CenterPoint Energy Proprietary and Confidential Information

Natural Gas Price Update

May 2015

Phil Reeves

Director of Commercial & Industrial Sales

& Transportation Services

CenterPoint Energy

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Natural Gas Price Update

Natural Gas Price Overview

• Cumulatively, from October 2014 through January 2015, the nation was 3.6%

warmer than normal.

• Consumption is expected to grow in the industrial and power sectors and

decline in the commercial and residential sectors in 2015 and remain flat in

2016.

• Prices are projected to remain at relatively low levels, reflecting abundant and

strong supplies.

Source: Energy Information Administration and American Gas Association

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Storage levels

Supply (short-term and long-term)

• Availability of long-term domestic supplies

• Production capacity

• Weather (e.g. temperatures, hurricanes)

Demand

• Increased use of natural gas to generate electricity and in the

Industrial sector

• Warm winters/cool summers (demand ↓)

• Cold winters/warm summers (demand ↑)

• Economic conditions

Natural Gas Price Update

Factors That Affect Natural Gas Prices

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Prices are given in Therms in your bill:

• 1 Therm = 100,000 BTU

• 10 Therm = 1 Dekatherm (Dth) = 1 MM Btu = 1 MCF

Natural Gas Price Update

Components of Your Natural Gas Bill

Delivery Charge The Delivery Charge is a fixed rate and

recovers the natural gas utility’s cost of

doing business not recovered through the

basic charge.

Pipeline Demand Charge Covers the cost of transporting the gas on

the interstate pipeline (e.g., from Oklahoma

to Minnesota)

Commodity Charge Covers the total costs paid by the natural

gas utility to purchase the gas used by

customers. The commodity charge varies

from month-to-month as the price of natural

gas from the producers and suppliers

changes. Customers only pay the

wholesale cost of natural gas which is

passed through to the customer without

mark-up.

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Higher Gas Prices Case:

- Economic growth

- Weather Impact: Cold winters / hurricanes

Lower Gas Prices Case:

- Domestic supply continues to grow

- Mild Winters / limited hurricane impact

- Recession / limited economic growth

* Prices are based on the NYMEX forecast as of April 28, 2015. CenterPoint Energy makes no definite predictions on actual future prices.

Based on the NYMEX, natural gas commodity prices are forecasted to be mainly below $4/MCF until late next year.*

Natural Gas Price Update

2015 Price, Supply and Demand

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NYMEX Settled Low Forecast NYMEX Forecast High Forecast

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Natural Gas Price Update

Henry Hub Natural Gas Price

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Natural Gas Price Update

Primary Energy Consumption By Fuel

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• Energy Information Administration predicts that U.S. total natural gas

consumption will increase to an average of 73.8 Bcf/d in 2015 and 74.8

Bcf/d in 2016, compared to 73.6 Bcf/d in 2014.

• Growth is largely driven by the industrial and electric power sectors.

• Consumption in the power sector is expected to increase 3.2% in 2015 and

1.8% in 2016.

• Industrial sector consumption is expected to grow by 4.5% in 2015 and

2.1% in 2016.

• Residential and commercial consumption is expected to decline in 2015

and remain flat in 2016.

Source: EIA Short-Term Energy Analysis, January 2015

Natural Gas Price Update

Natural Gas Demand

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Natural Gas Price Update

Energy Consumption By Sector

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Natural Gas Price Update

U.S. Natural Gas Consumed for Electric Power

Generation

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Natural Gas Price Update

Regional Natural Gas Consumption for Electric

Power Generation

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•Total gas production increased 35% from 2005-2013

•Shale-sourced natural gas is now the main provider for our domestic

supply

• Increases in drilling efficiency and growth in oil production (although at a

slower rate) will continue to support growing natural gas production in the

coming years

•More than half of the total increase comes from the Hayesville and

Marcellus shale formations

•Dry natural gas production is 12.2% greater than year-ago levels

•With the current economic environment, shale directed drilling and

infrastructure builds will likely slow

Natural Gas Price Update

Supply From Shale Production

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Natural Gas Price Update

Domestically Produced Shale Basins

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Natural Gas Price Update

Monthly Dry Shale Production

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Natural Gas Price Update

U.S. Natural Gas Production and Imports

At the end of the 2014-15 heating season, underground

storage was 75% higher than last year, but 12% below the 5-

year average.

The injection season started earlier this year and does not have

as far to go compared to last year to reach operationally full.

Current natural gas in storage is 77% higher than year-ago

levels.

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Natural Gas Price Update

Supply- Natural Gas in Storage

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Working gas in underground storage compared with 5-year range

Working gas in storage was 1,710 Bcf as of Friday, April 24, 2015, according to

EIA estimates, which is 77% above year-ago levels and 4% below the five-year

average.

Natural Gas Price Update

Supply- Natural Gas in Storage

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Natural Gas Price Update

Supply- Natural Gas in Storage

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Questions?