8-KRegulation FD

CENTERPOINT ENERGY INC 8-K Report, Regulation FD Disclosure (Jul 21, 2005)

Filed July 21, 2005For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy, Inc. (CNP) reports on a significant development regarding its electric transmission and distribution subsidiary, CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). On July 14, 2005, the Public Utility Commission of Texas (PUC) issued an order allowing CenterPoint Houston to implement a competition transition charge (CTC) to recover approximately $570 million, plus interest at 11.075% annually, over 14 years. This amount is expected to grow by about $8 million per month from May 31, 2005, until the CTC is operational, and also includes the recovery of rate case expenses. The CTC is a mechanism to recover the portion of CenterPoint Houston's stranded costs not covered by potential transition bond issuances. The PUC had previously determined these stranded costs, including interest, to be approximately $2.3 billion as of August 31, 2004. However, the ability to issue transition bonds, initially authorized in March 2005, is currently stalled due to appeals, which has pushed the recovery reliance towards the CTC.

Key Highlights

  • 1CenterPoint Energy Houston Electric authorized to implement a Competition Transition Charge (CTC) to recover stranded costs.
  • 2The CTC is expected to collect approximately $570 million, plus interest, over 14 years.
  • 3Interest rate on the unrecovered balance is 11.075% annually.
  • 4An additional $24 million for rate case expenses will be recovered over three years.
  • 5PUC previously determined stranded costs, including interest, to be approximately $2.3 billion as of August 31, 2004.
  • 6Appeals of a prior financing order have delayed the issuance of transition bonds, making the CTC a primary recovery method.
  • 7The CTC cannot be implemented until the PUC resolves any rehearing motions or a 20-day rehearing period expires.

Frequently Asked Questions

The CTC is an authorized charge that CenterPoint Energy Houston Electric, LLC can implement to recover its 'stranded costs'. These are costs incurred by the company during the transition to a more competitive retail electric market in Texas, which are no longer recoverable through traditional rates. The Public Utility Commission of Texas (PUC) has approved this charge as part of the state's electric restructuring law.

The PUC order allows CenterPoint Houston to collect approximately $570 million, plus interest, over a 14-year period. This amount is in addition to approximately $24 million for rate case expenses over three years. Due to the accrual of interest at an annual rate of 11.075%, the total amount expected to be collected is growing by about $8 million per month from May 31, 2005, until the CTC is implemented.

CenterPoint Houston had been authorized to issue transition bonds to securitize a portion of its stranded costs. However, appeals have been filed against the financing order that authorized these bonds. As a result, the company cannot issue the bonds while these appeals are pending. This has shifted the reliance on recovering stranded costs towards the implementation of the CTC.

CenterPoint Houston cannot implement the CTC immediately. It must wait until the Public Utility Commission of Texas takes final action on any motions for rehearing that are filed, or until the 20-day period for requesting a rehearing has expired. The actual implementation date will depend on the PUC's resolution of these procedural steps.