8-KOther Events

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Aug 20, 2009)

Filed August 20, 2009For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) announced through its subsidiary, CenterPoint Energy Houston Electric, LLC, that the Public Utility Commission of Texas (PUC) has approved a settlement to recover $663 million in system restoration costs related to Hurricane Ike. This approval is a significant development for the company, as it provides a clear path for recovering these substantial expenses. The recovery mechanism will involve issuing system restoration bonds for the distribution system costs and utilizing the existing transmission cost of service process for the transmission portion. Specifically, approximately $643 million allocated to the distribution system will be recovered through the issuance of bonds, with a separate proceeding underway to authorize this. A settlement agreement has been filed with the PUC to resolve this financing order proceeding, which, if approved, would allow for the issuance of $643 million in bonds plus associated carrying charges and transaction costs. Importantly, benefits from accumulated deferred federal income taxes (ADFIT) will be credited to customers over the life of the bonds rather than reducing the securitized amount. Investors should monitor the upcoming PUC meeting on August 26, 2009, for final approval of the financing order.

Key Highlights

  • 1PUC of Texas approved a settlement authorizing CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) to recover $663 million in system restoration costs from Hurricane Ike.
  • 2The recovery will include carrying costs on the authorized amount.
  • 3Approximately $643 million for the distribution system will be recovered through the issuance of system restoration bonds.
  • 4The transmission portion of the costs, around $20 million, will be recovered through the existing transmission cost of service process.
  • 5CenterPoint Houston filed a settlement agreement for a financing order to authorize the issuance of $643 million in bonds.
  • 6The bond issuance settlement includes provisions for carrying charges and limited up-front qualified transaction costs ($6.1 million).
  • 7Benefits from accumulated deferred federal income taxes (ADFIT) related to restoration costs will be credited to customers over the bond's life, not used to reduce the securitized amount.

Frequently Asked Questions

CenterPoint Energy Houston Electric is authorized to recover $663 million in system restoration costs associated with Hurricane Ike, plus carrying costs.

The majority of the costs, approximately $643 million related to the distribution system, will be recovered through the issuance of system restoration bonds. The remaining $20 million for the transmission system will be recovered through the existing transmission cost of service process.

The financing order proceeding is necessary to authorize CenterPoint Houston to issue the system restoration bonds totaling $643 million. A settlement agreement has been filed with the Texas Utility Commission to resolve this matter.

The benefits from ADFIT related to system restoration costs will not reduce the amount to be securitized. Instead, CenterPoint Houston will provide a credit to customers related to these benefits over the life of the bonds that are issued.