8-KOther Events

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Nov 15, 2006)

Filed November 15, 2006For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy, Inc. (CNP) on November 15, 2006, details a significant regulatory development concerning its natural gas subsidiary, CenterPoint Energy Resources Corp. (CERC). CERC's Minnesota Gas division had applied to the Minnesota Public Utilities Commission (MPUC) for approval to recover approximately $21 million in previously unrecovered natural gas purchase costs incurred between July 1, 2000, and June 30, 2004. This recovery was contingent on obtaining a waiver from MPUC rules. On November 9, 2006, the MPUC voted to deny this waiver. While a formal order is pending, this decision, if upheld, would require CERC to take a pre-tax charge to earnings of $21 million. CERC intends to appeal any ruling that prevents the recovery of these costs, which were incurred for gas delivered to customers who have not yet paid for them. Investors should monitor any further developments regarding the formal MPUC order and CERC's potential appeal.

Key Highlights

  • 1CenterPoint Energy's natural gas subsidiary, CERC, sought to recover $21 million in unrecovered purchased gas costs from July 2000 to June 2004.
  • 2The recovery required a waiver from the Minnesota Public Utilities Commission (MPUC) rules.
  • 3On November 9, 2006, the MPUC voted to deny the waiver application.
  • 4If the denial is formalized, CERC will likely incur a pre-tax charge of $21 million.
  • 5CERC delivered the gas to customers and has not been paid for these costs.
  • 6CERC plans to appeal any decision that prevents the recovery of these costs.

Frequently Asked Questions

The main issue is that the Minnesota Public Utilities Commission (MPUC) voted to deny a waiver to CenterPoint Energy Resources Corp. (CERC), CERC's natural gas subsidiary, which would have allowed CERC to recover approximately $21 million in natural gas costs incurred between July 1, 2000, and June 30, 2004.

If the MPUC's denial is formalized in its order, CERC will be required to take a pre-tax charge to earnings of $21 million. This would reduce the company's reported profit by that amount.

Yes, CenterPoint Energy Resources Corp. (CERC) expects to appeal any decision that precludes the recovery of these costs. They emphasize that the gas was delivered to customers and has not been paid for.

A formal order from the MPUC is not expected for several weeks. The company will then proceed with its appeal if the denial is upheld.