Factors.