Before David begins, I'd like to mention that a replay of this call will be available through 6 p.m., Central Time, Thursday, August 9, 2012. To access the replay, please call (855) 859-2056 or (404) 537-3406 and enter the conference ID number 91655009. You can also listen to on online replay of the call through the website that I just mentioned. We will archive the call on CenterPoint Energy's website for at least one year.And with that, I will now turn the call over to David. David M. McClanahan Thank you, Carla. Good morning, ladies and gentlemen. Thank you for joining us today, and thank you for your interest in CenterPoint Energy. This quarter was a good one for the company. We had a solid quarter from both a financial and operating standpoint. This morning, we reported net income of $126 million or $0.29 per diluted share. This compares to net income of $119 million or $0.28 per diluted share for the same quarter of 2011. Operating income for the second quarter was $302 million compared to $303 million last year. Houston Electric had a solid quarter, despite milder weather, compared to 2011. We reported operating income of $153 million, which was the same as the second quarter of 2011. Operating income benefited from the growth of more than 43,000 customers since the second quarter of last year. This represents a growth rate of 2%, which we believe will continue for the remainder of the year. We also benefited from the ongoing recognition of deferred equity returns associated with the company's recovery of true-up proceeds, and an increase in miscellaneous revenues, primarily from grants of right-of-way easements. Offsetting these benefit was a $15 million impact from the rate changes implemented in September 2011, and higher net transmission cost. In May, Houston Electric substantially completed the deployment of our advanced metering system, having installed approximately 2.2 million smart meters. We completed this $660 million project, on time and on budget, and I'm very proud of the many employees who contributed to the success of this deployment.
Houston Electric is now focused on implementing our intelligent grid project, which will bring substantial automation and new functionality to our distribution system. This project, other system improvements and robust growth in our Houston service territory should drive capital expenditures of $500 million to $600 million per year, contributing to rate base growth of approximately 4% annually.Our natural gas distribution business reporting -- reported $9 million of operating income in the second quarter of 2012, which was $4 million less than last year, primarily due to the impacts of milder weather. We continue to focus on productivity gains and operating efficiencies to offset the impact of extremely mild weather this year. Annual rate adjustments in a number of our jurisdictions continue to help us recovery new investments, as well as to offset reductions in usage, without the necessity of a major rate proceeding. This significantly reduces the amount of regulatory lag which we would typically experience. We also continue to be focused on system reliability, due to the replacement of infrastructure, as well as upgrading our systems to enhance service to our customers. These investments, together with normal load growth and system maintenance, are expected to require capital expenditures of $300 million to $400 million annually and produce rate-based growth of approximately 6% a year. Now let me turn to our midstream businesses. Our interstate pipelines unit recorded operating income of $52 million compared to $60 million for the same quarter of 2011. The decline was primarily the result of an expired backhaul contract and the associated loss of compressor efficiency. We continue to pursue opportunities to serve customers on or near our pipelines, with special focus on power generation customers and producers in Western Oklahoma looking for access to interstate markets. Read the rest of this transcript for free on seekingalpha.com