Exhibit 99(a)

ITEM 1.  BUSINESS

                                   REGULATION

     We are subject to regulation by various federal, state, local and foreign
governmental agencies, including the regulations described below.

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

     As a subsidiary of a registered public utility holding company, we are
subject to a comprehensive regulatory scheme imposed by the SEC in order to
protect customers, investors and the public interest. Although the SEC does not
regulate rates and charges under the 1935 Act, it does regulate the structure,
financing, lines of business and internal transactions of public utility holding
companies and their system companies. In order to obtain financing, acquire
additional public utility assets or stock, or engage in other significant
transactions, we are generally required to obtain approval from the SEC under
the 1935 Act.

     Prior to the Restructuring, CenterPoint Energy and Reliant Energy obtained
an order from the SEC that authorized the Restructuring transactions, including
the Distribution, and granted CenterPoint Energy certain authority with respect
to system financing, dividends and other matters. The financing authority
granted by that order will expire on June 30, 2003, and CenterPoint Energy must
obtain a further order from the SEC under the 1935 Act, related, among other
things, to the financing activities of CenterPoint Energy and its subsidiaries,
including us, subsequent to June 30, 2003.

     In a July 2002 order, the SEC limited the aggregate amount of our external
borrowings to $2.7 billion. Our ability to pay dividends is restricted by the
SEC's requirement that common equity as a percentage of total capitalization
must be at least 30% after the payment of any dividend. In addition, the order
restricts our ability to pay dividends out of capital accounts to the extent
current or retained earnings are insufficient for those dividends. Under these
restrictions, we are permitted to pay dividends in excess of our current or
retained earnings in an amount up to $100 million.

     In 2002, we obtained authority from each state in which such authority was
required to restructure in a manner that would allow CenterPoint Energy to claim
an exemption from registration under the 1935 Act. CenterPoint Energy has
concluded that a restructuring would not be beneficial and has elected to remain
a registered holding company under the 1935 Act.

FEDERAL ENERGY REGULATORY COMMISSION

     The transportation and sale or resale of natural gas in interstate commerce
is subject to regulation by the Federal Energy Regulatory Commission (FERC)
under the Natural Gas Act and the Natural Gas Policy Act of 1978, as amended.
The FERC has jurisdiction over, among other things, the construction of pipeline
and related facilities used in the transportation and storage of natural gas in
interstate commerce, including the extension, expansion or abandonment of these
facilities. The rates charged by interstate pipelines for interstate
transportation and storage services are also regulated by the FERC.

     Our natural gas pipeline subsidiaries may periodically file applications
with the FERC for changes in their generally available maximum rates and charges
designed to allow them to recover their costs of providing service to customers
(to the extent allowed by prevailing market conditions), including a reasonable
rate of return. These rates are normally allowed to become effective after a
suspension period and, in some cases, are subject to refund under applicable law
until such time as the FERC issues an order on the allowable level of rates.

     In February 2000, the FERC issued Order No. 637, which introduced several
measures to increase competition for interstate pipeline transportation
services. Order No. 637 authorizes interstate pipelines to propose
term-differentiated and peak/off-peak rates, and requires pipelines to make
tariff filings to expand pipeline service options for customers. Both of our
natural gas pipeline subsidiaries made two Order No. 637


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compliance filings in 2000, and both obtained uncontested settlements filed with
the FERC in 2001. In 2002, the FERC issued orders accepting both settlements,
subject to certain modifications. The FERC has denied requests for rehearing and
clarification of the orders and has accepted, with modification, the compliance
tariff filed under one of the orders and ordered additional revised tariff
sheets to be filed under the other order.

STATE AND LOCAL REGULATION

     In almost all communities in which we provide natural gas distribution
services, we operate under franchises, certificates or licenses obtained from
state and local authorities. The terms of the franchises, with various
expiration dates, typically range from 10 to 30 years. None of our material
franchises expires before 2005. We expect to be able to renew expiring
franchises. In most cases, franchises to provide natural gas utility services
are not exclusive.

     Substantially all of our retail natural gas sales are subject to
traditional cost-of-service regulation at rates regulated by the relevant state
public service commissions and, in Texas, by the Railroad Commission of Texas
(Railroad Commission) and municipalities we serve.

     Arkansas Rate Case.  In November 2001, Arkla filed a rate request in
Arkansas seeking rates to yield approximately $47 million in additional annual
gross revenue. In August 2002, a settlement was approved by the Arkansas Public
Service Commission (APSC) which is expected to result in an increase in base
rates of approximately $32 million annually. In addition, the APSC approved a
gas main replacement surcharge which is expected to provide $2 million of
additional gross revenue in 2003 and additional amounts in subsequent years. The
new rates included in the final settlement were effective with all bills
rendered on and after September 21, 2002.

     Oklahoma Rate Case.  In May 2002, Arkla filed a request in Oklahoma to
increase its base rates by $13.7 million annually. In December 2002, a
settlement was approved by the Oklahoma Corporation Commission which is expected
to result in an increase in base rates of approximately $7.3 million annually.
The new rates included in the final settlement were effective with all bills
rendered on and after December 29, 2002.

     City of Tyler, Texas, Gas Costs Review.  By letter to Entex dated July 31,
2002, the City of Tyler, Texas, forwarded various computations of what it
believes to be excessive costs ranging from $2.8 million to $39.2 million for
gas purchases by Entex for resale to residential and small commercial customers
in that city under supply agreements in effect since 1992. Entex's gas costs for
its Tyler system are recovered from customers pursuant to tariffs approved by
the city and filed with both the city and the Railroad Commission. Pursuant to
an agreement, on January 29, 2003, Entex and the city filed a Joint Petition for
Review of Charges for Gas Sales (Joint Petition) with the Railroad Commission.
The Joint Petition requests that the Railroad Commission determine whether Entex
has properly and lawfully charged and collected for gas service to its
residential and commercial customers in its Tyler distribution system for the
period beginning November 1, 1992, and ending October 31, 2002. We believe that
all costs for Entex's Tyler distribution system have been properly included and
recovered from customers pursuant to Entex's filed tariffs and that the city has
no legal or factual support for the statements made in its letter.

DEPARTMENT OF TRANSPORTATION

     In December 2002, Congress enacted the Pipeline Safety Improvement Act of
2002. This legislation applies to our interstate pipelines as well as our
intra-state pipelines and local distribution companies. The legislation imposes
several requirements related to ensuring pipeline safety and integrity. It
requires companies to assess the integrity of their pipeline transmission and
distribution facilities in areas of high population concentration and further
requires companies to perform remediation activities in accordance with the
requirements of the legislation over a 10-year period.

     In January 2003, the U.S. Department of Transportation published a notice
of proposed rulemaking to implement provisions of the legislation. The
Department of Transportation is expected to issue final rules by the end of
2003.


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     While we anticipate that increased capital and operating expenses will be
required to comply with the legislation, we will not be able to quantify the
level of spending required until the Department of Transportation's final rules
are issued.

                             ENVIRONMENTAL MATTERS

GENERAL ENVIRONMENTAL ISSUES

     We are subject to numerous federal, state and local requirements relating
to the protection of the environment and the safety and health of personnel and
the public. These requirements relate to a broad range of our activities,
including: the discharge of pollutants into water and soil; the proper handling
of solid, hazardous, and toxic materials; and waste, noise, and safety and
health standards applicable to the workplace. In order to comply with these
requirements, we will spend substantial amounts from time to time to construct,
modify and retrofit equipment, and to clean up or decommission disposal or fuel
storage areas and other locations as necessary.

     Our facilities are subject to state and federal laws and regulations
governing the discharge of pollutants into the air and waterways. In many cases
we must obtain permits or other governmental authorizations that prescribe the
parameters for discharges from our facilities. There are ongoing efforts to
modify standards relating to both the discharge of pollutants into streams and
waterways and to air quality. These efforts may result in more restrictive
regulations and permit terms applicable to our facilities in the future.

     We anticipate no significant capital and other special project expenditures
between 2002 and 2006 for environmental compliance. If we do not comply with
environmental requirements that apply to our operations, regulatory agencies
could seek to impose on us civil, administrative and/or criminal liabilities as
well as seek to curtail our operations. Under some statutes, private parties
could also seek to impose civil fines or liabilities for property damage,
personal injury and possibly other costs.

     Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, or CERCLA, owners and operators of facilities from which
there has been a release or threatened release of hazardous substances, together
with those who have transported or arranged for the disposal of those
substances, are liable for:

     - the costs of responding to that release or threatened release; and

     - the restoration of natural resources damaged by any such release.

     We are not aware of any liabilities under CERCLA that would have a material
adverse effect on us, our financial position, results of operations or cash
flows.

LIABILITY FOR PREEXISTING CONDITIONS AND REMEDIATION

     Manufactured Gas Plant Sites.  We and our predecessors operated
manufactured gas plants (MGP) in the past. In Minnesota, remediation has been
completed on two sites, other than ongoing monitoring and water treatment. There
are five remaining sites in our Minnesota service territory, two of which we
believe were neither owned nor operated by us, and for which we believe we have
no liability.

     At December 31, 2002, we had accrued $19 million for remediation of the
Minnesota sites. At December 31, 2002, the estimated range of possible
remediation costs was $8 million to $44 million based on remediation continuing
for 30 to 50 years. The cost estimates are based on studies of a site or
industry average costs for remediation of sites of similar size. The actual
remediation costs will be dependent upon the number of sites to be remediated,
the participation of other potentially responsible parties (PRP), if any, and
the remediation methods used. We have an environmental expense tracker mechanism
in our rates in Minnesota. We have collected $12 million at December 31, 2002 to
be used for future environmental remediation.


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     We have received notices from the United States Environmental Protection
Agency and others regarding our status as a PRP for sites in other states. Based
on current information, we have not been able to quantify a range of
environmental expenditures for potential remediation expenditures with respect
to other MGP sites.

     Hydrocarbon Contamination.  In August 2001, a number of Louisiana residents
who live near the Wilcox Aquifer filed suit in the 1st Judicial District Court,
Caddo Parish, Louisiana against us and others. The suit alleges that we and the
other defendants allowed or caused hydrocarbon or chemical contamination of the
Wilcox Aquifer, which lies beneath property owned or leased by the defendants
and is the sole or primary drinking water aquifer in the area. The monetary
damages sought are unspecified. In April 2002, a separate suit with identical
allegations against the same parties was filed in the same court. Additionally
in January 2003, a third suit with similar allegations was filed against the
same parties in the 26th Judicial Court, Bossier Parish, Louisiana.

     Mercury Contamination.  Like similar companies, our pipeline and natural
gas distribution operations have in the past employed elemental mercury in
measuring and regulating equipment. It is possible that small amounts of mercury
may have been spilled in the course of normal maintenance and replacement
operations and that these spills may have contaminated the immediate area around
the meters with elemental mercury. We have found this type of contamination in
the past, and we have conducted remediation at sites found to be contaminated.
Although we are not aware of additional specific sites, it is possible that
other contaminated sites may exist and that remediation costs may be incurred
for these sites. Although the total amount of these costs cannot be known at
this time, based on our experience and that of others in the natural gas
industry to date and on the current regulations regarding remediation of these
sites, we believe that the cost of any remediation of these sites will not be
material to our financial position, results of operations or cash flows.

ITEM 3.  LEGAL PROCEEDINGS

     For a brief descriptions of certain legal and regulatory proceedings
affecting us, see "Regulation" and "Environmental Matters" in Item 1 of this
report and Notes 10(c) and 10(d) to our consolidated financial statements.

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