Dear ShareholdersOperating Income Year Over Year

Dear Shareholders,

We are very pleased to report that in 2010 CenterPoint Energy turned in another solid performance, strengthening our balance sheet and achieving overall earnings growth despite a struggling economy. As is always the case, the foundation of this success is the hard work of our company's dedicated employees.

Net income for 2010 was $442 million, up almost 19 percent from the $372 million we earned in 2009. Earnings per share for 2010 increased nearly 6 percent to $1.07, compared to $1.01 in 2009. Total shareholder return, which includes both stock price appreciation and annual dividends, was 14.2 percent for the year, well over twice the return of the S&P 500 Utilities Index. In January 2010, we raised our quarterly dividend from 19.00 cents per share to 19.50 cents per share. We raised it again in January 2011 to 19.75 cents per share, making this the sixth consecutive year of dividend increases. Although we are nearing the top end of our dividend payout goal of returning 50 to 75 percent of sustainable earnings, we understand the importance of dividends to our shareholders and remain focused on growing earnings to support future dividend growth.

We chose "Building an Intelligent Future, Today" as the theme of this year's annual report based on our goal of providing intelligent, long-lasting solutions for our customers. Internally, we will support this goal by making smart investments in energy delivery infrastructure and technology, continuing to improve processes and positioning ourselves for future successes. Thus, our overall focus is to build an intelligent energy future for our customers and our shareholders.

Approximately 60 percent of our operating income is provided by our regulated electric and natural gas distribution utilities, while more than 24 percent is from our regulated interstate pipelines. These regulated units operate in attractive and geographically diverse service territories and provide a firm foundation of stable earnings and cash flow. Nearly 14 percent of our operating income is provided by our unregulated field services business, which derives a substantial portion of its income from fee-based services. The remainder comes from our unregulated energy services business and other operations.

"Disciplined" and "strategic" describe both our business philosophy and our approach to new investments. We continue to select projects that build on a strong foundation of consistent, predictable earnings and also provide significant upside for our shareholders. Investments in smart electric meters, the intelligent grid and the expansion of our pipelines and field services operations all exemplify the kind of smart, targeted growth that builds shareholder value.

We also worked to improve our future by strengthening our balance sheet during 2010. We sold more than $400 million of new equity and ended the year with a capital structure of approximately 33 percent equity and 67 percent debt, excluding securitization bonds. This is a significant improvement from just five years ago when our capital structure had been nearly 90 percent debt. This strengthening of our financial position enhances our ability to make smart investments as well as weather unpredictable financial market disruptions.

BUSINESS SEGMENT RESULTS

Our electric transmission and distribution business had a very solid year. Core operating income increased to $427 million, compared to $414 million in 2009. Modest customer growth, together with favorable weather, contributed to our earnings performance. We also made significant strides in our advanced metering system and intelligent grid deployments. These projects are bringing our electric system into the digital age and positioning CenterPoint Energy as one of the most advanced electric distribution utilities in the country.

In February 2011, we received a disappointing decision from the Public Utility Commission of Texas (PUCT) in a rate case we were required to file by an earlier rate settlement. Although the PUCT agreed to rates with a higher equity component (45 percent rather than 40 percent), this was substantially offset with a lower authorized return on equity of 10 percent. As a result of the PUCT's order, we expect our revenues to be essentially unchanged, but our operating income will be adversely affected by about $25 to $30 million annually. We are working with the PUCT and Texas legislature to explore a less expensive, more efficient regulatory process that would allow for more timely cost recovery.

We had the best year ever in our natural gas distribution business, with operating income of $231 million, compared to $204 million in 2009. Over the last several years, we have made significant progress in our efforts to decouple revenues from the volume of gas sold. The rates for approximately 50 percent of our natural gas customers are now decoupled, which helps us promote energy efficiency while reducing the financial impact on the company from declines in customer usage. These new rate designs, together with lower pension expenses and reduced bad debt expense, accounted for most of our improved financial results in 2010. We are very pleased with the direction of this business, and we continue to make strategic investments in automation that will enable us to provide more efficient service and improve customer satisfaction.

Our interstate pipelines business reported strong operating income of $270 million, compared to $256 million in 2009. We completed the fourth phase of our Carthage to Perryville pipeline, significantly expanding our capacity and doing so ahead of schedule and below budget. We also initiated improvements in the way we run our pipeline systems. Last year, we began upgrades to our control systems and made other technology investments to improve operational efficiency. We continued to increase the percentage of revenues that are secured under long-term, fee-based contracts, and we executed a 10-year contract extension with our natural gas distribution affiliate.

2010 was a very good year in our field services business. Operating income was $151 million, compared to $94 million in 2009. Although we realized a significant gain from the sale of a small, non-strategic gathering system, income from new investments in our Magnolia and Olympia gathering systems in the Haynesville Shale were the primary earnings drivers last year. We have gathering assets strategically placed near prolific shale plays in Arkansas, Louisiana, Oklahoma and Texas, and our field services business has become one of the leading providers of natural gas infrastructure services in the Haynesville Shale. Last year, we set company records for new capital investments in this business as well as the volume of natural gas gathered. As a result of our proven track record and our strong relationships with key natural gas producers, we remain very optimistic about the earnings potential of this business.

Our competitive natural gas sales and services business had a disappointing year. Operating income was $16 million, down from $21 million in 2009. We had a successful year in our retail division, which sells natural gas to commercial and industrial customers across 17 states. However, our wholesale division suffered due to tight locational and seasonal storage spreads. Looking forward, we will continue to focus on strengthening our retail base as the economy improves and natural gas demand increases. We will also work to optimize our wholesale assets when market conditions permit.

CREATING AN INTELLIGENT FUTURE, TODAY

We remain confident and optimistic about our company's future. Our investments in smart meter and intelligent grid technologies have positioned our electric distribution operations as an industry leader. These new systems will change the way our customers manage their energy use and how we manage the grid.

As we look ahead, we continue to believe that natural gas will play a vital role in our nation's energy strategy. Whether used for direct heating or electric generation, natural gas is plentiful, has the lowest carbon footprint of any fossil fuel, and the technologies needed to use it efficiently are available today. Our interstate pipelines, natural gas distribution, field services and competitive gas marketing segments are all well positioned to serve this growing demand.

As always, our employees remain the key to the successful operation of our company. We appreciate their ongoing commitment to serving our customers, communities and shareholders. Across the company, we are investing in technology, training and knowledge transfer to ensure our workforce is prepared for tomorrow.

We believe our disciplined, intelligent approach has positioned CenterPoint Energy to succeed now and for many years to come.

Thank you for your continued confidence, and we will keep striving to increase the value of your investment.

Sincerely,
Milton Carroll
Milton Carroll
Chairman

David M. McClanahan
David M. McClanahan
President and CEO

President and CEO Video

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Intelligent Resources

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Highlights

Our Vision
To be recognized as America's leading energy delivery company... and more.

Highlights

Defend My Dividend
Shareholders and employees alike lobbied to maintain the current dividend tax rate. An industry-wide campaign, supported by the Edison Electric Institute and American Gas Association, generated nearly 200,000 e-mails to 538 members of Congress.

Highlights

Core Values
Our values of integrity, accountability, initiative and respect reflect the basic ethical principles that guide our conduct every day.

Highlights

180,000 Hours
Last year, our employees volunteered nearly 180,000 hours and raised more than $2.9 million for non-profit organizations.


Our Company At A Glance

Electric Transmission & Distribution
Our electric transmission and distribution utility serves approximately 2.1 million metered customers in a 5,000-square-mile service territory in the Houston metropolitan area. Operating income was $567 million, consisting of $427 million from the electric utility and $140 million related to transition and system restoration bonds.

Our Company At A Glance

Natural Gas Distribution
Our natural gas distribution business serves approximately 3.3 million customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. Operating income was $231 million.

Our Company At A Glance

Interstate Pipelines
Our interstate natural gas pipelines business has approximately 8,200 miles of pipe and has the capacity to transport more than 9.5 billion cubic feet (Bcf) per day of natural gas. Operating income was $270 million, plus $19 million equity income from a jointly owned pipeline.

Our Company At A Glance

Field Services
Our natural gas gathering and processing business operates about 3,800 miles of gathering lines and gathered approximately 650 Bcf of natural gas in 2010. Operating income was $151 million, plus $10 million equity income from a natural gas gathering and processing joint venture.

Our Company At A Glance

Competitive Natural Gas Sales & Services
Our competitive natural gas sales and services business provides energy and risk management solutions to retail and wholesale customers east of the Rockies. Operating income was $16 million.


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