8-KOther EventsExhibits & Filings

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Dec 21, 2007)

Filed December 21, 2007For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) announced an important development regarding a regulatory matter impacting its transmission and distribution subsidiary, CenterPoint Energy Houston Electric, LLC (CEHE). On December 20, 2007, the Texas 3rd Court of Appeals issued a decision on the appeal of a true-up order from the Public Utility Commission of Texas (Commission). This decision reversed portions of a prior district court ruling, impacting CEHE's ability to recover certain costs related to its 2004 stranded cost "true-up" filing. The Court of Appeals decision generally favored CEHE in several key areas, reversing the Commission's disallowance of recovery for the $73 million interest component of excess mitigation credits paid to non-Reliant energy providers, and disallowing recovery of $146 million in excess deferred federal income taxes and investment tax credits. It also allowed recovery of $278 million in excess mitigation credits paid to Reliant Energy, Inc., with applicable interest. However, the decision remanded the Commission's ruling on tax normalization for further consideration, and reversed the district court's decision that would have allowed recovery of certain capacity auction true-up costs. CEHE and CenterPoint intend to seek further review from the Texas Supreme Court on the true-up order.

Key Highlights

  • 1Texas 3rd Court of Appeals issued a decision on CEHE's stranded cost true-up filing appeal.
  • 2The Court reversed prior rulings on the recovery of certain costs, generally in favor of CEHE.
  • 3CEHE is now allowed to recover the $73 million interest component of excess mitigation credits paid to non-Reliant providers.
  • 4CEHE is now allowed to recover $146 million in excess deferred federal income taxes and investment tax credits.
  • 5CEHE is allowed to recover $278 million in excess mitigation credits paid to Reliant Energy, Inc., with applicable interest.
  • 6The ruling on tax normalization was remanded for further consideration by the Commission.
  • 7CenterPoint Energy intends to seek further review of the true-up order from the Texas Supreme Court.

Frequently Asked Questions

The Court of Appeals decision could allow CEHE to recover significant amounts previously disallowed by the Commission, including $73 million in interest on excess mitigation credits, $146 million in excess deferred income taxes and investment tax credits, and $278 million in excess mitigation credits paid to Reliant Energy, Inc., all with applicable interest. This potential recovery could positively impact CEHE's financial position.

No, the decision is not final. The Court of Appeals decision remands certain issues, and importantly, CEHE and CenterPoint Energy intend to seek further review from the Texas Supreme Court. Therefore, the final outcome and any potential financial recovery are still subject to future legal proceedings.

The ruling on tax normalization has been remanded for further consideration by the Commission. Additionally, the Court reversed portions of a lower court decision that would have allowed recovery of certain capacity auction true-up costs, indicating this aspect remains a point of contention.

The key parties are CenterPoint Energy Houston Electric, LLC (CEHE), a subsidiary of CenterPoint Energy, Inc. (CNP), the Public Utility Commission of Texas (Commission), and formerly Reliant Energy, Inc., concerning the recovery of stranded costs and related credits.