8-KOther Events

CENTERPOINT ENERGY INC 8-K Report (Mar 10, 2004)

Filed March 10, 2004For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) disclosed in an 8-K filing on March 10, 2004, a significant development in a fuel reconciliation proceeding before the Public Utility Commission of Texas concerning its subsidiary, CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). An Administrative Law Judge (ALJ) recommended disallowing approximately $87 million in fuel expenses incurred by CenterPoint Houston, which, with interest, totals about $117 million pre-tax or $76 million after-tax. While this is a recommended decision and not final, CNP is proactively establishing a $76 million after-tax reserve against its 2003 earnings. This reserve will materially reduce previously reported 2003 net income and diluted earnings per share.

Key Highlights

  • 1CenterPoint Energy's subsidiary, CenterPoint Houston, faces a recommended disallowance of $87 million in fuel expenses by a Texas Administrative Law Judge (ALJ).
  • 2The total recommended disallowance, including interest, amounts to approximately $117 million pre-tax or $76 million after-tax.
  • 3The ALJ's recommendation is not a final decision; the full Public Utility Commission of Texas will make a final determination in April.
  • 4CenterPoint Houston intends to oppose the proposed disallowance.
  • 5CNP is establishing a $76 million after-tax reserve for 2003 earnings to reflect the potential impact of this disallowance.
  • 6This reserve reduces previously announced 2003 fourth-quarter income from $149 million ($0.48/share) to $72 million ($0.23/share).
  • 7Overall 2003 income from continuing operations is reduced from $496 million ($1.62/share) to $420 million ($1.37/share) due to this reserve.

Frequently Asked Questions

The main issue is a recommended disallowance of $87 million in fuel expenses by an Administrative Law Judge for CenterPoint Energy Houston Electric, LLC, in a fuel reconciliation proceeding before the Public Utility Commission of Texas. The total recommended disallowance, including interest, is approximately $117 million pre-tax or $76 million after-tax.

No, the Administrative Law Judge's recommendation is not a final decision. The Public Utility Commission of Texas will make the final decision in April 2004, and they may accept or modify the ALJ's recommendation. CenterPoint Houston plans to oppose the disallowance.

CenterPoint Energy is establishing a $76 million after-tax reserve against its 2003 results to account for the potential disallowance. This reduces previously announced fourth-quarter 2003 income from $149 million ($0.48/share) to $72 million ($0.23/share), and overall 2003 income from continuing operations from $496 million ($1.62/share) to $420 million ($1.37/share).

If the disallowance is upheld by the full commission, CenterPoint Energy will have incurred a reduction in earnings by the after-tax amount of $76 million (approximately $117 million pre-tax). The company is proactively booking this potential impact through a reserve.