1042773--3/9/2007--CENTERPOINT_ENERGY_RESOURCES

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{debt, indebtedness, cash}

{gas, price, oil}

{condition, economic, financial}

{financial, litigation, operation}

{loss, insurance, financial}

{capital, credit, financial}

{regulation, change, law}

{cost, contract, operation}

{cost, regulation, environmental}

{tax, income, asset}

{customer, product, revenue}

{operation, natural, condition}

Our natural gas distribution and competitive natural gas sales and services businesses are subject to fluctuations in natural gas pricing levels, which could affect the ability of our suppliers and customers to meet their obligations or otherwise adversely affect our liquidity. If we were to fail to renegotiate a contract with one of our significant pipeline customers or if we renegotiate the contract on less favorable terms, there could be an adverse impact on our operations. A decline in our credit rating could result in us having to provide collateral in order to purchase gas. The revenues and results of operations of our interstate pipelines and field services businesses are subject to fluctuations in the supply of natural gas. Our revenues and results of operations are seasonal. The actual construction costs of proposed pipelines and related compression facilities may be significantly higher than our current estimates. The states in which we provide regulated local gas distribution may, either through legislation or rules, adopt restrictions similar to those under the 1935 Act regarding organization, financing and affiliate transactions that could have significant adverse effects on our ability to operate. Risk Factors Associated with Our Consolidated Financial Condition If we are unable to arrange future financings on acceptable terms, our ability to refinance existing indebtedness could be limited. The financial condition and liquidity of our parent company could affect our access to capital, our credit standing and our financial condition. We are an indirect wholly owned subsidiary of CenterPoint Energy. CenterPoint Energy can exercise substantial control over our dividend policy and business and operations and could do so in a manner that is adverse to our interests. The use of derivative contracts by us and our subsidiaries in the normal course of business could result in financial losses that negatively impact our results of operations and those of our subsidiaries. We derive a substantial portion of our operating income from subsidiaries through which we hold a substantial portion of our assets. Risks Common to Our Businesses and Other Risks We are subject to operational and financial risks and liabilities arising from environmental laws and regulations Our insurance coverage may not be sufficient. Insufficient insurance coverage and increased insurance costs could adversely impact our results of operations, financial condition and cash flows. We and CenterPoint Energy could incur liabilities associated with businesses and assets that we have transferred to others.

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1042773--3/9/2007--CENTERPOINT_ENERGY_RESOURCES_CORP