0001130310 cnp:HoustonElectricMember cnp:OperationAndMaintenanceExpenseMember cnp:CenterpointEnergyMember 2019-01-01 2019-03-31
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
For the quarterly period ended March 31, 2020
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM __________________ TO __________________


Commission file number 1-31447

CenterPoint Energy, Inc.
(Exact name of registrant as specified in its charter)
Texas74-0694415
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
1111 Louisiana
Houston Texas 77002(713) 207-1111Texas77002
(Address and zip code of principal executive offices)Principal Executive Offices)
(Registrant’s telephone number, including area code)Zip Code)

(713) 207-1111
Registrant's telephone number, including area code

Commission file number 1-3187
CenterPoint Energy Houston Electric, LLC
(Exact name of registrant as specified in its charter)
Texas22-3865106
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1111 LouisianaHoustonTexas77002
(Address of Principal Executive Offices)(Zip Code)
(713) 207-1111
Registrant's telephone number, including area code

Commission file number 1-13265
CenterPoint Energy Resources Corp.
(Exact name of registrant as specified in its charter)
Delaware76-0511406
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1111 LouisianaHoustonTexas77002
(Address of Principal Executive Offices)(Zip Code)
(713) 207-1111
Registrant's telephone number, including area code



Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
CenterPoint Energy, Inc.Common Stock, $0.01 par valueCNPThe New York Stock Exchange
Chicago Stock Exchange, Inc.
CenterPoint Energy, Inc.Depositary Shares for 1/20 of 7.00% Series B Mandatory Convertible Preferred Stock, $0.01 par valueCNP/PBThe New York Stock Exchange
CenterPoint Energy Houston Electric, LLC9.15% First Mortgage Bonds due 2021n/aThe New York Stock Exchange
CenterPoint Energy Houston Electric, LLC6.95% General Mortgage Bonds due 2033n/aThe New York Stock Exchange
CenterPoint Energy Resources Corp.6.625% Senior Notes due 2037n/aThe New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
CenterPoint Energy, Inc.YesþNoo
CenterPoint Energy Houston Electric, LLCYesþNoo
CenterPoint Energy Resources Corp.YesþNoo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
CenterPoint Energy, Inc.YesþNoo
CenterPoint Energy Houston Electric, LLCYesþNoo
CenterPoint Energy Resources Corp.YesþNoo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
      Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
 Large accelerated filer(Do not check if a smallerAccelerated filerNon-accelerated filerSmaller reporting company)companyEmerging growth company
CenterPoint Energy, Inc.þoo☐☐
CenterPoint Energy Houston Electric, LLCooþ☐☐
CenterPoint Energy Resources Corp.ooþ☐☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ
As
CenterPoint Energy, Inc.Yes☐Noþ
CenterPoint Energy Houston Electric, LLCYes☐Noþ
CenterPoint Energy Resources Corp.Yes☐Noþ

Indicate the number of October 26, 2017, CenterPoint Energy, Inc. had 431,033,509 shares outstanding of each of the issuers’ classes of common stock outstanding, excluding 166 shares held as treasury stock.of May 1, 2020:
CenterPoint Energy, Inc.502,656,951shares of common stock outstanding, excluding 166 shares held as treasury stock
CenterPoint Energy Houston Electric, LLC1,000common shares outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc.
CenterPoint Energy Resources Corp.1,000shares of common stock outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc.

CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

 


CENTERPOINT ENERGY, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2017


TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION 
Item 1. 
Financial Statements
1
  
CondensedCenterPoint Energy, Inc. Financial Statements of Consolidated Income (unaudited)
Three and Nine Months Ended September 30, 2017 and 2016 (unaudited)
1
  
CenterPoint Energy Houston Electric, LLC Financial Statements (unaudited)
7
  
CondensedCenterPoint Energy Resources Corp. Financial Statements of Consolidated Comprehensive Income (unaudited)
Three and Nine Months Ended September 30, 2017 and 2016 (unaudited)
213
  
Condensed Consolidated Balance Sheets
September 30, 2017 and December 31, 2016 (unaudited)
3
Condensed Statements of Consolidated Cash Flows
Nine Months Ended September 30, 2017 and 2016 (unaudited)
5
Combined Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)
619
  
(1) Background and Basis of Presentation
19
  
(2) New Accounting Pronouncements
21
(3) Held for Sale and Discontinued Operations
21
(4) Revenue Recognition
25
(5) Employee Benefit Plans
28
(6) Regulatory Accounting
29
(7) Derivative Instruments
31
(8) Fair Value Measurements
36
(9) Unconsolidated Affiliates
40
(10) Goodwill and Other Intangibles
43
(11) Indexed Debt Securities (ZENS) and Securities Related to ZENS
45
(12) Short-term Borrowings and Long-term Debt
45
(13) Income Taxes
47
(14) Commitments and Contingencies
48
(15) Earnings Per Share
52
(16) Reportable Segments
53
(17) Supplemental Disclosure of Cash Flow Information
56
(18) Related Party Transactions
56
(19) Equity
57
(20) Subsequent Events
59
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2861
  
Recent Events
61
  
Consolidated Results of Operations
63
Results of Operations by Reportable Segment
67
Certain Factors Affecting Future Earnings
77
Liquidity and Capital Resources
78
Item 3. 
Quantitative and Qualitative Disclosures about Market Risk
4393
Item 4. 
Controls and Procedures
4394
    
PART II. OTHER INFORMATION 
Item 1. 
Legal Proceedings
4495
Item 1A. 
Risk Factors
4495
Item 5.
Other Information
44
Item 6. 
Exhibits
4497
Signatures
101




i



GLOSSARY
AEMACE AtmosAffordable Clean Energy Marketing, LLC, previously a wholly-owned subsidiary of Atmos Energy Holdings, Inc., a wholly-owned subsidiary of Atmos Energy Corporation
AMAsAMA Asset Management AgreementsAgreement
AMS Advanced Metering System
APSC Arkansas Public Service Commission
ARAMAverage rate assumption method
AROAsset retirement obligation
ARPAlternative revenue program
ASCAccounting Standards Codification
ASU Accounting Standards Update
AT&T Common AT&T Inc. common stock
AT&T CommonAthena Energy Services AT&T common stockAthena Energy Services Buyer, LLC, a Delaware limited liability company and subsidiary of Energy Capital Partners, LLC
Bailey to Jones Creek ProjectA transmission project in the greater Freeport, Texas area, which includes enhancements to two existing substations and the construction of a new 345 kV double-circuit line to be located in the counties of Brazoria, Matagorda and Wharton
Bcf Billion cubic feet
BDABilling Determinant Adjustment, which is a revenue stabilization mechanism used to adjust revenues impacted by declines in natural gas consumption which occurred after the most recent rate case
Bond Companies TransitionBond Company II, Bond Company III, Bond Company IV and Restoration Bond Company, each a wholly-owned, bankruptcy remote entity formed solely for the purpose of purchasing and owning transition or system restoration bond companiesproperty through the issuance of Securitization Bonds
Brazos Valley ConnectionBond Company II A portionCenterPoint Energy Transition Bond Company II, LLC, a wholly-owned subsidiary of the Houston region transmission project betweenElectric
Bond Company IIICenterPoint Energy Transition Bond Company III, LLC, a wholly-owned subsidiary of Houston Electric’s Zenith substationElectric
Bond Company IVCenterPoint Energy Transition Bond Company IV, LLC, a wholly-owned subsidiary of Houston Electric
CARES ActCoronavirus Aid, Relief, and the Gibbons Creek substation owned by the Texas Municipal Power AgencyEconomic Security Act
CCRCoal Combustion Residuals
CECAClean Energy Cost Adjustment
CECLCurrent expected credit losses
CEIPCenterPoint Energy Intrastate Pipelines, LLC, a wholly-owned subsidiary of CERC Corp.
CenterPoint Energy CenterPoint Energy, Inc., and its subsidiaries
CERC Corp.CenterPoint Energy Resources Corp.
CERC CERC Corp., together with its subsidiaries
CERC Corp.CenterPoint Energy Resources Corp.
CES CenterPoint Energy Services, Inc., a wholly-owned subsidiary of CERC Corp.
Charter Common Charter Communications, Inc. common stock
Charter mergerMerger of Charter Communications, Inc. and Time Warner Cable Inc.
CIP Conservation Improvement Program
ContinuumCME The retail energy services business of Continuum RetailChicago Mercantile Exchange
CNGCompressed Natural Gas
CNP MidstreamCenterPoint Energy Services, LLC, including itsMidstream, Inc., a wholly-owned subsidiary Lakeshoreof CenterPoint Energy Services, LLC
CODMChief Operating Decision Maker, the Registrants’ Chief Executive Officer
Common StockCenterPoint Energy, Inc. common stock, par value $0.01 per share
COVID-19Novel coronavirus disease 2019 and related global outbreak that was subsequently declared a pandemic by the natural gas wholesale assets previously owned by Continuum Energy Services, LLCWorld Health Organization
COVID-19 ERP
COVID-19 Electricity Relief Program

CPPClean Power Plan

ii

GLOSSARY
CSIACompliance and System Improvement Adjustment
DCRF Distribution Cost Recovery Factor
DRRDistribution Replacement Rider
DSMADemand Side Management Adjustment
EBITDAEarnings before income taxes, depreciation and amortization
EDITExcess deferred income taxes
EECR Energy Efficiency Cost Recovery
EECRF Energy Efficiency Cost Recovery Factor
EEFCEnergy Efficiency Funding Component
EEFREnergy Efficiency Funding Rider
ELGEffluent Limitation Guidelines
Enable Enable Midstream Partners, LP
Enable GPEnable GP, LLC, Enable’s general partner
Enable Series A Preferred UnitsEnable’s 10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in Enable
Energy ServicesOffers competitive variable and fixed-priced physical natural gas supplies primarily to commercial and industrial customers and electric and natural gas utilities through CES and its subsidiary, CEIP
Energy Services Disposal GroupSubstantially all of the businesses within CenterPoint Energy’s and CERC’s Energy Services reporting unit that will be sold under the Equity Purchase Agreement
EPAEnvironmental Protection Agency
Equity Purchase AgreementEquity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Athena Energy Services
ERCOT Electric Reliability Council of Texas
FASBESG Financial Accounting Standards BoardEnergy Systems Group, LLC, a wholly-owned subsidiary of Vectren
FERCFederal Energy Regulatory Commission
Fitch Fitch, Inc.
Form 10-Q Quarterly Report on Form 10-Q
FRP Formula Rate Plan
Gas Daily Platt’sPlatts gas daily indices
GenOnGHG GenOn Energy, Inc.Greenhouse gases
GRIP Gas Reliability Infrastructure Program
GWh Gigawatt-hours
Houston Electric CenterPoint Energy Houston Electric, LLC and its subsidiaries
IBEWIDEM International BrotherhoodIndiana Department of Electrical WorkersEnvironmental Management
Indiana ElectricOperations of SIGECO’s electric transmission and distribution services, and includes its power generating and wholesale power operations
Indiana GasIndiana Gas Company, Inc., a wholly-owned subsidiary of Vectren
Indiana NorthGas operations of Indiana Gas
Indiana SouthGas operations of SIGECO
Indiana UtilitiesThe combination of Indiana Electric, Indiana North and Indiana South
Infrastructure ServicesProvides underground pipeline construction and repair services through Vectren’s wholly-owned subsidiaries, Miller Pipeline, LLC and Minnesota Limited, LLC
Infrastructure Services Disposal GroupBusinesses within the Infrastructure Services reporting unit that were sold under the Securities Purchase Agreement
Interim Condensed Financial Statements CondensedUnaudited condensed consolidated interim financial statements and combined notes
IRPIntegrated Resource Plan
IRS Internal Revenue Service

iii

GLOSSARY
IURCIndiana Utility Regulatory Commission
kVKilovolt
KWKilowatts
LIBOR London Interbank Offered Rate
LPSCLNG Louisiana Public Service CommissionLiquefied Natural Gas
MGPsMergerThe merger of Merger Sub with and into Vectren on the terms and subject to the conditions set forth in the Merger Agreement, with Vectren continuing as the surviving corporation and as a wholly-owned subsidiary of CenterPoint Energy, Inc.
Merger AgreementAgreement and Plan of Merger, dated as of April 21, 2018, among CenterPoint Energy, Vectren and Merger Sub
Merger SubPacer Merger Sub, Inc., an Indiana corporation and wholly-owned subsidiary of CenterPoint Energy
MESCenterPoint Energy Mobile Energy Solutions, Inc., a wholly-owned subsidiary of CERC Corp.
MGP Manufactured gas plantsplant
MLP Master Limited Partnership
MMBtu One million British thermal units

ii

GLOSSARY (cont.)
Moody’s Moody’s Investors Service, Inc.
MPSC Mississippi Public Service Commission
MPUC Minnesota Public Utilities Commission
NECAMRT National Electrical Contractors AssociationEnable Mississippi River Transmission, LLC
MWMegawatts
NGD Natural gas distribution business
NGLs Natural gas liquids
NOLsNet operating losses
NRG NRG Energy, Inc.
NYMEX New York Mercantile Exchange
OCC Oklahoma Corporation Commission
OGE OGE Energy Corp.
PBRC Performance Based Rate Change
PHMSAPowerTeam Services U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety AdministrationPowerTeam Services, LLC, a Delaware limited liability company
PRPs Potentially responsible parties
PUCOPublic Utilities Commission of Ohio
PUCT Public Utility Commission of Texas
Railroad Commission Railroad Commission of Texas
RCRAResource Conservation and Recovery Act of 1976
RegistrantsCenterPoint Energy, Houston Electric and CERC, collectively
Reliant Energy Reliant Energy, Incorporated
REP Retail electric provider
Restoration Bond CompanyCenterPoint Energy Restoration Bond Company, LLC, a wholly-owned subsidiary of Houston Electric
ROE Return on equity
ROURight of use
RRA Rate Regulation Adjustment
RRIReliant Resources, Inc.
RSP Rate Stabilization Plan
SEC Securities and Exchange Commission
Securities Purchase AgreementSecurities Purchase Agreement, dated as of February 3, 2020, by and among VUSI, PowerTeam Services, and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren
Securitization Bonds Transition and system restoration bonds

iv

GLOSSARY
Series A Preferred UnitsStock 10%CenterPoint Energy’s Series A Fixed-to-Floating Non-CumulativeRate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in EnableStock, par value $0.01 per share, with a liquidation preference of $1,000 per share
Series B Preferred StockCenterPoint Energy’s 7.00% Series B Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share
Series C Preferred StockCenterPoint Energy’s Series C Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share
SIGECOSouthern Indiana Gas and Electric Company, a wholly-owned subsidiary of Vectren
S&P Standard & Poor’sS&P Global Ratings Services, a division of The McGraw-Hill Companies
SRCSales Reconciliation Component
TBD To be determined
TCEH Corp. Formerly Texas Competitive Electric Holdings Company LLC, predecessor to Vistra Energy Corp. whose major subsidiaries include Luminant and TXU Energy
TCJATax reform legislation informally called the Tax Cuts and Jobs Act of 2017
TCOS Transmission Cost of Service
TCRFTransmission Cost Recovery Factor
TDSICTransmission, Distribution and Storage System Improvement Charge
TDU Transmission and distribution utility
Time CommonTSCR Time Inc. common stockTax Savings Credit Rider
Transition AgreementsUtility Holding Services Agreement, Employee Transition Agreement, Transitional Seconding Agreement and other agreements entered into in connection with the formationUtility Holding, LLC, a wholly-owned subsidiary of EnableCenterPoint Energy
TWVCC Time Warner Inc.Vectren Capital Corp., a wholly-owned subsidiary of Vectren
TW CommonVectren TW common stockVectren Corporation, a wholly-owned subsidiary of CenterPoint Energy as of February 1, 2019
TW SecuritiesVEDO Charter Common, Time Common and TW CommonVectren Energy Delivery of Ohio, Inc., a wholly-owned subsidiary of Vectren
VIE Variable interest entity
Vistra Energy Corp. Texas-based energy company focused on the competitive energy and power generation markets
VRPVoluntary Remediation Program
VUHIVectren Utility Holdings, Inc., a wholly-owned subsidiary of Vectren
ZENS 2.0% Zero-Premium Exchangeable Subordinated Notes due 2029
2016ZENS-Related SecuritiesAs of both March 31, 2020 and December 31, 2019, consisted of AT&T Common and Charter Common
2019 Form 10-K Annual Report on Form 10-K for the fiscal year ended December 31, 20162019



iiiv


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


From time to time wethe Registrants make statements concerning ourtheir expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will” or other similar words.


WeThe Registrants have based ourtheir forward-looking statements on our management’s beliefs and assumptions based on information reasonably available to our management at the time the statements are made. WeThe Registrants caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, wethe Registrants cannot assure you that actual results will not differ materially from those expressed or implied by ourthe Registrants’ forward-looking statements. In this Form 10-Q, unless context requires otherwise, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries, including Houston Electric, CERC and Vectren.


The following are some of the factors that could cause actual results to differ from those expressed or implied by ourthe Registrants’ forward-looking statements:statements and apply to all Registrants unless otherwise indicated:


the performance of Enable, the amount of cash distributions we receiveCenterPoint Energy receives from Enable, Enable’s ability to redeem the Enable Series A Preferred Units in certain circumstances and the value of ourCenterPoint Energy’s interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as:


◦competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable;


◦the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines;


◦economic effects of the recent actions of Saudi Arabia, Russia and other oil-producing countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices;

◦the demand for crude oil, natural gas, NGLs and transportation and storage services;


◦environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing;


◦recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable;


◦the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments;

◦changes in tax status; and


◦access to debt and equity capital; and


◦the availability and prices of raw materials and services for current and future construction projects;

the COVID-19 pandemic and its effect on our and Enable’s operations, business and financial condition, our industries and the communities we serve, U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto;

volatility and a substantial recent decline in the markets for oil and natural gas as a result of the actions of crude-oil exporting nations and the Organization of Petroleum Exporting Countries and reduced worldwide consumption due to the COVID-19 pandemic;


vi

the expected benefits of the Merger and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the Merger, as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities;

the recording of impairment charges, including any impairment or loss associated with the sale of the Infrastructure Services and Energy Services Disposal Groups;

industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns;


timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment;


future economic conditions in regional and national markets and their effect on sales, prices and costs;


weather variations and other natural phenomena, including the impact of severe weather events on operations and capital;


state and federal legislative and regulatory actions or developments affecting various aspects of our businesses (including the businesses of Enable), including, among others, energy deregulation or re-regulation, pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by our regulated businesses;


tax reformlegislation, including the effects of the CARES Act and legislation;of the TCJA (which includes any potential changes to interest deductibility) and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of EDIT and our rates;


ourCenterPoint Energy’s and CERC’s ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms;


•
the timing and extent of changes in commodity prices, particularly natural gas and coal, and the effects of geographic and seasonal commodity price differentials on CERC and Enable;

the ability of CenterPoint Energy’s and CERC’s non-utility business operating in the Energy Services Disposal Group to effectively optimize opportunities related to natural gas price volatility and the effects of geographic and seasonal commodity price differentials;
storage activities, including weather-related impacts;


actions by credit rating agencies, including any potential downgrades to credit ratings;

problems with regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates;



the availability and prices of raw materials and services and changes in labor for current and future construction projects;
iv


local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change;change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact the continued operation, and/or cost recovery of generation plant costs and related assets;


the impact of unplanned facility outages;outages or other closures;


any direct or indirect effects on our or Enable’s facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt our businesses or the businesses of third parties, or other catastrophic events such as fires, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences;


our ability to invest planned capital and the timely recovery of our investment in capital;investments, including those related to Indiana Electric’s anticipated IRP;


our ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;

vii


our ability to control operation and maintenance costs;

actions by credit rating agencies;


the sufficiency of our insurance coverage, including availability, cost, coverage and terms;terms and ability to recover claims;


the investment performance of ourCenterPoint Energy’s pension and postretirement benefit plans;


changes in interest rates and their impact on costs of borrowing and the valuation of CenterPoint Energy’s pension benefit obligation;

commercial bank and financial market conditions, our access to capital, the cost of such capital, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets;


changes in interest rates or rates of inflation;


inability of various counterparties to meet their obligations to us;


non-payment for our services due to financial distress of our customers;


the extent and effectiveness of our and Enable’s risk management and hedging activities, including, but not limited to our financial and weather hedges and weather hedges;commodity risk management activities;


timely and appropriate regulatory actions, which include actions allowing securitization, or other recovery of costs associated with Hurricane Harvey andfor any future hurricanes or natural disasters;disasters or other recovery of costs;

our or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses (including a reduction of our interests in Enable, whether through our election to sell the common units we own in the public equity markets or otherwise, subject to certain limitations), which we cannot assure you will be completed or will have the anticipated benefits to us or Enable;

acquisition and merger activities involving us or our competitors;

our or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations;

the ability of GenOn (formerly known as RRI Energy, Inc., Reliant Energy and RRI), a wholly-owned subsidiary of NRG, and its subsidiaries, currently the subject of bankruptcy proceedings, to satisfy their obligations to us, including indemnity obligations;

the outcome of litigation;


the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric;

CenterPoint Energy’s or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the proposed sale of CES, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable;

acquisition and merger activities involving us or our competitors, including the ability to successfully complete merger, acquisition and divestiture plans;

our subsidiaries;or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations;


the outcome of litigation;

the development of new opportunities and the performance of projects undertaken by ESG, including, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties and guarantees;

changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation;


the impact of alternate energy sources on the demand for natural gas;

the timing and outcome of any audits, disputes and other proceedings related to taxes;


the effective tax rates;


the transition to a replacement for the LIBOR benchmark interest rate;

the effect of changes in and application of accounting standards and pronouncements; and


•
other factors discussed in “Risk Factors” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K, which are incorporated herein by reference, in Item 1A of Part II of this Form 10-Q and other reports the Registrants file from time to time with the SEC.

other factors we discuss in “Risk Factors” in Item 1A of Part I of our 2016 Form 10-K, which is incorporated herein by reference, and other reports we file from time to time with the SEC.
viii



You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and wethe Registrants undertake no obligation to update or revise any forward-looking statements. Investors should note that the Registrants announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, the Registrants may use the Investors section of CenterPoint Energy’s website (www.centerpointenergy.com) to communicate with investors about the Registrants. It is possible that the financial and other information posted there could be deemed to be material information. The information on CenterPoint Energy’s website is not part of this combined Form 10-Q.


vix
Table of Contents


PART I. FINANCIAL INFORMATION


Item 1.     FINANCIAL STATEMENTS


CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(In Millions, Except Per Share Amounts)
(Unaudited)


 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
        
Revenues:       
Utility revenues$1,233
 $1,278
 $4,001
 $4,003
Non-utility revenues865
 611
 2,975
 1,444
Total2,098
 1,889
 6,976
 5,447
        
Expenses:       
Utility natural gas106
 99
 706
 663
Non-utility natural gas832
 584
 2,843
 1,368
Operation and maintenance519
 505
 1,614
 1,539
Depreciation and amortization269
 324
 749
 873
Taxes other than income taxes93
 93
 288
 288
Total1,819
 1,605
 6,200
 4,731
Operating Income279
 284
 776
 716
        
Other Income (Expense):       
Gain on marketable securities37
 77
 104
 187
Loss on indexed debt securities(36) (72) (59) (258)
Interest and other finance charges(80) (83) (235) (256)
Interest on securitization bonds(18) (23) (58) (70)
Equity in earnings of unconsolidated affiliate, net68
 73
 199
 164
Other, net17
 20
 50
 41
Total(12) (8) 1
 (192)
        
Income Before Income Taxes267
 276
 777
 524
Income tax expense98
 97
 281
 193
Net Income$169
 $179
 $496
 $331
        
Basic Earnings Per Share$0.39
 $0.42
 $1.15
 $0.77
        
Diluted Earnings Per Share$0.39
 $0.41
 $1.14
 $0.76
        
Dividends Declared Per Share$0.2675
 $0.2575
 $0.8025
 $0.7725
        
Weighted Average Shares Outstanding, Basic431
 431
 431
 431
        
Weighted Average Shares Outstanding, Diluted434
 433
 434
 433
  Three Months Ended
  March 31,
  2020 2019
   
Revenues:    
Utility revenues $2,073
 $2,171
Non-utility revenues 94
 58
Total 2,167
 2,229
Expenses:    
Utility natural gas, fuel and purchased power 609
 797
Non-utility cost of revenues, including natural gas 64
 47
Operation and maintenance 674
 748
Depreciation and amortization 282
 300
Taxes other than income taxes 136
 126
Goodwill Impairment 185
 —
Total 1,950
 2,018
Operating Income 217
 211
Other Income (Expense):    
Gain (loss) on marketable securities (144) 83
Gain (loss) on indexed debt securities 135
 (86)
Interest expense and other finance charges (139) (121)
Interest expense on Securitization Bonds (8) (12)
Equity in earnings (loss) of unconsolidated affiliates, net (1,475) 62
Interest income —
 12
Interest income from Securitization Bonds 1
 2
Other income, net 13
 6
Total (1,617) (54)
Income (Loss) from Continuing Operations Before Income Taxes (1,400) 157
Income tax expense (benefit) (347) 14
Income (Loss) from Continuing Operations (1,053) 143
Income (loss) from discontinued operations (net of tax expense (benefit) of ($17) and $8, respectively) (146) 26
Net Income (Loss) (1,199) 169
Preferred stock dividend requirement 29
 29
Income (Loss) Available to Common Shareholders $(1,228) $140
     
Basic earnings (loss) per common share - continuing operations $(2.15) $0.23
Basic earnings (loss) per common share - discontinued operations (0.29) 0.05
Basic Earnings (Loss) Per Common Share (2.44) 0.28
Diluted earnings (loss) per common share - continuing operations $(2.15) $0.23
Diluted earnings (loss) per common share - discontinued operations (0.29) 0.05
Diluted Earnings (Loss) Per Common Share $(2.44) $0.28
     
Weighted Average Common Shares Outstanding, Basic 502
 502
Weighted Average Common Shares Outstanding, Diluted 502
 504


See Combined Notes to InterimUnaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(In Millions)
(Unaudited)


 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net income$169
 $179
 $496
 $331
Other comprehensive income:       
Adjustment related to pension and other postretirement plans (net of tax of $2, $2, $4 and $1)—
 1
 2
 1
Net deferred gain (loss) from cash flow hedges (net of tax of $2, $1, $2 and $-0-)(2) 2
 (3) 1
Total(2) 3
 (1) 2
Comprehensive income$167
 $182
 $495
 $333
  Three Months Ended
  March 31,
  2020 2019
 (in millions)
Net income (loss) $(1,199) $169
Other comprehensive income (loss):    
Adjustment to pension and other postretirement plans (net of tax of $1 and $1) 1
 1
Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-) —
 (1)
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0- and $-0-) —
 1
Other comprehensive loss from unconsolidated affiliates (net of tax of $-0- and $-0-) (3) —
Total (2) 1
Comprehensive income (loss) (1,201) 170
  Preferred stock dividend requirement 29
 29
Comprehensive income (loss) available to common shareholders $(1,230) $141


See Combined Notes to InterimUnaudited Condensed Consolidated Financial Statements




CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions)
(Unaudited)


ASSETS


March 31,
2020		 December 31,
2019
September 30,
2017		 December 31,
2016		(in millions)
Current Assets:      
Cash and cash equivalents ($200 and $340 related to VIEs, respectively)$201
 $341
Cash and cash equivalents ($190 and $216 related to VIEs, respectively)$220
 $241
Investment in marketable securities1,057
 953
678
 822
Accounts receivable ($65 and $52 related to VIEs, respectively), less bad debt reserve of $16 and $15, respectively783
 740
Accrued unbilled revenues213
 335
Accounts receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $30 and $21, respectively711
 702
Accrued unbilled revenues, less bad debt reserve of $3 and $-0-, respectively320
 469
Natural gas inventory252
 131
97
 209
Materials and supplies190
 181
278
 263
Non-trading derivative assets64
 51
Taxes receivable—
 30
93
 106
Prepaid expenses and other current assets ($31 and $40 related to VIEs, respectively)175
 161
Current assets held for sale1,647
 1,002
Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively)120
 123
Total current assets2,935
 2,923
4,164
 3,937
   
Property, Plant and Equipment:      
Property, plant and equipment18,581
 17,831
30,830
 30,324
Less: accumulated depreciation and amortization5,881
 5,524
9,852
 9,700
Property, plant and equipment, net12,700
 12,307
20,978
 20,624
   
Other Assets:      
Goodwill867
 862
4,697
 4,882
Regulatory assets ($1,690 and $1,919 related to VIEs, respectively)2,539
 2,677
Non-trading derivative assets56
 19
Investment in unconsolidated affiliate2,481
 2,505
Regulatory assets ($758 and $788 related to VIEs, respectively)2,120
 2,117
Investment in unconsolidated affiliates850
 2,408
Preferred units – unconsolidated affiliate363
 363
363
 363
Non-current assets held for sale—
 962
Other194
 173
223
 236
Total other assets6,500
 6,599
8,253
 10,968
   
Total Assets$22,135
 $21,829
$33,395
 $35,529


See Combined Notes to InterimUnaudited Condensed Consolidated Financial Statements



CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(In Millions, except share amounts)
(Unaudited)


LIABILITIES AND SHAREHOLDERS’ EQUITY


March 31,
2020		 December 31,
2019
September 30,
2017		 December 31,
2016		(in millions, except share amounts)
Current Liabilities:      
Short-term borrowings$48
 $35
Current portion of VIE securitization bonds long-term debt432
 411
Current portion of VIE Securitization Bonds long-term debt$204
 $231
Indexed debt, net120
 114
18
 19
Current portion of other long-term debt550
 500
1,204
 618
Indexed debt securities derivative776
 717
758
 893
Accounts payable657
 657
739
 884
Taxes accrued199
 172
177
 239
Interest accrued83
 108
126
 158
Customer deposits124
 124
Non-trading derivative liabilities17
 41
9
 7
Current liabilities held for sale383
 455
Other339
 325
300
 350
Total current liabilities3,221
 3,080
4,042
 3,978
   
Other Liabilities: 
  
 
  
Deferred income taxes, net5,458
 5,263
3,562
 3,928
Non-trading derivative liabilities10
 5
14
 15
Benefit obligations886
 913
746
 750
Regulatory liabilities1,127
 1,298
3,480
 3,474
Non-current liabilities held for sale—
 43
Other284
 278
751
 738
Total other liabilities7,765
 7,757
8,553
 8,948
   
Long-term Debt: 
  
 
  
VIE securitization bonds, net1,500
 1,867
VIE Securitization Bonds, net710
 746
Other long-term debt, net6,031
 5,665
13,120
 13,498
Total long-term debt, net7,531
 7,532
13,830
 14,244
   
Commitments and Contingencies (Note 13)

 

   
Commitments and Contingencies (Note 14)


 


Shareholders’ Equity: 
  
 
  
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, none issued or outstanding—
 —
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 431,030,884 shares and 430,682,504 shares outstanding, respectively4
 4
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized


 


Series A Preferred Stock, $0.01 par value, $800 aggregate liquidation preference, 800,000 shares outstanding790
 790
Series B Preferred Stock, $0.01 par value, $978 aggregate liquidation preference, 977,500 shares outstanding950
 950
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 502,647,495 shares and 502,242,061 shares outstanding, respectively5
 5
Additional paid-in capital4,204
 4,195
6,086
 6,080
Accumulated deficit(518) (668)
Retained earnings (accumulated deficit)(761) 632
Accumulated other comprehensive loss(72) (71)(100) (98)
Total shareholders’ equity3,618
 3,460
6,970
 8,359
   
Total Liabilities and Shareholders’ Equity$22,135
 $21,829
$33,395
 $35,529


See Combined Notes to InterimUnaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended March 31,
Nine Months Ended September 30,2020 2019
2017 2016(in millions)
Cash Flows from Operating Activities:      
Net income$496
 $331
Adjustments to reconcile net income to net cash provided by operating activities:   
Net income (loss)$(1,199) $169
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization749
 873
282
 300
Depreciation and amortization on assets held for sale—
 13
Amortization of deferred financing costs18
 19
7
 7
Amortization of intangible assets in non-utility cost of revenues1
 9
Deferred income taxes185
 150
(377) (14)
Unrealized gain on marketable securities(104) (187)
Loss on indexed debt securities59
 258
Goodwill impairment and loss from reclassification to held for sale214
 —
Goodwill impairment185
 —
Unrealized loss (gain) on marketable securities144
 (83)
Loss (gain) on indexed debt securities(135) 86
Write-down of natural gas inventory—
 1
3
 1
Equity in earnings of unconsolidated affiliate, net of distributions(199) (164)
Equity in (earnings) losses of unconsolidated affiliates1,475
 (62)
Distributions from unconsolidated affiliates

70
 74
Pension contributions(46) (7)(2) (2)
Changes in other assets and liabilities, excluding acquisitions:      
Accounts receivable and unbilled revenues, net216
 86
236
 138
Inventory(52) (5)110
 120
Taxes receivable30
 149
13
 —
Accounts payable(137) (90)(192) (332)
Fuel cost recovery(30) (43)11
 58
Non-trading derivatives, net(53) 23
(53) (40)
Margin deposits, net(49) 65
21
 19
Interest and taxes accrued2
 (48)(95) (116)
Net regulatory assets and liabilities(135) (26)(38) (3)
Other current assets21
 (9)(5) 16
Other current liabilities19
 31
(37) (101)
Other assets(3) —
19
 58
Other liabilities28
 29
1
 (39)
Other, net16
 19
Other operating activities, net3
 (5)
Net cash provided by operating activities1,031
 1,455
662
 271
Cash Flows from Investing Activities:      
Capital expenditures(994) (1,047)(664) (537)
Acquisitions, net of cash acquired(132) (102)—
 (5,987)
Decrease in notes receivable – unconsolidated affiliate—
 363
Investment in preferred units – unconsolidated affiliate—
 (363)
Distributions from unconsolidated affiliate in excess of cumulative earnings223
 223
7
 —
Decrease (increase) in restricted cash of Bond Companies8
 (2)
Proceeds from sale of marketable securities—
 178
Other, net3
 11
Other investing activities, net3
 (15)
Net cash used in investing activities(892) (739)(654) (6,539)
Cash Flows from Financing Activities:      
Increase in short-term borrowings, net13
 3
Proceeds from (payments of) commercial paper, net(428) 63
(828) 2,692
Proceeds from long-term debt, net1,096
 600
—
 721
Payments of long-term debt(597) (855)(63) (994)
Long-term revolving credit facility, net1,050
 135
Debt issuance costs(13) (9)—
 (8)
Payment of dividends on common stock(346) (332)
Distribution to ZENS note holders—
 (178)
Other, net(4) (2)
Net cash used in financing activities(279) (710)
Net Increase (Decrease) in Cash and Cash Equivalents(140) 6
Cash and Cash Equivalents at Beginning of Period341
 264
Cash and Cash Equivalents at End of Period$201
 $270
Supplemental Disclosure of Cash Flow Information:   
Cash Payments/Receipts:   
Interest, net of capitalized interest$306
 $324
Income taxes (refunds), net14
 (105)
Non-cash transactions:   
Accounts payable related to capital expenditures111
 75
Payment of dividends on Common Stock(145) (144)
Payment of dividends on Preferred Stock(42) (43)
Other financing activities, net(4) (14)
Net cash provided by (used in) financing activities(32) 2,345
Net Decrease in Cash, Cash Equivalents and Restricted Cash(24) (3,923)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period271
 4,278
Cash, Cash Equivalents and Restricted Cash at End of Period$247
 $355

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
  Three Months Ended March 31,
  2020 2019
  Shares Amount Shares Amount
   
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares        
Balance, beginning of period 2
 $1,740
 2
 $1,740
Balance, end of period 2
 1,740
 2
 1,740
Common Stock, $0.01 par value; authorized 1,000,000,000 shares  
  
  
  
Balance, beginning of period 502
 5
 501
 5
Issuances related to benefit and investment plans —
 —
 1
 —
Balance, end of period 502
 5
 502
 5
Additional Paid-in-Capital      
  
Balance, beginning of period   6,080
  
 6,072
Issuances related to benefit and investment plans   6
  
 (12)
Balance, end of period   6,086
  
 6,060
Retained Earnings (Accumulated Deficit)    
  
  
Balance, beginning of period   632
  
 349
Net income (loss)   (1,199)  
 169
Common Stock dividends declared ($0.2900 and $-0- per share, respectively)   (145)  
 —
Series A Preferred Stock dividends declared ($30.6250 and $-0- per share, respectively)   (25)   —
Series B Preferred Stock dividends declared ($17.5000 and $-0- per share, respectively)   (17)   —
Adoption of ASU 2016-13   (7)    
Balance, end of period   (761)  
 518
Accumulated Other Comprehensive Loss    
  
  
Balance, beginning of period   (98)  
 (108)
Other comprehensive income (loss)   (2)  
 1
Balance, end of period   (100)  
 (107)
Total Shareholders’ Equity   $6,970
  
 $8,216

See Combined Notes to InterimUnaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
  Three Months Ended March 31,
  2020 2019
 (in millions)
Revenues $634
 $686
Expenses:  
  
Operation and maintenance 359
 368
Depreciation and amortization 129
 175
Taxes other than income taxes 64
 62
Total 552
 605
Operating Income 82
 81
Other Income (Expense):  
  
Interest expense and other finance charges (41) (40)
Interest expense on Securitization Bonds (8) (12)
Interest income 1
 4
Interest income from Securitization Bonds 1
 2
Other income (expense), net 3
 (2)
Total (44) (48)
Income Before Income Taxes 38
 33
Income tax expense 5
 6
Net Income $33
 $27

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
  Three Months Ended March 31,
  2020 2019
 (in millions)
Net income $33
 $27
Other comprehensive loss:    
Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-) —
 (1)
Total —
 (1)
Comprehensive income $33
 $26

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS
 March 31,
2020		 December 31,
2019
 (in millions)
Current Assets:   
Cash and cash equivalents ($190 and $216 related to VIEs, respectively)$196
 $216
Accounts and notes receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $1 and $1, respectively244
 238
Accounts and notes receivable–affiliated companies11
 523
Accrued unbilled revenues92
 117
Materials and supplies157
 147
Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively)36
 49
Total current assets736
 1,290
Property, Plant and Equipment:   
Property, plant and equipment13,058
 12,829
Less: accumulated depreciation and amortization3,844
 3,797
Property, plant and equipment, net9,214
 9,032
Other Assets: 
  
Regulatory assets ($758 and $788 related to VIEs, respectively)891
 915
Other29
 25
Total other assets920
 940
Total Assets$10,870
 $11,262

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


















CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

LIABILITIES AND MEMBER’S EQUITY
 March 31,
2020		 December 31,
2019
 (in millions)
Current Liabilities: 
  
Current portion of VIE Securitization Bonds long-term debt$204
 $231
Accounts payable259
 268
Accounts and notes payable–affiliated companies175
 76
Taxes accrued61
 123
Interest accrued51
 69
Other78
 63
Total current liabilities828
 830
Other Liabilities: 
  
Deferred income taxes, net1,036
 1,030
Benefit obligations72
 75
Regulatory liabilities1,271
 1,288
Other80
 69
Total other liabilities2,459
 2,462
Long-term Debt: 
  
VIE Securitization Bonds, net710
 746
Other, net3,974
 3,973
Total long-term debt, net4,684
 4,719
Commitments and Contingencies (Note 14)
 
Member’s Equity:   
Common stock—
 —
Additional paid-in capital2,486
 2,486
Retained earnings428
 780
Accumulated other comprehensive loss(15) (15)
Total member’s equity2,899
 3,251
Total Liabilities and Member’s Equity$10,870
 $11,262

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 Three Months Ended March 31,
 2020 2019
 (in millions)
Cash Flows from Operating Activities:   
Net income$33
 $27
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization129
 175
Amortization of deferred financing costs3
 3
Deferred income taxes(1) (15)
Changes in other assets and liabilities: 
  
Accounts and notes receivable, net19
 21
Accounts receivable/payable–affiliated companies(3) (32)
Inventory(10) 1
Accounts payable(2) 2
Taxes receivable—
 5
Interest and taxes accrued(80) (58)
Non-trading derivatives, net—
 (25)
Net regulatory assets and liabilities(11) (44)
Other current assets13
 13
Other current liabilities8
 (7)
Other assets—
 3
Other liabilities8
 (1)
Other operating activities, net(3) (2)
Net cash provided by operating activities103
 66
Cash Flows from Investing Activities: 
  
Capital expenditures(286) (258)
Decrease (increase) in notes receivable–affiliated companies481
 (979)
Other investing activities, net(3) —
Net cash provided by (used in) investing activities192
 (1,237)
Cash Flows from Financing Activities: 
  
Proceeds from long-term debt, net—
 696
Payments of long-term debt(63) (175)
Increase (decrease) in notes payable–affiliated companies133
 (1)
Dividend to parent(385) (24)
Contribution from parent—
 590
Debt issuance costs—
 (7)
Other financing activities, net—
 (1)
Net cash provided by (used in) financing activities(315) 1,078
Net Decrease in Cash, Cash Equivalents and Restricted Cash(20) (93)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period235
 370
Cash, Cash Equivalents and Restricted Cash at End of Period$215
 $277

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)

  Three Months Ended March 31,
  2020 2019
  Shares Amount Shares Amount
   
Common Stock  
  
  
  
Balance, beginning of period 1,000
 $—
 1,000
 $—
Balance, end of period 1,000
 —
 1,000
 —
Additional Paid-in-Capital    
  
  
Balance, beginning of period   2,486
  
 1,896
Contribution from Parent   —
   590
Balance, end of period   2,486
  
 2,486
Retained Earnings    
  
  
Balance, beginning of period   780
  
 800
Net income   33
  
 27
Dividend to parent   (385)   (24)
Balance, end of period   428
  
 803
Accumulated Other Comprehensive Loss        
Balance, beginning of period   (15)   (14)
Other comprehensive loss   —
   (1)
Balance, end of period   (15)   (15)
Total Member’s Equity   $2,899
  
 $3,274

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)

  Three Months Ended
  March 31,
  2020 2019
 (in millions)
Revenues:    
Utility revenues $996
 $1,195
Non-utility revenues 15
 17
Total 1,011
 1,212
Expenses:  
  
Utility natural gas 472
 687
Non-utility cost of revenues, including natural gas 6
 10
Operation and maintenance 209
 233
Depreciation and amortization 74
 73
Taxes other than income taxes 50
 49
Total 811
 1,052
Operating Income 200
 160
Other Expense:  
  
Interest expense and other finance charges (30) (29)
Other expense, net (4) (3)
Total (34) (32)
Income From Continuing Operations Before Income Taxes 166
 128
Income tax expense 35
 18
Income From Continuing Operations 131
 110
Income (loss) from discontinued operations (net of tax expense (benefit) of ($11) and $8, respectively) (64) 28
Net Income $67
 $138

See Combined Notes to Unaudited Condensed Consolidated Financial Statements



CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)

  Three Months Ended
  March 31,
  2020 2019
 (in millions)
Net income $67
 $138
Comprehensive income $67
 $138

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
 March 31,
2020		 December 31,
2019
 (in millions)
Current Assets:
   
Cash and cash equivalents$1
 $2
Accounts receivable, less bad debt reserve of $24 and $15, respectively324
 322
Accrued unbilled revenues, less bad debt reserve of $2 and $-0-, respectively140
 249
Accounts and notes receivable–affiliated companies11
 10
Materials and supplies74
 71
Natural gas inventory30
 135
Current assets held for sale675
 691
Prepaid expenses and other current assets8
 9
Total current assets1,263
 1,489
Property, Plant and Equipment:   
Property, plant and equipment8,210
 8,079
Less: accumulated depreciation and amortization2,312
 2,270
Property, plant and equipment, net5,898
 5,809
Other Assets: 
  
Goodwill757
 757
Regulatory assets192
 191
Non-current assets held for sale—
 213
Other40
 53
Total other assets989
 1,214
Total Assets$8,150
 $8,512

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


















CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY

 March 31,
2020		 December 31,
2019
 (in millions)
Current Liabilities: 
  
Current portion of long-term debt$593
 $—
Accounts payable235
 333
Accounts and notes payable–affiliated companies48
 47
Taxes accrued80
 84
Interest accrued31
 38
Customer deposits75
 74
Current liabilities held for sale275
 368
Other134
 167
Total current liabilities1,471
 1,111
Other Liabilities: 
  
Deferred income taxes, net498
 470
Benefit obligations80
 80
Regulatory liabilities1,235
 1,219
Non-current liabilities held for sale—
 27
Other411
 418
Total other liabilities2,224
 2,214
Long-Term Debt1,784
 2,546
Commitments and Contingencies (Note 14)

 

Stockholder’s Equity:   
Common stock—
 —
Additional paid-in capital2,116
 2,116
Retained earnings545
 515
Accumulated other comprehensive income10
 10
Total stockholder’s equity2,671
 2,641
Total Liabilities and Stockholder’s Equity$8,150
 $8,512


See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 Three Months Ended March 31,
 2020 2019
 (in millions)
Cash Flows from Operating Activities:   
Net income$67
 $138
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization74
 73
Depreciation and amortization on assets held for sale—
 4
Amortization of deferred financing costs3
 3
Deferred income taxes23
 21
Goodwill impairment and loss from reclassification to held for sale132
 —
Write-down of natural gas inventory3
 1
Changes in other assets and liabilities: 
  
Accounts receivable and unbilled revenues, net169
 102
Accounts receivable/payable–affiliated companies—
 (18)
Inventory114
 119
Accounts payable(159) (255)
Fuel cost recovery9
 58
Interest and taxes accrued(11) (8)
Non-trading derivatives, net(54) (26)
Margin deposits, net21
 19
Net regulatory assets and liabilities1
 19
Other current assets(1) 7
Other current liabilities(13) (8)
Other assets18
 (12)
Other liabilities(15) 10
Other operating activities, net—
 1
Net cash provided by operating activities381
 248
Cash Flows from Investing Activities: 
  
Capital expenditures(176) (146)
Increase in notes receivable–affiliated companies—
 (106)
Other investing activities, net(1) 2
Net cash used in investing activities(177) (250)
Cash Flows from Financing Activities: 
  
Proceeds from (payments of) commercial paper, net(172) 11
Dividends to parent(32) (20)
Other financing activities, net(1) (2)
Net cash used in financing activities(205) (11)
Net Decrease in Cash, Cash Equivalents and Restricted Cash(1) (13)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period2
 25
Cash, Cash Equivalents and Restricted Cash at End of Period$1
 $12

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)

  Three Months Ended March 31,
  2020 2019
  Shares Amount Shares Amount
   
Common Stock        
Balance, beginning of period 1,000
 $—
 1,000
 $—
Balance, end of period 1,000
 —
 1,000
 —
Additional Paid-in-Capital    
  
  
Balance, beginning of period   2,116
  
 2,015
Contribution from parent   —
   —
Balance, end of period   2,116
  
 2,015
Retained Earnings    
  
  
Balance, beginning of period   515
  
 423
Net income   67
  
 138
Dividend to parent   (32)  
 (20)
Adoption of ASU 2016-13   (5)   —
Balance, end of period   545
  
 541
Accumulated Other Comprehensive Income    
  
  
Balance, beginning of period   10
  
 5
Balance, end of period   10
  
 5
Total Stockholder’s Equity                                                              $2,671
  
 $2,561

See Combined Notes to Unaudited Condensed Consolidated Financial Statements


CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

COMBINED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1) Background and Basis of Presentation


General.This combined Form 10-Q is filed separately by three registrants: CenterPoint Energy, Inc., CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other Registrants or the subsidiaries of CenterPoint Energy other than itself or its subsidiaries.

Except as discussed in the last paragraph in Note 12 to the Registrants’ Condensed Consolidated Financial Statements, no registrant has an obligation in respect of any other Registrant’s debt securities, and holders of such debt securities should not consider the financial resources or results of operations of any Registrant other than the obligor in making a decision with respect to such securities.

Included in this combined Form 10-Q are the Interim Condensed Financial Statements of CenterPoint Energy.Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Combined Notes to the Unaudited Condensed Consolidated Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated. The Interim Condensed Financial Statements are unaudited, omit certain financial statement disclosures and should be read with the 2016Registrants’ financial statements included in the Registrants’ combined 2019 Form 10-K.


Background.CenterPoint Energy, Inc. is a public utility holding company. CenterPoint Energy’s operating subsidiaries owncompany and operate electric transmission and distribution and natural gas distribution facilities, supply natural gas to commercial and industrial customers and electric and natural gas utilities and ownowns interests in Enable as described below. As of March 31, 2020, CenterPoint Energy’s indirect, wholly-ownedoperating subsidiaries include:reported as continuing operations were as follows:


Houston Electric which engages in theowns and operates electric transmission and distribution businessfacilities in the Texas Gulf Coast area that includes the city of Houston;Houston.


CERC Corp., which(i) owns and operates natural gas distribution systems in six6 states; (ii) owns and operates permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) provides temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.


CES, which obtains and offers competitive variable and fixed-price physicalVectren holds three public utilities through its wholly-owned subsidiary, VUHI, a public utility holding company:
Indiana Gas provides energy delivery services to natural gas suppliescustomers located in central and southern Indiana;

SIGECO provides energy delivery services primarily to commercial and industrial customers and electric and natural gas utilitiescustomers located near Evansville in 33 states.southwestern Indiana and owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market; and


VEDO provides energy delivery services to natural gas customers located near Dayton in west-central Ohio.

Vectren performs non-utility activities through ESG, which provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.

As of September 30, 2017,March 31, 2020, CenterPoint Energy, indirectly through CNP Midstream, owned approximately 53.7% of the common units representing limited partner interests in Enable, 50% of the management rights and 40% of the incentive distribution rights in Enable GP and also directly owned an aggregate of 14,520,000 Enable Series A Preferred Units inUnits. Enable which owns, operates and develops natural gas and crude oil infrastructure assets, and CERC Corp. owned approximately 54.1% of the common units representing limited partner interests in Enable.assets.


As of September 30, 2017,March 31, 2020, CenterPoint Energy and Houston Electric had VIEs consisting of the Bond Companies, which it consolidates.are consolidated. The consolidated VIEs are wholly-owned, bankruptcy-remote, special purpose entities that were formed specificallysolely for the purpose of securitizing transition and system restoration-related property. Creditors of CenterPoint Energy and Houston Electric have no recourse to any assets or revenues of the Bond Companies. The bonds issued by these VIEs are payable only from and secured by transition and system restoration property, and the bondholders have no recourse to the general credit of CenterPoint Energy.Energy or Houston Electric.


Basis of Presentation. The preparation of the Registrants’ financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


CenterPoint Energy’sThe Interim Condensed Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the respective periods. Amounts reported in CenterPoint Energy’sthe Condensed Statements of Consolidated Income are not necessarily indicative of amounts expected for a full-year period due to the effects of, among other things, (a) seasonal fluctuations in demand for energy and energy services, (b) changes in energy commodity prices, (c) timing of maintenance and other expenditures and (d) acquisitions and dispositions of businesses, assets and other interests. Certain prior year amounts have been reclassified to conform to the current year presentation.

Discontinued Operations. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group, which provide underground pipeline construction and repair services through wholly-owned subsidiaries Miller Pipeline, LLC and Minnesota Limited, LLC and serve natural gas utilities across the United States, focusing on recurring integrity, station and maintenance work and opportunities for large transmission pipeline construction projects. The transaction closed on April 9, 2020. See Note 3 for further information.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group, which obtains and offers competitive variable and fixed-price physical natural gas supplies and services primarily to commercial and industrial customers and electric and natural gas utilities in over 30 states. The transaction is expected to close in the second quarter of 2020. See Note 3 for further information.

COVID-19 Impacts.On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders in the Registrants’ service territories. The Registrants have experienced some resulting disruptions to their business operations, as these restrictions have significantly impacted many sectors of the economy, with businesses curtailing or ceasing normal operations. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by governmental authorities, customers, suppliers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. While the Registrants continue to assess the COVID-19 situation and cannot estimate with any degree of certainty the full impact of the COVID-19 outbreak on their liquidity, financial condition and future results of operations, the Registrants expect the COVID-19 situation to adversely impact future quarters. See Notes 5 and 6 for further information on COVID-19’s impact on the Registrants.


For a description of CenterPoint Energy’s reportable business segments, see Note 15.

(2) New Accounting Pronouncements


In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). ASU 2016-01 requires equity investments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value and to recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. It does not change the guidance for classifying and measuring investments in debt securities and loans. ASU 2016-01 also changes certain disclosure requirements and other aspects related to recognition and measurement of financial assets and financial liabilities. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. As of the first reporting period in which the guidance is adopted, a cumulative-effect adjustment to beginning retained earnings will be made, with two features that will be adopted prospectively. CenterPoint Energy does not believe this standard will have a material impact on its financial position, results of operations, cash flows and disclosures.


In 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) and related amendments. ASU 2016-02The following table provides a comprehensive new lease model that requires lessees to recognize assets and liabilities for most leases and would change certain aspects of lessor accounting. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. A modified retrospective adoption approach is required. CenterPoint Energy is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows and disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09).  The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. CenterPoint Energy adopted this standard as of January 1, 2017. The adoption did not have a material impact on CenterPoint Energy’s financial position or results of operations.  However, CenterPoint Energy’s statement of cash flows reflects a decrease in financing activity and a corresponding increase in operating activity of $4 million and $3 million as of September 30, 2017 and 2016, respectively, due to the retrospective application of the requirement that cash paid to a tax authority when shares are withheld to satisfy statutory income tax withholding obligations should be presented as a financing rather than as an operating activity.

In 2016, the FASB issued ASUs which amended ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, as amended, provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. Early adoption is permitted, and entities have the option of using either a full retrospective or a modified retrospective adoption approach. CenterPoint Energy is currently evaluating its revenue streams under these ASUs and has not yet identified any significant changes as the result of these new standards. A substantial amount of CenterPoint Energy’s revenues are tariff and derivative based, which we do not anticipate will be significantly impacted by these ASUs. CenterPoint Energy expects to adopt these ASUs on January 1, 2018 using the modified retrospective adoption approach.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 provides clarifying guidance on the classificationoverview of certain cash receipts and payments inrecently adopted or issued accounting pronouncements applicable to all the statement of cash flows and eliminates the variation in practice related to such classifications. ASU 2016-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. A retrospective adoption approach is required. CenterPoint Energy is currently assessing the impact that this standard will have on its statement of cash flows.Registrants, unless otherwise noted.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. ASU 2016-18 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. A retrospective adoption approach is required. This standard will not have an impact on CenterPoint Energy’s financial position, results of operations, and disclosures, but it will have an impact on the presentation of the statement of cash flows.
Recently Adopted Accounting Standards
ASU Number and NameDescriptionDate of Adoption
Financial Statement Impact
upon Adoption
ASU 2016-13- Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
This standard, including standards amending this standard, requires a new model called CECL to estimate credit losses for (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments.
Transition method:modified retrospective
January 1, 2020
The Registrants adopted the standard and recognized a cumulative-effect adjustment of the transition to opening retained earnings and allowance for doubtful accounts with no impact on results of operations and cash flows. See Note 4 for more information.

ASU 2018-13- Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement
This standard eliminates, modifies and adds certain disclosure requirements for fair value measurements.
Transition method: prospective for additions and one modification and retrospective for all other amendments
Adoption of eliminations and modifications as of September 30, 2018 and additions as of January 1, 2020

The adoption of this standard did not impact the Registrants’ financial position, results of operations or cash flows. Note 8 reflects the disclosures modified and added upon adoption.

Accounting Standards Update (ASU) No. 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

This standard simplifies accounting for income taxes by eliminating certain exceptions to the guidance for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes that are partially based on income and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
Transition method: prospective for all amendments that apply to the Registrants

January 1, 2020
Upon adoption, the Registrants are not required to apply the intraperiod tax allocation exception when there is a current-period loss from continuing operations.  Accordingly, CenterPoint Energy determined the tax effect of income from continuing operations without considering the tax effects of items that are not included in continuing operations (i.e., discontinued operations).  Additionally, CenterPoint Energy is no longer required to limit the year-to-date tax benefit recognized when the year-to-date benefit exceeds the anticipated full year benefit.




In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01). ASU 2017-01 revises the definition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then under ASU 2017-01, the asset or group of assets is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs to be more closely aligned with how outputs are described in ASC 606. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted in certain circumstances. A prospective adoption approach is required. ASU 2017-01 could have a potential impact on CenterPoint Energy’s accounting for future acquisitions.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. A prospective adoption approach is required. ASU 2017-04 will have an impact on CenterPoint Energy’s future calculation of goodwill impairments if an impairment is identified.


In February 2017, the FASB issued ASU No. 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU 2017-05). ASU 2017-05 clarifies when and how to apply ASC 610-20 Gains and Losses from the Derecognition of Nonfinancial Assets, which was issued as part of ASU 2014-09 Revenue from Contracts with Customers (Topic 606). ASU 2017-05 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. Companies can elect a retrospective or modified retrospective approach to adoption. CenterPoint Energy does not believe this standard will have a material impact on its financial position, results of operations, cash flows and disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07). ASU 2017-07 requires an employer to report the service cost component of the net periodic pension cost and postretirement benefit cost in the same line item(s) as other employee compensation costs arising from services rendered during the period; all other components will be presented separately from the line item(s) that includes the service cost and outside of any subtotal of operating income. In addition, only the service cost component will be eligible for capitalization in assets. ASU 2017-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. ASU 2017-07 should be applied retrospectively for the presentation of the service cost component and the other components and prospectively for the capitalization of the service cost component. The adoption of this guidance is expected to result in an increase to operating income and a decrease to other income. Prospectively, other components previously capitalized in assets will be recorded as regulatory assets in CenterPoint Energy’s rate-regulated businesses. CenterPoint Energy does not believe this standard will have a material impact on its financial position, results of operations, cash flows and disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09). ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ASU 2017-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. ASU 2017-09 should be applied prospectively for awards modified on or after the adoption date. This standard will have an impact on CenterPoint Energy’s future treatment of changes to share-based payment awards.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness, eases certain documentation and assessment requirements, and updates the presentation and disclosure requirements. ASU 2017-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. A cumulative-effect adjustment to eliminate the separate measurement of ineffectiveness upon adoption is required for existing cash flow and net investment hedges. Presentation and disclosure guidance should be applied prospectively. CenterPoint Energy is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows and disclosures.


Management believes that other recently adopted or issued accounting standards whichthat are not yet effective will not have a material impact on CenterPoint Energy’s consolidatedthe Registrants’ financial position, results of operations or cash flows upon adoption.


(3) AcquisitionHeld for Sale and Discontinued Operations (CenterPoint Energy and CERC)


Divestiture of Infrastructure Services (CenterPoint Energy). On JanuaryFebruary 3, 2017,CES,2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.

In February 2020, certain assets and liabilities representing the Infrastructure Services Disposal Group met the held for sale criteria and represented all of the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was considered an indirect, wholly-owned subsidiaryasset sale for tax purposes, requiring net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the Infrastructure Services Disposal Group and to be recognized as a deferred income tax benefit by CenterPoint Energy upon closing.

Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy, completed its acquisition of AEM. After working capital adjustments, the final purchase price was $147 million and was allocated to identifiable assets acquired and liabilities assumed based on their estimated fair values on the acquisition date.


The following table summarizes the final purchase price allocation and the fair value amounts recognized for the assets acquired and liabilities assumed related to the acquisition:
  (in millions)
Total purchase price consideration $147
Cash $15
Receivables 140
Natural gas inventory 78
Derivative assets 35
Prepaid expenses and other current assets 5
Property and equipment 8
Identifiable intangibles 25
Total assets acquired 306
Accounts payable 113
Derivative liabilities 43
Other current liabilities 7
Other liabilities 1
Total liabilities assumed 164
Identifiable net assets acquired 142
Goodwill 5
Net assets acquired $147

The goodwill of $5 million resulting from the acquisition reflects the excess of the purchase price over the fair value of the net identifiable assets acquired. The goodwill recorded as part of the acquisition primarily reflects the value of the complementary operational and geographic footprints, scale and expanded capabilities provided by the acquisition.

Identifiable intangible assets were recorded at estimated fair value as determined by management based on available information, which includes a preliminary valuation prepared by an independent third party. The significant assumptions used in arriving at the estimated identifiable intangible asset values included management’s estimates of future cash flows, the discount rate which is based on the weighted average cost of capital for comparable publicly traded guideline companies and projected customer attrition rates. The useful lives for the identifiable intangible assets were determined using methods that approximate the pattern of economic benefit provided by the utilization of the assets.

The estimated fair value of the identifiable intangible assets and related useful lives as included in the final purchase price allocation include:
  Estimate Fair Value Estimate Useful Life
  (in millions) (in years)
Customer relationships $25
 15

Amortization expense related to the above identifiable intangible assets was $-0- and $1 millionEnergy’s financial statements for the three and nine months ended September 30, 2017, respectively.March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for cost to sell.

Because the Infrastructure Services Disposal Group met the held for sale criteria during the three months ended March 31, 2020 and the proposed sale was completed on April 9, 2020, all Infrastructure Services Disposal Group assets and liabilities as of March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.

RevenuesDivestiture of approximately $311 millionEnergy Services (CenterPoint Energy and $989 million, respectively,CERC). On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. This transaction does not include CEIP and operatingits assets. The transaction is expected to close in the second quarter of 2020.

In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax asset of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and $28 million, respectively, attributable to the AEM acquisition are reported inbe recognized as a deferred tax expense by CenterPoint Energy upon closing.

Upon classifying the Energy Services business segmentDisposal Group as held for sale and includedin connection with the preparation of CenterPoint Energy’s and CERC’s respective financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC recorded a goodwill impairment of approximately $62 million and a loss on assets held for sale of approximately $70 million, plus an additional loss of $6 million for cost to sell recorded only at CenterPoint Energy.

Because the Energy Services Disposal Group met the held for sale criteria and the proposed sale is expected to be completed within one year, all Energy Services Disposal Group assets and liabilities as of March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.

The assets and liabilities of the Infrastructure Services and Energy Services Disposal Groups classified as held for sale in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets, as applicable, include the following:
  March 31, 2020
  CenterPoint Energy CERC
  Infrastructure Services Disposal Group Energy Services Disposal Group Total Energy Services Disposal Group
  (in millions)
Receivables, net $216
 $355
 $571
 $355
Accrued unbilled revenues 57
 2
 59
 2
Natural gas inventory —
 52
 52
 52
Materials and supplies 6
 —
 6
 —
Non-trading derivative assets —
 213
 213
 213
Property, plant and equipment, net 313
 29
 342
 29
Goodwill 138
 —
 138
 —
Loss on assets held for sale —
 (70) (70) (70)
Other 242
 94
 336
 94
Total current assets held for sale $972
 $675
 $1,647
 $675
         
Accounts payable $46
 $206
 $252
 $206
Taxes accrued 2
 —
 2
 —
Non-trading derivative liabilities —
 36
 36
 36
Benefit obligations —
 4
 4
 4
Other 60
 29
 89
 29
Total current liabilities held for sale $108
 $275
 $383
 $275




  December 31, 2019
  CenterPoint Energy CERC
  Infrastructure Services Disposal Group Energy Services Disposal Group Total Energy Services Disposal Group
  (in millions)
Receivables, net $192
 $445
 $637
 $445
Accrued unbilled revenues 109
 8
 117
 8
Natural gas inventory —
 67
 67
 67
Materials and supplies 6
 —
 6
 —
Non-trading derivative assets —
 136
 136
 136
Other 4
 35
 39
 35
Total current assets held for sale 311
 691
 1,002
 691
Property, plant and equipment, net 295
 26
 321
 26
Goodwill 
 220
 62
 282
 62
Non-trading derivative assets —
 58
 58
 58
Other 234
 67
 301
 67
Total non-current assets held for sale 749
 213
 962
 213
Total assets held for sale $1,060
 $904
 $1,964
 $904
         
Accounts payable $45
 $299
 344
 $299
Taxes accrued 2
 —
 2
 —
Non-trading derivative liabilities —
 44
 44
 44
Other 40
 25
 65
 25
Total current liabilities held for sale 87
 368
 455
 368
Non-trading derivative liabilities —
 14
 14
 14
Benefit obligations —
 4
 4
 4
Other 16
 9
 25
 9
Total non-current liabilities held for sale 16
 27
 43
 27
Total liabilities held for sale $103
 $395
 $498
 $395

Because the Infrastructure Services and Energy Services Disposal Groups met the held for sale criteria and their disposals also represent a strategic shift to CenterPoint Energy and CERC, as applicable, they are reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, as applicable, and as a result, prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.


A summary of the Infrastructure Services and Energy Services Disposal Groups presented in CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable, is as follows:
  Three Months Ended March 31,
  2020 
2019 (1)
 2020 2019 2020 2019 2020 2019
  CenterPoint Energy CERC
  Infrastructure Services Disposal Group Energy Services Disposal Group Total Energy Services Disposal Group
  (in millions)
Revenues $222
 $146
 $886
 $1,242
 $1,108
 $1,388
 $886
 $1,242
Expenses:           —
    
Non-utility cost of revenues 44
 43
 808
 1,185
 852
 1,228
 808
 1,185
Operation and maintenance 163
 96
 20
 17
 183
 113
 20
 17
Depreciation and amortization —
 9
 —
 4
 —
 13
 —
 4
Taxes other than income taxes 1
 —
 1
 —
 2
 —
 1
 —
Total 208
 148
 829
 1,206
 1,037
 1,354
 829
 1,206
Income (loss) from Discontinued Operations before income taxes 14
 (2) 57
 36
 71
 34
 57
 36
Loss from classification to held for sale (2) 96
 —
 138
 —
 234
 —
 132
 —
Income tax expense (benefit) (5) —
 (12) 8
 (17) 8
 (11) 8
Net income (loss) from Discontinued Operations $(77) $(2) $(69) $28
 $(146) $26
 $(64) $28

(1)Reflects February 1, 2019 to March 31, 2019 results only due to the Merger.

(2)Loss from classification to held for sale is inclusive of goodwill impairment and, for CenterPoint Energy, its costs to sell.

CenterPoint Energy and CERC have elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. Long-lived assets are not depreciated or amortized once they are classified as held for sale. The following table summarizes CenterPoint Energy’s and CERC’s cash flows from discontinued operations and certain supplemental cash flow disclosures related to the Infrastructure Services and Energy Services Disposal Groups, as applicable:
  Three Months Ended March 31,
  2020 2019 2020 2019 2020 2019
  CenterPoint Energy CERC
  Infrastructure Services Disposal Group Energy Services Disposal Group Energy Services Disposal Group
  (in millions)
Depreciation and amortization $—
 $9
 $—
 $4
 $—
 $4
Amortization of intangible assets in Non-utility cost of revenues —
 2
 —
 —
 —
 —
Write-down of natural gas inventory —
 —
 3
 1
 3
 1
Capital expenditures 16
 27
 1
 1
 1
 1
Non-cash transactions:            
Accounts payable related to capital expenditures 2
 3
 4
 6
 4
 6


Other Sale Related Matters (CenterPoint Energy and CERC). CES provides natural gas supply to CenterPoint Energy’s and CERC’s NGD under contracts executed in a competitive bidding process, with the duration of some contracts extending into 2021. In addition, CERC is the natural gas transportation provider for a portion of CES’s customer base and will continue to be the transportation provider for these customers as long as these customers retain a relationship with the divested CES business.


Revenues and expenses incurred by CenterPoint Energy and CERC for natural gas transportation and supply are as follows:

  Three Months Ended March 31,
  2020 2019 2020 2019
  CenterPoint Energy CERC
  (in millions)
Transportation revenue $16
 $16
 $16
 $16
Natural gas expense 45
 64
 44
 63

The Infrastructure Services Disposal Group provides pipeline construction and repair services to CenterPoint Energy’s and CERC’s NGD. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by NGD utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the NGD utility. Amounts charged for these services that are not capitalized are included primarily in Operation and maintenance expenses. Fees incurred by CenterPoint Energy’s and CERC’s NGD for pipeline construction and repair services are as follows:
  Three Months Ended March 31,
  2020 
2019 (1)
 2020 
2019 (1)
  CenterPoint Energy CERC
  (in millions)
Pipeline construction and repair services capitalized $34
 $19
 $—
 $1
Pipeline construction and repair service charges in operations and maintenance expense 1
 4
 1
 1


(1)Represents charges for the period February 1, 2019 through March 31, 2019 only due to the Merger.

(4) Revenue Recognition and Provision for Doubtful Accounts

Revenues from Contracts with Customers

In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services. The revenues and related balances in the following tables exclude operating revenues and balances from the Energy Services Disposal Group and Infrastructure Services Disposal Group, which are now reflected as discontinued operations and assets held for sale.

The following tables disaggregate revenues by reportable segment and major source:

CenterPoint Energy
  Three Months Ended March 31, 2020
  
Houston Electric
 T&D
 
Indiana
 Electric Integrated
 Natural Gas Distribution 
Corporate
 and Other
 Total
  (in millions)
Revenue from contracts $638
 $129
 $1,293
 $81
 $2,141
Other (1)
 —
 —
 25
 1
 26
Total revenues $638
 $129
 $1,318
 $82
 $2,167

  Three Months Ended March 31, 2019
  
Houston Electric
 T&D
 Indiana
Electric Integrated (2)		 Natural Gas Distribution (2) 
Corporate
 and Other (2)
 Total
  (in millions)
Revenue from contracts $690
 $83
 $1,413
 $41
 $2,227
Other (1)
 (1) —
 2
 1
 2
Total revenues $689
 $83
 $1,415
 $42
 $2,229

(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation

in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period. Total lease income was $1 million and $2 million for the three and nine months ended September 30, 2017.March 31, 2020 and 2019, respectively.

(2)Reflects revenues from Vectren subsidiaries for the period from February 1, 2019 to March 31, 2019.

Houston Electric
 Three Months Ended March 31,
 2020 2019
 (in millions)
Revenue from contracts$638
 $690
Other (1)
(4) (4)
Total revenues$634
 $686

(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period. Lease income was not significant for the three months ended March 31, 2020 and 2019.

CERC
  Three Months Ended March 31,
  2020 2019
  Natural Gas Distribution 
Corporate
 and Other
 Total Natural Gas Distribution 
Corporate
 and Other
 Total
  (in millions)
Revenue from contracts $981
 $3
 $984
 $1,205
 $1
 $1,206
Other (1)
 27
 —
 27
 6
 —
 6
Total revenues $1,008
 $3
 $1,011
 $1,211
 $1
 $1,212

(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period. Lease income was not significant for the three months ended March 31, 2020 and 2019.

Houston Electric T&D (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by the PUCT, is recognized as electricity is delivered and represents amounts both billed and unbilled. Discretionary services requested by customers are provided at a point in time with control transferring upon the completion of the service. Revenue for discretionary services is recognized upon completion of service based on the tariff rates set by the PUCT. Payments for electricity distribution and discretionary services are aggregated and received on a monthly basis. Houston Electric performs transmission services over time as a stand-ready obligation to provide a reliable network of transmission systems. Revenue is recognized upon time elapsed, and the monthly tariff rate set by the PUCT. Payments are received on a monthly basis.

Indiana Electric Integrated (CenterPoint Energy).Indiana Electric generates, distributes and transmits electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, is recognized as electricity is delivered and represents amounts both billed and unbilled. Customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.

Natural Gas Distribution (CenterPoint Energy and CERC). CERC distributes and transports     natural gas to customers over time, and customers consume the natural gas when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by

the state governing agency for that service area, is recognized as natural gas is delivered and represents amounts both billed and unbilled. Discretionary services requested by the customer are satisfied at a point in time and revenue is recognized upon completion of service and the tariff rates set by the applicable state regulator. Payments of natural gas distribution, transportation and discretionary services are aggregated and received on a monthly basis.

Contract Balances. When the timing of delivery of service is different from the timing of the payments made by customers and when the right to consideration is conditioned on something other than the passage of time, the Registrants recognize either a contract asset (performance precedes billing) or a contract liability (customer payment precedes performance). Those customers that prepay are represented by contract liabilities until the performance obligations are satisfied. The following unaudited pro forma financial information reflectsRegistrants’ contract assets are included in Accrued unbilled revenues in their Condensed Consolidated Balance Sheets. As of March 31, 2020, the consolidatedCenterPoint Energy’s contract assets primarily relate to ESG contracts where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilitiesin their Condensed Consolidated Balance Sheets. As of March 31, 2020, CenterPoint Energy’s contract liabilities primarily relate to ESG contracts where revenue is recognized using the input method.

The opening and closing balances of accounts receivable, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers from continuing operations for the three months ended March 31, 2020 are as follows:

CenterPoint Energy
 Accounts Receivable Other Accrued Unbilled Revenues 
Contract
Assets
 Contract Liabilities
 (in millions)
Opening balance as of December 31, 2019$566
 $469
 $6
 $30
Closing balance as of March 31, 2020612
 320
 13
 23
Increase (decrease)$46
 $(149) $7
 $(7)


The amount of revenue recognized in the three-month period ended March 31, 2020 that was included in the opening contract liability was $25 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between CenterPoint Energy’s performance and the customer’s payment.

Houston Electric
 Accounts Receivable Other Accrued Unbilled Revenues Contract Liabilities
 (in millions)
Opening balance as of December 31, 2019$210
 $117
 $3
Closing balance as of March 31, 2020209
 92
 8
Increase$(1) $(25) $5

The amount of operationsrevenue recognized in the three-month period ended March 31, 2020 that was included in the opening contract liability was $1 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.

CERC
 Accounts Receivable Other Accrued Unbilled Revenues
 (in millions)
Opening balance as of December 31, 2019$222
 $249
Closing balance as of March 31, 2020265
 140
Decrease$43
 $(109)

CERC does not have any opening or closing contract asset or contract liability balances.

Remaining Performance Obligations (CenterPoint Energy).The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting

period for contracts and (2) when CenterPoint Energy assumingexpects to recognize this revenue. Such contracts include energy performance and sustainable infrastructure services contracts of ESG, which are included in Corporate and Other.
 Rolling 12 Months Thereafter Total
 (in millions)
Revenue expected to be recognized on contracts in place as of March 31, 2020:     
Corporate and Other$218
 $569
 $787
 $218
 $569
 $787


Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the AEM acquisition had taken placetransaction price. For contracts for which revenue from the satisfaction of the performance obligations is recognized in the amount invoiced, the practical expedient was elected and revenue expected to be recognized on these contracts has not been disclosed.

Provision of Doubtful Accounts

The Registrants adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related amendments on January 1, 2016. Adjustments2020 using a modified retrospective method. ASU 2016-13 replaces the “incurred loss” model with a CECL model for financial assets measured at amortized cost and for certain off-balance sheet credit exposures. Adoption of this standard did not have a material impact on the Registrants’ respective consolidated financial statements. CenterPoint Energy and CERC applied the $5 million cumulative-effect adjustment of the transition to pro forma net incomeopening retained earnings as of the effective date, which included $2 million related to the Energy Services Disposal Group. There was no material cumulative-effect adjustment for Houston Electric. The disclosures for periods prior to adoption will be presented in accordance with accounting standards in effect for those periods.

CenterPoint Energy and CERC segregate financial assets that fall under the scope of Topic 326, primarily trade receivables due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include intercompany sales, amortization of intangible assets, depreciation of fixed assets, interest expense associated with debt financing to fund the acquisition,changing weather, commodity prices, regulations, and related income tax effects. The pro forma information does not include the mark-to-market impact of financial instruments designated as cash flow hedges of anticipated purchases and sales at index prices. The effective portion of these hedges are excluded from earnings and reported asmacroeconomic factors, among others. Houston Electric had no material changes in Other Comprehensive Income. Additionally,its methodology to recognize losses on financial assets that fall under the pro forma information does not includescope of Topic 326, primarily due to the mark-to-market impactnature of physical forward transactions that were previously accounted for as normal purchaseits customers and sale transactions.regulatory environment.

The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved had the acquisition taken place on the dates indicated or the future consolidated results of operations of the combined company.
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in millions)
Operating Revenue $2,098
 $2,145
 $6,976
 $6,161
Net Income 169
 179
 496
 335


(4) (5) Employee Benefit Plans


CenterPoint Energy’sThe Registrants’ net periodic cost, before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes, includes the following components relating to pension and postretirement benefits:

Pension Benefits (CenterPoint Energy)
 Three Months Ended September 30,
 2017 2016
 Pension
Benefits		 Postretirement
Benefits		 Pension
Benefits		 Postretirement
Benefits
 (in millions)
Service cost$9
 $—
 $10
 $1
Interest cost22
 4
 23
 4
Expected return on plan assets(24) (1) (26) (2)
Amortization of prior service cost (credit)2
 (1) 3
 (1)
Amortization of net loss14
 —
 15
 —
Net periodic cost (2)
$23
 $2
 $25
 $2
        
 Nine Months Ended September 30,
 2017 2016
 Pension
Benefits		 Postretirement
Benefits		 Pension
Benefits		 Postretirement
Benefits
 (in millions)
Service cost$27
 $1
 $28
 $2
Interest cost66
 12
 70
 13
Expected return on plan assets(72) (4) (76) (5)
Amortization of prior service cost (credit)7
 (3) 7
 (2)
Amortization of net loss43
 —
 47
 —
Curtailment gain (1)
—
 —
 —
 (3)
Net periodic cost (2)
$71
 $6
 $76
 $5
  Three Months Ended March 31,
  2020 2019
 (in millions)
Service cost (1) $10
 $10
Interest cost (2) 19
 23
Expected return on plan assets (2) (28) (25)
Amortization of prior service cost (2) —
 2
Amortization of net loss (2) 10
 13
Curtailment gain (2) (3) —
 (1)
Net periodic cost $11
 $22

(1)Amounts presented in the table above are included in Operation and maintenance expense in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.

(2)Amounts presented in the table above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals.

(1)(3)A curtailment gain or loss is required when the expected future services of a significant number of current employees are reduced or eliminated for the accrual of benefits. In May 2016, Houston Electric entered intoFebruary 2019, CenterPoint Energy recognized a renegotiated collective bargaining agreement with the IBEW Local Union 66 that provides that for Houston Electric union employees covered under the agreement who retire on or after January 1, 2017, retiree medical and prescription drug coverage will be provided exclusively through the NECA/IBEW Family Medical Care Plan in exchange for the payment of monthly premiums as determined under the agreement. As a result, the accrued postretirement benefits related to such future Houston Electric union retirees were eliminated. In 2016, Houston Electric recognized apension curtailment gain of $3$1 million as an accelerated recognitionrelated to Vectren employees whose employment was terminated after the Merger closed.

Postretirement Benefits
 Three Months Ended March 31,
 2020 2019
 CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
 (in millions)
Service cost (1)$—
 $—
 $—
 $1
 $—
 $—
Interest cost (2)3
 1
 1
 4
 2
 1
Expected return on plan assets (2)(1) (1) —
 (2) (1) —
Amortization of prior service cost (credit) (2)(1) (1) —
 (1) (1) —
Net periodic cost (income)$1
 $(1) $1
 $2
 $—
 $1


(1)Amounts presented in the tables above are included in Operation and maintenance expense in each of the prior service credit that would otherwise be recognized in future periods.Registrants’ respective Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.


(2)Net periodic costAmounts presented in this table is before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral forthe tables above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory purposes.  deferrals.



CenterPoint Energy’s changes in accumulated comprehensive loss relatedThe table below reflects the expected contributions to defined benefitbe made to the pension and postretirement benefit plans are as follows:during 2020:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Beginning Balance$(70) $(65) $(72) $(65)
Other comprehensive income (loss) before reclassifications (1)
—
 —
 —
 (4)
Amounts reclassified from accumulated other comprehensive loss:       
Prior service cost (2)
—
 1
 1
 1
Actuarial losses (2)
2
 2
 5
 5
Tax expense(2) (2) (4) (1)
Net current period other comprehensive income—
 1
 2
 1
Ending Balance$(70) $(64) $(70) $(64)
 CenterPoint Energy Houston Electric CERC
 (in millions)
Expected minimum contribution to pension plans during 2020$83
 $—
 $—
Expected contribution to postretirement benefit plans in 202017
 10
 4

(1)Total other comprehensive income (loss) is related to the remeasurement of the postretirement plan.

(2)These accumulated other comprehensive components are included in the computation of net periodic cost.


CenterPoint Energy expectsThe table below reflects the contributions made to contributethe pension and postretirement benefit plans during 2020:
  Three Months Ended March 31, 2020
  CenterPoint Energy Houston Electric CERC
 (in millions)
Pension plans $2
 $—
 $—
Postretirement benefit plans 4
 2
 1


COVID-19 Impacts.  The Registrants remeasure the funded status of each plan as of December 31 each year, and at an interim period when a minimumcurtailment, settlement, or material plan amendment occurs.  On the measurement date, actuarial gains or losses are recognized in accumulated other comprehensive income, or when cost is recovered through regulated rates, as a regulatory asset or liability. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. The fair value of approximately $46 millionpension plan assets on the plan remeasurement date impacts the funded status, net period cost, and the required cash contributions; however, changes to its pension plan assets do not impact the Condensed Statements of Consolidated Income or Condensed Consolidated Balance Sheets in interim periods when a plan remeasurement is not required. An interim remeasurement of the plans in 2017, of which approximately $28 millionwas not required, and $46 million were contributedtherefore did not occur, during the three and nine months ended September 30, 2017, respectively.March 31, 2020.

CenterPoint Energy expects to contribute a total of approximately $16 million to its postretirement benefit plan in 2017, of which approximately $4 million and $12 million were contributed during the three and nine months ended September 30, 2017, respectively.


(5) (6) Regulatory AccountingMatters


Equity Return.Return (CenterPoint Energy and Houston Electric)

As of September 30, 2017,March 31, 2020, CenterPoint Energy and Houston Electric hashave not recognized an allowed equity return of $299$162 million because such return will be recognized as it is recovered in future rates. During the three months ended September 30, 2017The timing of CenterPoint Energy’s and 2016, Houston Electric recognized approximately $13 million and $22 million, respectively,Electric’s recognition of the allowed equity return not previously recognized. During the nine months ended September 30, 2017 and 2016, Houston Electric recognized approximately $30 million and $52 million, respectively, of the allowed equity return not previously recognized.will vary each period based on amounts actually collected during that period. The unrecognized

Hurricane Harvey. equity return will be recognized as it is recovered in rates through 2024. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.
  Three Months Ended March 31,
  2020 2019
  CenterPoint Energy Houston Electric CenterPoint Energy Houston Electric
  (in millions)
Allowed equity return recognized $6
 $6
 $11
 $11


Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately $194 million, among other requests. On January 23, 2020, Houston Electric filed a Stipulation and Settlement Agreement with the PUCT that provided for the following, among other things:

an overall revenue requirement increase of approximately $13 million;

an ROE of 9.4%;

a capital structure of 57.5% debt/42.5% equity;

a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and

recovery of all retail transmission related costs through the TCRF.

Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s electric delivery system and CERC Corp.’s NGD suffered damage as a result of Hurricane Harvey, a major storm classified as a Category 4 hurricane on the Saffir-Simpson Hurricane Wind Scale, that first struck the Texas coast on Friday, August 25, 2017 and remained over the Houston areanext base rate proceeding. No rate base items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for the next several days. The unprecedented flooding from torrential amounts of rainfall accompanying the storm caused significant damage to or destruction of residences and businesses served by Houston Electric and NGD.

Currently, Houston Electric estimates that total costs to restoreno later than four years from the electric delivery facilities damaged as a resultdate of Hurricane Harvey will range from $110 million to $120 million and estimates that the total restoration costs covered by insurance will be approximately $35 million.PUCT’s final order in the proceeding. Additionally, Houston Electric will defernot file a DCRF in 2020, nor will a subsequent separate proceeding with the uninsured storm restoration costs as management believes it is probable that such costs willPUCT be recovered through traditional rate adjustment mechanisms for capital costsinstituted regarding EDIT on Houston Electric’s securitized assets. Furthermore, under the terms of the Stipulation and through the next rate proceeding for operation and maintenance expenses. As of September 30, 2017,Settlement Agreement, Houston Electric recorded anagreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy. The PUCT approved the Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the final order. The rates were implemented on April 23, 2020.

CenterPoint Energy and Houston Electric record pre-tax expense for (i) probable disallowances of $4 million in property, plantcapital investments and equipment(ii) customer refund obligations and $73 millioncosts deferred in regulatory assets netwhen recovery of $23 millionsuch amounts is no longer considered probable.

COVID-19 Regulatory Matters

Governors, public utility commissions and other authorities in insurance receivables recorded, for restoration costs incurred.  Asthe states in which the Registrants operate have issued a result, storm restoration costs should not materiallynumber of different orders related to the COVID-19 pandemic. On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s reported net incomeservice territory. 

The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for 2017.reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of the COVID-19 ERP.  The transmission and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete cost recovery and disburse all reimbursement amounts or remaining balances.


Currently, NGD estimatesSimilarly, regulatory authorities have issued orders addressing customer non-payment and disconnection. In Indiana, the IURC issued an order that, total costsamong other things, permits utilities to restore natural gas distribution facilities damaged as a result of Hurricane Harvey will range from $25 millionvoluntarily suspend or waive late fees and reconnection fees and reconnect customers who have been disconnected due to $30 million and estimates that the total restoration costs covered by insurance will be approximately $17 million.  NGD will defer the uninsured storm restoration costs as management believes it is probablenon-payment, provided that such costsactions are taken on a non-discriminatory basis and apply to all customers.  Commissions in other states have issued similar orders. In CenterPoint Energy’s and CERC’s NGD service territories and for Indiana Electric, CenterPoint Energy and CERC, as applicable, have temporarily suspended disconnections for non-payment and will be recovered through traditional rate adjustment mechanismscontinue to support those customers who may need payment assistance, arrangements or extensions.

In the other states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for capitalcertain COVID-19 related costs and through the next rate proceeding for operation and maintenance expenses. As of September 30, 2017, NGD has recorded approximately $7 million in regulatory assets, net of $2savings. 

million of insurance receivables recorded, for restoration costs incurred. As a result, storm restoration costs should not materially affect CERC’s reported net income for 2017.


(6) (7) Derivative Instruments


CenterPoint Energy isThe Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. CenterPoint Energy utilizesThe Registrants utilize derivative instruments such as physical forward contracts, swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on its operating results and cash flows. Such derivatives are recognized in CenterPoint Energy’s Condensed Consolidated Balance Sheets at their fair value unless

On February 24, 2020, CenterPoint Energy, electsthrough its subsidiary CERC Corp., entered into the normal purchase and sales exemption for qualified physical transactions. A derivative may be designated as a normal purchase or sale ifEquity Purchase Agreement to sell the intentEnergy Services Disposal Group. The transaction is expected to physically receive or deliver the product for use or saleclose in the normal coursesecond quarter of business.2020. The following disclosures include the Energy Services Disposal Group and are identified as held for sale or discontinued operations.

CenterPoint Energy has a Risk Oversight Committee composed of corporate and business segment officers that oversees commodity price, weather and credit risk activities, including CenterPoint Energy’s marketing, risk management services and hedging activities. The committee’s duties are to establish CenterPoint Energy’s commodity risk policies, allocate board-approved commercial risk limits, approve the use of new products and commodities, monitor positions and ensure compliance with CenterPoint Energy’s risk management policies, procedures and limits established by CenterPoint Energy’s board of directors.

CenterPoint Energy’s policies prohibit the use of leveraged financial instruments. A leveraged financial instrument, for this purpose, is a transaction involving a derivative whose financial impact will be based on an amount other than the notional amount or volume of the instrument.


(a)Non-Trading Activities


Commodity Derivative Instruments.Instruments (CenterPoint Energy and CERC). CenterPoint Energy, entersthrough its Indiana Utilities, and CERC, through the Energy Services Disposal Group, enter into certain derivative instruments to mitigate the effects of commodity price movements. Certain financial instruments used to hedge portions of the natural gas inventory of the Energy Services business segmentDisposal Group are designated as fair value hedges for accounting purposes. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges.


Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as economic or cash flow hedges. The objective of these hedges is to offset risk associated with interest rates borne by the Registrants in connection with an anticipated future fixed rate debt offering or other exposure to variable rate debt. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging financing activity, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. For the impacts of cash flow hedges to Accumulated other comprehensive income, see Note 19.

The table below summarizes the Registrants’ outstanding interest rate hedging activity:
 March 31, 2020 December 31, 2019
Hedging ClassificationNotional Principal
 
CenterPoint
 Energy (1)
 
Houston
 Electric
 
CenterPoint
 Energy (1)
 
Houston
 Electric
 (in millions)
Economic hedge$84
 $—
 $84
 $—

(1)Relates to interest rate derivative instruments at SIGECO.

Weather Hedges.Hedges (CenterPoint Energy and CERC). CenterPoint Energy hasand CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on NGD in Arkansas, Indiana, Louisiana, Mississippi, Minnesota, Ohio and Oklahoma.Oklahoma, as applicable. CenterPoint Energy’s and CERC’s NGD in Texas and CenterPoint Energy’s electric operations in Texas and Indiana do not have such mechanisms, although fixed customer charges are historically higher in Texas for NGD compared to CenterPoint Energy’sits other jurisdictions. As a result, fluctuations from normal weather may have a positive or negative effect on CenterPoint Energy’s and CERC’s NGD’s results in Texas and on Houston Electric’sCenterPoint Energy’s electric operations’ results in its Texas and Indiana service territory.territories.


CenterPoint Energy enteredand CERC, as applicable, enter into heating-degree day swapswinter season weather hedges from time to time for certain NGD Texas jurisdictions to mitigate the effect of fluctuations from normal weather on its results of operations and cash flows for the 2017–2018 winter heating season, which contained a bilateral dollar cap of $8 million. However, CenterPoint Energy did not enter into heating-degree day swaps for NGD jurisdictions for the 2015–2016 or 2016–2017 winter heating seasons. CenterPoint Energy entered into weather hedges for the Houston Electricelectric operations’ service territory to mitigate the effect of fluctuations from normal weather on its results of operations and cash flows, which contained bilateral dollar caps of $7 million, $9 million and $9 million for the 2015–2016, 2016–2017 and 2017–2018 winter seasons, respectively. The swapsflows. These weather hedges are based on heating degree days at 10-year normal weather. During both the three months ended September 30, 2017 and 2016, CenterPoint Energy recognized no gains or losses related to these swaps. During the nine months ended September 30, 2017 and 2016, CenterPoint Energy recognized gains of $1 million and $3 million, respectively, related to these swaps. Weather hedge gains and losses are included in revenues in the Condensed Statements of Consolidated Income.

Hedging of Interest Expense for Future Debt Issuances. In January 2017, Houston Electric enteredand Indiana Electric do not enter into forward interest rate agreements with several counterparties, having an aggregate notional amount of $150 million. These agreements were executed to hedge, in part, volatility in the 10-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments of Houston Electric’s $300 million issuance of fixed rate debt in January 2017. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of realized losses associated with the agreements, which totaled approximately $0.5 million, is a component of accumulated other comprehensive income in 2017 and will be amortized over the life of the bonds.

In 2017, CenterPoint Energy entered into forward interest rate agreements with several counterparties, having an aggregate notional amount of $350 million. These agreements were executed to hedge, in part, volatility in the 5-year U.S. treasury rate by reducing CenterPoint Energy’s exposure to variability in cash flows relating to interest payments of CenterPoint Energy’s $500 million issuance of fixed rate debt in August 2017. These forward interest rate agreements were designated as cash flowweather hedges.

Accordingly, the effective portion of realized losses associated with the agreements, which totaled approximately $2.9 million, is a component of accumulated other comprehensive income in 2017 and will be amortized over the life of the notes.

In August 2017, CERC Corp. entered into forward interest rate agreements with several counterparties, having an aggregate notional amount of $150 million. These agreements were executed to hedge, in part, volatility in the 30-year U.S. treasury rate by reducing CERC Corp.’s exposure to variability in cash flows related to interest payments of CERC Corp.’s $300 million issuance of fixed rate debt in August 2017. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of realized losses associated with the agreements, which totaled approximately $1.5 million, is a component of accumulated other comprehensive income in 2017 and will be amortized over the life of the notes.


(b)Derivative Fair Values and Income Statement Impacts


The following tables present information about CenterPoint Energy’s derivative instruments and hedging activities. The first fourthree tables provide a balance sheet overview of CenterPoint Energy’s Derivative Assets and Liabilities, as of September 30, 2017 and December 31, 2016, while the last table providestwo tables provide a breakdown of the related income statement impactsimpacts. The Energy Services Disposal Group’s derivative balances are reported in assets or liabilities held for the threesale. See Note 3 for further information.

Fair Value of Derivative Instruments and nine months ended September 30, 2017 and 2016.Hedged Items

CenterPoint Energy
Fair Value of Derivative Instruments
 March 31, 2020 December 31, 2019
Balance Sheet Location 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
 September 30, 2017 (in millions)
Derivatives designated
as fair value hedges:
 
Balance Sheet
Location
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
Derivatives designated as fair value hedges:        
 (in millions)
Natural gas derivatives (1) (2) (3)
 Current Assets: Non-trading derivative assets $—
 $—
Current Liabilities: Current liabilities held for sale 18
 —
 12
 —
Natural gas derivatives (1) (2) (3)
 Current Liabilities: Non-trading derivative liabilities 5
 —
    
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:        
Natural gas derivatives (1) (2) (3)
 Current Assets: Non-trading derivative assets 65
 2
Current Assets: Current assets held for sale 215
 2
 139
 3
Natural gas derivatives (1) (2) (3)
 Other Assets: Non-trading derivative assets 58
 2
Other Assets: Non-current assets held for sale —
 —
 58
 —
Natural gas derivatives (1) (2) (3)
 Current Liabilities: Non-trading derivative liabilities 27
 55
Current Liabilities: Non-trading derivative liabilities —
 9
 —
 7
Natural gas derivatives (1) (2) (3)
 Other Liabilities: Non-trading derivative liabilities 9
 25
Current Liabilities: Current liabilities held for sale 113
 217
 73
 177
Natural gas derivatives (1) (2) (3)
Other Liabilities: Non-trading derivative liabilities —
 14
 —
 15
Natural gas derivatives (1) (2) (3)
Other Liabilities: Non-current liabilities held for sale —
 —
 10
 39
Interest rate derivativesOther Liabilities —
 26
 —
 10
Indexed debt securities derivative Current Liabilities —
 776
Current Liabilities —
 758
 —
 893
Total $164
 $860
Total CenterPoint EnergyTotal CenterPoint Energy $346
 $1,026
 $292
 $1,144


(1)The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 1,8662,126 Bcf or a net 46232 Bcf long position.position and 2,226 Bcf or a net 374 Bcf long position as of March 31, 2020 and December 31, 2019, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure.


(2)Natural gas contracts are presented on a net basis in the Condensed Consolidated Balance Sheets as they are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets.due. The net of total non-trading natural gas derivative assets and liabilities was a $93 million asset as shown on CenterPoint Energy’s Condensed Consolidated Balance Sheets (and asis detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below), and was comprised of the natural gas contracts derivative assets and liabilities separately shown above, impacted by collateral netting of $13 million.below.


(3)Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.


CERC
    March 31, 2020 December 31, 2019
  Balance Sheet Location 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
    (in millions)
Derivatives designated as fair value hedges:        
Natural gas derivatives (1) (2) (3)
 Current Liabilities: Current liabilities held for sale $18
 $—
 $12
 $—
Derivatives not designated as hedging instruments:        
Natural gas derivatives (1) (2) (3)
 Current Assets: Current assets held for sale 215
 2
 139
 3
Natural gas derivatives (1) (2) (3)
 Other Assets: Non-current assets held for sale —
 —
 58
 —
Natural gas derivatives (1) (2) (3)
 Current Liabilities: Current liabilities held for sale 113
 217
 73
 177
Natural gas derivatives (1) (2) (3)
 Other Liabilities: Non-current liabilities held for sale —
 —
 10
 39
Total CERC $346
 $219
 $292
 $219


(1)The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 2,126 Bcf or a net 232 Bcf long position and 2,226 Bcf or a net 374 Bcf long position as of March 31, 2020 and December 31, 2019, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure.

(2)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below.

(3)Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

Cumulative Basis Adjustment for Fair Value Hedges (CenterPoint Energy and CERC)
   March 31, 2020
 Balance Sheet Location Carrying Amount of Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
   CenterPoint Energy CERC CenterPoint Energy CERC
   (in millions)
Hedged items in fair value hedge relationship:        
Natural gas inventoryCurrent Assets: Current assets held for sale $45
 $45
 $(19) $(19)
Borrowed natural gasCurrent Liabilities: Current liabilities held for sale (2) (2) —
 —
Gas imbalance receivableCurrent Assets: Current assets held for sale 2
 2
 (2) (2)
Gas imbalance payableCurrent Liabilities: Current liabilities held for sale —
 —
 1
 1
Total $45
 $45
 $(20) $(20)

   December 31, 2019
 Balance Sheet Location Carrying Amount of Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
   CenterPoint Energy CERC CenterPoint Energy CERC
   (in millions)
Hedged items in fair value hedge relationship:        
Natural gas inventoryCurrent Assets: Current assets held for sale $47
 $47
 $(13) $(13)
Total $47
 $47
 $(13) $(13)


Offsetting of Natural Gas Derivative Assets and Liabilities (CenterPoint Energy and CERC)

CenterPoint Energy
Offsetting of Natural Gas Derivative Assets and Liabilities
  September 30, 2017
  
Gross Amounts Recognized (1)
 Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2)
  (in millions)
Current Assets: Non-trading derivative assets $97
 $(33) $64
Other Assets: Non-trading derivative assets 67
 (11) 56
Current Liabilities: Non-trading derivative liabilities (57) 40
 (17)
Other Liabilities: Non-trading derivative liabilities (27) 17
 (10)
Total $80
 $13
 $93
 March 31, 2020 December 31, 2019
 
Gross Amounts Recognized (1)
 Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2) Gross Amounts Recognized (1) Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2)
 (in millions)
Current Assets: Current assets held for sale$346
 $(133) $213
 $224
 $(88) $136
Other Assets: Non-current assets held for sale—
 —
 —
 68
 (10) 58
Current Liabilities: Non-trading derivative liabilities(9) —
 (9) (7) —
 (7)
Current Liabilities: Current liabilities held for sale(219) 183
 (36) (180) 136
 (44)
Other Liabilities: Non-trading derivative liabilities(14) —
 (14) (15) —
 (15)
Other Liabilities: Non-current liabilities held for sale—
 —
 —
 (39) 25
 (14)
Total CenterPoint Energy$104
 $50
 $154
 $51
 $63
 $114


CERC
 March 31, 2020 December 31, 2019
 
Gross Amounts Recognized (1)
 Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2) Gross Amounts Recognized (1) Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2)
 (in millions)
Current Assets: Current assets held for sale$346
 $(133) $213
 $224
 $(88) $136
Other Assets: Non-current assets held for sale—
 —
 —
 68
 (10) 58
Current Liabilities: Current liabilities held for sale(219) 183
 (36) (180) 136
 (44)
Other Liabilities: Non-current liabilities held for sale—
 —
 —
 (39) 25
 (14)
Total CERC$127
 $50
 $177
 $73
 $63
 $136

(1)Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.


(2)The derivative assets and liabilities on the Registrant’s respective Condensed Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.



Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy and CERC)

Fair Value of Derivative Instruments
  December 31, 2016
Derivatives not designated
as hedging instruments
 
Balance Sheet
Location
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
    (in millions)
Natural gas derivatives (1) (2) (3)
 Current Assets: Non-trading derivative assets $79
 $14
Natural gas derivatives (1) (2) (3)
 Other Assets: Non-trading derivative assets 24
 5
Natural gas derivatives (1) (2) (3)
 Current Liabilities: Non-trading derivative liabilities 2
 43
Natural gas derivatives (1) (2) (3)
 Other Liabilities: Non-trading derivative liabilities —
 5
Indexed debt securities derivative Current Liabilities —
 717
Total (4)
 $105
 $784
 Three Months Ended March 31,
 2020 2019
 
Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)
 Income from discontinued operations
 CenterPoint Energy CERC CenterPoint Energy CERC
 (in millions)
Total amounts presented in the statements of income in which the effects of hedges are recorded$887
 $786
 $1,251
 $1,171
Gain (loss) on fair value hedging relationships:       
Commodity contracts:       
Hedged items in fair value hedging relationships(7) (7) (6) (6)
Derivatives designated as hedging instruments7
 7
 6
 6
Amounts excluded from effectiveness testing recognized in earnings immediately(38) (38) (14) (14)


(1)The fair value shownIncome statement impact associated with cash flow hedge activity is related to gains and losses reclassified from Accumulated other comprehensive income into income. Amounts are immaterial for natural gas contracts is comprised of derivative gross volumes totaling 1,035 Bcf or a net 59 Bcf long position. Certain natural gas contracts hedge basis risk onlyeach Registrant in the three months ended March 31, 2020 and lack a fixed price exposure.2019, respectively.

(2)Natural gas contracts are presented on a net basis in the Condensed Consolidated Balance Sheets as they are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets. The net of total non-trading natural gas derivative assets and liabilities was a $24 million asset as shown on CenterPoint Energy’s Condensed Consolidated Balance Sheets (and as detailed in the table below), and was comprised of the natural gas contracts derivative assets and liabilities separately shown above, impacted by collateral netting of $14 million.

(3)Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

(4)No derivatives were designated as fair value hedges as of December 31, 2016.

Offsetting of Natural Gas Derivative Assets and Liabilities
  December 31, 2016
  
Gross Amounts Recognized (1)
 Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2)
  (in millions)
Current Assets: Non-trading derivative assets $81
 $(30) $51
Other Assets: Non-trading derivative assets 24
 (5) 19
Current Liabilities: Non-trading derivative liabilities (57) 16
 (41)
Other Liabilities: Non-trading derivative liabilities (10) 5
 (5)
Total $38
 $(14) $24

(1)Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.

(2)The derivative assets and liabilities on the Condensed Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.

Realized and unrealized gains and losses on natural gas derivatives are recognized in the Condensed Statements of Consolidated Income as revenue for physical sales derivative contracts and as natural gas expense for financial natural gas derivatives and physical purchase natural gas derivatives. Realized and unrealized gains and losses on indexed debt securities are recorded as Other Income (Expense) in the Condensed Statements of Consolidated Income.

Hedge ineffectiveness is recorded as a component of natural gas expense and primarily results from differences in the location of the derivative instrument and the hedged item. Basis ineffectiveness arises from natural gas market price differences between the locations of the hedged inventory and the delivery location specified in the hedge instruments. The impact of natural gas derivatives designated as fair value hedges, the related hedged item, and natural gas derivatives not designated as hedging instruments are presented in the table below.

CenterPoint Energy
    Three Months Ended March 31,
  Income Statement Location 2020 2019
   (in millions)
Effects of derivatives not designated as hedging instruments on the income statement:    
Commodity contracts Income from discontinued operations $75
 $4
Indexed debt securities derivative Gain (loss) on indexed debt securities 135
 (86)
Total CenterPoint Energy $210
 $(82)

Income Statement Impact of Derivative Activity
    Three Months Ended September 30,
  Income Statement Location 2017 2016
Derivatives designated as fair value hedges:   (in millions)
Natural gas derivatives Gains (Losses) in Expenses: Natural Gas $(4) $—
Fair value adjustments for natural gas inventory designated as the hedged item Gains (Losses) in Expenses: Natural Gas 4
 —
Total increase in Expenses: Natural Gas (1)
 $—
 $—
       
Derivatives not designated as hedging instruments:      
Natural gas derivatives Gains (Losses) in Revenues $30
 $31
Natural gas derivatives Gains (Losses) in Expenses: Natural Gas (9) (13)
Indexed debt securities derivative Gains (Losses) in Other Income (Expense) (36) (72)
Total - derivatives not designated as hedging instruments $(15) $(54)


CERC
    Three Months Ended March 31,
  Income Statement Location 2020 2019
   (in millions)
Effects of derivatives not designated as hedging instruments on the income statement:    
Commodity contracts Income from discontinued operations $75
 $4
Total CERC $75
 $4

Income Statement Impact of Derivative Activity
    Nine Months Ended September 30,
  Income Statement Location 2017 2016
Derivatives designated as fair value hedges:   (in millions)
Natural gas derivatives Gains (Losses) in Expenses: Natural Gas $8
 $—
Fair value adjustments for natural gas inventory designated as the hedged item Gains (Losses) in Expenses: Natural Gas (10) —
Total increase in Expenses: Natural Gas (1)
 $(2) $—
       
Derivatives not designated as hedging instruments:      
Natural gas derivatives Gains (Losses) in Revenues $162
 $1
Natural gas derivatives Gains (Losses) in Expenses: Natural Gas (91) 35
Indexed debt securities derivative Gains (Losses) in Other Income (Expense) (59) (258)
Total - derivatives not designated as hedging instruments $12
 $(222)

(1)Hedge ineffectiveness results from the basis ineffectiveness discussed above, and excludes the impact to natural gas expense from timing ineffectiveness.  Timing ineffectiveness arises due to changes in the difference between the spot price and the futures price, as well as the difference between the timing of the settlement of the futures and the valuation of the underlying physical commodity.  As the commodity contract nears the settlement date, spot-to-forward price differences should converge, which should reduce or eliminate the impact of this ineffectiveness on natural gas expense.



(c)Credit Risk Contingent Features (CenterPoint Energy and CERC)


CenterPoint Energy entersand CERC enter into financial derivative contracts containing material adverse change provisions. These provisions could require CenterPoint Energy or CERC to post additional collateral if the S&P or Moody’s credit ratings of CenterPoint Energy, Inc. or its subsidiaries, including CERC Corp., are downgraded. The total fair value of the derivative instruments that contain credit risk contingent features that are in a net liability position as of both September 30, 2017 and December 31, 2016 was $1 million.  CenterPoint Energy posted no assets as collateral toward derivative instruments that contain credit risk contingent features as of either September 30, 2017 or December 31, 2016.  If all derivative contracts (in a net liability position) containing credit risk contingent features were triggered as of September 30, 2017 and December 31, 2016, $1 million and $-0-, respectively, of additional assets would be required to be posted as collateral.
 March 31, 2020 December 31, 2019
 CenterPoint Energy CERC CenterPoint Energy CERC
 (in millions)
Aggregate fair value of derivatives containing material adverse change provisions in a net liability position$1
 $1
 $1
 $1
Fair value of collateral already posted—
 —
 —
 —
Additional collateral required to be posted if credit risk contingent features triggered1
 1
 1
 1



(7) (8) Fair Value Measurements


Assets and liabilities that are recorded at fair value in the Registrants’ Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:


Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities, as well as natural gas inventory that has been designated as the hedged item in a fair value hedge.


Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, andquoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability.liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. A market approach is utilized to value the Registrants’ Level 2 natural gas derivative assets or liabilities. CenterPoint Energy’s Level 2 assets or liabilities.indexed debt securities derivative is valued using an option model and a discounted cash flow model, which uses projected dividends on the ZENS-Related Securities and a discount rate as observable inputs.


Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect CenterPoint Energy’sthe Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. CenterPoint Energy developsThe Registrants develop these inputs based on the best information available, including CenterPoint Energy’sthe Registrants’ own data. A market approach is utilized to value CenterPoint Energy’sthe Registrants’ Level 3 assets or liabilities. As of September 30, 2017,March 31, 2020, CenterPoint Energy’s and CERC’s Level 3 assets and liabilities are comprised of physical natural gas forward contracts and options and its indexed debt securities.options. Level 3 physical natural gas forward contracts and options are valued using a discounted cash flow model which includes illiquid forward price curve locations (ranging from $1.08$1.15 to $5.83$4.83 per MMBtu for CenterPoint Energy, with a volumetrically weighted average of $2.22 per MMBtu, and from $1.15 to $4.83 per MMBtu for CERC, with a volumetrically weighted average of $2.22 per MMBtu) as an unobservable input. Level 3 options are valued through Black-Scholes (including forward start) option models which include option volatilities (ranging from 0% to 87%) as an unobservable input.  CenterPoint Energy’s and CERC’s Level 3 physical natural gas forward contracts and options derivative assets and liabilities consist of both long and short positions (forwards and options) and their fair value is sensitive to forward prices and volatilities. If forward prices decrease, CenterPoint Energy’s. Forward price decreases (increases) as of March 31, 2020 would have resulted in lower (higher) values, respectively, for long forwards lose value whereas itsand options and higher (lower) values, respectively, for short forwards gain in value.  If volatility decreases, CenterPoint Energy’s long options lose value whereas its short options gain in value. CenterPoint Energy’s Level 3 indexed debt securities are valued using a Black-Scholes option model and a discounted cash flow model, which use option volatility (11.4%) and a projected dividend growth rate (7%) as unobservable inputs. An increase in either volatilities or projected dividends will increase the value of the indexed debt securities, and a decrease in either the volatilities or projected dividends will decrease the value of the indexed debt securities.options.


CenterPoint Energy determinesThe Registrants determine the appropriate level for each financial asset and liability on a quarterly basis and recognizes transfers between levels at the end of the reporting period.  For the nine months ended September 30, 2017, there were no transfers between Level 1 and 2. CenterPoint Energybasis. The Registrants also recognizesrecognize purchases of Level 3 financial assets and liabilities at their fair market value at the end of the reporting period.



The following tables present information about CenterPoint Energy’sthe Registrants’ assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of September 30, 2017March 31, 2020 and December 31, 2016,2019 and indicate the fair value hierarchy of the valuation techniques utilized by CenterPoint Energythe Registrants to determine such fair value.

CenterPoint Energy
September 30, 2017
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting
Adjustments (1)
 Balance
 March 31, 2020 December 31, 2019
(in millions)

Level 1
 Level 2 Level 3 
Netting
(1)
 Total 

Level 1
 Level 2 Level 3 
Netting
(1)
 Total
Assets         (in millions)
Corporate equities$1,060
 $—
 $—
 $—
 $1,060
$680
 $—
 $—
 $—
 $680
 $825
 $—
 $—
 $—
 $825
Investments, including money
market funds (2)
67
 —
 —
 —
 67
48
 —
 —
 —
 48
 49
 —
 —
 —
 49
Natural gas derivatives (3)
3
 128
 33
 (44) 120
Hedged portion of natural gas inventory65
 —
 —
 —
 65
Natural gas derivatives (3)(4)(5)
—
 305
 41
 (133) 213
 —
 250
 42
 (98) 194
Hedged portion of gas imbalance payable1
 —
 —
 —
 1
 —
 —
 —
 —
 —
Total assets$1,195
 $128
 $33
 $(44) $1,312
$729
 $305
 $41
 $(133) $942
 $874
 $250
 $42
 $(98) $1,068
Liabilities 
  
  
  
  
 
  
  
  
  
          
Indexed debt securities derivative$—
 $—
 $776
 $—
 $776
$—
 $758
 $—
 $—
 $758
 $—
 $893
 $—
 $—
 $893
Interest rate derivatives—
 26
 —
 —
 26
 —
 10
 —
 —
 10
Natural gas derivatives—
 23
 —
 —
 23
 —
 22
 —
 —
 22
Natural gas derivatives (3)(5)
3
 74
 7
 (57) 27
—
 201
 18
 (183) 36
 —
 195
 24
 (161) 58
Hedged portion of natural gas inventory (5)
19
 —
 —
 —
 19
 13
 —
 —
 —
 13
Hedged portion of gas imbalance receivable2
 —
 —
 —
 2
 —
 —
 —
 —
 —
Total liabilities$3
 $74
 $783
 $(57) $803
$21
 $1,008
 $18
 $(183) $864
 $13
 $1,120
 $24
 $(161) $996

Houston Electric
 March 31, 2020 December 31, 2019
 

Level 1
 Level 2 Level 3 Netting Total 

Level 1
 Level 2 Level 3 Netting Total
Assets(in millions)
Investments, including money market funds (2)
$31
 $—
 $—
 $—
 $31
 $32
 $—
 $—
 $—
 $32
Total assets$31
 $—
 $—
 $—
 $31
 $32
 $—
 $—
 $—
 $32

CERC
 March 31, 2020 December 31, 2019
 

Level 1
 Level 2 Level 3 
Netting
(1)
 Total 

Level 1
 Level 2 Level 3 
Netting
(1)
 Total
Assets(in millions)
Corporate equities$1
 $—
 $—
 $—
 $1
 $2
 $—
 $—
 $—
 $2
Investments, including money market funds (2)
11
 —
 —
 —
 11
 11
 —
 —
 —
 11
Natural gas derivatives (3)(4)(5)
—

305

41

(133) 213
 —
 250
 42
 (98) 194
Hedged portion of gas imbalance payable1
 —
 —
 —
 1
 —
 —
 —
 —
 —
Total assets$13
 $305
 $41
 $(133) $226
 $13
 $250
 $42
 $(98) $207
Liabilities 
  
  
  
  
          
Natural gas derivatives (3)(4)(5)
$—

$201

$18

$(183) $36
 $—
 $195
 $24
 $(161) $58
Hedged portion of natural gas inventory (5)
19
 —
 —
 —
 19
 13
 —
 —
 —
 13
Hedged portion of gas imbalance receivable2
 —
 —
 —
 2
 —
 —
 —
 —
 —
Total liabilities$21
 $201
 $18
 $(183) $57
 $13
 $195
 $24
 $(161) $71


(1)Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy and CERC to settle positive and negative positions and also include cash collateral of $13 million posted with the same counterparties.counterparties as follows:

 March 31, 2020 December 31, 2019
 CenterPoint Energy CERC CenterPoint Energy CERC
 (in millions)
Cash collateral posted with the same counterparties$50
 $50
 $63
 $63


(2)Amounts are included in Prepaid Expensesexpenses and Other Current Assetsother current assets in the Condensed Consolidated Balance Sheets.


(3)Natural gas derivatives include no material amounts related to physical forward transactions with Enable.
 December 31, 2016
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting
Adjustments (1)
 Balance
     
 (in millions)
Assets         
Corporate equities$956
 $—
 $—
 $—
 $956
Investments, including money
market funds (2)
77
 —
 —
 —
 77
Natural gas derivatives (3)
11
 74
 20
 (35) 70
Total assets$1,044
 $74
 $20
 $(35) $1,103
Liabilities 
  
  
  
  
Indexed debt securities derivative$—
 $—
 $717
 $—
 $717
Natural gas derivatives (3)
4
 56
 7
 (21) 46
Total liabilities$4
 $56
 $724
 $(21) $763


(1)(4)Amounts representLevel 1 natural gas derivatives include exchange-traded derivatives cleared by the impactCME, which deems that financial instruments cleared by the CME are settled daily in connection with posted cash payments. As a result of legally enforceable master netting arrangements that allow CenterPoint Energythis exchange rule, CME-related derivatives are considered to settle positivehave no fair value at the balance sheet date for financial reporting purposes and negative positionsare presented in Level 1 net of posted cash; however, the derivatives remain outstanding and also include cash collateral of $14 million held by CES fromsubject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the same counterparties.CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.


(2)(5)Amounts are includedclassified as held for sale in Prepaid Expenses and Other Current Assets in the Registrants’ respective Condensed Consolidated Balance Sheets.

(3)Natural gas derivatives include no material amounts related to physical forward transactions with Enable.



The following table presents additional information about assets or liabilities, including derivatives that are measured at fair value on a recurring basis for which CenterPoint Energy hasand CERC have utilized Level 3 inputs to determine fair value:
  Three Months Ended March 31,
  2020 2019
  CenterPoint Energy CERC CenterPoint Energy CERC
 (in millions)
Beginning balance $18
 $18
 $30
 $30
Total gains (losses) 15
 15
 (1) (1)
Total settlements (10) (10) (15) (15)
Transfers into Level 3 —
 —
 1
 1
Transfers out of Level 3 —
 —
 (2) (2)
Ending balance (1) $23
 $23
 $13
 $13
         
The amount of total gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date:
  $14
 $14
 $(2) $(2)

 
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
 Derivative assets and liabilities, net
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Beginning balance$(712) $16
 $(704) $12
Purchases (1)
—
 —
 —
 12
Total gains (losses)(38) 9
 (38) 13
Total settlements(1) (8) (5) (24)
Transfers into Level 37
 —
 9
 5
Transfers out of Level 3(6) —
 (12) (1)
Ending balance (2)
$(750) $17
 $(750) $17
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date (3)
$(36) $6
 $(42) $14


(1)Mark-to-market value of Level 3 derivative assets acquired through the purchase of AEM was less than $1 million at the acquisition date.

(2)CenterPoint Energy and CERC did not have significant Level 3 purchases or sales during either of the three or nine months ended September 30, 2017March 31, 2020 or 2016.2019. The Level 3 assets and liabilities as of March 31, 2020 and 2019 are classified in the CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets as held for sale.

Items Measured at Fair Value on a Nonrecurring Basis

Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 primarily due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. The impairment analysis compared the estimated fair value of CenterPoint Energy’s investment in Enable to its carrying value. The fair value of the investment was determined using multiple valuation methodologies under both the market and income approaches. Both of these approaches incorporate significant estimates and assumptions, including:


(3)During 2016, CenterPoint Energy transferred its indexed debt securities from Level 2 to Level 3 to reflect changes in the significance of the unobservable inputs used in the valuation. As of September 30, 2017, the indexed debt securities liability was $776 million. During the three and nine months ended September 30, 2017, there was a loss of $36 million and $59 million, respectively, on the indexed debt securities.

Market Approach

• quoted price of Enable’s common units;

• recent market transactions of comparable companies; and

• EBITDA to total enterprise multiples for comparable companies.

Income Approach

• Enable’s forecasted cash distributions;

• projected cash flows of incentive distribution rights;

• forecasted growth rate of Enable’s cash distributions; and

• determination of the cost of equity, including market risk premiums.

Weighting of the Different Approaches

Significant unobservable inputs used include the growth rate applied to the projected cash distributions beyond 2020 and the discount rate used to determine the present value of the estimated future cash flows. Based on the significant unobservable estimates and assumptions required, CenterPoint Energy concluded that the fair value estimate should be classified as a Level 3 measurement within the fair value hierarchy. As a result of this analysis, CenterPoint Energy recorded an other than temporary impairment on its investment in Enable of $1,541 million, reducing the fair value of the investment to $848 million. See Note 9 for further discussion of the impairment.

As of March 31, 2020, CenterPoint Energy recorded a goodwill impairment charge of $185 million in the Indiana Electric Integrated reporting unit. See Note 10 for further information.

CenterPoint Energy recognized a goodwill impairment charge of $82 million upon classifying the Infrastructure Services Disposal Group as held for sale and CenterPoint Energy and CERC recognized a goodwill impairment charge of approximately $62 million and a loss on assets held for sale of approximately $70 million upon classifying the Energy Services Disposal Group as held for sale. Using a market approach, the fair value of the Infrastructure Services Disposal Group as of March 31, 2020 is determined to be approximately $864 million and the fair value of the Energy Services Disposal Group as of March 31, 2020 is determined to be approximately $402 million. For both Disposal Groups, CenterPoint Energy and CERC, as applicable, used the contractual sales price adjusted for estimated working capital, and other contractual purchase price adjustments, which are Level 2 inputs. See Note 3 for further information.

Estimated Fair Value of Financial Instruments


The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading” and short-term borrowings are estimated to be approximately equivalent to carrying amounts and have been excluded from the table below. The carrying amounts of non-trading derivative assets and liabilities and CenterPoint Energy’s ZENS indexed debt securities derivative are stated at fair value and are excluded from the table below. The fair value of each debt instrument is determined by multiplying the principal amount of each debt instrument by a combination of historical trading prices and comparable issue data. These liabilities, which are not measured at fair value in the Registrants’ Condensed Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.
 September 30, 2017 December 31, 2016
 Carrying
Amount		 Fair
Value		 
Carrying
Amount
 
Fair
Value
 (in millions)
Financial liabilities:       
Long-term debt$8,513
 $9,005
 $8,443
 $8,846
 March 31, 2020 December 31, 2019
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 (in millions)
CenterPoint Energy       
Long-term debt, including current maturities (1)
$15,238
 $16,047
 $15,093
 $16,067
Houston Electric       
Long-term debt, including current maturities (1)
$4,888
 $5,368
 $4,950
 $5,457
CERC       
Long-term debt, including current maturities$2,377
 $2,637
 $2,546
 $2,803

(1)Includes Securitization Bonds debt.

(8)(9) Unconsolidated AffiliateAffiliates (CenterPoint Energy and CERC)


CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP, and, accordingly, accounts for its investment in Enable’s common units using the equity method of accounting.

Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of March 31, 2020, CenterPoint Energy’s maximum exposure to loss related to Enable a VIE in which CenterPoint Energy is not the primary beneficiary, is limited to its equity investment andin unconsolidated affiliate, its investment in Enable Series A Preferred Unit investment as presented in the Condensed Consolidated Balance Sheets as of September 30, 2017Units and outstanding current accounts receivable from Enable.


Investment in Unconsolidated Affiliates (CenterPoint Energy):
 March 31, 2020 December 31, 2019
 (in millions)
Enable$848
 $2,406
Other2
 2
  Total$850
 $2,408


CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply of crude oil and natural gas and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units. See Note 8 for further discussion of the determination of fair value of CenterPoint Energy’s investment in Enable.

Equity in Earnings of Unconsolidated Affiliates, net (CenterPoint Energy):
  Three Months Ended March 31,
  2020 2019
 (in millions)
Enable $(1,475) $62
Other —
 —
        Total $(1,475) $62


CenterPoint Energy recognized a loss of $1,475 million from its investment in Enable for the three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million.

Transactions with Enable:Limited Partner Interest and Units Held in Enable (CenterPoint Energy):
 March 31, 2020
 
Limited Partner Interest (1)
 
Common Units (2)
 
Enable Series A Preferred Units (3)
CenterPoint Energy53.7% 233,856,623
 14,520,000
OGE25.5% 110,982,805
 —
Public unitholders20.8% 90,604,066
 —
        Total units outstanding100.0% 435,443,494
 14,520,000

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Reimbursement of transition services (1)
$—
 $1
 $3
 $6
Natural gas expenses, including transportation and storage costs23
 22
 80
 79
Interest income related to notes receivable from Enable—
 —
 —
 1


(1)Represents amounts billed underExcludes the Transition Agreements for certain support services provided to Enable. Actual transition services costs are recorded net of reimbursement.
 September 30, 2017 December 31, 2016
 (in millions)
Accounts receivable for amounts billed for transition services$1
 $1
Accounts payable for natural gas purchases from Enable8
 10

Limited Partner Interest in Enable(1):
September 30, 2017
CenterPoint Energy54.1%
OGE25.7%

(1)Excluding the Series A Preferred Units owned by CenterPoint Energy.


(2)Held indirectly through CNP Midstream by CenterPoint Energy.
In November 2016, Enable completed a public offering of 11,500,000 common units of which 1,424,281 were sold by ArcLight Capital Partners, LLC. The common units issued and sold by Enable resulted in dilution of both CenterPoint Energy’s and OGE’s limited partner interest in Enable.
(3)The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Condensed Consolidated Balance Sheets, was $363 million as of March 31, 2020 and $363 million as of December 31, 2019. No impairment charges or adjustment due to observable price changes were required or recorded during the current or prior reporting periods.

Enable Common Units and Series A Preferred Units Held:
 September 30, 2017
 Common Series A Preferred
CenterPoint Energy233,856,623
 14,520,000
OGE110,982,805
 —

The 139,704,916 subordinated units previously owned by CERC Corp. converted into common units of Enable on a one-for-one basis, on August 30, 2017, at the end of the subordination period, as set forth in Enable’s Fourth Amended and Restated Agreement of Limited Partnership. Upon conversion, holders of common units resulting from the conversion of subordinated units have all the rights and obligations of unitholders holding all other common units, including the right to receive distributions pro rata made with respect to common units.


Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal.refusal set forth in Enable’s Agreement of Limited Partnership.

Interests Held in Enable GP (CenterPoint Energy):
 March 31, 2020
 
Management
Rights (1)
 
Incentive Distribution Rights (2)
CenterPoint Energy (3)
50% 40%
OGE50% 60%


(1)Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.

(2)Enable previously expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to Enable GP and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, no incentive distributions have been made.

(3)Held indirectly through CNP Midstream.


Distributions Received from Enable is controlled jointly by CERC Corp.(CenterPoint Energy):

CenterPoint Energy
  Three Months Ended March 31,
  2020 2019
  Per Unit Cash Distribution Per Unit Cash Distribution
   
Enable common units (1)
 $0.3305
 $77
 $0.3180
 $74
Enable Series A Preferred Units 0.6250
 9
 0.6250
 9
  Total CenterPoint Energy   $86
   $83

(1)On April 1, 2020, Enable announced a 50% reduction in its quarterly distribution per common unit from $0.3305 to $0.16525.

Transactions with Enable (CenterPoint Energy and OGE, and each own 50% of the management rightsCERC):
The transactions with Enable in the general partner of Enable. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable’s general partner to a third party is subject to mutual rights of first offerfollowing tables exclude transactions with the Energy Services Disposal Group, which are now reflected as discontinued operations and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable’s general partner.liabilities held for sale.

  Three Months Ended March 31,
  2020 2019
 (in millions)
CenterPoint Energy 
Natural gas expenses, includes transportation and storage costs $27
 $27
CERC    
Natural gas expenses, includes transportation and storage costs 27
 27



 March 31, 2020 December 31, 2019
 (in millions)
CenterPoint Energy   
Accounts payable for natural gas purchases from Enable$9
 $9
CERC   
Accounts payable for natural gas purchases from Enable9
 9


Summarized unaudited consolidated income information for Enable is as follows:
 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2017 2016 2017
2016 2020
2019
 (in millions)(in millions)
Operating revenues $705
 $620
 $1,997
 $1,658
 $648
 $795
Cost of sales, excluding depreciation and amortization 349
 268
 936
 717
 226
 378
Impairment of goodwill and other long-lived assets —
 8
 —
 8
Depreciation and amortization 104
 105
Goodwill and long-lived assets impairments 28
 —
Operating income 137
 139
 399
 299
 146
 165
Net income attributable to Enable 104
 110
 301
 231
Reconciliation of Equity in Earnings, net:        
Net income attributable to Enable common units 103
 113
Reconciliation of Equity in Earnings (Losses), net:    
CenterPoint Energy’s interest $56
 $61
 $163
 $128
 $55
 $61
Basis difference amortization (1)
 12
 12
 36
 36
 12
 12
Loss on dilution, net of proportional basis difference recognition (1) (11)
Impairment of CenterPoint Energy’s equity method investment in Enable (1,541) —
CenterPoint Energy’s equity in earnings, net $68
 $73
 $199
 $164
 $(1,475) $62

(1)Equity in earnings of unconsolidated affiliatesaffiliate includes CenterPoint Energy’s share of Enable’sEnable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in Enable’s net assets.assets of Enable. The basis difference is being amortized over approximately 33 years,through the average life of the assets to which the basis difference is attributed.year 2048.


Summarized unaudited consolidated balance sheet information for Enable is as follows:
 September 30,
2017
December 31, 2016March 31, 2020 December 31, 2019
 (in millions)(in millions)
Current assets $446
 $396
$333
 $389
Non-current assets 10,816
 10,816
11,784
 11,877
Current liabilities 831
 362
391
 780
Non-current liabilities 2,740
 3,056
4,374
 4,077
Non-controlling interest 12
 12
27
 37
Preferred equity 362
 362
362
 362
Accumulated other comprehensive loss(9) (3)
Enable partners’ equity 7,317
 7,420
6,972
 7,013
Reconciliation of Equity Method Investment in Enable:    
CenterPoint Energy’s ownership interest in Enable partners’ capital $4,007
 $4,067
CenterPoint Energy’s basis difference (1,526) (1,562)
Reconciliation of Investment in Enable:   
CenterPoint Energy’s ownership interest in Enable partners’ equity$3,739
 $3,767
CenterPoint Energy’s basis difference (1)
(2,891) (1,361)
CenterPoint Energy’s equity method investment in Enable $2,481
 $2,505
$848
 $2,406


(1)Includes the impairment of CenterPoint Energy’s equity method investment in Enable of $1,541 million recorded during the three months ended March 31, 2020. The basis difference is being amortized through the year 2048.
Distributions Received from Unconsolidated Affiliate:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Investment in Enable’s common units$74
 $74
 $223
 $223
Investment in Enable’s Series A Preferred Units9
 9
 27
 13
As of September 30, 2017, CERC Corp. and OGE also own 40% and 60%, respectively, of the incentive distribution rights held by the general partner of Enable. Enable is expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to its general partner and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, the general partner will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances the general partner of Enable will have the right to reset the minimum quarterly distribution and the target

distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, no incentive distributions have been made.


(9) (10) Goodwill and Other Intangibles (CenterPoint Energy and CERC)


Goodwill and intangible assets related to the Infrastructure Services and Energy Services Disposal Groups are classified as held for sale on CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets, as applicable, and are excluded from the tabular disclosures below. See Note 3 for further information.
CenterPoint Energy’s goodwill by reportable business segment as of March 31, 2020 and December 31, 2016 and changes in the carrying amount of goodwill as of September 30, 2017 are2019 is as follows:
  December 31, 2019 Impairment March 31,
2020
 (in millions)
Indiana Electric Integrated $1,121
 $185
 $936
Natural Gas Distribution 3,312
 —
 3,312
Corporate and Other 449
 —
 449
Total $4,882
 $185
 $4,697

 December 31, 2016 AEM Acquisition (1) September 30,
2017		 
 (in millions) 
Natural Gas Distribution$746
 $—
 $746
 
Energy Services105
(2)5
 110
(2)
Other Operations11
 —
 11
 
Total$862
 $5
 $867
 
CERC’s goodwill by reportable segment as of March 31, 2020 and December 31, 2019 is as follows:
(1) See Note 3.
 March 31, 2020 December 31, 2019
 (in millions)
Natural Gas Distribution$746
 $746
Corporate and Other11
 11
Total$757
 $757

(2) Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.


CenterPoint Energy performs itsand CERC perform goodwill impairment tests at least annually and evaluatesevaluate goodwill when events or changes in circumstances indicate that its carrying value may not be recoverable. The impairment evaluation for goodwill is performed using a two-step process. In the first step,by comparing the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. The reporting units approximate the reportable segments, with the exception of ESG, which is a separate reporting unit but included in CenterPoint Energy’s Corporate and Other. The estimated fair value of the reporting unit is generallyprimarily determined based on an income approach or a weighted combination of income and market approaches. If the basiscarrying amount is in excess of discounted cash flows. If the estimated fair value of the reporting unit, then the excess amount is less thanthe impairment charge that should be recorded, not to exceed the carrying amount of goodwill.

In connection with their preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting unit, thenunits due to the macroeconomic conditions related in part to the COVID-19 pandemic and the resulting decrease in CenterPoint Energy’s enterprise market capitalization below book value from the decline in CenterPoint Energy’s common stock price.

CenterPoint Energy’s interim impairment test in the first quarter of 2020 resulted in a second step must be completed to determinenon-cash goodwill impairment charge
in the amount of $185 million for the Indiana Electric Integrated reportable segment. The Indiana Electric Integrated reporting unit fair value analysis resulted in an implied fair value of goodwill of $936 million for this reporting unit, and as a result, the non-cash impairment that should be recorded. Incharge was recorded in the second step,three months ended March 31, 2020.

CenterPoint Energy estimated the impliedvalue of the Indiana Electric Integrated reporting unit using primarily an income approach. Under the income approach, the fair value of the reporting unit’s goodwillunit is determined by allocatingusing the reporting unit’s fairpresent value to all of its assetsfuture expected cash flows, which include management’s projections of the amount and liabilities other than goodwill (including any unrecognized intangible assets) intiming of future capital expenditures and the cash inflows from the related regulatory recovery. These estimated future cash flows are then discounted using a manner similar torate that approximates the weighted average cost of capital of a purchase price allocation.market participant. The resulting impliedselection of the discount rate requires significant judgment.

With the exception of Indiana Electric Integrated discussed above, the fair value of theeach of CenterPoint Energy’s and CERC’s reporting units exceeded their carrying value, resulting in no goodwill that resultsimpairment from the applicationMarch 31, 2020 interim impairment test. See Note 3 for goodwill impairments included within discontinued operations.

The tables below present information on CenterPoint Energy’s other intangible assets recorded in Other non-current assets on CenterPoint Energy’s Condensed Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CenterPoint Energy’s Condensed Statements of this second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference.Consolidated Income, unless otherwise indicated.
 March 31, 2020 December 31, 2019
 Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance
 (in millions)
Customer relationships$33
 $(5) $28
 $33
 $(4) $29
Trade names16
 (1) 15
 16
 (1) 15
Construction backlog (1)
5
 (4) 1
 5
 (4) 1
Operation and maintenance agreements (1)
12
 (1) 11
 12
 —
 12
Other2
 (1) 1
 2
 (1) 1
Total$68
 $(12) $56
 $68
 $(10) $58


(1)Amortization expense related to the operation and maintenance agreements and construction backlog is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Condensed Statements of Consolidated Income.
  Three Months Ended March 31,
  2020 2019
 (in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization $1
 $—
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas 1
 7


CenterPoint Energy performed its annual impairment test inestimates that amortization expense of intangible assets with finite lives for the third quarter of 2017 and determined, based on the results of the first step, that no impairment charge was required for any reportable segment.next five years will be as follows:

 Amortization Expense
 (in millions)
Remaining nine months of 2020$6
20216
20226
20236
20245
20255


(10)(11) Indexed Debt Securities (ZENS) and Securities Related to ZENS (CenterPoint Energy)


(a) Investment in Securities Related to ZENS


In 1995, CenterPoint Energy sold a cable television subsidiary to TW and received TW securities as partial consideration. A subsidiary of CenterPoint Energy now holds 7.1 million shares of TW Common, 0.9 million shares of Time Common and 0.9 million shares of Charter Common,certain securities detailed in the table below, which are classified as trading securities and are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS. Unrealized gains and losses resulting from changes in the market value of the TWZENS-Related Securities are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.

 Shares Held
 March 31, 2020 December 31, 2019
AT&T Common10,212,945
 10,212,945
Charter Common872,503
 872,503


(b) ZENS


In September 1999, CenterPoint Energy issued ZENS having an original principal amount of $1$1.0 billion of which $828 million remainremained outstanding as of September 30, 2017.March 31, 2020. Each ZENS was originallyis exchangeable at the holder’s option at any time for an amount of cash equal to 95% of the market value of the reference shares of TW Common attributable to such note. The number and identity of the reference shares attributable to each ZENS are adjusted for certain corporate events. As of September 30, 2017, the

CenterPoint Energy’s reference shares for each ZENS consisted of 0.5 sharethe following:
 March 31, 2020 December 31, 2019
 (in shares)
AT&T Common0.7185
 0.7185
Charter Common0.061382
 0.061382


CenterPoint Energy pays interest on the ZENS at an annual rate of TW Common, 0.0625 share2% plus the amount of Time Commonany quarterly cash dividends paid in respect of the reference shares attributable to the ZENS. The principal amount of the ZENS is subject to increases or decreases to the extent that the annual yield from interest and 0.061382 sharecash dividends on the reference shares attributable to the ZENS is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of Charter Common,March 31, 2020, the ZENS, having an original principal amount of $828 million and thea contingent principal balance was $507 million.

On October 22, 2016, AT&T announced that it had entered into a definitive agreementamount of $70 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to acquire TW in a stock and cash transaction. On February 15, 2017, TW shareholders approved95% of the announced transaction with AT&T. Pursuantmarket value of the reference shares attributable to the merger agreement, upon closing of the merger, TW shareholders would receive for each of their shares of TW Common an estimated implied value of $107.50, comprised of $53.75 per share in cash and $53.75 per share in AT&T Common. The stock portion will be subject to a collar such that TW shareholders will receive 1.437 shares of AT&T Common if AT&T Common’s average stock price is below $37.411 at closing and 1.3 shares of AT&T Common if AT&T Common’s average stock price is above $41.349 atZENS.

closing. Cash received for the TW Common reference shares would subsequently be distributed to ZENS holders, which is expected to reduce the contingent principal balance, and reference shares would consist of Charter Common, Time Common and AT&T Common. AT&T has publicly announced that the merger is expected to close by the end of 2017.


(11) (12) Short-term Borrowings and Long-term Debt


(a)Short-term Borrowings (CenterPoint Energy and CERC)


Inventory Financing. NGD currently has AMAs associated with its utility distribution service in Arkansas, north Louisiana, Mississippi, Oklahoma and Oklahoma that extend through 2020.Texas. The AMAs have varying terms, the longest of which expires in 2021. Pursuant to the provisions of the agreements, NGD sells natural gas and agrees to repurchase an equivalent amount of natural gas during the winter heating seasons at the same cost, plus a financing charge.cost. These transactions are accounted for as an inventory financingfinancing. CenterPoint Energy and CERC had an associated principal obligation of $48 million and $35 millionno outstanding obligations related to the AMAs as of September 30, 2017both March 31, 2020 and December 31, 2016, respectively.2019.

(b)Long-term Debt


Debt RetirementsCredit Facilities. In February 2017, CenterPoint Energy retired $250 million aggregate principal amount of its 5.95% senior notes at their maturity. The retirement of senior notes was financed by the issuance of commercial paper.

Debt Issuances. During the nine months ended September 30, 2017, CenterPoint Energy, Houston Electric and CERC Corp. issued the following debt instruments:
  Issuance Date Debt Instrument Aggregate Principal Amount Interest Rate Maturity Date
      (in millions)    
Houston Electric January 2017 General mortgage bonds $300
 3.00% 2027
CenterPoint Energy August 2017 Unsecured senior notes   500
 2.50% 2022
CERC Corp. August 2017 Unsecured senior notes   300
 4.10% 2047

The proceeds from the issuances were used for general limited liability company and corporate purposes, as applicable, including to repay portions of outstanding commercial paper.

Credit Facilities. In June 2017, CenterPoint Energy, Houston Electric and CERC Corp. each entered into amendments to their respective revolving credit facilities to extend the termination date thereof from March 3, 2021 to March 3, 2022 and to terminate the swingline loan subfacility thereunder. The amendments to the CenterPoint Energy and CERC Corp. revolving credit facilities also increased the aggregate commitments by $100 million and $300 million, respectively, to $1.7 billion and $900 million under their respective revolving credit facilities. No changes were made to the aggregate commitments under the Houston Electric revolving credit facility. In connection with the amendments to increase the aggregate commitments under their respective revolving credit facilities, CenterPoint Energy and CERC Corp. each increased the size of their respective commercial paper programs to permit the issuance of commercial paper notes in an aggregate principal amount not to exceed $1.7 billion and $900 million, respectively, at any time outstanding.

As of September 30, 2017 and December 31, 2016, CenterPoint Energy, Houston Electric and CERC Corp.Registrants had the following revolving credit facilities and utilizationas of such facilities:March 31, 2020:
 September 30, 2017 December 31, 2016 
 Size of
Facility		 Loans Letters
of Credit		 Commercial
Paper		 Size of
Facility		 Loans Letters
of Credit		 Commercial
Paper		 
 (in millions) 
CenterPoint Energy$1,700
 $—
 $6
 $447
(1)$1,600
 $—
 $6
 $835
(1)
Houston Electric300
 —
 4
 —
 300
 —
 4
 —
 
CERC Corp.900
 —
 —
 529
(2)600
 —
 4
 569
(2)
Total$2,900
 $—
 $10
 $976
 $2,500
 $—
 $14
 $1,404
 
Execution
 Date
 Registrant 
Size of
Facility
 
Draw Rate of LIBOR plus (1)
 Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio 
Debt for Borrowed Money to Capital
Ratio as of
March 31, 2020 (2)
 Termination Date
    (in millions)        
March 3, 2016 CenterPoint Energy $3,300
 1.500% 65%(3)59.0% March 3, 2022
July 14, 2017 
CenterPoint Energy (4)
 400
 1.125% 65% 50.4% July 14, 2022
July 14, 2017 
CenterPoint Energy (5)
 200
 1.250% 65% 56.5% July 14, 2022
March 3, 2016 Houston Electric 300
 1.250% 65%(3)53.4% March 3, 2022
March 3, 2016 CERC 900
 1.250% 65% 43.6% March 3, 2022
  Total $5,100
        


(1)Weighted average interest rate was 1.42% and 1.04% as of September 30, 2017 and December 31, 2016, respectively.

(2)Weighted average interest rate was 1.43% and 1.03% as of September 30, 2017 and December 31, 2016, respectively.


Execution
 Date
 Company 
Size of
Facility
 
Draw Rate of LIBOR plus (2)
 Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio 
Debt for Borrowed Money to Capital
Ratio as of
September 30, 2017 (3)
 
Termination Date (5)
    (in millions)        
March 3, 2016 CenterPoint Energy $1,700
(1)1.250% 65%(4)56.9% March 3, 2022
March 3, 2016 Houston Electric 300
 1.125% 65%(4)49.0% March 3, 2022
March 3, 2016 CERC Corp. 900
(1)1.250% 65% 38.6% March 3, 2022

(1)Amended on June 16, 2017 to increase the aggregate commitment size as noted above.

(2)Based on current credit ratings.


(3)(2)As defined in the revolving credit facility agreement,agreements, excluding Securitization Bonds.


(4)(3)TheFor CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase from 65% to 70% if Houston Electric experiences damage from a natural disaster in its service territory and CenterPoint Energy certifies to the administrative agent that Houston Electric has incurred system restoration costs reasonably likely to exceed $100 million in a consecutive 12-month period, all or part of which Houston Electric intends to seek to recover through securitization financing. Such temporary increase in the financial covenant would be in effect from the date CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of such certification.


(4)This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $10 million swing line sublimit and a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program.

(5)Amended on June 16, 2017 to extend the termination date as noted above.This credit facility was issued by VCC, is guaranteed by Vectren and includes a $40 million swing line sublimit and an $80 million letter of credit sublimit.


The Registrants, including the subsidiaries of CenterPoint Energy Houston Electric and CERC Corp.discussed above, were in compliance with all financial debt covenants as of September 30, 2017.March 31, 2020.

The table below reflects the utilization of the Registrants’ respective revolving credit facilities:
 March 31, 2020 December 31, 2019
RegistrantLoans Letters
of Credit		 Commercial
Paper		 Weighted Average Interest Rate Loans Letters
of Credit		 Commercial
Paper		 Weighted Average Interest Rate
 (in millions, except weighted average interest rate)
CenterPoint Energy (1)
$900
 $6
 $1,169
 2.17% $—
 $6
 $1,633
 1.95%
CenterPoint Energy (2)
150
 —
 76
 2.19% —
 —
 268
 2.08%
CenterPoint Energy (3)
—
 —
 —
 —% —
 —
 —
 —%
Houston Electric—
 —
 —
 —% —
 —
 —
 —%
CERC—
 1
 205
 2.80% —
 1
 377
 1.94%
Total$1,050
 $7
 $1,450
   $—
 $7
 $2,278
  


(1)CenterPoint Energy’s outstanding commercial paper generally has maturities of 60 days or less.


(2)This credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.

(3)This credit facility was issued by VCC and is guaranteed by Vectren.

Other. As of March 31, 2020, certain financial institutions agreed to issue, from time to time, up to $50 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on December 31, 2020. As of March 31, 2020, such financial institutions had issued $20 million of letters of credit on behalf of Vectren and certain of its subsidiaries. 

Houston Electric had $68 million and $68 million of general mortgage bonds outstanding as of March 31, 2020 and December 31, 2019, respectively, as collateral for long-term debt of CenterPoint Energy that matures in 2028. These bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations.

(12) (13) Income Taxes


The Registrants reported the following effective tax rate reported for the three months ended September 30, 2017 was 37% compared to 35% for the same period in 2016. The higher effective tax rate for the three months ended September 30, 2017rates:
  Three Months Ended March 31,
  2020 2019
CenterPoint Energy - Continuing operations (1)
 25% 9%
CenterPoint Energy - Discontinued operations (2) 
 10% 24%
Houston Electric (3)
 13% 18%
CERC - Continuing operations (4)
 21% 14%
CERC - Discontinued operations (5)
 15% 22%


(1)CenterPoint Energy’s higher effective tax rate on the loss from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.

(2)CenterPoint Energy’s lower effective tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due to the non-deductible portions of goodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.

(3)Houston Electric's lower effective tax rate for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability.

(4)CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT liability.

(5)CERC’s lower effective tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was due to the non-deductible portion of the goodwill impairment on the Energy Services Disposal Group.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, deferring the payment of the employer share of payroll taxes for the remaining months of 2020 until 2021 and 2022, increasing the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerating refunds for minimum tax credit carryforwards, among other provisions. The tax effects of receiving less nontaxable incomechanges in tax laws are recognized in the period. The effective tax rate reported for the nine months ended September 30, 2017 was 36% compared to 37% for the same period in 2016.

which the law is enacted. As such, CenterPoint Energy recorded a $19 million benefit resulting from carryback claims expected to be filed to refund taxes paid in prior years.

The Registrants reported noa net uncertain tax liability, inclusive of interest and penalties, of $8 million as of September 30, 2017 and expects no significant changeMarch 31, 2020. A net $1 million decrease from December 31, 2019 was primarily driven by a favorable court of appeals decision resulting in a reduction of the associated state tax reserve. The Registrants believe that it is reasonably possible that a decrease of up to the uncertain$5 million in unrecognized tax liability overbenefits may occur in the next twelve months. Tax12 months as a result of a lapse of statutes on older exposures and/or the filing

of applications for accounting method changes. For CenterPoint Energy, tax years through 20152017 have been audited and settled with the IRS. For the 2016 and 20172018-2020 tax years, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process. Legacy Vectren is not currently under audit with the IRS, and the 2017-2019 tax years are still open.


(13) (14) Commitments and Contingencies


(a)Natural Gas Supply CommitmentsPurchase Obligations (CenterPoint Energy and CERC)


Natural gas supply commitmentsCommitments include natural gas contractsminimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas Distribution reportable segment and Energy Services business segments, whichCenterPoint Energy’s Indiana Electric Integrated reportable segment. Contracts with minimum payment provisions have various quantity requirements and durations thatand are not classified as non-trading derivative assets and liabilities in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2020 and December 31, 2016 as these2019. These contracts meet an exception as “normal purchases contracts” or do not meet the definition of a derivative. Natural gas and coal supply commitments also include natural gas transportation contracts that do not meet the definition of a derivative.



As of September 30, 2017,March 31, 2020, minimum paymentpurchase obligations for natural gas supply commitments are approximately:
 
CenterPoint Energy (1)
 
CERC (1)
 (in millions)
Remaining nine months of 2020$464
 $309
2021601
 417
2022409
 234
2023327
 175
2024263
 168
2025208
 163
2026 and beyond1,622
 1,329

 (in millions)
Remaining three months of 2017$169
2018507
2019348
2020166
202176
2022 and beyond113

(1)Excludes Energy Services Disposal Group obligations.


Indiana Electric Integrated also has other purchased power agreements that do not have minimum thresholds but require payment when energy is generated by the provider. Costs arising from certain of these commitments are pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.

CenterPoint Energy’s and CERC’s NGD have AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group. The AMAs have varying terms, the longest of which expires in 2021. For further information, see Note 3.

(b)Guarantees and Product Warranties (CenterPoint Energy)

In the normal course of business, ESG enters into contracts requiring it to timely install infrastructure, operate facilities, pay vendors and subcontractors and support warranty obligations and, at times, issue payment and performance bonds and other forms of assurance in connection with these contracts.

Specific to ESG’s role as a general contractor in the performance contracting industry, as of March 31, 2020, there were 62 open surety bonds supporting future performance with an aggregate face amount of approximately $563 million. ESG’s exposure is less than the face amount of the surety bonds and is limited to the level of uncompleted work under the contracts. As of March 31, 2020, approximately 34% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to ESG. In addition to these performance obligations, ESG also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. Since ESG’s inception in 1994, CenterPoint Energy believes ESG has had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operating effectively. CenterPoint Energy assessed the fair value of its obligation for such guarantees as of March 31, 2020 and no amounts were recorded on CenterPoint Energy’s Condensed Consolidated Balance Sheets.

CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of ESG. These guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of subsidiary obligations to allow those subsidiaries to conduct business without posting other forms of assurance. As of March 31, 2020, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting ESG’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees

to be approximately $513 million as of March 31, 2020. This exposure primarily relates to energy savings guarantees on federal energy savings performance contracts. Other parent company level guarantees, certain of which do not contain a cap on potential liability, have been issued in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy considers the likelihood of a material amount being incurred as remote.

(c)Guarantees and Product Warranties (CenterPoint Energy and CERC)

In the normal course of business, the Energy Services Disposal Group trades natural gas under supply contracts and enters into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities, CERC Corp. has issued guarantees to the Energy Services Disposal Group’s counterparties to guarantee the payment of the Energy Services Disposal Group’s obligations. While the Energy Services Disposal Group remains wholly-owned by CERC Corp., these guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of the Energy Services Disposal Group’s obligations to allow the Energy Services Disposal Group to conduct business without posting other forms of assurance. As of March 31, 2020, the face amount of CERC Corp.’s guarantees of the Energy Services Disposal Group’s obligations was approximately $1.5 billion.

A CERC Corp. guarantee primarily has a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by the Energy Services Disposal Group prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Since CERC Corp. has owned the Energy Services Disposal Group, CERC Corp. has not paid any amounts under any guarantees of the Energy Services Disposal Group’s obligations. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. Under the terms of the Equity Purchase Agreement, Athena Energy Services must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after closing of the sale. Additionally, to the extent that CERC Corp. retains any exposure relating to the guarantees of the Energy Services Disposal Group obligations 90 days after closing, Athena Energy Services will pay a 3% annualized fee on such exposure, increasing by 1% on an annualized basis every three months.

CenterPoint Energy and CERC recorded 0 amounts on their respective Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 related to these guarantees.

(d)Legal, Environmental and Other Matters


Legal Matters


Gas Market Manipulation Cases.  CenterPoint Energy, Houston Electric or their predecessor, ReliantMinnehaha Academy (CenterPoint Energy and certain of their former subsidiaries have been named as defendants in certain lawsuits described below. Under a master separation agreement between CenterPoint Energy and a former subsidiary, RRI, CenterPoint Energy and its subsidiaries are entitled to be indemnified by RRI and its successors for any losses, including certain attorneys’ fees and other costs, arising out of these lawsuits.  In May 2009, RRI sold its Texas retail business to a subsidiary of NRG and RRI changed its name to RRI Energy, Inc. In December 2010, Mirant Corporation merged with and became a wholly-owned subsidiary of RRI, and RRI changed its name to GenOn. In December 2012, NRG acquired GenOn through a merger in which GenOn became a wholly-owned subsidiary of NRG. None of the sale of the retail business, the merger with Mirant Corporation, or the acquisition of GenOn by NRG alters RRI’s (now GenOn’s) contractual obligations to indemnify CenterPoint Energy and its subsidiaries, including Houston Electric, for certain liabilities, including their indemnification obligations regarding the gas market manipulation litigation.

A large number of lawsuits were filed against numerous gas market participants in a number of federal and western state courts in connection with the operation of the natural gas markets in 2000–2002. CenterPoint Energy and its affiliates have since been released or dismissed from all such cases. CES, a subsidiary of CERC Corp., was a defendant in a case now pending in federal court in Nevada alleging a conspiracy to inflate Wisconsin natural gas prices in 2000–2002. On May 24, 2016, the district court granted CES’s motion for summary judgment, dismissing CES from the case. The plaintiffs have appealed that ruling. CenterPoint Energy and CES intend to continue vigorously defending against the plaintiffs’ claims. In June 2017, GenOn and various affiliates filed for protection under Chapter 11 of the U.S. Bankruptcy Code. CenterPoint Energy, CERC, and CES submitted proofs of claim in the bankruptcy proceedings to protect their indemnity rights. If GenOn were unable to meet its indemnity obligations or satisfy a liability that has been assumed in the gas market manipulation litigation, then CenterPoint Energy, Houston Electric or CERC could incur liability and be responsible for satisfying the liability. CenterPoint Energy does not expect the ultimate outcome of the case against CES to have a material adverse effect on its financial condition, results of operations or cash flows.

Minnehaha Academy.  CERC). On August 2, 2017, a natural gas explosion occurred at the Minnehaha Academy in Minneapolis, Minnesota, resulting in the deaths of two school employees, serious injuries to others and significant property damage to the school. CenterPoint Energy, certain of its subsidiaries, including CERC, and the contractor company working in the school have been named in litigation arising out of this incident. CenterPoint Energy and CERC have reached confidential settlement agreements on all wrongful death and property damage claims and with some personal injury claimants. Additionally, CenterPoint Energy is cooperatingand CERC cooperated with ongoing investigationsthe investigation conducted by the National Transportation Safety Board, which concluded its investigation in December 2019 and issued a report without making any recommendations. Further, CenterPoint Energy and CERC contested and reached a settlement regarding approximately $200,000 in fines imposed by the Minnesota Office of Pipeline Safety. In early 2018, the Minnesota Occupational Safety and Health Administration and the Minnesota Office of Pipeline Safety.concluded its investigation without any adverse findings against CenterPoint Energy or CERC. CenterPoint Energy’s and CERC’s general and excess liability insurance policies provide coverage for third party bodily injury and property damage claims. 

Litigation Related to the Merger (CenterPoint Energy). With respect to the Merger, in July 2018, seven separate lawsuits were filed against Vectren and the individual directors of Vectren’s Board of Directors in the U.S. District Court for the Southern District of Indiana. These lawsuits alleged violations of Sections 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Vectren Proxy Statement filed on June 18, 2018 was materially incomplete because it omitted material information concerning the Merger. In August 2018, the seven lawsuits were consolidated, and the Court denied the plaintiffs’ request for a preliminary injunction. In October 2018, the plaintiffs filed their Consolidated Amended Class Action Complaint. In December 2018, two plaintiffs voluntarily dismissed their lawsuits. In September 2019, the court granted the defendants’ motion to dismiss and dismissed the remaining plaintiffs’ claims with prejudice, which the plaintiffs appealed in October 2019. The defendants believe that the allegations asserted are without merit and intend to vigorously defend themselves against the claims raised. CenterPoint Energy

does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows.

Environmental Matters


MGP Sites. CenterPoint Energy, CERC and itstheir predecessors operated MGPs in the past. With respectIn addition, certain of CenterPoint Energy’s subsidiaries acquired through the Merger operated MGPs in the past. The costs CenterPoint Energy or CERC, as applicable, expect to certain Minnesota MGPincur to fulfill their respective obligations are estimated by management using assumptions based on actual costs incurred, the timing of expected future payments and inflation factors, among others. While CenterPoint Energy and CERC have recorded all costs which they presently are obligated to incur in connection with activities at these sites, CERC has completed state-ordered remediationit is possible that future events may require remedial activities which are not presently foreseen, and continues state-ordered monitoring and water treatment. As of September 30, 2017, CERC had a recorded liability of $7 millionthose costs may not be subject to PRP or insurance recovery.

(i)
Minnesota MGPs (CenterPoint Energy and CERC). With respect to certain Minnesota MGP sites, CenterPoint Energy and CERC have completed state-ordered remediation and continue state-ordered monitoring and water treatment. CenterPoint Energy and CERC recorded a liability as reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.

(ii)
Indiana MGPs (CenterPoint Energy). In the Indiana Gas service territory, the existence, location and certain general characteristics of 26 gas manufacturing and storage sites have been identified for which CenterPoint Energy may have some remedial responsibility. A remedial investigation/feasibility study was completed at one of the sites under an agreed upon order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. The remaining sites have been submitted to the IDEM’s VRP. CenterPoint Energy has also identified its involvement in five manufactured gas plant sites in SIGECO’s service territory, all of which are currently enrolled in the IDEM’s VRP. CenterPoint Energy is currently conducting some level of remedial activities, including groundwater monitoring at certain sites.

(iii)
Other MGPs(CenterPoint Energy and CERC). In addition to the Minnesota and Indiana sites, the EPA and other regulators have investigated MGP sites that were owned or operated by CenterPoint Energy or CERC or may have been owned by one of their former affiliates.

Total costs that may be incurred in connection with addressing these sites cannot be determined at this time. The estimated accrued costs are limited to CenterPoint Energy’s and CERC’s share of the remediation efforts and are therefore net of exposures of other PRPs. The estimated range of possible remediation costs for the sites for which CenterPoint Energy and CERC believes itbelieve they may have responsibility was $4 million to $30 million based on remediation continuing for 30 to 50 years. the minimum time frame given in the table below.
 March 31, 2020
 CenterPoint Energy CERC
 (in millions, except years)
Amount accrued for remediation$11
 $7
Minimum estimated remediation costs7
 5
Maximum estimated remediation costs53
 32
Minimum years of remediation5
 30
Maximum years of remediation50
 50

The cost estimates are based on studies of a site or industry average costs for remediation of sites of similar size. The actual remediation costs will depend on the number of sites to be remediated, the participation of other PRPs, if any, and the remediation methods used.


In addition to the Minnesota sites, the Environmental Protection Agency and other regulators have investigated MGP sites that were owned or operated by CERC or may have been owned by one of its former affiliates. CenterPoint Energy doesand CERC do not expect the ultimate outcome of these matters to have a material adverse effect on the financial condition, results of operations or cash flows of either CenterPoint Energy or CERC.


Asbestos.Some facilities owned by CenterPoint Energythe Registrants or itstheir predecessors contain or have contained asbestos insulation and other asbestos-containing materials. CenterPoint Energy and its subsidiariesThe Registrants are from time to time named, along with numerous others, as defendants in lawsuits filed by a number of individuals who claim injury due to exposure to asbestos, and CenterPoint Energy anticipatesthe Registrants anticipate that additional claims may be asserted in the future. Although their ultimate outcome cannot be predicted at this time, CenterPoint Energy doesthe Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on CenterPoint Energy’stheir financial condition, results of operations or cash flows.


CCR Rule (CenterPoint Energy). In April 2015, the EPA finalized its CCR Rule, which regulates ash as non-hazardous material under the RCRA. The final rule allows beneficial reuse of ash, and the majority of the ash generated by Indiana Electric’s generating plants will continue to be reused. In July 2018, the EPA released its final CCR Rule Phase I Reconsideration which extended the deadline to October 31, 2020 for ceasing placement of ash in ponds that exceed groundwater protections standards or that fail to meet location restrictions. While the EPA Phase I Reconsideration moves forward, the existing CCR compliance obligations remain in effect. In August 2019, the EPA proposed additional amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. These amendments have not yet been finalized. The proposed revisions would not restrict Indiana Electric’s current beneficial reuse of its fly ash.

Indiana Electric has three ash ponds, two at the F.B. Culley facility (Culley East and Culley West) and one at the A.B. Brown facility. Under the existing CCR Rule, Indiana Electric is required to perform integrity assessments, including ground water monitoring, at its F.B. Culley and A.B. Brown generating stations. The ground water studies are necessary to determine the remaining service life of the ponds and whether a pond must be retrofitted with liners or closed in place, with bottom ash handling conversions completed. Indiana Electric’s Warrick generating unit is not included in the scope of the CCR Rule as this unit has historically been part of a larger generating station that predominantly serves an adjacent industrial facility. In March 2018, Indiana Electric began posting ground water data monitoring reports annually to its public website in accordance with the requirements of the CCR Rule. This data preliminarily indicates potential groundwater impacts very close to Indiana Electric’s ash impoundments, and further analysis is ongoing. The CCR Rule required companies to complete location restriction determinations by October 18, 2018. Indiana Electric completed its evaluation and determined that one F.B. Culley pond (Culley East) and the A.B. Brown pond fail the aquifer placement location restriction. As a result of this failure, Indiana Electric is required to cease disposal of new ash in the ponds and commence closure of the ponds by October 31, 2020. CenterPoint Energy plans to seek extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through December 31, 2023. The inability to take these extensions may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or adversely impact Indiana Electric’s future operations. Failure to comply with these requirements could also result in an enforcement proceeding including the imposition of fines and penalties. On April 24, 2019, Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already commenced closure activities. CenterPoint Energy believes the language in the IURC order is favorable for future recovery of closure costs for Indiana Electric’s remaining ponds.

Indiana Electric continues to refine site specific estimates of closure costs. In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. The proceeds of these settlements will offset costs that have been and will be incurred to close the ponds. In March 2019, Indiana Electric entered into agreements with third parties for the excavation and beneficial reuse of the ash at the A.B. Brown ash pond. On August 14, 2019, Indiana Electric filed its petition with the IURC for recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs associated with the excavation and recycling of the ponded ash. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR Rule. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.

As of March 31, 2020, CenterPoint Energy has recorded an approximate $69 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the settlements in the aforementioned insurance proceeding. In addition to these removal costs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.

Other Environmental. From time to time, CenterPoint Energy identifiesthe Registrants identify the presence of environmental contaminants during its operations or on property where its predecessor companiestheir predecessors have conducted operations. Other such sites involving contaminants may be identified in the future. CenterPoint Energy hasThe Registrants have and expectsexpect to continue to remediate any identified sites consistent with itsstate and federal legal obligations. From time to time, CenterPoint Energy hasthe Registrants have received notices, and may receive notices in the future, from regulatory authorities or others regarding its status as a PRP in connection with sites found to require remediation due to the presence of environmental contaminants. In addition, CenterPoint Energy hasthe Registrants have been, or may be, named from time to time as a defendantdefendants in litigation related to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, CenterPoint Energy doesthe Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on CenterPoint Energy’stheir financial condition, results of operations or cash flows.


Other Proceedings


CenterPoint Energy isThe Registrants are involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business. From time to time, CenterPoint Energy isthe

Registrants are also a defendantdefendants in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry. Some of these proceedings involve substantial amounts. CenterPoint EnergyThe Registrants regularly analyzesanalyze current information and, as necessary, providesprovide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. CenterPoint Energy doesThe Registrants do not expect the disposition of these matters to have a material adverse effect on CenterPoint Energy’sthe Registrants’ financial condition, results of operations or cash flows.


(14) (15) Earnings Per Share (CenterPoint Energy)


The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share. Basic earnings per common share calculations:is determined by dividing Income available to common shareholders - basic by the Weighted average common shares outstanding - basic for the applicable period. Diluted earnings per common share is determined by the inclusion of potentially dilutive common stock equivalent shares that may occur if securities to issue Common Stock were exercised or converted into Common Stock.
  Three Months Ended March 31,
  2020 2019
   
Continuing Operations Numerator:    
Income (loss) from continuing operations $(1,053) $143
Less: Preferred stock dividend requirement 29
 29
Income (loss) available to common shareholders - basic (1,082) 114
Add back: Series B Preferred Stock dividend (2)
 —
 —
Income (loss) available to common shareholders from continuing operations - diluted $(1,082) $114
Discontinued Operations Numerator:    
Income (loss) from discontinued operations $(146) $26
     
Denominator:    
Weighted average common shares outstanding - basic 502,388,000
 501,521,000
Plus: Incremental shares from assumed conversions:    
Restricted stock (1)
 —
 2,423,000
Series B Preferred Stock (2)
 —
 —
Weighted average common shares outstanding - diluted 502,388,000
 503,944,000
     
Earnings (loss) per common share:    
Basic earnings (loss) per common share - continuing operations $(2.15) $0.23
Basic earnings (loss)per common share - discontinued operations (0.29) 0.05
Basic Earnings (Loss) Per Common Share $(2.44) $0.28
     
Diluted earnings (loss) per common share - continuing operations $(2.15) $0.23
Diluted earnings (loss) per common share - discontinued operations (0.29) 0.05
Diluted Earnings (Loss) Per Common Share $(2.44) $0.28

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions, except share and per share amounts)
Net income$169
 $179
 $496
 $331
        
Basic weighted average shares outstanding431,026,000
 430,682,000
 430,939,000
 430,581,000
Plus: Incremental shares from assumed conversions:       
Restricted stock3,060,000
 2,714,000
 3,060,000
 2,714,000
Diluted weighted average shares434,086,000
 433,396,000
 433,999,000
 433,295,000
        
Basic earnings per share       
Net income$0.39
 $0.42
 $1.15
 $0.77
        
Diluted earnings per share       
Net income$0.39
 $0.41
 $1.14
 $0.76


(1)2,567,000 incremental shares from assumed conversions of restricted stock have not been included in the computation of diluted earnings (loss) per share for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.

(2)The potentially dilutive impact from Series B Preferred Stock applies the if-converted method in calculating diluted earnings per common share. Under this method, diluted earnings per common share is adjusted for the more dilutive effect of the Series B Preferred Stock as a result of either its accumulated dividend for the period in the numerator or the assumed-converted common share equivalent in the denominator. The computation of diluted earnings per common share outstanding for the three months ended March 31, 2020 and 2019 excludes Series B Preferred Stock dividends of $17 million and $17 million, respectively, and 35,923,000 and 34,354,000 potentially dilutive shares, respectively, because to include them would be anti-dilutive. However, these could be potentially dilutive in the future.

(15) (16) Reportable Business Segments


CenterPoint Energy’sThe Registrants’ determination of reportable business segments considers the strategic operating units under which CenterPoint Energythe Registrants’ CODM manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. CenterPoint Energy uses operatingAs of January 1, 2020, the Registrants’ CODM views net income as the measure of profit or loss for its businessthe reportable segments otherrather than Midstream Investments, where it uses equity in earningsthe previous measure of unconsolidated affiliates.operating income. Certain prior year amounts have been reclassified to conform to the current year presentation.


As of March 31, 2020, reportable segments by Registrant were as follows:
RegistrantsHouston Electric T&DIndiana Electric IntegratedNatural Gas DistributionMidstream Investments
CenterPoint EnergyXXXX
Houston ElectricX
CERCX

CenterPoint Energy’s and Houston Electric’s Houston Electric T&D reportable business segments include the following: Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Thesegment consists of electric transmission and distribution function

(Houston Electric) is reportedservices in the Texas Gulf Coast area.

CenterPoint Energy’s Indiana Electric Transmission & Distribution business segment.Integrated reportable segment consists of electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.

CenterPoint Energy’s Natural Gas Distribution reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers.customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas; (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP, formerly included in the Energy Services represents reportable segment; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES, formerly included in the Energy Services reportable segment.

CERC’s Natural Gas Distribution reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas; (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP, formerly included in the Energy Services reportable segment; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES, formerly included in the Energy Services reportable segment.

CenterPoint Energy’s non-rate regulated gas sales and services operations. Midstream Investments reportable segment consists of CenterPoint Energy’sthe equity investment in Enable (excluding the Enable Series A Preferred Units).

CenterPoint Energy’s Corporate and Other Operations consists primarily of energy performance contracting and sustainable infrastructure services through ESG and other corporate operations which support all of the business operations of CenterPoint Energy’sEnergy.

CERC’s Corporate and Other consists primarily of corporate operations which support all of the business operations of CERC.

Discontinued Operations

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group, which consists of underground pipeline construction and repair services. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. See Note 3 for further information.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group, which consists of non-rate regulated natural gas sales and service operations. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. See Note 3 for further information.



Financial data for businessreportable segments is as follows:

 For the Three Months Ended September 30, 2017
 Revenues from
External
Customers		 Net
Intersegment
Revenues		 Operating
Income
 (in millions)
Electric Transmission & Distribution$843
(1)$—
 $247
Natural Gas Distribution390
 8
 19
Energy Services861
 10
 7
Midstream Investments (2)
—
 —
 —
Other Operations4
 —
 6
Eliminations—
 (18) —
Consolidated$2,098
 $—
 $279
CenterPoint Energy
 Three Months Ended March 31,
 2020
 
Revenues from
External
Customers
 Equity in Earnings of Unconsolidated Affiliates 
Depreciation
and
Amortization
 Interest Income Interest Expense 
Income Tax Expense
(Benefit)
 Net Income (Loss)
 (in millions)
Houston Electric T&D$638
(3)$—
 $129
 $1
(1)$(41)(2)$5
 $37
Indiana Electric Integrated129
 —
 25
 —
 (6) 3
 (171)
Natural Gas Distribution1,318
 —
 111
 1
 (32) 56
 204
Midstream Investments—
 (1,475) —
 —
 (14) (361) (1,127)
Corporate and Other82
 —
 17
 48
 (96) (50) 4
Eliminations—
 —
 —
 (50) 50
 —
 —
Continuing Operations$2,167
 $(1,475) $282
 $—
 $(139) $(347) (1,053)
Discontinued Operations, net            (146)
Consolidated            $(1,199)
              
 Three Months Ended March 31,
 2019
 
Revenues from
External
Customers
 Equity in Earnings of Unconsolidated Affiliates 
Depreciation
and
Amortization
 Interest Income Interest Expense 
Income Tax Expense
(Benefit)
 Net Income (Loss)
 (in millions)
Houston Electric T&D$689
(3)$—
 $175
 $4
(1)$(40)(2)$6
 $30
Indiana Electric Integrated83
 —
 16
 —
 (3) (2) (9)
Natural Gas Distribution1,415
 —
 95
 1
 (23) 26
 120
Midstream Investments—
 62
 —
 2
 (12) 28
 24
Corporate and Other42
 —
 14
 46
 (84) (44) (22)
Eliminations—
 —
 —
 (41) 41
 —
 —
Consolidated$2,229
 $62
 $300
 $12
 $(121) $14
 143
Discontinued Operations, net            26
Consolidated            $169


(1)Excludes interest income from Securitization Bonds of $1 million and $2 million for the three months ended March 31, 2020 and 2019, respectively.

(2)Excludes interest expense on Securitization Bonds of $8 million and $12 million for the three months ended March 31, 2020 and 2019, respectively.

(3)CenterPoint Energy’s Houston Electric T&D’s revenues from major external customers are as follows:
  Three Months Ended March 31,
  2020 2019
  (in millions)
Affiliates of NRG $156
 $151
Affiliates of Vistra Energy Corp. 81
 54


Houston Electric

Houston Electric consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been
included.


Houston Electric’s T&D revenues from major external customers are as follows:
  Three Months Ended March 31,
  2020 2019
  (in millions)
Affiliates of NRG $156
 $151
Affiliates of Vistra Energy Corp. 81
 54


CERC
 For the Three Months Ended September 30, 2016
 Revenues from
External
Customers		 Net
Intersegment
Revenues		 Operating
Income
 (in millions)
Electric Transmission & Distribution$908
(1)$—
 $257
Natural Gas Distribution370
 7
 22
Energy Services608
 6
 5
Midstream Investments (2)
—
 —
 —
Other Operations3
 —
 —
Eliminations—
 (13) —
Consolidated$1,889
 $—
 $284

 For the Nine Months Ended September 30, 2017   
 
Revenues from
External
Customers
 
Net
Intersegment
Revenues
 
Operating
Income
 Total Assets as of September 30, 2017 
 (in millions) 
Electric Transmission & Distribution$2,234
(1)$—
 $489
 $10,289
 
Natural Gas Distribution1,767
 24
 220
 6,067
 
Energy Services2,964
 34
 58
 1,337
 
Midstream Investments (2)
—
 —
 —
 2,481
 
Other Operations11
 —
 9
 2,694
(3)
Eliminations—
 (58) —
 (733) 
Consolidated$6,976
 $—
 $776
 $22,135
 
 Three Months Ended March 31,
 2020
 
Revenues from
External
Customers
 
Depreciation
and
Amortization
 Interest Income Interest Expense 
Income Tax Expense
(Benefit)
 Net Income (Loss)
 (in millions)
Natural Gas Distribution$1,008
 $74
 $1
 $(21) $44
 $134
Corporate and Other3
 —
 21
 (31) (9) (3)
Eliminations—
 —
 (22) 22
 —
 —
Continuing Operations$1,011
 $74
 $—
 $(30) $35
 131
Discontinued Operations, net          (64)
Consolidated          $67
            
 Three Months Ended March 31,
 2019
 
Revenues from
External
Customers
 
Depreciation
and
Amortization
 Interest Income Interest Expense 
Income Tax Expense
(Benefit)
 Net Income (Loss)
 (in millions)
Natural Gas Distribution$1,211
 $73
 $1
 $(19) $26
 $119
Corporate and Other1
 —
 20
 (31) (8) (9)
Eliminations—
 —
 (21) 21
 —
 —
Continuing Operations$1,212
 $73
 $—
 $(29) $18
 110
Discontinued Operations, net          28
Consolidated          $138

CenterPoint Energy and CERC
 Total Assets
 March 31, 2020 December 31, 2019
 
CenterPoint
 Energy
 CERC CenterPoint
Energy		 CERC
 (in millions)
Houston Electric T&D$10,870
 $—
 $11,264
 $—
Indiana Electric Integrated3,015
 —
 3,168
 —
Natural Gas Distribution13,979
 7,562
 14,105
 7,698
Midstream Investments915
 —
 2,473
 —
Corporate and Other, net of eliminations2,969
 (87) 2,555
 (90)
Continuing Operations31,748
 7,475
 33,565
 7,608
Assets Held for Sale1,647
 675
 1,964
 904
Consolidated$33,395
 $8,150
 $35,529
 $8,512




(17) Supplemental Disclosure of Cash Flow Information

CenterPoint Energy and CERC elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. See Note 3 for certain supplemental cash flow disclosures related to the Infrastructure Services and Energy Services Disposal Groups. The table below provides supplemental disclosure of cash flow information and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups.
 For the Nine Months Ended September 30, 2016   
 Revenues from
External
Customers		 Net
Intersegment
Revenues		 Operating
Income		 Total Assets as of December 31, 2016 
 (in millions) 
Electric Transmission & Distribution$2,331
(1)$—
 $498
 $10,211
 
Natural Gas Distribution1,672
 21
 202
 6,099
 
Energy Services1,433
 17
 11
 1,102
 
Midstream Investments (2)
—
 —
 —
 2,505
 
Other Operations11
 —
 5
 2,681
(3)
Eliminations—
 (38) —
 (769) 
Consolidated$5,447
 $—
 $716
 $21,829
 
 Three Months Ended March 31,
 2020 2019
 CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
 (in millions)
Cash Payments/Receipts:           
Interest, net of capitalized interest$148
 $68
 $35
 $154
 $86
 $35
Income tax refunds, net—
 —
 —
 (4) —
 —
Non-cash transactions:         
  
Accounts payable related to capital expenditures200
 110
 66
 166
 98
 49
ROU assets obtained in exchange for lease liabilities (1)
14
 —
 5
 29
 1
 26

(1)2019 includes the transition impact of adoption of ASU 2016-02 Leases.

The table below provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the amount reported in the Condensed Statements of Consolidated Cash Flows and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups.
 March 31, 2020 December 31, 2019
 CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
 (in millions)
Cash and cash equivalents$220
 $196
 $1
 $241
 $216
 $2
Restricted cash included in Prepaid expenses and other current assets27
 19
 —
 30
 19
 —
Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows$247
 $215
 $1
 $271
 $235
 $2


(18) Related Party Transactions(Houston Electric and CERC)

Houston Electric and CERC participate in CenterPoint Energy’s money pool through which they can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper.

The table below summarizes CenterPoint Energy money pool activity:
 March 31, 2020
December 31, 2019
 Houston Electric
CERC
Houston Electric
CERC
 (in millions, except interest rates)
Money pool investments (borrowings) (1)
$(133) $—
 $481
 $—
Weighted average interest rate1.98% 1.98% 1.98% 1.98%

(1)Included in Accounts and notes receivable (payable)–affiliated companies on Houston Electric’s and CERC’s respective Condensed Consolidated Balance Sheets.


Houston Electric and CERC affiliate related net interest income (expense) were as follows:
  Three Months Ended March 31,
  2020 2019
  Houston Electric CERC Houston Electric CERC
   
Interest income (expense) (1) $1
 $—
 $3
 $1

(1)Interest income is included in Other income (expense), net and interest expense is included in Interest and other finance charges on Houston Electric’s and CERC’s respective Condensed Statements of Consolidated Income.

CenterPoint Energy provides some corporate services to Houston Electric and CERC. The costs of services have been charged directly to Houston Electric and CERC using methods that management believes are reasonable. These methods include negotiated usage rates, dedicated asset assignment and proportionate corporate formulas based on operating expenses, assets, gross margin, employees and a composite of assets, gross margin and employees. Houston Electric provides certain services to CERC. These services are billed at actual cost, either directly or as an allocation and include fleet services, shop services, geographic services, surveying and right-of-way services, radio communications, data circuit management and field operations. Additionally, CERC provides certain services to Houston Electric. These services are billed at actual cost, either directly or as an allocation and include line locating and other miscellaneous services. These charges are not necessarily indicative of what would have been incurred had Houston Electric and CERC not been affiliates.

Amounts charged for these services were as follows and are included primarily in operation and maintenance expenses:
  Three Months Ended March 31,
  2020 2019
  Houston Electric CERC Houston Electric CERC
  (in millions)
Corporate service charges $49
 $55
 $52
 $43
Net affiliate service charges (billings) (6) 6
 (2) 2

The table below presents transactions among Houston Electric, CERC and their parent, Utility Holding.
  Three Months Ended March 31,
  2020 2019
  Houston Electric CERC Houston Electric CERC
   
Cash dividends paid to parent $385
 $32
 $24
 $20
Cash contribution from parent —
 —
 590
 —


(19) Equity

Dividends Declared and Paid (CenterPoint Energy)

CenterPoint Energy paid dividends on its Common Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
Declaration Date Record Date Payment Date Per Share 
Total
(in millions)
February 3, 2020
 
February 20, 2020
 
March 12, 2020
 $0.2900
 $145
Total 2020     $0.2900
 $145
         
December 12, 2018
 
February 21, 2019
 
March 14, 2019
 $0.2875
 $144
Total 2019     $0.2875
 $144


CenterPoint Energy paid dividends on its Series A Preferred Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
Declaration Date Record Date Payment Date Per Share 
Total
(in millions)
February 3, 2020
 
February 14, 2020
 
March 2, 2020
 $30.6250
 $25
Total 2020     $30.6250
 $25
         
December 12, 2018
 
February 15, 2019
 
March 1, 2019
 $32.1563
 $26
Total 2019     $32.1563
 $26

CenterPoint Energy paid dividends on its Series B Preferred Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
Declaration Date Record Date Payment Date Per Share 
Total
(in millions)
February 3, 2020
 
February 14, 2020
 
March 2, 2020
 $17.5000
 $17
Total 2020     $17.5000
 $17
         
December 12, 2018
 
February 15, 2019
 
March 1, 2019
 $17.5000
 $17
Total 2019     $17.5000
 $17

Dividend Requirement on Preferred Stock (CenterPoint Energy)
  Three Months Ended March 31,
  2020 2019
 (in millions)
Series A Preferred Stock $12
 $12
Series B Preferred Stock 17
 17
Total preferred stock dividend requirement $29
 $29


Accumulated Other Comprehensive Income (Loss)

Changes in accumulated comprehensive income (loss) are as follows:
            
 Three Months Ended March 31,
 2020 2019
 CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
 (in millions)
Beginning Balance$(98) $(15) $10
 $(108) $(14) $5
Other comprehensive income (loss) before reclassifications:           
Deferred gain (loss) from interest rate derivatives (1)—
 —
 —
 (1) (1) —
Other comprehensive loss from unconsolidated affiliates(3) —
 —
 —
 —
 —
Amounts reclassified from accumulated other comprehensive loss:           
Actuarial losses (2)2
 —
 —
 2
 —
 —
Reclassification of deferred loss from cash flow hedges realized in net income—
 —
 —
 1
 —
 —
Tax expense(1) —
 —
 (1) —
 —
Net current period other comprehensive income (loss)(2) —
 —
 1
 (1) —
Ending Balance$(100) $(15) $10
 $(107) $(15) $5

(1)Electric Transmission & Distribution revenuesGains and losses are reclassified from major customersAccumulated other comprehensive income into income when the hedged transactions affect earnings. The reclassification amounts are as follows:included in Interest and other finance charges in each of the Registrants’ respective Statements of Consolidated Income. Over the next twelve months estimated amortization from Accumulated Comprehensive Income into income is expected to be immaterial.
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in millions)
Affiliates of NRG $221
 $223
 $540
 $527
Affiliates of Vistra Energy Corp. 72
 71
 172
 166


(2)Midstream Investments’ equity earningsAmounts are as follows:included in the computation of net periodic cost and are reflected in Other income (expense), net in each of the Registrants’ respective Statements of Consolidated Income.

Series C Preferred Stock Private Placement (CenterPoint Energy)

On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 725,000 shares of its Series C Preferred Stock, at a price of $1,000 share, resulting in gross proceeds of $725 million.

The Series C Preferred Stock is entitled to participate in any dividend or distribution (excluding those payable in Common Stock) with the Common Stock on a pari passu, pro rata, as-converted basis. At liquidation, the Series C Preferred Stock will rank pari passu to the existing Series A Preferred Stock and Series B Preferred Stock and senior to the Common Stock, but will participate in a liquidation only on an as-converted to Common Stock basis.

Conversion of the Series C Preferred Stock is mandatory upon the occurrence of any of the following triggers: (i) the 12-month anniversary date of the preferred stock purchase agreements, (ii) a bankruptcy event, and (iii) a fundamental change in CenterPoint Energy, including, among other things certain change of control events. Upon a mandatory conversion, each share of Series C Preferred Stock will convert into the number of Common Stock equal to the quotient of $1,000 divided by the prevailing conversion price, which is initially $15.31. In a conversion at the 12-month anniversary date, in lieu of issuing Common Stock, CenterPoint Energy may, at its election, make a cash payment equal to the product of (i) the then current market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion. Following the six-month anniversary date of the issuance of the Series C Preferred Stock, holders of Series C Preferred Stock also have an optional right to convert their holdings to Common Stock at any time, subject to a limit on conversion of no more than 4.9% of the outstanding Common Stock. The conversion price is subject to adjustment for subdivisions and combinations, dividends or distributions payable in common stock. If all of the 725,000 shares of Series C Preferred Stock converted at the current conversion price, CenterPoint Energy would issue an incremental 47,354,670 shares of Common Stock.

CenterPoint Energy may not issue more than a specified amount of outstanding Common Stock upon conversion of Preferred Stock. Once such specified amount has been reached, each Series C Preferred Stock holder electing to convert or subject to mandatory conversion will receive a cash payment equal to the product of (i) the market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion.

Series C Preferred Stock holders have no voting rights, except that the affirmative vote of a majority of outstanding Series C Preferred Stock is required for the company to (i) create any class or series of securities that is senior to the Series C Preferred Stock; (ii) reclassify or amend any authorized securities of CenterPoint Energy if reclassification would render the relevant security on a parity with or senior to the Series C Preferred Stock; or (iii) increase the authorized amount or issue any additional shares of Series C Preferred Stock.

The vote of at least 66 2/3% of the outstanding shares of Series C Preferred Stock is needed to amend the terms of the Series C Preferred Stock in any manner that would adversely alter or change the rights of the Series C Preferred Stock, subject to certain exceptions.

Common Stock Private Placement (CenterPoint Energy)

On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 41,977,612 shares of its Common Stock, at a price of $16.08 share, resulting in gross proceeds of $675 million.

(20) Subsequent Events (CenterPoint Energy)

CenterPoint Energy Dividend Declarations
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in millions)
Enable $68
 $73
 $199
 $164
Equity Instrument Declaration Date Record Date Payment Date Per Share
Common Stock (1)
 
April 24, 2020
 
May 21, 2020
 
June 11, 2020
 $0.1500
Series B Preferred Stock 
April 24, 2020
 
May 15, 2020
 
June 1, 2020
 17.5000


(3)(1)IncludedOn April 1, 2020, in total assetsresponse to the reduction in cash flow related to the reduction in Enable quarterly common unit distributions announced by Enable on April 1, 2020, CenterPoint Energy announced a reduction of Other Operations as of September 30, 2017 and December 31, 2016 are pension and other postemployment-related regulatory assets of $715 million and $759 million, respectively.its quarterly common stock dividend per share from $0.2900 to $0.1500.

Enable Distributions Declarations (CenterPoint Energy)
(16) Subsequent Events

Equity Instrument Declaration Date Record Date Payment Date Per Unit Distribution 
Expected Cash Distribution
(in millions)
Enable common units (1)
 
May 5, 2020
 
May 19, 2020
 
May 27, 2020
 $0.16525
 $39
Enable Series A Preferred Units 
May 5, 2020
 
May 5, 2020
 
May 15, 2020
 0.62500
 9

(1)On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction.

Divestiture of Infrastructure Services (CenterPoint Energy)

On October 25, 2017,April 9, 2020, CenterPoint Energy’s board of directors declared a regular quarterly cash dividend of $0.2675 per share of common stock payable on December 8, 2017, to shareholders of record asEnergy completed the previously announced sale of the closeInfrastructure Services Disposal Group to PowerTeam Services for $850 million in cash, subject to an adjustment for working capital and other contractual adjustments. The net proceeds of business on November 16, 2017.the sale were used to repay a portion of outstanding CenterPoint Energy debt. See Note 3 for further information.


ERCOT Loan Agreement (CenterPoint Energy and Houston Electric)

On October 31, 2017, Enable declaredApril 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a quarterly cash distribution of $0.318 per unit on allno-interest loan agreement with ERCOT to provide for an initial fund balance for reimbursement for approximately $5 million.

Private Placements

On May 6, 2020, CenterPoint Energy entered into agreements for the private placements of its outstanding common units forSeries C Preferred Stock and its Common Stock. For more information about the quarter ended September 30, 2017. Accordingly, CERC Corp. expects to receive a cash distribution of approximately $74 million from Enable in the fourth quarter of 2017 to be made with respect to CERC Corp.’s investment in common units of Enable for the third quarter of 2017.private placements, see Note 19.

On October 31, 2017, Enable declared a quarterly cash distribution of $0.625 per Series A Preferred Unit for the quarter ended September 30, 2017. Accordingly, CenterPoint Energy expects to receive a cash distribution of approximately $9 million from Enable in the fourth quarter of 2017 to be made with respect to CenterPoint Energy’s investment in Series A Preferred Units of Enable for the third quarter of 2017.



Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES


The following combined discussion and analysis should be read in combination with ourthe Interim Condensed Financial Statements contained in this Form 10-Q and our 2016the Registrants’ combined 2019 Form 10-K. When discussing CenterPoint Energy’s consolidated financial information, it includes the results of Houston Electric and CERC, which, along with CenterPoint Energy, are collectively referred to as the Registrants. Where appropriate, information relating to a specific Registrant has been segregated and labeled as such. In this Form 10-Q, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries. No Registrant makes any representations as to the information related solely to CenterPoint Energy or the subsidiaries of CenterPoint Energy other than itself.


RECENT EVENTS

COVID-19 Impacts. On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders in our service territories. CenterPoint Energy has experienced some resulting disruptions to its business operations, as these restrictions have significantly impacted many sectors of the economy with various businesses curtailing or ceasing normal operations. For example, since mid-March, we have had to restrict access to our administrative offices around the United States. However, we continue to be productive through alternate work arrangements, leveraging a strong technology platform to support our employees working remotely at home to perform their duties or directly from their vehicles to serve our customers. Where we must maintain a presence in the field, we have adjusted our operational protocols to minimize exposure and risk to our field personnel, customers and the communities we serve, including, among other things, modifying our work schedules and reporting locations, delaying certain work types, such as maintenance and capital projects, and adjusting project scope and scale to adhere to safety protocols, while continuing to maintain the work activities necessary for safe and reliable service to our customers with increased safety precautions.

Our first priority in our response to this crisis has been the health and safety of our employees, our customers and other business counterparties. Because we provide a critical service to our customers, it is paramount that we keep our employees who operate our business safe and informed, and we have taken and are updating precautions for that purpose. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers’ operations under the circumstances. In addition, we have assessed and updated our existing business continuity plans for each of our business units in the context of this pandemic. We have a corporate response planning team who assesses risks to the business, including for health, safety and environmental matters and personnel issues, and addresses various impacts of the situation, as they have been developing. We also have modified certain business practices (including those related to employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences) to conform to government restrictions and best practices encouraged by the Centers for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented. We are also working with our suppliers to understand the potential impacts to our supply chain, including identifying any negative impacts to material supplies, working to mitigate them and pre-planning for longer-term emergency response protocols. This is a rapidly evolving situation and could lead to extended disruption of economic activity in our markets; we will continue to monitor developments affecting our workforce, our customers and our suppliers and take additional precautions as we believe are warranted.

An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively impacted under the current economic conditions. In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment will be temporarily suspended. For Houston Electric, we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. To the extent these conditions in our service territories persist, our bad debt expense from uncollectible accounts could increase, negatively impacting our financial condition, results of operations and cash flows. With respect to our regulatory proceedings, we could experience significant delays in scheduling proceedings or hearings and in obtaining orders from regulatory agencies. Any such delays could adversely affect our future results of operations.

Due to current macroeconomic conditions and the decline in our common stock price, we identified a triggering event to perform an interim goodwill impairment test and recognized a non-cash goodwill impairment charge of $185 million in our Indiana Electric Integrated reporting unit for the three months ended March 31, 2020. For further discussion of this impairment, see Note 10 to the Interim Condensed Financial Statements.

Hurricane Harvey. Houston Electric’sAs of the date of this Form 10-Q, our efforts to respond to the challenges presented by the conditions described above and minimize the impacts to our business have yielded results. Our electric delivery systemfacilities and CERC Corp.’s NGD suffered damagenatural gas distribution systems have remained operational and our customers have continued to receive service. Although we continue to assess the COVID-19 situation, we cannot estimate with any degree of certainty the full financial impact of the COVID-19 pandemic on our business. Nor can we predict the effect that the significant disruption and volatility currently being experienced in the markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time. However, we expect the COVID-19 pandemic to adversely impact us in future quarters due to the considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, closures or disruptions, among other things. The ultimate impacts to our business, financial condition, results of operations, liquidity and cash flows will depend on future developments, including, among others, the ultimate duration and geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the development of effective treatments, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. For additional discussion regarding risks associated with the COVID-19 pandemic, see “Risk Factors” in Item 1A of Part II of this Form 10-Q.

Enable Quarterly Distributions. The price of, and global demand for, natural gas, NGLs and crude oil have declined significantly as a result of Hurricane Harvey,the ongoing spread and economic effects of the COVID-19 pandemic and the significant governmental measures being implemented to control the spread of COVID-19. In addition, the recent dispute over crude oil production levels between Russia and members of the Organization of the Petroleum Exporting Countries led by Saudi Arabia have exacerbated the sharp decline in the price of NGLs and crude oil. Despite the subsequent agreement in April 2020 by a coalition of nations including Russia and Saudi Arabia to reduce production of crude oil, the price of NGLs and crude oil have remained significantly depressed and, in the case of crude oil, have at times reached a negative price. Further, financial market declines and volatility, together with deteriorating credit, liquidity concerns, decreasing production, and increasing inventories, are conditions that are associated with a general economic downturn. Producers have announced and begun to implement plans to reduce production and decrease the drilling and completion of wells in response to these conditions, which struckinclude reductions in the Texas coastexploration, development and production activity across Enable’s areas of operation. As a result, the effects of the COVID-19 pandemic and the decline in demand and price for natural gas, NGLs and crude oil have begun and may continue to negatively impact the demand for midstream services. In response to the impacts of these developments on Friday, August 25, 2017.its business, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. For further information, regardingsee “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.

CenterPoint Energy Financial Measures. On April 1, 2020, in response to the impactcurrent business environment and to strengthen its financial position and adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions, CenterPoint Energy announced targeted reductions in (i) its quarterly common stock dividend to $0.1500 per share; (ii) 2020 operation and maintenance expenses, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets; and (iii) 2020 capital spending. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Hurricane Harvey,Cash” below.

Enable Investment Impairment. CenterPoint Energy recognized a loss of $1,475 million on its investment in Enable for the three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million. For further discussion, see Note 59 to ourthe Interim Condensed Financial Statements.


CenterPoint EnergyLeadership Transition. On February 19, 2020, the Board of Directors appointed John W. Somerhalder II to the position of Interim President and Chief Executive Officer. On April 1, 2020, the Board of Directors appointed Kristie L. Colvin to the position of Interim Executive Vice President and Chief Financial Officer in addition to her position as Chief Accounting Officer. In conjunction with their respective appointments, Mr. Somerhalder and Ms. Colvin also have been appointed to serve on the Board of Directors of Enable GP.

Business Divestitures. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020. On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

Regulatory Proceedings. On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates.A settlement has been reached and a final order from the PUCT was received on March 9, 2020 and were implemented on April 23, 2020. For details related to

our pending and completed regulatory proceedings and orders related to the TCJA to date in 2017,2020, see “—Liquidity and Capital Resources —Regulatory Matters” below.


Debt Issuances. In August 2017,Private Placements. On May 6, 2020, CenterPoint Energy issued $500 million aggregate principal amountentered into agreements for the private placements of unsecured senior notesits Series C Preferred Stock and CERC Corp. issued $300 million aggregate principal amount of unsecured senior notes.its Common Stock. For furthermore information about our 2017 debt issuances,the private placements, see Note 1119 to ourthe Interim Condensed Financial Statements.


New Directors and Board of Directors Committee. On May 6, 2020, at the recommendation of the Governance Committee, the Board of Directors appointed David J. Lesar and Barry T. Smitherman to the Board of Directors effective immediately. Messrs. Lesar and Smitherman have been elected to serve as directors of CenterPoint Energy until the expiration of their respective terms on the date of its annual meeting of shareholders in 2021 and until their successors are elected and qualified. Messrs. Lesar and Smitherman are expected to stand for election as directors at the annual meeting of shareholders in 2021. Messrs. Lesar and Smitherman will serve on the Board of Directors’ newly established Business Review and Evaluation Committee, which will assist the Board in evaluating and optimizing the various businesses, assets and ownership interests currently held by CenterPoint Energy.

CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONS

For information regarding factors that may affect the future results of our consolidated operations, please read “Risk Factors” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions, except per share amounts)
Revenues$2,098
 $1,889
 $6,976
 $5,447
Expenses1,819
 1,605
 6,200
 4,731
Operating Income279
 284
 776
 716
Interest and Other Finance Charges(80) (83) (235) (256)
Interest on Securitization Bonds(18) (23) (58) (70)
Equity in Earnings of Unconsolidated Affiliate, net68
 73
 199
 164
Other Income, net18
 25
 95
 (30)
Income Before Income Taxes267
 276
 777
 524
Income Tax Expense98
 97
 281
 193
Net Income$169
 $179
 $496
 $331
        
Basic Earnings Per Share$0.39
 $0.42
 $1.15
 $0.77
        
Diluted Earnings Per Share$0.39
 $0.41
 $1.14
 $0.76
  Three Months Ended March 31,
  2020 2019
   
Revenues $2,167
 $2,229
Expenses 1,950
 2,018
Operating Income 217
 211
Interest Expense and Other Finance Charges (139) (121)
Interest Expense on Securitization Bonds (8) (12)
Equity in Earnings of Unconsolidated Affiliates, net (1,475) 62
Interest Income —
 12
Interest Income from Securitization Bonds 1
 2
Other Income (Expense), net 4
 3
Income (Loss) from Continuing Operations Before Income Taxes (1,400) 157
Income Tax Expense (Benefit) (347) 14
Income (Loss) from Continuing Operations (1,053) 143
Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($17) and $8, respectively) (146) 26
Net Income (Loss) (1,199) 169
Preferred Stock Dividend Requirement 29
 29
Income (Loss) Available to Common Shareholders $(1,228) $140
Basic Earnings (Loss) Per Common Share:    
Basic earnings (loss) per common share - continuing operations $(2.15) $0.23
Basic earnings (loss) per common share - discontinued operations (0.29) 0.05
Basic Earnings (Loss) Per Common Share $(2.44) $0.28
Diluted Earnings (Loss) Per Common Share:    
Diluted earnings (loss) per common share - continuing operations $(2.15) $0.23
Diluted earnings (loss) per common share - discontinued operations (0.29) 0.05
Diluted Earnings (Loss) Per Common Share $(2.44) $0.28


Three months ended September 30, 2017March 31, 2020 compared to three months ended September 30, 2016March 31, 2019


WeCenterPoint Energy reported net incomea loss available to common shareholders of $169$1,228 million ($0.392.44 loss per diluted common share) for the three months ended September 30, 2017March 31, 2020 compared to net income available to common shareholders of $179$140 million ($0.410.28 per diluted common share) for the three months ended September 30, 2016.March 31, 2019.

The decrease of $1,368 million in net income of $10 millionavailable to common shareholders was primarily due to the following key factors:


a $40$1,151 million decrease in net income from the gain on marketable securities included in Other Income, net shown above;Midstream Investments reportable segment further discussed under Results of Operations by Reportable Segment below;


a $5$172 million decreaseincrease in operating incomeloss from discontinued operations, net related to the Infrastructure Services and Energy Services Disposal Groups further discussed below by segment;

a $5 million decrease in equity earnings from our investment in Enable, discussed further in Note 83 to ourthe Interim Condensed Financial Statements; and


a $3$162 million decrease in miscellaneous other non-operatingnet income included in Other Income, net shown above.from the Indiana Electric Integrated reportable segment further discussed under Results of Operations by Reportable Segment below.



These decreases in net income were partially offset by the following:


a $36an $84 million decrease in the loss on the underlying value of the indexed debt securities related to the ZENS included in Other Income, net shown above;

a $5 million decrease in interest expense related to lower outstanding balances of our Securitization Bonds; and

a $3 million decrease in interest expense due to lower weighted average interest rates on outstanding debt.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

We reported net income of $496 million ($1.14 per diluted share) for the nine months ended September 30, 2017 compared to net income of $331 million ($0.76 per diluted share) for the nine months ended September 30, 2016.

The increase in net income from the Natural Gas Distribution reportable segment further discussed under Results of $165 million was primarily due to the following key factors:Operations by Reportable Segment below;


a $199 million decrease in the loss on indexed debt securities related to the ZENS included in Other Income, net shown above, resulting from decreased losses of $82 million in the underlying value of the indexed debt securities and a loss of $117 million from the Charter merger in 2016;

a $60$26 million increase in operatingnet income from Corporate and Other further discussed belowunder Results of Operations by segment;Reportable Segment below; and


a $35$7 million increase in equity earnings from our investment in Enable, discussed further in Note 8 to our Interim Condensed Financial Statements;

a $21 million decrease in interest expense due to lower weighted average interest rates on outstanding debt;

a $14 million increase in cash distributions on Series A Preferred Units included in Other Income, net shown above; and

a $12 million decrease in interest expense related to lower outstanding balances of our Securitization Bonds.

These increases in net income were partially offsetfrom the Houston Electric T&D reportable segment further discussed under Results of Operations by the following:Reportable Segment below.

an $88 million increase in income tax expense due to higher net income;

an $83 million decrease in the gain on marketable securities included in Other Income, net shown above; and

a $5 million decrease in miscellaneous other non-operating income included in Other Income, net shown above.


Income Tax Expense - Continuing Operations


OurCenterPoint Energy’s effective tax rate from continuing operations reported for the three months ended September 30, 2017March 31, 2020 was 37%25% compared to 35%9% for the same period in 2016.three months ended March 31, 2019.  The higher effective tax rate for the three months ended September 30, 2017March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.
Income Tax Expense - Discontinued Operations

CenterPoint Energy’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 10% compared to 24% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was primarily due to the tax effectsnon-deductible portions of receiving less nontaxable incomegoodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.


HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS
OF CONSOLIDATED RESULTS OF OPERATIONS

Houston Electric’s results of operations are affected by seasonal fluctuations in the period. demand for electricity. Houston Electric’s results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates Houston Electric charges, debt service costs, income tax expense, Houston Electric’s ability to collect receivables from REPs and Houston Electric’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations of Houston Electric’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
  Three Months Ended March 31,
  2020 2019
 (in millions)
Revenues (1)

$634

$686
Expenses
552

605
Operating Income
82

81
Interest Expense and Other Finance Charges (41) (40)
Interest Expense on Securitization Bonds (8) (12)
Interest Income 1
 4
Interest Income from Securitization Bonds 1
 2
Other Income (Expense), net 3
 (2)
Income before Income Taxes
38

33
Income Tax Expense 5
 6
Net Income
$33

$27

(1)Excludes weather hedge gains of $4 million and $3 million for the three months ended March 31, 2020 and 2019, respectively, recorded in Utility revenues on CenterPoint Energy’s Condensed Statements of Consolidated Income. See Note 7(a) to the Interim Condensed Financial Statements for more information on the weather hedge.

Three months ended March 31, 2020 compared to three months ended March 31, 2019

Houston Electric reported net income of $33 million for the three months ended March 31, 2020 compared to net income of $27 million for the three months ended March 31, 2019.  

The increase of $6 million in net income from the Houston Electric T&D reportable segment is discussed below in Results of Operations by Reportable Segment, exclusive of weather hedges recorded at CenterPoint Energy.

Income Tax Expense

Houston Electric’s effective tax rate reported for the ninethree months ended September 30, 2017March 31, 2020 was 36%13% compared to 37%18% for the same period in 2016. We expect our annualthree months ended March 31, 2019. The lower effective tax rate for the fiscal year ending Decemberthree months ended March 31, 20172020 was primarily due to be approximately 36%.an increase in the amount of amortization of the net regulatory EDIT liability.


CERC’S MANAGEMENT’S NARRATIVE ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS

CERC’s results of operations are affected by seasonal fluctuations in the demand for natural gas and price movements of energy commodities as well as the optimization of margins through natural gas basis differentials. CERC’s results of operations are also affected by, among other things, the actions of various federal, state and local governmental authorities having jurisdiction over rates CERC charges, competition in CERC’s various business operations, the effectiveness of CERC’s risk management activities, debt service costs and income tax expense. For more information regarding factors that may affect the future results of operations for CERC’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
  Three Months Ended March 31,
  2020 2019
 (in millions)
Revenues $1,011
 $1,212
Expenses 811
 1,052
Operating Income 200
 160
Interest Expense and Other Finance Charges (30) (29)
Other Expense, net (4) (3)
Income from Continuing Operations Before Income Taxes 166
 128
Income Tax Expense 35
 18
Income from Continuing Operations 131
 110
Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($11) and $8, respectively) (64) 28
Net Income $67
 $138

Three months ended March 31, 2020 compared to three months ended March 31, 2019

CERC reported net income of $67 million for the three months ended March 31, 2020 compared to net income of $138 million for the three months ended March 31, 2019.  

The decrease in net income of $71 million was primarily due to a $92 million decrease in income from discontinued operations, net of tax, discussed further in Note 3 to the Interim Condensed Financial Statements.

This decrease in net income was partially offset by the following:

a $15 million increase in net income from the Natural Gas Distribution reportable segment discussed further under Results of Operations by Reportable Segment below; and
a $6 million increase in net income from Corporate and Other.

Income Tax Expense - Continuing Operations

CERC’s effective tax rate on income from continuing operations for the three months ended March 31, 2020 was 21% compared to 14% for the three months ended March 31, 2019. CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT liability.

Income Tax Expense - Discontinued Operations

CERC’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 15% compared to 22% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was due to the non-deductible portion of goodwill impairment on the Energy Services Disposal Group.


RESULTS OF OPERATIONS BY BUSINESSREPORTABLE SEGMENT


The following table presents operatingAs of January 1, 2020, the Registrants’ CODM views net income for eachas the measure of our business segmentsprofit or loss for the three and nine months ended September 30, 2017 and 2016.  reportable segments rather than the previous measure of operating income. Certain prior year amounts have been reclassified to conform to the current year presentation.

Discontinued Operations. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

As of March 31, 2020, reportable segments by Registrant were as follows:
RegistrantsHouston Electric T&DIndiana Electric IntegratedNatural Gas DistributionMidstream Investments
CenterPoint EnergyXXXX
Houston ElectricX
CERCX

Included in revenues are intersegment sales. We accountsales, which are accounted for intersegment sales as if the sales were to third parties at current market prices. See Note 16 to the Interim Condensed Financial Statements for details of reportable segments by Registrant.

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Electric Transmission & Distribution$247
 $257
 $489
 $498
Natural Gas Distribution19
 22
 220
 202
Energy Services7
 5
 58
 11
Other Operations6
 —
 9
 5
Total Consolidated Operating Income$279
 $284
 $776
 $716




Houston Electric Transmission & DistributionT&D (CenterPoint Energy)


For information regarding factors that may affect the future results of operations of ourthe Houston Electric Transmission & Distribution businessT&D reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Our Electric Generation, Transmission &and Distribution Business”Businesses” and “— Other Risk Factors Affecting Our Businesses or OurCenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of our 2016the Registrants’ combined 2019 Form 10-K.10-K and in Item 1A of Part II of this Form 10-Q.


The following table provides summary data of ourthe Houston Electric Transmission & Distribution business segment for the three and nine months ended September 30, 2017 and 2016:T&D reportable segment:
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 2020 2019
(in millions, except throughput and customer data)  
Revenues:       
Utility Revenues:    
TDU(1)$729
 $725
 $1,944
 $1,881
 $600
 $595
Bond Companies114
 183
 290
 450
 38
 94
Total revenues843
 908
 2,234
 2,331
Total utility revenues 638
 689
Expenses:           
Operation and maintenance, excluding Bond Companies344
 336
 1,040
 995
 358
 366
Depreciation and amortization, excluding Bond Companies97
 96
 296
 285
 99
 93
Taxes other than income taxes59
 59
 177
 173
 64
 62
Bond Companies96
 160
 232
 380
 31
 84
Total expenses596
 651
 1,745
 1,833
 552
 605
Operating Income$247
 $257
 $489
 $498
 86
 84
Operating Income:       
TDU$229
 $234
 $431
 $428
Bond Companies (1)
18
 23
 58
 70
Total segment operating income$247
 $257
 $489
 $498
Other Income (Expense)    
Interest expense and other finance charges (41) (40)
Interest expense on Securitization Bonds (8) (12)
Interest income 1
 4
Interest income from Securitization Bonds 1
 2
Other income (expense), net 3
 (2)
Income from Continuing Operations Before Income Taxes 42
 36
Income tax expense 5
 6
Net Income (1)
 $37
 $30
Throughput (in GWh):           
Residential10,419
 10,776
 23,512
 23,427
 5,351
 5,183
Total26,453
 26,518
 67,956
 66,839
 20,102
 19,019
Number of metered customers at end of period:           
Residential2,156,624
 2,116,312
 2,156,624
 2,116,312
 2,260,352
 2,206,563
Total2,435,558
 2,389,014
 2,435,558
 2,389,014
 2,552,739
 2,494,761
  
(1)RepresentsNet income for CenterPoint Energy’s Houston Electric T&D reportable segment differs from net income for Houston Electric due to weather hedge gains (losses) recorded at CenterPoint Energy that are not recorded at Houston Electric. Utility revenues in CenterPoint Energy’s Condensed Statements of Consolidated Income included weather hedge gains (losses) of $4 million and $3 million for the amount necessarythree months ended March 31, 2020 and 2019, respectively, for CenterPoint Energy’s Houston Electric T&D reportable segment. See Note 7(a) to pay interestthe Interim Condensed Financial Statements for more information on the Securitization Bonds.weather hedges.



Three months ended September 30, 2017March 31, 2020 compared to three months ended September 30, 2016March 31, 2019


OurCenterPoint Energy’s Houston Electric Transmission & Distribution businessT&D reportable segment reported operatingnet income of $247$37 million for the three months ended September 30, 2017, consisting of $229March 31, 2020, compared to $30 million from the TDU and $18 million related to the Bond Companies. Forfor the three months ended September 30, 2016, operating income totaled $257 million, consisting of $234 million from the TDU and $23 million related to the Bond Companies.March 31, 2019.

TDU operating
Net income decreased $5increased $7 million, primarily due to the following key factors:


lower usagedecreased operation and maintenance expenses of $12$17 million, largelyinclusive of a $6 million decrease in severance costs, primarily due to a return to more normal weather in 2017;lower labor and benefits costs, lower support services costs, and lower contract services costs;


lower equity return of $9 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during 2016; and

lower miscellaneous revenues, including right-of-way,•customer growth of $7 million.million from the addition of almost 58,000 customers; and


a $5 million increase in Other income (expense), net due to income associated with corporate-owned life insurance.

These decreasesincreases to operatingnet income were partially offset by the following:

rate increases of $12 million related to distribution capital investments;
lower operation and maintenance expenses of $4 million; and

customer growth of $9 million from the addition of over 46,000 new customers.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Our Electric Transmission & Distribution business segment reported operating income of $489 million for the nine months ended September 30, 2017, consisting of $431 million from the TDU and $58 million related to the Bond Companies. For the nine months ended September 30, 2016, operating income totaled $498 million, consisting of $428 million from the TDU and $70 million related to the Bond Companies.

TDU operating income increased $3 million, primarily due to the following key factors:

rate increases of $39 million related to distribution capital investments; and

customer growth of $26 million from the addition of over 46,000 new customers.

These increases to operating income were partially offset by the following:

lower equity return of $22 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during 2016;


higher depreciation and amortization expense, primarily because of ongoing additions to plant in service, and other taxes of $14$9 million;


lower usageequity return of $14 million;$5 million, primarily related to the annual true-up of transition charges to correct over-collections that occurred during the preceding 12 months;


lower miscellaneous revenues includingof $3 million, primarily related to right-of-way revenues;

decreased interest income of $9 million;$3 million, primarily due to lower investments in the CenterPoint Energy money pool; and


higher operation and maintenance expenses of $2 million; and

increased transmission costs billed by transmission providers of $47$9 million, which were partially offset by higher transmission-related revenues of $46$7 million.

Lower depreciation and amortization expenses related to AMS of $1 million were offset by a corresponding decrease in related revenues.



Indiana Electric Integrated (CenterPoint Energy)

Natural Gas Distribution


For information regarding factors that may affect the future results of operations of our Natural Gas Distribution businessthe Indiana Electric Integrated reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Our Natural GasElectric Generation, Transmission and Distribution and Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or OurCenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of our 2016the Registrants’ combined 2019 Form 10-K.10-K and in Item 1A of Part II of this Form 10-Q.


The following table provides summary data of our Natural Gas Distribution business segment for the three and nine months ended September 30, 2017 and 2016:CenterPoint Energy’s Indiana Electric Integrated reportable segment:
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 2020 
2019 (1)
(in millions, except throughput and customer data)  
Revenues$398
 $377
 $1,791
 $1,693
Utility Revenues $129
 $83
Expenses:           
Natural gas117
 104
 742
 679
Utility natural gas, fuel and purchased power 35
 26
Operation and maintenance163
 159
 531
 526
 44
 48
Depreciation and amortization66
 61
 194
 180
 25
 16
Taxes other than income taxes33
 31
 104
 106
 4
 2
Goodwill Impairment 185
 —
Total expenses379
 355
 1,571
 1,491
 293
 92
Operating Income$19
 $22
 $220
 $202
Throughput (in Bcf):       
Operating Loss (164) (9)
Other Income (Expense):    
Interest expense and other finance charges (6) (3)
Other income (expense), net 2
 1
Loss from Continuing Operations Before Income Taxes (168) (11)
Income tax expense (benefit) 3
 (2)
Net Loss $(171) $(9)
Throughput (in GWh):    
Retail 1,078
 704
Wholesale 63
 58
Total 1,141
 762
Number of metered customers at end of period:    
Residential13
 12
 94
 105
 129,233
 128,194
Commercial and industrial50
 51
 189
 193
Total Throughput63
 63
 283
 298
Number of customers at end of period:       
Residential3,179,284
 3,143,357
 3,179,284
 3,143,357
Commercial and industrial253,041
 251,043
 253,041
 251,043
Total3,432,325
 3,394,400
 3,432,325
 3,394,400
 148,265
 147,047


(1)Represents February 1, 2019 through March 31, 2019 results only due to the Merger.
Three months ended September 30, 2017March 31, 2020 compared to three months ended September 30, 2016March 31, 2019


Our Natural Gas Distribution businessCenterPoint Energy’s Indiana Electric Integrated reportable segment reported operating incomea net loss of $19$171 million for the three months ended September 30, 2017March 31, 2020, compared to $22$9 million for the three months ended September 30, 2016.March 31, 2019.


Operating income decreased $3The net loss increased $162 million as a result of the following key factors:


increaseda $185 million goodwill impairment charge further discussed in Note 10 to the Interim Condensed Financial Statements;

a $9 million increase in depreciation and amortization expense primarily due to ongoing additions to plant-in-service, and other taxesfrom the inclusion of $6 million;

lower usage of $4 million, primarilyexpense for three months in 2020 versus two months included in 2019 due to the timing of a decoupling normalization adjustment; andMerger on February 1, 2019;


higher operation and maintenance expenses of $3 million.

These decreases were partially offset by the following:

rate relief increaseda $5 million primarily from Texas jurisdictions of $2increase in state and federal income taxes driven by growth in earnings and the non-deductible goodwill impairment;

a $3 million Arkansas rate case filing of $1decrease in customer margin due to unfavorable weather not protected by weather normalization mechanisms; and

a $3 million and Mississippi RRA of $1 million; and

customer growth of $2 million associated with the addition of approximately 38,000 new customers.

Increased operation and maintenance expenses related to energy efficiency programs of $1 million were offset by corresponding increasesincrease in the related revenues.


Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Our Natural Gas Distribution business segment reported operating income of $220 million for the nine months ended September 30, 2017 compared to $202 million for the nine months ended September 30, 2016.

Operating income increased $18 million as a result of the following key factors:

rate increases of $25 million, primarily from Texas jurisdictions of $12 million, Arkansas rate case filing of $10 million and Mississippi RRA of $3 million;

labor and benefits were favorable by $11 million resulting primarilyinterest expense from the recordinginclusion of a regulatory asset (and a corresponding reductionexpense for three months in expense)2020 versus two months included in 2019 due to recover $16 million of prior postretirement expenses in future rates established in the Texas Gulf rate order; andMerger on February 1, 2019.
customer growth of $3 million associated with the addition of approximately 38,000 new customers.


These increases were partially offset by the following:


increased depreciation and amortization expense, primarilya $34 million increase in electric margin from the inclusion of results for three months in 2020 versus two months included in 2019 due to ongoing additions to plant-in-service,the Merger on February 1, 2019;

a $3 million increase in margin associated with the Indiana Electric infrastructure replacement TDSIC program; and other taxes of $10 million;


highera $4 million decrease in operation and maintenance expensesexpense inclusive of $9a $19 million partially resulting from an adjustment associated with the Texas Gulf rate orderreduction in Merger-related severance and incentive compensation costs in 2019 and a timing related reduction of $4 million, which is timing related; and

lower usage of $7 million primarily due to milder weather effects, partially mitigated by decoupling and weather normalization adjustments.

Increased operation andplant maintenance expenses related to energy efficiency programs of $7 million and increased gross receipts taxesexpenditures of $2 million, werepartially offset by corresponding increasesa $17 million increase from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the related revenues.Merger on February 1, 2019.



Natural Gas Distribution (CenterPoint Energy)
Energy Services


For information regarding factors that may affect the future results of operations of our Energy Services businessCenterPoint Energy’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Our Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or OurCenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of our 2016the Registrants’ combined 2019 Form 10-K.10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of our Energy Services business segment for the three and nine months ended September 30, 2017 and 2016:CenterPoint Energy’s Natural Gas Distribution reportable segment:
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 2020 2019 (1)
(in millions, except throughput and customer data)  
Revenues$871
 $614
 $2,998
 $1,450
Revenues:    
Utility revenues $1,306
 $1,399
Non-utility revenues 12
 16
Total revenues 1,318
 1,415
Expenses:           
Natural gas839
 591
 2,865
 1,389
Utility natural gas 574
 771
Non-utility cost of revenues, including natural gas 6
 10
Operation and maintenance22
 16
 65
 43
 267
 310
Depreciation and amortization3
 1
 9
 5
 111
 95
Taxes other than income taxes—
 1
 1
 2
 67
 60
Total expenses864
 609
 2,940
 1,439
 1,025
 1,246
Operating Income$7
 $5
 $58
 $11
 293
 169
       
Timing impacts related to mark-to-market gain (loss) (1)
$2
 $(2) $23
 $(18)
       
Throughput (in Bcf)272
 200
 864
 570
       
Number of customers at end of period (2)
30,817
 31,669
 30,817
 31,669
Other Income (Expense):    
Interest expense and other finance charges (32) (23)
Interest income 1
 1
Other income (expense), net (2) (1)
Income from Continuing Operations Before Income Taxes 260
 146
Income tax expense 56
 26
Net Income $204
 $120
Throughput (in Bcf):    
Residential 107
 114
Commercial and industrial 146
 136
Total Throughput 253
 250
Number of customers at end of period:    
Residential 4,266,685
 4,219,795
Commercial and industrial 350,009
 350,419
Total 4,616,694
 4,570,214


(1)Includes only February 1, 2019 through March 31, 2019 results of acquired natural gas businesses due to the change in unrealized mark-to-market value and the impact from derivative assets and liabilities acquired through the purchase of Continuum and AEM.Merger.

(2)Does not include approximately 66,100 natural gas customers as of September 30, 2017 that are under residential and small commercial choice programs invoiced by their host utility.


Three months ended September 30, 2017March 31, 2020 compared to three months ended September 30, 2016March 31, 2019


Our Energy Services businessCenterPoint Energy’s Natural Gas Distribution reportable segment reported operatingnet income of $7$204 million for the three months ended September 30, 2017March 31, 2020 compared to $5$120 million for the three months ended September 30, 2016. TheMarch 31, 2019.


Net income increased by $84 million primarily as a result of the following key factors:

a $65 million increase in operating incomemargin related to an additional month of $2earnings in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;

rate increases of $46 million wasin Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed below;

a $44 million reduction in operation and maintenance expense, primarily due to a $53 million decrease in Merger-related severance costs in 2019, offset by an additional month of operation and maintenance expense in the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;

a $5 million increase in revenues associated with customer growth from the addition of over 46,000 new customers; and

an increase in revenue of $4 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas, Indiana, Ohio and Mississippi.

These increases were partially offset by the following:

a $30 million increase from mark-to-market accounting for derivatives associatedin state and federal income taxes driven by growth in earnings and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;

a $16 million increase in depreciation and amortization and a $12 million increase in other non-income related taxes, primarily due to capital projects placed in service in 2020 and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;

$10 million of lower revenue attributed to milder weather and lower customer usage; and

a $9 million increase in interest expense due to incremental financing to fund capital projects and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019.

Increased operation and maintenance expenses related to energy efficiency programs of $1 million and decreased taxes other than income taxes of $5 million were offset by corresponding increases and decreases in the related revenues.




Natural Gas Distribution (CERC)

For information regarding factors that may affect the future results of operations of CERC’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with certain natural gas purchasesOur Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and sales usedCompetitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of CERC’s Natural Gas Distribution reportable segment:
  Three Months Ended March 31,
  2020 2019
   
Revenues:    
Utility revenues $996
 $1,195
Non-utility revenues 12
 16
Total revenues 1,008
 1,211
Expenses:   

Utility natural gas 472
 687
Non-utility cost of revenues, including natural gas 6
 10
Operation and maintenance 204
 227
Depreciation and amortization 74
 73
Taxes other than income taxes 50
 49
Total expenses 806
 1,046
Operating Income 202
 165
Other Income (Expense):    
Interest expense and other finance charges (21) (19)
Interest income 1
 1
Other income (expense), net (4) (2)
Income from Continuing Operations Before Income Taxes 178
 145
Income tax expense 44
 26
Net Income $134
 $119
Throughput (in Bcf):    
Residential 74
 91
Commercial and industrial 90
 98
Total Throughput 164
 189
Number of customers at end of period:    
Residential 3,299,011
 3,261,669
Commercial and industrial 261,120
 261,709
Total 3,560,131
 3,523,378

Three months ended March 31, 2020 compared to lock in economic margins. Operatingthree months ended March 31, 2019

CERC’s Natural Gas Distribution reportable segment reported net income of $134 million for the three months ended September 30, 2017 also includedMarch 31, 2020 compared to $119 million for the three months ended March 31, 2019.

Net income increased $15 million primarily as a result of the following key factors:

rate increases of $28 million in Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed below;


a $17 million reduction in operation and maintenance expense, inclusive of a $10 million decrease in Merger-related severance costs in 2019, primarily due to lower labor benefits and support services costs;

higher revenue of $5 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas and Mississippi; and

a $2 million increase in revenues associated with customer growth from the addition of almost 37,000 new customers.

These increases were partially offset primarily by the following:

an $18 million increase in state and federal income taxes and interest expense, primarily due to increased taxable income;

$8 million of lower revenue attributed to milder weather and lower customer usage as compared to the three months ended March 31, 2019;

a $5 million increase in property and other non-income related taxes, primarily due to increases in local tax rates and property valuations;

a $2 million increase in interest expense, primarily due to increased debt financing to fund an increase in capital projects in 2020; and

a $1 million increase in depreciation and amortization from an increase of incremental capital projects placed in service in 2020.

Decreased operation and maintenance expenses related to the acquisitionenergy efficiency programs of $5 million and integrationtaxes other than income taxes of AEM.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Our Energy Services business segment reported operating income of $58$4 million for the nine months ended September 30, 2017 compared to $11 million for the nine months ended September 30, 2016.  The increase in operating income of $47 million was primarily due to a $41 million increase from mark-to-market accounting for derivatives associated with certain natural gas purchases and sales used to lock in economic margins. Operating incomewere offset by corresponding decreases in the first nine months of 2017 also included $3 million of expenses related to the acquisition and integration of AEM. The remaining increase in operating income was primarily due to the increased throughput related to the acquisition of AEM in 2017.revenues.



Midstream Investments (CenterPoint Energy)
 
For information regarding factors that may affect the future results of operations of ourthe Midstream Investments businessreportable segment, please read “Risk Factors — Risk Factors Affecting OurCenterPoint Energy’s Interests in Enable Midstream Partners, LP” and “— Other Risk Factors Affecting Our Businesses or OurCenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of our 2016the Registrants’ combined 2019 Form 10-K.10-K and in Item 1A of Part II of this Form 10-Q.


The following table provides pre-tax equitythe net income (loss) of ourthe Midstream Investments businessreportable segment:
  Three Months Ended March 31,
  2020 2019
 (in millions)
Non-utility Revenues $—
 $—
Taxes other than income taxes (1) —
Total Expenses (1) —
Operating Income 1
 —
Other Income (Expense):    
Interest expense and other finance charges $(14) $(12)
Equity in earnings (loss) from Enable, net (1,475) 62
Interest income —
 $2
Income (Loss) from Continuing Operations Before Income Taxes (1,488) 52
Income tax expense (benefit) (361) 28
Net Income (Loss) $(1,127) $24
CenterPoint Energy’s Midstream Investment reportable segment reported a net loss of $1,127 million for the three and nine months ended September 30, 2017 and 2016:
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in millions)
Enable $68
 $73
 $199
 $164
Other OperationsMarch 31, 2020, compared to net income of $24 million for the three months ended March 31, 2019.

Net income decreased $1,151 million primarily as a result of the following key factors:

a $1,541 million impairment charge recorded on CenterPoint Energy’s equity investment in Enable (see Note 9 to the Interim Condensed Financial Statements for further information); and

a $6 million decrease in Equity in Earnings from Enable.

These decreases were partially offset by the following:

a $389 million increase in income tax benefit primarily resulting from the impairment charge discussed above and a lower effective tax rate in 2020; and

a $10 million decrease in the loss on dilution.

On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.

Corporate and Other (CenterPoint Energy)

The following table shows the operatingnet income (loss) of CenterPoint Energy’s Corporate and Other:
  Three Months Ended March 31,
  2020 2019 (1)
 (in millions)
Non-utility Revenues $82
 $42
Expenses:    
Non-utility cost of revenues, including natural gas 58
 37
Operation and maintenance 5
 24
Depreciation and amortization 17
 14
Taxes other than income taxes 2
 2
Total 82
 77
Operating Loss —
 (35)
Other Income (Expense)    
Gain (loss) on marketable securities (144) 83
Gain (loss) on indexed debt securities 135
 (86)
Interest expense and other finance charges (96) (84)
Interest income 48
 46
Other income, net 11
 10
Loss from Continuing Operations Before Income Taxes (46) (66)
Income tax benefit (50) (44)
Net Income (Loss) $4
 $(22)

(1)Includes only February 1, 2019 through March 31, 2019 results of the ESG business acquired in the Merger.

Three months ended March 31, 2020 compared to three months ended March 31, 2019

CenterPoint Energy’s Corporate and Other reported net income of our Other Operations business segment$4 million for the three and nine months ended September 30, 2017March 31, 2020 compared to a net loss of $22 million for the three months ended March 31, 2019.

Net income increased $26 million primarily due to the following key factors:

a $221 million increase in gains on the underlying value of indexed debt securities related to the ZENS;

a $19 million decrease in operation and 2016:maintenance expenses primarily due to the following:

◦lower corporate allocations retained in continuing operations related to the Infrastructure Services Disposal Group of $11 million primarily from Merger-related severance and incentive compensation costs incurred in 2019 that did not recur in 2020;

◦decreased benefits and services costs of $4 million;

◦decreased software maintenance costs of $2 million; and

◦reduced Merger-related integration costs of $2 million incurred in 2019 that did not recur in 2020;

a $19 million increase in margin primarily related to higher margin of $9 million at ESG from two large federal projects in 2020 and the reduction of Merger-related amortization of intangibles for construction backlog of $6 million in non-utility cost of revenues, including natural gas; and

a $6 million increase in income tax benefit.

These increases in net income were partially offset by the following:

a $227 million increase in losses on marketable securities;

a $12 million increase in interest expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to additional debt acquired in the Merger on February 1, 2019; and

a $3 million increase in depreciation and amortization from the inclusion of expense for three months in 2020 versus two months included in 2019 for businesses acquired in the Merger on February 1, 2019.

Corporate and Other (CERC)

The following table shows the net income (loss) of CERC’s Corporate and Other:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Revenues$4
 $3
 $11
 $11
Expenses(2) 3
 2
 6
Operating Income$6
 $—
 $9
 $5
  Three Months Ended March 31,
  2020 2019
 (in millions)
Non-utility Revenues $3
 $1
Expenses    
Operation and maintenance 5
 6
Total 5
 6
Operating Loss (2) (5)
Other Income (Expense):    
Interest expense and other finance charges (31) (31)
Interest income 21
 20
Other income (expense), net —
 (1)
Loss from Continuing Operations Before Income Taxes (12) (17)
Income tax benefit (9) (8)
Net Loss $(3) $(9)


CERTAIN FACTORS AFFECTING FUTURE EARNINGS


For information on other developments, factors and trends that may have an impact on ourthe Registrants’ future earnings, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Affecting Future Earnings” in Item 7 of Part II of our 2016 Form 10-K,and “Risk Factors” in Item 1A of Part I of our 2016the Registrants’ combined 2019 Form 10-K, in Item 1A of Part II of this Form 10-Q and “Cautionary Statement Regarding Forward-Looking Information” in this Form 10-Q.


LIQUIDITY AND CAPITAL RESOURCES


Historical Cash Flows


The following table summarizes the net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, 2017 and 2016:activities:
Three Months Ended March 31,
Nine Months Ended September 30,2020 2019
2017 2016CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
(in millions)(in millions)
Cash provided by (used in):          
Operating activities$1,031
 $1,455
$662
 $103
 $381
 $271
 $66
 $248
Investing activities(892) (739)(654) 192
 (177) (6,539) (1,237) (250)
Financing activities(279) (710)(32) (315) (205) 2,345
 1,078
 (11)


Cash Provided by Operating Activities

NetActivities. The following items contributed to increased (decreased) net cash provided by operating activities infor the first ninethree months of 2017 decreased $424 millionended March 31, 2020 compared to the first nine monthssame period of 2016 due2019:
 CenterPoint Energy 
Houston
 Electric
 CERC
 (in millions)
Changes in net income after adjusting for non-cash items$(1,363) $(26) $62
Changes in working capital212
 58
 67
Change in equity in earnings of unconsolidated affiliates1,537
 —
 —
Change in distributions from unconsolidated affiliates (1) 
(4) —
 —
Other9
 5
 4
 $391
 $37
 $133

(1)This change is partially offset by the change in distributions from Enable in excess of cumulative earnings in investing activities noted in the table below.

Investing Activities.The following items contributed tochanges inworking capital ($301 million), lower (increased) decreased net income after adjusting for non-cash and non-operating items ($116 million; primarily depreciation and amortization) and decreased cash from other non-current items ($7 million). The changes in working capital items in the first nine months of 2017 primarily related to decreased cash provided by taxes receivable; margin deposits, net; net regulatory assets and liabilities; non-trading derivatives, net; and inventory; partially offset by increased

cash provided by net accounts receivable/payable; interest and taxes accrued; net other current assets and liabilities; and fuel cost recovery.

Cash Used in Investing Activities

Net cash used in investing activities infor the first ninethree months of 2017 increased $153 millionended March 31, 2020 compared to the first nine monthssame period of 2016 primarily due to decreased cash received for the repayment of notes receivable from Enable ($363 million), decreased proceeds from the sale of marketable securities associated with the Charter merger ($178 million) and increased cash used for acquisitions ($30 million), which were partially offset by decreased cash used for the purchase of Series A Preferred Units ($363 million), decreased capital expenditures ($53 million) and decreased restricted cash ($10 million). In 2017, we acquired AEM for $132 million in cash and, in 2016, we acquired Continuum for $102 million in cash.2019:
Cash Used in Financing Activities
 CenterPoint Energy 
Houston
 Electric
 CERC
 (in millions)
Mergers and acquisitions, net of cash acquired$5,987
 $—
 $—
Higher capital expenditures(127) (28) (30)
Net change in notes receivable from affiliated companies—
 1,460
 106
Change in distributions from Enable in excess of cumulative earnings7
 —
 —
Other18
 (3) (3)
 $5,885
 $1,429
 $73


NetFinancingActivities. The following items contributed to (increased) decreased net cash used in financing activities infor the first ninethree months of 2017 decreased $431 millionended March 31, 2020 compared to the first nine monthssame period of 2016 due to increased proceeds from long-term debt ($496 million), decreased payments of long-term debt ($258 million), decreased distributions to ZENS holders ($178 million) and increased short-term borrowings ($10 million), which were partially offset by increased payments of commercial paper ($491 million), increased payments of common stock dividends ($14 million) and increased debt issuance costs ($4 million).2019:

 CenterPoint Energy 
Houston
 Electric
 CERC
 (in millions)
Net changes in commercial paper outstanding$(3,520) $—
 $(183)
Net changes in long-term debt outstanding, excluding commercial paper210
 (584) —
Net changes in long-term revolving credit facilities915
 —
 —
Net changes in debt issuance costs8
 7
 —
Increased payment of Common Stock dividends(1) —
 —
Decreased payment of preferred stock dividends1
 —
 —
Net change in notes payable from affiliated companies—
 134
 —
Contribution from parent—
 (590) —
Dividend to parent—
 (361) (12)
Other10
 1
 1
 $(2,377) $(1,393) $(194)

Future Sources and Uses of Cash


OurThe liquidity and capital requirements of the Registrants are affected primarily by our results of operations, capital expenditures, debt service requirements, tax payments, working capital needs and various regulatory actions. Our capitalCapital expenditures are expected to be used for investment in infrastructure for our electric transmission and distribution operations and our natural gas distribution operations.infrastructure. These capital expenditures are anticipated to maintain reliability and safety, as well asincrease resiliency and expand our systems through value-added projects. OurIn addition to dividend payments on CenterPoint Energy’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock, and in addition to interest payments on debt, the Registrants’ principal anticipated cash requirements for the remaining threenine months of 20172020 include the following:

capital expenditures of approximately $473 million;
  CenterPoint Energy Houston Electric CERC
  (in millions)
Estimated capital expenditures $1,682
 $626
 $401
Scheduled principal payments on Securitization Bonds 168
 168
 —
Maturing Vectren term loans 600
 —
 —


maturing senior notes of $250 million;

scheduled principal payments on Securitization Bonds of $64 million;

restoration costs associated with Hurricane Harvey;

dividend payments on CenterPoint Energy, Inc. common stock; and

interest payments on debt.

WeThe Registrants expect that borrowings under our credit facilities, proceeds from commercial paper and anticipated cash flows from operations and distributions on our investments in common units and Series A Preferred Units from Enable will be sufficient to meet our anticipated cash needs for the remaining threenine months of 2017.2020 will be met with borrowings under their credit facilities, bank loans, proceeds from the private placement of Series C Preferred Stock and Common Stock, proceeds from the issuance of long-term debt, proceeds from the completed sale of the Infrastructure Services Disposal Group, proceeds from the anticipated sale of the Energy Services Disposal Group, anticipated cash flows from operations, with respect to CenterPoint Energy and CERC, proceeds from commercial paper and, with respect to CenterPoint Energy, distributions from Enable. Discretionary financing or refinancing may result in the issuance of equity securities of CenterPoint Energy or debt securities of the Registrants in the capital markets or the arrangement of additional credit facilities.facilities or term bank loans. Issuances of equity or debt in the capital markets, funds raised in the commercial paper markets and additional credit facilities may not, however, be available to us on acceptable terms.

On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to CenterPoint Energy that fall below CenterPoint Energy’s previously disclosed expected minimum quarterly distribution from Enable of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce Enable common unit distributions to CenterPoint Energy by approximately $155 million per year.

Additionally, on April 1, 2020, CenterPoint Energy provided a business update related to certain measures it expects to take in response to the current business environment to strengthen its financial position and to adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions discussed above. These measures are expected to include reducing CenterPoint Energy’s (i) quarterly common stock dividend per share from $0.2900 to $0.1500; (ii) anticipated 2020 capital spending by approximately $300 million, with CenterPoint Energy continuing to target five-year total capital investment of approximately $13 billion as previously disclosed; and (iii) anticipated operation and maintenance expenses for 2020 by a target

of approximately $40 million, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets.

To the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, the Registrants may need to consider alternative sources of funding for some of its operations and for working capital, which may increase the cost of capital and result in higher interest expense. At this time, the Registrants expect impacts on their liquidity due to COVID-19 to be temporary. Although CenterPoint Energy customarily satisfies its near-term financing needs with proceeds from commercial paper, CenterPoint Energy has utilized its revolving credit facilities as a source of funding because market disruptions caused by COVID-19 limited its access to the commercial paper markets. These uncertain economic conditions may also result in the inability of the Registrants’ customers and other counterparties to make payments to the Registrants, on a timely basis or at all, which could adversely affect the business, cash flows, liquidity, financial condition and results of operations of the Registrants. Under such circumstances, the Registrants would intend to rely on borrowings from the short-term capital markets as well as continued use of their revolving credit facilities to mitigate such effects until cash flows revert to their pre-COVID-19 levels. The net proceeds of CenterPoint Energy’s sale of the Infrastructure Services Disposal Group were used to repay a portion of outstanding CenterPoint Energy debt, including $200 million of maturing Vectren term loans.

Off-Balance Sheet Arrangements


Other than operating leases,Houston Electric’s general mortgage bonds issued as collateral for tax-exempt long-term debt of CenterPoint Energy as discussed in Note 12, guarantees as discussed in Note 14(b) and (c) to the Interim Condensed Financial Statements, we have no off-balance sheet arrangements.


Regulatory Matters


Brazos Valley Connection ProjectCOVID-19 Regulatory Matters

Governors, public utility commissions and other authorities in the states in which we operate have issued a number of different orders related to the COVID-19 pandemic. While many jurisdictions are subject to mandatory stay-at-home and similar orders, essential businesses and activities are exempted from these orders, including utility operations and maintenance. Accordingly, CenterPoint Energy’s crews will continue to provide essential service by responding to calls, completing work orders and undertaking other critical work. To protect our customers and employees, we are implementing COVID-19 safety precautions. Additionally, regulatory authorities have issued orders addressing customer non-payment and disconnection. For example, in Indiana, the IURC issued an order that, among other things, permits utilities to voluntarily suspend or waive late fees and reconnections fees and reconnect customers who have been disconnected due to non-payment, provided that such actions are taken on a non-discriminatory basis and apply to all customers. Commissions in other states have issued similar orders. In our NGD service territories and for Indiana Electric, we have temporarily suspended disconnections for non-payment and will continue to support those customers who may need payment assistance, arrangements or extensions. We will continue to monitor developments in this area and adjust our response as guidelines and circumstances may require.
On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset costs resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory. The order includes several requirements for transmission and distribution utilities (including Houston Electric):
Transmission and distribution utilities must file a tariff rider to collect funds to reimburse costs related to unpaid bills from eligible residential customers unemployed due to the impacts of COVID-19. The rider is based on $0.33 per MW hour ($0.00033 per KW hour) to be applied to all customer classes. Houston Electric filed its updated tariff implementing the rider on March 31, 2020, which was approved by the PUCT on April 2, 2020.

Transmission and distribution utilities entered into no-interest loan agreements with ERCOT to provide for an initial fund balance for reimbursement. On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a no-interest loan agreement with ERCOT for approximately $5 million.

The fund administered by each transmission and distribution utility for the COVID-19 ERP can also receive donations and grants from governmental entities, corporations, and other entities. Any funds received from other sources shall be administered and treated in the same manner by the transmission and distribution utilities as the funds in the program from the rider.

Construction beganTransmission and distribution utilities may petition the PUCT for changes to the COVID-19 ERP, including the level of the rider in the event that the funds collected are not sufficient to cover reimbursements.

REPs will identify eligible customers to the relevant transmission and distribution utilities, and the transmission and distribution utilities will cease charging REPs for associated delivery charges, except securitization related charges. REPs will cease submitting disconnection for non-payment orders to transmission and distribution utilities for eligible customers.

The funds collected through the rider will be used to reimburse the following entities and costs: REPs’ energy charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice (reimbursement amounts are based on an average energy cost of $0.04 per KW hour); transmission and distribution utilities’ delivery charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice; the Brazos Valley Connectionthird-party administrator to cover its reasonable costs of administering the COVID-19 ERP eligibility process; and ERCOT for the loan to the transmission and distribution utilities.

•
REPs will submit one spreadsheet with reimbursement claims to transmission and distribution utilities beginning on April 30, 2020 and all subsequent requests that may be made on the 15th of each month, and transmission and distribution utilities will process reimbursement payments within 14 days.

Transmission and distribution utilities will prepare reports and file them at the PUCT every 30 days showing aggregate amounts of reimbursements to the transmission and distribution utilities and REPs.
The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of the COVID-19 ERP. The transmission and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete any remaining COVID-19 ERP cost recovery and disburse all reimbursement amounts or remaining balances.

In the other states in which we operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs and savings. For example, the MPSC is allowing CenterPoint Energy and CERC to defer the following:

all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system beginning with the date of the Governor of Mississippi’s declared state of emergency; and

any costs, including any incremental bad debt expenses and all associated credit and collection costs, related to connections, reconnections, or disconnections for all customers classes. This deferral authorization includes, but is not limited to, customer-paid fees.

Further, the MPSC is also allowing CenterPoint Energy and CERC to offset these deferrals with any financial relief received from other sources at the federal or state level. Orders have also been received from the Railroad Commission, the LPSC and the APSC authorizing CenterPoint Energy and CERC to defer some or all COVID-19 related costs for future recovery.

Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately $194 million, among other requests. On January 23, 2020, Houston Electric filed a Stipulation and Settlement Agreement with the PUCT that provides for the following, among other things:

an overall revenue requirement increase of approximately $13 million;

an ROE of 9.4%;

a capital structure of 57.5% debt/42.5% equity;

a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and

recovery of all retail transmission related costs through the TCRF.


Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for Houston Electric no later than four years from the date of the PUCT’s final order in the proceeding. Additionally, Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceeding with the PUCT be instituted regarding EDIT on Houston Electric’s securitized assets. Furthermore, under the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy but left the determination of whether to impose a dividend restriction up to the PUCT. The PUCT approved the Stipulation and Settlement Agreement at its February 2017,14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the final order. The rates were implemented on April 23, 2020.

CenterPoint Energy and Houston Electric expects to complete constructionrecord pre-tax expense for (i) probable disallowances of capital investments and energize the Brazos Valley Connection(ii) customer refund obligations and costs deferred in the first quarter of 2018, ahead of the original June 1, 2018 energization date.  Houston Electric continues to anticipate that the final capital costs of the project will be within the estimated range of approximately $270-$310 million in the PUCT’s original order. Houston Electric is eligible to continue making filings for theregulatory assets when recovery of land acquisition costs through interim TCOS updates in advance of project completion.such amounts is no longer considered probable.


FreeportBailey to Jones Creek Project (CenterPoint Energy and Houston Electric)


In April 2017, Houston Electric submitted a proposal to ERCOT requesting its endorsement of the Freeport Area Master Plan, which included the Bailey to Jones Creek Project. On November 21, 2019, the PUCT issued its final approval of Houston Electric’s certificate of convenience and necessity application, based on an unopposed settlement agreement under which Houston Electric would construct the project at an estimated cost of approximately $250 million transmission project$483 million. In April 2020, a federal court vacated the Army Corps of Engineers Nationwide Permit 12, which Houston Electric intended to use for the project. Houston Electric is monitoring those proceedings and has filed its individual permit application with the Army Corps in accordance with the federal court decision. Significant delays in the Freeport, Texas area,processing of that application could lead to delays in completing construction. The actual capital costs of the project will depend on land acquisition costs, construction costs, minor changes to the routing of the line to mitigate environmental and other land use impacts, structure design to address soil and coastal wind conditions, the permitting issues described above, and other factors. Houston Electric has commenced pre-construction activities on the project, and anticipates beginning construction in early 2021 and completing construction and energizing the line before the peak electric season in April 2022.

Indiana Electric Generation Project (CenterPoint Energy)

Indiana Electric must make substantial investments in its generation resources in the near term to comply with environmental regulations. On February 20, 2018, Indiana Electric filed a petition seeking authorization from the IURC to construct a new 700-850 MW natural gas combined cycle generating facility to replace the baseload capacity of its existing generation fleet at an approximate cost of $900 million, which includes enhancements to two existing substations and the constructioncost of a new 345 kv double-circuit transmission line. Capital expendituresnatural gas pipeline to serve the plant.

As a part of this same proceeding, Indiana Electric also sought recovery under Indiana Senate Bill 251 of costs to be incurred for environmental investments to be made at its F.B. Culley generating plant to comply with ELG and CCR rules. The F.B. Culley investments, estimated to be approximately $95 million, began in 2019 and will allow the F.B. Culley Unit 3 generating facility to comply with environmental requirements and continue to provide generating capacity to Indiana Electric’s customers. Under Indiana Senate Bill 251, Indiana Electric sought authority to recover 80% of the approved costs, including a return, using a tracking mechanism, with the remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding.

On April 24, 2019, the IURC issued an order approving the environmental investments proposed for the F.B. Culley generating facility, along with recovery of prior pollution control investments made in 2014. The order denied the proposed gas combined cycle generating facility. Indiana Electric is conducting a new IRP, expected to be completed in mid-2020, to identify an appropriate investment of capital in its generation fleet to satisfy the needs of its customers and comply with environmental regulations.

Indiana Electric A.B. Brown Ash Pond Remediation (CenterPoint Energy)

On August 14, 2019, Indiana Electric filed a petition with the IURC, seeking approval, as a federally mandated project, will be incrementalfor the recovery of costs associated with the clean closure of the A.B. Brown ash pond pursuant to its previously disclosed five-year capital plan. Houston Electric anticipates a decision from ERCOTIndiana Senate Bill 251. This project, expected to last approximately 14 years, would result in the fourth quarterfull excavation and recycling of 2017, and ifthe ponded ash through agreements with a beneficial reuse entity, totaling approximately $160 million. Under Indiana Senate Bill 251, Indiana Electric seeks authority to recover via a tracking mechanism 80% of the approved will makecosts, with a return on eligible capital investments needed to allow for the necessary filingsextraction of the ponded ash, with the PUCT.remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding. On December 19, 2019 and subsequently on January 10, 2020, Indiana Electric filed a settlement agreement with the intervening parties whereby the costs would be recovered as requested, with an additional commitment by Indiana Electric to offset the federally mandated costs by at least $25 million, representing a combination of total cash proceeds received from the

PHMSA Matters

On December 14, 2016, PHMSA announced an interim final ruleash reuser and total insurance proceeds to impose industry-developed recommendations as enforceable safety standards for downhole (underground) equipment, including wells, wellbore tubing, and casing, at both interstate and intrastate underground natural gas storage facilities. Both CERC and Enable own and operate underground storage facilities that are subject to this rule’s provisions, which include procedures and practices for operations, maintenance, threat identification, monitoring, assessment, site security, emergency response and preparedness, training and recordkeeping. This rule went into effect on January 18, 2017,be received from Indiana Electric’s insurers under confidential settlement agreements of litigation filed against the insurers. The settlement agreement with the intervening parties is pending before the IURC, with an announced compliance deadlineorder expected in the first half of January 18, 2018. PHMSA determined, however, that it will not issue enforcement citations to any operators for violations of provisions2020. If approved, Indiana Electric would expect recovery of the interim final rule that had previously been non-mandatory provisions of American Petroleum Institute Recommended Practices 1170 and 1171 until one year after PHMSA issues a final rule, which it expectsapproved costs to publishcommence in January of 2018. On October 19, 2017, PHMSA formally reopened the comment period on the interim final rule in response to a petition for reconsideration. This matter remains ongoing and subject to future PHMSA determinations. CERC and Enable will continue to monitor developments and assess the potential impact of any modifications to this rule.2021.


Rate Change Applications


Houston Electric and CERCThe Registrants are routinely involved in rate change applications before state regulatory authorities. Those applications include general rate cases, where the entire cost of service of the utility is assessed and reset. In addition, Houston Electric is periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS and DCRF) and annually files to adjust its EECRF. CERC is periodically involved in proceedings to adjust its capital tracking mechanisms in Texas (GRIP), its cost of service adjustments in Arkansas, Louisiana, Mississippi and Oklahoma (FRP, RSP, RRA and PBRC)PBRC, respectively), its decoupling mechanism in Minnesota, and its energy efficiency cost trackers in Arkansas, Minnesota, Mississippi and Oklahoma (EECR, CIP, EECR and EECR)EECR, respectively). CenterPoint Energy is periodically involved in proceedings to adjust its capital tracking mechanisms in Indiana (CSIA for gas and TDSIC for electric) and Ohio (DRR), its decoupling mechanism in Indiana (SRC for gas), and its energy efficiency cost trackers in Indiana (EEFC for gas and DSMA for electric) and Ohio (EEFR).

The table below reflects significant applications pending or completed since our 2016the Registrants’ combined 2019 Form 10-K was filed with the SEC.

Mechanism
Annual Increase (Decrease) (1)
(in millions)
Filing
 Date
Effective DateApproval DateAdditional Information
CenterPoint Energy and Houston Electric (PUCT)
Rate Case$13
April
2019
April
2020
March 2020
See discussion above under Houston Electric Base Rate Case.
TCOS (1)
17March 2020TBDTBDRequested an increase of $204 million to rate base.
CenterPoint Energy and CERC - Beaumont/East Texas (Railroad Commission)
Rate Case (1)7
November
2019
TBDTBDUnanimous settlement agreement filed with the Railroad Commission in March 2020 that recommends a $4 million annual increase in current revenues, a refund for an Unprotected EDIT Rider amortized over three years of which $2.2 million is refunded in the first year and establishes a 9.65% ROE and a 56.95% equity ratio for future GRIP filings for the Beaumont/East Texas jurisdiction. The settlement calls for new rates to be effective with October 2020 usage and would be reflected starting with November 2020 bills.
CenterPoint Energy and CERC - South Texas, Houston and Texas Coast (Railroad Commission)
GRIP (1)18
March
2020
TBDTBDBased on net change in invested capital of $144 million.
CenterPoint Energy and CERC - Arkansas (APSC)
FRP (1)(8)
April
2020
TBDTBDBased on ROE of 9.5% with 50 basis point (+/-) earnings band. Revenue reduction of $8.1 million based on prior test year true-up earned return on equity of 11.75% combined with projected test year return on equity of 8.40%.
CenterPoint Energy and CERC - Minnesota (MPUC)
CIP Financial Incentive (1)
9
May
2020
TBDTBDCIP Financial Incentive based on 2019 activity.
Rate Case (1)
62October 2019TBDTBDReflects a proposed 10.15% ROE on a 51.39% equity ratio. Interim rates reflecting an annual increase of $53 million were implemented on January 1, 2020.
CenterPoint Energy and CERC - Oklahoma (OCC)
PBRC (1)
(2)
March
2020
TBDTBDBased on ROE of 10% with 50 basis point (+/-) earnings band. Revenue credit of approximately $2 million based on 2019 test year adjusted earned ROE of 15.37%.

Mechanism 
Annual Increase (Decrease) (1)
(in millions)
 
Filing
 Date
 Effective Date Approval Date Additional Information
Houston Electric (PUCT)CenterPoint Energy and CERC - Mississippi (MPSC)
AMS
RRA (1)
 N/A2 
JuneMay
20172020
TBDTBDFinal reconciliation of AMS surcharge proposing a $28.7 million refund for AMS revenue in excess of expenses, for which a reserve has been recorded. Refunds began in September 2017.
EECRF (2)$11.0
June
2017
TBDTBDAnnual reconciliation filing for program year 2016 and includes proposed performance bonus of $11 million. Anticipated effective date of March 2018.
DCRF41.8
April
 2017
September
2017
July
2017
Based on an increase in eligible distribution-invested capital for 2016 of $479 million. Unanimous Stipulation and Settlement Agreement was filed in June 2017 for $86.8 million (a $41.8 million annual increase).  The settlement agreement also included the AMS refund referenced above.
TCOS7.8December 2016
February
2017
February
2017		Based on an incremental increase in total rate base of $109.6 million.
TCOS39.3September 2017 TBD TBD Based on an incrementalROE of 9.292% with 100 basis point (+/-) earnings band. Revenue increase in total rate base of $263.4 million.$2 million based on 2019 test year adjusted earned ROE of 7.45%.
CenterPoint Energy - Indiana South Texas and Beaumont/East Texas (Railroad Commission)- Gas (IURC)
GRIP
CSIA (1)
 7.61 
March
 2017
April 2020		 
July
2017 2020
 TBDRequested an increase of $13 million to rate base, which reflects a $1 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $1 million annually.
CenterPoint Energy - Indiana North - Gas (IURC)
June
2017CSIA (1)
 Based on net change in invested capital of $46.5 million.
Houston and Texas Coast (Railroad Commission)
Rate Case4 16.5November 2016
May
2017
May
2017
The Railroad Commission approved a unanimous settlement agreement establishing parameters for future GRIP filings, including a 9.6% ROE on a 55.15% equity ratio.
Texarkana, Texas Service Area (Multiple City Jurisdictions)
Rate Case1.1April 2020 
July
2017 2020
 TBDRequested an increase of $35 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $14 million annually.
CenterPoint Energy - Ohio (PUCO)
September
2017TSCR (1)
 August 2017Approved rates are consistent with Arkansas rates approved in 2016.
Arkansas (APSC)
EECR (2)0.5N/A 
MayJanuary
20172019
January 2018September 2017Recovers $11.0 million, including an incentive of $0.5 million based on 2016 program performance.
FRP7.6April
2017		October
2017		September 2017Based on ROE of 9.5% as approved in the last rate case. Unanimous Settlement Agreement was filed in July 2017 for $7.6 million and was subsequently approved.
BDA3.9
March
2017
June
2017
June
2017
For the evaluation period between January 2016 and August 2016. Amounts are recorded during the evaluation period.
Minnesota (MPUC)
Rate Case56.5August 2017 TBD TBD Reflects a proposed 10.0% ROE on a 52.18% equity ratio. Includes a proposalApplication to extend decoupling beyond current expiration dateflow back to customers certain benefits from the TCJA. Initial impact reflects credits for 2018 of June 2018. Interim rates reflecting an annual increase$(10) million and 2019 of $47.8$(9) million, were effective October 1, 2017.and 2020 of $(6) million, with mechanism to begin subsequent to new approval by PUCO. The order is expected in 2020.
CIP (2)DRR 13.810 
May
20172020
August 2017August 2017Annual reconciliation filing for program year 2016 and includes performance bonus of $13.8 million.
Decoupling20.4September 2017 
September
20172020
 TBD Reflects revenue under recoveryRequested an increase of $67 million to rate base for the period July 1, 2016 through June 30, 2017 and $3.0investments made in 2019, which reflects a $10 million related to the under recoveryannual increase in current revenues.  A change in (over)/under-recovery variance of prior period adjustment factor. $9.2$2 million was recognizedannually is also included in 2016 and $11.2 million has been recognized in 2017.rates.
Mississippi (MPSC)CenterPoint Energy - Indiana Electric (IURC)
RRA
TDSIC (1)
 2.34
February
2020
 
May
20172020
July
2017
July
2017
Authorized ROE of 9.59% and a capital structure of 50% debt and 50% equity.
Louisiana (LPSC)
RSP1.0September 2016December 2016
April
2017
Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity.
RSP3.4September 2017December 2017 TBD Authorized ROERequested an increase of 9.95%$34 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a capital structurechange in (over)/under-recovery variance of 48% debt and 52% equity.
Oklahoma (OCC)
EECR (2)0.4
March
 2017
November 2017October 2017Recovers $2.6$2 million including an incentive of $0.4 million based on 2016 program performance.
PBRC2.2
March
2017
November 2017October 2017Based on ROE of 10%.annually.


(1)Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates.


(2)Amounts are recorded when approved.
Tax Reform

TCJA-related 2018 tax expense refunds are currently included in the Registrants’ existing rates and are therefore reducing the Registrants’ current annual revenue. The TCJA-related 2018 tax expense refunds for Houston Electric were completed in September 2019. However, in Houston Electric’s rate case filed in April 2019, and subsequently adjusted in errata filings in May and June 2019, pursuant to the Stipulation and Settlement Agreement, Houston Electric will return unprotected EDIT net regulatory liability balance to customers, through a separate rider and its wholesale transmission tariff over approximately three years. The balance of unprotected EDIT was $105 million as of December 31, 2018. In addition, Houston Electric’s TCJA-related protected EDIT balance as of December 31, 2018 is $563 million and must be returned to customers over ARAM.

CenterPoint Energy’s electric and natural gas utilities in Indiana and Ohio, which were acquired during the Merger, currently recover corporate income tax expense in approved rates charged to customers. The IURC and the PUCO both issued orders which initiated proceedings to investigate the impact of the TCJA on utility companies and customers within Indiana and Ohio, respectively. In addition, the IURC and PUCO have ordered each utility to establish regulatory liabilities to record all estimated impacts of tax reform starting January 1, 2018 until the date when rates are adjusted to capture these impacts. In Indiana, in response to Vectren’s pre-Merger filing for proposed changes to its rates and charges to consider the impact of the lower federal income tax rates, the IURC approved an initial reduction to current rates and charges, effective June 1, 2018, to capture the immediate impact of the lower corporate federal income tax rate. The refund of EDIT and regulatory liabilities commenced in November 2018 for Indiana electric customers and in January 2019 for Indiana natural gas customers. In Ohio, the initial rate reduction to current rates and charges became effective upon conclusion of its pending base rate case on August 28, 2019. In January 2019, an application was filed with PUCO in compliance with its October 2018 order requiring utilities to file for a request to adjust rates to reflect the impact of the TCJA, requesting authority to implement a rider to flow back to customers the tax benefits realized under the TCJA, including the refund of EDIT and regulatory liabilities. CenterPoint Energy expects this proceeding to be approved in 2020.



ELG (CenterPoint Energy)

Under the Clean Water Act, the EPA sets technology-based guidelines for water discharges from new and existing electric generation facilities. In September 2015, the EPA finalized revisions to the existing steam electric ELG setting stringent technology-based water discharge limits for the electric power industry. The EPA focused this rulemaking on wastewater generated primarily by pollution control equipment necessitated by the comprehensive air regulations, specifically setting strict water discharge limits for arsenic, mercury and selenium for scrubber waste waters. The ELG will be implemented when existing water discharge permits for the plants are renewed. In the case of Indiana Electric’s water discharge permits, in 2017 the IDEM issued final renewals for the F.B. Culley and A.B. Brown power plants. IDEM agreed that units identified for retirement by December 2023 would not be required to install new treatment technology to meet ELG, and approved a 2020 compliance date for dry bottom ash and a 2023 compliance date for flue gas desulfurization wastewater treatment standards for the remaining coal-fired unit at F.B. Culley.

On April 13, 2017, as part of the U.S. President’s Administration’s regulatory reform initiative, which is focused on the number and nature of regulations, the EPA granted petitions to reconsider the ELG rule, and indicated it would stay the current implementation deadlines in the rule during the pendency of the reconsideration. On September 13, 2017, the EPA finalized a rule postponing certain interim compliance dates by two years, but did not postpone the final compliance deadline of December 31, 2023. In April 2018, the EPA published an effluent guidelines program plan that anticipated a December 2019 rule revising the effluent limitations and pre-treatment standards for existing sources in the 2015 rule. On April 12, 2019, the U.S. Court of Appeals for the Fifth Circuit vacated and remanded portions of the ELG rule that selected impoundment as the best available technology for legacy wastewater and leachate. It is not clear what revisions to the ELG rule the EPA will implement, or what effect those revisions may have. As Indiana Electric does not currently have short-term ELG implementation deadlines in its recently renewed wastewater discharge permits, it does not anticipate immediate impacts from the EPA’s two-year extension of preliminary implementation deadlines due to the longer compliance time frames granted by IDEM and will continue to work with IDEM to evaluate further implementation plans. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR and ELG rules.  CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.

CPP and ACE Rule (CenterPoint Energy)

On August 3, 2015, the EPA released its CPP Rule, which required a 32% reduction in carbon emissions from 2005 levels. The final rule was published in the Federal Register on October 23, 2015, and that action was immediately followed by litigation ultimately resulting in the U.S. Supreme Court staying implementation of the rule. On August 31, 2018, the EPA published its proposed CPP replacement rule, the ACE Rule, which was finalized on July 8, 2019 and requires states to implement a program of energy efficiency improvement targets for individual coal-fired electric generating units. States have three years to develop state plans to implement the ACE rule, and CenterPoint Energy does not expect a state ACE rule to be finalized and approved by the EPA until 2024. CenterPoint Energy is currently unable to predict the effect of a state plan to implement the ACE rule but does not anticipate that such a plan would have a material effect.

Impact of Legislative Actions & Other Initiatives (CenterPoint Energy)

At this time, compliance costs and other effects associated with reductions in GHG emissions or obtaining renewable energy sources remain uncertain. While the requirements of a state ACE rule remain uncertain, Indiana Electric will continue to monitor regulatory activity regarding GHG emission standards that may affect its electric generating units.

MRT Rate Case (CenterPoint Energy)

In June 2018, MRT filed a general Natural Gas Act rate case, and in October 2019, MRT filed a second rate case. MRT began collecting the rates proposed in the 2018 rate case, subject to refund, on January 1, 2019. On November 5, 2019, as supplemented on December 13, 2019, MRT filed uncontested proposed settlements for the 2018 and 2019 rate cases. The FERC approved both settlements on March 26, 2020, and that order became final on April 25, 2020.

Other Matters


Credit Facilities


OurThe Registrants may draw on their respective revolving credit facilities may be drawn on by the companies from time to time to provide funds used for general corporate and limited liability company purposes, including to backstop the companies’CenterPoint Energy’s and CERC’s commercial paper programs. The facilities may also be utilized to obtain letters of credit. For further details related to ourthe Registrants’ revolving credit facilities, please see Note 12 to the Interim Condensed Financial Statements.


Based on the consolidated debt to capitalization covenant in the Registrants’ revolving credit facilities, the Registrants would have been permitted to utilize the full capacity of such revolving credit facilities, which aggregated approximately $5.1 billion as of March 31, 2020. As of May 1, 2020, the Registrants had the following revolving credit facilities and the 2017 amendments, please see Note 11 to our Interim Condensed Financial Statements.

Asutilization of October 26, 2017, we had the followingsuch facilities:
Company 
Size of
Facility
 
Amount
Utilized at
October 26, 2017 (1)
 Termination Date
(in millions)
CenterPoint Energy $1,700
 $403
(2) 
March 3, 2022
Houston Electric 300
 4
(3) 
March 3, 2022
CERC Corp. 900
 561
(4) 
March 3, 2022
    Amount Utilized as of May 1, 2020    
Registrant Size of Facility Loans Letters of Credit Commercial Paper Weighted Average Interest Rate Termination Date
  (in millions)    
CenterPoint Energy $3,300
 $—
 $8
 $1,675
 1.68% March 3, 2022
CenterPoint Energy (1)
 400
 —
 —
 147
 0.68% July 14, 2022
CenterPoint Energy (2)
 200
 —
 —
 —
 —% July 14, 2022
Houston Electric 300
 —
 —
 —
 —% March 3, 2022
CERC 900
 —
 1
 125
 0.63% March 3, 2022
Total $5,100
 $—
 $9
 $1,947
    


(1)Based on the consolidated debt to capitalization covenant in our revolvingThe credit facility was issued by VUHI and the revolving credit facility of each of Houston Electricis guaranteed by SIGECO, Indiana Gas and CERC Corp., we would have been permitted to utilize the full capacity of such revolving credit facilities, which aggregated $2.9 billion as of September 30, 2017.VEDO.


(2)Represents outstanding commercial paper of $397 millionThe credit facility was issued by VCC and outstanding letters of credit of $6 million.is guaranteed by Vectren.

(3)Represents outstanding letters of credit.
(4)Represents outstanding commercial paper.


Borrowings under each of the three revolving credit facilities are subject to customary terms and conditions. However, there is no requirement that the borrower makemakes representations prior to borrowingsborrowing as to the absence of material adverse changes or litigation that could be expected to have a material adverse effect. Borrowings under each of the revolving credit facilities are subject to acceleration upon the occurrence of events of default that we consider customary. The revolving credit facilities also provide for customary fees, including commitment fees, administrative agent fees, fees in respect of letters of credit and other fees. In each of the three revolving credit facilities, the spread to LIBOR and the commitment fees fluctuate based on the borrower’s credit rating. The borrowers are currently in compliance with the various business and financial covenants in the threefive revolving credit facilities.


Long-term Debt Financing Transactions


In January 2017, Houston Electric issued $300 million aggregate principal amount of general mortgage bonds. In February 2017, CenterPoint Energy retired $250 million aggregate principal amount of its 5.95% senior notes at their maturity. In August 2017, CenterPoint Energy issued $500 million aggregate principal amount of unsecured senior notes. In August 2017, CERC Corp. issued $300 million aggregate principal amount of unsecured senior notes. For furtherdetailed information about our 2017the Registrants’ debt transactions in 2020, see Note 11Notes 12 and 20 to ourthe Interim Condensed Financial Statements.


Securities Registered with the SEC


On January 31, 2017, CenterPoint Energy, Houston Electric and CERC Corp.the Registrants filed a joint shelf registration statement with the SEC, as amended on September 24, 2018, registering indeterminate principal amounts of Houston Electric’s general mortgage bonds, CERC Corp.’s senior debt securities and CenterPoint Energy’s senior debt securities and junior subordinated debt securities and an indeterminate number of CenterPoint Energy’s shares of common stock,Common Stock, shares of preferred stock, depositary shares, as well as stock purchase contracts and equity units. The joint shelf registration statement will expireexpired on January 31, 2020.


Temporary Investments


As of October 26, 2017, weMay 1, 2020, the Registrants had no temporary external investments.



Money Pool


We haveThe Registrants participate in a money pool through which the holding companythey and participatingcertain of their subsidiaries can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under ourCenterPoint Energy’s revolving credit facility or the sale of ourCenterPoint Energy’s commercial paper. The net funding requirements of the CERC money pool are expected to be met with borrowings under CERC’s revolving credit facility or the sale of CERC’s commercial paper. The money pool may not provide sufficient funds to meet the Registrants’ cash needs.


The table below summarizes CenterPoint Energy money pool activity by Registrant as of May 1, 2020:
 Weighted Average Interest Rate Houston Electric CERC
   (in millions)
Money pool investments (borrowings)1.70% $(193) $—

Impact on Liquidity of a Downgrade in Credit Ratings


The interest on borrowings under ourthe credit facilities is based on oureach respective borrower’s credit rating. On August 4, 2017, S&P revised its rating outlooks on senior debt of CenterPoint Energy, Houston Electric and CERC Corp. to positive from developing and affirmed its ratings. On September 24, 2017, Fitch upgraded Houston Electric’s senior secured debt rating to A+ and maintained its rating outlook of stable. In addition, Fitch revised its rating outlooks on senior debt of CenterPoint Energy and CERC Corp. to positive from stable and affirmed its ratings.

As of October 26, 2017,May 1, 2020, Moody’s, S&P and Fitch had assigned the following credit ratings to senior debt of CenterPoint Energy and certain subsidiaries: the borrowers:
  Moody’s S&P Fitch
Company/RegistrantBorrower/Instrument Rating Outlook (1) Rating Outlook (2) Rating Outlook (3)
CenterPoint Energy
CenterPoint Energy Senior
Unsecured Debt
 Baa1Baa2NegativeBBBNegativeBBBNegative
CenterPoint EnergyVectren Corp. Issuer Ratingn/an/aBBB+Negativen/an/a
CenterPoint EnergyVUHI Senior Unsecured DebtA3 Stable BBB+ PositiveNegative BBBn/a Positiven/a
Houston ElectricCenterPoint EnergyIndiana Gas Senior
Unsecured Debt		n/an/aBBB+Negativen/an/a
CenterPoint EnergySIGECO Senior Secured Debt A1 Stable A PositiveNegative A+n/a Stablen/a
CERC Corp. Senior Unsecured
Debt
Houston Electric		 Baa2Houston Electric Senior Secured DebtA2 Stable A-ANegativeANegative
CERCCERC Corp. Senior Unsecured DebtBaa1 Positive BBBBBB+ PositiveNegativeBBB+Stable

(1)A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term.


(2)An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term.


(3)A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.


WeThe Registrants cannot assure that the ratings set forth above will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. WeThe Registrants note that these credit ratings are included for informational purposes and are not recommendations to buy, sell or hold ourthe Registrants’ securities and may be revised or withdrawn at any time by the rating agency. Each rating should be evaluated independently of any other rating. Any future reduction or withdrawal of one or more of ourthe Registrants’ credit ratings could have a material adverse impact on ourthe Registrants’ ability to obtain short- and long-term financing, the cost of such financings and the execution of ourthe Registrants’ commercial strategies.


A decline in credit ratings could increase borrowing costs under ourthe Registrants’ revolving credit facilities. If ourthe Registrants’ credit ratings or those of Houston Electric or CERC Corp. had been downgraded one notch by each of the three principal credit rating agenciesS&P and Moody’s from the ratings that existed as of September 30, 2017,March 31, 2020, the impact on the borrowing costs under the threefive revolving credit facilities would have been immaterial. A decline in credit ratings would also increase the interest rate on long-term debt to be issued in the capital markets and could negatively impact ourthe Registrants’ ability to complete capital market transactions and to access the commercial paper market. Additionally, a decline in credit ratings could increase cash collateral requirements and reduce earnings of ourCenterPoint Energy’s and CERC’s Natural Gas Distribution andreportable segments.

The Energy Services business segments.

CES, a wholly-owned subsidiary of CERC Corp. operating in our Energy Services business segment,Disposal Group provides natural gas sales and services primarily to commercial and industrial customers and electric and natural gas utilities throughout the United States. To economically hedge its exposure to natural gas prices, CESthe Energy Services Disposal Group uses derivatives with provisions standard for the industry, including those pertaining to credit thresholds. Typically, the credit threshold negotiated with each counterparty defines the amount of unsecured credit that such counterparty will extend to CES.the Energy Services Disposal Group. To the extent that the credit exposure that a counterparty has to CESthe Energy Services Disposal Group at a particular time does not exceed that credit threshold, CESthe Energy Services Disposal Group is not obligated to provide collateral. Mark-to-market exposure in excess of the credit threshold is routinely collateralized or settled-to-market by CES.the Energy Services Disposal Group. Similarly, mark-to-market exposure offsetting and exceeding the credit threshold may cause the counterparty to provide collateral to the Energy Services Disposal Group. As of September 30, 2017,March 31, 2020, the amountsamount posted by the Energy Services Disposal Group as collateral and settled-to-market aggregated approximately $35$72 million. Should the credit ratings of CERC Corp. (as the credit support provider for CES)the Energy Services Disposal Group) fall below certain levels, CES the Energy Services Disposal Group

would be required to provide additional collateral up to the amount of its previously unsecured credit limit. WeCenterPoint Energy and CERC estimate that as of September 30, 2017,March 31, 2020, unsecured credit limits extended to CESthe Energy Services Disposal Group by counterparties aggregated $358$452 million, and $1 millionnone of such amount was utilized.


Pipeline tariffs and contracts typically provide that if the credit ratings of a shipper or the shipper’s guarantor drop below a threshold level, which is generally investment grade ratings from both Moody’s and S&P, cash or other collateral may be demanded from the shipper in an amount equal to the sum of three months’ charges for pipeline services plus the unrecouped cost of any lateral built for such shipper. If the credit ratings of CERC Corp. decline below the applicable threshold levels, CERC Corp. might need to provide cash or other collateral of as much as $197$193 million as of September 30, 2017.March 31, 2020. The amount of collateral will depend on seasonal variations in transportation levels.


ZENS and Securities Related to ZENS (CenterPoint Energy)


If ourCenterPoint Energy’s creditworthiness were to drop such that ZENS holders thought ourits liquidity was adversely affected or the market for the ZENS were to become illiquid, some ZENS holders might decide to exchange their ZENS for cash. Funds for the payment of cash upon exchange could be obtained from the sale of the shares of TWZENS-Related Securities that we ownCenterPoint Energy owns or from other sources. We ownCenterPoint Energy owns shares of TWZENS-Related Securities equal to approximately 100% of the reference shares used to calculate ourits obligation to the holders of the ZENS. ZENS exchanges result in a cash outflow because tax deferrals related to the ZENS and TWshares of ZENS-Related Securities shares would typically cease when ZENS are exchanged or otherwise retired and TWshares of ZENS-Related Securities shares are sold. The ultimate tax liability related to the ZENS continues to increase by the amount of the tax benefit realized each year, and there could be a significant cash outflow when the taxes are paid as a result of the retirement or exchange of the ZENS. If all ZENS had been exchanged for cash on September 30, 2017,March 31, 2020, deferred taxes of approximately $472$470 million would have been payable in 2017.2020. If all the TWZENS-Related Securities had been sold on September 30, 2017,March 31, 2020, capital gains taxes of approximately $331$119 million would have been payable in 2017.

2020 based on 2020 tax rates in effect. For additional information about ZENS, see Note 1011 to ourthe Interim Condensed Financial Statements.


Cross Defaults


Under oureach of CenterPoint Energy’s, Houston Electric’s and CERC’s respective revolving credit facility,facilities, as well as under CenterPoint Energy’s term loan agreement, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $125 million by usthe borrower or any of ourtheir respective significant subsidiaries will cause a default.default under such borrower’s respective credit facility or term loan agreement. A default by CenterPoint Energy would not trigger a default under ourits subsidiaries’ debt instruments or revolving credit facilities.


Under each of VUHI’s and VCC’s respective revolving credit facilities and term loan agreements, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $50 million by the borrower, any of their respective subsidiaries or any of the respective guarantors of a credit facility or term loan agreement will cause a default under such borrower’s respective credit facility or term loan agreement.

Possible Acquisitions, Divestitures and Joint Ventures


From time to time, wethe Registrants consider the acquisition or the disposition of assets or businesses or possible joint ventures, strategic initiatives or other joint ownership arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are unpredictable. WeThe Registrants may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to usthe Registrants at that time due to a variety of events, including, among others, maintenance of our credit ratings, industry conditions, general economic conditions, market conditions and market perceptions.


In February 2016, we announcedCenterPoint Energy previously disclosed that we were evaluating strategic alternatives for our investment in Enable, including a sale or spin-off qualifying under Section 355 of the U.S. Internal Revenue Code. We have determined that we will no longer pursue a spin option. Should the sale option not be viable, we intend toit may reduce ourits ownership in Enable over time through a sale of the common units we holdsales in the public equity markets, or otherwise, of the Enable common units it holds, subject to market conditions. There can beCenterPoint Energy has no assurances that these evaluations will resultintention to reduce its ownership of Enable common units and currently plans to hold such Enable common units and to utilize any cash distributions received on such Enable common units to finance a portion of CenterPoint Energy’s capital expenditure program. CenterPoint Energy may consider or alter its plans or proposals in respect of any specific action, and we do not intendsuch plans in the future.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to disclose further developmentssell the Infrastructure Services Disposal Group. The transaction closed on these initiatives unless and until our board of directors approves a specific action or as otherwise required.April 9, 2020.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of 2020.

See Note 3 to the Interim Condensed Financial Statements for further information.

Enable Midstream Partners (CenterPoint Energy)


We receiveCenterPoint Energy receives quarterly cash distributions from Enable on its common units and Enable Series A Preferred Units we own.Units. A reduction in the cash distributions we receiveCenterPoint Energy receives from Enable could significantly impact ourCenterPoint Energy’s liquidity. For additional information about cash distributions from Enable, see Notes 89 and 1620 to ourthe Interim Condensed Financial Statements.


Hedging of Interest Expense for Future Debt Issuances


DuringFrom time to time, the first three quarters of 2017, we enteredRegistrants may enter into forward interest rate agreements to hedge, in part, volatility in the U.S. treasury rates by reducing variability in cash flows related to interest payments. For further information, see Note 6(a)7(a) to ourthe Interim Condensed Financial Statements.



Weather Hedge (CenterPoint Energy and CERC)


WeCenterPoint Energy and CERC have historically entered into partial weather hedges for certain NGD jurisdictions and Houston Electric’selectric operations’ Texas service territory to mitigate the impact of fluctuations from normal weather. WeCenterPoint Energy and CERC remain exposed to some weather risk as a result of the partial hedges. For more information about our weather hedges, see Note 6(a)7(a) to ourthe Interim Condensed Financial Statements.


Collection of Receivables from REPs (CenterPoint Energy and Houston Electric)

Houston Electric’s receivables from the distribution of electricity are collected from REPs that supply the electricity Houston Electric distributes to their customers. Before conducting business, a REP must register with the PUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, structural problems in the market served by ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for Houston Electric’s services or could cause them to delay such payments. Houston Electric depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs could adversely affect Houston Electric’s cash flows. In the event of a REP’s default, Houston Electric’s tariff provides a number of remedies, including the option for Houston Electric to request that the PUCT suspend or revoke the certification of the REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. However, Houston Electric remains at risk for payments related to services provided prior to the shift to the replacement REP or the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations and claims might be made against Houston Electric involving payments it had received from such REP. If a REP were to file for bankruptcy, Houston Electric may not be successful in recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, PUCT regulations authorize utilities, such as Houston Electric, to defer bad debts resulting from defaults by REPs for recovery in future rate cases, subject to a review of reasonableness and necessity.

Other Factors that Could Affect Cash Requirements


In addition to the above factors, ourthe Registrants’ liquidity and capital resources could also be negatively affected by:


reductions in the cash distributions we receive from Enable;

cash collateral requirements that could exist in connection with certain contracts, including our weather hedging arrangements, and natural gas purchases, natural gas price and natural gas storage activities of ourCenterPoint Energy’s and CERC’s Natural Gas Distribution and Energy Services business segments;reportable segment; 

acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased natural gas prices and concentration of natural gas suppliers;suppliers (CenterPoint Energy and CERC); 

increased costs related to the acquisition of natural gas;gas (CenterPoint Energy and CERC); 


increases in interest expense in connection with debt refinancings and borrowings under credit facilities;facilities or term loans; 

various legislative or regulatory actions;

incremental collateral, if any, that may be required due to regulation of derivatives;derivatives (CenterPoint Energy and CERC); 
the ability of GenOn and its subsidiaries, currently the subject of bankruptcy proceedings, to satisfy their obligations in respect of GenOn’s indemnity obligations to us and our subsidiaries;


the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to usCenterPoint Energy and our subsidiaries;Houston Electric, including the negative impact on such ability related to COVID-19;


slower customer payments and increased write-offs of receivables due to higher natural gas prices, or changing economic conditions;conditions or COVID-19 (CenterPoint Energy and CERC); 

the satisfaction of any obligations pursuant to guarantees;

the outcome of litigation brought by or against us;litigation; 

contributions to pension and postretirement benefit plans;

restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and


•
various other risks identified in “Risk Factors” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
various other risks identified in “Risk Factors” in Item 1A of Part I of our 2016 Form 10-K.


Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money


Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions. For information about the total debt to capitalization financial covenants in ourthe Registrants’ and certain of CenterPoint Energy’s subsidiaries’ revolving credit facilities, see Note 1112 to ourthe Interim Condensed Financial Statements.

CRITICAL ACCOUNTING POLICIES

Impairment of Long-Lived Assets, Including Identifiable Intangibles, Goodwill, Equity Method Investments, and Investments without a Readily Determinable Fair Value

The Registrants review the carrying value of long-lived assets, including identifiable intangibles, goodwill, equity method investments, and investments without a readily determinable fair value whenever events or changes in circumstances indicate that such carrying values may not be recoverable, and at least annually, goodwill is tested for impairment as required by accounting guidance for goodwill and other intangible assets.  Unforeseen events, changes in market conditions, and probable regulatory disallowances, where applicable, could have a material effect on the value of long-lived assets, including intangibles, goodwill, equity method investments, and investments without a readily determinable fair value due to changes in observable or estimated market value, future cash flows, interest rate, and regulatory matters could result in an impairment charge.

In connection with its preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units due to the macroeconomic conditions resulting from the COVID-19 pandemic and the related decline in CenterPoint Energy’s common stock price. CenterPoint Energy recognized goodwill impairment losses, discussed below, during the three months March 31, 2020, and CERC recorded no impairments to goodwill within continuing operations during the three months ended March 31, 2020. The long-lived assets within the reporting units were determined to be recoverable as of March 31, 2020.

Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenue performance measures. The fair value could be different using different estimates and assumptions in these valuation techniques.

Fair value measurements require significant judgment and unobservable inputs, including (i) projected timing and amount of future cash flows, which factor in planned growth initiatives, (ii) the regulatory environment, as applicable, and (iii) discount rates reflecting risk inherent in the current and future market prices. Determining the discount rates requires the estimation of the appropriate company specific risk premiums for those businesses based on evaluation of industry and entity-specific risks, which

includes expectations about future market or economic conditions and reflects the risk demonstrated by market participants through the value of CenterPoint Energy’s common stock price as of the impairment test date. Changes in these assumptions could have a significant impact on results of the impairment tests. CenterPoint Energy and CERC utilized a third-party valuation specialist to determine the key assumptions used in the estimate of fair value for each of their respective reporting units on the date of their annual goodwill impairment test and for CenterPoint Energy the fair value of each of its reporting units are reconciled to its market capitalization based on the price of CenterPoint Energy’s common stock.

Interim goodwill impairment test, excluding assets held for sale

CenterPoint Energy and CERC performed an interim goodwill impairment test as of March 31, 2020. The fair value of each reporting unit was derived using an income approach or a weighted combination of income and market approaches. Based on the results of the test, CenterPoint Energy recorded a goodwill impairment loss of $185 million at its Indiana Electric Integrated reporting unit. CERC recorded no goodwill impairment charge in its continuing operations for the three months ended March 31, 2020.

The fair values of each reporting unit exceeded the carrying value of the reporting unit, with the exception of CenterPoint Energy’s Indiana Electric Integrated reporting unit. As of March 31, 2020, subsequent to the impairment loss recorded by CenterPoint Energy in the three months ended March 31, 2020, Indiana Electric Integrated reporting unit’s fair value approximated its carrying value, and the reporting unit had total goodwill of $936 million. The reporting unit is comprised entirely of businesses acquired in the Merger on February 1, 2019, when the carrying value of the acquired assets and liabilities were adjusted to fair value and as a result presented the greatest risk for impairment. The primary driver for the decline in fair value as of the March 31, 2020 interim goodwill impairment test date is an increase in discounts rates, or the weighted average cost of capital of market participants, on the rate regulated reporting units due in part to the decline in current macroeconomic conditions from July 1, 2019, the previous annual testing date, to March 31, 2020.

An interim goodwill impairment test could be triggered and goodwill impairments recorded in future periods by CenterPoint Energy or CERC’s reporting units due to any of the following: CenterPoint Energy’s market capitalization falling below book value, adverse macroeconomic environment, turnover in key personnel, events affecting a reporting unit such as a contemplated disposal of all or part of a reporting unit, actual earnings results that are materially lower than expected, significant adverse changes in the operating or regulatory environment, or changes in discount rates or other key assumptions that require judgment and are forward looking in nature.

For further information, see Note 10 to the Interim Condensed Financial Statements.

Assets held for sale and discontinued operations, Infrastructure Services Disposal Group

Generally, a long-lived asset to be sold is classified as held for sale in the period in which management, with approval from the Board of Directors, as applicable, commits to a plan to sell, and a sale is expected to be completed within one year. The Registrants record assets and liabilities held for sale, or the disposal group, at the lower of their carrying value or their estimated fair value less cost to sell. If a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. Goodwill is not allocated to a portion of a reporting unit that does not meet the definition of a business. A disposal group that meets the held for sale criteria and also represents a strategic shift to the Registrant is also reflected as discontinued operations on the Statements of Consolidated Income, and prior periods are recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.

In February 2020, certain assets and liabilities representing the Infrastructure Services Disposal Group met the held for sale criteria and represented all of the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was considered an asset sale for tax purposes, requiring the net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the disposal group and were recognized as a deferred income tax benefit by CenterPoint Energy upon closing.

Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for transaction costs.

Because the Infrastructure Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy, it is reflected as discontinued operations on CenterPoint Energy’s Statements of Consolidated Income, and as a result, prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

Assets held for sale and discontinued operations, Energy Services Disposal Group

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. This transaction does not include CEIP and its assets. The transaction is expected to close in the second quarter of 2020.

In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax assets of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and will be recognized as a deferred tax expense by CenterPoint Energy upon closing.

Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment loss of approximately $62 million and a loss on assets held for sale of approximately $70 million, plus an additional loss of $6 million for transaction costs. CenterPoint Energy and CERC disclosed it its 2019 Form 10-K that an anticipated loss on held for sale of $80 million was expected in the three months ended March 31, 2020. The primary driver for the increase in the actual impairment recorded by CenterPoint Energy and CERC in the three months ended March 31, 2020 compared to the amounts previously anticipated is a result of an increase in portions of the derivative assets, net of derivative liabilities, excluded from the working capital adjustment within the Equity Purchase Agreement during the three months ended March 31, 2020. Additional impairments or loss on held for sale may be recorded in future periods due to increases to the carrying value of derivative assets or decreases to derivative liabilities in those periods.

Because the Energy Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy and CERC, it is reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, and prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

For further information, see Note 3 to the Interim Condensed Financial Statements.

Equity Method Investments

Equity method investments are evaluated for impairment when factors indicate that a decrease in value of an investment has occurred and the carrying amount of the investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the best estimate of fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of its financial statements for the three months ended March 31, 2020, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest, and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units.

Key assumptions in the market approach include recent market transactions of comparable companies and EBITDA to total enterprise multiples for comparable companies. Due to volatility of the quoted price of Enable’s units, a volume weighted average price was used under the market approach to best approximate fair value at the measurement date. Key assumptions in the income

approach include Enable’s forecasted cash distributions, projected cash flows of incentive distribution rights, forecasted growth rate of Enable’s cash distributions beyond 2020, and the discount rate used to determine the present value of the estimated future cash flows. A weighing of the different approaches was utilized to determine the estimated fair value of our investment in Enable. CenterPoint Energy based its assumptions on projected financial information that it believes is reasonable; however, actual results may differ materially from those projections. It is reasonably possible that the fair value of CenterPoint Energy’s investment in Enable will change in the near term due to the following: actual Enable cash distribution is materially lower than expected, significant adverse changes in Enable’s operating environment, decline in Enable’s common unit price, increase in the discount rate, and changes in other key assumptions which require judgment and/or are forward looking in nature. Further declines in the fair value of Enable could result in additional impairments.

For further information, see Note 9 to the Interim Condensed Financial Statements.

NEW ACCOUNTING PRONOUNCEMENTS


See Note 2 to ourthe Interim Condensed Financial Statements, incorporated herein by reference, for a discussion of new accounting pronouncements that affect us.the Registrants.



OTHER SIGNIFICANT MATTERS

The significant uncertainties related to the COVID-19 pandemic and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries. While it is unknown how long these conditions will last and what the complete financial effect will be, the plan assets and benefit obligations of our pension and postretirement plans are expected to be negatively impacted when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019.  A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the subsequent years from the historical amounts. Currently, we do not expect the event to impact the disclosed 2020 plan expenses or minimum required contributions. 

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Houston Electric and CERC meet the conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and are therefore permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies. Accordingly, Houston Electric and CERC have omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures About Market Risk) of Part I of the Form 10-Q.

Interest Rate Risk (CenterPoint Energy)


As of September 30, 2017, weMarch 31, 2020, CenterPoint Energy had outstanding long-term debt, lease obligations and obligations under ourits ZENS that subject usit to the risk of loss associated with movements in market interest rates.


OurCenterPoint Energy’s floating rate obligations aggregated $976 million$4.2 billion and $1.4$3.9 billion as of September 30, 2017March 31, 2020 and December 31, 2016,2019, respectively. If the floating interest rates were to increase by 10% from September 30, 2017March 31, 2020 rates, ourCenterPoint Energy’s combined interest expense would increase by approximately $1.4$9 million annually.


As of September 30, 2017March 31, 2020 and December 31, 2016, we2019, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating $7.6$11.2 billion and $7.1$11.2 billion, respectively, in principal amount and having a fair value of $8.112.0 billion and $7.5$12.2 billion, respectively. Because these instruments are fixed-rate, they do not expose usCenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of these instruments would increase by approximately $223$348 million if interest rates were to decline by 10% from levels at September 30, 2017.March 31, 2020. In general, such an increase in fair value would impact earnings and cash flows only if weCenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.


The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $12018 million as of September 30, 2017March 31, 2020 was a fixed-rate obligation and, therefore, did not expose usCenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of the debt component would increase by approximately $182 million if interest rates were to decline by 10% from levels at September 30, 2017.March 31, 2020. Changes in the fair value of the derivative component, a $776$758 million recorded liability at September 30, 2017,March 31, 2020, are recorded in ourCenterPoint Energy’s Condensed Statements of Consolidated Income and, therefore, we areit is exposed to changes in the fair value of the derivative component as a result of changes in the underlying risk-free interest rate. If the risk-free interest rate were to increase by 10% from September 30, 2017March 31, 2020 levels, the fair value of the

derivative component liability would increasedecrease by approximately less than $51 million, which would be recorded as an unrealized lossgain in ourCenterPoint Energy’s Condensed Statements of Consolidated Income.


Equity Market Value Risk (CenterPoint Energy)


We areCenterPoint Energy is exposed to equity market value risk through ourits ownership of 7.1 million shares of TW Common, 0.910.2 million shares of TimeAT&T Common and 0.9 million shares of Charter Common, which we holdCenterPoint Energy holds to facilitate ourits ability to meet ourits obligations under the ZENS. See Note 11 to the condensed consolidated financial statements for a discussion of CenterPoint Energy’s ZENS obligation. Changes in the fair value of the ZENS-Related Securities held by CenterPoint Energy are expected to substantially offset changes in the fair value of the derivative component of the ZENS. A decrease of 10% from the September 30, 2017March 31, 2020 aggregate market value of these shares would result in a net loss of approximately less than $1 million, which would be recorded as an unrealized loss in ourCenterPoint Energy’s Condensed Statements of Consolidated Income.


Commodity Price Risk From Non-Trading Activities (CenterPoint Energy)


We useCenterPoint Energy’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms. CenterPoint Energy’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years. This authority has been utilized to secure fixed price natural gas using both physical purchases and financial derivatives. As of March 31, 2020, the recorded fair value of non-trading energy derivative liabilities was $23 million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.

Although CenterPoint Energy’s regulated operations are exposed to limited commodity price risk, natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered. Constructive regulatory orders, such as those authorizing lost margin recovery, other innovative rate designs and recovery of unaccounted for natural gas and other natural gas-related expenses, also mitigate the effect natural gas costs may have on CenterPoint Energy’s financial condition. In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy.

CenterPoint Energy uses derivative instruments as economic hedges to offset the commodity price exposure inherent in our businesses.the Energy Services Disposal Group. The commodity risk created by these instruments, including the offsetting impact on the market value of natural gas inventory, is described below. We measureCenterPoint Energy measures this commodity risk using a sensitivity analysis. For purposes of this analysis, we estimateCenterPoint Energy estimates commodity price risk by applying a $0.50 change in the forward NYMEX price to ourits net open fixed price position (including forward fixed price physical contracts, natural gas inventory and fixed price financial contracts) at the end of each period. As of September 30, 2017,March 31, 2020, the recorded fair value of ourCenterPoint Energy’s non-trading energy derivatives was a net asset of $80$127 million (before collateral), all of which is related to ourthe Energy Services business segment.Disposal Group and included in assets and liabilities held for sale. A $0.50 change in the forward NYMEX price would have had a combined impact of $3$19 million on ourCenterPoint Energy’s non-trading energy derivatives net asset, included in assets and liabilities held for sale, and the market value of natural gas inventory. For further information, See Note 3 to the Interim Condensed Financial Statements.


Commodity price risk is not limited to changes in forward NYMEX prices. Variation of commodity pricing between the different indices used to mark to market portions of ourEnergy Services Disposal Group’s natural gas inventory, included in assets held for sale, (Gas Daily) and the related fair value hedge (NYMEX) can result in volatility to ourCenterPoint Energy’s net income. Over time, any gains or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.


On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

Item 4.CONTROLS AND PROCEDURES


In accordance with Exchange Act Rules 13a-15 and 15d-15, wethe Registrants carried out an evaluation,separate evaluations, under the supervision and with the participation of each company’s management, including ourthe principal executive officer and principal financial officer, of the effectiveness of ourthe disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, ourthose evaluations, the principal executive officer and principal financial officer, in each case, concluded that ourthe disclosure controls and procedures were effective as of September 30, 2017March 31, 2020 to provide assurance that information required to be disclosed in our the

reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and

such information is accumulated and communicated to our management, including ourthe principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.


There has been no change in ourthe Registrants’ internal controls over financial reporting that occurred during the three months ended September 30, 2017March 31, 2020 that has materially affected, or is reasonably likely to materially affect, ourthe Registrants’ internal controls over financial reporting.


PART II. OTHER INFORMATION


Item 1.LEGAL PROCEEDINGS


For a description of certain legal and regulatory proceedings, affecting CenterPoint Energy, please read Note 13(b)14(d) to ourthe Interim Condensed Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Sources and Uses of Cash” and “— Regulatory Matters,” each of which is incorporated herein by reference. See also “Business“Business — Regulation” and “— Environmental Matters”Matters” in Item 1 and “Legal Proceedings”“Legal Proceedings” in Item 3 of our 2016the Registrants’ combined 2019 Form 10-K.


Item 1A.RISK FACTORS


TherePlease see below the new risk factors affecting the Registrants’ businesses and CenterPoint Energy’s investment in Enable, in addition to those discussed in “Risk Factors” in Item 1A of Part I of the combined 2019 Form 10-K, which could materially affect the Registrants’ financial condition or future results. Except for the updates below, there have been no material changes from the risk factors disclosed in our 2016the combined 2019 Form 10-K.


We face risks related to COVID-19 and other health epidemics and outbreaks, including economic, regulatory, legal, workforce and cyber security risks, which could adversely impact our financial condition, results of operations, cash flows and liquidity.
Item 5.OTHER INFORMATION
The recent outbreak of COVID-19 is a rapidly evolving situation that is adversely affecting current global economic activities and conditions. An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively affected under the current economic conditions. Furthermore, to the extent we experience disruptions in our supply chain that limit our ability to obtain materials and equipment necessary for our businesses, whether through delayed order fulfillment, limited production or unavailability due to COVID-19, we may be unable to perform our operations timely or as anticipated, which could result in service or construction delays or increased costs.

In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment and late fees are temporarily suspended, which could increase our bad debt expense. For Houston Electric, we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. These PUCT orders provide for suspended disconnections for certain residential customers as well as for their REPs and utilities to be compensated through a temporary rider charged by utilities, including Houston Electric, applicable to all customers. Additionally, the PUCT orders allow for certain utility costs related to COVID-19 to be placed in a regulatory asset for utilities to seek recovery in the future. As adverse economic conditions continue, REPs could encounter financial difficulties, including bankruptcies, which could impair their ability to pay for Houston Electric’s services or could cause them to delay such payments. Additionally, our state and local regulatory agencies, in response to a federal mandate or otherwise, could impose restrictions on the rates we charge to provide our services, including the inability to implement approved rates, or delay actions with respect to our rate cases and filings. The COVID-19 outbreak may affect our ability to timely satisfy regulatory requirements such as recordkeeping and/or timely reporting requirements. As the EPA and many state environmental agencies have issued enforcement discretion policies for such issues, it is unclear whether the effect of any possible noncompliance due to COVID-19 will be material.
Furthermore, in the event a substantial portion of our workforce were to be impacted by COVID-19 for an extended period of time, we may face challenges with respect to our services or operations and we may not be able to execute our capital plan as anticipated. There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, shortages of employees, facility shutdowns or business closures. We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in certain meetings,

Ratioevents and conferences) to conform to government restrictions and best practices encouraged by governmental and regulatory authorities. However, the quarantine of Earningspersonnel or the inability to Fixed Charges. access our facilities or customer sites could adversely affect our operations. Also, we have a limited number of highly skilled employees for some of our operations. If a large proportion of our employees in those critical positions were to contract COVID-19 at the same time, we would rely upon our business continuity plans in an effort to continue operations at our facilities, but there is no certainty that such measures will be sufficient to mitigate the adverse impact to our operations that could result from shortages of highly skilled employees.

In addition, the significant uncertainties related to the COVID-19 pandemic and actions taken to slow its spread have had, and are expected to continue to have, an adverse impact on the economies and financial markets of many countries. The ratioplan assets and benefit obligations of earningsour pension and postretirement plans are expected to fixed chargesbe impacted negatively when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the nine months ended September 30, 2017subsequent years from the historical amounts.

As many of our employees and 2016 was 3.63third-party service providers work remotely in accordance with government mandates, we face heightened cyber security and 2.73, respectively.privacy risks related to unauthorized system access, aggressive social engineering tactics and adversaries attacking the information technology systems, network infrastructure, technology and facilities used to conduct our businesses. We do not believe thatwill continue to monitor developments affecting our employees, customers and operations. At this time, however, we cannot predict the ratios for these nine-month periods are necessarily indicativeextent or duration of the ratiosCOVID-19 pandemic or its effects on national, state and local economies, including the impact on our ability to access capital markets, our supply chain and our workforce, nor can we estimate the potential adverse impact from COVID-19 on our financial condition, results of operations, cash flows and liquidity.

The demand for Enable’s services are impacted by the drilling and production decisions of others and by commodity price volatility, which could adversely affect its financial position, results of operations and its ability to make cash distributions to us. A sustained decline in energy and commodity prices may also contribute to unfavorable economic conditions in certain of our service territories, in particular Houston, Texas.

The COVID-19 pandemic has adversely affected Enable’s businesses by (i) reducing the demand for natural gas, NGLs and crude oil due to reduced global and national economic activity, leading to significantly lower prices for natural gas, NGLs and crude oil; (ii) impairing the supply chain of certain of its customers for which it provides gathering and processing services, both of which could lead to further reduction of the utilization of its systems; and (iii) reducing producer activity across its footprint which is expected to result in reduced utilization of its services. In addition, concerns about global economic growth, as well as uncertainty regarding the timing, pace and extent of an economic recovery in the United States and abroad, have had a significant adverse impact on global financial markets and commodity prices. The price of, and demand for, natural gas, NGLs and crude oil declined significantly in response to the ongoing spread and economic effects of COVID-19, including significant governmental measures being implemented to control the spread of COVID-19, including quarantines, travel restrictions and business shutdowns and efforts made by oil-producing countries to reduce production of crude oil in response to declining global demand. For example, a coalition of 23 nations led by Saudi Arabia and Russia agreed to reduce production of crude oil by 9.7 million barrels per day in May and June; however, NGL and crude oil prices have remained depressed. These events, combined with the continuing COVID-19 pandemic and uncertainty regarding the length of time it will take for the 12-month periods dueUnited States and the rest of the world to slow the spread of COVID-19 to the seasonal naturepoint where applicable authorities are comfortable easing current restrictions on various commercial and economic activities, contributed to a sharp drop in prices for crude oil in the first quarter of 2020 and negative crude oil prices in the second quarter of 2020. On March 31, 2020, Enable’s common unit price closed at $2.57 per common unit. In response to these industry conditions, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to us that fall below our previously disclosed expected minimum quarterly distribution from Enable of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce its common unit distributions to us by approximately $155 million per year. Enable currently cannot predict the duration or magnitude of the effects of COVID-19 on the supply and demand for, and the price of, natural gas, NGLs and crude oil or the exploration, development and production activity of the producers across its areas of operation. Sustained low commodity prices and reductions in exploration or production activities could continue to adversely affect the value of our business. The ratios were calculated pursuantinterests in Enable and Enable’s financial position, results of operations and ability to applicable rulesmake cash distributions to us.

Additionally, the significant decline in energy and commodity prices described above, if sustained, could cause, the rate of economic, employment and/or population growth in certain of our service territories to decline. In particular, Houston, Texas has a higher percentage of employment tied to the energy sector relative to other regions of the SEC.country. A reduction in the rate of economic, employment and/or population growth could result in lower growth and reduced demand for and usage of electricity and natural gas in such service territories. As such, sustained low energy and commodity prices could have an adverse impact on our financial condition, results of operations, cash flows and liquidity.

Item 6.EXHIBITS

The following exhibits are filed herewith:


Exhibits not incorporated by reference to a prior filingfiled herewith are designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing as indicated.

Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about CenterPoint Energy, Inc.,the Registrants, any other persons, any state of affairs or other matters.
 
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, CenterPoint Energy hasthe Registrants have not filed as exhibits to this Form 10-Q certain long-term debt instruments, including indentures, under which the total amount of securities authorized does not exceed 10% of the total assets of CenterPoint Energythe Registrants and its subsidiaries on a consolidated basis. CenterPoint EnergyThe Registrants hereby agreesagree to furnish a copy of any such instrument to the SEC upon request.
Exhibit
Number
 Description 
Report or Registration
Statement
 
SEC File or
Registration
Number
 
Exhibit
Reference
 Description 
Report or Registration
Statement
 
SEC File or
Registration
Number
 
Exhibit
Reference
 CenterPoint Energy Houston Electric CERC
2.1* 
Agreement and Plan of Merger, dated as of April 21, 2018, by and among Vectren Corporation, CenterPoint Energy, Inc. and Pacer Merger Sub, Inc.
 CenterPoint Energy’s Form 8-K dated April 21, 2018 1-31447 2.1 x 
2.2* 
Securities Purchase Agreement, dated as of February 3, 2020, by and among Vectren Utility Services, Inc., PowerTeam Services, LLC and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren Corporation
 CenterPoint Energy’s Form 8-K dated February 3, 2020 1-31447 x 
2.3* 
Equity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Athena Energy Services Buyer, LLC
 CenterPoint Energy’s Form 8-K dated February 24, 2020 1-31447 x x
3.1 
Restated Articles of Incorporation of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated July 24, 2008 1-31447 3.2 
Restated Articles of Incorporation of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated July 24, 2008 1-31447 3.2 x 
3.2 
Third Amended and Restated Bylaws of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated February 21, 2017 1-31447 3.1 
Restated Certificate of Formation of Houston Electric
 Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 1-3187 3.1 x 
3.3 
Statement of Resolutions Deleting Shares Designated Series A Preferred Stock of CenterPoint Energy
 CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 1-31447 3(c) 
Certificate of Incorporation of RERC Corp.

 CERC Form 10-K for the year ended December 31, 1997 1-13265 3(a)(1) x
4.1 
Form of CenterPoint Energy Stock Certificate
 CenterPoint Energy’s Registration Statement on Form S-4 3-69502 4.1
4.2 
$1,600,000,000 Credit Agreement, dated as of March 3, 2016, among CenterPoint Energy, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.1
3.4 
Certificate of Merger merging former NorAm Energy Corp. with and into HI Merger, Inc. dated August 6, 1997
 CERC Form 10-K for the year ended December 31, 1997 1-13265 3(a)(2) x
3.5 
Certificate of Amendment changing the name to Reliant Energy Resources Corp.
 CERC Form 10-K for the year ended December 31, 1998 1-13265 3(a)(3) x
3.6 
Certificate of Amendment changing the name to CenterPoint Energy Resources Corp.
 CERC Form 10-Q for the quarter ended June 30, 2003 1-13265 3(a)(4) x
3.7 
Third Amended and Restated Bylaws of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated February 21, 2017 1-31447 3.1 x 
3.8 
Amended and Restated Limited Liability Company Agreement of Houston Electric
 Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 1-3187 3.2 x 
3.9 
Bylaws of RERC Corp.
 CERC Form 10-K for the year ended December 31, 1997 1-13265 3(b) x
3.10 
Statement of Resolutions Deleting Shares Designated Series A Preferred Stock of CenterPoint Energy
 CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 1-31447 3(c) x 

Exhibit
Number
 Description 
Report or Registration
Statement
 
SEC File or
Registration
Number
 
Exhibit
Reference
4.3 
$300,000,000 Credit Agreement, dated as of March 3, 2016, among Houston Electric, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.2
4.4 
$600,000,000 Credit Agreement, dated as of March 3, 2016, among CERC Corp., as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.3
4.5 
First Amendment to Amended and Restated Credit Agreement, dated as of June 16, 2017, by and among CenterPoint Energy, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.1
4.6 
First Amendment to Credit Agreement, dated as of June 16, 2017, among Houston Electric, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.2
4.7 
First Amendment to Credit Agreement, dated as of June 16, 2017, among CERC Corp., as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.3
4.8 
Indenture, dated as of May 19, 2003, between CenterPoint Energy and JPMorgan Chase Bank, as Trustee

 CenterPoint Energy’s Form 8-K dated May 19, 2003 1-31447 4.1
+4.9 
Supplemental Indenture No. 9 to Exhibit 4.8, dated as of August 10, 2017, providing for the issuance of CenterPoint Energy’s 2.50% Senior Notes due 2022

      
4.10 
Indenture, dated as of February 1, 1998, between Reliant Energy Resources Corp. and Chase Bank of Texas, National Association, as Trustee

 CERC Corp.’s Form 8-K dated February 5, 1998 1-13265 4.1
+4.11 
Supplemental Indenture No. 16 to Exhibit 4.10, dated as of August 23, 2017, providing for the issuance of CERC Corp.’s 4.10% Senior Notes due 2047

      
+12 
Computation of Ratios of Earnings to Fixed Charges
      
+31.1 
Rule 13a-14(a)/15d-14(a) Certification of Scott M. Prochazka
      
+31.2 
Rule 13a-14(a)/15d-14(a) Certification of William D. Rogers
      
+32.1 
Section 1350 Certification of Scott M. Prochazka
      
+32.2 
Section 1350 Certification of William D. Rogers
      
+101.INS XBRL Instance Document      
+101.SCH XBRL Taxonomy Extension Schema Document      
+101.CAL XBRL Taxonomy Extension Calculation Linkbase Document      
+101.DEF XBRL Taxonomy Extension Definition Linkbase Document      
+101.LAB XBRL Taxonomy Extension Labels Linkbase Document      
+101.PRE XBRL Taxonomy Extension Presentation Linkbase Document      
Exhibit
Number
 Description 
Report or Registration
Statement
 
SEC File or
Registration
Number
 
Exhibit
Reference
 CenterPoint Energy Houston Electric CERC
3.11 
Statement of Resolution Establishing Series of Shares Designated Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated August 22, 2018 1-31447 3.1 x    
3.12 
Statement of Resolution Establishing Series of Shares designated 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated September 25, 2018 1-31447 3.1 x    
4.1 
Form of CenterPoint Energy Stock Certificate
 CenterPoint Energy’s Registration Statement on Form S-4 3-69502 4.1 x    
4.2 
Form of Certificate representing the Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy
 CenterPoint Energy’s Form 8-K dated August 22, 2018 1-31447 4.1 x    
4.3 
Form of Certificate representing the 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy (included as Exhibit A to Exhibit 3.12)
 CenterPoint Energy’s Form 8-K dated September 25, 2018 1-31447 4.1 x    
4.4 
Deposit Agreement, dated as of October 1, 2018, among CenterPoint Energy and Broadridge Corporate Issuer Solutions, Inc., as Depositary, and the holders from time to time of the Depositary Receipts described therein
 CenterPoint Energy’s Form 8-K dated September 25, 2018 1-31447 4.2 x    
4.5 
Form of Depositary Receipt for the Depositary Shares (included as Exhibit A to Exhibit 4.4)
 CenterPoint Energy’s Form 8-K dated September 25, 2018 1-31447 4.3 x    
4.6 
$1,600,000,000 Credit Agreement, dated as of March 3, 2016, among CenterPoint Energy, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.1 x    
4.7 
$300,000,000 Credit Agreement, dated as of March 3, 2016, among Houston Electric, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.2 x x  
4.8 
$600,000,000 Credit Agreement, dated as of March 3, 2016, among CERC Corp., as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated March 3, 2016 1-31447 4.3 x   x
4.9 
First Amendment to Amended and Restated Credit Agreement, dated as of June 16, 2017, by and among CenterPoint Energy, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.1 x    
4.10 
Second Amendment to Amended and Restated Credit Agreement, dated as of May 25, 2018, by and among CenterPoint Energy, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated May 25, 2018 1-31447 4.1 x    
4.11 
First Amendment to Credit Agreement, dated as of June 16, 2017, among Houston Electric, as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.2 x x  
4.12 
First Amendment to Credit Agreement, dated as of June 16, 2017, among CERC Corp., as Borrower, and the banks named therein
 CenterPoint Energy’s Form 8-K dated June 16, 2017 1-31447 4.3 x   x
4.13 
$400,000,000 Credit Agreement, dated as of July 14, 2017, among VUHI, as Borrower, certain Subsidiaries of VUHI, as Guarantors, and the banks named therein
 Vectren’s Form 8-K dated July 17, 2017 1-15467 10.1 x    
4.14 
$200,000,000 Credit Agreement, dated as of July 14, 2017, among VCC, as Borrower, Vectren Corporation, as Guarantor, and the banks named therein
 Vectren’s Form 8-K dated July 17, 2017 1-15467 10.2 x    

Exhibit
Number
 Description 
Report or Registration
Statement
 
SEC File or
Registration
Number
 
Exhibit
Reference
 CenterPoint Energy Houston Electric CERC
4.15 
Term Loan Agreement dated as of July 30, 2018, among VUHI, as Borrower, the Subsidiaries of Borrower identified herein as Guarantors and the banks named therein
 Vectren’s Form 8-K dated July 30, 2018 1-15467 10.1 x    
4.16 
Term Loan Agreement dated as of September 14, 2018, among VCC, as Borrower, Vectren as Guarantor, and the banks named therein
 Vectren’s Form 8-K dated September 18, 2018 1-15467 10.1 x    
4.17 
First Amendment to Term Loan Agreement, dated as of June 25, 2019, among VCC, as Borrower, Vectren as Guarantor and the banks named therein
 CenterPoint Energy’s Form 10-Q for the quarter ended June 30, 2019 1-31447 4.17 x    
4.18 
$1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein  
 CenterPoint Energy’s Form 8-K dated May 15, 2019 1-31447 4.1 x    
10.1 
Second Amendment to the CenterPoint Energy Savings Restoration Plan, effective as of January 1, 2020
 CenterPoint Energy’s Form 8-K dated December 9, 2019 1-31447 10.1 x    
10.2 
First Amendment to the Amended and Restated CenterPoint Energy Stock Plan for Outside Directors
 CenterPoint Energy’s Form 10-K for the year ended December 31, 2019 1-31447 10(n)(2) x    
10.3 
Separation and Release Agreement between CenterPoint Energy, Inc. and Scott M. Prochazka, dated March 6, 2020
 CenterPoint Energy’s Form 8-K dated March 6, 2020 1-31447 10.1 x    
10.4 
Form of Award Agreement for Restricted Stock Unit Awards
 CenterPoint Energy’s Form 8-K dated March 4, 2020 1-31447 10.1 x    
10.5 
Form of Award Agreement for Performance Share Units
 CenterPoint Energy’s Form 8-K/A dated March 30, 2020 1-31447 10.1 x    
10.6 
Form of Award Agreement for Restricted Stock Unit Awards
 CenterPoint Energy’s Form 8-K/A dated March 30, 2020 1-31447 10.2 x    
+31.1.1 
Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II
       x    
+31.1.2 
Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II
         x  
+31.1.3 
Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II
           x
+31.2.1 
Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin
       x    
+31.2.2 
Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin
         x  
+31.2.3 
Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin
           x
+32.1.1 
Section 1350 Certification of John W. Somerhalder II
       x    
+32.1.2 
Section 1350 Certification of John W. Somerhalder II
         x  
+32.1.3 
Section 1350 Certification of John W. Somerhalder II
           x
+32.2.1 
Section 1350 Certification of Kristie L. Colvin
       x    
+32.2.2 
Section 1350 Certification of Kristie L. Colvin
         x  
+32.2.3 
Section 1350 Certification of Kristie L. Colvin
           x
+101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document       x x x
+101.SCH Inline XBRL Taxonomy Extension Schema Document       x x x


Exhibit
Number
Description
Report or Registration
Statement
SEC File or
Registration
Number
Exhibit
Reference
CenterPoint EnergyHouston ElectricCERC
+101.CALInline XBRL Taxonomy Extension Calculation Linkbase Documentxxx
+101.DEFInline XBRL Taxonomy Extension Definition Linkbase Documentxxx
+101.LABInline XBRL Taxonomy Extension Labels Linkbase Documentxxx
+101.PREInline XBRL Taxonomy Extension Presentation Linkbase Documentxxx
+104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)xxx
*Schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

SIGNATURES






Pursuant to the requirements of the Securities Exchange Act of 1934, theeach registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




 CENTERPOINT ENERGY, INC.
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
CENTERPOINT ENERGY RESOURCES CORP.
  
  
By:/s/ Kristie L. Colvin
 Kristie L. Colvin
 SeniorInterim Executive Vice President and Chief AccountingFinancial Officer
 and Chief Accounting Officer


Date: November 3, 2017May 7, 2020





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