8-KOther Events

CENTERPOINT ENERGY INC 8-K Report, Corporate Update (Sep 9, 2011)

Filed September 9, 2011For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy, Inc. (CNP) details a preliminary order issued by the Public Utility Commission of Texas (Texas Utility Commission) on September 6, 2011, concerning a remand proceeding for CenterPoint Energy Houston Electric, LLC (CenterPoint Houston). The order addresses legal and policy questions related to the recovery of certain costs, specifically focusing on the interest rate applied to unsecuritized true-up balances. The Texas Utility Commission determined that a weighted average of the utility's historical and marginal cost of debt should be used, starting January 1, 2002. This decision is expected to reduce the recoverable interest by at least $180 million through December 31, 2011, compared to CenterPoint Houston's previously sought rate. Following this order, CenterPoint Houston filed an amended application seeking to recover approximately $2.3 billion (before considering accumulated deferred federal income taxes). This revised amount includes interest calculated at 8.06% from January 1, 2002, as per the preliminary ruling. The filing also clarifies adjustments to the sale price of Texas Genco assets and an increase in claimed stranded costs by approximately $450 million. The final resolution and the exact recovery amount remain uncertain and subject to further commission action and potential appeals.

Key Highlights

  • 1Texas Utility Commission issued a preliminary order on September 6, 2011, regarding CenterPoint Houston's true-up proceedings.
  • 2The order mandates a specific interest rate calculation for unsecuritized true-up balances, potentially reducing recoverable interest by at least $180 million.
  • 3CenterPoint Houston filed an amended application seeking recovery of approximately $2.3 billion (before ADFIT).
  • 4The amended application incorporates the preliminary order's interest rate determination and adjusts the calculation of stranded costs.
  • 5Stranded cost recovery is expected to increase by approximately $450 million due to adjustments in the Texas Genco asset sale price.
  • 6Accumulated Deferred Federal Income Taxes (ADFIT) are estimated to reduce the recoverable amount by $200 million to $300 million.
  • 7The final resolution of these proceedings and the ultimate recovery amount are currently unknown and subject to future regulatory and legal actions.

Frequently Asked Questions

The preliminary order is expected to reduce the amount of recoverable interest on CenterPoint Houston's unsecuritized true-up balances by at least $180 million through December 31, 2011, by mandating a lower interest rate than previously sought by the company.

Following the preliminary order, CenterPoint Houston filed an amended application seeking to recover approximately $2.3 billion before accounting for accumulated deferred federal income taxes (ADFIT).

Stranded costs are calculated based on the difference between the net book value of generation assets at December 31, 2001, and the realized sales price. The filing indicates that approximately $450 million has been added to the stranded cost recovery amount due to adjustments in the sale price of Texas Genco assets, specifically by excluding certain nuclear assets acquired after December 31, 2001.

The final resolution and the exact recovery amount are still uncertain. They will depend on the outcome of further proceedings before the Texas Utility Commission and any subsequent appeals.