8-KRegulation FD

CENTERPOINT ENERGY INC 8-K Report, Regulation FD Disclosure (Oct 11, 2019)

Filed October 11, 2019For Securities:CNP

Summary

This 8-K filing from CenterPoint Energy (CNP) on October 11, 2019, provides an update on the base rate application for its subsidiary, CenterPoint Energy Houston Electric, LLC ("Houston Electric"), with the Public Utility Commission of Texas ("PUCT") and various cities. The filing highlights the Administrative Law Judges' Proposal for Decision ("PFD"), which, if approved in its entirety with minor corrections, would result in a significant operating income reduction for Houston Electric compared to its initial request. Specifically, the PFD proposes reductions totaling $138 million from the company's requested operating income, primarily driven by adjustments to the rate of return on equity, equity ratio, rate base disallowances, operations and maintenance expenses, and weather normalization. Furthermore, the PFD indicates potential negative financial impacts beyond operating income, including an estimated pre-tax write-off of approximately $120 million due to rate base disallowances, and a one-time refund of capital recovery. The filing also notes the possibility of a separate proceeding to determine the customer impact of excess deferred income taxes on securitized assets. Investors are advised that the PUCT is expected to begin deliberations on November 14, 2019, with a final order anticipated by the end of 2019. The company will post further updates on its investor relations website.

Key Highlights

  • 1Houston Electric filed exceptions to the Administrative Law Judges' Proposal for Decision (PFD) on October 10, 2019.
  • 2The PFD, if adopted with corrections, would lead to an operating income reduction of $138 million from Houston Electric's initial request.
  • 3Key PFD proposed reductions include lower ROE and equity ratio ($62 million), rate base disallowances ($25 million), O&M expenses ($39 million), and weather normalization ($12 million).
  • 4An estimated pre-tax write-off of approximately $120 million is expected due to PFD-related rate base disallowances.
  • 5Houston Electric anticipates a one-time refund of capital recovery from transmission and distribution cost recovery mechanisms.
  • 6A separate PUCT proceeding may determine the disposition of $158 million in excess deferred income taxes on securitized assets.
  • 7PUCT deliberations are scheduled to begin on November 14, 2019, with a final order expected later in 2019.

Frequently Asked Questions

The PFD, if fully approved with corrections, is expected to result in a significant operating income reduction of $138 million for Houston Electric compared to its initial rate request. Additionally, a pre-tax write-off of approximately $120 million and a capital recovery refund are anticipated.

The PUCT is expected to begin deliberations on November 14, 2019, and a final order is anticipated later in 2019.

The main drivers for the proposed operating income reductions include adjustments to the rate of return on equity and equity ratio, rate base disallowances, reductions in operations and maintenance expenses, and weather normalization adjustments.

The PFD proposes several reductions that would benefit customers through lower rates. Furthermore, there may be a separate proceeding to determine if $158 million in excess deferred income taxes on securitized assets will be provided to customers.