UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One) |
þ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017 |
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For the quarterly period ended September 30, 2023
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| FOR THE TRANSITION PERIOD FROM __________________ TO __________________ |
Commission file number 1-31447
CenterPoint Energy, Inc.
(Exact name of registrant as specified in its charter)
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Texas | | 74-0694415 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1111 Louisiana | |
Houston Texas 77002 | (713) 207-1111Texas | 77002 |
(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)
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Texas | | 22-3865106 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1111 Louisiana | Houston | Texas | 77002 |
(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)
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Delaware | | 76-0511406 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1111 Louisiana | Houston | Texas | 77002 |
(Address of Principal Executive Offices) | | (Zip Code) |
(713) 207-1111
Registrant's telephone number, including area code
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Securities registered pursuant to Section 12(b) of the Act: |
Registrant | Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
CenterPoint Energy, Inc. | Common Stock, $0.01 par value | CNP | The New York Stock Exchange |
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CenterPoint Energy Houston Electric, LLC | 6.95% General Mortgage Bonds due 2033 | n/a | The New York Stock Exchange |
CenterPoint Energy Resources Corp. | 6.625% Senior Notes due 2037 | n/a | The 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
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CenterPoint Energy, Inc. | Yes | þ | | No | o |
CenterPoint Energy Houston Electric, LLC | Yes | þ | | No | o |
CenterPoint Energy Resources Corp. | Yes | þ | | No | o |
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
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CenterPoint Energy, Inc. | Yes | þ | | No | o |
CenterPoint Energy Houston Electric, LLC | Yes | þ | | No | o |
CenterPoint Energy Resources Corp. | Yes | þ | | No | o |
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):
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| Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller reporting companyo | Emerging growth companyo |
CenterPoint Energy, Inc. | þ | (Do not check if a smaller reporting company)o | o | ☐ | ☐ |
CenterPoint Energy Houston Electric, LLC | o | o | þ | ☐ | ☐ |
CenterPoint Energy Resources Corp. | o | o | þ | ☐ | ☐ |
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
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CenterPoint Energy, Inc. | Yes | ☐ | | No | þ |
CenterPoint Energy Houston Electric, LLC | Yes | ☐ | | No | þ |
CenterPoint Energy Resources Corp. | Yes | ☐ | | No | þ |
As
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.
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CenterPoint Energy, Inc. | | 631,223,560 | shares of common stock outstanding, excluding 166 shares held as treasury stock |
CenterPoint Energy Houston Electric, LLC | | 1,000 | common shares outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc. |
CenterPoint Energy Resources Corp. | | 1,000 | shares 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
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PART I. | | FINANCIAL INFORMATION | |
Item 1. | | | |
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PART I. | | FINANCIAL INFORMATION | |
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Item 1. | | | |
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| | Three and Nine Months Ended September 30, 2017 and 2016 (unaudited) | |
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| | Three and Nine Months Ended September 30, 2017 and 2016 (unaudited) | |
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| | September 30, 2017 and December 31, 2016 (unaudited) | |
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| | Nine Months Ended September 30, 2017 and 2016 (unaudited) | |
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Item 2. | | | |
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| | Consolidated Results of Operations | |
| | Results of Operations by Reportable Segment | |
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Item 4. | | | |
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PART II. | | OTHER INFORMATION | |
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Item 1. | | | |
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Item 1A. | | | |
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Item 5. | | | |
Item 6. | | | |
Item 6. | | | |
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GLOSSARY |
ACE | | Affordable Clean Energy |
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AFSI | | Adjusted financial statement income |
AFUDC | | Allowance for funds used during construction |
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AMA | | Asset Management Agreement |
Arevon | | Arevon Energy, Inc., which was formed through the combination of Capital Dynamics, Inc.’s U.S. Clean Energy Infrastructure business unit and Arevon Asset Management |
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AEMARO | | AtmosAsset retirement obligation |
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ARP | | Alternative revenue program |
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ASC | | Accounting Standards Codification |
Asset Purchase Agreement | | Asset Purchase Agreement, dated as of April 29, 2021, by and between CERC Corp. and Southern Col Midco |
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AT&T Common | | AT&T Inc. common stock |
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Bcf | | Billion cubic feet |
Board | | Board of Directors of CenterPoint Energy, Marketing,Inc. |
Bond Companies | | 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 property through the issuance of Securitization Bonds |
Bond Company IV | | CenterPoint Energy Transition Bond Company IV, LLC, a wholly-owned subsidiary of Houston Electric |
BTA | | Build Transfer Agreement |
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CAMT | | Corporate Alternative Minimum Tax |
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CARES Act | | Coronavirus Aid, Relief, and Economic Security Act |
CCN | | Certificate of Convenience and Necessity |
CCR | | Coal Combustion Residuals |
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CECA | | Clean Energy Cost Adjustment |
CEIP | | CenterPoint Energy Intrastate Pipelines, LLC, a wholly-owned subsidiary of CERC Corp. |
CenterPoint Energy | | CenterPoint Energy, Inc., and its subsidiaries |
CERC | | CERC Corp., together with its subsidiaries |
CERC Corp. | | CenterPoint Energy Resources Corp. |
CES | | CenterPoint Energy Services, Inc. (now known as Symmetry Energy Solutions, LLC), previously a wholly-owned subsidiary of CERC Corp. |
Charter Common | | Charter Communications, Inc. common stock |
CIP | | Conservation Improvement Program |
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CODM | | Chief Operating Decision Maker, who is each Registrant’s Chief Operating Executive |
Common Stock | | CenterPoint Energy, Inc. common stock, par value $0.01 per share |
Compensation Committee | | Compensation Committee of the Board |
Convertible Notes | | CenterPoint Energy’s 4.25% Convertible Senior Notes due 2026 |
Convertible Notes Indenture | | Indenture dated as of August 4, 2023 by and between CenterPoint Energy and The Bank of New York Mellon Trust Company, National Association, as trustee |
COVID-19 | | Novel coronavirus disease 2019, and any mutations or variants thereof, and related global outbreak that was subsequently declared a pandemic by the World Health Organization |
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CPCN | | Certificate of Public Convenience and Necessity |
CPP | | Clean Power Plan |
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CSIA | | Compliance and System Improvement Adjustment |
DCRF | | Distribution Cost Recovery Factor |
DOC | | U.S. Department of Commerce |
DRR | | Distribution Replacement Rider |
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GLOSSARY |
DSMA | | Demand Side Management Adjustment |
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ECA | | Environmental Cost Adjustment |
EDIT | | Excess deferred income taxes |
EECR | | Energy Efficiency Cost Recovery |
EECRF | | Energy Efficiency Cost Recovery Factor |
EEFC | | Energy Efficiency Funding Component |
EEFR | | Energy Efficiency Funding Rider |
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Energy Systems Group | | Energy Systems Group, LLC, previously a wholly-owned subsidiary of Atmos Energy Holdings, Inc., a wholly-owned subsidiary of Atmos Energy CorporationVectren |
AMAsEnergy Transfer | | Asset Management AgreementsEnergy Transfer LP, a Delaware limited partnership |
AMSEnergy Transfer Common Units | | Advanced Metering System |
APSC | | Arkansas Public Service Commission |
ASU | | Accounting Standards Update |
AT&T | | AT&T Inc. |
AT&T Common | | AT&TEnergy Transfer common stock |
Bcf | | Billion cubic feet |
BDA | | Billing Determinant Adjustment, which is a revenue stabilization mechanism used to adjust revenues impacted by declinesunits, representing limited partner interests in natural gas consumption which occurred after the most recent rate case |
Bond Companies | | Transition and system restoration bond companies |
Brazos Valley Connection | | A portion of the Houston region transmission project between Houston Electric’s Zenith substation and the Gibbons Creek substation owned by the Texas Municipal Power Agency |
CenterPoint Energy | | CenterPoint Energy Inc., and its subsidiaries |
CERC Corp. | | CenterPoint Energy Resources Corp. |
CERC | | CERC Corp., together with its subsidiaries |
CES | | CenterPoint Energy Services, Inc., a wholly-owned subsidiary of CERC Corp. |
Charter Common | | Charter Communications, Inc. common stock |
Charter merger | | Merger of Charter Communications, Inc. and Time Warner Cable Inc. |
CIP | | Conservation Improvement Program |
Continuum | | The retail energy services business of Continuum Retail Energy Services, LLC, including its wholly-owned subsidiary Lakeshore Energy Services, LLC and the natural gas wholesale assets previously owned by Continuum Energy Services, LLC |
DCRF | | Distribution Cost Recovery Factor |
EECR | | Energy Efficiency Cost Recovery |
EECRF | | Energy Efficiency Cost Recovery Factor |
Enable | | Enable Midstream Partners, LP |
ERCOT | | Electric Reliability Council of Texas |
FASB | | Financial Accounting Standards Board |
Fitch | | Fitch, Inc. |
Form 10-Q | | Quarterly Report on Form 10-Q |
FRP | | Formula Rate Plan |
Gas Daily | | Platt’s gas daily indices |
GenOn | | GenOn Energy, Inc. |
GRIP | | Gas Reliability Infrastructure Program |
GWh | | Gigawatt-hours |
Houston Electric | | CenterPoint Energy Houston Electric, LLC and its subsidiaries |
IBEW | | International Brotherhood of Electrical Workers |
Interim Condensed Financial Statements | | Condensed consolidated interim financial statements and notes |
IRS | | Internal Revenue Service |
LIBOR | | London Interbank Offered Rate |
LPSC | | Louisiana Public Service Commission |
MGPs | | Manufactured gas plants |
MLP | | Master Limited Partnership |
MMBtu | | One million British thermal units |
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GLOSSARY (cont.) |
Moody’s | | Moody’s Investors Service, Inc. |
MPSC | | Mississippi Public Service Commission |
MPUC | | Minnesota Public Utilities Commission |
NECA | | National Electrical Contractors Association |
NGD | | Natural gas distribution business |
NGLs | | Natural gas liquids |
NRG | | NRG Energy Inc. |
NYMEX | | New York Mercantile Exchange |
OCC | | Oklahoma Corporation Commission |
OGE | | OGE Energy Corp. |
PBRC | | Performance Based Rate Change |
PHMSA | | U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration |
PRPs | | Potentially responsible parties |
PUCT | | Public Utility Commission of Texas |
Railroad Commission | | Railroad Commission of Texas |
Reliant Energy | | Reliant Energy, Incorporated |
REP | | Retail electric provider |
ROE | | Return on equity |
RRA | | Rate Regulation Adjustment |
RRI | | Reliant Resources, Inc. |
RSP | | Rate Stabilization Plan |
SEC | | Securities and Exchange Commission |
Securitization Bonds | | Transition and system restoration bonds |
Transfer Series AG Preferred Units | | 10%Energy Transfer Series A Fixed-to-Floating Non-CumulativeG Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in EnableEnergy Transfer |
S&PEPA | | Standard & Poor’s Ratings Services, a division of The McGraw-Hill CompaniesEnvironmental Protection Agency |
TBD | | |
Equity Purchase Agreement | | Equity Purchase Agreement, dated as of May 21, 2023, by and between Vectren Energy Services and ESG Holdings Group |
ERCOT | | Electric Reliability Council of Texas |
ESG Holdings Group | | ESG Holdings Group, LLC, a Delaware limited liability company, and an affiliate of Oaktree Capital Management |
Exchange Act | | The Securities Exchange Act of 1934, as amended |
February 2021 Winter Storm Event | | The extreme and unprecedented winter weather event in February 2021 (Winter Storm Uri) that resulted in electricity generation supply shortages, including in Texas, and natural gas supply shortages and increased wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures |
FERC | | Federal Energy Regulatory Commission |
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Fitch | | Fitch Ratings, Inc. |
Form 10-Q | | Quarterly Report on Form 10-Q |
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GHG | | Greenhouse gases |
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GRIP | | Gas Reliability Infrastructure Program |
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GWh | | Gigawatt-hours |
Houston Electric | | CenterPoint Energy Houston Electric, LLC and its subsidiaries |
IAS | | International Accounting Standards |
IBEW | | International Brotherhood of Electrical Workers |
IDEM | | Indiana Department of Environmental Management |
Indiana Electric | | Operations of SIGECO’s electric transmission and distribution services, and includes its power generating and wholesale power operations |
Indiana Gas | | Indiana Gas Company, Inc., formerly a wholly-owned subsidiary of Vectren, acquired by CERC on June 30, 2022 |
Indiana North | | Gas operations of Indiana Gas |
Indiana South | | Gas operations of SIGECO |
Indiana Utilities | | The combination of Indiana Electric, Indiana North and Indiana South |
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Interim Condensed Financial Statements | | Unaudited condensed consolidated interim financial statements and combined notes |
IRA | | Inflation Reduction Act of 2022 |
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IRP | | Integrated Resource Plan |
IRS | | Internal Revenue Service |
IURC | | Indiana Utility Regulatory Commission |
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LIBOR | | London Interbank Offered Rate |
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GLOSSARY |
LLTF | | Long Lead Time Facilities, which are transmission and distribution facilities that have a lead time of at least six months and would aid in restoring power to Houston Electric’s distribution customers following a widespread power outage under Public Utility Regulatory Act Section 39.918 |
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LPSC | | Louisiana Public Service Commission |
LTIP | | Long-term Incentive Plan |
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M&DOT | | Mortgage and Deed of Trust, dated November 1, 1944, between Houston Lighting and Power Company and Chase Bank of Texas, National Association (formerly, South Texas Commercial National Bank of Houston), as Trustee, as amended and supplemented |
MDL | | Multi-district litigation |
Merger | | The 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 Agreement | | Agreement and Plan of Merger, dated as of April 21, 2018, among CenterPoint Energy, Vectren and Merger Sub |
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Merger Sub | | Pacer Merger Sub, Inc., an Indiana corporation and wholly-owned subsidiary of CenterPoint Energy |
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MGP | | Manufactured gas plant |
MISO | | Midcontinent Independent System Operator |
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Moody’s | | Moody’s Investors Service, Inc. |
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MPUC | | Minnesota Public Utilities Commission |
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MW | | Megawatt |
NERC | | North American Electric Reliability Corporation |
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NRG | | NRG Energy, Inc. |
NYSE | | New York Stock Exchange |
Oriden | | Oriden LLC |
Origis | | Origis Energy USA Inc. |
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OUCC | | Indiana Office of Utility Consumer Counselor |
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Posey Solar | | Posey Solar, LLC, a special purpose entity |
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PPA | | Power Purchase Agreement |
PRPs | | Potentially responsible parties |
PTCs | | Production Tax Credits |
PUCO | | Public Utilities Commission of Ohio |
PUCT | | Public Utility Commission of Texas |
Railroad Commission | | Railroad Commission of Texas |
RCRA | | Resource Conservation and Recovery Act of 1976 |
Registrants | | CenterPoint Energy, Houston Electric and CERC, collectively |
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REP | | Retail electric provider |
Restoration Bond Company | | CenterPoint Energy Restoration Bond Company, LLC, a wholly-owned subsidiary of Houston Electric |
Restructuring | | CERC Corp.’s common control acquisition of Indiana Gas and VEDO from VUH on June 30, 2022 |
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ROE | | Return on equity |
ROU | | Right of use |
RRA | | Rate Regulation Adjustment |
RSP | | Rate Stabilization Plan |
S&P | | S&P Global Ratings |
Scope 1 emissions | | Direct source of emissions from a company’s operations |
Scope 2 emissions | | Indirect source of emissions from a company’s energy usage |
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GLOSSARY |
Scope 3 emissions | | Indirect source of emissions from a company’s end-users |
SEC | | Securities and Exchange Commission |
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Securitization Bonds | | Transition and system restoration bonds issued by the Bond Companies and SIGECO Securitization Bonds issued by the SIGECO Securitization Subsidiary |
Series A Preferred Stock | | CenterPoint Energy’s Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
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SIGECO | | Southern Indiana Gas and Electric Company, a wholly-owned subsidiary of Vectren |
SIGECO Securitization Bonds | | SIGECO Securitization Subsidiary’s Series 2023-A Senior Secured Securitization Bonds |
SIGECO Securitization Subsidiary | | SIGECO Securitization I, LLC, a direct, wholly-owned subsidiary of SIGECO |
SOFR | | Secured Overnight Financing Rate |
Southern Col Midco | | Southern Col Midco, LLC, a Delaware limited liability company and an affiliate of Summit Utilities, Inc. |
SRC | | Sales Reconciliation Component |
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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 |
TCOSTCJA | | Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017 |
TCOS | | Transmission Cost of Service |
TDUTCRF | | Transmission Cost Recovery Factor |
TDSIC | | Transmission, Distribution and Storage System Improvement Charge |
TDU | | Transmission and distribution utility |
Time CommonTEEEF | | Time Inc. common stockAssets leased or costs incurred as “temporary emergency electric energy facilities” under the Public Utility Regulatory Act Section 39.918, also referred to as mobile generation |
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Topic 326 | | Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
Transition AgreementsServices Agreement | | Transition Services Agreement Employee Transition Agreement, Transitional Seconding Agreementby and other agreements entered into in connection with the formation of Enablebetween CenterPoint Energy Service Company, LLC and Southern Col Midco |
TWVectren | | Time Warner Inc.Vectren, LLC, which converted its corporate structure from Vectren Corporation to a limited liability company on June 30, 2022, a wholly-owned subsidiary of CenterPoint Energy as of February 1, 2019 |
TW CommonVectren Energy Services | | TW common stockVectren Energy Services Corporation, an Indiana corporation and a wholly-owned subsidiary of CenterPoint Energy |
TW SecuritiesVEDO | | Charter Common, Time Common and TW CommonVectren Energy Delivery of Ohio, LLC, which converted its corporate structure from Vectren Energy Delivery of Ohio, Inc. to a limited liability company on June 13, 2022, formerly a wholly-owned subsidiary of Vectren, acquired by CERC on June 30, 2022 |
VIE | | Variable interest entity |
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Vistra Energy Corp. | | Texas-based energy company focused on the competitive energy and power generation markets |
ZENSVRP | | Voluntary Remediation Program |
VUH | | Vectren Utility Holdings, LLC, which converted its corporate structure from Vectren Utility Holdings, Inc. to a limited liability company on June 30, 2022, a wholly-owned subsidiary of Vectren |
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WBD Common | | Warner Bros. Discovery, Inc. Series A common stock |
Winter Storm Elliott | | From December 21 to 26, 2022, a historic extratropical cyclone created winter storm conditions, including blizzards, high winds, snowfall and record cold temperatures across the majority of the United States and parts of Canada |
ZENS | | 2.0% Zero-Premium Exchangeable Subordinated Notes due 2029 |
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2016GLOSSARY |
ZENS-Related Securities | | As of September 30, 2023 and December 31, 2022, consisted of AT&T Common, Charter Common and WBD Common |
2022 Form 10-K | | Annual Report on Form 10-K for the fiscal year ended December 31, 20162022 as filed with the SEC on February 17, 2023 |
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 SIGECO.
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:
•CenterPoint Energy’s business strategies and strategic initiatives, restructurings, including the performancecompleted Restructuring, joint ventures and acquisitions or dispositions of Enable,assets or businesses, including the amount of cash distributions we receive from Enable, Enable’s ability to redeem the Series A Preferred Units in certain circumstances and the valuecompleted sales of our interestNatural Gas businesses in Enable,Arkansas and factors that mayOklahoma and Energy Systems Group, and our exit of the midstream sector, which we cannot assure will have a material impact on such performance, cash distributions and value, including factors such as:the anticipated benefits to us;
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◦ | competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including the extent and timing of the entry of additional competition in the markets served by Enable; |
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◦ | 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; |
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◦ | the demand for crude oil, natural gas, NGLs and transportation and storage services; |
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◦ | environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; |
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◦ | recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; |
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◦ | access to debt and equity capital; and |
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◦ | the availability and prices of raw materials and services for current and future construction projects; |
•industrial, commercial and residential growth in our service territories and changes in market demand, including the effects of energy efficiency measures and demographic patterns;
•our ability to fund and invest planned capital and the timely recovery of our investments, including those related to Indiana Electric’s generation transition plan as part of its IRPs;
•our ability to successfully construct, operate, repair and maintain electric generating facilities, natural gas facilities, TEEEF and electric transmission facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;
•timely and appropriate rate actions that allow and authorize requested and timely recovery of costs and a reasonable return on investment;investment, including the timing and amount of recovery of Houston Electric’s TEEEF leases, and requested or favorable adjustments to rates and approval of other requested items as part of base rate proceedings;
future •economic conditions in regional and national markets, including changes to inflation and interest rates, and instability of banking institutions, and their effect on sales, prices and costs;
•weather variations and other natural phenomena, including the impact of severe weather events on operations, capital and capital;legislation such as seen in connection with the February 2021 Winter Storm Event;
•volatility in the markets for natural gas as a result of, among other factors, armed conflicts, including the conflict in Israel and any broader related conflict, and the conflict in Ukraine, and the related sanctions on certain Russian entities;
•continued disruptions to the global supply chain, including increases in commodity prices, and tariffs and other legislation impacting the supply chain, that could prevent CenterPoint Energy from securing the resources needed to, among other things, fully execute on its 10-year capital plan or achieve its net zero and carbon emissions reduction goals;
•non-payment for our services due to financial distress of our customers and the ability of our customers, including REPs, to satisfy their obligations to CenterPoint Energy, Houston Electric, and CERC, and the negative impact on such ability related to adverse economic conditions and severe weather events;
•public health threats, such as COVID-19, and their effect on our 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 behavior relating thereto;
•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 reform and legislation;
our 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 the effects of geographic and seasonal commodity price differentials;
problems with regulatory approval, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or in cost overruns that cannot be recouped in rates;
local, state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change;
the impact of unplanned facility outages;
any •direct or indirect effects on our facilities, resources, operations and financial condition resulting from terrorism, cyber-attacks,cyber attacks or intrusions, 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 and other severe weather events, pandemic health events or other occurrences;
•tax legislation, including the effects of the CARES Act and the IRA (which includes but is not limited to any potential changes to tax rates, CAMT imposed, tax credits and/or interest deductibility), as well as any changes in tax laws under the current or future administrations, and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of EDIT and our rates;
•our ability to invest planned capitalmitigate weather impacts through normalization or rate mechanisms, and the timely recoveryeffectiveness of our investment in capital;such mechanisms;
our ability to control operation and maintenance costs;
•actions by credit rating agencies;agencies, including any potential downgrades to credit ratings;
•matters affecting 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 costs that cannot be recouped in rates;
•local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact operations, cost recovery of generation plant costs and related assets, and CenterPoint Energy’s net zero and carbon emissions reduction goals;
•the impact of unplanned facility outages or other closures;
•the sufficiency of our insurance coverage, including availability, cost, coverage and terms;terms and ability to recover claims;
•the availability and prices of raw materials and services and changes in labor for current and future construction projects and operations and maintenance costs, including our ability to control such costs;
the investment performance of our•impacts from CenterPoint Energy’s pension and postretirement benefit plans;plans, such as the investment performance and increases to net periodic costs as a result of plan settlements and changes in assumptions, including discount rates;
•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, including disruptions in the banking industry, our access to capital, the cost of such capital, impacts on our vendors, customers and suppliers, 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 risk management and hedging activities, including, but not limited to, our financial hedges and weather hedges;activities;
•timely and appropriate regulatory actions, which include actions allowing securitization, for any hurricanes or other severe weather events, or natural disasters or other recovery of costs, associated with Hurricane Harvey and any future hurricanes or natural disasters;including stranded coal-fired generation asset 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 or divestiture activities involving us or our competitors;industry, including the ability to successfully complete merger, acquisition and divestiture plans;
•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 us and our subsidiaries;
•changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation;generation, and their adoption by consumers;
•the impact of climate change and alternate energy sources on the demand for natural gas and electricity generated or transmitted by us;
•the timing and outcome of any audits, disputes and other proceedings related to taxes;
•the recording of impairment charges;
•political and economic developments, including energy and environmental policies under the effective tax rates;current administration;
•CenterPoint Energy’s ability to execute on its strategy, initiatives, targets and goals, including its net zero and carbon
emissions reduction goals and its operations and maintenance expenditure goals;
•the outcome of litigation, including litigation related to the February 2021 Winter Storm Event;
•obligations related to warranties, guarantees and other contractual and legal obligations;
•the effect of changes in and application of accounting standards and pronouncements; and
•other factors we discussdiscussed in “Risk Factors” in Item 1A of Part I of our 2016the Registrants’ combined 2022 Form 10-K, which isare incorporated herein by reference, and in other reports wethat the Registrants file from time to time with the SEC.
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 and other 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.
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, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions, except per share amounts) |
Revenues: | | | | | | | |
Utility revenues | $ | 1,849 | | | $ | 1,829 | | | $ | 6,355 | | | $ | 6,400 | |
Non-utility revenues | 11 | | | 74 | | | 159 | | | 210 | |
Total | 1,860 | | | 1,903 | | | 6,514 | | | 6,610 | |
Expenses: | | | | | | | |
Utility natural gas, fuel and purchased power | 192 | | | 349 | | | 1,550 | | | 1,860 | |
Non-utility cost of revenues, including natural gas | 1 | | | 52 | | | 98 | | | 143 | |
Operation and maintenance | 648 | | | 670 | | | 1,990 | | | 2,020 | |
Depreciation and amortization | 374 | | | 329 | | | 1,042 | | | 974 | |
Taxes other than income taxes | 127 | | | 119 | | | 395 | | | 401 | |
| | | | | | | |
Total | 1,342 | | | 1,519 | | | 5,075 | | | 5,398 | |
Operating Income | 518 | | | 384 | | | 1,439 | | | 1,212 | |
Other Income (Expense): | | | | | | | |
Gain (loss) on equity securities | 49 | | | (206) | | | 56 | | | (284) | |
Gain (loss) on indexed debt securities | (47) | | | 210 | | | (52) | | | 381 | |
Gain (loss) on sale | — | | | — | | | (12) | | | 303 | |
Interest expense and other finance charges | (176) | | | (116) | | | (489) | | | (375) | |
Interest expense on Securitization Bonds | (7) | | | (3) | | | (11) | | | (11) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other income, net | 13 | | | 8 | | | 39 | | | 25 | |
Total | (168) | | | (107) | | | (469) | | | 39 | |
Income Before Income Taxes | 350 | | | 277 | | | 970 | | | 1,251 | |
Income tax expense | 68 | | | 75 | | | 245 | | | 328 | |
| | | | | | | |
| | | | | | | |
Net Income | 282 | | | 202 | | | 725 | | | 923 | |
Income allocated to preferred shareholders | 26 | | | 13 | | | 50 | | | 37 | |
Income Available to Common Shareholders | $ | 256 | | | $ | 189 | | | $ | 675 | | | $ | 886 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Basic Earnings Per Common Share | 0.41 | | | 0.30 | | | 1.07 | | | 1.41 | |
| | | | | | | |
| | | | | | | |
Diluted Earnings Per Common Share | $ | 0.40 | | | $ | 0.30 | | | $ | 1.07 | | | $ | 1.40 | |
| | | | | | | |
Weighted Average Common Shares Outstanding, Basic | 631 | | | 630 | | | 631 | | | 629 | |
Weighted Average Common Shares Outstanding, Diluted | 633 | | | 633 | | | 633 | | | 633 | |
|
| | | | | | | | | | | | | | | |
| 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 revenues | 865 |
| | 611 |
| | 2,975 |
| | 1,444 |
|
Total | 2,098 |
| | 1,889 |
| | 6,976 |
| | 5,447 |
|
| | | | | | | |
Expenses: | | | | | | | |
Utility natural gas | 106 |
| | 99 |
| | 706 |
| | 663 |
|
Non-utility natural gas | 832 |
| | 584 |
| | 2,843 |
| | 1,368 |
|
Operation and maintenance | 519 |
| | 505 |
| | 1,614 |
| | 1,539 |
|
Depreciation and amortization | 269 |
| | 324 |
| | 749 |
| | 873 |
|
Taxes other than income taxes | 93 |
| | 93 |
| | 288 |
| | 288 |
|
Total | 1,819 |
| | 1,605 |
| | 6,200 |
| | 4,731 |
|
Operating Income | 279 |
| | 284 |
| | 776 |
| | 716 |
|
| | | | | | | |
Other Income (Expense): | | | | | | | |
Gain on marketable securities | 37 |
| | 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, net | 68 |
| | 73 |
| | 199 |
| | 164 |
|
Other, net | 17 |
| | 20 |
| | 50 |
| | 41 |
|
Total | (12 | ) | | (8 | ) | | 1 |
| | (192 | ) |
| | | | | | | |
Income Before Income Taxes | 267 |
| | 276 |
| | 777 |
| | 524 |
|
Income tax expense | 98 |
| | 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, Basic | 431 |
| | 431 |
| | 431 |
| | 431 |
|
| | | | | | | |
Weighted Average Shares Outstanding, Diluted | 434 |
| | 433 |
| | 434 |
| | 433 |
|
See Combined Notes to Interim 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, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Net Income | $ | 282 | | | $ | 202 | | | $ | 725 | | | $ | 923 | |
Other comprehensive income (loss): | | | | | | | |
Adjustment to pension and other postretirement plans (net of tax expense (benefit) of $-0-, $(9), $-0- and $(5)) | 1 | | | 2 | | | — | | | (20) | |
Net deferred gain from cash flow hedges (net of tax of $-0-, $-0-, $-0- and $-0-) | 2 | | | — | | | 2 | | | — | |
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0-, $-0-, $-0- and $-0-) | — | | | — | | | — | | | 1 | |
| | | | | | | |
| | | | | | | |
Total | 3 | | | 2 | | | 2 | | | (19) | |
Comprehensive income | 285 | | | 204 | | | 727 | | | 904 | |
Income allocated to preferred shareholders | 26 | | | 13 | | | 50 | | | 37 | |
Comprehensive income available to common shareholders | $ | 259 | | | $ | 191 | | | $ | 677 | | | $ | 867 | |
|
| | | | | | | | | | | | | | | |
| 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 |
|
See Combined Notes to Interim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions)
(Unaudited)
ASSETS | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents ($118 and $75 related to VIEs, respectively) | $ | 120 | | | $ | 74 | |
Investment in equity securities | 566 | | | 510 | |
| | | |
Accounts receivable ($32 and $22 related to VIEs, respectively), less allowance for credit losses of $31 and $38, respectively | 767 | | | 889 | |
Accrued unbilled revenues ($2 and $0 related to VIEs, respectively), less allowance for credit losses of $1 and $4, respectively | 340 | | | 764 | |
| | | |
Natural gas and coal inventory | 138 | | | 241 | |
Materials and supplies | 672 | | | 635 | |
Non-trading derivative assets | 1 | | | 10 | |
Taxes receivable | 67 | | | 20 | |
| | | |
Regulatory assets | 217 | | | 1,385 | |
Prepaid expenses and other current assets ($14 and $13 related to VIEs, respectively) | 134 | | | 171 | |
Total current assets | 3,022 | | | 4,699 | |
Property, Plant and Equipment: | | | |
Property, plant and equipment | 39,618 | | | 37,728 | |
Less: accumulated depreciation and amortization | 10,447 | | | 10,585 | |
Property, plant and equipment, net | 29,171 | | | 27,143 | |
Other Assets: | | | |
Goodwill | 4,160 | | | 4,294 | |
Regulatory assets ($438 and $229 related to VIEs, respectively) | 2,481 | | | 2,193 | |
| | | |
Non-trading derivative assets | — | | | 2 | |
| | | |
| | | |
| | | |
| | | |
Other non-current assets | 167 | | | 215 | |
Total other assets | 6,808 | | | 6,704 | |
Total Assets | $ | 39,001 | | | $ | 38,546 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Current Assets: | | | |
Cash and cash equivalents ($200 and $340 related to VIEs, respectively) | $ | 201 |
| | $ | 341 |
|
Investment in marketable securities | 1,057 |
| | 953 |
|
Accounts receivable ($65 and $52 related to VIEs, respectively), less bad debt reserve of $16 and $15, respectively | 783 |
| | 740 |
|
Accrued unbilled revenues | 213 |
| | 335 |
|
Natural gas inventory | 252 |
| | 131 |
|
Materials and supplies | 190 |
| | 181 |
|
Non-trading derivative assets | 64 |
| | 51 |
|
Taxes receivable | — |
| | 30 |
|
Prepaid expenses and other current assets ($31 and $40 related to VIEs, respectively) | 175 |
| | 161 |
|
Total current assets | 2,935 |
| | 2,923 |
|
| | | |
Property, Plant and Equipment: | | | |
Property, plant and equipment | 18,581 |
| | 17,831 |
|
Less: accumulated depreciation and amortization | 5,881 |
| | 5,524 |
|
Property, plant and equipment, net | 12,700 |
| | 12,307 |
|
| | | |
Other Assets: | | | |
Goodwill | 867 |
| | 862 |
|
Regulatory assets ($1,690 and $1,919 related to VIEs, respectively) | 2,539 |
| | 2,677 |
|
Non-trading derivative assets | 56 |
| | 19 |
|
Investment in unconsolidated affiliate | 2,481 |
| | 2,505 |
|
Preferred units – unconsolidated affiliate | 363 |
| | 363 |
|
Other | 194 |
| | 173 |
|
Total other assets | 6,500 |
| | 6,599 |
|
| | | |
Total Assets | $ | 22,135 |
| | $ | 21,829 |
|
See Combined Notes to Interim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(In Millions, except share amounts)
(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions, except par value and shares) |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Current Liabilities: | | | |
Short-term borrowings | $ | 4 | | | $ | 511 | |
Current portion of VIE Securitization Bonds long-term debt | 170 | | | 156 | |
Indexed debt, net | 5 | | | 7 | |
Current portion of other long-term debt | 1,255 | | | 1,346 | |
Indexed debt securities derivative | 630 | | | 578 | |
Accounts payable | 763 | | | 1,352 | |
| | | |
Taxes accrued | 244 | | | 298 | |
Interest accrued | 179 | | | 159 | |
Dividends accrued | 126 | | | 144 | |
Customer deposits | 110 | | | 110 | |
| | | |
| | | |
| | | |
| | | |
Other current liabilities | 407 | | | 452 | |
Total current liabilities | 3,893 | | | 5,113 | |
Other Liabilities: | | | |
Deferred income taxes, net | 4,128 | | | 3,986 | |
| | | |
Benefit obligations | 533 | | | 547 | |
Regulatory liabilities | 3,195 | | | 3,245 | |
| | | |
Other non-current liabilities | 829 | | | 774 | |
Total other liabilities | 8,685 | | | 8,552 | |
Long-term Debt: | | | |
VIE Securitization Bonds, net | 408 | | | 161 | |
Other long-term debt, net | 16,430 | | | 14,675 | |
Total long-term debt, net | 16,838 | | | 14,836 | |
Commitments and Contingencies (Note 13) | | | |
Temporary Equity (Note 18) | — | | | 3 | |
Shareholders’ Equity: | | | |
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 0 shares and 800,000 shares outstanding, respectively, $0 and $800 liquidation preference, respectively (Note 18) | — | | | 790 | |
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 631,209,962 shares and 629,535,631 shares outstanding, respectively | 6 | | | 6 | |
Additional paid-in capital | 8,581 | | | 8,568 | |
Retained earnings | 1,027 | | | 709 | |
Accumulated other comprehensive loss | (29) | | | (31) | |
Total shareholders’ equity | 9,585 | | | 10,042 | |
Total Liabilities and Shareholders’ Equity | $ | 39,001 | | | $ | 38,546 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Current Liabilities: | | | |
Short-term borrowings | $ | 48 |
| | $ | 35 |
|
Current portion of VIE securitization bonds long-term debt | 432 |
| | 411 |
|
Indexed debt, net | 120 |
| | 114 |
|
Current portion of other long-term debt | 550 |
| | 500 |
|
Indexed debt securities derivative | 776 |
| | 717 |
|
Accounts payable | 657 |
| | 657 |
|
Taxes accrued | 199 |
| | 172 |
|
Interest accrued | 83 |
| | 108 |
|
Non-trading derivative liabilities | 17 |
| | 41 |
|
Other | 339 |
| | 325 |
|
Total current liabilities | 3,221 |
| | 3,080 |
|
| | | |
Other Liabilities: | |
| | |
|
Deferred income taxes, net | 5,458 |
| | 5,263 |
|
Non-trading derivative liabilities | 10 |
| | 5 |
|
Benefit obligations | 886 |
| | 913 |
|
Regulatory liabilities | 1,127 |
| | 1,298 |
|
Other | 284 |
| | 278 |
|
Total other liabilities | 7,765 |
| | 7,757 |
|
| | | |
Long-term Debt: | |
| | |
|
VIE securitization bonds, net | 1,500 |
| | 1,867 |
|
Other long-term debt, net | 6,031 |
| | 5,665 |
|
Total long-term debt, net | 7,531 |
| | 7,532 |
|
| | | |
Commitments and Contingencies (Note 13) |
|
| |
|
|
| | | |
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, respectively | 4 |
| | 4 |
|
Additional paid-in capital | 4,204 |
| | 4,195 |
|
Accumulated deficit | (518 | ) | | (668 | ) |
Accumulated other comprehensive loss | (72 | ) | | (71 | ) |
Total shareholders’ equity | 3,618 |
| | 3,460 |
|
| | | |
Total Liabilities and Shareholders’ Equity | $ | 22,135 |
| | $ | 21,829 |
|
See Combined Notes to Interim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Millions)(Unaudited)
(Unaudited) | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| (in millions) |
Cash Flows from Operating Activities: | | | |
Net income | $ | 725 | | | $ | 923 | |
| | | |
| | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 1,042 | | | 974 | |
| | | |
Deferred income taxes | 94 | | | 26 | |
| | | |
| | | |
| | | |
| | | |
Loss (gain) on divestitures | 12 | | | (303) | |
Loss (gain) on equity securities | (56) | | | 284 | |
Loss (gain) on indexed debt securities | 52 | | | (381) | |
| | | |
| | | |
| | | |
Pension contributions | (30) | | | (6) | |
Changes in other assets and liabilities: | | | |
Accounts receivable and unbilled revenues, net | 528 | | | 95 | |
| | | |
Inventory | 63 | | | (224) | |
Taxes receivable | (47) | | | 1 | |
Accounts payable | (443) | | | (119) | |
| | | |
Net regulatory assets and liabilities | 1,102 | | | 148 | |
| | | |
Other current assets and liabilities | (41) | | | (199) | |
Other non-current assets and liabilities | 59 | | | 34 | |
Other operating activities, net | 9 | | | 72 | |
| | | |
| | | |
Net cash provided by operating activities | 3,069 | | | 1,325 | |
Cash Flows from Investing Activities: | | | |
Capital expenditures | (3,323) | | | (3,079) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Proceeds from sale of marketable securities | — | | | 702 | |
Proceeds from divestitures, net of cash divested | 145 | | | 2,075 | |
| | | |
| | | |
Other investing activities, net | (12) | | | 73 | |
| | | |
| | | |
Net cash used in investing activities | (3,190) | | | (229) | |
Cash Flows from Financing Activities: | | | |
Increase (decrease) in short-term borrowings, net | (14) | | | 457 | |
Payment of obligation for finance lease | — | | | (218) | |
Payments of commercial paper, net | (1,496) | | | (1,620) | |
Proceeds from long-term debt and term loans | 5,574 | | | 2,089 | |
Payments of long-term debt and term loans, including make-whole premiums | (2,613) | | | (1,519) | |
| | | |
| | | |
| | | |
| | | |
Payment of debt issuance costs | (50) | | | (26) | |
| | | |
| | | |
Payment of dividends on Common Stock | (359) | | | (328) | |
Payment of dividends on Preferred Stock | (49) | | | (48) | |
| | | |
| | | |
| | | |
| | | |
Redemption of Series A Preferred Stock | (800) | | | — | |
Other financing activities, net | (25) | | | (7) | |
| | | |
| | | |
Net cash provided by (used in) financing activities | 168 | | | (1,220) | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 47 | | | (124) | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 91 | | | 254 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 138 | | | $ | 130 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Cash Flows from Operating Activities: | | | |
Net income | $ | 496 |
| | $ | 331 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 749 |
| | 873 |
|
Amortization of deferred financing costs | 18 |
| | 19 |
|
Deferred income taxes | 185 |
| | 150 |
|
Unrealized gain on marketable securities | (104 | ) | | (187 | ) |
Loss on indexed debt securities | 59 |
| | 258 |
|
Write-down of natural gas inventory | — |
| | 1 |
|
Equity in earnings of unconsolidated affiliate, net of distributions | (199 | ) | | (164 | ) |
Pension contributions | (46 | ) | | (7 | ) |
Changes in other assets and liabilities, excluding acquisitions: | | | |
Accounts receivable and unbilled revenues, net | 216 |
| | 86 |
|
Inventory | (52 | ) | | (5 | ) |
Taxes receivable | 30 |
| | 149 |
|
Accounts payable | (137 | ) | | (90 | ) |
Fuel cost recovery | (30 | ) | | (43 | ) |
Non-trading derivatives, net | (53 | ) | | 23 |
|
Margin deposits, net | (49 | ) | | 65 |
|
Interest and taxes accrued | 2 |
| | (48 | ) |
Net regulatory assets and liabilities | (135 | ) | | (26 | ) |
Other current assets | 21 |
| | (9 | ) |
Other current liabilities | 19 |
| | 31 |
|
Other assets | (3 | ) | | — |
|
Other liabilities | 28 |
| | 29 |
|
Other, net | 16 |
| | 19 |
|
Net cash provided by operating activities | 1,031 |
| | 1,455 |
|
Cash Flows from Investing Activities: | | | |
Capital expenditures | (994 | ) | | (1,047 | ) |
Acquisitions, net of cash acquired | (132 | ) | | (102 | ) |
Decrease in notes receivable – unconsolidated affiliate | — |
| | 363 |
|
Investment in preferred units – unconsolidated affiliate | — |
| | (363 | ) |
Distributions from unconsolidated affiliate in excess of cumulative earnings | 223 |
| | 223 |
|
Decrease (increase) in restricted cash of Bond Companies | 8 |
| | (2 | ) |
Proceeds from sale of marketable securities | — |
| | 178 |
|
Other, net | 3 |
| | 11 |
|
Net cash used in investing activities | (892 | ) | | (739 | ) |
Cash Flows from Financing Activities: | | | |
Increase in short-term borrowings, net | 13 |
| | 3 |
|
Proceeds from (payments of) commercial paper, net | (428 | ) | | 63 |
|
Proceeds from long-term debt, net | 1,096 |
| | 600 |
|
Payments of long-term debt | (597 | ) | | (855 | ) |
Debt issuance costs | (13 | ) | | (9 | ) |
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 Period | 341 |
| | 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), net | 14 |
| | (105 | ) |
Non-cash transactions: | | | |
Accounts payable related to capital expenditures | 111 |
| | 75 |
|
See Combined Notes to Interim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| (in millions of dollars and shares, except authorized shares and par value amounts) |
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares | | | | | | | | | | | | | | | |
Balance, beginning of period | 1 | | | $ | 790 | | | 1 | | | $ | 790 | | | 1 | | | $ | 790 | | | 1 | | | $ | 790 | |
Redemption of Series A Preferred Stock | (1) | | | (790) | | | — | | | — | | | (1) | | | (790) | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Balance, end of period | — | | | — | | | 1 | | | 790 | | | — | | | — | | | 1 | | | 790 | |
Common Stock, $0.01 par value; authorized 1,000,000,000 shares | | | | | | | | | | | | | | | |
Balance, beginning of period | 631 | | | 6 | | | 629 | | | 6 | | | 630 | | | 6 | | | 629 | | | 6 | |
| | | | | | | | | | | | | | | |
Issuances related to benefit and investment plans | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | |
Balance, end of period | 631 | | | 6 | | | 629 | | | 6 | | | 631 | | | 6 | | | 629 | | | 6 | |
Additional Paid-in-Capital | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 8,570 | | | | | 8,544 | | | | | 8,568 | | | | | 8,529 | |
| | | | | | | | | | | | | | | |
Issuances related to benefit and investment plans | | | 11 | | | | | 13 | | | | | 13 | | | | | 28 | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | 8,581 | | | | | 8,557 | | | | | 8,581 | | | | | 8,557 | |
Retained Earnings | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 1,032 | | | | | 768 | | | | | 709 | | | | | 154 | |
Net income | | | 282 | | | | | 202 | | | | | 725 | | | | | 923 | |
Common Stock dividends declared (see Note 18) | | | (246) | | | | | (227) | | | | | (366) | | | | | (334) | |
Preferred Stock dividends declared (see Note 18) | | | (41) | | | | | (24) | | | | | (41) | | | | | (24) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | 1,027 | | | | | 719 | | | | | 1,027 | | | | | 719 | |
Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | |
Balance, beginning of period | | | (32) | | | | | (85) | | | | | (31) | | | | | (64) | |
Other comprehensive loss | | | 3 | | | | | 2 | | | | | 2 | | | | | (19) | |
Balance, end of period | | | (29) | | | | | (83) | | | | | (29) | | | | | (83) | |
Total Shareholders’ Equity | | | $ | 9,585 | | | | | $ | 9,989 | | | | | $ | 9,585 | | | | | $ | 9,989 | |
See Combined Notes to Interim Condensed 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 September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Revenues | $ | 1,083 | | | $ | 935 | | | $ | 2,784 | | | $ | 2,562 | |
Expenses: | | | | | | | |
Operation and maintenance | 409 | | | 395 | | | 1,190 | | | 1,193 | |
Depreciation and amortization | 210 | | | 175 | | | 555 | | | 511 | |
Taxes other than income taxes | 70 | | | 65 | | | 201 | | | 196 | |
Total | 689 | | | 635 | | | 1,946 | | | 1,900 | |
Operating Income | 394 | | | 300 | | | 838 | | | 662 | |
Other Income (Expense): | | | | | | | |
Interest expense and other finance charges | (69) | | | (50) | | | (185) | | | (148) | |
Interest expense on Securitization Bonds | (2) | | | (3) | | | (6) | | | (11) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other income, net | 5 | | | 5 | | | 22 | | | 13 | |
Total | (66) | | | (48) | | | (169) | | | (146) | |
Income Before Income Taxes | 328 | | | 252 | | | 669 | | | 516 | |
Income tax expense | 72 | | | 52 | | | 147 | | | 108 | |
Net Income | $ | 256 | | | $ | 200 | | | $ | 522 | | | $ | 408 | |
See Combined Notes to Interim Condensed 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 September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Net income | $ | 256 | | | $ | 200 | | | $ | 522 | | | $ | 408 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Comprehensive income | $ | 256 | | | $ | 200 | | | $ | 522 | | | $ | 408 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents ($113 and $75 related to VIEs, respectively) | $ | 113 | | | $ | 75 | |
Accounts receivable ($30 and $22 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively | 482 | | | 311 | |
Accounts and notes receivable–affiliated companies | 409 | | | 21 | |
Accrued unbilled revenues | 182 | | | 142 | |
Materials and supplies | 489 | | | 471 | |
Taxes receivable | 8 | | | — | |
| | | |
| | | |
Prepaid expenses and other current assets ($13 and $13 related to VIEs, respectively) | 33 | | | 41 | |
Total current assets | 1,716 | | | 1,061 | |
Property, Plant and Equipment: | | | |
Property, plant and equipment | 19,056 | | | 17,753 | |
Less: accumulated depreciation and amortization | 4,425 | | | 4,292 | |
Property, plant and equipment, net | 14,631 | | | 13,461 | |
Other Assets: | | | |
Regulatory assets ($107 and $229 related to VIEs, respectively) | 775 | | | 778 | |
| | | |
Other non-current assets | 37 | | | 39 | |
Total other assets | 812 | | | 817 | |
Total Assets | $ | 17,159 | | | $ | 15,339 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
LIABILITIES AND MEMBER’S EQUITY | | | |
Current Liabilities: | | | |
| | | |
Current portion of VIE Securitization Bonds long-term debt | $ | 159 | | | $ | 156 | |
| | | |
Accounts payable | 359 | | | 413 | |
Accounts and notes payable–affiliated companies | 92 | | | 755 | |
Taxes accrued | 152 | | | 150 | |
Interest accrued | 93 | | | 83 | |
| | | |
Other current liabilities | 90 | | | 88 | |
Total current liabilities | 945 | | | 1,645 | |
Other Liabilities: | | | |
Deferred income taxes, net | 1,359 | | | 1,229 | |
Benefit obligations | 38 | | | 38 | |
Regulatory liabilities | 1,032 | | | 1,155 | |
| | | |
Other non-current liabilities | 113 | | | 77 | |
Total other liabilities | 2,542 | | | 2,499 | |
Long-term Debt: | | | |
VIE Securitization Bonds, net | 81 | | | 161 | |
Other long-term debt, net | 7,425 | | | 6,036 | |
Total long-term debt, net | 7,506 | | | 6,197 | |
Commitments and Contingencies (Note 13) | | | |
Member’s Equity: | | | |
Common stock | — | | | — | |
Additional paid-in capital | 4,745 | | | 3,860 | |
Retained earnings | 1,421 | | | 1,138 | |
| | | |
Total member’s equity | 6,166 | | | 4,998 | |
Total Liabilities and Member’s Equity | $ | 17,159 | | | $ | 15,339 | |
See Combined Notes to Interim Condensed 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)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| (in millions) |
Cash Flows from Operating Activities: | | | |
Net income | $ | 522 | | | $ | 408 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 555 | | | 511 | |
Deferred income taxes | 117 | | | 44 | |
| | | |
| | | |
Changes in other assets and liabilities: | | | |
Accounts and notes receivable, net | (211) | | | (159) | |
Accounts receivable/payable–affiliated companies | (9) | | | (35) | |
Inventory | (18) | | | (116) | |
Accounts payable | (23) | | | (11) | |
Taxes receivable | (8) | | | — | |
Net regulatory assets and liabilities | (113) | | | (40) | |
Other current assets and liabilities | 18 | | | (43) | |
Other non-current assets and liabilities | 44 | | | (5) | |
Other operating activities, net | (16) | | | (9) | |
Net cash provided by operating activities | 858 | | | 545 | |
Cash Flows from Investing Activities: | | | |
Capital expenditures | (1,724) | | | (1,727) | |
Increase in notes receivable–affiliated companies | (400) | | | (360) | |
| | | |
| | | |
Other investing activities, net | (8) | | | 34 | |
Net cash used in investing activities | (2,132) | | | (2,053) | |
Cash Flows from Financing Activities: | | | |
| | | |
| | | |
Proceeds from long-term debt | 1,398 | | | 1,589 | |
Payments of long-term debt | (77) | | | (444) | |
Decrease in notes payable–affiliated companies | (642) | | | (512) | |
Dividend to parent | (239) | | | (141) | |
Contribution from parent | 885 | | | 1,143 | |
| | | |
Payment of debt issuance costs | (12) | | | (15) | |
Payment of obligation for finance lease | — | | | (218) | |
Other financing activities, net | (1) | | | — | |
Net cash provided by financing activities | 1,312 | | | 1,402 | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 38 | | | (106) | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 88 | | | 233 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 126 | | | $ | 127 | |
See Combined Notes to Interim Condensed 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 September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| (in millions, except share amounts) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Common Stock | | | | | | | | | | | | | | | |
Balance, beginning of period | 1,000 | | | $ | — | | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | |
Balance, end of period | 1,000 | | | — | | | 1,000 | | | — | | | 1,000 | | | — | | | 1,000 | | | — | |
Additional Paid-in-Capital | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 4,510 | | | | | 3,860 | | | | | 3,860 | | | | | 2,678 | |
Non-cash contribution from parent | | | — | | | | | — | | | | | — | | | | | 38 | |
Contribution from parent | | | 235 | | | | | — | | | | | 885 | | | | | 1,143 | |
Other | | | — | | | | | — | | | | | — | | | | | 1 | |
Balance, end of period | | | 4,745 | | | | | 3,860 | | | | | 4,745 | | | | | 3,860 | |
Retained Earnings | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 1,244 | | | | | 1,085 | | | | | 1,138 | | | | | 944 | |
Net income | | | 256 | | | | | 200 | | | | | 522 | | | | | 408 | |
Dividend to parent | | | (79) | | | | | (74) | | | | | (239) | | | | | (141) | |
Balance, end of period | | | 1,421 | | | | | 1,211 | | | | | 1,421 | | | | | 1,211 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total Member’s Equity | | | $ | 6,166 | | | | | $ | 5,071 | | | | | $ | 6,166 | | | | | $ | 5,071 | |
See Combined Notes to Interim Condensed 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 | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Revenues: | | | | | | | |
Utility revenues | $ | 574 | | | $ | 663 | | | $ | 3,014 | | | $ | 3,206 | |
Non-utility revenues | 9 | | | 9 | | | 31 | | | 26 | |
Total | 583 | | | 672 | | | 3,045 | | | 3,232 | |
Expenses: | | | | | | | |
Utility natural gas | 141 | | | 276 | | | 1,399 | | | 1,660 | |
Non-utility cost of revenues, including natural gas | 1 | | | 1 | | | 2 | | | 3 | |
Operation and maintenance | 187 | | | 190 | | | 616 | | | 630 | |
Depreciation and amortization | 125 | | | 113 | | | 365 | | | 333 | |
Taxes other than income taxes | 53 | | | 50 | | | 181 | | | 185 | |
| | | | | | | |
Total | 507 | | | 630 | | | 2,563 | | | 2,811 | |
Operating Income | 76 | | | 42 | | | 482 | | | 421 | |
Other Income (Expense): | | | | | | | |
Gain on sale | — | | | — | | | — | | | 557 | |
Interest expense and other finance charges | (44) | | | (32) | | | (131) | | | (91) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other income (expense), net | 6 | | | — | | | 12 | | | (11) | |
Total | (38) | | | (32) | | | (119) | | | 455 | |
Income Before Income Taxes | 38 | | | 10 | | | 363 | | | 876 | |
Income tax expense | 10 | | | 17 | | | 80 | | | 220 | |
| | | | | | | |
| | | | | | | |
Net Income (Loss) | $ | 28 | | | $ | (7) | | | $ | 283 | | | $ | 656 | |
See Combined Notes to Interim Condensed 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 | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Net income (loss) | $ | 28 | | | $ | (7) | | | $ | 283 | | | $ | 656 | |
| | | | | | | |
Adjustment to pension and other postretirement plans (net of tax of $-0-, $-0- ,$-0- and $-0-) | — | | | — | | | (1) | | | — | |
| | | | | | | |
Other comprehensive loss | — | | | — | | | (1) | | | — | |
Comprehensive income (loss) | $ | 28 | | | $ | (7) | | | $ | 282 | | | $ | 656 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents | $ | 1 | | | $ | — | |
Accounts receivable, less allowance for credit losses of $28 and $34, respectively | 234 | | | 463 | |
Accrued unbilled revenues, less allowance for credit losses of $1 and $4, respectively | 119 | | | 573 | |
Accounts receivable–affiliated companies | 14 | | | 52 | |
Notes receivable–affiliated companies | 86 | | | — | |
Materials and supplies | 118 | | | 98 | |
Natural gas inventory | 92 | | | 195 | |
Non-trading derivative assets | 1 | | | 7 | |
Taxes receivable | — | | | 12 | |
| | | |
| | | |
Regulatory assets | 205 | | | 1,336 | |
Prepaid expenses and other current assets | 46 | | | 78 | |
Total current assets | 916 | | | 2,814 | |
Property, Plant and Equipment: | | | |
Property, plant and equipment | 15,460 | | | 14,379 | |
Less: accumulated depreciation and amortization | 4,151 | | | 3,973 | |
Property, plant and equipment, net | 11,309 | | | 10,406 | |
Other Assets: | | | |
Goodwill | 1,583 | | | 1,583 | |
Regulatory assets | 833 | | | 844 | |
Non-trading derivative assets | — | | | 2 | |
| | | |
| | | |
| | | |
Other non-current assets | 53 | | | 55 | |
Total other assets | 2,469 | | | 2,484 | |
Total Assets | $ | 14,694 | | | $ | 15,704 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
LIABILITIES AND STOCKHOLDER’S EQUITY | | | |
Current Liabilities: | | | |
Short-term borrowings | $ | 4 | | | $ | 511 | |
Current portion of long-term debt | 57 | | | 1,331 | |
Accounts payable | 289 | | | 690 | |
Accounts payable–affiliated companies | 209 | | | 190 | |
| | | |
Taxes accrued | 178 | | | 140 | |
Interest accrued | 44 | | | 50 | |
Customer deposits | 95 | | | 94 | |
| | | |
| | | |
Other current liabilities | 220 | | | 200 | |
Total current liabilities | 1,096 | | | 3,206 | |
Other Liabilities: | | | |
Deferred income taxes, net | 1,168 | | | 1,262 | |
| | | |
| | | |
Benefit obligations | 76 | | | 76 | |
Regulatory liabilities | 1,857 | | | 1,801 | |
| | | |
Other non–current liabilities | 513 | | | 501 | |
Total other liabilities | 3,614 | | | 3,640 | |
Long-Term Debt | 4,186 | | | 3,495 | |
Commitments and Contingencies (Note 13) | | | |
Stockholder’s Equity: | | | |
Common stock | — | | | — | |
Additional paid-in capital | 4,229 | | | 3,729 | |
Retained earnings | 1,554 | | | 1,618 | |
Accumulated other comprehensive income | 15 | | | 16 | |
Total stockholder’s equity | 5,798 | | | 5,363 | |
Total Liabilities and Stockholder’s Equity | $ | 14,694 | | | $ | 15,704 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| (in millions) |
Cash Flows from Operating Activities: | | | |
Net income | $ | 283 | | | $ | 656 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 365 | | | 333 | |
| | | |
Deferred income taxes | (113) | | | 217 | |
| | | |
Gain on divestitures | — | | | (557) | |
Changes in other assets and liabilities: | | | |
Accounts receivable and unbilled revenues, net | 724 | | | 271 | |
Accounts receivable/payable–affiliated companies | 57 | | | (59) | |
Inventory | 90 | | | (87) | |
| | | |
Accounts payable | (384) | | | (117) | |
| | | |
| | | |
| | | |
Net regulatory assets and liabilities | 1,192 | | | 181 | |
| | | |
Other current assets and liabilities | 64 | | | (81) | |
Other non-current assets and liabilities | (5) | | | (5) | |
Other operating activities, net | (3) | | | 1 | |
Net cash provided by operating activities | 2,270 | | | 753 | |
Cash Flows from Investing Activities: | | | |
Capital expenditures | (1,219) | | | (1,166) | |
Increase in notes receivable–affiliated companies | (86) | | | — | |
| | | |
Proceeds from divestiture | — | | | 2,075 | |
Other investing activities, net | (15) | | | 12 | |
| | | |
| | | |
Net cash provided by (used in) investing activities | (1,320) | | | 921 | |
Cash Flows from Financing Activities: | | | |
Increase (decrease) in short-term borrowings, net | (14) | | | 457 | |
| | | |
Payments of commercial paper, net | (805) | | | (324) | |
Proceeds from long-term debt and term loan | 2,006 | | | 852 | |
Payments of long-term debt and term loan | (2,275) | | | (425) | |
| | | |
Dividends to parent | (347) | | | (844) | |
Payment of debt issuance costs | (13) | | | (11) | |
| | | |
Decrease in notes payable–affiliated companies | — | | | (1,517) | |
Contribution from parent | 500 | | | 125 | |
| | | |
| | | |
Other financing activities, net | (1) | | | (1) | |
| | | |
| | | |
Net cash used in financing activities | (949) | | | (1,688) | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 1 | | | (14) | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | — | | | 15 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1 | | | $ | 1 | |
See Combined Notes to Interim Condensed 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 September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| (in millions, except share amounts) |
Common Stock | | | | | | | | | | | | | | | |
Balance, beginning of period | 1,000 | | | $ | — | | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | |
Balance, end of period | 1,000 | | | — | | | 1,000 | | | — | | | 1,000 | | | — | | | 1,000 | | | — | |
Additional Paid-in-Capital | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 4,229 | | | | | 3,565 | | | | | 3,729 | | | | | 4,106 | |
Non-cash contribution from parent | | | — | | | | | — | | | | | — | | | | | 54 | |
Contribution from parent | | | — | | | | | — | | | | | 500 | | | | | 125 | |
Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses | | | — | | | | | — | | | | | — | | | | | (720) | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | 4,229 | | | | | 3,565 | | | | | 4,229 | | | | | 3,565 | |
Retained Earnings | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 1,562 | | | | | 1,569 | | | | | 1,618 | | | | | 1,017 | |
Net income | | | 28 | | | | | (7) | | | | | 283 | | | | | 656 | |
Dividend to parent | | | (36) | | | | | (13) | | | | | (347) | | | | | (124) | |
Balance, end of period | | | 1,554 | | | | | 1,549 | | | | | 1,554 | | | | | 1,549 | |
Accumulated Other Comprehensive Income | | | | | | | | | | | | | | | |
Balance, beginning of period | | | 15 | | | | | 10 | | | | | 16 | | | | | 10 | |
Other comprehensive loss | | | — | | | | | — | | | | | (1) | | | | | — | |
Balance, end of period | | | 15 | | | | | 10 | | | | | 15 | | | | | 10 | |
Total Stockholder’s Equity | | | $ | 5,798 | | | | | $ | 5,124 | | | | | $ | 5,798 | | | | | $ | 5,124 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITEDINTERIM 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 Note 11 to the Registrants’ Interim Condensed 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 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 2022 Form 10-K. The Combined Notes to Interim Condensed Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated.
Background.Background. CenterPoint Energy, Inc. is a public utility holding company. On June 30, 2023, CenterPoint Energy completed the sale of its indirect subsidiary, Energy Systems Group, to an unaffiliated third party. For additional information, see Note 3. CenterPoint Energy completed the Restructuring on June 30, 2022, whereby the equity interests in Indiana Gas and VEDO, both subsidiaries it acquired in its acquisition of Vectren on February 1, 2019, were transferred from VUH to CERC Corp. SIGECO was not acquired by CERC and remains a subsidiary of VUH. On January 10, 2022, CERC Corp. completed the sale of its Arkansas and Oklahoma Natural Gas businesses. For additional information, see Note 3.
As of September 30, 2023, CenterPoint Energy’s operating subsidiaries ownwere as follows:
•Houston Electric owns and operateoperates electric transmission and distribution and natural gas distribution facilities supply natural gas to commercial and industrial customers and electric and natural gas utilities and own interests in Enable as described below. CenterPoint Energy’s indirect, wholly-owned subsidiaries include:
Houston Electric, which engages in the electric transmission and distribution business in the Texas Gulf Coastgulf coast area that includes the city of Houston;
•CERC Corp., which (i) directly owns and operates natural gas distribution systems in six states;Louisiana, Minnesota, Mississippi and
CES, which obtains Texas, (ii) indirectly, through Indiana Gas and offers competitive variableVEDO, owns and fixed-price physicaloperates natural gas suppliesdistribution systems in Indiana and Ohio, respectively, and (iii) owns and operates permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and
•SIGECO provides energy delivery services primarily to commercial and industrial customers and electric and natural gas utilitiescustomers located in 33 states.and near Evansville in southwestern Indiana and owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market.
As of September 30, 2017,2023, CenterPoint Energy also owned an aggregate of 14,520,000 Series A Preferred Units in Enable, which owns, operatesEnergy’s reportable segments were Electric, Natural Gas, and develops natural gasCorporate and crude oil infrastructure assets,Other. Houston Electric and CERC Corp. owned approximately 54.1%each consist of the common units representing limited partner interests in Enable.a single reportable segment. For a description of CenterPoint Energy’s reportable segments, see Note 15.
As of September 30, 2017,2023, CenterPoint Energy, Houston Electric and SIGECO had VIEs consisting ofincluding the Bond Companies and the SIGECO Securitization Subsidiary, 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 property or facilitating the securitization financing of qualified costs in the second quarter of 2023 associated with the completed retirement of SIGECO’s A.B. Brown coal generation facilities. CenterPoint Energy, through SIGECO, has a controlling financial interest in the SIGECO Securitization Subsidiary and system restoration-related property.is the VIE’s primary beneficiary. For further information, see Note 6. Creditors of CenterPoint Energy, Houston Electric and SIGECO have no recourse to any assets or revenues of the Bond Companies.Companies or the SIGECO Securitization Subsidiary, as applicable. The bondsSecuritization Bonds issued by these VIEs are payable only from and secured by transition and system restorationor securitization property, as applicable, and the bondholders have no recourse to the general credit of CenterPoint Energy.Energy, Houston Electric or SIGECO.
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.
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 2016-02 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 classification of certain cash receipts and payments in 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.
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.
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 otherrecently adopted standards and recently issued 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) AcquisitionDivestitures (CenterPoint Energy and CERC)
Divestiture of Energy Systems Group. On May 21, 2023, CenterPoint Energy, through its subsidiary Vectren Energy Services, entered into an Equity Purchase Agreement to sell all of the outstanding limited liability company interests of Energy Systems Group to ESG Holdings Group, for a purchase price of $157 million, subject to customary adjustments set forth in the Equity Purchase Agreement, including adjustments based on Energy Systems Group’s net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. The transaction closed on June 30, 2023, and CenterPoint Energy received $154 million in cash, subject to finalization of the purchase price adjustment. Additionally, as of September 30, 2023, CenterPoint Energy had a payable to ESG Holdings Group for working capital and other adjustments set forth in the Equity Purchase Agreement that have not yet been finalized.
In May 2023, certain assets and liabilities of Energy Systems Group met the held for sale criteria. The divestiture of Energy Systems Group reflects CenterPoint Energy’s continued strategic focus on its core utility businesses. The historical annual revenues, net income and total assets of Energy Systems Groups did not have a sufficient effect, quantitatively or qualitatively, on CenterPoint Energy’s financial results to be considered a strategic shift. Therefore, the income and expenses associated with Energy Systems Group were not reflected as discontinued operations on CenterPoint Energy’s Condensed Statements of Consolidated Income. For disposal groups that are classified as held for sale but that do not meet the criteria for discontinued operations reporting, the assets and liabilities of the disposal group are required to be separately presented on the face of the balance sheet only in the initial period in which it is classified as held for sale. Therefore, CenterPoint Energy’s Condensed Consolidated Balance Sheet as of December 31, 2022 was not recast to reflect Energy Systems Group’s assets and liabilities as held for sale. Depreciation and amortization of long-lived assets ceased at the end of the quarter in which the held for sale criteria is met. Additionally, as a result of the completion of the sale of Energy Systems Group in June 2023, there were no assets or liabilities classified as held for sale as of September 30, 2023. For a discussion of guarantees and product warranties related to Energy Systems Group prior to the sale, see Note 13(b).
CenterPoint Energy recognized a loss on sale of approximately $12 million, including $3 million of transaction costs, during the nine months ended September 30, 2023, in connection with the closing of the sale of Energy Systems Group. Additionally, CenterPoint Energy recognized a current tax expense of $33 million during the nine months ended September 30, 2023, as a result of the cash taxes payable upon the closing of the sale.
The pre-tax loss for Energy Systems Group, excluding interest and corporate allocations, included in CenterPoint Energy’s Condensed Statements of Consolidated Income is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Loss from Continuing Operations Before Income Taxes | $ | — | | | $ | (1) | | | $ | (4) | | | $ | (5) | |
| | | | | | | |
Divestiture of Arkansas and Oklahoma Natural Gas Businesses. On April 29, 2021, CenterPoint Energy, through its subsidiary CERC Corp., entered into an Asset Purchase Agreement to sell its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion in cash, including recovery of approximately $425 million in natural gas costs, including storm-related
incremental natural gas costs associated with the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The assets included approximately 17,000 miles of main pipeline in Arkansas, Oklahoma and certain portions of Bowie County, Texas serving more than half a million customers. The transaction closed on January 3, 2017,CES,10, 2022.
The sale was considered an indirect, wholly-ownedasset sale for tax purposes, requiring net deferred tax liabilities to be excluded from held for sale balances. The deferred taxes associated with the businesses were recognized as a deferred income tax benefit by CenterPoint Energy and CERC upon closing of the sale in 2022.
Although the Arkansas and Oklahoma Natural Gas businesses met the held for sale criteria, their disposals did not represent a strategic shift to CenterPoint Energy and CERC, as both retained significant operations in, and continued to invest in, their natural gas businesses. Therefore, the income and expenses associated with the disposed businesses were not reflected as discontinued operations on CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable. Since the depreciation on the Arkansas and Oklahoma Natural Gas assets continued to be reflected in revenues through customer rates until the closing of the transaction and will be reflected in the carryover basis of the rate-regulated assets, CenterPoint Energy and CERC continued to record depreciation on those assets through the closing of the transaction. The Registrants record assets and liabilities held for sale at the lower of their carrying value or their estimated fair value less cost to sell.
CenterPoint Energy and CERC recognized gains of $303 million and $557 million, respectively, net of transaction costs of $59 million, in connection with the closing of the disposition of the Arkansas and Oklahoma Natural Gas businesses during the year ended December 31, 2022. CenterPoint Energy and CERC collected a receivable of $15 million in May 2022 for full and final settlement of the working capital adjustment under the Asset Purchase Agreement.
The pre-tax income for the Arkansas and Oklahoma Natural Gas businesses, excluding interest and corporate allocations, included in CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income is as follows:
| | | | | | | | | | | |
| Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 (1) |
| (in millions) |
Income from Continuing Operations Before Income Taxes | $ | — | | | $ | 9 | |
| | | |
(1)Reflects January 1, 2022 to January 9, 2022 results only due to the sale of the Arkansas and Oklahoma Natural Gas businesses.
Effective on the date of the closing of the disposition of the Arkansas and Oklahoma Natural Gas businesses, a subsidiary of CenterPoint Energy completed its acquisitionentered into the Transition Services Agreement, whereby that subsidiary agreed to provide certain transition services such as accounting, customer operations, procurement, and technology functions for a term of AEM. After working capital adjustments,up to twelve months. In November 2022, a significant majority of all services under the final purchase price was $147Transition Services Agreement were terminated, and on January 10, 2023, all remaining services were terminated.
CenterPoint Energy’s charges to Southern Col Midco for reimbursement of transition services were $-0- and less than $1 million during the three and nine months ended September 30, 2023 and were $10 million and was allocated$29 million during the three and nine months ended September 30, 2022. Actual transitional services costs incurred are recorded net of amounts charged to identifiable assets acquiredSouthern Col Midco. CenterPoint Energy had accounts receivable from Southern Col Midco of $-0- as of September 30, 2023 and liabilities assumed based on their estimated fair values on$1 million as of December 31, 2022, for transition services.
(4) Revenue Recognition and Allowance for Credit Losses
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 acquisition date.consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services.
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.
The following table summarizes the final purchase price allocationtables disaggregate revenues by reportable segment and the fair value amounts recognizedmajor source:
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 1,274 | | | $ | 589 | | | $ | 1 | | | $ | 1,864 | |
| | | | | | | | |
Other (1) | | (13) | | | 8 | | | 1 | | | (4) | |
| | | | | | | | |
Total revenues | | $ | 1,261 | | | $ | 597 | | | $ | 2 | | | $ | 1,860 | |
| | | | | | | | |
| | Nine Months Ended September 30, 2023 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 3,272 | | | $ | 3,100 | | | $ | 125 | | | $ | 6,497 | |
Other (1) | | (22) | | | 36 | | | 3 | | | 17 | |
| | | | | | | | |
Total revenues | | $ | 3,250 | | | $ | 3,136 | | | $ | 128 | | | $ | 6,514 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 1,155 | | | $ | 686 | | | $ | 65 | | | $ | 1,906 | |
Other (1) | | (9) | | | 6 | | | — | | | (3) | |
| | | | | | | | |
Total revenues | | $ | 1,146 | | | $ | 692 | | | $ | 65 | | | $ | 1,903 | |
| | | | | | | | |
| | Nine Months Ended September 30, 2022 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 3,113 | | | $ | 3,358 | | | $ | 182 | | | $ | 6,653 | |
Other (1) | | (21) | | | (24) | | | 2 | | | (43) | |
| | | | | | | | |
Total revenues | | $ | 3,092 | | | $ | 3,334 | | | $ | 184 | | | $ | 6,610 | |
(1)Primarily consists of income from ARPs and leases. Total lease income was $2 million and $1 million for the assets acquiredthree months ended September 30, 2023 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 of2022, respectively, and $6 million and $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 patternnine months ended September 30, 2023 and 2022, respectively.
Houston Electric
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (in millions) |
Revenue from contracts | | $ | 1,100 | | | $ | 949 | | | $ | 2,821 | | | $ | 2,597 | |
Other (1) | | (17) | | | (14) | | | (37) | | | (35) | |
Total revenues | | $ | 1,083 | | | $ | 935 | | | $ | 2,784 | | | $ | 2,562 | |
(1)Primarily consists of economic benefit provided by the utilization of the assets.
The estimated fair value of the identifiable intangible assetsincome from ARPs 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 assetsleases. Lease income was $-0- and $1 millionnot significant for the three and nine months ended September 30, 2017, respectively.2023 and 2022.
Revenues
CERC
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (in millions) |
Revenue from contracts | | $ | 575 | | | $ | 667 | | | $ | 3,012 | | | $ | 3,257 | |
Other (1) | | 8 | | | 5 | | | 33 | | | (25) | |
| | | | | | | | |
Total revenues | | $ | 583 | | | $ | 672 | | | $ | 3,045 | | | $ | 3,232 | |
(1)Primarily consists of approximately $311income from ARPs and leases. Lease income was $1 million for both the three months ended September 30, 2023 and $989 million, respectively, and operating2022. Lease income of approximatelywas $3 million and $28$2 million, respectively, attributable to the AEM acquisition are reported in the Energy Services business segment and included in CenterPoint Energy’s Condensed Statements of Consolidated Income for the three and nine months ended September 30, 2017.2023 and 2022.
Revenues from Contracts with Customers
Electric (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time, and customers consume the electricity when delivered. Indiana Electric generates, transmits and distributes 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, such as the PUCT and the IURC, 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 provided by Houston Electric 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 regulator. Payments are received on a monthly basis. Indiana Electric customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.
Natural Gas (CenterPoint Energy and CERC). CenterPoint Energy and CERC distribute and transport 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 Registrants’ contract assets are included in Accrued unbilled revenues and contract liabilities are included in Accounts payable and Other current liabilitiesin their Condensed Consolidated Balance Sheets. CenterPoint Energy’s contract assets and contract liabilities primarily related to Energy Systems Group contracts where revenue was recognized using the input method prior to the sale of Energy Systems Group that was completed on June 30, 2023.
The following unaudited pro forma financial information reflectsopening and closing balances of accounts receivable, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers are as follows:
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract Assets | | Contract Liabilities | |
| (in millions) | |
Opening balance as of December 31, 2022 | $ | 858 | | | $ | 764 | | | $ | 4 | | | $ | 45 | | |
Closing balance as of September 30, 2023 | 733 | | | 340 | | | — | | | 5 | | |
Decrease | $ | (125) | | | $ | (424) | | | $ | (4) | | (1) | $ | (40) | | (1) | |
(1)Decrease primarily related to the consolidatedcompleted sale of Energy Systems Group on June 30, 2023.
The amount of revenue recognized during the nine-month period ended September 30, 2023 that was included in the opening contract liability was $2 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, 2022 | $ | 271 | | | $ | 142 | | | | | $ | 2 | |
Closing balance as of September 30, 2023 | 459 | | | 182 | | | | | 5 | |
Increase (decrease) | $ | 188 | | | $ | 40 | | | | | $ | 3 | |
The amount of operationsrevenue recognized during the nine-month period ended September 30, 2023 that was included in the opening contract liability was $2 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, 2022 | $ | 478 | | | $ | 573 | | | | | | | |
Closing balance as of September 30, 2023 | 230 | | | 119 | | | | | | | |
Decrease | $ | (248) | | | $ | (454) | | | | | | | |
CERC does not have any opening or closing contract asset or contract liability balances.
Remaining Performance Obligations (CenterPoint Energy).Following the completed sale of Energy Systems Group on June 30, 2023, CenterPoint Energy assuming the AEM acquisition had taken place on January 1, 2016. Adjustments to pro forma net income include intercompany sales, amortization of intangible assets, depreciation of fixed assets, interest expense associated with debt financing to fund the acquisition,no remaining performance obligations.
Practical Expedients 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 purchasesExemption. Sales taxes and sales at index prices. The effective portion of these hedgesother similar taxes collected from customers are excluded from earningsthe transaction 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 reportedrevenue expected to be recognized on these contracts has not been disclosed.
Allowance for Credit Losses
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 changing weather, commodity prices, regulations, and macroeconomic 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. For a discussion of regulatory deferrals, including those related to COVID-19, see Note 6.
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:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 |
| Pension Benefits | | Postretirement Benefits | | Pension Benefits | | Postretirement Benefits |
| (in millions) |
Service cost | $ | 9 |
| | $ | — |
| | $ | 10 |
| | $ | 1 |
|
Interest cost | 22 |
| | 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 loss | 14 |
| | — |
| | 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 cost | 66 |
| | 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 loss | 43 |
| | — |
| | 47 |
| | — |
|
Curtailment gain (1) | — |
| | — |
| | — |
| | (3 | ) |
Net periodic cost (2) | $ | 71 |
| | $ | 6 |
| | $ | 76 |
| | $ | 5 |
|
Pension Benefits (CenterPoint Energy) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Service cost (1) | $ | 6 | | | $ | 7 | | | $ | 19 | | | $ | 23 | |
Interest cost (2) | 19 | | | 20 | | | 57 | | | 52 | |
Expected return on plan assets (2) | (19) | | | (21) | | | (57) | | | (69) | |
| | | | | | | |
Amortization of net loss (2) | 7 | | | 8 | | | 21 | | | 22 | |
Settlement cost (2) (3) | — | | | 8 | | | — | | | 38 | |
| | | | | | | |
Net periodic cost | $ | 13 | | | $ | 22 | | | $ | 40 | | | $ | 66 | |
| |
(1) | 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 into 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
(1)Amounts presented in the table above are included in Operation and maintenance expense 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 a curtailment gain of $3 million as an accelerated recognition of the prior service credit that would otherwise be recognized in future periods. |
| |
(2) | Net periodic cost in this table is before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes. |
CenterPoint Energy’s changesCondensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.
(2)Amounts presented in accumulated comprehensive loss relatedthe table above are included in Other income, net in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of regulatory deferrals.
(3)Amounts presented represent a one-time, non-cash settlement cost, prior to definedregulatory deferrals, which are required when the total lump sum distributions or other settlements of plan benefit obligations during a plan year exceed the service cost and interest cost components of the net periodic cost for that year.
Postretirement Benefits
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Service cost (1) | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Interest cost (2) | 3 | | | 1 | | | 1 | | | 3 | | | 1 | | | 1 | |
Expected return on plan assets (2) | (1) | | | (1) | | | — | | | (1) | | | (1) | | | (1) | |
Amortization of prior service credit (2) | (1) | | | (1) | | | 1 | | | (1) | | | (1) | | | — | |
Amortization of net loss (2) | (2) | | | (1) | | | (1) | | | (1) | | | (1) | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net periodic cost (benefit) | $ | (1) | | | $ | (2) | | | $ | 1 | | | $ | — | | | $ | (2) | | | $ | 1 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Service cost (1) | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 1 | |
Interest cost (2) | 9 | | | 4 | | | 3 | | | 7 | | | 3 | | | 3 | |
Expected return on plan assets (2) | (4) | | | (3) | | | — | | | (3) | | | (3) | | | (1) | |
Amortization of prior service cost (credit) (2) | (2) | | | (4) | | | 2 | | | (2) | | | (3) | | | 1 | |
Amortization of net loss (2) | (6) | | | (3) | | | (2) | | | (3) | | | (2) | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net periodic cost (benefit) | $ | (2) | | | $ | (6) | | | $ | 3 | | | $ | — | | | $ | (5) | | | $ | 3 | |
(1)Amounts presented in the tables 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 tables above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals.
The table below reflects the expected contributions to be made to the pension and postretirement benefit plans are as follows:during 2023:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Expected contribution to pension plans during 2023 | $ | 31 | | | $ | — | | | $ | — | |
Expected contribution to postretirement benefit plans in 2023 | 8 | | | 1 | | | 4 | |
|
| | | | | | | | | | | | | | | |
| 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 | ) |
| |
(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 contribute a minimum of approximately $46 million to itsthe pension plans in 2017, of which approximately $28 million and $46 million were contributed during the three and nine months ended September 30, 2017, respectively.
CenterPoint Energy expects to contribute a total of approximately $16 million to its postretirement benefit planplans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Pension plans (1) | $ | 26 | | | $ | — | | | $ | — | | | $ | 30 | | | $ | — | | | $ | — | |
Postretirement benefit plans | 1 | | | — | | | 1 | | | 5 | | | — | | | 3 | |
(1)A discretionary contribution in 2017,the amount of which approximately $4$24 million and $12 million were contributed duringwas made in September 2023.
(6) Regulatory Matters
Equity Return
The Registrants are at times allowed by a regulator to defer an equity return as part of the three and nine months ended September 30, 2017, respectively.
(5) Regulatory Accounting
Equity Return. Asrecoverable carrying costs of September 30, 2017, Houston Electric hasa regulatory asset. A deferred equity return is capitalized for rate-making purposes, but it is not recognized anincluded in the Registrant’s regulatory assets on its Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of $299 million because such return will be recognizedConsolidated Income as it is recovered in rates. During the three months ended September 30, 2017 and 2016, Houston Electric recognized approximately $13 million and $22 million, respectively, of theThe recoverable allowed equity return not previously recognized. Duringyet recognized by the Registrants is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) | | CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) |
| (in millions) |
Allowed equity return not recognized | $ | 205 | | | $ | 81 | | | $ | 66 | | | $ | 188 | | | $ | 82 | | | $ | 54 | |
(1)In addition to the amounts described in (2) and (3) below, represents CenterPoint Energy’s allowed equity return on post in-service carrying cost, including investments at SIGECO and securitized qualified costs associated with the completed retirements of SIGECO’s A.B. Brown coal-fired generation facilities.
(2)Represents Houston Electric’s allowed equity return on its true-up balance of stranded costs, other changes and related interest resulting from the formerly integrated electric utilities prior to Texas deregulation to be recovered in rates through 2024 and certain storm restoration, TEEEF and LLTF balances.
(3)CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas and costs associated with investments in Indiana.
The table below reflects the amount of allowed equity return recognized by each Registrant in its Condensed Statements of Consolidated Income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Allowed equity return recognized | $ | 14 | | | $ | 14 | | | $ | — | | | $ | 14 | | | $ | 12 | | | $ | 1 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Allowed equity return recognized | $ | 32 | | | $ | 30 | | | $ | 1 | | | $ | 36 | | | $ | 33 | | | $ | 2 | |
February 2021 Winter Storm Event
In February 2021, certain of the Registrants’ jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted their businesses. The February 2021 Winter Storm Event impacted wholesale prices of CenterPoint Energy’s and CERC’s natural gas purchases and their ability to serve customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations, experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the cost of natural gas purchased by CenterPoint Energy and CERC of approximately $2 billion. CenterPoint Energy and CERC have completed recovery of natural gas costs in Mississippi, Indiana and Texas discussed further below, and continue to recover the natural gas cost in Louisiana and Minnesota. As of September 30, 2023, CenterPoint Energy and CERC have each recorded current regulatory assets of $92 million and non-current regulatory assets of $141 million associated with the February 2021 Winter Storm Event. As of December 31, 2022, CenterPoint Energy and CERC have each recorded current regulatory assets of $1,175 million and non-current regulatory assets of $202 million associated with the February 2021 Winter Storm Event.
In Minnesota, the MPUC issued its written order on October 19, 2022 disallowing CERC’s recovery of approximately $36 million of the $409 million incurred, and CERC’s regulatory asset balance was reduced to reflect the disallowance. CERC filed a petition for reconsideration on November 8, 2022 and a written order denying the petition for reconsideration was issued on January 6, 2023.
CenterPoint Energy and CERC have approximately $75 million of the total $2 billion of natural gas costs incurred during the February 2021 Winter Storm Event remaining under prudence review in Louisiana, which may impact the amount ultimately recovered in Louisiana. On August 24, 2023, the LPSC Staff issued an Audit Report which recommends some prospective process changes to the gas supply bid process and did not recommend any disallowance of February 2021 Winter Storm Event gas costs incurred in Louisiana. Recovery of such costs remains subject to LPSC approval.
As of both September 30, 2023 and December 31, 2022, as authorized by the PUCT, both CenterPoint Energy and Houston Electric recorded a regulatory asset of $8 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, both CenterPoint Energy and Houston Electric recorded a regulatory asset of $17 million and $16 million as of both September 30, 2023 and December 31, 2022, to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.
See Note 13(c) for further information regarding litigation related to the February 2021 Winter Storm Event.
Texas Public Securitization
The Texas Natural Gas Securitization Finance Corporation issued customer rate relief bonds in March 2023, and on March 23, 2023, CenterPoint Energy and CERC, collectively, received approximately $1.1 billion in cash proceeds from the state’s
customer rate relief bonds. The proceeds from the state’s customer rate relief bonds included carrying costs incurred through August 2022. Incremental carrying costs incurred after August 2022 until the date the proceeds were received are recorded in a separate regulatory asset to be included for recovery in a subsequent rate proceeding. As CenterPoint Energy and CERC have no future financial obligations for the repayment of the state’s customer rate relief bonds, the customer rate relief bonds are not recorded on CenterPoint Energy’s or CERC’s balance sheets. The $1.1 billion in cash proceeds from the customer rate relief bonds is considered to be a government grant. The state’s customer rate relief bonds are backed in part by customer rate relief property, including customer rate relief charges, which are non-bypassable uniform monthly volumetric charges to be paid by all existing and future customers as a component of each regulated utility’s gas cost or in another manner that the Railroad Commission determines reasonable, separate from their base rate. CERC only acts as a collection agent, whose duties include management, servicing and administration of a portion of the customer rate relief property which is associated with the customer rate relief charge imposed on customers of CERC under the guidance and direction from the Railroad Commission. The Texas Natural Gas Securitization Finance Corporation, and not CenterPoint Energy or CERC, is the owner of the customer rate relief property. The assets of the Texas Natural Gas Securitization Finance Corporation are not available to pay creditors of CenterPoint Energy, CERC, or their affiliates. While the customer rate relief charges will be included by CERC in their monthly billings, the billing amount is established by the Railroad Commission. CERC will remit all customer rate relief charges to the financing entity set up by the Railroad Commission. Therefore, the collection and servicing of customer rate relief charges have no impact on the respective Condensed Statements of Consolidated Income of CenterPoint Energy or CERC.
As U.S. generally accepted accounting principles have no specific accounting guidance for government grants or assistance, the cash proceeds from the state’s customer rate relief bonds were accounted for as a government grant by analogy to the grant model under IAS 20—Accounting for Government Grants and Disclosures of Government Assistance. CenterPoint Energy and CERC reflect the proceeds from the grant as a deduction to natural gas costs and recognized the $1.1 billion of cash proceeds from the state’s customer rate relief bonds within Utility natural gas expense on their respective Condensed Statements of Consolidated Income in the nine months ended September 30, 2017 and 2016, Houston Electric recognized approximately $30 million and $52 million, respectively,2023, net of the allowed equity return not previously recognized.recognition of natural gas cost related to relieving CenterPoint Energy and CERC’s regulatory assets related to the February 2021 Winter Storm Event in the same period.
Hurricane Harvey. HoustonIndiana Electric Securitization of Generation Retirements (CenterPoint Energy)
On January 4, 2023, the IURC issued an order in accordance with Indiana Senate Enrolled Act 386 authorizing the issuance of up to $350 million in securitization bonds to securitize qualified costs associated with the retirements of Indiana 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 area 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 restore the electric delivery facilities damaged as a result of Hurricane Harvey will range from $110 million to $120 million and estimatesA.B. Brown coal-fired generation facilities. Accordingly, CenterPoint Energy determined that the total restoration costs covered by insurance will be approximately $35 million. Houston Electric will defer the uninsured storm restoration costs as management believes it is probable that such costs will be recovered through traditional rate adjustment mechanisms for capital costs and through the next rate proceeding for operation and maintenance expenses. Asretirement of September 30, 2017, Houston Electric recorded an increase of $4 million in property, plant and equipment became probable upon the issuance of the order. No loss on abandonment was recognized in connection with issuance of the order as there was no disallowance of all or part of the cost of the abandoned property, plant and $73 million in regulatory assets, netequipment. In the first quarter of $23 million in insurance receivables recorded, for restoration costs incurred. As a result, storm restoration costs should not materially affect Houston Electric’s reported net income for 2017.
Currently, NGD estimates that total costs2023, upon receipt of the order, CenterPoint Energy reclassified property, plant and equipment to restore natural gas distribution facilities damaged as a result of Hurricane Harvey will range from $25 million 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 probable that such costs will be recovered through traditional rate adjustment mechanismssecuritization to a regulatory asset and such amounts continued to earn a full return until recovered through securitization.
On March 24, 2023, SIGECO and the SIGECO Securitization Subsidiary filed a registration statement on Form SF-1, amended on May 16, 2023, under the Securities Act of 1933, as amended, with the SEC registering the public offering and sale of approximately $341 million aggregate principal amount of the SIGECO Securitization Bonds. The registration statement became effective on June 12, 2023. The SIGECO Securitization Subsidiary issued $341 million aggregate principal amount of the SIGECO Securitization Bonds on June 29, 2023. See Note 11 for capitalfurther details of the issuance. The SIGECO Securitization Subsidiary used the net proceeds from the issuance to purchase the securitization property from SIGECO. No gain or loss was recognized.
The SIGECO Securitization Bonds are secured by the securitization property, which includes the right to recover, through non-bypassable securitization charges payable by SIGECO’s retail electric customers, the qualified costs of SIGECO authorized by the IURC order. SIGECO has no payment obligations with respect to the SIGECO Securitization Bonds except to remit collections of securitization charges as set forth in a servicing agreement between SIGECO and the SIGECO Securitization Subsidiary. The non-bypassable securitization charges are subject to a true-up mechanism.
Houston Electric TEEEF
Pursuant to legislation passed in 2021, Houston Electric entered into two leases for TEEEF (mobile generation) which are detailed in Note 19. Houston Electric initially sought recovery of deferred costs and the applicable return as of December 31, 2021 under these lease agreements of approximately $200 million in its DCRF application filed with the PUCT on April 5, 2022, and subsequently amended on July 1, 2022, to show mobile generation in a separate Rider TEEEF. The annual revenue
increase requested for these lease agreements was approximately $57 million. A final order was issued on April 5, 2023 approving a reduced revenue requirement of $39 million that results in full recovery of costs requested but lengthens the amortization period for the short-term lease to be collected over 82.5 months. On April 28, 2023, and May 1, 2023, certain intervenors filed motions for rehearing of the PUCT’s April 5, 2023 order. On May 25, 2023, the PUCT issued its order on rehearing which clarified some of the findings, but did not change the approval of TEEEF cost recovery. On June 19, 2023, certain intervenors filed motions for rehearing of the PUCT’s May 25, 2023 Order on Rehearing; the PUCT issued an order on August 3, 2023 denying the motions for rehearing. The deadline for a party to file a judicial appeal of the PUCT’s decision was September 5, 2023, and no appeal was filed. As such, the PUCT’s decision on the first TEEEF filing is now final and non-appealable.
On April 5, 2023, Houston Electric made its second TEEEF filing requesting recovery of TEEEF related costs incurred through December 31, 2022. Houston Electric is requesting a new annual revenue requirement of approximately $188 million using 78 months to amortize the next rate proceedingrelated deferred costs for operationproposed rates beginning September 2023, a net increase in TEEEF revenues of approximately $149 million. On June 7, 2023, intervenors jointly requested a hearing, and maintenance expenses. Ason June 14, 2023, the PUCT staff indicated that it does not oppose a hearing in this docket. On June 21, 2023 Houston Electric made a filing that a hearing is not necessary given the PUCT’s decision in the TEEEF docket filed in 2022 and indicated that if the PUCT does refer this case to the State Office of Administrative Hearings, any preliminary order issued by the PUCT should be limited. On July 18, 2023 the PUCT referred the case to the State Office of Administrative Hearings and, on July 20, 2023, the PUCT issued a preliminary order identifying the issues to be addressed. On August 28, 2023, the State Office of Administrative Hearings issued an Order setting interim rates to collect an annual revenue requirement at the filed amount. Interim rates became effective on September 1, 2023 and are subject to surcharge or refund if they differ from the final rates approved by the PUCT. On October 12, 2023, a joint motion to abate was filed because the parties reached an agreement in principle on all issues.The agreement in principle is subject to PUCT approval. The ultimate outcome of these proceedings cannot be predicted at this time.
Houston Electric defers costs associated with the short-term and long-term leases that are probable of recovery and would otherwise be charged to expense in a regulatory asset, including allowed debt returns, and determined that such regulatory assets remain probable of recovery as of September 30, 2017, NGD2023. Right of use finance lease assets, such as assets acquired under the long-term leases, are evaluated for impairment under the long-lived asset impairment model by assessing if a capital disallowance from a regulator is probable through monitoring the outcome of rate cases and other proceedings. Houston Electric continues to monitor the on-going proceedings and has not recorded approximately $7 millionany impairments on its right of use assets in the year ended December 31, 2022 or the nine months ended September 30, 2023. See Note 19 for further information.
COVID-19 Regulatory Matters
Regulatory commissions in Indiana Electric’s and CenterPoint Energy’s and CERC’s Natural Gas service territories have either (1) issued orders to record a regulatory assets, netasset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of $2
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) Derivative Instruments
disconnections and payment plans, or (2) provided authority to recover bad debt expense through an existing tracking mechanism. Both CenterPoint Energy isand CERC have recorded estimated incremental uncollectible receivables to the associated regulatory asset of $18 million and $17 million, respectively, as of September 30, 2023 and December 31, 2022. CenterPoint Energy and CERC have $5 million and $4 million, respectively, remaining to recover through rates and other sources as of September 30, 2023, and $11 million and $10 million, respectively, remaining to recover through rates and other sources as of December 31, 2022.
(7) Derivative Instruments
The 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
(a)Non-Trading Activities
Commodity Derivative Instruments (CenterPoint Energy and CERC). CenterPoint Energy electsand CERC, through the normal purchase and sales exemption for qualified physical transactions. A derivative may be designated as a normal purchase or sale if the intent is to physically receive or deliver the product for use or sale in the normal course of business.
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.
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(a) | Non-Trading Activities |
Derivative Instruments. CenterPoint Energy entersIndiana Utilities they respectively own, enter into certain derivative instruments to mitigate the effects of commodity price movements. Certain financialOutstanding derivative instruments used todesignated as economic hedges at the Indiana Utilities hedge portions of thelong-term variable rate natural gas inventory ofpurchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the Energy Services business segmentgains and losses on derivatives are designated as fair value hedges for accounting purposes.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.
The table below summarizes CenterPoint Energy’s outstanding interest rate hedging activity:
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| | September 30, 2023 | | | | December 31, 2022 |
Hedging Classification | | Notional Principal |
| | CenterPoint Energy | | | | CenterPoint Energy | | |
| | (in millions) |
Economic hedge (1) | | $ | — | | | | | $ | 84 | | | |
| | | | | | | | |
(1)Relates to interest rate derivative instruments at SIGECO that terminated on May 1, 2023.
In May 2023, CenterPoint Energy entered into a forward interest rate agreement having an aggregate notional amount of $75 million, which agreement was amended in June 2023. The agreement was executed to hedge, in part, volatility in the 3-year U.S treasury rate by reducing CenterPoint Energy’s exposure to variability in cash flows related to interest payments of CenterPoint Energy’s $400 million issuance of fixed rate debt in August 2023. The forward interest rate agreement was designated as a cash flow hedge. The realized gains and losses associated with the agreement were immaterial.
In September 2023, SIGECO entered into two forward interest rate agreements having aggregate notional amounts of $50 million and $38 million. The agreements were executed to hedge, in part, volatility in the 5-year and 7-year U.S. treasury rates, respectively, by reducing SIGECO’s exposure to variability in cash flows related to interest payments of SIGECO’s $470 million issuance of fixed rate debt in October 2023. The forward interest rate agreements were designated as cash flow hedges. The realized gains and losses associated with the agreements were immaterial.
Weather Hedges.Normalization (CenterPoint Energy and CERC). CenterPoint Energy hasand CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on NGDNatural Gas in Arkansas,Indiana, Louisiana, Mississippi, Minnesota and Oklahoma. NGDOhio, as applicable. CenterPoint Energy’s and CERC’s Natural Gas 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’s other jurisdictions.mechanisms. As a result, fluctuations from normal weather may have a positive or negative effect on NGD’sCenterPoint Energy’s and CERC’s Natural Gas’ results in Texas and on Houston Electric’sCenterPoint Energy’s electric operations’ results in its Texas and Indiana service territory.
CenterPoint Energy entered into heating-degree day swaps 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 didterritories. The Registrants do not currently enter into heating-degree day swaps for NGD jurisdictions for the 2015–2016 or 2016–2017 winter heating seasons. CenterPointweather hedges.
(b)Derivative Fair Values and Income Statement Impacts (CenterPoint Energy entered into weather hedges for the Houston Electric 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 swaps 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.CERC)
Hedging of Interest Expense for Future Debt Issuances. In January 2017, Houston Electric 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 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 flow 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.
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(b) | Derivative Fair Values and Income Statement Impacts |
The following tables present information about CenterPoint Energy’s derivative instruments and hedging activities. The first four tables providetable provides a balance sheet overview of CenterPoint Energy’s Derivative Assetsderivative assets and Liabilities as of September 30, 2017 and December 31, 2016,liabilities, while the last table provides a breakdown of the related income statement impacts forimpacts.
Fair Value of Derivative Instruments and Hedged Items
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2023 | | December 31, 2022 |
| | Balance Sheet Location | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| Derivatives not designated as hedging instruments: | | (in millions) |
| Natural gas derivatives (1) | Current Assets: Non-trading derivative assets | | $ | 1 | | | $ | — | | | $ | 9 | | | $ | — | |
| Natural gas derivatives (1) | Other Assets: Non-trading derivative assets | | — | | | — | | | 2 | | | — | |
| | | | | | | | | | |
| Interest rate derivatives | Current Assets: Non-trading derivative assets | | — | | | — | | | 1 | | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Indexed debt securities derivative (2) | Current Liabilities | | — | | | 630 | | | — | | | 578 | |
| | | | | | | | | | |
| Total | | $ | 1 | | | $ | 630 | | | $ | 12 | | | $ | 578 | |
CERC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2023 | | December 31, 2022 |
| | Balance Sheet Location | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| Derivatives not designated as hedging instruments: | | (in millions) |
| Natural gas derivatives (1) | Current Assets: Non-trading derivative assets | | $ | 1 | | | $ | — | | | $ | 7 | | | $ | — | |
| Natural gas derivatives (1) | Other Assets: Non-trading derivative assets | | — | | | — | | | 2 | | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Total | | $ | 1 | | | $ | — | | | $ | 9 | | | $ | — | |
(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the three and nine months ended September 30, 2017 and 2016.
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| | | | | | | | | | |
Fair Value of Derivative Instruments |
| | September 30, 2017 |
Derivatives designated as fair value hedges: | | 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 | | $ | — |
| | $ | — |
|
Natural gas derivatives (1) (2) (3) | | Current Liabilities: Non-trading derivative liabilities | | 5 |
| | — |
|
| | | | | | |
Derivatives not designated as hedging instruments: | | | | | | |
Natural gas derivatives (1) (2) (3) | | Current Assets: Non-trading derivative assets | | 65 |
| | 2 |
|
Natural gas derivatives (1) (2) (3) | | Other Assets: Non-trading derivative assets | | 58 |
| | 2 |
|
Natural gas derivatives (1) (2) (3) | | Current Liabilities: Non-trading derivative liabilities | | 27 |
| | 55 |
|
Natural gas derivatives (1) (2) (3) | | Other Liabilities: Non-trading derivative liabilities | | 9 |
| | 25 |
|
Indexed debt securities derivative | | Current Liabilities | | — |
| | 776 |
|
Total | | $ | 164 |
| | $ | 860 |
|
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(1) | The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 1,866 Bcf or a net 46 Bcf long position. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure. |
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(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 $93 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 $13 million. |
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(3) | Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable. |
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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 |
|
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(1) | Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements. |
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(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. |
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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 |
|
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(1) | The fair value shown 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 only and lack a fixed price exposure. |
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(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. |
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(3) | Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable. |
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(4) | No derivatives were designated as fair value hedges as of December 31, 2016. |
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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 |
|
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(1) | Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements. |
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(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 onmark-to-market fair value of each natural gas derivativescontract is in an asset position with no offsetting amounts.
(2)Derivative component of the ZENS obligation that represents the ZENS holder’s option to receive the appreciated value of the reference shares at maturity and other payments to which they may be entitled. See Note 10 for further information.
Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy)
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| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | Income Statement Location | | 2023 | | 2022 | | 2023 | | 2022 |
Derivatives not designated as hedging instruments: | | | | (in millions) |
Indexed debt securities derivative (1) | | Gain (loss) on indexed debt securities | | $ | (47) | | | $ | 210 | | | $ | (52) | | | $ | 381 | |
| | | | | | | | | | |
| | | | | | | | |
(1)The indexed debt securities derivative is recorded at fair value and changes in the fair value are recognizedrecorded in theCenterPoint Energy’s Condensed Statements of Consolidated Income as revenue for physical salesIncome.
(c) Credit Risk Contingent Features (CenterPoint Energy)
Certain of CenterPoint Energy’s derivative contractsinstruments contain provisions that require CenterPoint Energy’s debt to maintain an investment grade credit rating on its long-term unsecured unsubordinated debt from S&P and as natural gas expense for financial natural gas derivatives and physical purchase natural gas derivatives. Realized and unrealized gains and losses on indexedMoody’s. If CenterPoint Energy’s debt securities are recorded as Other Income (Expense)were to fall below investment grade, it would be in the Condensed Statementsviolation 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 instrumentthese provisions, 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.
|
| | | | | | | | | | |
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 | ) |
|
| | | | | | | | | | |
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 impactcounterparties 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 enters into financial derivative contracts containing material adverse change provisions. These provisions could require CenterPoint Energy to post additional collateral if the S&P or Moody’s credit ratings of CenterPoint Energy, Inc. or its subsidiaries are downgraded. The total fair value of the derivative instruments that contain credit risk contingent features that are in a net liability position ascould request immediate payment.As of both September 30, 20172023 and December 31, 2016 was $1 million. CenterPoint Energy posted no assets as collateral toward derivative instruments that contain2022, all derivatives with 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 riskrisk-related 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.in an asset position.
(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.securities.
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’s Level 3 assets or liabilities. As of September 30, 2017, CenterPoint Energy’s Level 3 assets and liabilities are comprised of physical natural gas forward contracts and options and its indexed debt securities. Level 3 physical natural gas forward contracts are valued using a discounted cash flow model which includes illiquid forward price curve locations (ranging from $1.08 to $5.83 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 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 long forwards lose value whereas its 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.
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 Energy also recognizes purchases of Level 3 financial assets and liabilities at their fair market value at the end of the reporting period.basis.
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, 20172023 and December 31, 2016,2022 and indicate the fair value hierarchy of the valuation techniques utilized by CenterPoint Energythe Registrants to determine such fair value.
|
| | | | | | | | | | | | | | | | | | | |
| 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 |
| | | | |
| (in millions) |
Assets | | | | | | | | | |
Corporate equities | $ | 1,060 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,060 |
|
Investments, including money market funds (2) | 67 |
| | — |
| | — |
| | — |
| | 67 |
|
Natural gas derivatives (3) | 3 |
| | 128 |
| | 33 |
| | (44 | ) | | 120 |
|
Hedged portion of natural gas inventory | 65 |
| | — |
| | — |
| | — |
| | 65 |
|
Total assets | $ | 1,195 |
| | $ | 128 |
| | $ | 33 |
| | $ | (44 | ) | | $ | 1,312 |
|
Liabilities | |
| | |
| | |
| | |
| | |
|
Indexed debt securities derivative | $ | — |
| | $ | — |
| | $ | 776 |
| | $ | — |
| | $ | 776 |
|
Natural gas derivatives (3) | 3 |
| | 74 |
| | 7 |
| | (57 | ) | | 27 |
|
Total liabilities | $ | 3 |
| | $ | 74 |
| | $ | 783 |
| | $ | (57 | ) | | $ | 803 |
|
| |
(1) | Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy to settle positive and negative positions and also include cash collateral of $13 million posted with the same counterparties. |
| |
(2) | Amounts are included in Prepaid Expenses and Other 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) | Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy to settle positive and negative positions and also include cash collateral of $14 million held by CES from the same counterparties. |
| |
(2) | Amounts are included in Prepaid Expenses and Other Current Assets in the 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 has utilized Level 3 inputs to determine fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total |
Assets | (in millions) |
Equity securities | $ | 566 | | | $ | — | | | $ | — | | | | | $ | 566 | | | $ | 510 | | | $ | — | | | $ | — | | | | $ | 510 | |
Investments, including money market funds (1) | 31 | | | — | | | — | | | | | 31 | | | 32 | | | — | | | — | | | | 32 | |
Interest rate derivatives | — | | | — | | | — | | | | | — | | | — | | | 1 | | | — | | | | 1 | |
Natural gas derivatives | — | | | 1 | | | — | | | | | 1 | | | — | | | 11 | | | — | | | | 11 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total assets | $ | 597 | | | $ | 1 | | | $ | — | | | | | $ | 598 | | | $ | 542 | | | $ | 12 | | | $ | — | | | | $ | 554 | |
Liabilities | | | | | | | | | | | | | | | | | | |
Indexed debt securities derivative | $ | — | | | $ | 630 | | | $ | — | | | | | $ | 630 | | | $ | — | | | $ | 578 | | | $ | — | | | | $ | 578 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities | $ | — | | | $ | 630 | | | $ | — | | | | | $ | 630 | | | $ | — | | | $ | 578 | | | $ | — | | | | $ | 578 | |
|
| | | | | | | | | | | | | | | |
| 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 3 | 7 |
| | — |
| | 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 |
|
Houston Electric
| |
(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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | | | Total | | Level 1 | | Level 2 | | Level 3 | | | | Total |
Assets | (in millions) |
Investments, including money market funds (1) | $ | 14 | | | $ | — | | | $ | — | | | | | $ | 14 | | | $ | 17 | | | $ | — | | | $ | — | | | | | $ | 17 | |
| | | | | | | | | | | | | | | | | | | |
Total assets | $ | 14 | | | $ | — | | | $ | — | | | | | $ | 14 | | | $ | 17 | | | $ | — | | | $ | — | | | | | $ | 17 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| |
(2) | CenterPoint Energy did not have significant Level 3 sales during either of the three or nine months ended September 30, 2017 or 2016. |
| |
(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. |
CERC
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total |
Assets | (in millions) |
| | | | | | | | | | | | | | | | | | |
Investments, including money market funds (1) | $ | 14 | | | $ | — | | | $ | — | | | | | $ | 14 | | | $ | 14 | | | $ | — | | | $ | — | | | | $ | 14 | |
Natural gas derivatives | — | | | 1 | | | — | | | | | 1 | | | — | | | 9 | | | — | | | | 9 | |
Total assets | $ | 14 | | | $ | 1 | | | $ | — | | | | | $ | 15 | | | $ | 14 | | | $ | 9 | | | $ | — | | | | $ | 23 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
(1)Amounts are included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.
Estimated Fair Value of Financial Instruments
The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading”measured at fair value 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| CenterPoint Energy (1) | | Houston Electric (1) | | CERC | | CenterPoint Energy (1) | | Houston Electric (1) | | CERC |
Long-term debt, including current maturities | (in millions) |
| | | | | | | | | | | |
| | | | | | | | | | | |
Carrying amount | $ | 18,263 | | | $ | 7,665 | | | $ | 4,243 | | | $ | 16,338 | | | $ | 6,353 | | | $ | 4,826 | |
Fair value | 16,283 | | | 6,397 | | | 3,908 | | | 14,990 | | | 5,504 | | | 4,637 | |
(1)Includes Securitization Bonds, as applicable. (8) Unconsolidated Affiliate
CenterPoint(9) Goodwill and Other Intangibles (CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP,CERC)
Goodwill (CenterPoint Energy and accordingly, accounts for its investment in Enable’s common units using the equity method of accounting.CERC)
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 and Series A Preferred Unit investment as presented in the Condensed Consolidated Balance Sheets as of September 30, 2017 and outstanding current accounts receivable from Enable.
Transactions with Enable:
|
| | | | | | | | | | | | | | | |
| 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 costs | 23 |
| | 22 |
| | 80 |
| | 79 |
|
Interest income related to notes receivable from Enable | — |
| | — |
| | — |
| | 1 |
|
| |
(1) | Represents amounts billed under 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 Enable | 8 |
| | 10 |
|
Limited Partner Interest in Enable (1):
|
| | |
| September 30, 2017 |
CenterPoint Energy | 54.1 | % |
OGE | 25.7 | % |
| |
(1) | Excluding the Series A Preferred Units owned by CenterPoint Energy. |
In November 2016, Enable completed a public offering of 11,500,000 common units of which 1,424,281 were soldgoodwill 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.
Enable Common Units and Series A Preferred Units Held:
|
| | | | | |
| September 30, 2017 |
| Common | | Series A Preferred |
CenterPoint Energy | 233,856,623 |
| | 14,520,000 |
|
OGE | 110,982,805 |
| | — |
|
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 of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales 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.
Enable is controlled jointly by CERC Corp. and OGE, and each own 50% of the management rights 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 offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable’s general partner.
Summarized unaudited consolidated income information for Enablereportable segment is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | | | Disposals | | September 30, 2023 |
| | (in millions) |
Electric (1) | | $ | 936 | | | | | $ | — | | | $ | 936 | |
Natural Gas | | 2,920 | | | | | — | | | 2,920 | |
Corporate and Other | | 438 | | | | | 134 | | (2) | | 304 | |
| | | | | | | | |
Total | | $ | 4,294 | | | | | $ | 134 | | | $ | 4,160 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 |
| 2016 |
| | (in millions) |
Operating revenues | | $ | 705 |
| | $ | 620 |
| | $ | 1,997 |
| | $ | 1,658 |
|
Cost of sales, excluding depreciation and amortization | | 349 |
| | 268 |
| | 936 |
| | 717 |
|
Impairment of goodwill and other long-lived assets | | — |
| | 8 |
| | — |
| | 8 |
|
Operating income | | 137 |
| | 139 |
| | 399 |
| | 299 |
|
Net income attributable to Enable | | 104 |
| | 110 |
| | 301 |
| | 231 |
|
Reconciliation of Equity in Earnings, net: | | | | | | | | |
CenterPoint Energy’s interest | | $ | 56 |
| | $ | 61 |
| | $ | 163 |
| | $ | 128 |
|
Basis difference amortization (1) | | 12 |
| | 12 |
| | 36 |
| | 36 |
|
CenterPoint Energy’s equity in earnings, net | | $ | 68 |
| | $ | 73 |
| | $ | 199 |
| | $ | 164 |
|
| |
(1) | Equity in earnings of unconsolidated affiliates includes CenterPoint Energy’s share of Enable’s 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. The basis difference is amortized over approximately 33 years, the average life of the assets to which the basis difference is attributed. |
Summarized unaudited consolidated balance sheet information for Enable is as follows:
|
| | | | | | | | |
| | September 30, 2017 |
| December 31, 2016 |
| | (in millions) |
Current assets | | $ | 446 |
| | $ | 396 |
|
Non-current assets | | 10,816 |
| | 10,816 |
|
Current liabilities | | 831 |
| | 362 |
|
Non-current liabilities | | 2,740 |
| | 3,056 |
|
Non-controlling interest | | 12 |
| | 12 |
|
Preferred equity | | 362 |
| | 362 |
|
Enable partners’ equity | | 7,317 |
| | 7,420 |
|
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 | ) |
CenterPoint Energy’s equity method investment in Enable | | $ | 2,481 |
| | $ | 2,505 |
|
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 Units | 9 |
| | 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) Goodwill
Goodwill by reportable business segment as of December 31, 2016 and changes in the carrying amount of goodwill as of September 30, 2017 are as follows:
|
| | | | | | | | | | | | |
| December 31, 2016 | | AEM Acquisition (1) | | September 30, 2017 | |
| (in millions) | |
Natural Gas Distribution | $ | 746 |
| | $ | — |
| | $ | 746 |
| |
Energy Services | 105 |
| (2) | 5 |
| | 110 |
| (2) |
Other Operations | 11 |
| | — |
| | 11 |
| |
Total | $ | 862 |
| | $ | 5 |
| | $ | 867 |
| |
(1) See Note 3.
(2) Amount presented is net of the accumulated goodwill impairment charge of $252$185 million recorded in 2012.2020.
(2)Represents goodwill attributable to the sale of Energy Systems Group. For further information, see Note 3.
CERC’s goodwill as of both September 30, 2023 and December 31, 2022 is as follows:
| | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | (in millions) |
Goodwill | | | | | | | | $ | 1,583 | |
When 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. As described further in Note 3, certain assets and liabilities of Energy Systems Group, including goodwill of $134 million at CenterPoint Energy, were disposed of upon consummation of the sale of Energy Systems Group in the second quarter of 2023. The disposal of goodwill attributable to Energy Systems Group was reflected in the loss on sale of $12 million during the nine months ended September 30, 2023.
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. 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 thanrecorded as an impairment charge, not to exceed the carrying amount of the reporting unit, then a second step must be completed to determine the amount of thegoodwill.
CenterPoint Energy and CERC performed their annual goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill (including any unrecognized intangible assets) in a manner similar to a purchase price allocation. The resulting implied fair value of the goodwill that results from the application of this second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference.
CenterPoint Energy performed its annual impairment testtests in the third quarter of 20172023 and determined based on the results of the first step, that no goodwill impairment charge was required for any reportable segment.reporting unit as a result of those tests.
Other Intangibles (CenterPoint Energy)
The tables below present information on CenterPoint Energy’s intangible assets, excluding goodwill, 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 Consolidated Income. The intangible assets and associated amortization expense are primarily related to Energy Systems Group prior to the completion of the sale in June 2023 as indicated below. See Note 3 for further information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Balance | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance |
| | (in millions) |
Customer relationships (1) | | $ | — | | | $ | — | | | $ | — | | | $ | 33 | | | $ | (16) | | | $ | 17 | |
| | | | | | | | | | | | |
Trade names (1) | | — | | | — | | | — | | | 16 | | | (6) | | | 10 | |
| | | | | | | | | | | | |
Operation and maintenance agreements (1) (2) | | — | | | — | | | — | | | 12 | | | (2) | | | 10 | |
Other | | 2 | | | (1) | | | 1 | | | 2 | | | (1) | | | 1 | |
Total | | $ | 2 | | | $ | (1) | | | $ | 1 | | | $ | 63 | | | $ | (25) | | | $ | 38 | |
(1)Related to Energy Systems Group prior to the completion of the sale in June 2023. Amortization ceased at June 30, 2023, the end of the quarter in which the held for sale criteria was met. See Note 3 for further information.
(2)Amortization expense related to the operation and maintenance agreements is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Condensed Statements of Consolidated Income. Amortization ceased at June 30, 2023, the end of the quarter in which the held for sale criteria was met. See Note 3 for further information.
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
| 2023 | | 2022 | | 2023 | | 2022 | |
| (in millions) | |
Amortization expense of intangible assets recorded in Depreciation and amortization | $ | — | | | $ | 1 | | | $ | 3 | | | $ | 4 | | |
| | | | | | | | |
CenterPoint Energy estimates that amortization expense of intangible assets with finite lives for the next five years will not be significant.
(10) Equity Securities and Indexed Debt Securities (ZENS) and Securities Related to ZENS(CenterPoint Energy)
(a) Investment inEquity Securities Related to ZENS
In 1995,During the nine months ended September 30, 2022, CenterPoint Energy sold a cable television subsidiarycompleted the execution of its previously announced plan to TWexit the midstream sector by selling the remaining Energy Transfer Common Units and received TWEnergy Transfer Series G Preferred Units it held.
Gains and losses on equity securities, as partial consideration. A subsidiarynet of transaction costs, are recorded in Gain (Loss) on Equity Securities in CenterPoint Energy’s Condensed Statements of Consolidated Income.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gains (Losses) on Equity Securities |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (in millions) |
AT&T Common | | $ | (10) | | | $ | (57) | | | $ | (35) | | | $ | (94) | |
Charter Common | | 63 | | | (144) | | | 88 | | | (304) | |
WBD Common | | (5) | | | (5) | | | 3 | | | 28 | |
Energy Transfer Common Units | | — | | | — | | | — | | | 95 | |
Energy Transfer Series G Preferred Units | | — | | | — | | | — | | | (9) | |
Other | | 1 | | | — | | | — | | | — | |
Total | | $ | 49 | | | $ | (206) | | | $ | 56 | | | $ | (284) | |
| | | | | | | | |
CenterPoint Energy now holds 7.1recorded net unrealized gains of $49 million and $56 million for the three and nine months ended September 30, 2023 and net unrealized losses of $206 million and $370 million for the three and nine months ended September 30, 2022 respectively, for equity securities held as of September 30, 2023 and 2022.
CenterPoint Energy and its subsidiaries hold 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 securitiessecurities. Shares of AT&T Common, Charter Common and WBD Common 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 TW Securities are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares Held | | Carrying Value |
| | September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| | | | | | (in millions) |
AT&T Common | | 10,212,945 | | | 10,212,945 | | | $ | 153 | | | $ | 188 | |
Charter Common | | 872,503 | | | 872,503 | | | 384 | | | 296 | |
WBD Common | | 2,470,685 | | | 2,470,685 | | | 27 | | | 23 | |
| | | | | | | | |
| | | | | | | | |
Other | | | | | | 2 | | | 3 | |
Total | | | | | | $ | 566 | | | $ | 510 | |
(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, 2017.2023. 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:
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (in shares) |
AT&T Common | 0.7185 | | | 0.7185 | |
Charter Common | 0.061382 | | | 0.061382 | |
WBD Common | 0.173817 | | | 0.173817 | |
| | | |
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,September 30, 2023, 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 $20 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) Short-term Borrowings and Long-term Debt
Inventory Financing. NGD currently hasFinancing. CenterPoint Energy’s and CERC’s Natural Gas businesses have third-party AMAs associated with itstheir utility distribution service in Arkansas, northIndiana, Louisiana, Minnesota, Mississippi and Oklahoma that extend through 2020.Texas. The AMAs have varying terms, the longest of which expires in 2027. Pursuant to the provisions of the agreements, NGDCenterPoint Energy’s and CERC’s Natural Gas either sells natural gas to the asset manager and agrees to repurchase an equivalent amount of natural gas duringthroughout the winter heating seasonsyear at the same cost, plus a financing charge. Theseor simply purchases its full natural gas requirements at each delivery point from the asset manager. Certain of these transactions are accounted for as an inventory financingfinancing. CenterPoint Energy and CERC had an associated principal obligation of $48$4 million and $35$11 million outstanding obligations related to the AMAs as of September 30, 20172023 and December 31, 2016, respectively.2022, respectively, recorded in Short-term borrowings on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets.
Debt Retirements. 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. Transactions. During the nine months ended September 30, 2017, CenterPoint Energy, Houston Electric and CERC Corp. issued2023, the following debt instruments:instruments were issued or incurred:
| Registrant | | Registrant | | Issuance Date | | Debt Instrument | | Aggregate Principal Amount | | Interest Rate | | Maturity Date |
| | | | (in millions) |
| | | Issuance Date | | Debt Instrument | | Aggregate Principal Amount | | Interest Rate | | Maturity Date | |
| | (in millions) | | |
Houston Electric | | January 2017 | | General mortgage bonds | | $ | 300 |
| | 3.00% | | 2027 | Houston Electric | | March 2023 | | General Mortgage Bonds (1) | | $ | 600 | | | 4.95% | | 2033 |
Houston Electric | | Houston Electric | | March 2023 | | General Mortgage Bonds (1) | | 300 | | | 5.30% | | 2053 |
Houston Electric | | Houston Electric | | September 2023 | | General Mortgage Bonds (13) | | 500 | | | 5.20% | | 2028 |
| | | Total Houston Electric | | 1,400 | | |
CERC | | CERC | | February 2023 | | Term Loan (2) | | 500 | | | SOFR (3) + 0.85% | | 2024 |
CERC | | CERC | | February 2023 | | Senior Notes (4) | | 600 | | | 5.25% | | 2028 |
CERC | | CERC | | February 2023 | | Senior Notes (4) | | 600 | | | 5.40% | | 2033 |
CERC | | CERC | | May 2023 | | Senior Notes (5) | | 300 | | | 5.25% | | 2028 |
| | | Total CERC | | 2,000 | | |
CenterPoint Energy (6) | | CenterPoint Energy (6) | | March 2023 | | First Mortgage Bonds (7) | | 100 | | | 4.98% | | 2028 |
CenterPoint Energy (6) | | CenterPoint Energy (6) | | March 2023 | | First Mortgage Bonds (7) | | 80 | | | 5.04% | | 2033 |
CenterPoint Energy | | August 2017 | | Unsecured senior notes | | 500 |
| | 2.50% | | 2022 | CenterPoint Energy | | March 2023 | | Term Loan (8) | | 250 | | | SOFR (3) + 1.50% | | 2023 |
CERC Corp. | | August 2017 | | Unsecured senior notes | | 300 |
| | 4.10% | | 2047 | |
CenterPoint Energy (9) | | CenterPoint Energy (9) | | June 2023 | | Securitization Bonds (10) | | 341 | | | 5.026% - 5.172% | | 2038-2043 |
CenterPoint Energy | | CenterPoint Energy | | August 2023 | | Convertible Notes (11) | | 1,000 | | | 4.25% | | 2026 |
CenterPoint Energy | | CenterPoint Energy | | August 2023 | | Senior Notes (12) | | 400 | | | 5.25% | | 2026 |
| | | Total CenterPoint Energy | | $ | 5,571 | | |
The(1)Total proceeds from theHouston Electric’s March 2023 issuances of general mortgage bonds, net of transaction expenses and fees, were approximately $890 million. Approximately $593 million of such proceeds were used for general limited liability company purposes, including capital expenditures, working capital and corporate purposes, as applicable, including to repay portionsthe repayment of outstanding commercial paper.
Credit Facilities. In June 2017, CenterPoint Energy,all or a portion of 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 toElectric’s borrowings under the CenterPoint Energy money pool, and CERC Corp. revolving credit facilities also increasedapproximately $296 million of such proceeds will be disbursed or allocated to finance or refinance, in part or in full, new or existing projects that meet stated criteria.
(2)Total proceeds, net of transaction expenses and fees, of approximately $500 million were used for general corporate purposes, including the repayment of CERC’s outstanding commercial paper balances.
(3)As defined in the applicable term loan agreement, which includes an adjustment of 0.10% per annum.
(4)Total proceeds from CERC’s February 2023 issuances of senior notes, net of transaction expenses and fees, of approximately $1.2 billion were used for general corporate purposes, including the repayment of (i) all or a portion of CERC’s outstanding 0.700% senior notes due 2023, (ii) all or a portion of CERC’s outstanding floating rate senior notes due 2023 and (iii) a portion of CERC’s outstanding commercial paper balances.
(5)Total proceeds, net of issuance premiums, transaction expenses and fees, of approximately $308 million, which includes approximately $3 million of accrued interest, were used for general corporate purposes, including repayment of all or a portion of CERC’s outstanding $500 million term loan due February 2024.
(6)Issued by SIGECO.
(7)Total proceeds from SIGECO’s March 2023 issuances of first mortgage bonds, net of transaction expenses and fees, of approximately $179 million were used for general corporate purposes, including repaying short-term debt and refunding long-term debt at maturity or otherwise.
(8)Total proceeds, net of transaction expenses and fees, of approximately $250 million were used for general corporate purposes, including the repayment of CenterPoint Energy’s outstanding commercial paper balances. The full outstanding amount of the term loan, including accrued and unpaid interest, was repaid in March 2023 and, following the repayment, the term loan agreement was terminated.
(9)Issued by the SIGECO Securitization Subsidiary. Scheduled final payment dates are November 15, 2036 and May 15, 2041. The SIGECO Securitization Bonds will be repaid over time through a securitization charge imposed on retail electric customers in SIGECO’s service territory. See Notes 1 and 6 for further details.
(10)Total proceeds from the SIGECO Securitization Subsidiary’s June 2023 issuance of SIGECO Securitization Bonds, net of transaction expenses and fees, of approximately $337 million were used to pay SIGECO the purchase price of the securitization property. SIGECO used the net proceeds from the sale of the securitization property (after payment of upfront financing costs) to reimburse or pay for qualified costs approved by the IURC related to the completed retirement of its A.B. Brown 1 and 2 coal-powered generation units.
(11)Total proceeds, net of discounts, transaction fees and expenses, of $985 million were used for general corporate purposes, including the redemption of CenterPoint Energy’s Series A Preferred Stock on September 1, 2023, and the repayment of a portion of CenterPoint Energy’s outstanding commercial paper. See additional information below.
(12)Total proceeds, net of discounts, transaction fees and expenses, of $397 million were used for general corporate purposes, including the repayment of a portion of CenterPoint Energy’s outstanding commercial paper.
(13)Total proceeds from Houston Electric’s September 2023 issuances of general mortgage bonds, net of transaction expenses and fees, of approximately $496 million were used for general limited liability company purposes, including capital expenditures, working capital and the repayment of all of Houston Electric’s borrowings under the CenterPoint Energy money pool.
SIGECO Debt Remarketing. In April 2023, SIGECO executed a remarketing agreement to remarket five series of tax-exempt debt issued by the Indiana Finance Authority, and secured by SIGECO first mortgage bonds, of approximately $148 million, comprised of: (i) $107 million aggregate commitmentsprincipal amount of Environmental Improvement Refunding Revenue Bonds, Series 2013, originally issued by $100the Indiana Finance Authority on April 26, 2013, and (ii) $41 million aggregate principal amount of Environmental Improvement Refunding Revenue Bonds, Series 2014, originally issued by the Indiana Finance Authority on September 24, 2014, which closed on May 1, 2023.
In July 2023, SIGECO executed a remarketing agreement to remarket two series of tax-exempt debt issued by the City of Mount Vernon, Indiana and $300Warrick County, Indiana, and secured by SIGECO first mortgage bonds, of approximately $38 million, respectively,comprised of: (i) $23 million aggregate principal amount of Environmental Improvement Revenue Bonds, Series 2015 issued by the City of Mount Vernon and (ii) $15 million aggregate principal amount of Environmental Improvement Revenue Bonds, Series 2015 issued by Warrick County, which closed on September 1, 2023. Effective September 1, 2023, the bonds of each series bear interest at a fixed rate of 4.250% per annum to $1.7 billionthe earlier of (i) its redemption date or (ii) September 1, 2028, at which time the bonds are subject to mandatory tender.
Convertible Senior Notes. Interest on the Convertible Notes described in the table above is payable semiannually in arrears on February 15 and $900 millionAugust 15 of each year, beginning on February 15, 2024. The Convertible Notes will mature on August 15, 2026, unless earlier converted or repurchased by CenterPoint Energy in accordance with their terms.
Prior to the close of business on the business day immediately preceding May 15, 2026, the Convertible Notes are convertible only under certain conditions. On or after May 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their respective revolving credit facilities. No changes were madeConvertible Notes at any time at the conversion rate then in effect, irrespective of the conditions. CenterPoint Energy may not redeem the Convertible Notes prior to the maturity date and no sinking fund is provided for the Convertible Notes.
Upon conversion of the Convertible Notes, CenterPoint Energy will pay cash up to the aggregate commitments underprincipal amount of the Houston Electric revolving credit facility. Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of Common Stock, or a combination of cash and shares of Common Stock, at CenterPoint Energy’s election, in respect of the remainder, if any, of CenterPoint Energy’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. The conversion rate for the Convertible Notes is initially 27.1278 shares of Common Stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $36.86 per share of Common Stock). The initial conversion price of the Convertible Notes represents a premium of approximately 25.0% over the last reported sale price of the Common Stock on the New York Stock Exchange on August 1, 2023. Initially, a maximum of 33,909,700 shares of Common Stock may be issued upon conversion of the Convertible Notes based on the initial maximum conversion rate of 33.9097 shares of Common Stock per $1,000 principal amount of Convertible Notes. The conversion rate will be subject to adjustment in some events (as described in the Convertible Notes Indenture) but will not be adjusted for any accrued and unpaid interest.
In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes, CenterPoint Energy will, in certain circumstances, increase the conversion rate for a holder of Convertible Notes who elects to convert its Convertible Notes in connection with such a corporate event. If CenterPoint Energy undergoes a fundamental change (as described in the amendmentsConvertible Notes Indenture) (other than an exempted fundamental change, as described in the Convertible Notes Indenture), holders of the Convertible Notes may require CenterPoint Energy to increaserepurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the aggregate commitments under their respective revolving credit facilities,principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Convertible Notes are senior unsecured obligations of CenterPoint Energy and CERC Corp. each increasedrank senior in right of payment to any of CenterPoint Energy’s indebtedness that is expressly subordinated in right of payment to the sizeConvertible Notes; equal in right of their respective commercial paper programspayment to permitany of CenterPoint Energy’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of CenterPoint Energy’s secured indebtedness it may incur in the future to the extent of the value of the assets securing such future secured indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations and liabilities of a type not required to be reflected on a balance sheet of such subsidiaries in accordance with generally accepted accounting principles) of CenterPoint Energy’s subsidiaries.
SIGECO First Mortgage Bonds. On October 13, 2023, SIGECO issued a total of $470 million aggregate principal amount of first mortgage bonds in three tranches: (i) $180 million first mortgage bonds bearing interest at 5.75% due 2029; (ii) $105 million first mortgage bonds bearing interest at 5.91% due 2030; and (iii) $185 million first mortgage bonds bearing
interest at 6.00% due 2034. The net proceeds of $467 million will be used for general corporate purposes, including repaying short-term debt and refunding long-term debt at maturity or otherwise.
Debt Repayments and Redemptions. During the nine months ended September 30, 2023, the following debt instruments were repaid at maturity or redeemed prior to maturity with proceeds received from the Texas securitization discussed further in Note 6 or through the issuance of commercial paper notes in annew debt. The table does not include Bond Company payments for which there is a dedicated revenue stream,
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Registrant | | Repayment/Redemption Date | | Debt Instrument | | Aggregate Principal Amount | | Interest Rate | | Maturity Date |
| | | | | | (in millions) | | | | |
CERC | | March 2023 | | Term Loan (3) | | $ | 500 | | | SOFR (2) + 0.70% | | 2023 |
CERC | | March 2023 | | Senior Notes | | 700 | | | 0.70% | | 2023 |
CERC | | March 2023 | | Floating Rate Senior Notes | | 575 | | | Three-month LIBOR plus 0.5% | | 2023 |
CERC | | May 2023 | | Term Loan (4) | | 500 | | | SOFR (2) + 0.85% | | 2024 |
| | | | Total CERC | | 2,275 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
CenterPoint Energy (1) | | January 2023 | | First Mortgage Bonds | | 11 | | | 4.00% | | 2044 |
CenterPoint Energy | | March 2023 | | Term Loan (3) | | 250 | | | SOFR (2) + 1.50% | | 2023 |
| | | | Total CenterPoint Energy | | $ | 2,536 | | | | | |
(1) On December 16, 2022, SIGECO provided notice of redemption and on January 17, 2023, SIGECO redeemed $11 million aggregate principal amount notof SIGECO’s outstanding first mortgage bonds due 2044 at a redemption price equal to exceed $1.7 billion100% of the principal amount of the first mortgage bonds to be redeemed plus accrued and $900 million, respectively, atunpaid interest thereon, if any, time outstanding.to, but excluding, the redemption date.
(2) As defined in the applicable term loan agreement, which includes an adjustment of 0.10% per annum.
As(3) The full outstanding amount of September 30, 2017the term loan, including accrued and December 31, 2016, CenterPoint Energy, Houston Electricunpaid interest, was repaid in March 2023 and, CERC Corp.following the repayment, the term loan agreement was terminated.
(4) The full outstanding amount of the term loan, including accrued and unpaid interest, was repaid in May 2023 and, following the repayment, the term loan agreement was terminated.
Credit Facilities. The Registrants had the following revolving credit facilities as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Execution Date | | Registrant | | Size of Facility | | Draw Rate of SOFR plus (1) | | Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio | | Debt for Borrowed Money to Capital Ratio as of September 30, 2023 (2) | | Termination Date |
| | | | (in millions) | | | | | | | | |
December 6, 2022 | | CenterPoint Energy | | $ | 2,400 | | | 1.500% | | 65.0% | (3) | 59.2% | | December 6, 2027 |
December 6, 2022 | | CenterPoint Energy (4) | | 250 | | | 1.125% | | 65.0% | | 43.8% | | December 6, 2027 |
| | | | | | | | | | | | |
December 6, 2022 | | Houston Electric | | 300 | | | 1.250% | | 67.5% | (3) | 52.4% | | December 6, 2027 |
December 6, 2022 | | CERC | | 1,050 | | | 1.125% | | 65.0% | | 38.2% | | December 6, 2027 |
| | Total | | $ | 4,000 | | | | | | | | | |
(1)Based on current credit ratings.
(2)As defined in the revolving credit facility agreements, excluding Securitization Bonds.
(3)For CenterPoint Energy and utilizationHouston Electric, the financial covenant limit will temporarily increase 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 facilities:certification.
(4)This credit facility was issued by SIGECO.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Electric | 300 |
| | — |
| | 4 |
| | — |
| | 300 |
| | — |
| | 4 |
| | — |
| |
CERC Corp. | 900 |
| | — |
| | — |
| | 529 |
| (2) | 600 |
| | — |
| | 4 |
| | 569 |
| (2) |
Total | $ | 2,900 |
| | $ | — |
| | $ | 10 |
| | $ | 976 |
| | $ | 2,500 |
| | $ | — |
| | $ | 14 |
| | $ | 1,404 |
| |
| |
(1) | Weighted average interest rate was 1.42% and 1.04% asThe Registrants, including the subsidiaries 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) | As defined in the revolving credit facility agreement, excluding Securitization Bonds. |
| |
(4) | 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. |
| |
(5) | Amended on June 16, 2017 to extend the termination date as noted above. |
CenterPoint Energy Houston Electric and CERC Corp.discussed above, were in compliance with all financial debt covenants as of September 30, 2017.2023.
The table below reflects the utilization of the Registrants’ respective revolving credit facilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 | | | December 31, 2022 |
Registrant | | Loans | | Letters of Credit | | Commercial Paper (2) | | Weighted Average Interest Rate | | | Loans | | Letters of Credit | | Commercial Paper (2) | | Weighted Average Interest Rate |
| | (in millions, except weighted average interest rate) |
CenterPoint Energy | | $ | — | | | $ | 8 | | | $ | 1,079 | | | 5.50 | % | | | $ | — | | | $ | 11 | | | $ | 1,770 | | | 4.71 | % |
CenterPoint Energy (1) | | — | | | — | | | — | | | — | % | | | — | | | — | | | — | | | — | % |
Houston Electric | | — | | | — | | | — | | | — | % | | | — | | | — | | | — | | | — | % |
CERC | | — | | | 1 | | | — | | | — | % | | | — | | | — | | | 805 | | | 4.67 | % |
Total | | $ | — | | | $ | 9 | | | $ | 1,079 | | | | | | $ | — | | | $ | 11 | | | $ | 2,575 | | | |
(1)This credit facility was issued by SIGECO.
(2)Outstanding commercial paper generally has maturities of 60 days or less and each Registrants’ commercial paper program is backstopped by such Registrants’ long-term credit facilities. Neither Houston Electric nor SIGECO has a commercial paper program.
Liens. As of September 30, 2023, Houston Electric’s assets were subject to liens securing approximately $7.6 billion of general mortgage bonds outstanding under the General Mortgage, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. The general mortgage bonds that are held in trust to secure pollution control bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. Houston Electric could issue approximately $4.5 billion of additional general mortgage bonds on the basis of retired bonds and 70% of property additions as of September 30, 2023. No first mortgage bonds are outstanding under the M&DOT, and Houston Electric is contractually obligated to not issue any additional first mortgage bonds under the M&DOT and is undertaking actions to release the lien of the M&DOT and terminate the M&DOT.
As of September 30, 2023, SIGECO had approximately $457 million aggregate principal amount of first mortgage bonds outstanding. Generally, all of SIGECO’s real and tangible property is subject to the lien of SIGECO’s mortgage indenture which was amended and restated effective as of January 1, 2023. As of September 30, 2023, SIGECO was permitted to issue additional bonds under its mortgage indenture up to 70% of then currently unfunded property additions and approximately $1.4 billion of additional first mortgage bonds could be issued on this basis. On October 13, 2023, SIGECO issued a total of $470 million aggregate principal amount of first mortgage bonds in three tranches as discussed above.
Other. As of September 30, 2023, certain financial institutions agreed to issue, from time to time, up to $5 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. As of September 30, 2023, such financial institutions had issued less than $1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.
(12) 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 higherrates:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
CenterPoint Energy (1) (2) | 19 | % | | 27 | % | | 25 | % | | 26 | % |
| | | | | | | |
Houston Electric (3) | 22 | % | | 21 | % | | 22 | % | | 21 | % |
CERC (4) (5) | 25 | % | | 170 | % | | 22 | % | | 25 | % |
| | | | | | | |
(1)CenterPoint Energy’s lower effective tax rate for the three months ended September 30, 20172023 compared to the same period ended September 30, 2022 was primarily due to the tax effectsimpacts of receiving less nontaxable incomethe absence of non-deductible goodwill
associated with the sale of the Natural Gas business in Arkansas and Oklahoma in 2022 and an increase in EDIT amortization of the period. Thenet regulatory liability for EDIT.
(2)CenterPoint Energy’s lower effective tax rate reported for the nine months ended September 30, 2017 was 36%2023 compared to 37% for the same period ended September 30, 2022 was primarily due to the tax impacts of the absence of non-deductible goodwill associated with the sale of the Natural Gas businesses in 2016.Arkansas and Oklahoma in 2022, partially offset by the tax impacts of the sale of Energy Systems Group and an increase in state income taxes.
(3)Houston Electric’s higher effective tax rate for the three and nine months ended September 30, 2023 compared to the same periods ended September 30, 2022 was primarily driven by an increase in state income taxes.
(4)CERC’s lower effective tax rate for the three months ended September 30, 2023 compared to the same period ended September 30, 2022 was primarily driven by the tax impact of the absence of non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma in 2022 and an increase in the favorable impact of amortization of the net regulatory liability for EDIT.
(5)CERC’s lower effective tax rate for the nine months ended September 30, 2023 compared to the same period ended September 30, 2022 was primarily driven by the tax impact of the absence of non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma in 2022 and increase in the favorable impact of amortization of the net regulatory liability for EDIT, partially offset by an increase in state income taxes.
CenterPoint Energy reported noa net uncertain tax liability, inclusive of interest and penalties, of $29 million as of September 30, 20172023. The Registrants believe that it is reasonably possible that there will be no change in unrecognized tax benefits, including penalties and expects no significant change to the uncertain tax liability overinterest, in the next twelve months.12 months as a result of a lapse of statutes on older exposures, a tax settlement, and/or a resolution of open audits.
Tax Audits and Settlements. Tax years through 20152018 have been audited and settled with the IRS.IRS for CenterPoint Energy. The 2019 and 2020 tax years are before IRS Appeals. For the 2016 and 20172021-2023 tax years, CenterPoint Energy is a participantthe Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2014-2019 tax years have been audited and settled with the IRS.
(13) Commitments and Contingencies
| |
(a) | Natural Gas Supply Commitments |
Natural gas supply commitments(a)Purchase Obligations (CenterPoint Energy and CERC)
Commitments include natural gas contractsminimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas Distributionreportable segment and Energy Services business segments, whichCenterPoint Energy’s Electric reportable segment. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the registrant and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. 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, 20172023 and December 31, 2016 as these2022. 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.
On February 1, 2023, Indiana Electric entered into an amended and restated BTA to purchase the 191 MW Posey Solar project for a fixed purchase price over the anticipated 35-year life. On February 7, 2023, Indiana Electric filed a CPCN with the IURC to approve the amended BTA. With the passage of the IRA, Indiana Electric can now pursue PTCs for solar projects. Indiana Electric filed the updated CPCN with a request that project costs, net of PTCs, be recovered in rate base, through base rates or the CECA mechanism, depending on which provides more timely recovery. On September 6, 2023, the IURC issued an order approving the CPCN. The Posey Solar project is expected to be placed in service in 2025.
On January 11, 2023, the IURC issued an order approving the settlement agreement granting Indiana Electric a CPCN to purchase and acquire the 130 MW Pike County solar project through a BTA and approved the estimated cost. The IURC also designated the project as a clean energy project as well as approved the proposed levelized rate and associated ratemaking and accounting treatment. Due to inflationary pressures, the developer disclosed that costs have exceeded the agreed upon levels in the BTA. Once pricing is updated and parties determine whether to continue with the project, Indiana Electric may have to refile for approval of the project with the IURC, which could delay the in-service date from 2025 to 2026.
As of September 30, 2017,2023, other than discussed below, undiscounted minimum purchase obligations are approximately:
| | | | | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | CERC |
| Natural Gas Supply | Electric Supply (1) | | Other (2) | | Natural Gas Supply |
| (in millions) |
Remaining three months of 2023 | $ | 220 | | $ | 51 | | | $ | 71 | | | $ | 218 | |
2024 | 683 | | 160 | | | 181 | | | 678 | |
2025 | 588 | | 492 | | | 39 | | | 584 | |
2026 | 501 | | 342 | | | 39 | | | 497 | |
2027 | 425 | | 105 | | | — | | | 421 | |
2028 | 380 | | 68 | | | — | | | 376 | |
2029 and beyond | 1,710 | | 719 | | | 332 | | | 1,685 | |
(1)CenterPoint Energy’s undiscounted minimum payment obligations related to PPAs with commitments ranging from 15 years to 25 years and its purchase commitments under its BTA in Posey County, Indiana and its BTA in Pike County, Indiana are included above.
(2)The undiscounted payment obligations relate primarily to technology hardware and software agreements.
Excluded from the table above are estimates for natural gas supplycash outlays from other PPAs through Indiana Electric that do not have minimum thresholds but do require payment when energy is generated by the provider. Costs arising from certain of these commitments are approximately:pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.
(b) Guarantees and Product Warranties (CenterPoint Energy)
On May 21, 2023, CenterPoint Energy, through Vectren Energy Services, entered into the Equity Purchase Agreement to sell Energy Systems Group. The sale closed on June 30, 2023. See Note 3 for further information.
In the normal course of business prior to the consummation of the transaction on June 30, 2023, CenterPoint Energy, primarily through Vectren, issued parent company level guarantees supporting Energy Systems Group’s obligations. When Energy Systems Group was wholly owned by CenterPoint Energy, these guarantees did not represent incremental consolidated obligations, but rather, these guarantees represented guarantees of Energy Systems Group’s obligations to allow it to conduct business without posting other forms of assurance. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $509 million as of September 30, 2023 and expects the exposure to decrease pro rata. 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, were issued prior to the sale of Energy Systems Group in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects.
Under the terms of the Equity Purchase Agreement, ESG Holdings Group must generally use reasonable best efforts to replace existing CenterPoint Energy guarantees with credit support provided by a party other than CenterPoint Energy as of and after the closing of the transaction. The Equity Purchase Agreement also requires certain protections to be provided for any damages incurred by CenterPoint Energy in relation to these guarantees not released by closing. No additional guarantees were provided by CenterPoint Energy in favor of Energy Systems Group subsequent to the closing of the sale on June 30, 2023.
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. CenterPoint Energy believes that, from Energy Systems Group’s inception in 1994 to the closing of the sale of Energy Systems Group on June 30, 2023, Energy Systems Group had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operated effectively. CenterPoint Energy recorded no amounts on its Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 related to its obligation under the outstanding guarantees.
|
| | | |
| (in millions) |
Remaining three months of 2017 | $ | 169 |
|
2018 | 507 |
|
2019 | 348 |
|
2020 | 166 |
|
2021 | 76 |
|
2022 and beyond | 113 |
|
(c)Legal, Environmental and Other Matters
| |
(b) | Legal, Environmental and Other Matters |
Legal Matters
Gas Market Manipulation Cases.Litigation Related to the February 2021 Winter Storm Event. Various legal proceedings are still pending against numerous entities with respect to the February 2021 Winter Storm Event, including against CenterPoint Energy, Utility Holding, LLC, Houston Electric, or their predecessor, Reliantand CERC. Like other Texas energy companies and TDUs, CenterPoint Energy and Houston Electric have become involved in certain investigations, litigation and other regulatory and legal proceedings regarding their efforts to restore power during the storm and their compliance with NERC, ERCOT and PUCT rules and directives. Additionally, like other natural gas market participants, CERC has been named in litigation alleging gas market manipulation.
CenterPoint Energy, Utility Holding, LLC, and Houston Electric, along with hundreds of their former subsidiariesother defendants (including ERCOT, power generation companies, other TDUs, natural gas producers, REPs, and other entities) have received claims and lawsuits filed by plaintiffs alleging wrongful death, personal injury, property damage and other injuries and damages.
Substantially all of the litigation is or will be consolidated in Texas state court in Harris County, Texas, as part of an MDL proceeding, with one case currently pending in justice court in Harris County. The judge overseeing the MDL issued an initial case management order and stayed all proceedings and discovery. Per the case management order, the judge entertained dispositive motions in five representative or “bellwether” cases and, in late January 2023, issued rulings on them. The judge ruled that ERCOT has sovereign immunity as a governmental entity and dismissed the suits against it. In a recent opinion in an unrelated matter, the Texas Supreme Court held that ERCOT is entitled to sovereign immunity. This ruling will apply to claims against ERCOT in the MDL. The MDL judge also dismissed all claims against the natural gas defendants (which lists of natural gas defendants incorrectly included Utility Holding, LLC), and the REP defendants and some causes of action against the other defendants. As to the TDU and generator defendants, the MDL judge dismissed some causes of action but denied the motions to dismiss claims for negligence, gross negligence, and nuisance, which denial the TDU defendants and generator defendants are asking the court of appeals to overturn. The court of appeals granted the request for oral argument in the TDU mandamus proceeding and heard oral argument on October 23, 2023. The MDL judge has allowed plaintiffs to file several motions related to the framework for preliminary discovery, but otherwise the cases remain stayed as the MDL judge addresses additional preliminary issues.
As of September 30, 2023, there are approximately 220 pending lawsuits that are in or will be added to the MDL proceeding related to the February 2021 Winter Storm Event, and CenterPoint Energy and Houston Electric, along with numerous other entities, have been named as defendants in certainapproximately 155 of those lawsuits. A putative class action on behalf of everyone who received electric power via the ERCOT grid and sustained a power outage between February 10, 2021 and February 28, 2021 is also pending against CenterPoint Energy, Houston Electric, and numerous other defendants. Additionally, Utility Holding, LLC is currently named as a defendant in approximately five lawsuits described below. Under a master separation agreement between in which CenterPoint Energy and/or Houston Electric are also named as defendants. CenterPoint Energy expects that the claims against Utility Holding, LLC will ultimately be dismissed in light of the judge’s initial rulings. CenterPoint Energy, Utility Holding, LLC, and Houston Electric intend to vigorously defend themselves against the claims raised.
CenterPoint Energy and Houston Electric have also responded to inquiries from the Texas Attorney General and the Galveston County District Attorney’s Office, and various other regulatory and governmental entities also conducted inquiries, investigations and other reviews of the February 2021 Winter Storm Event and the efforts made by various entities to prepare for, and respond to, the event, including the electric generation shortfall issues.
In February 2023, twelve lawsuits were filed in state district court in Harris County and Tom Green County, Texas, against dozens of gas market participants in Texas, including natural gas producers, processors, pipelines, marketers, sellers, traders, gas utilities, and financial institutions. Plaintiffs named CERC as one such defendant, along with “CenterPoint Energy Services, Inc.,” incorrectly identifying it as CERC’s parent company (CenterPoint Energy previously divested CES). One lawsuit filed in Harris County is a former subsidiary, RRI,putative class action on behalf of two classes of electric and natural gas customers (those who experienced a loss of electricity and/or natural gas, and those who were charged securitization-related surcharges on a utility bill or were otherwise charged higher rates for electricity and/or gas during the February 2021 Winter Storm Event), potentially including millions of class members. Two other lawsuits (one filed in Harris County and one in Tom Green County) are brought by an entity that purports to be an assignee of claims by tens of thousands of persons and entities that have assigned claims to the plaintiff. These, and nine other similar lawsuits filed in Harris County, generally allege that the defendants engaged in gas market manipulation and price gouging, including by intentionally withholding, suppressing, or diverting supplies of natural gas in connection with the February 2021 Winter Storm Event, Winter Storm Elliott, and other severe weather conditions, and through financial market manipulation. Plaintiffs allege that this manipulation impacted gas supply and prices as well as the market, supply, and price of electricity in Texas and caused blackouts and other damage. Plaintiffs assert claims for tortious interference with existing contract, private nuisance, and unjust enrichment, and allege a broad array of injuries and damages,
including personal injury, property damage, and harm from certain costs being securitized and passed on to ratepayers. The lawsuits do not specify the amount of damages sought, but seek broad categories of actual, compensatory, statutory, consequential economic, and punitive damages; restitution and disgorgement; pre- and post-judgment interest; costs and attorneys’ fees; and other relief. As of September 30, 2023, most of the lawsuits have not been served, but the three cases in which defendants were served were tagged for transfer to the existing MDL proceeding referenced above. The plaintiffs in those three cases filed motions to remand the lawsuits back to their original trial courts and out of the MDL. On August 1, 2023, the judge overseeing the MDL denied the motions to remand. Plaintiffs’ joint motion for reconsideration of the MDL judge’s orders denying remand is pending before the MDL panel. Regardless of whether the cases remain within the MDL, CERC intends to vigorously defend itself against the claims raised, including by raising jurisdictional challenges to the plaintiffs’ claims.
To date, there have not been demands, quantification, disclosure or discovery of damages by any party to any of the above legal matters that are sufficient to enable CenterPoint Energy and its subsidiaries to estimate exposure. Given that, as well as the preliminary nature of the proceedings, the numerosity of parties and complexity of issues involved, and the uncertainties of litigation, CenterPoint Energy and its subsidiaries are entitledunable to be indemnified by RRI and its successors forpredict the outcome or consequences of 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 saleforegoing matters or to estimate a range 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 indemnifypotential losses. 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. 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, and the contractor company working in the school have been named in litigation arising out of this incident. Additionally, CenterPoint Energy is cooperating with ongoing investigations conducted by the National Transportation Safety Board, the Minnesota Occupational Safety and Health Administration and the Minnesota Office of Pipeline Safety. CenterPoint Energy’s general and excess liability insurance policies that provide coverage for third party bodily injury and property damage claims. Given the nature of certain of the recent allegations, however, it is possible that the insurers for third party bodily injury and property damage claims could dispute coverage for other types of damage that may be alleged by plaintiffs. CenterPoint Energy and its subsidiaries intend to continue to pursue any and all available insurance coverage for all of these matters.
Environmental Matters
MGP Sites. CenterPoint Energy, CERC and itstheir predecessors, including predecessors of Vectren, operated MGPs in the past. The costs CenterPoint Energy or CERC, as applicable, expect to incur 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 obligations for all costs which are probable and estimable, including amounts they are presently obligated to incur in connection with activities at these sites, it is possible that future events may require remedial activities which are not presently foreseen, and those 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 hashave completed state-ordered remediation and continuescontinue state-ordered monitoring and water treatment. As of September 30, 2017,CenterPoint Energy and CERC hadrecorded a recorded liability of $7 millionas reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.
(ii)Indiana MGPs (CenterPoint Energy and CERC). 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 and CERC 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.
| | | | | | | | | | | |
| September 30, 2023 |
| CenterPoint Energy | | CERC |
| (in millions, except years) |
Amount accrued for remediation | $ | 17 | | | $ | 15 | |
Minimum estimated remediation costs | 12 | | | 11 | |
Maximum estimated remediation costs | 51 | | | 44 | |
Minimum years of remediation | 5 | | 5 |
Maximum years of remediation | 50 | | 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. In August 2019, the EPA proposed additional “Part A” amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. Further “Part B” amendments, which related to alternate liners for CCR surface impoundments and the surface impoundment closure process, were published in March 2020. The Part A amendments were finalized in August 2020 and extended the deadline to cease placement of ash in ponds to April 11, 2021, discussed further below. The Part A amendments do not restrict Indiana Electric’s current beneficial reuse of its fly ash. CenterPoint Energy evaluated the Part B amendments to determine potential impacts and determined that the Part B amendments did not have an impact on its current plans.
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. 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. Preliminary groundwater monitoring 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 was required to cease disposal of new ash in the ponds and commence closure of the ponds by April 11, 2021, unless approved for an extension. CenterPoint Energy filed timely extension requests available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through October 15, 2023. The EPA is still reviewing industry extension requests, including CenterPoint Energy’s extension request for the Culley East pond; however, the Culley East pond was taken out of service on May 1, 2023, and the A.B. Brown pond on October 7, 2023, so there is no longer a need for an extension at either the Culley East or A.B. Brown ash ponds. 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 completed closure activities. 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 ponded ash. This petition was subsequently approved by the IURC on May 13, 2020. On October 28, 2020, the IURC approved Indiana Electric’s ECA proceeding, which included the initiation of recovery of the federally mandated project 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. On November 1, 2022, Indiana Electric filed for a CPCN to recover federally mandated costs associated with closure of the Culley East Pond, its third and final ash pond. Indiana Electric is also seeking accounting and ratemaking relief for the project, and on June 8, 2023, Indiana Electric filed a revised CPCN for recovery of the federally mandated ash pond costs. The project costs are estimated to be approximately $52 million, inclusive of overheads.
On May 18, 2023, the EPA proposed amendments to the CCR rule that would, if finalized, apply closure requirements for inactive surface impoundments located at inactive facilities (legacy CCR surface impoundments) and CCR management units located at regulated CCR facilities. CenterPoint Energy is currently reviewing this proposal.
As of September 30, 2023, CenterPoint Energy has recorded an approximate $116 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 AROs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.
Clean Water Act Permitting of Groundwater Discharges. In April 2020, the U.S. Supreme Court issued an opinion providing that indirect discharges via groundwater or other non-point sources are subject to permitting and liability under the Clean Water Act when they are the functional equivalent of a direct discharge. However, on May 25, 2023, in Sackett v. Environmental Protection Agency, the U.S. Supreme Court issued an opinion redefining the term “waters of the United States,” which may limit the scope of the April 2020 opinion. The Registrants are evaluating the extent to which these decisions will affect Clean Water Act permitting requirements and/or liability for their operations.
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) Earnings Per Share (CenterPoint Energy)
Basic earnings per common share is computed by dividing income available to common shareholders by the basic weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding, including all potentially dilutive common shares, if the effect of such common shares is dilutive.
Diluted earnings per common share reflects the dilutive effect of potential common shares from share-based awards. The dilutive effect of restricted stock is computed using the treasury stock method, as applicable, which includes the incremental
shares that would be hypothetically vested in excess of the number of shares assumed to be hypothetically repurchased with the assumed proceeds.
Diluted earnings per common share will also reflect the dilutive effect of potential common shares from the conversion of the Convertible Notes. Convertible debt in which the principal amount must be settled in cash is excluded from the calculation of diluted earnings per share. There would be no interest expense adjustment to the numerator for the cash-settled portion of the Convertible Notes because that portion will always be settled in cash. The conversion spread value in shares will be included in diluted earnings per share using the if-converted method if the convertible debt is in the money. The denominator of diluted earnings per share is determined by dividing the conversion spread value of the share-settled portion of the Convertible Notes as of the reporting date by the average share price over the reporting period. For the three and nine months ended September 30, 2023, the convertible debt was not in the money; therefore, no incremental shares were assumed converted or included in the diluted earnings per share calculation below. For further details about the Convertible Notes, see Note 11.
The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per share calculations:common share.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions, except per share and share amounts) |
Numerator: | | | | | | | |
Income from continuing operations | $ | 282 | | | $ | 202 | | | $ | 725 | | | $ | 923 | |
Less: Preferred stock dividend requirement (Note 18) | 26 | | | 13 | | | 50 | | | 37 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Income available to common shareholders - basic and diluted | $ | 256 | | | $ | 189 | | | $ | 675 | | | $ | 886 | |
Denominator: | | | | | | | |
Weighted average common shares outstanding - basic | 631,185,000 | | | 629,509,000 | | | 630,854,000 | | | 629,374,000 | |
Plus: Incremental shares from assumed conversions: | | | | | | | |
Restricted stock | 1,858,000 | | | 3,559,000 | | | 2,183,000 | | | 3,559,000 | |
| | | | | | | |
| | | | | | | |
Weighted average common shares outstanding - diluted | 633,043,000 | | | 633,068,000 | | | 633,037,000 | | | 632,933,000 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Earnings Per Common Share: | | | | | | | |
| | | | | | | |
| | | | | | | |
Basic Earnings Per Common Share | $ | 0.41 | | | $ | 0.30 | | | $ | 1.07 | | | $ | 1.41 | |
| | | | | | | |
| | | | | | | |
Diluted Earnings Per Common Share | $ | 0.40 | | | $ | 0.30 | | | $ | 1.07 | | | $ | 1.40 | |
|
| | | | | | | | | | | | | | | |
| 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 outstanding | 431,026,000 |
| | 430,682,000 |
| | 430,939,000 |
| | 430,581,000 |
|
Plus: Incremental shares from assumed conversions: | | | | | | | |
Restricted stock | 3,060,000 |
| | 2,714,000 |
| | 3,060,000 |
| | 2,714,000 |
|
Diluted weighted average shares | 434,086,000 |
| | 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 |
|
(15) Reportable Business Segments
CenterPoint Energy’sThe Registrants’ determination of reportable business segments considers the strategic operating units under which CenterPoint Energyits 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 operatingEach Registrant’s CODM views net income as the measure of profit or loss for its businessthe reportable segments.
As of September 30, 2023, reportable segments other than Midstream Investments, where it uses equity in earnings of unconsolidated affiliates.by Registrant were as follows:
CenterPoint Energy
•CenterPoint Energy’s Electric reportable business segments include the following: Electric Transmission & Distribution, Natural Gas Distribution, Energy Services, Midstream Investments and Other Operations. Thesegment consisted of electric transmission and distribution function
(Houston Electric) is reportedservices in the Electric Transmission & Distribution business segment.Texas gulf coast area in the ERCOT region and electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations in the MISO region.
•CenterPoint Energy’s Natural Gas Distributionreportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers. Energy Services represents customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas; and (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP.
•CenterPoint Energy’s non-rate regulated gas salesCorporate and services operations. Midstream InvestmentsOther category consists of CenterPoint Energy’s equity investment in Enable (excludingenergy performance contracting and sustainable infrastructure services through Energy Systems Group through June 30, 2023, the Series A Preferred Units). Other Operations consists primarilydate of otherthe sale of Energy Systems Group, and corporate operations which support all of the business operations of CenterPoint Energy’s business operations.Energy.
Houston Electric
•Houston Electric’s single reportable segment consisted of electric transmission services to transmission service customers in the ERCOT region and distribution services to REPs serving the Texas gulf coast area.
CERC
•CERC’s single reportable segment following the Restructuring consisted of (i) intrastate natural gas sales to, and natural gas transportation and distribution for, residential, commercial, industrial and institutional customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas; and (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP.
Financial data for businessreportable segments is as follows:
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | | | |
| 2023 | | 2022 | | | | | | | |
| Revenues from External Customers | | | | Net Income (Loss) | | Revenues from External Customers | | | | Net Income (Loss) | | | | | | | |
| (in millions) | | | | | | | |
Electric | $ | 1,261 | | (1) | | | $ | 290 | | | $ | 1,146 | | (1) | | | $ | 234 | | | | | | | | |
Natural Gas | 597 | | | | | 27 | | | 692 | | | | | (10) | | | | | | | | |
Corporate and Other | 2 | | | | | (35) | | | 65 | | | | | (22) | | | | | | | | |
Consolidated | $ | 1,860 | | | | | $ | 282 | | | $ | 1,903 | | | | | $ | 202 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Nine Months Ended September 30, | | | | | | | |
| 2023 | | 2022 | | | | | | | |
| Revenues from External Customers | | | | Net Income (Loss) | | Revenues from External Customers | | | | Net Income | | | | | | | |
| (in millions) | | | | | | | |
Electric | $ | 3,250 | | (1) | | | $ | 593 | | | $ | 3,092 | | (1) | | | $ | 489 | | | | | | | | |
Natural Gas | 3,136 | | | | | 296 | | | 3,334 | | | | | 416 | | | | | | | | |
Corporate and Other | 128 | | | | | (164) | | | 184 | | | | | 18 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Consolidated | $ | 6,514 | | | | | $ | 725 | | | $ | 6,610 | | | | | $ | 923 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
(1)Houston Electric revenues from major external customers are as follows (CenterPoint Energy and Houston Electric):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (in millions) |
Affiliates of NRG | | $ | 370 | | | $ | 327 | | | $ | 826 | | | $ | 797 | |
Affiliates of Vistra Energy Corp. | | 177 | | | 153 | | | 403 | | | 372 | |
| | | | | | | | | | | |
| Total Assets |
| September 30, 2023 | | December 31, 2022 |
| (in millions) |
Electric | $ | 21,130 | | | $ | 19,024 | |
Natural Gas | 16,802 | | | 18,043 | |
| | | |
Corporate and Other, net of eliminations (1) | 1,069 | | | 1,479 | |
| | | |
Consolidated | $ | 39,001 | | | $ | 38,546 | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1)Total assets included pension and other postemployment-related regulatory assets of $379 million and $405 million as of September 30, 2023 and December 31, 2022, respectively.
|
| | | | | | | | | | | |
| 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 Distribution | 390 |
| | 8 |
| | 19 |
|
Energy Services | 861 |
| | 10 |
| | 7 |
|
Midstream Investments (2) | — |
| | — |
| | — |
|
Other Operations | 4 |
| | — |
| | 6 |
|
Eliminations | — |
| | (18 | ) | | — |
|
Consolidated | $ | 2,098 |
| | $ | — |
| | $ | 279 |
|
Houston Electric
Houston Electric consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been included.
CERC
CERC consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been included.
(16) Supplemental Disclosure of Cash Flow Information
|
| | | | | | | | | | | |
| 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 Distribution | 370 |
| | 7 |
| | 22 |
|
Energy Services | 608 |
| | 6 |
| | 5 |
|
Midstream Investments (2) | — |
| | — |
| | — |
|
Other Operations | 3 |
| | — |
| | — |
|
Eliminations | — |
| | (13 | ) | | — |
|
Consolidated | $ | 1,889 |
| | $ | — |
| | $ | 284 |
|
The table below provides supplemental disclosure of cash flow information:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Cash Payments/Receipts: | | | | | | | | | | | |
Interest, net of capitalized interest | $ | 521 | | | $ | 211 | | | $ | 153 | | | $ | 376 | | | $ | 188 | | | $ | 67 | |
Income tax payments, net | 200 | | | 12 | | | 113 | | | 340 | | | 113 | | | 3 | |
Non-cash transactions: | | | | | | | | | | | |
Accounts payable related to capital expenditures | 264 | | | 137 | | | 122 | | | 333 | | | 197 | | | 145 | |
ROU assets obtained in exchange for lease liabilities (1) | 3 | | | 1 | | | — | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
(1) Excludes ROU assets obtained through prepayment of the lease liabilities. See Note 19.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Cash and cash equivalents (1) | $ | 120 | | | $ | 113 | | | $ | 1 | | | $ | 74 | | | $ | 75 | | | $ | — | |
Restricted cash included in Prepaid expenses and other current assets | 18 | | | 13 | | | — | | | 17 | | | 13 | | | — | |
| | | | | | | | | | | |
Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | $ | 138 | | | $ | 126 | | | $ | 1 | | | $ | 91 | | | $ | 88 | | | $ | — | |
(1)Cash and cash equivalents related to VIEs as of September 30, 2023 and December 31, 2022 included $118 million and $75 million, respectively, at CenterPoint Energy and $113 million and $75 million, respectively, at Houston Electric.
|
| | | | | | | | | | | | | | | | |
| 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 Distribution | 1,767 |
| | 24 |
| | 220 |
| | 6,067 |
| |
Energy Services | 2,964 |
| | 34 |
| | 58 |
| | 1,337 |
| |
Midstream Investments (2) | — |
| | — |
| | — |
| | 2,481 |
| |
Other Operations | 11 |
| | — |
| | 9 |
| | 2,694 |
| (3) |
Eliminations | — |
| | (58 | ) | | — |
| | (733 | ) | |
Consolidated | $ | 6,976 |
| | $ | — |
| | $ | 776 |
| | $ | 22,135 |
| |
(17) Related Party Transactions(Houston Electric and CERC)
|
| | | | | | | | | | | | | | | | |
| 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 Distribution | 1,672 |
| | 21 |
| | 202 |
| | 6,099 |
| |
Energy Services | 1,433 |
| | 17 |
| | 11 |
| | 1,102 |
| |
Midstream Investments (2) | — |
| | — |
| | — |
| | 2,505 |
| |
Other Operations | 11 |
| | — |
| | 5 |
| | 2,681 |
| (3) |
Eliminations | — |
| | (38 | ) | | — |
| | (769 | ) | |
Consolidated | $ | 5,447 |
| | $ | — |
| | $ | 716 |
| | $ | 21,829 |
| |
| |
(1) | Electric Transmission & Distribution revenues from major customers are as follows: |
|
| | | | | | | | | | | | | | | | |
| | 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 earnings are as follows: |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (in millions) |
Enable | | $ | 68 |
| | $ | 73 |
| | $ | 199 |
| | $ | 164 |
|
| |
(3) | IncludedHouston Electric and CERC participate in total assets 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. |
(16) Subsequent Events
On October 25, 2017, CenterPoint Energy’s board of directors declaredmoney pool through which they can borrow or invest on a regular quarterlyshort-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash dividend of $0.2675 per share of common stock payable on December 8, 2017, to shareholders of record asposition. The net funding requirements of the close of business on November 16, 2017.
On October 31, 2017, Enable declared a quarterly cash distribution of $0.318 per unit on all of its outstanding common units for 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 2017CenterPoint Energy money pool are expected to be mademet with respectborrowings 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:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| Houston Electric | | CERC | | Houston Electric | | CERC |
| (in millions, except interest rates) |
Money pool investments (borrowings) (1) | $ | 400 | | | $ | 86 | | | $ | (642) | | | $ | — | |
Weighted average interest rate | 5.56 | % | | 5.56 | % | | 4.75 | % | | 4.75 | % |
(1)Included in Accounts and notes receivable (payable)–affiliated companies on Houston Electric’s and CERC’s respective Condensed Consolidated Balance Sheets.
CenterPoint Energy provides some corporate services to Houston Electric and CERC. The costs of services have been charged directly to Houston Electric and CERC Corp.’s investmentusing methods that management believes are reasonable. These methods include 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 common unitsoperation and maintenance expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC |
| (in millions) |
Corporate service charges | $ | 40 | | | $ | 56 | | | $ | 38 | | | $ | 54 | | | $ | 115 | | | $ | 162 | | | $ | 114 | | | $ | 163 | |
Net affiliate service charges (billings) | (1) | | | 1 | | | 3 | | | (3) | | | (7) | | | 7 | | | (12) | | | 12 | |
The table below presents transactions among Houston Electric, CERC and their parent, CenterPoint Energy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | (in millions) |
Cash dividends paid to parent | | $ | 79 | | | $ | 36 | | | $ | 74 | | | $ | 13 | | | $ | 239 | | | $ | 347 | | | $ | 141 | | | $ | 124 | |
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 720 | |
Cash contribution from parent | | 235 | | | — | | | — | | | — | | | 885 | | | 500 | | | 1,143 | | | 125 | |
Net assets acquired in the Restructuring | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,345 | |
Non-cash capital contribution from parent in payment for property, plant and equipment below | | — | | | — | | | — | | | — | | | — | | | — | | | 38 | | | 54 | |
Cash paid to parent for property, plant and equipment below | | — | | | — | | | — | | | — | | | — | | | — | | | 65 | | | 61 | |
Property, plant and equipment from parent (1) | | — | | | — | | | — | | | — | | | — | | | — | | | 103 | | | 115 | |
(1) Property, plant and equipment purchased from CenterPoint Energy at its net carrying value on the date of Enable for the third quarterpurchase.
(18) Equity
Dividends Declared and Paid (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dividends Declared Per Share | | Dividends Paid Per Share |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Common Stock | | $ | 0.390 | | | $ | 0.360 | | | $ | 0.580 | | | $ | 0.530 | | | $ | 0.190 | | | $ | 0.180 | | | $ | 0.570 | | | $ | 0.520 | |
Series A Preferred Stock | | 30.625 | | | 30.625 | | | 30.625 | | | 30.625 | | | 30.625 | | | 30.625 | | | 61.250 | | | 61.250 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
On October 31, 2017, Enable declared a quarterly cash distribution of $0.625 per Series A Preferred Unit for the quarter endedStock Redemption (CenterPoint Energy)
On September 30, 2017. Accordingly,1, 2023, CenterPoint Energy expects to receive a cash distributionredeemed 800,000 shares 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 UnitsStock, in whole for cash at a redemption price of Enable$1,000 per share, plus any accumulated and unpaid dividends thereon to, but excluding, the redemption date.
Preferred Stock (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liquidation Preference Per Share | | Shares Outstanding as of | | Outstanding Value as of |
| | | September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| | (in millions, except shares and per share amounts) |
Series A Preferred Stock | | $ | 1,000 | | | — | | | 800,000 | | | $ | — | | | $ | 790 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | — | | | 800,000 | | | $ | — | | | $ | 790 | |
Income Allocated to Preferred Shareholders (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (in millions) |
Series A Preferred Stock | $ | 26 | | | $ | 13 | | | $ | 50 | | | $ | 37 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total income allocated to preferred shareholders | $ | 26 | | | $ | 13 | | | $ | 50 | | | $ | 37 | |
Temporary Equity (CenterPoint Energy)
On the approval and recommendation of the Compensation Committee and approval of the Board (acting solely through its independent directors), CenterPoint Energy entered into a retention incentive agreement with David J. Lesar, then President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. Pursuant to the retention incentive agreement, Mr. Lesar received equity-based awards under CenterPoint Energy’s LTIP covering a total of 1 million shares of Common Stock (Total Stock Award) which were granted in multiple annual awards. Mr. Lesar received 400 thousand restricted stock units in July 2021 that vested in December 2022 and 400 thousand restricted stock units and 200 thousand restricted stock units in February 2022 and February 2023, respectively, that will vest in December 2023. For accounting purposes, the 1 million shares under the Total Stock Award, consisting of the equity-based awards described above, were considered granted in July 2021. In the event that death, disability, termination without cause or resignation for good reason, as defined in the retention incentive agreement, had occurred prior to the full Total Stock Award being awarded, CenterPoint Energy would have paid a lump sum cash payment equal to the value of the unawarded equity-based awards, based on the closing trading price of Common Stock on the date of the event’s occurrence. Because the equity-based awards would have been redeemable for cash prior to being awarded upon events that were not probable at the grant date, the equity associated with any unawarded equity-based awards were classified as Temporary Equity as of December 31, 2022 on CenterPoint Energy’s Condensed Consolidated Balance Sheets. As of September 30, 2023, all restricted stock units have been awarded to Mr. Lesar and no amounts are reflected in Temporary Equity on CenterPoint Energy’s Condensed Consolidated Balance Sheets.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated comprehensive income (loss) are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Beginning Balance | $ | (32) | | | $ | — | | | $ | 15 | | | $ | (85) | | | $ | — | | | $ | 10 | |
Other comprehensive income (loss) before reclassifications: | | | | | | | | | | | |
Remeasurement of pension and other postretirement plans | — | | | — | | | — | | | (10) | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income (loss): | | | | | | | | | | | |
Net deferred gain from cash flow hedges | 2 | | | — | | | — | | | — | | | — | | | — | |
Prior service cost (1) | 1 | | | — | | | — | | | — | | | — | | | — | |
Actuarial losses (1) | — | | | — | | | — | | | 2 | | | — | | | — | |
Settlement (2) | — | | | — | | | — | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
Tax benefit (expense) | — | | | — | | | — | | | 9 | | | — | | | — | |
Net current period other comprehensive income (loss) | 3 | | | — | | | — | | | 2 | | | — | | | — | |
Ending Balance | $ | (29) | | | $ | — | | | $ | 15 | | | $ | (83) | | | $ | — | | | $ | 10 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Beginning Balance | $ | (31) | | | $ | — | | | $ | 16 | | | $ | (64) | | | $ | — | | | $ | 10 | |
Other comprehensive income (loss) before reclassifications: | | | | | | | | | | | |
Remeasurement of pension and other postretirement plans | — | | | — | | | — | | | (44) | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Amounts reclassified from accumulated other comprehensive income (loss): | | | | | | | | | | | |
Net deferred gain from cash flow hedges | 2 | | | — | | | — | | | — | | | — | | | — | |
Prior service cost (1) | — | | | — | | | (1) | | | 1 | | | — | | | — | |
Actuarial losses (1) | — | | | — | | | — | | | 4 | | | — | | | — | |
Settlement (2) | — | | | — | | | — | | | 14 | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Tax benefit (expense) | — | | | — | | | — | | | 5 | | | — | | | — | |
Net current period other comprehensive income (loss) | 2 | | | — | | | (1) | | | (19) | | | — | | | — | |
Ending Balance | $ | (29) | | | $ | — | | | $ | 15 | | | $ | (83) | | | $ | — | | | $ | 10 | |
(1)Amounts are included in the computation of net periodic cost and are reflected in Other income, net in each of the Registrants’ respective Condensed Statements of Consolidated Income.
(2)Amounts presented represent a one-time, non-cash settlement cost (benefit), prior to regulatory deferrals, which are required when the total lump sum distributions or other settlements of plan benefit obligations during a plan year exceed the service cost and interest cost components of the net periodic cost for that year. Amounts presented in the table above are included in Other income (expense), net in CenterPoint Energy’s Statements of Consolidated Income, net of regulatory deferrals.
(19) Leases
In 2021, Houston Electric entered into a temporary short-term lease and long-term leases for mobile generation. The short-term lease agreement allowed Houston Electric to take delivery of TEEEF assets on a short-term basis with an initial term ending on September 30, 2022 and extended until December 31, 2022. As of December 31, 2022, the short-term lease agreement has expired and all mobile generation assets are leased under the long-term lease agreement. Per Houston Electric’s short-term lease accounting policy election, a ROU asset and lease liability are not reflected on Houston Electric’s Condensed
Consolidated Balance Sheets. Expenses associated with the short-term lease, including carrying costs, are deferred to a regulatory asset and totaled, net of amounts recovered in rates, $102 million and $103 million as of September 30, 2023 and December 31, 2022, respectively.
The long-term lease agreement includes up to 505 MW of TEEEF, all of which was delivered as of December 31, 2022, triggering lease commencement at delivery, with an initial term ending in 2029 for all TEEEF leases. These assets were previously available under the short-term lease agreement. Houston Electric derecognized the finance lease liability when the extinguishment criteria in Topic 405 - Liabilities was achieved. Per the terms of the agreement, lease payments are due and made in full by Houston Electric upon taking possession of the asset, relieving substantially all of the associated finance lease liability at that time.The remaining finance lease liability associated with the commenced long-term TEEEF agreement was not significant as of September 30, 2023 and December 31, 2022 and relates to removal costs that will be incurred at the end of the lease term. As of September 30, 2023, Houston Electric has secured a first lien on the assets leased under the prepayment agreement, except for assets with lease payments totaling $101 million. The $101 million prepayment is being held in an escrow account, not controlled by Houston Electric, and the funds will be released when a first lien can be secured for Houston Electric. Expenses associated with the long-term lease, including depreciation expense on the right of use asset and carrying costs, are deferred to a regulatory asset and totaled, net of amounts recovered in rates, $117 million and $60 million as of September 30, 2023 and December 31, 2022, respectively. The long-term lease agreement contains a termination clause that can be exercised in the event of material adverse regulatory actions. If the right to terminate is elected, subject to the satisfaction of certain conditions, 75% of Houston Electric’s prepaid lease costs that is attributable to the period from the effective date of termination to the end of the lease term would be refunded. In December 2022, the long-term lease agreement was amended to include a disallowance reimbursement clause that can be exercised in the event that any regulatory proceeding or settlement agreement results in a disallowance of Houston Electric’s recovery of deferred costs under either the long-term lease agreement, short-term lease agreement or any other quantifiable adverse financial impact to Houston Electric. If the disallowance reimbursement clause is exercised, 85% of such disallowance up to $53 million would be paid to Houston Electric. Any disallowance greater than $53 million would remain subject to the 75% limit set forth in the termination clause. For further discussion of the regulatory impacts, see Note 6.
Houston Electric will also incur variable costs throughout the lease term for the third quarteroperation and maintenance of 2017.the generators. Lease costs, including variable and ROU asset amortization costs, are deferred to Regulatory assets as incurred as a recoverable cost under the 2021 Texas legislation. See Note 6 for further information regarding recovery of these deferred costs.
The components of lease cost, included in Operation and maintenance expense on the Registrants’ respective Condensed Statements of Consolidated Income, are as follows:
| |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease cost | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | |
Short-term lease cost | 15 | | | 14 | | | — | | | 39 | | | 39 | | | 1 | |
| | | | | | | | | | | |
Total lease cost (1) | $ | 16 | | | $ | 15 | | | $ | — | | | $ | 41 | | | $ | 39 | | | $ | 1 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease cost | $ | 4 | | | $ | 2 | | | $ | 1 | | | $ | 4 | | | $ | — | | | $ | 1 | |
Short-term lease cost | 28 | | | 27 | | | — | | | 123 | | | 122 | | | 1 | |
| | | | | | | | | | | |
Total lease cost (1) | $ | 32 | | | $ | 29 | | | $ | 1 | | | $ | 127 | | | $ | 122 | | | $ | 2 | |
(1) CenterPoint Energy and Houston Electric defer finance lease costs for TEEEF to Regulatory assets for recovery rather than recognizing Depreciation and Amortization in the Condensed Statements of Consolidated Income.
Lease income was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease income | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 1 | |
Variable lease income | — | | | — | | | — | | | — | | | — | | | — | |
Total lease income | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 1 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease income | $ | 5 | | | $ | 1 | | | $ | 3 | | | $ | 4 | | | $ | 1 | | | $ | 2 | |
Variable lease income | 1 | | | — | | | — | | | 1 | | | — | | | — | |
Total lease income | $ | 6 | | | $ | 1 | | | $ | 3 | | | $ | 5 | | | $ | 1 | | | $ | 2 | |
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 | | |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | | | | | |
| (in millions, except lease term and discount rate) |
Assets: | | | | | | | | | | | | | | | | | |
Operating ROU assets (1) | $ | 15 | | | $ | 6 | | | $ | 4 | | | $ | 19 | | | $ | 6 | | | $ | 5 | | | | | | | |
Finance ROU assets (2) | 550 | | | 550 | | | — | | | 621 | | | 621 | | | — | | | | | | | |
Total leased assets | $ | 565 | | | $ | 556 | | | $ | 4 | | | $ | 640 | | | $ | 627 | | | $ | 5 | | | | | | | |
| | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | |
Current operating lease liability (3) | $ | 4 | | | $ | 1 | | | $ | 1 | | | $ | 5 | | | $ | 1 | | | $ | 2 | | | | | | | |
Non-current operating lease liability (4) | 11 | | | 5 | | | 3 | | | 14 | | | 5 | | | 4 | | | | | | | |
Total leased liabilities (5) | $ | 15 | | | $ | 6 | | | $ | 4 | | | $ | 19 | | | $ | 6 | | | $ | 6 | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted-average remaining lease term (in years) - operating leases | 5.7 | | 4.1 | | 3.3 | | 4.3 | | 4.8 | | 3.9 | | | | | | |
Weighted-average discount rate - operating leases | 3.94 | % | | 4.09 | % | | 3.60 | % | | 3.80 | % | | 4.01 | % | | 3.58 | % | | | | | | |
Weighted-average remaining lease term (in years) - finance leases | 5.8 | | 5.8 | | — | | | 6.5 | | 6.5 | | — | | | | | | | |
Weighted-average discount rate - finance leases | 3.60 | % | | 3.60 | % | | — | | | 3.60 | % | | 3.60 | % | | — | | | | | | | |
(1)Reported within Other assets in the Registrants’ respective Condensed Consolidated Balance Sheets.
(2)Reported within Property, Plant and Equipment in the Registrants’ respective Condensed Consolidated Balance Sheets. Finance lease assets are recorded net of accumulated amortization.
(3)Reported within Current other liabilities in the Registrants’ respective Condensed Consolidated Balance Sheets.
(4)Reported within Other liabilities in the Registrants’ respective Condensed Consolidated Balance Sheets.
(5)Finance lease liabilities were not significant as of June 30, 2023 or December 31, 2022 and are reported within Other long-term debt in the Registrants’ respective Condensed Consolidated Balance Sheets when applicable.
As of September 30, 2023, finance lease liabilities were not significant to the Registrants. As of September 30, 2023, maturities of operating lease liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Remainder of 2023 | $ | 2 | | | $ | — | | | $ | 1 | |
2024 | 3 | | | 2 | | | 2 | |
2025 | 3 | | | 2 | | | 1 | |
2026 | 3 | | | 2 | | | 1 | |
2027 | 2 | | | 1 | | | — | |
2028 | 2 | | | — | | | — | |
2029 and beyond | 1 | | | — | | | — | |
Total lease payments | 16 | | | 7 | | | 5 | |
Less: Interest | 1 | | | 1 | | | 1 | |
Present value of lease liabilities | $ | 15 | | | $ | 6 | | | $ | 4 | |
As of September 30, 2023, future minimum finance lease payments were not significant to the Registrants. As of September 30, 2023, maturities of undiscounted operating lease payments to be received are as follows:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Remainder of 2023 | $ | 2 | | | $ | — | | | $ | 1 | |
2024 | 6 | | | 1 | | | 5 | |
2025 | 8 | | | 1 | | | 5 | |
2026 | 8 | | | — | | | 5 | |
2027 | 7 | | | — | | | 5 | |
2028 | 7 | | | — | | | 5 | |
2029 and beyond | 173 | | | — | | | 170 | |
Total lease payments to be received | $ | 211 | | | $ | 2 | | | $ | 196 | |
Other information related to leases is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating cash flows from operating leases included in the measurement of lease liabilities | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | |
Financing cash flows from finance leases included in the measurement of lease liabilities | — | | | — | | | — | | | 47 | | | 47 | | | — | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating cash flows from operating leases included in the measurement of lease liabilities | $ | 4 | | | $ | 1 | | | $ | 1 | | | $ | 4 | | | $ | — | | | $ | 1 | |
Financing cash flows from finance leases included in the measurement of lease liabilities | — | | | — | | | — | | | 218 | | | 218 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
See Note 16 for information on ROU assets obtained in exchange for operating lease liabilities.
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 combined Form 10-Q and our 2016the Registrants’ combined 2022 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 combined 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
Hurricane Harvey. Houston Electric’s electric delivery systemSeries A Preferred Stock Redemption. On September 1, 2023, CenterPoint Energy redeemed the Series A Preferred Stock in whole for cash of $800 million at a redemption price of $1,000 per share, plus accumulated and CERC Corp.’s NGD suffered damage as a result of Hurricane Harvey, which struckunpaid dividends thereon to, but excluding, the Texas coast on Friday, August 25, 2017.redemption date. For further information, regarding the impact of Hurricane Harvey, see Note 518 to ourthe Interim Condensed Financial Statements.
Divestiture of Energy Systems Group.On May 21, 2023, Vectren Energy Services entered into an Equity Purchase Agreement to sell all of the outstanding limited liability company interests of Energy Systems Group to ESG Holdings Group, for a purchase price of $157 million, subject to customary adjustments set forth in the Equity Purchase Agreement, including adjustments based on Energy Systems Group’s net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. The transaction closed on June 30, 2023, for $154 million in cash, subject to finalization of the purchase price adjustment. For further information, see Note 3 to the Interim Condensed Financial Statements.
Regulatory Proceedings. On March 23, 2023, CenterPoint Energy and CERC, collectively, received approximately $1.1 billion in proceeds from the customer rate relief bonds issued by the Texas Public Financing Authority related to the February 2021 Winter Storm Event. On April 5, 2023, a final order was issued approving the $39 million revenue requirement from Houston Electric’s 2021 investment in TEEEF. On April 5, 2023, Houston Electric filed its second TEEEF filing requesting a net increase in TEEEF revenues of approximately $149 million. On August 28, 2023 the State Office of Administrative Hearings issued an Order setting interim rates to collect an annual revenue requirement at the filed amount. On June 29, 2023, Indiana Electric received the net securitization proceeds of $337 million to reimburse it for or fund qualified costs approved by the IURC related to the retirement of its A.B. Brown coal-fired generation facilities. For detailsfurther information, see Note 6 to the Interim Condensed Financial Statements. For information related to our pending and completed regulatory proceedings to date in 2017,2023, see “—Liquidity and Capital Resources —Regulatory Matters” below.
Debt Issuances. In August 2017, CenterPoint Energy issued $500 million aggregate principal amount of unsecured senior notes and CERC Corp. issued $300 million aggregate principal amount of unsecured senior notes. For further information about our 2017 debt issuances, see Note 11 to our Interim Condensed Financial Statements.
CONSOLIDATED RESULTS OF OPERATIONS
|
| | | | | | | | | | | | | | | |
| 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 |
|
Expenses | 1,819 |
| | 1,605 |
| | 6,200 |
| | 4,731 |
|
Operating Income | 279 |
| | 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, net | 68 |
| | 73 |
| | 199 |
| | 164 |
|
Other Income, net | 18 |
| | 25 |
| | 95 |
| | (30 | ) |
Income Before Income Taxes | 267 |
| | 276 |
| | 777 |
| | 524 |
|
Income Tax Expense | 98 |
| | 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 September 30, 2017 compared to three months ended September 30, 2016
We reported net income of $169 million ($0.39 per diluted share) for the three months ended September 30, 2017 compared to net income of $179 million ($0.41 per diluted share) for the three months ended September 30, 2016.
The decrease in net income of $10 million was primarily due to the following key factors:
a $40 million decrease in the gain on marketable securities included in Other Income, net shown above;
a $5 million decrease in operating income discussed below by segment;
a $5 million decrease in equity earnings from our investment in Enable, discussed further in Note 8 to our Interim Condensed Financial Statements; and
a $3 million decrease in miscellaneous other non-operating income included in Other Income, net shown above.
These decreases in net income were partially offset by the following:
a $36 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) forTransactions. During the nine months ended September 30, 2016.
The increase2023, CenterPoint Energy issued or borrowed a combined $5.6 billion in net incomenew debt, including Houston Electric’s issuance of $165$1.4 billion aggregate principal amount of general mortgage bonds, CERC’s issuance of $1.5 billion aggregate principal amount of senior notes and $500 million was primarily due to the following key factors:
a $199term loan, SIGECO Securitization Subsidiary’s issuance of $341 million decrease in the loss on indexed debt securities related to the ZENS included in Other Income, net shown above, resulting from decreased lossesaggregate principal amount of $82SIGECO Securitization Bonds, SIGECO’s issuance of $180 million in the underlying valueaggregate principal amount of the indexed debt securitiesfirst mortgage bonds, and a lossCenterPoint Energy’s issuance of $117$1.0 billion aggregate principal of convertible notes, $400 million from the Charter merger in 2016;
a $60aggregate principal of senior notes and $250 million increase in operating income discussed below by segment;
a $35 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 offset by the following:
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
Our 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, 2017 was primarily due to the tax effects of receiving less nontaxable income in the period. The effective tax rate reported forterm loan. During the nine months ended September 30, 2017 was 36% compared2023, CenterPoint Energy repaid or redeemed a combined $2.5 billion of debt, including CERC’s repayment of $1.0 billion of term loans and $1.275 billion of senior notes maturing in 2023, CenterPoint Energy’s repayment of its $250 million term loan and SIGECO’s early redemption of $11 million of first mortgage bonds maturing in 2044, excluding scheduled principal payments on Securitization Bonds. On October 13, 2023, SIGECO issued a total of $470 million aggregate principal amount of first mortgage bonds in three tranches. For information about debt transactions to 37% fordate in 2023, see Note 11 to the same period in 2016. We expect our annualInterim Condensed Financial Statements.
CenterPoint Energy Leadership Transition. On March 15, 2023, CenterPoint Energy announced the appointment of Christopher Foster to the position of Executive Vice President and Chief Financial Officer, effective tax rate forMay 5, 2023. On September 27, 2023, CenterPoint Energy appointed Kristie L. Colvin to the fiscal year ending December 31, 2017 to be approximately 36%.position of Senior Vice President, Chief Accounting Officer of CenterPoint Energy and its affiliated subsidiaries, effective October 5, 2023.
CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONS BY BUSINESS SEGMENT
The following table presents operating income for eachFor information regarding factors that may affect the future results of our business segmentsconsolidated operations, please read “Risk Factors” in Item 1A of Part I of the Registrants’ combined 2022 Form 10-K.
Income available to common shareholders for the three and nine months ended September 30, 20172023 and 2016. Included2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | Favorable (Unfavorable) | | 2023 | | 2022 | | Favorable (Unfavorable) |
| | (in millions) |
Electric | | $ | 290 | | | $ | 234 | | | $ | 56 | | | $ | 593 | | | $ | 489 | | | $ | 104 | |
Natural Gas | | 27 | | | (10) | | | 37 | | | 296 | | | 416 | | | (120) | |
Total Utility Operations | | 317 | | | 224 | | | 93 | | | 889 | | | 905 | | | (16) | |
Corporate & Other (1) | | (61) | | | (35) | | | (26) | | | (214) | | | (19) | | | (195) | |
| | | | | | | | | | | | |
Total CenterPoint Energy | | $ | 256 | | | $ | 189 | | | $ | 67 | | | $ | 675 | | | $ | 886 | | | $ | (211) | |
(1)Includes energy performance contracting and sustainable infrastructure services through Energy Systems Group through June 30, 2023, the date of the sale of Energy Systems Group, unallocated corporate costs, interest income and interest expense, intercompany eliminations and the reduction of income allocated to preferred shareholders.
Three months ended September 30, 2023 compared to three months ended September 30, 2022
Income available to common shareholders increased $67 million primarily due to the following items:
•an increase in revenues are intersegment sales. We accountincome available to common shareholders of $56 million for intersegment salesthe Electric reportable segment, as iffurther discussed below;
•an increase in income available to common shareholders of $37 million for the sales wereNatural Gas reportable segment, as further discussed below;
•a decrease in income available to third parties atcommon shareholders of $26 million for Corporate and Other, primarily due to approximately $17 million of costs related to redemption of the Series A Preferred Stock in September 2023 as discussed in Note 18 to the Interim Condensed Financial statements, partially offset by the termination of the associated dividend payment that would have been paid in September 2023 post-redemption. The remaining variance is primarily driven by an increase in borrowing costs.
Nine months ended September 30, 2023 compared to nine months ended September 30, 2022
Income available to common shareholders decreased $211 million primarily due to the following items:
•an increase in net income of $104 million for the Electric reportable segment, as further discussed below;
•a decrease in net income of $120 million for the Natural Gas reportable segment, as further discussed below;
•a decrease in income available to common shareholders of $195 million for Corporate and Other, primarily due to the pre-tax net gain of $86 million on the sale of Energy Transfer equity securities in 2022 further discussed in Note 10 to the Interim Condensed Financial Statements, partially offset by $45 million of costs associated with early redemption of long-term debt in first quarter 2022, a loss on sale of $12 million and current market prices.tax expense of $33 million related to the divestiture of Energy Systems Group further discussed in Note 3 to the Interim Condensed Financial Statements, as well as $19 million due to remeasurement of deferred income tax balances. The decrease in income is also due to approximately $17 million of costs related to redemption of the Series A Preferred Stock in September 2023 as discussed in Note 18 to the Interim Condensed Financial statements, partially offset by the termination of the associated dividend payment that would have been paid in September 2023 post-redemption. The remaining variance is due largely to increase in borrowing costs.
Income Tax Expense. For a discussion of effective tax rate per period, see Note 12 to the Interim Condensed Financial Statements.
|
| | | | | | | | | | | | | | | |
| 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 Distribution | 19 |
| | 22 |
| | 220 |
| | 202 |
|
Energy Services | 7 |
| | 5 |
| | 58 |
| | 11 |
|
Other Operations | 6 |
| | — |
| | 9 |
| | 5 |
|
Total Consolidated Operating Income | $ | 279 |
| | $ | 284 |
| | $ | 776 |
| | $ | 716 |
|
CENTERPOINT ENERGY’S RESULTS OF OPERATIONS BY REPORTABLE SEGMENT
CenterPoint Energy’s CODM views net income as the measure of profit or loss for the reportable segments. Segment results include inter-segment interest income and expense, which may result in inter-segment profit and loss.
The following discussion of CenterPoint Energy’s results of operations is separated into two reportable segments, Electric and Natural Gas.
Electric Transmission & Distribution(CenterPoint Energy)
For information regarding factors that may affect the future results of operations of ourCenterPoint Energy’s Electric Transmission & Distribution businessreportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,Affecting Operations — Electric Generation, Transmission and Distribution,” “— Risk Factors Affecting Our Electric Transmission & Distribution Business”Regulatory, Environmental and Legal Risks,” “— Other Risk Factors Affecting Our Businesses or Our Interests in Enable Midstream Partners, LP”Financial, Economic and Market Risks,” “— Risk Factors Affecting Safety and Security Risks” and “— General and Other Risks” in Item 1A of Part I of our 2016the Registrants’ combined 2022 Form 10-K.
The following table provides summary data of ourthe Electric Transmission & Distribution business segment for the three and nine months ended September 30, 2017 and 2016:reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | Favorable (Unfavorable) | | 2023 | | 2022 | | Favorable (Unfavorable) |
| (in millions, except operating statistics) |
Revenues | $ | 1,261 | | | $ | 1,146 | | | $ | 115 | | | $ | 3,250 | | | $ | 3,092 | | | $ | 158 | |
Expenses: | | | | | | | | | | | |
Utility natural gas, fuel and purchased power | 51 | | | 65 | | | 14 | | | 130 | | | 162 | | | 32 | |
Operation and maintenance | 459 | | | 465 | | | 6 | | | 1,335 | | | 1,351 | | | 16 | |
Depreciation and amortization | 241 | | | 207 | | | (34) | | | 650 | | | 604 | | | (46) | |
Taxes other than income taxes | 73 | | | 67 | | | (6) | | | 208 | | | 207 | | | (1) | |
| | | | | | | | | | | |
Total expenses | 824 | | | 804 | | | (20) | | | 2,323 | | | 2,324 | | | 1 | |
Operating Income | 437 | | | 342 | | | 95 | | | 927 | | | 768 | | | 159 | |
Other Income (Expense): | | | | | | | | | | | |
Interest expense and other finance charges | (81) | | | (58) | | | (23) | | | (213) | | | (174) | | | (39) | |
| | | | | | | | | | | |
Other income, net | 13 | | | 9 | | | 4 | | | 39 | | | 21 | | | 18 | |
Income Before Income Taxes | 369 | | | 293 | | | 76 | | | 753 | | | 615 | | | 138 | |
Income tax expense | 79 | | | 59 | | | (20) | | | 160 | | | 126 | | | (34) | |
Net Income | $ | 290 | | | $ | 234 | | | $ | 56 | | | $ | 593 | | | $ | 489 | | | $ | 104 | |
Throughput (in GWh): | | | | | | | | | | | |
Residential | 13,851 | | 11,970 | | 16 | % | | 28,855 | | 28,319 | | 2 | % |
Total | 35,029 | | 30,330 | | 15 | % | | 84,794 | | 82,755 | | 2 | % |
Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
Cooling degree days | 123 | % | | 105 | % | | 18 | % | | 117 | % | | 110 | % | | 7 | % |
Heating degree days | — | % | | 200 | % | | (200) | % | | 86 | % | | 121 | % | | (35) | % |
Number of metered customers at end of period: | | | | | | | | | | | |
Residential | 2,578,969 | | 2,527,383 | | 2 | % | | 2,578,969 | | 2,527,383 | | 2 | % |
Total | 2,906,307 | | 2,850,910 | | 2 | % | | 2,906,307 | | 2,850,910 | | 2 | % |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| (in millions, except throughput and customer data) |
Revenues: | | | | | | | |
TDU | $ | 729 |
| | $ | 725 |
| | $ | 1,944 |
| | $ | 1,881 |
|
Bond Companies | 114 |
| | 183 |
| | 290 |
| | 450 |
|
Total revenues | 843 |
| | 908 |
| | 2,234 |
| | 2,331 |
|
Expenses: | | | | | | | |
Operation and maintenance, excluding Bond Companies | 344 |
| | 336 |
| | 1,040 |
| | 995 |
|
Depreciation and amortization, excluding Bond Companies | 97 |
| | 96 |
| | 296 |
| | 285 |
|
Taxes other than income taxes | 59 |
| | 59 |
| | 177 |
| | 173 |
|
Bond Companies | 96 |
| | 160 |
| | 232 |
| | 380 |
|
Total expenses | 596 |
| | 651 |
| | 1,745 |
| | 1,833 |
|
Operating Income | $ | 247 |
| | $ | 257 |
| | $ | 489 |
| | $ | 498 |
|
Operating Income: | | | | | | | |
TDU | $ | 229 |
| | $ | 234 |
| | $ | 431 |
| | $ | 428 |
|
Bond Companies (1) | 18 |
| | 23 |
| | 58 |
| | 70 |
|
Total segment operating income | $ | 247 |
| | $ | 257 |
| | $ | 489 |
| | $ | 498 |
|
Throughput (in GWh): | | | | | | | |
Residential | 10,419 |
| | 10,776 |
| | 23,512 |
| | 23,427 |
|
Total | 26,453 |
| | 26,518 |
| | 67,956 |
| | 66,839 |
|
Number of metered customers at end of period: | | | | | | | |
Residential | 2,156,624 |
| | 2,116,312 |
| | 2,156,624 |
| | 2,116,312 |
|
Total | 2,435,558 |
| | 2,389,014 |
| | 2,435,558 |
| | 2,389,014 |
|
| |
(1) | Represents the amount necessary to pay interest on the Securitization Bonds. |
Three months ended September 30, 2017 compared to three months ended September 30, 2016
Our Electric Transmission & Distribution business segment reported operating income of $247 millionThe following table provides variance explanations for the three months ended September 30, 2017, consisting of $229 million from the TDU and $18 million related2023 compared to the Bond Companies. For 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.
TDU operating income decreased $5 million, primarily due to the following key factors:
lower usage of $12 million, largely due to a return to more normal weather in 2017;
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, of $7 million.
These decreases to operating 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 million2022 as well as for the nine months ended September 30, 2017, consisting of $431 million from the TDU and $58 million related2023 compared to the Bond Companies. For the nine months ended September 30, 2016, operating2022 by major income totaled $498 million, consistingstatement caption for the Electric reportable segment:
| | | | | | | | | | | | | | |
| | Favorable (Unfavorable) |
| | Three Months Ended September 30, 2023 vs 2022 | | Nine Months Ended September 30, 2023 vs 2022 |
| | (in millions) |
Revenues | | | | |
Transmission Revenues, including TCOS and TCRF, inclusive of costs billed by transmission providers, partially offset in operation and maintenance below | | $ | 24 | | | $ | 98 | |
Customer rates | | 68 | | | 136 | |
Cost of fuel and purchased power, offset in utility natural gas, fuel and purchased power below | | (14) | | | (32) | |
Customer growth | | 8 | | | 20 | |
| | | | |
| | | | |
Miscellaneous revenues, including service connections and off-system sales | | 3 | | | (6) | |
Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | — | | | (4) | |
Energy efficiency, and other pass-through, offset in operation and maintenance below | | (19) | | | (12) | |
Weather, efficiency improvements and other usage impacts | | 36 | | | (12) | |
Bond Companies and SIGECO Securitization Subsidiary, offset in other line items below | | 9 | | | (30) | |
Total | | $ | 115 | | | $ | 158 | |
Utility natural gas, fuel and purchased power | | | | |
Cost of fuel, including coal, natural gas, and fuel oil, offset in revenues above | | $ | (2) | | | $ | 5 | |
Cost of purchased power, offset in revenues above | | 16 | | | 27 | |
Total | | $ | 14 | | | $ | 32 | |
Operation and maintenance | | | | |
All other operation and maintenance expense, including materials and supplies and insurance | | $ | (4) | | | $ | 23 | |
Energy efficiency, and other pass-through, offset in revenues above | | 19 | | | 12 | |
Labor and benefits | | (3) | | | 10 | |
Contract services | | — | | | (2) | |
Bond Companies and SIGECO Securitization Subsidiary, offset in other line items | | — | | | 1 | |
Support services, primarily information technology cost | | (2) | | | (3) | |
| | | | |
| | | | |
| | | | |
Transmission costs billed by transmission providers, offset in revenues above | | (4) | | | (25) | |
Total | | $ | 6 | | | $ | 16 | |
Depreciation and amortization | | | | |
Bond Companies and SIGECO Securitization Subsidiary, offset in other line items | | $ | (5) | | | $ | 26 | |
Ongoing additions to plant-in-service | | (29) | | | (72) | |
Total | | $ | (34) | | | $ | (46) | |
Taxes other than income taxes | | | | |
| | | | |
| | | | |
Franchise fees and other taxes | | $ | — | | | $ | 3 | |
Incremental capital projects placed in service, net of updated property tax rates | | (6) | | | (4) | |
Total | | $ | (6) | | | $ | (1) | |
Interest expense and other finance charges | | | | |
Changes in outstanding debt | | $ | (21) | | | $ | (56) | |
Bond Companies and SIGECO Securitization Subsidiary, offset in other line items | | (4) | | | — | |
Other, primarily AFUDC and impacts of regulatory deferrals | | 2 | | | 17 | |
Total | | $ | (23) | | | $ | (39) | |
Other income, net | | | | |
Other income, including AFUDC - Equity | | $ | 4 | | | $ | 15 | |
Bond Companies and SIGECO Securitization Subsidiary interest income , offset in other line items | | — | | | 3 | |
| | | | |
Total | | $ | 4 | | | $ | 18 | |
Income Tax Expense. For a discussion of $428 million from the TDU and $70 million relatedeffective tax rate per period by Registrant, see Note 12 to the Bond Companies.Interim Condensed Financial Statements.
TDU operating income increased $3 million, primarily due to the following key factors:
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 million;
lower usage of $14 million;
lower miscellaneous revenues, including right-of-way, of $9 million;
higher operation and maintenance expenses of $2 million; and
increased transmission costs billed by transmission providers of $47 million, which were partially offset by higher transmission-related revenues of $46 million.
Natural Gas Distribution(CenterPoint Energy)
For information regarding factors that may affect the future results of operations of ourCenterPoint Energy’s Natural Gas Distribution businessreportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,Affecting Operations — Natural Gas,” “— Risk Factors Affecting Our Natural Gas DistributionRegulatory, Environmental and Energy Services Businesses” andLegal Risks,” “— Other Risk Factors Affecting Our Businesses or Our Interests in Enable Midstream Partners, LP”Financial, Economic and Market Risks,” “— Risk Factors Affecting Safety and Security Risks” and “— General and Other Risks” in Item 1A of Part I of our 2016the Registrants’ combined 2022 Form 10-K.
The following table provides summary data of ourCenterPoint Energy’s Natural Gas Distribution business segment for the three and nine months ended September 30, 2017 and 2016:reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | Favorable (Unfavorable) | | 2023 | | 2022 | | Favorable (Unfavorable) |
| (in millions, except operating statistics) |
Revenues | $ | 597 | | | $ | 692 | | | $ | (95) | | | $ | 3,136 | | | $ | 3,334 | | | $ | (198) | |
Expenses: | | | | | | | | | | | |
Utility natural gas, fuel and purchased power | 141 | | | 284 | | | 143 | | | 1,420 | | | 1,698 | | | 278 | |
Non-utility cost of revenues, including natural gas | 1 | | | 1 | | | — | | | 2 | | | 3 | | | 1 | |
Operation and maintenance | 198 | | | 199 | | | 1 | | | 648 | | | 654 | | | 6 | |
Depreciation and amortization | 130 | | | 118 | | | (12) | | | 380 | | | 347 | | | (33) | |
Taxes other than income taxes | 53 | | | 51 | | | (2) | | | 182 | | | 189 | | | 7 | |
Total expenses | 523 | | | 653 | | | 130 | | | 2,632 | | | 2,891 | | | 259 | |
Operating Income | 74 | | | 39 | | | 35 | | | 504 | | | 443 | | | 61 | |
Other Income (Expense): | | | | | | | | | | | |
Gain on sale | — | | | — | | | — | | | — | | | 303 | | | (303) | |
Interest expense and other finance charges | (46) | | | (34) | | | (12) | | | (138) | | | (97) | | | (41) | |
| | | | | | | | | | | |
Other income (expense), net | 8 | | | — | | | 8 | | | 14 | | | (10) | | | 24 | |
Income Before Income Taxes | 36 | | | 5 | | | 31 | | | 380 | | | 639 | | | (259) | |
Income tax expense | 9 | | | 15 | | | 6 | | | 84 | | | 223 | | | 139 | |
Net Income (Loss) | $ | 27 | | | $ | (10) | | | $ | 37 | | | $ | 296 | | | $ | 416 | | | $ | (120) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Throughput (in Bcf): | | | | | | | | | | | |
Residential | 14 | | 15 | | (7) | % | | 138 | | 166 | | (17) | % |
Commercial and Industrial | 84 | | 81 | | 4 | % | | 308 | | 307 | | — | % |
Total | 98 | | 96 | | 2 | % | | 446 | | 473 | | (6) | % |
Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
Heating degree days | 20 | % | | 85 | % | | (65) | % | | 87 | % | | 108 | % | | (21) | % |
Number of metered customers at end of period: | | | | | | | | | | | |
Residential | 3,967,080 | | 3,920,848 | | 1 | % | | 3,967,080 | | 3,920,848 | | 1 | % |
Commercial and Industrial | 299,915 | | 296,144 | | 1 | % | | 299,915 | | 296,144 | | 1 | % |
Total | 4,266,995 | | 4,216,992 | | 1 | % | | 4,266,995 | | 4,216,992 | | 1 | % |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| (in millions, except throughput and customer data) |
Revenues | $ | 398 |
| | $ | 377 |
| | $ | 1,791 |
| | $ | 1,693 |
|
Expenses: | | | | | | | |
Natural gas | 117 |
| | 104 |
| | 742 |
| | 679 |
|
Operation and maintenance | 163 |
| | 159 |
| | 531 |
| | 526 |
|
Depreciation and amortization | 66 |
| | 61 |
| | 194 |
| | 180 |
|
Taxes other than income taxes | 33 |
| | 31 |
| | 104 |
| | 106 |
|
Total expenses | 379 |
| | 355 |
| | 1,571 |
| | 1,491 |
|
Operating Income | $ | 19 |
| | $ | 22 |
| | $ | 220 |
| | $ | 202 |
|
Throughput (in Bcf): | | | | | | | |
Residential | 13 |
| | 12 |
| | 94 |
| | 105 |
|
Commercial and industrial | 50 |
| | 51 |
| | 189 |
| | 193 |
|
Total Throughput | 63 |
| | 63 |
| | 283 |
| | 298 |
|
Number of customers at end of period: | | | | | | | |
Residential | 3,179,284 |
| | 3,143,357 |
| | 3,179,284 |
| | 3,143,357 |
|
Commercial and industrial | 253,041 |
| | 251,043 |
| | 253,041 |
| | 251,043 |
|
Total | 3,432,325 |
| | 3,394,400 |
| | 3,432,325 |
| | 3,394,400 |
|
Three months ended September 30, 2017 compared to three months ended September 30, 2016
Our Natural Gas Distribution business segment reported operating income of $19 millionThe following table provides variance explanations for the three months ended September 30, 20172023 compared to $22 million for the three months ended September 30, 2016.
Operating income decreased $3 million2022 as a result ofwell as for the following key factors:
increased depreciation and amortization expense, primarily due to ongoing additions to plant-in-service, and other taxes of $6 million;
lower usage of $4 million, primarily due to the timing of a decoupling normalization adjustment; and
higher operation and maintenance expenses of $3 million.
These decreases were partially offset by the following:
rate relief increased $5 million, primarily from Texas jurisdictions of $2 million, Arkansas rate case filing of $1 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 increases 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 for2023 compared to the nine months ended September 30, 2017 compared to $202 million2022 by major income statement caption for the nine months ended September 30, 2016.Natural Gas reportable segment:
| | | | | | | | | | | | | | |
| | Favorable (Unfavorable) |
| | Three Months Ended September 30, 2023 vs 2022 | | Nine Months Ended September 30, 2023 vs 2022 |
| | (in millions) |
Revenues | | | | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | — | | | $ | (38) | |
Weather and usage | | (2) | | | (11) | |
Cost of natural gas, offset in utility natural gas, fuel and purchased power below | | (143) | | | (255) | |
Gross receipts tax, offset in taxes other than income taxes below | | — | | | (8) | |
Energy efficiency, offset in operation and maintenance below | | — | | | (9) | |
| | | | |
| | | | |
| | | | |
Non-volumetric and miscellaneous revenue | | 13 | | | 16 | |
Changes in non-utility revenues | | 6 | | | 14 | |
Customer growth | | 3 | | | 16 | |
Pass-through revenues, offset in operation and maintenance below | | 6 | | | 21 | |
Customer rates and impact of the change in rate design | | 22 | | | 56 | |
Total | | $ | (95) | | | $ | (198) | |
Utility natural gas, fuel and purchased power | | | | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | — | | | $ | 23 | |
Cost of natural gas, offset in revenues above | | 143 | | | 255 | |
| | | | |
| | | | |
Total | | $ | 143 | | | $ | 278 | |
Non-utility costs of revenues, including natural gas | | | | |
Other, primarily non-utility cost of revenues | | $ | — | | | $ | 1 | |
Total | | $ | — | | | $ | 1 | |
Operation and maintenance | | | | |
| | | | |
Corporate support services | | $ | — | | | $ | 6 | |
Labor and benefits | | (2) | | | 1 | |
Energy efficiency, offset in revenues above | | — | | | 9 | |
Miscellaneous operations and maintenance expense, including bad debt expense | | 6 | | | 10 | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 3 | |
Contract services | | 3 | | | (2) | |
Pass-through expense, offset in revenues above | | (6) | | | (21) | |
Total | | $ | 1 | | | $ | 6 | |
Depreciation and amortization | | | | |
Incremental capital projects placed in service | | $ | (12) | | | $ | (35) | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 2 | |
| | | | |
Total | | $ | (12) | | | $ | (33) | |
Taxes other than income taxes | | | | |
Gross receipts tax, offset in revenues above | | $ | — | | | $ | 8 | |
Other, primarily property taxes | | (2) | | | (2) | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 1 | |
| | | | |
Total | | $ | (2) | | | $ | 7 | |
Gain on sale | | | | |
Net gain on sale of Arkansas and Oklahoma Natural Gas businesses | | $ | — | | | $ | (303) | |
Total | | $ | — | | | $ | (303) | |
Interest expense and other finance charges | | | | |
Changes in outstanding debt | | $ | (9) | | | $ | (56) | |
Other, primarily AFUDC and impacts of regulatory deferrals | | (3) | | | 15 | |
Total | | $ | (12) | | | $ | (41) | |
| | | | |
| | | | |
| | | | |
Other income (expense), net | | | | |
AFUDC - Equity, primarily from increased capital spend | | $ | 3 | | | $ | 7 | |
Decrease to non-service benefit cost | | — | | | 11 | |
Other | | 5 | | | 6 | |
| | | | |
Total | | $ | 8 | | | $ | 24 | |
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 12 to the Interim Condensed Financial Statements.
HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS
OF CONSOLIDATED RESULTS OF OPERATIONS
Houston Electric’s CODM views net income increased $18 million as a resultthe measure of profit or loss for its single reportable segment. Houston Electric’s results of operations are affected by seasonal fluctuations in the following key factors:
rate increasesdemand for electricity. Houston Electric’s results of $25 million, primarilyoperations 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 Texas jurisdictions of $12 million, Arkansas rate case filing of $10 millionREPs and Mississippi RRA of $3 million;
labor and benefits were favorable by $11 million resulting primarily from the recording of a regulatory asset (and a corresponding reduction in expense)Houston Electric’s ability to recover $16 million of prior postretirement expenses in future rates established in the Texas Gulf rate order; and
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, primarily due to ongoing additions to plant-in-service, and other taxes of $10 million;
higher operation and maintenance expenses of $9 million partially resulting from an adjustment associated with the Texas Gulf rate order 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 and maintenance expenses related to energy efficiency programs of $7 million and increased gross receipts taxes of $2 million were offset by corresponding increases in the related revenues.
Energy Services
its regulatory assets. For more information regarding factors that may affect the future results of operations of our Energy ServicesHouston Electric’s business, segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,Affecting Operations — Electric Generation, Transmission and Distribution,” “— Risk Factors Affecting Our Natural Gas DistributionRegulatory, Environmental and Energy Services Businesses” andLegal Risks,” “— Other Risk Factors Affecting Our Businesses or Our Interests in Enable Midstream Partners, LP”Financial, Economic and Market Risks,” “— Risk Factors Affecting Safety and Security Risks” and “— General and Other Risks” in Item 1A of Part I of our 2016the Registrants’ combined 2022 Form 10-K.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | Favorable (Unfavorable) | | 2023 | | 2022 | | Favorable (Unfavorable) |
| (in millions, except operating statistics) |
Revenues: | | | | | | | | | | | |
TDU | $ | 1,027 | | | $ | 879 | | | $ | 148 | | | $ | 2,655 | | | $ | 2,394 | | | $ | 261 | |
Bond Companies | 56 | | | 56 | | | — | | | 129 | | | 168 | | | (39) | |
Total revenues | 1,083 | | | 935 | | | 148 | | | 2,784 | | | 2,562 | | | 222 | |
Expenses: | | | | | | | | | | | |
Operation and maintenance, excluding Bond Companies | 407 | | | 393 | | | (14) | | | 1,186 | | | 1,190 | | | 4 | |
Depreciation and amortization, excluding Bond Companies | 157 | | | 123 | | | (34) | | | 433 | | | 357 | | | (76) | |
Taxes other than income taxes | 70 | | | 65 | | | (5) | | | 201 | | | 196 | | | (5) | |
Bond Companies | 55 | | | 54 | | | (1) | | | 126 | | | 157 | | | 31 | |
Total expenses | 689 | | | 635 | | | (54) | | | 1,946 | | | 1,900 | | | (46) | |
Operating Income | 394 | | | 300 | | | 94 | | | 838 | | | 662 | | | 176 | |
Other Income (Expense): | | | | | | | | | | | |
Interest expense and other finance charges | (69) | | | (50) | | | (19) | | | (185) | | | (148) | | | (37) | |
Interest expense on Securitization Bonds | (2) | | | (3) | | | 1 | | | (6) | | | (11) | | | 5 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other income, net | 5 | | | 5 | | | — | | | 22 | | | 13 | | | 9 | |
Income Before Income Taxes | 328 | | | 252 | | | 76 | | | 669 | | | 516 | | | 153 | |
Income tax expense | 72 | | | 52 | | | (20) | | | 147 | | | 108 | | | (39) | |
Net Income | $ | 256 | | | $ | 200 | | | $ | 56 | | | $ | 522 | | | $ | 408 | | | $ | 114 | |
Throughput (in GWh): | | | | | | | | | | | |
Residential | 13,410 | | 11,525 | | 16 | % | | 27,803 | | 27,223 | | 2 | % |
Total | 33,546 | | 28,928 | | 16 | % | | 80,984 | | 78,565 | | 3 | % |
Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
Cooling degree days | 123 | % | | 105 | % | | 18 | % | | 117 | % | | 111 | % | | 6 | % |
Heating degree days | — | % | | — | % | | — | % | | 87 | % | | 124 | % | | (37) | % |
Number of metered customers at end of period: | | | | | | | | | | | |
Residential | 2,443,150 | | 2,392,107 | | 2 | % | | 2,443,150 | | 2,392,107 | | 2 | % |
Total | 2,751,218 | | 2,696,366 | | 2 | % | | 2,751,218 | | 2,696,366 | | 2 | % |
The following table provides summary data of our Energy Services business segment 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, except throughput and customer data) |
Revenues | $ | 871 |
| | $ | 614 |
| | $ | 2,998 |
| | $ | 1,450 |
|
Expenses: | | | | | | | |
Natural gas | 839 |
| | 591 |
| | 2,865 |
| | 1,389 |
|
Operation and maintenance | 22 |
| | 16 |
| | 65 |
| | 43 |
|
Depreciation and amortization | 3 |
| | 1 |
| | 9 |
| | 5 |
|
Taxes other than income taxes | — |
| | 1 |
| | 1 |
| | 2 |
|
Total expenses | 864 |
| | 609 |
| | 2,940 |
| | 1,439 |
|
Operating Income | $ | 7 |
| | $ | 5 |
| | $ | 58 |
| | $ | 11 |
|
| | | | | | | |
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 |
|
| |
(1) | Includes the change in unrealized mark-to-market value and the impact from derivative assets and liabilities acquired through the purchase of Continuum and AEM. |
| |
(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, 2017 compared to three months ended September 30, 2016
Our Energy Services business segment reported operating income of $7 millionvariance explanations for the three months ended September 30, 20172023 compared to $5 million for the three months ended September 30, 2016. The increase in operating income of $2 million was primarily due to a $4 million increase from mark-to-market accounting for derivatives associated with certain natural gas purchases and sales used to lock in economic margins. Operating income for the three months ended September 30, 2017 also included $2 million of expenses related to the acquisition and integration 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 million for the nine months ended September 30, 2017 compared to $11 million2022 as well as for the nine months ended September 30, 2016. The increase in operating2023 compared to the nine months ended September 30, 2022 by major income statement caption for Houston Electric:
| | | | | | | | | | | | | | |
| | Favorable (Unfavorable) |
| | Three Months Ended September 30, 2023 vs 2022 | | Nine Months Ended September 30, 2023 vs 2022 |
| | (in millions) |
Revenues | | | | |
Transmission Revenues, including TCOS and TCRF, inclusive of costs billed by transmission providers | | $ | 23 | | | $ | 97 | |
Customer rates | | 80 | | | 146 | |
| | | | |
Customer growth | | 8 | | | 20 | |
| | | | |
Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | — | | | (4) | |
| | | | |
Weather impacts and other usage | | 38 | | | 1 | |
| | | | |
| | | | |
Energy efficiency, offset in operations and maintenance below | | (1) | | | 1 | |
Bond Companies, offset in other line items below | | — | | | (39) | |
| | | | |
Total | | $ | 148 | | | $ | 222 | |
Operation and maintenance, excluding Bond Companies | | | | |
All other operation and maintenance expense, including materials and supplies and insurance | | $ | (4) | | | $ | 24 | |
Labor and benefits | | (3) | | | 9 | |
Support services, primarily information technology cost | | (1) | | | (1) | |
Contract services | | (3) | | | (2) | |
| | | | |
| | | | |
| | | | |
Energy efficiency, offset in revenues above | | 1 | | | (1) | |
Transmission costs billed by transmission providers, offset in revenues above | | (4) | | | (25) | |
Total | | $ | (14) | | | $ | 4 | |
Depreciation and amortization, excluding Bond Companies | | | | |
Ongoing additions to plant-in-service | | $ | (34) | | | $ | (76) | |
Total | | $ | (34) | | | $ | (76) | |
Taxes other than income taxes | | | | |
Incremental capital projects placed in service, net of updated property tax rates | | $ | (5) | | | $ | (5) | |
| | | | |
| | | | |
Total | | $ | (5) | | | $ | (5) | |
Bond Companies expense | | | | |
Operations and maintenance and depreciation expense, offset in revenues above | | $ | (1) | | | $ | 31 | |
Total | | $ | (1) | | | $ | 31 | |
Interest expense and other finance charges | | | | |
Changes in outstanding debt | | $ | (18) | | | $ | (47) | |
Other, primarily AFUDC, impacts of regulatory deferrals | | (1) | | | 10 | |
Total | | $ | (19) | | | $ | (37) | |
| | | | |
| | | | |
| | | | |
| | | | |
Interest expense on Securitization Bonds | | | | |
Lower outstanding principal balance, offset in revenues above | | $ | 1 | | | $ | 5 | |
Total | | $ | 1 | | | $ | 5 | |
Other income, net | | | | |
Other income, including AFUDC - Equity | | $ | — | | | $ | 6 | |
Bond Companies interest income, offset in other line items | | — | | | 3 | |
| | | | |
Total | | $ | — | | | $ | 9 | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of $47 million was primarily dueeffective tax rate per period, see Note 12 to a $41 million increase from mark-to-market accountingthe Interim Condensed Financial Statements.
CERC’S MANAGEMENT’S NARRATIVE ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS
CERC’s CODM views net income as the measure of profit or loss for derivatives associated with certain natural gas purchases and sales used to lock in economic margins. Operating incomeits single reportable segment. CERC’s results of operations are affected by seasonal fluctuations in the first nine monthsdemand for natural gas. CERC’s results of 2017operations are also included $3 millionaffected by, among other things, the actions of expenses relatedvarious federal, state and local governmental authorities having jurisdiction over rates CERC charges, debt service costs and income tax expense, CERC’s ability to the acquisitioncollect receivables from customers and integration of AEM. The remaining increase in operating income was primarily dueCERC’s ability to the increased throughput related to the acquisition of AEM in 2017.
Midstream Investments
recover its regulatory assets. For more information regarding factors that may affect the future results of operations of our Midstream Investmentsfor CERC’s business, segment, please read “Risk Factors — Risk Factors Affecting Our Interests in Enable Midstream Partners, LP” andOperations — Natural Gas,” “— Other Risk Factors Affecting Our Businesses or Our Interests in Enable Midstream Partners, LP”Regulatory, Environmental and Legal Risks,” “— Risk Factors Affecting Financial, Economic and Market Risks,” “— Risk Factors Affecting Safety and Security Risks” and “— General and Other Risks” in Item 1A of Part I of our 2016the Registrants’ combined 2022 Form 10-K.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | Favorable (Unfavorable) | | 2023 | | 2022 | | Favorable (Unfavorable) |
| (in millions, except operating statistics) |
Revenues | $ | 583 | | | $ | 672 | | | $ | (89) | | | $ | 3,045 | | | $ | 3,232 | | | $ | (187) | |
Expenses: | | | | | | | | | | | |
Utility natural gas, fuel and purchased power | 141 | | | 276 | | | 135 | | | 1,399 | | | 1,660 | | | 261 | |
Non-utility cost of revenues, including natural gas | 1 | | | 1 | | | — | | | 2 | | | 3 | | | 1 | |
Operation and maintenance | 187 | | | 190 | | | 3 | | | 616 | | | 630 | | | 14 | |
Depreciation and amortization | 125 | | | 113 | | | (12) | | | 365 | | | 333 | | | (32) | |
Taxes other than income taxes | 53 | | | 50 | | | (3) | | | 181 | | | 185 | | | 4 | |
Total expenses | 507 | | | 630 | | | 123 | | | 2,563 | | | 2,811 | | | 248 | |
Operating Income | 76 | | | 42 | | | 34 | | | 482 | | | 421 | | | 61 | |
Other Income (Expense): | | | | | | | | | | | |
Gain on sale | — | | | — | | | — | | | — | | | 557 | | | (557) | |
Interest expense and other finance charges | (44) | | | (32) | | | (12) | | | (131) | | | (91) | | | (40) | |
| | | | | | | | | | | |
Other income (loss), net | 6 | | | — | | | 6 | | | 12 | | | (11) | | | 23 | |
Income Before Income Taxes | 38 | | | 10 | | | 28 | | | 363 | | | 876 | | | (513) | |
Income tax expense | 10 | | | 17 | | | 7 | | | 80 | | | 220 | | | 140 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net Income (Loss) | $ | 28 | | | $ | (7) | | | $ | 35 | | | $ | 283 | | | $ | 656 | | | $ | (373) | |
Throughput (in Bcf): | | | | | | | | | | | |
Residential | 14 | | 14 | | — | % | | 135 | | 161 | | (16) | % |
Commercial and Industrial | 76 | | 74 | | 3 | % | | 282 | | 281 | | — | % |
Total | 90 | | 88 | | 2 | % | | 417 | | 442 | | (6) | % |
Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
Heating degree days | 21 | % | | 85 | % | | (64) | % | | 88 | % | | 108 | % | | (20) | % |
Number of metered customers at end of period: | | | | | | | | | | | |
Residential | 3,863,739 | | 3,817,553 | | 1 | % | | 3,863,739 | | 3,817,553 | | 1 | % |
Commercial and Industrial | 289,376 | | 285,576 | | 1 | % | | 289,376 | | 285,576 | | 1 | % |
Total | 4,153,115 | | 4,103,129 | | 1 | % | | 4,153,115 | | 4,103,129 | | 1 | % |
The following table provides pre-tax equity income of our Midstream Investments business segmentvariance explanations for the three andmonths ended September 30, 2023 compared to the three months ended September 30, 2022 as well as for the 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 Operations
The following table shows2023 compared to the operating income of our Other Operations business segment for the three and nine months ended September 30, 2017 and 2016:2022 by major income statement caption for CERC:
| | | | | | | | | | | | | | |
| | Favorable (Unfavorable) |
| | Three Months Ended September 30, 2023 vs 2022 | | Nine Months Ended September 30, 2023 vs 2022 |
| | (in millions) |
Revenues | | | | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | — | | | $ | (38) | |
Weather and usage | | (2) | | | (11) | |
Cost of natural gas, offset in utility natural gas, fuel and purchased power below | | (135) | | | (238) | |
Gross receipts tax, offset in taxes other than income taxes below | | — | | | (6) | |
Energy efficiency, offset in operation and maintenance below | | — | | | (8) | |
| | | | |
Non-volumetric and miscellaneous revenue | | 14 | | | 16 | |
Changes in non-utility revenues | | 6 | | | 14 | |
| | | | |
Pass-through revenues, offset in operation and maintenance below | | 4 | | | 14 | |
Customer growth | | 3 | | | 15 | |
Customer rates and impact of the change in rate design | | 21 | | | 55 | |
Total | | $ | (89) | | | $ | (187) | |
Utility natural gas, fuel and purchased power | | | | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | — | | | $ | 23 | |
Cost of natural gas, offset in revenues above | | 135 | | | 238 | |
| | | | |
| | | | |
Total | | $ | 135 | | | $ | 261 | |
Non-utility costs of revenues, including natural gas | | | | |
Other, primarily non-utility cost of revenues | | $ | — | | | $ | 1 | |
Total | | $ | — | | | $ | 1 | |
Operation and maintenance | | | | |
Corporate support services | | $ | (1) | | | $ | 6 | |
Labor and benefits | | (2) | | | 1 | |
Energy efficiency, offset in revenues above | | — | | | 8 | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 3 | |
Miscellaneous operations and maintenance expense, including bad debt expense | | 7 | | | 10 | |
Contract services | | 3 | | | — | |
Pass-through expense, offset in revenues above | | (4) | | | (14) | |
| | | | |
| | | | |
| | | | |
Total | | $ | 3 | | | $ | 14 | |
Depreciation and amortization | | | | |
Incremental capital projects placed in service | | $ | (12) | | | $ | (34) | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 2 | |
| | | | |
Total | | $ | (12) | | | $ | (32) | |
Taxes other than income taxes | | | | |
Gross receipts tax, offset in revenues above | | $ | — | | | $ | 6 | |
Other, primarily property taxes | | (3) | | | (3) | |
Nine days in January 2022 for Arkansas and Oklahoma Natural Gas businesses due to sale | | — | | | 1 | |
Total | | $ | (3) | | | $ | 4 | |
Gain on sale | | | | |
Net gain on sale of Arkansas and Oklahoma Natural Gas businesses | | $ | — | | | $ | (557) | |
Total | | $ | — | | | $ | (557) | |
Interest expense and other finance charges | | | | |
Changes in outstanding debt | | $ | (9) | | | $ | (54) | |
Other, primarily AFUDC and impacts of regulatory deferrals | | (3) | | | 14 | |
Total | | $ | (12) | | | $ | (40) | |
| | | | |
| | | | |
| | | | |
Other income (expense), net | | | | |
AFUDC - Equity, primarily from increased capital spend | | $ | 2 | | | $ | 6 | |
Decrease to non-service benefit cost | | 1 | | | 11 | |
Other | | 3 | | | 6 | |
| | | | |
Total | | $ | 6 | | | $ | 23 | |
Income Tax Expense. For a discussion of effective tax rate per period, see Note 12 to the Interim Condensed Financial Statements.
|
| | | | | | | | | | | | | | | |
| 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 |
|
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 2022 Form 10-K, and “Cautionary Statement Regarding Forward-Looking Information” in this combined 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 during the nine months ended September 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Cash provided by (used in): | | | | | | | | | | | |
Operating activities | $ | 3,069 | | | $ | 858 | | | $ | 2,270 | | | $ | 1,325 | | | $ | 545 | | | $ | 753 | |
Investing activities | (3,190) | | | (2,132) | | | (1,320) | | | (229) | | | (2,053) | | | 921 | |
Financing activities | 168 | | | 1,312 | | | (949) | | | (1,220) | | | 1,402 | | | (1,688) | |
Operating Activities. The following items contributed to increased (decreased) net cash provided by operating activities for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| (in millions) |
Cash provided by (used in): | | | |
Operating activities | $ | 1,031 |
| | $ | 1,455 |
|
Investing activities | (892 | ) | | (739 | ) |
Financing activities | (279 | ) | | (710 | ) |
Cash Provided by Operating Activities
Net cash provided by operating activities in the first nine months of 2017 decreased $424 million2023 compared to the first nine months of 2016 due tochanges inworking capital ($301 million), lower 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 2017ended September 30, 2022:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Changes in net income after adjusting for non-cash items | $ | 346 | | | $ | 231 | | | $ | (114) | |
Changes in working capital | 506 | | | 113 | | | 624 | |
Change in net regulatory assets and liabilities (1) | 954 | | | (73) | | | 1,011 | |
| | | | | |
| | | | | |
| | | | | |
Higher pension contribution | (24) | | | — | | | — | |
| | | | | |
Other | (38) | | | 42 | | | (4) | |
| $ | 1,744 | | | $ | 313 | | | $ | 1,517 | |
| | | | | |
| | | | | |
| | | | | |
(1)This change is primarily related to the receipt of proceeds at CenterPoint Energy and CERC from the Texas securitization program. For further details, see Note 6 to the Interim Condensed Financial Statements.
Investing Activities.The following items contributed to (increased) 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 nine months of 2017 increased $153 millionended September 30, 2023 compared to the first nine months ended September 30, 2022:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Proceeds from the sale of equity securities | $ | (702) | | | $ | — | | | $ | — | |
| | | | | |
Capital expenditures | (244) | | | 3 | | | (53) | |
Net change in notes receivable from affiliated companies | — | | | (40) | | | (86) | |
| | | | | |
| | | | | |
Proceeds from divestitures | (1,930) | | | — | | | (2,075) | |
| | | | | |
| | | | | |
Other | (85) | | | (42) | | | (27) | |
| $ | (2,961) | | | $ | (79) | | | $ | (2,241) | |
FinancingActivities. The following items contributed to (increased) 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.
Cash Used in Financing Activities
Netnet cash used in financing activities infor the first nine months of 2017 decreased $431 millionended September 30, 2023 compared to the first nine months 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).ended September 30, 2022:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Net changes in commercial paper outstanding | $ | 124 | | | $ | — | | | $ | (481) | |
| | | | | |
| | | | | |
Net changes in long-term debt and term loans outstanding, excluding commercial paper | 2,391 | | | 176 | | | (696) | |
| | | | | |
| | | | | |
Net changes in debt issuance costs | (24) | | | 3 | | | (2) | |
Net changes in short-term borrowings | (471) | | | — | | | (471) | |
Redemption of Series A Preferred Stock | (800) | | | — | | | — | |
Payment of obligation for finance lease | 218 | | | 218 | | | — | |
Increased payment of common stock dividends | (31) | | | — | | | — | |
Increased payment of preferred stock dividends | (1) | | | — | | | — | |
Net change in notes payable from affiliated companies | — | | | (130) | | | 1,517 | |
Contribution from parent | — | | | (258) | | | 375 | |
Dividend to parent | — | | | (98) | | | 497 | |
| | | | | |
| | | | | |
Other | (18) | | | (1) | | | — | |
| $ | 1,388 | | | $ | (90) | | | $ | 739 | |
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 Common Stock and interest payments on debt, the Registrants’ principal anticipated cash requirements for the remaining three months of 20172023 include the following:
| | | | | | | | | | | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
Estimated capital expenditures | | $ | 802 | | | $ | 379 | | | $ | 329 | |
Scheduled principal payments on Securitization Bonds | | 79 | | | 79 | | | — | |
Maturing senior notes | | 57 | | | — | | | 57 | |
Expected contributions to pension plans and other post-retirement plans | | 4 | | | 1 | | | 1 | |
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| | | | | | |
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capital expenditures of approximately $473 million;
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 three months of 2017.2023 will be met with borrowings under their credit facilities, proceeds from the issuance of long-term debt, term loans, anticipated cash flows from operations, and, with respect to CenterPoint Energy and CERC, proceeds from commercial paper. Discretionary financing or refinancing may result in the issuance of equity 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.
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 11 and guarantees as discussed in Note 13(b) to the Interim Condensed Financial Statements, we have no off-balance sheet arrangements.
Regulatory Matters
Brazos Valley Connection ProjectFebruary 2021 Winter Storm Event
Construction beganFor further information about the February 2021 Winter Storm Event, see Note 6 to the Interim Condensed Financial Statements.
Indiana Electric Securitization of Planned Generation Retirements (CenterPoint Energy)
For further information about the issuance of SIGECO Securitization Bonds, see Note 6 to the Interim Condensed Financial Statements.
Indiana Electric CPCN (CenterPoint Energy)
BTAs
On February 23, 2021, Indiana Electric filed a CPCN with the IURC seeking approval to purchase the Posey Solar project. On October 27, 2021, the IURC issued an order approving the CPCN, authorizing Indiana Electric to purchase the Posey Solar project through a BTA to acquire its solar array assets for a fixed purchase price and approved recovery of costs via a levelized rate over the anticipated 35-year life. Due to community feedback and rising project costs caused by inflation and supply chain issues affecting the energy industry, Indiana Electric, along with Arevon, the developer, announced plans in January 2022 to downsize the Posey Solar project to 191 MW. Indiana Electric collaboratively agreed to the scope change, and on February 1, 2023, Indiana Electric entered into an amended and restated BTA that is contingent on further IURC review and approval. On February 7, 2023, Indiana Electric filed a CPCN with the IURC to approve the amended BTA. With the passage of the IRA, Indiana Electric can now pursue PTCs for solar projects. Indiana Electric has filed an updated CPCN with a request that project costs, net of PTCs, be recovered in rate base, through base rates or the CECA mechanism, depending on which provides more timely recovery. On September 6, 2023 the IURC issued an order approving the CPCN. The Posey Solar project is expected to be placed in service in 2025.
On July 5, 2022, Indiana Electric entered into a BTA to acquire a 130 MW solar array in Pike County, Indiana through a special purpose entity for a capped purchase price. A CPCN for the project was filed with the IURC on July 29, 2022. On September 21, 2022, an agreement in principle was reached resolving all the issues between Indiana Electric and OUCC. The Stipulation and Settlement agreement was filed on October 6, 2022 and a settlement hearing was held on November 1, 2022. On January 11, 2023, the IURC issued an order approving the settlement agreement authorizing Indiana Electric to purchase and acquire the Pike County solar project through a BTA and approved the estimated cost. The IURC also designated the project as a clean energy project, approved the proposed levelized rate and associated ratemaking and accounting treatment. Due to inflationary pressures, the developer disclosed that costs have exceeded the agreed upon levels in the BTA. Once pricing is updated and parties determine whether to continue with the project, Indiana Electric may have to refile for approval of the project with the IURC, which could delay the in-service date from 2025 to 2026.
On January 10, 2023, Indiana Electric filed a CPCN with the IURC to acquire a wind energy generating facility with installed capacity of 200 MWs through a BTA, consistent with its 2019/2020 IRP that calls for up to 300 MWs of wind generation. Indiana Electric has requested recovery of the wind facility via the CECA mechanism, which is expected to be placed in service by the end of 2026. On June 6, 2023 the IURC issued an order approving the CPCN, and thereby authorizing Indiana Electric to purchase the wind generating facility. However, as of the date of the filing of this Form 10-Q, Indiana Electric has not entered into any definitive agreement relating to this wind energy generating facility, and it is not certain that a definitive agreement will be entered into at all.
PPAs
Indiana Electric also sought approval in February 2021 for a 100 MW solar PPA with Clenera LLC in Warrick County, Indiana. The request accounted for increased cost of debt related to this PPA, which provides equivalent equity return to offset imputed debt during the 25 year life of the PPA. In October 2021, the IURC approved the Warrick County solar PPA but denied the request to preemptively offset imputed debt in the PPA cost. Due to rising project costs caused by inflation and supply chain issues affecting the energy industry, Clenera LLC and Indiana Electric were compelled to renegotiate terms of the agreement to increase the PPA price.On January 17, 2023, Indiana Electric filed a request with the IURC to amend the previously approved PPA with certain modifications. Revised purchase power costs are requested to be recovered through the
fuel adjustment clause proceedings over the term of the amended PPA. The amended PPA was approved by the IURC in the second quarter of 2023. The Clenera LLC solar array is expected to be placed in service in the second quarter of 2025.
On August 25, 2021, Indiana Electric filed with the IURC seeking approval to purchase 185 MW of solar power, under a 15-year PPA, from Oriden, which is developing a solar project in Vermillion County, Indiana, and 150 MW of solar power, under a 20-year PPA, from Origis, which is developing a solar project in Knox County, Indiana. On May 4, 2022, the IURC issued an order approving Indiana Electric to enter into both PPAs. In March 2022, when the results of the MISO interconnection study were completed, Origis advised Indiana Electric that the costs to construct the solar project in Knox County, Indiana had increased. The increase was largely driven by escalating commodity and supply chain costs impacting manufacturers worldwide. In August 2022, Indiana Electric and Origis entered into an amended PPA, which reiterated the terms contained in the 2021 PPA with certain modifications. On October 19, 2022, Indiana Electric filed with the IURC seeking approval of the amended PPA with Origis and a hearing was held on January 4, 2023. On February 22, 2023, the IURC issued an order authorizing Indiana Electric to (i) enter into the amended PPA with Origis; (ii) recover the cost of the amended PPA over its full term as proposed; and (iii) use the proposed ratemaking treatment. On January 17, 2023, Indiana Electric filed a request with the IURC to amend the previously approved PPA with Oriden with certain modifications. Revised purchase power costs are requested to be recovered through the fuel adjustment clause proceedings over the term of the amended PPA with Oriden. The amended PPA with Oriden was approved by the IURC in the second quarter of 2023. The Oriden solar array is expected to be placed in service in the second quarter of 2025 and the Origis solar array is expected to be placed in service by the third quarter of 2024.
Natural Gas Combustion Turbines
On June 17, 2021, Indiana Electric filed a CPCN with the IURC seeking approval to construct two natural gas combustion turbines to replace portions of its existing coal-fired generation fleet. On June 28, 2022, the IURC approved the CPCN. The estimated $334 million turbine facility is planned to be constructed at the current site of the A.B. Brown power plant in Posey County, Indiana and would provide a combined output of 460 MW. Indiana Electric received approval for depreciation expense and post in-service carrying costs to be deferred in a regulatory asset until the date Indiana South’s base rates include a return on and recovery of depreciation expense on the Brazos Valley Connectionfacility. A new approximately 23.5 mile pipeline will be constructed and operated by Texas Gas Transmission, LLC to supply natural gas to the turbine facility. Indiana Electric entered into an agreement with Texas Gas Transmission, pending FERC approval of a necessary pipeline, to supply firm gas service to the new combustion turbines being constructed as part of the generation transition. On October 20, 2022, FERC granted Texas Gas Transmission a certificate to construct the pipeline. On November 21, 2022, the Citizens Action Coalition of Indiana, Inc. filed a request for rehearing which was denied on June 8, 2023 when FERC issued a Notice of Denial of Rehearing by Operation of Law. Separately, on February 21, 2023, Citizens Action Coalition of Indiana, Inc. filed a Petition for Review at the United States Court of Appeals for the District of Columbia. The appeal is pending with the briefing schedule recently being released. Finally, on July 7, 2023, FERC issued a Notice to Proceed with Full Construction and Modification Approvals, granting Texas Gas Transmission’s request to proceed, in February 2017,full, with construction of the Henderson County Expansion Project. Indiana Electric granted its contractor a full notice to proceed to construct the turbines on December 9, 2022. The facility is targeted to be operational by mid-2025. Recovery of the proposed natural gas combustion turbines and Houstonregulatory asset will be requested in the next Indiana Electric rate case expected in 2023.
Culley Unit 3 Operations
In June 2022, F.B. Culley Unit 3, an Indiana Electric coal-fired electric generation unit with an installed generating capacity of 270 MW, experienced an operating issue relating to its boiler feed pump turbine. The unit returned to service in March 2023. In testimony filed September 13, 2023, the OUCC and an intervenor that represents industrial customers filed testimony with the IURC alleging that Indiana Electric did not act prudently which led to the unplanned outage and recommended disallowances between $21 million to $27 million. On October 23, 2023, Indiana Electric filed rebuttal testimony with the IURC. Indiana Electric expects to complete construction and energizea decision from the Brazos Valley ConnectionIURC in the first quarterhalf of 2018, ahead of the original June 1, 2018 energization date.2024.
Space City Solar Transmission Interconnection Project (CenterPoint Energy and Houston Electric)
On December 17, 2020, Houston Electric continuesfiled a certificate of convenience and necessity application with the PUCT for approval to anticipate thatbuild a 345 kV transmission line in Wharton County, Texas connecting the finalHillje substation on Houston Electric’s transmission system to the planned 610 MW Space City Solar Generation facility being developed by third-party developer EDF Renewables. The actual 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 the recovery ofdepend on actual land acquisition costs, through interim TCOS updatesconstruction costs, and other factors. In November 2021, the PUCT approved a route that was estimated to cost $25 million and issued a final order on January 12, 2022. There have been project delays due to supply chain constraints in advancethe developer acquiring solar panels.
Freeport Project
In April 2017, Houston Electric submittedexpects construction to be substantially complete by the end of 2023 and the transmission line is expected to be energized shortly after the generation facility is complete.
Kilgore Transmission Project (CenterPoint Energy and Houston Electric)
On August 30, 2023, Houston Electric filed a proposalCCN application with the PUCT for approval to ERCOT requesting its endorsement ofbuild a 138 kV double circuit transmission line in Chambers County, Texas that will loop the existing 138 kV Chevron to Langston circuit number 86 on Houston Electric’s approximately $250transmission system to Houston Electric’s planned Kilgore substation. The actual capital costs of the project, including the transmission line and the planned Kilgore substation, will depend on actual land acquisition costs, construction costs, and other factors and have been estimated to be $60 million transmissionto $99 million. A decision on the approval of the project in the Freeport, PUCT proceeding is expected in the first quarter of 2024.
Texas area,Legislation (CenterPoint Energy, Houston Electric and CERC)
Houston Electric and CERC are also reviewing legislation passed in 2023, including the following pieces of legislation that became law during the 88th Texas Legislature, including:
•House Bill 1500 is effective September 1, 2023 and continues the functions of the PUCT, the Office of Public Utility Counsel, and ERCOT through 2029. This bill also includes an amendment that clarifies the use cases under which TDUs may lease and operate temporary generation during “significant” power outages;
•House Bill 2263 is effective June 12, 2023 and authorizes local distribution companies to offer programs to promote energy conservation and to recover costs prudently incurred to implement such programs under Railroad Commission authority;
•House Bill 2555 is effective June 13, 2023 and allows an electric utility to create a transmission and distribution system resiliency plan with the PUCT and associated cost recovery to enhance its system through hardening, undergrounding certain lines, flood mitigation measures, and vegetation management. We anticipate that the PUCT will open a rule making proceeding; the PUCT has until December 10, 2023 to adopt a rule;
•Senate Bill 947 is effective September 1, 2023 and creates severe criminal offenses for intentional damage to critical infrastructure facilities that create extended power outages;
•Senate Bill 1015 is effective June 18, 2023 and allows utilities to file the DCRF twice a year, on any day the PUCT is open (at least 185 days after filing a full base rate proceeding) and setting an administrative approval timeline of 60 days;
•Senate Bill 1016 is effective May 5, 2023 and requires the PUCT to presume that all employee compensation and benefits are reasonable and necessary when establishing a utility’s rates if based upon market compensation studies issued within the last three years; it includes enhancements to two existing substationsexceptions for utility officer incentives that are based on financial metrics. Certain incentive compensation that is in-line with market studies will be presumed reasonable and recoverable; and
•Senate Bill 1076 is effective June 2, 2023 and moves the construction of a new 345 kv double-circuit transmission line. Capital expenditurestimeline for the projectPUCT to approve certificates of convenience and necessity for transmission projects to 180 days after the date of filing, rather than the first anniversary of the day it was filed.
Minnesota Legislation (CenterPoint Energy and CERC)
The Natural Gas Innovation Act was passed by the Minnesota legislature in June 2021 with bipartisan support. This law establishes a regulatory framework to enable the state’s investor-owned natural gas utilities to provide customers with access to renewable energy resources and innovative technologies, with the goal of reducing greenhouse gas emissions and advancing the state’s clean energy future. The maximum allowable cost for an innovation plan will start at 1.75% of the utility's revenue in the state and could increase to 4% by 2033, subject to review and approval by the MPUC. Specifically, the Natural Gas Innovation Act allows a natural gas utility to submit an innovation plan for approval by the MPUC which could propose the use of renewable energy resources and innovative technologies such as:
•renewable natural gas (produces energy from organic materials such as wastewater, agricultural manure, food waste, agricultural or forest waste);
•renewable hydrogen gas (produces energy from water through electrolysis with renewable electricity such as solar);
•energy efficiency measures (avoids energy consumption in excess of the utility’s existing conservation programs); and
•innovative technologies (reduces or avoids greenhouse gas emissions using technologies such as carbon capture).
On June 28, 2023, CERC submitted its first innovation plan to the MPUC; the five-year plan includes 18 pilot projects and seven smaller research-and-development projects. These projects will deploy and evaluate a broad array of innovative resources including made-in-Minnesota alternative gases such as renewable natural gas and green hydrogen as well as pioneering technologies such as a networked geothermal district energy system and end-use carbon capture. The proposed plan requires
approval from the MPUC through a review process that is expected to take about one year. The MPUC requested comments by September 15, 2023 if parties believe that the filing is incomplete based on the reporting requirements or if parties do not believe that that the MPUC’s standard informal proceeding process is appropriate. No parties filed comments regarding completeness or raising concerns that the MPUC’s standard informal procedural process is inappropriate. The initial comment period closes November 3, 2023, reply comments are due January 12, 2024 and supplemental comments are due February 2, 2024; the MPUC indicated that unless warranted by comments received by September 15, 2023, it does not intend to hear this matter before the completion of the entire comment period.
Solar Panel Issues (CenterPoint Energy)
CenterPoint Energy’s current and future solar projects have been impacted by delays and/or increased costs. The delays and inflationary cost pressures communicated from the developers of our solar projects have been primarily due to (i) unavailability of solar panels and other uncertainties related to a DOC investigation on anti-dumping and countervailing duties petition filed by a domestic solar manufacturer, (ii) the December 2021 Uyghur Forced Labor Prevention Act on solar modules and other products manufactured in China's Xinjiang Uyghur Autonomous Region and (iii) persistent general global supply chain and labor availability issues. On December 2, 2022, the DOC issued its preliminary determination, finding four of the eight companies being investigated are attempting to bypass U.S. duties. On August 18, 2023, the DOC announced its final determination and found that five of the eight companies investigated are attempting to bypass U.S. duties by doing minor processing in one of the Southeast Asian countries before shipment to the United States. Pursuant to President Biden’s executive order issued in June 2022, duties will not be collected on any solar module and cell imports from these Southeast Asian countries until June 2024, as long as the imports are consumed in the U.S. market within six months of the termination of the executive order. The executive order could be subject to legal and legislative challenges and its effects remain uncertain. The resolution of these issues will determine what additional costs or delays our solar projects will be incrementalsubject to. These impacts have resulted in cost increases for certain projects, and may result in cost increases in other projects, and such impacts have resulted in, or are expected to its previously disclosed five-year capital plan. Houston Electric anticipates a decision from ERCOTresult in, the fourth quarterneed for us to seek additional regulatory review and approvals. Additionally, significant changes to project costs and schedules as a result of 2017, and if approved, will makethese factors could impact the necessary filings with the PUCT.
PHMSA Matters
On December 14, 2016, PHMSA announced an interim final rule 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, with an announced compliance deadline of January 18, 2018. PHMSA determined, however, that it will not issue enforcement citations to any operators for violations of provisionsviability of the interim final rule that had previously been non-mandatory provisions of American Petroleum Institute Recommended Practices 1170projects. For more information regarding potential delays, cancellations and 1171 until one year after PHMSA issues a final rule, which it expects to publishsupply chain disruptions, see “Item 1A. Risk Factors” 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.Registrants’ 2022 Form 10-K.
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 isRegistrants are periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS(e.g., CSIA, DCRF, DRR, GRIP, 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)TDSIC), its cost of service adjustments in Arkansas, Louisiana, Mississippi(e.g., RSP and Oklahoma (FRP, RSP, RRA and PBRC)RRA), its decoupling mechanism in Minnesota,(e.g., Decoupling and SRC), and its energy efficiency cost trackers in Arkansas, Minnesota, Mississippi(e.g., CIP, DSMA, EECR, EECRF, EEFC and Oklahoma (EECR, CIP, EECR and EECR)EEFR). The table below reflects significant applications pending or completed since our 2016the Registrants’ combined 2022 Form 10-K was filed with the SEC.
SEC through the date of the filing of this Form 10-Q. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mechanism | | Annual Increase (Decrease) (1) (in millions) | | Filing Date | | Effective Date | | Approval Date | | Additional Information |
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(in millions)
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Date
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CenterPoint Energy and Houston Electric (PUCT) |
AMS | | N/A | | June
2017
| | TBD | | TBD | | Final 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
| | TBD | | TBD | | Annual reconciliation filing for program year 2016 and includes proposed performance bonus of $11 million. Anticipated effective date of March 2018. |
DCRF | | 41.8 | | 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. |
TCOS | | 7.844 | | December 2016August 2023 | | February
2017 October 2023 | | February
2017October 2023 | | Based on an incremental increase in total rate base of $109.6 million. |
TCOS | | 39.3 | | September 2017 | | TBD | | TBD | | Based on an incremental increase in total rate base of $263.4 million. |
South Texas and Beaumont/East Texas (Railroad Commission) |
GRIP | | 7.6 | | March
2017
| | July
2017
| | June
2017
| | Based on net change in invested capital of $46.5$405 million for the period February 1, 2023 through June 30, 2023. Notice of Approval issued October 6, 2023. |
EECRF (1) | | 16 | | June 2023 | | TBD | | TBD | | The requested $53 million is comprised primarily of the following: 2024 program costs of $38 million; a credit of $2 million related to the over-recovery of 2022 program costs; the 2022 earned bonus of $16 million and 2024 projected evaluation, measurement and verification costs of $1 million. |
DCRF | | 70 | | April 2023 | | September 2023 | | September 2023 | | The net change in distribution invested capital since its last base rate proceeding of approximately $1.9 billion for the period January 1, 2019 through December 31, 2022 for a revenue increase of $85 million, adjusted for load growth. On July 14, 2023 a settlement was filed that results in a revenue increase of $70 million adjusted for load growth. Order approving the rates included in the settlement was issued September 14, 2023. |
TEEEF (1) | | 149 | | April 2023 | | TBD | | TBD | | A total Rider TEEEF revenue requirement of $188 million for cost incurred through December 31, 2022. The revenue change between the rates resulting from the 2022 TEEEF and this application is $149 million. Interim rates effective September 1, 2023. Settlement in principle announced and motion to abate filed October 12, 2023. |
TCOS | | 40 | | March 2023 | | May 2023 | | May 2023 | | Based on net change in invested capital of $367 million for the period August 1, 2022 through January 31, 2023. |
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Mechanism | | Annual Increase (Decrease) (1) (in millions) | | Filing Date | | Effective Date | | Approval Date | | Additional Information |
DCRF | | 117 | | April 2022 | | April 2023 | | April 2023 | | Original filing included both capital that has traditionally been recovered under DCRF and TEEEF capital; the filing was separated into traditional DCRF and TEEEF in June 2022. The traditional DCRF portion revenue requirement of $78 million was approved and was implemented September 1, 2022. A final order was issued on April 5, 2023 approving a TEEEF revenue requirement of $39 million with rates effective April 15, 2023. On April 28, 2023 and May 1, 2023 certain intervenors filed motions for rehearing of the PUCT’s April 5, 2023 order. On May 25, 2023 the PUCT issued its order on rehearing which clarified some of the findings, but did not change the approval of TEEEF cost recovery. On June 19, 2023 certain intervenors filed motions for rehearing of the May 25, 2023 order on rehearing. The PUCT denied the motions for rehearing in an order issued on August 3, 2023. See Note 6 to the Interim Condensed Financial Statements for further information. |
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CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) |
Rate CaseGRIP | | 16.560 | | November 2016March 2023 | | May
2017 June 2023 | | May
2017 June 2023 | | The Railroad Commission approved a unanimous settlement agreement establishing parametersBased on net change in invested capital for future GRIP filings, including a 9.6% ROE on a 55.15% equity ratio.calendar year 2022 of $390 million. |
Texarkana, Texas Service Area (Multiple City Jurisdictions)CenterPoint Energy and CERC - Minnesota (MPUC) |
Rate Case | | 1.1 | | July
2017CIP Financial Incentive (1)
| | September
2017 8 | | August 2017May 2023 | | Approved rates are consistent with Arkansas rates approved in 2016.September 2023 | | October 2023 | | CIP Financial Incentive based on 2022 CIP program activity. |
Arkansas (APSC)CenterPoint Energy and CERC - Mississippi |
EECR (2)RRA (1) | | 7 | 0.5 | May 2023 | May
2017
| October 2023 | January 2018 | October 2023 | September 2017 | | Recovers $11.0 million, including an incentiveBased ROE of $0.510.098% with 100 basis point (+/-) earnings band. Revenue increase of approximately $8 million based on 2016 program performance.2022 test year adjusted earned ROE of 5.66%. Interim increase of approximately $1 million implemented May 31, 2023. Settled increase of approximately $7 million approved and implemented October 3, 2023. Order authorized recovery of regulatory assets due to COVID-19 in the amount of $0.3 million over the 2024 calendar year. |
FRPCenterPoint Energy and CERC - Louisiana (LPSC) |
RSP(1) | | 7.66 | | April
2017September 2022 | | October
2017May 2023 | | September 2017April 2023 | | Based on ROE of 9.5% as approved9.95% with 50 basis point (+/-) earnings band. The North Louisiana increase, net of TCJA effects considered outside of the earnings band, is $3 million based on a test year ended June 2022 and adjusted ROE of 7.05%. The South Louisiana increase, net of TCJA effects considered outside of the earnings band, is $5 million based on a test year ended June 2022 and adjusted ROE of 4.19%. The TCJA refund impact to North Louisiana and South Louisiana was $1 million and $1 million, respectively. North Louisiana and South Louisiana also seek to recover regulatory assets due to COVID-19 bad debt expenses in the lastamounts of $0.7 million and $0.3 million, respectively. Interim rates implemented on December 28, 2022, subject to refund. On April 5, 2023 the LPSC issued an order approving a joint settlement for $2.7 million in North Louisiana and $4.6 million in South Louisiana in addition to the full impacts of TCJA and COVID-19 recoveries. Implementation occurred in May 2023 upon approval of compliance tariff. |
RSP | | 10 | | September 2023 | | TBD | | TBD | | Based on ROE of 9.95% with 50 basis point (+/-) earnings band. The North Louisiana increase, net of TCJA effects considered outside of the earnings band and completion of COVID-19 asset recovery, is $5 million based on a test year ended June 2023 and adjusted ROE of 5.08%. The South Louisiana increase, net of TCJA effects considered outside of the earnings band and completion of COVID-19 asset recovery, is $5 million based on a test year ended June 2023 and adjusted ROE of 5.47%. The TCJA refund impact to North Louisiana and South Louisiana was $0.6 million and $0.4 million, respectively. Interim rates may be implemented on December 28, 2023, subject to refund. |
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Mechanism | | Annual Increase (Decrease) (1) (in millions) | | Filing Date | | Effective Date | | Approval Date | | Additional Information |
CenterPoint Energy - Indiana South - Gas (IURC) |
CSIA | | 3 | | April 2023 | | July 2023 | | July 2023 | | Requested an increase of $33 million to rate base, which reflects approximately $3 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. Unanimous Settlement AgreementThe mechanism also includes a change in (over)/under-recovery variance of $1 million annually. Also included are unrecovered deferred Operations & Management expenses of $9 million. OUCC filed on June 2, 2023, recommending approval of the proposed CSIA rates and updated plan as filed, with non-cost recommendations. Rebuttal testimony filed June 16, 2023. A hearing was held June 28, 2023. The IURC issued an Order approving the CSIA on July 26, 2023. |
CSIA | | 3 | | October 2023 | | TBD | | TBD | | Requested an increase of $31 million to rate base, which reflects approximately $3 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 a change in (over)/under-recovery variance of $1 million annually. OUCC files on December 8, 2023. Rebuttal testimony is due December 15, 2023. A hearing is scheduled for January 3, 2024. |
CenterPoint Energy and CERC - Indiana North - Gas (IURC) |
CSIA | | 9 | | April 2023 | | July 2023 | | July 2023 | | Requested an increase of $95 million to rate base, which reflects approximately $9 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 a change in (over)/under-recovery variance of $5 million annually. Also included are unrecovered deferred operations & management expenses of $20 million. OUCC filed on June 2, 2023, recommending approval of the proposed CSIA rates and updated plan as filed, with non-cost recommendations. Rebuttal testimony was filed inon June 16, 2023. A hearing was held June 28, 2023. The IURC issued an Order approving the CSIA on July 2017 for $7.6 million and was subsequently approved.26, 2023. |
BDACSIA | | 3.99 | | March
2017 October 2023 | | June
2017
| | June
2017
| | For the evaluation period between January 2016 and August 2016. Amounts are recorded during the evaluation period. |
Minnesota (MPUC) |
Rate Case | | 56.5 | | August 2017 | | TBD | | TBD | | ReflectsRequested an increase of $98 million to rate base, which reflects approximately $9 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 a change in (over)/under-recovery variance of $1 million annually. OUCC files on December 8, 2023. Rebuttal testimony is due December 15, 2023. A hearing is scheduled for January 3, 2024. |
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CenterPoint Energy and CERC - Ohio (PUCO) |
DRR (1) | | 6 | | May 2023 | | September 2023 | | August 2023 | | Requested an increase of $46 million to rate base for investments made in 2022, which reflects a $6 million annual increase in current revenues. A change in (over)/under-recovery variance of $0.3 million annually is also included in rates. PUCO staff review and recommendation filed June 29, 2023, recommending approval as proposed. VEDO statement of issues resolved in case filed July 14, 2023. PUCO issued a Finding & Order approving the DRR August 23, 2023, and revised rates effective September 1, 2023. |
CenterPoint Energy - Indiana Electric (IURC) |
TDSIC | | 2 | | February 2023 | | June 2023 | | May 2023 | | Requested an increase of $31 million to rate base, which reflects a $5 million annual increase in current revenues. 80% of the revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance and a tax reform credit for a total of ($1 million). OUCC filed on April 3, 2023, recommending approval of the proposed 10.0% ROETDSIC rates and updated plan as filed. A hearing was held on a 52.18% equity ratio. Includes a proposalMay 3, 2023. On May 30, 2023, the IURC issued an order approving the TDSIC rates and updated plan as filed with rates effective June 1, 2023. |
CECA | | — | | February 2023 | | June 2023 | | May 2023 | | Requested an increase of less than $1 million to extend decoupling beyond current expiration date of June 2018. Interim rates reflectingrate base, which reflects an annual increase of $47.8less than $1 million werein current revenues. The mechanism also includes a change in (over)/under-recovery variance of less than ($1 million). OUCC filed on March 31, 2023, recommending approval of the proposed CECA cost recovery with a reduction of approximately $0.3 million. Rebuttal testimony was filed on April 6, 2023. A hearing was held on May 3, 2023. On May 30, 2023, the IURC issued an order approving the CECA rates with a cost recovery reduction of approximately $0.3 million with rates effective October 1, 2017.June 6, 2023. |
CIP (2) | | 13.8 | | May
2017ECA (1)
| | 1 | | May 2023 | | TBD | | TBD | | Requested an increase of $51 million to rate base, which reflects a $1 million annual increase in current revenues. 80% of the revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of less than $1 million. OUCC filed on July 7, 2023, recommending disallowance of up to $5.35 million in costs. Indiana Electric filed a rebuttal on July 14, 2023. Indiana Electric filed a Petition on August 201716, 2023, to reopen record and file supplemental testimony. Indiana Electric filed supplemental testimony on August 31, 2023. OUCC filed supplemental testimony on September 21, 2023. Indiana Electric filed rebuttal supplemental testimony on September 28, 2023. A hearing is scheduled for October 24, 2023. |
| | August 2017 | | Annual reconciliation filing for program year 2016 and includes performance bonus of $13.8 million. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
DecouplingMechanism | | 20.4 | | September 2017 | | SeptemberAnnual Increase (Decrease) (1)
2017(in millions)
| | TBDFiling Date | | ReflectsEffective Date | | Approval Date | | Additional Information |
DSMA (1) | | 16 | | July 2023 | | TBD | | TBD | | The requested $45 million is comprised primarily of the following: 2024 program costs of $11 million and $26 million of lost revenue, under recovery for the period July 1, 2016 through June 30, 2017 and $3.0$3 million related to the under recoveryover-recovery of 2022 program costs and $11 million under-recovery related to a prior period adjustment factor. $9.2variance adjustment; the requested $45 million is an increase of $16 million compared to the prior DSMA. A settlement between Indiana Electric and the OUCC was recognized in 2016reached concerning the $11 million under-recovery which resolves all issues related to the DSMA for January through December 2024 including the $11 million under-recovery. The settlement provides that the IURC should approve the DSMA and $11.2 million has been recognized in 2017.that Indiana Electric will arrange for educational training on demand side management offerings. A settlement hearing is scheduled for October 24, 2023. |
Mississippi (MPSC)TDSIC (1) | | 3 | | August 2023 | | TBD | | TBD | | Requested an increase of $27 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of the revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance and a tax reform credit for a total of ($0.2 million). OUCC filed on October 2, 2023 recommending approval of the proposed TDSIC rates. A hearing is scheduled for October 31, 2023. |
RRA | | 2.3 | | May
2017
| | July
2017
| | July
2017
| | Authorized ROE of 9.59% and a capital structure of 50% debt and 50% equity. |
Louisiana (LPSC) |
RSP | | 1.0 | | September 2016 | | December 2016 | | April
2017
| | Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity. |
RSP | | 3.4 | | September 2017 | | December 2017 | | TBD | | Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity. |
Oklahoma (OCC) |
EECR (2) | | 0.4 | | March
2017
| | November 2017 | | October 2017 | | Recovers $2.6 million, including an incentive of $0.4 million based on 2016 program performance. |
PBRC | | 2.2 | | March
2017
| | November 2017 | | October 2017 | | Based on ROE of 10%. |
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(1) | Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates. |
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(2) | Amounts are recorded when approved. |
(1)Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates.
Inflation Reduction Act (IRA)
On August 16, 2022, the IRA was signed into law. The new law extends or creates tax-related energy incentives for solar, wind and alternative clean energy sources, implements, subject to certain exceptions, a 1% tax on share repurchases after December 31, 2022, and implements a 15% corporate alternative minimum tax based on the AFSI of those corporations with an average AFSI of $1 billion over the most recent three-year period (i.e., the CAMT). The IRA did not have a material impact on the Registrants’ 2022 financial results and no material impact is expected for 2023 financial results. The Registrants may be currently subject to the CAMT, pending future guidance relating to comments requested in response to Notice 2023-64. If the Registrants are subject to the CAMT for 2023, the calculation of regular tax will exceed minimum tax for 2023; therefore, no minimum tax is expected to be paid. Further guidance on the tax provisions of the IRA is expected and the Registrants continue to evaluate the IRA provisions for the effect on their future financial results.
Greenhouse Gas Regulation and Compliance (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 July 8, 2019, the EPA published the ACE rule, which (i) repealed the CPP rule; (ii) replaced the CPP rule with a program that requires states to implement a program of energy efficiency improvement targets for individual coal-fired electric generating units; and (iii) amended the implementing regulations for Section 111(d) of the Clean Air Act. On January 19, 2021, the majority of the ACE rule — including the CPP repeal, CPP replacement, and the timing-related portions of the Section 111(d) implementing rule — was struck down by the U.S. Court of Appeals for the D.C. Circuit and on October 29, 2021, the U.S. Supreme Court agreed to consider four petitions filed by various coal interests and a coalition of 19 states. On June 30, 2022, the U.S. Supreme Court ruled that the EPA exceeded its authority in promulgating the CPP. On May 11, 2023, the EPA announced proposed emission limits and guidelines for carbon dioxide from fossil fuel-fired power plants under Section 111 of the Clean Air Act which, if finalized, apply new GHG performance standards for those existing coal-fired units expected to continue operation beyond December 31, 2029. We are currently reviewing the proposal for applicability to existing and new gas-fired generating units, but would note that CenterPoint Energy does not currently have plans to operate any of its coal-fired units beyond December 2029.
The Biden administration recommitted the United States to the Paris Agreement, which can be expected to drive a renewed regulatory push to require further GHG emission reductions from the energy sector and proceeded to lead negotiations at the global climate conference in Glasgow, Scotland. On April 22, 2021, President Biden announced new goals of 50% reduction of economy-wide GHG emissions, and 100% carbon-free electricity by 2035, which formed the basis of the U.S. commitments announced in Glasgow. In September 2021, CenterPoint Energy announced its net zero emissions goals for both Scope 1 emissions and certain Scope 2 emissions by 2035 as well as a goal to reduce certain Scope 3 emissions by 20% to 30% by 2035. Because Texas is an unregulated market, CenterPoint Energy’s Scope 2 estimates do not take into account Texas electric transmission and distribution assets in the line loss calculation and, in addition, exclude emissions related to purchased power in Indiana between 2024 and 2026 as estimated. CenterPoint Energy’s Scope 3 emissions estimates are based on the total natural
gas supply delivered to residential and commercial customers as reported in the U.S. Energy Information Administration (EIA) Form EIA-176 reports and do not take into account the emissions of transport customers and emissions related to upstream extraction. These emission goals are expected to be used to position CenterPoint Energy to comply with anticipated future regulatory requirements from the current and future administrations to further reduce GHG emissions. CenterPoint Energy’s and CERC’s revenues, operating costs and capital requirements could be adversely affected as a result of any regulatory action that would require installation of new control technologies or a modification of their operations or would have the effect of reducing the consumption of natural gas. The IRA established the Methane Emissions Reduction Program, which imposes a charge on methane emissions from certain natural gas transmission facilities, and the EPA has proposed new regulations targeting reductions in methane emissions, which if implemented will increase costs related to production, transmission and storage of natural gas. Houston Electric, in contrast to some electric utilities including Indiana Electric, does not generate electricity, other than TEEEF, and thus is not directly exposed to the risk of high capital costs and regulatory uncertainties that face electric utilities that burn fossil fuels to generate electricity. CenterPoint Energy’s net zero emissions goals are aligned with Indiana Electric’s generation transition plan and are expected to position Indiana Electric to comply with anticipated future regulatory requirements related to GHG emissions reductions. Nevertheless, Houston Electric’s and Indiana Electric’s revenues could be adversely affected to the extent any resulting regulatory action has the effect of reducing consumption of electricity by ultimate consumers within their respective service territories. Likewise, incentives to conserve energy or to use energy sources other than natural gas could result in a decrease in demand for the Registrants’ services. For example, Minnesota has enacted the Natural Gas Innovation Act that seeks to provide customers with access to renewable energy resources and innovative technologies, with the goal of reducing GHG emissions.Further, certain local government bodies have introduced or are considering requirements and/or incentives to reduce energy consumption by certain specified dates. For example, Minneapolis has adopted carbon emission reduction goals in an effort to decrease reliance on fossil gas. Additionally, cities in Minnesota within CenterPoint Energy’s Natural Gas operational footprint are considering initiatives to eliminate natural gas use in buildings and focus on electrification. Also, Minnesota cities may consider seeking legislative authority for the ability to enact voluntary enhanced energy standards for all development projects. These initiatives could have a significant impact on CenterPoint Energy and its operations, and this impact could increase if other cities and jurisdictions in its service area enact similar initiatives. Further, our third party suppliers, vendors and partners may also be impacted by climate change laws and regulations, which could impact CenterPoint Energy’s business by, among other things, causing permitting and construction delays, project cancellations or increased project costs passed on to CenterPoint Energy. Conversely, regulatory actions that effectively promote the consumption of natural gas because of its lower emissions characteristics would be expected to benefit CenterPoint Energy and CERC and their natural gas-related businesses. At this time, however, we cannot quantify the magnitude of the impacts from possible new regulatory actions related to GHG emissions, either positive or negative, on the Registrants’ businesses.
Compliance costs and other effects associated with climate change, reductions in GHG emissions and obtaining renewable energy sources remain uncertain. Although the amount of compliance costs remains uncertain, any new regulation or legislation relating to climate change will likely result in an increase in compliance costs. While the requirements of a federal or state rule remain uncertain, CenterPoint Energy will continue to monitor regulatory activity regarding GHG emission standards that may affect its business. Currently, CenterPoint Energy does not purchase carbon credits. In connection with its net zero emissions goals, CenterPoint Energy is expected to purchase carbon credits in the future; however, CenterPoint Energy does not currently expect the number of credits, or cost for those credits, to be material.
Climate Change Trends and Uncertainties
As a result of increased awareness regarding climate change, coupled with adverse economic conditions, availability of alternative energy sources, including private solar, microturbines, fuel cells, energy-efficient buildings and energy storage devices, and new regulations restricting emissions, including potential regulations of methane emissions, some consumers and companies may use less energy, meet their own energy needs through alternative energy sources or avoid expansions of their facilities, including natural gas facilities, resulting in less demand for the Registrants’ services. As these technologies become a more cost-competitive option over time, whether through cost effectiveness or government incentives and subsidies, certain customers may choose to meet their own energy needs and subsequently decrease usage of the Registrants’ systems and services, which may result in, among other things, Indiana Electric’s generating facilities becoming less competitive and economical. Further, evolving investor sentiment related to the use of fossil fuels and initiatives to restrict continued production of fossil fuels have had significant impacts on CenterPoint Energy’s electric generation and natural gas businesses. For example, because Indiana Electric’s current generating facilities substantially rely on coal for their operations, certain financial institutions choose not to participate in CenterPoint Energy’s financing arrangements. Conversely, demand for the Registrants’ services may increase as a result of customer changes in response to climate change. For example, as the utilization of electric vehicles increases, demand for electricity may increase, resulting in increased usage of CenterPoint Energy’s systems and services. Any negative opinions with respect to CenterPoint Energy’s environmental practices or its ability to meet the
challenges posed by climate change formed by regulators, customers, investors, legislators or other stakeholders could harm its reputation.
To address these developments, CenterPoint Energy announced its net zero emissions goals for both Scope 1 emissions and certain Scope 2 emissions by 2035. Indiana Electric’s 2019/2020 IRP identified a preferred portfolio that retires 730 MW of coal-fired generation facilities and replaces these resources with a mix of generating resources composed primarily of renewables, including solar, wind, and solar with storage, supported by dispatchable natural gas combustion turbines including a pipeline to serve such natural gas generation. Indiana Electric continues to execute on its 2019/2020 IRP and has received initial approvals for 756 MWs of the 700-1,000 MWs identified within Indiana Electric’s 2019/2020 IRP. Additionally, as reflected in its 10-year capital plan announced in September 2021, CenterPoint Energy anticipates spending over $3 billion in clean energy investments and enablement, which may be used to support, among other things, renewable energy generation and electric vehicle expansion. CenterPoint Energy believes its planned investments in renewable energy generation and corresponding planned reduction in its GHG emissions as part of its net zero emissions goals support global efforts to reduce the impacts of climate change. Indiana Electric has conducted a new IRP, which was submitted to the IURC in May 2023, to identify an appropriate generation resource portfolio to satisfy the needs of its customers and comply with environmental regulations. The proposed preferred portfolio is the second evolution to the generation transition plan to move away from coal-fired generation to a more sustainable portfolio of resources. Indiana Electric plans to convert its last remaining coal unit to natural gas by 2027 and to add a significant amount of additional renewable resources through 2033.
To the extent climate changes result in warmer temperatures in the Registrants’ service territories, financial results from the Registrants’ businesses could be adversely impacted. For example, CenterPoint Energy’s and CERC’s Natural Gas could be adversely affected through lower natural gas sales. On the other hand, warmer temperatures in CenterPoint Energy’s and Houston Electric’s electric service territory may increase revenues from transmission and distribution and generation through increased demand for electricity used for cooling. Another possible result of climate change is more frequent and more severe weather events, such as hurricanes, tornadoes and flooding, including such storms as the February 2021 Winter Storm Event. Since many of the Registrants’ facilities are located along or near the Texas gulf coast, increased or more severe hurricanes or tornadoes could increase costs to repair damaged facilities and restore service to customers. CenterPoint Energy’s current 10-year capital plan includes capital expenditures to maintain reliability and safety and increase resiliency of its systems as climate change may result in more frequent significant weather events. Houston Electric does not own or operate any electric generation facilities other than, since September 2021, its operation of TEEEF. Houston Electric transmits and distributes to customers of REPs electric power that the REPs obtain from power generation facilities owned by third parties. To the extent adverse weather conditions affect the Registrants’ suppliers, results from their energy delivery businesses may suffer. For example, in Texas, the February 2021 Winter Storm Event caused an electricity generation shortage that was severely disruptive to Houston Electric’s service territory and the wholesale generation market and also caused a reduction in available natural gas capacity. When the Registrants cannot deliver electricity or natural gas to customers, or customers cannot receive services, the Registrants’ financial results can be impacted by lost revenues, and they generally must seek approval from regulators to recover restoration costs. To the extent the Registrants are unable to recover those costs, or if higher rates resulting from recovery of such costs result in reduced demand for services, the Registrants’ future financial results may be adversely impacted. Further, as the intensity and frequency of significant weather events continues, it may impact our ability to secure cost-efficient insurance.
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, see Note 11 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 $4.0 billion as of September 30, 2023. As of October 18, 2023, 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:
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| | | | Amount Utilized as of October 18, 2023 | | | | |
Registrant | | Size of Facility | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | Termination Date |
| | (in millions) | | | | |
CenterPoint Energy | | $ | 2,400 | | | $ | — | | | $ | 8 | | | $ | 550 | | | 5.50% | | December 6, 2027 |
CenterPoint Energy (1) | | 250 | | | — | | | — | | | — | | | —% | | December 6, 2027 |
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Houston Electric | | 300 | | | — | | | — | | | — | | | —% | | December 6, 2027 |
CERC | | 1,050 | | | — | | | 1 | | | 58 | | | 5.43% | | December 6, 2027 |
Total | | $ | 4,000 | | | $ | — | | | $ | 9 | | | $ | 608 | | | | | |
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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 |
(1)This credit facility was issued by SIGECO.
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(1) | Based on the consolidated debt to capitalization covenant in our revolving credit facility and the revolving credit facility of each of Houston Electric 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. |
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(2) | Represents outstanding commercial paper of $397 million and outstanding letters of credit of $6 million. |
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(3) | Represents outstanding letters of credit. |
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(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 LIBORSOFR and the commitment fees fluctuate based on the borrower’s credit rating. Each of the Registrant’s credit facilities provide for a mechanism to replace SOFR with possible alternative benchmarks upon certain benchmark replacement events. The borrowers are currently in compliance with the various business and financial covenants in the threefour revolving credit facilities.
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 to date in 2023, see Note 11 to ourthe Interim Condensed Financial Statements.
Securities Registered with the SEC
On January 31, 2017, CenterPoint Energy, Houston Electric and CERC Corp.May 17, 2023, the Registrants filed a joint shelf registration statement with the SEC 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 expire on January 31, 2020.May 17, 2026. For information related to the Registrants’ debt issuances in 2023, see Note 11 to the Interim Condensed Financial Statements.
Temporary Investments
As of October 26, 2017, we18, 2023, 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 October 18, 2023:
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| Weighted Average Interest Rate | | Houston Electric | | CERC |
| | | (in millions) |
Money pool investments | 5.56% | | $ | 339 | | | $ | — | |
Impact on Liquidity of a Downgrade in Credit Ratings
The interest rate 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, 2017,18, 2023, Moody’s, S&P and Fitch had assigned the following credit ratings to senior debt of CenterPoint Energy and certain subsidiaries:
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| | Moody’s | | Moody’s | | S&P | | Fitch |
Company/InstrumentRegistrant | | RatingBorrower/Instrument | | Rating | | Outlook (1) | | Rating | | Outlook (2) | | Rating | | Outlook (3) |
CenterPoint Energy | | CenterPoint Energy Senior Unsecured Debt | | Baa1Baa2 | | Stable | | BBB+BBB | | PositiveStable | | BBB | | PositiveStable |
CenterPoint Energy | | Vectren Corp. Issuer Rating | | n/a | | n/a | | BBB+ | | Stable | | n/a | | n/a |
CenterPoint Energy | | SIGECO Senior Secured Debt | | A1 | | Stable | | A | | Stable | | n/a | | n/a |
Houston Electric | | Houston Electric Senior Secured Debt | | A1A2 | | Stable | | A | | PositiveStable | | A+A | | Stable |
CERC | | CERC Corp. Senior Unsecured Debt | | Baa2A3 | | Stable | | A-BBB+ | | PositiveStable | | BBBA- | | PositiveStable |
CERC | | Indiana Gas Senior Unsecured Debt | | n/a | | n/a | | BBB+ | | Stable | | n/a | | n/a |
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(1) | A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. |
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(2) | An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. |
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(3) | A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period. |
We(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 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.
The 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, 2017,2023, the impact on the borrowing costs under the three revolving credit facilities would have been immaterial.insignificant. 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 and Energy Services businessreportable segments.
CES, a wholly-owned subsidiary of CERC Corp. operating in our Energy Services business segment, 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, CES 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. To the extent that the credit exposure that a counterparty has to CES at a particular time does not exceed that credit threshold, CES 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. As of September 30, 2017, the amounts posted as collateral and settled-to-market aggregated approximately $35 million. Should the credit ratings of CERC Corp. (as the credit support provider for CES) fall below certain levels, CES would be required to provide additional collateral up to the amount of its previously unsecured credit limit. We estimate that as of September 30, 2017, unsecured credit limits extended to CES by counterparties aggregated $358 million, and $1 million 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 $197up to $253 million as of September 30, 2017.2023. 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 and ZENS-Related Securities 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, 2017,2023, deferred taxes of approximately $472$705 million would have been payable in 2017.2023. If all the TWZENS-Related Securities had been sold on September 30, 2017,2023, capital gains taxes of approximately $331$87 million would have been payable in 2017.
2023 based on 2023 tax rates in effect. For additional information about ZENS, see Note 10 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 and CERC’s term loan agreement, a payment default on, or a non-payment default, event or condition 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. Under SIGECO’s revolving credit facility, a payment default on, or a non-payment default, event or condition that permits acceleration of, any indebtedness for borrowed money and certain other specific types of obligations (including guarantees) exceeding $75 million by SIGECO or any of its significant subsidiaries will cause a default under SIGECO’s credit facility. A default by CenterPoint Energy would not trigger a default under ourits subsidiaries’ debt instruments or revolving credit facilities.
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 announced that we were evaluating strategic alternatives for our investment in Enable, including The Registrants may continue to explore asset sales as a sale or spin-off qualifying under Section 355means to efficiently finance a portion 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 to reduce our ownership in Enable over time through a sale of the common units we holdits increased capital expenditures in the public equity markets,future, subject to market conditions. There can be no assurances that these evaluations will result in any specific action, and we do not intendthe considerations listed above. For further information, see Note 3 to disclose further developments on these initiatives unless and until our board of directors approves a specific action or as otherwise required.
Enable Midstream Partners
We receive quarterly cash distributions from Enable on its common units and Series A Preferred Units we own. A reduction in the cash distributions we receive from Enable could significantly impact our liquidity. For additional information about cash distributions from Enable, see Notes 8 and 16 to our 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
We have entered into partial weather hedges for certain NGD jurisdictionsCollection of Receivables from REPs (CenterPoint Energy and Houston Electric)
Houston Electric’s service territoryreceivables from the distribution of electricity are collected from REPs that supply the electricity Houston Electric distributes to mitigatetheir customers. Before conducting business, a REP must register with the impactPUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, weather events such as the February 2021 Winter Storm Event, structural problems in the market served by ERCOT or financial difficulties of fluctuations from normal weather. We remain exposedone or more REPs could impair the ability of these REPs to some weather risk aspay for Houston Electric’s services or could cause them to delay such payments. Houston Electric depends on these REPs to remit payments on a resulttimely basis, and any delay or default in payment by REPs could adversely affect Houston Electric’s cash flows. In the event of a REP 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 partial hedges. For more information about our weather hedges, see Note 6(a)REP. Applicable regulatory provisions require that customers be shifted to our Interim Condensed Financial Statements.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:
•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 or the use of alternative sources of financings on capital and other financial markets;
•various legislative or regulatory actions;
•incremental collateral, if any, that may be required due to regulation of derivatives;derivatives (CenterPoint Energy);
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;
•slower customer payments and increased write-offs of receivables due to higher natural gas prices, or changing economic conditions;conditions, public health threats or severe weather events (CenterPoint Energy and CERC);
•the satisfaction of any obligations pursuant to guarantees;
•the outcome of litigation, brought by or against us;including litigation related to the February 2021 Winter Storm Event;
•contributions to pension and postretirement benefit plans;
•disruptions in the banking industry, including bank failures and uncertainty regarding bank stability;
•restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and
Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money
Certain provisions in certain note purchase agreements relating to debt issued by CERC have the effect of restricting the amount of secured debt issued by CERC and debt issued by subsidiaries of CERC Corp. Additionally, Houston Electric has contractually agreed that it will not issue additional firstand SIGECO are limited in the amount of mortgage bonds subject to certain exceptions.they can issue by the General Mortgage and SIGECO’s mortgage indenture, respectively. For information about the total debt to capitalization financial covenants in ourthe Registrants’ and SIGECO’s revolving credit facilities, see Note 11 to ourthe Interim Condensed Financial Statements.
NEW
CRITICAL ACCOUNTING PRONOUNCEMENTSPOLICIES
A critical accounting policy is one that is both important to the presentation of the Registrants’ financial condition and results of operations and requires management to make difficult, subjective or complex accounting estimates. An accounting estimate is an approximation made by management of a financial statement element, item or account in the financial statements. Accounting estimates in the Registrants’ historical consolidated financial statements measure the effects of past business transactions or events, or the present status of an asset or liability. Additionally, different estimates that the Registrants could have used or changes in an accounting estimate that are reasonably likely to occur could have a material impact on the presentation of their financial condition, results of operations or cash flows. The circumstances that make these judgments difficult, subjective and/or complex have to do with the need to make estimates about the effect of matters that are inherently uncertain. Estimates and assumptions about future events and their effects cannot be predicted with certainty. The Registrants base their estimates on historical experience and on various other assumptions that they believe to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Registrants’ operating environment changes.
Impairment of Long-Lived Assets, Including Identifiable Intangibles and Goodwill
The Registrants review the carrying value of long-lived assets, including identifiable intangibles and goodwill, 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 and goodwill, future cash flows, interest rate, and regulatory matters, and could result in an impairment charge.
CenterPoint Energy and CERC completed their 2023 annual goodwill impairment test during the third quarter of 2023 and determined, based on an income approach or a weighted combination of income and market approaches, that no goodwill impairment charge was required for any reporting unit. The fair values of each reporting unit significantly exceeded the carrying value of the reporting unit as of the last annual test.
From time to time, the Registrants consider the acquisition or the disposition of assets or businesses, and market information obtained through these exploratory activities is considered during the preparation of the financial statements to determine if an interim impairment test is required. The Registrants did not identify triggering events in connection with their preparation of the financial statements for the three and nine months ended September 30, 2023. See discussion below for goodwill attributable to disposed businesses, including assets held for sale.
Divestitures, including assets held for sale
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.
As described further in Note 23 to ourthe Interim Condensed Financial Statements, incorporated hereincertain assets and liabilities of Energy Systems Group representing a business were disposed of on June 30, 2023. As a result of the held for sale criteria being met during the same period as the completion of the sale, goodwill attributable to Energy Systems Group of $134 million was reflected in the pre-tax loss on sale of $12 million based on the actual sale proceeds received at closing on June 30, 2023.
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, present value techniques based on estimates of cash flows, or multiples of earnings or revenue performance measures. The fair value could be different if different estimates and assumptions in these valuation techniques were applied.
Fair value measurements require significant judgment and often 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 future market prices. Changes in these assumptions could have a significant impact on the resulting fair value.
For further information, see Note 3 to the Interim Condensed Financial Statements.
Accounting for Securitization of Generation Retirements
Accounting guidance for rate regulated long-lived asset abandonment requires that the carrying value of an operating asset or an asset under construction is removed from property, plant and equipment when it becomes probable that the asset will be abandoned. The Registrants recognize either a loss on abandonment or regulatory asset when they concluded it is probable the cost will be recovered in future rates. The portion of property, plant and equipment that will remain used and useful until abandonment and recovered through depreciation expense in rates will continue to be classified as property, plant and equipment until the asset is abandoned. The Registrants evaluate if an adjustment to the estimated life of the asset and, accordingly, the rate of depreciation, is required to recover the asset while it is still providing service. Determining probability of abandonment or probability of recovery requires significant judgment on the part of management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders and the strength or status of applications for rehearing or state court appeals.
In connection with the securitization financing of qualified costs in the second quarter of 2023 associated with the retirement of SIGECO’s A.B. Brown coal generation facilities, CenterPoint Energy evaluated the VIE consisting of the SIGECO Securitization Subsidiary, a wholly-owned, bankruptcy-remote, special purpose entity, for possible consolidation, including review of qualitative factors such as the power to direct the activities of the VIE and the obligation to absorb losses of the VIE. CenterPoint Energy has the power to direct the significant activities of the VIE and is most closely associated with the VIE as compared to other interests held by reference,the holders of the SIGECO Securitization Bonds. CenterPoint Energy is, therefore, considered the primary beneficiary and consolidated the VIE.
For purposes of reporting cash flows, the Registrants consider cash equivalents to be short-term, highly-liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents held by the SIGECO Securitization Subsidiary solely to support servicing the SIGECO Securitization Bonds as of September 30, 2023 are reflected on CenterPoint Energy’s Consolidated Balance Sheet.
In connection with the issuance of the SIGECO Securitization Bonds, CenterPoint Energy was required to establish a restricted cash account to collateralize the SIGECO Securitization Bonds that were issued in the financing transaction. The restricted cash account is not available for a discussionwithdrawal until the maturity of newthe SIGECO Securitization Bonds and is not included in cash and cash equivalents.
For further information, see Notes 1 and 6 to the Interim Condensed Financial Statements.
Other than the interim goodwill impairment review and securitization transaction discussed above, there have been no significant changes in our critical accounting pronouncements that affect us.policies during the nine months ended September 30, 2023, as compared to the critical accounting policies disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Registrants’ combined 2022 Form 10-K.
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Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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, we2023, 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$1.8 billion and $1.4$4.5 billion as of September 30, 20172023 and December 31, 2016,2022, respectively. If the floating interest rates were to increase by 10%100 basis points from September 30, 20172023 rates, ourCenterPoint Energy’s combined interest expense would increase by approximately $1.4$18 million annually. In September 2023, SIGECO closed on the remarketing of two series of tax-exempt debt of approximately $38 million. For further information, see Note 11 to the Interim Condensed Financial Statements.
As of September 30, 20172023 and December 31, 2016, we2022, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating $7.6$16.6 billion and $7.1$12.5 billion, respectively, in principal amount and having a fair value of $8.1$14.6 billion and $7.5$11.1 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$670 million if interest rates were to decline by 10% from levels at September 30, 2017.2023. 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. On an unconsolidated basis, CenterPoint Energy has no fixed-rate senior notes maturing in 2023; however, CERC has $57 million of fixed-rate senior notes maturing in 2023 that it expects to refinance at current rates.
The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $120$5 million as of September 30, 20172023 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 $18$1 million if interest rates were to decline by 10% from levels at September 30, 2017.2023. Changes in the fair value of the derivative component, a $776$630 million recorded liability at September 30, 2017,2023, 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, 20172023 levels, the fair value of the derivative component liability would increasedecrease by approximately $5$1 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 and 2.5 million shares of WBD Common, which we holdCenterPoint Energy holds to facilitate ourits ability to meet ourits obligations under the ZENS. See Note 10 to the Interim Condensed 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, 20172023 aggregate market value of these shares would result in a net loss of approximately $1less than $1 million,, which would be recorded as an unrealizeda loss in ourCenterPoint Energy’s Condensed Statements of Consolidated Income.
Commodity Price Risk From Non-Trading Activities (CenterPoint Energy and CERC)
We use derivative instruments as economic hedgesCenterPoint Energy’s and CERC’s regulated operations in Indiana have limited exposure to offset the commodity price exposure inherent in our businesses. The commodity risk created by these instruments, including the offsetting impact on the market valuefor transactions involving purchases and sales of natural gas, inventory, is described below. We measure this commodity riskcoal 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 and CERC’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using a sensitivity analysis. For purposesarrangements with an original term of this analysis, we estimate commodity price risk by applying a $0.50 change in the forward NYMEX priceup to our net open10 years. This authority has been utilized to secure fixed price position (including forward fixed price physical contracts, natural gas inventoryusing both physical purchases and fixed price financial contracts) at the end of each period.derivatives. As of September 30, 2017,2023, the recorded fair value of our non-trading energy derivativesderivative assets was a net asset of $80$1 million (before collateral), all of which is related to our Energy Services business segment. A $0.50 change in the forward NYMEX price would have had a combined impact of $3and $1 million, on our non-trading energy derivatives net assetrespectively, for CenterPoint Energy’s and the market value ofCERC’s utility natural gas inventory.operations in Indiana.
CommodityAlthough CenterPoint Energy’s and CERC’s regulated operations are exposed to limited 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 our natural gas inventory (Gas Daily) 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 related fair value hedge (NYMEX) can resulteffect natural gas costs may have on CenterPoint Energy’s financial condition. In 2008, the PUCO approved an exit of the merchant function in volatilityCenterPoint Energy’s and CERC’s Ohio natural gas service territory, allowing Ohio customers to our net income. Over time, any gainspurchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.CERC.
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Item 4. | CONTROLS AND PROCEDURES |
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, 20172023 to provide assurance that information required to be disclosed in ourthe 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, 20172023 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, including environmental legal proceedings that involve a governmental authority as a party and that the Registrants reasonably believe would result in $1,000,000 or more of monetary sanctions, exclusive of interest and costs, under federal, state and local laws that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, affecting CenterPoint Energy,the Registrants, please read Note 13(b)13(c) 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 2022 Form 10-K.
Item 1A.RISK FACTORS
There have been no material changes from the risk factors disclosed in our 2016the Registrants’ combined 2022 Form 10-K.
Ratio
Item 5.OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
During the ninethree months ended September 30, 2017 and 2016 was 3.63 and 2.73, respectively. We do not believe that the ratios for these nine-month periods are necessarily indicative2023, no director or officer of the ratios for the 12-month periods due to the seasonal natureCenterPoint Energy, Houston Electric or CERC adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of our business. The ratios were calculated pursuant to applicable rules of the SEC.Regulation S-K.
The following exhibits are filed herewith:collective bargaining agreement with IBEW 66 related to Houston Electric employees would have expired in May 2023, but Houston Electric and IBEW 66 agreed to renew the agreement on a monthly basis while active negotiations continued on a new collective bargaining agreement. On October 18, 2023, IBEW 66 members voted to ratify the new collective bargaining agreement with Houston Electric. The new collective bargaining agreement will expire in May 2026.
Item 6.EXHIBITS
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 combined 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.
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Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
2.1* | | | | CenterPoint Energy’s Form 8-K dated April 21, 2018 | | 1-31447 | | 2.1 | | x | | | | |
2.2* | | | | CenterPoint Energy’s Form 8-K dated February 3, 2020 | | 1-31447 | | 2.1 | | x | | | | |
2.3* | | | | CenterPoint Energy’s Form 8-K dated February 24, 2020 | | 1-31447 | | 2.1 | | x | | | | x |
2.4* | | | | CenterPoint Energy’s Form 10-Q for the quarter ended March 31, 2021 | | 1-31447 | | 2.4 | | x | | | | x |
3.1 | | | | CenterPoint Energy’s Form 8-K dated July 24, 2008 | | 1-31447 | | 3.2 | | x | | | | |
3.2 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.1 | | | | x | | |
3.3 | |
| | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(1) | | | | | | x |
3.4 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(2) | | | | | | x |
| | Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
3.1 | | | | CenterPoint Energy’s Form 8-K dated July 24, 2008 | | 1-31447 | | 3.2 | |
3.2 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | |
3.3 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | |
3.5 | | 3.5 | | | | CERC Form 10-K for the year ended December 31, 1998 | | 1-13265 | | 3(a)(3) | | x |
3.6 | | 3.6 | | | | CERC Form 10-Q for the quarter ended June 30, 2003 | | 1-13265 | | 3(a)(4) | | x |
3.7 | | 3.7 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | | x | |
3.8 | | 3.8 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.2 | | x | |
3.9 | | 3.9 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(b) | | x |
3.10 | | 3.10 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | | x | |
3.11 | | 3.11 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 3.1 | | x | |
3.12 | | 3.12 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 3.1 | | x | |
3.13 | | 3.13 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 3.1 | | x | |
4.1 | | | | CenterPoint Energy’s Registration Statement on Form S-4 | | 3-69502 | | 4.1 | 4.1 | | | | CenterPoint Energy’s Registration Statement on Form S-4 | | 3-69502 | | 4.1 | | x | |
4.2 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.1 | 4.2 | | | | CenterPoint Energy’s Form 8-K dated August 4, 2023 | | 1-31447 | | 4.1 | | x | |
4.3 | | 4.3 | | | | CenterPoint Energy’s Form 8-K dated May 19, 2003 | | 1-31447 | | 4.1 | | x | |
†4.4 | | †4.4 | | | | x | |
4.5 | | 4.5 | | | | CenterPoint Energy’s Form 10-Q for the quarter ended September 30, 2002 | | 1-31447 | | 4(j)(1) | | x | |
4.6 | | 4.6 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2002 | | 1-31447 | | 4(k)(10) | | x | |
4.7 | | 4.7 | | | | Houston Electric’s Form 8-K dated January 6, 2009 | | 1-3187 | | 4.2 | | x | |
4.8 | | 4.8 | | | | Houston Electric’s Form 8-K dated September 13, 2023 | | 1-3187 | | 4.4 | | x | |
†4.9 | | †4.9 | | | | x | |
|
| | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference |
4.3 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.2 |
4.4 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.3 |
4.5 | | | | CenterPoint Energy’s Form 8-K dated June 16, 2017 | | 1-31447 | | 4.1 |
4.6 | | | | CenterPoint Energy’s Form 8-K dated June 16, 2017 | | 1-31447 | | 4.2 |
4.7 | | | | 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 | |
| | | | | | |
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 | |
| | | | | | |
+12 | | | | | | | | |
+31.1 | | | | | | | | |
+31.2 | | | | | | | | |
+32.1 | | | | | | | | |
+32.2 | | | | | | | | |
+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 |
†10.1 | | | | | | | | | | x | | | | |
†10.2 | | | | | | | | | | x | | | | |
†10.3 | | | | | | | | | | x | | | | |
†10.4 | | | | | | | | | | x | | | | |
10.5 | | | | CenterPoint Energy’s Form 8-K dated September 27, 2023 | | 1-31447 | | 10.1 | | x | | | | |
10.6 | | | | CenterPoint Energy’s Form 8-K dated September 27, 2023 | | 1-31447 | | 10.2 | | x | | | | |
10.7 | | | | CenterPoint Energy’s Form 10-Q for the quarter ended June 30, 2023 | | 1-31447 | | 10.1 | | x | | | | |
†31.1.1 | | | | | | | | | | x | | | | |
†31.1.2 | | | | | | | | | | | | x | | |
†31.1.3 | | | | | | | | | | | | | | x |
†31.2.1 | | | | | | | | | | x | | | | |
†31.2.2 | | | | | | | | | | | | x | | |
†31.2.3 | | | | | | | | | | | | | | x |
†32.1.1 | | | | | | | | | | x | | | | |
†32.1.2 | | | | | | | | | | | | x | | |
†32.1.3 | | | | | | | | | | | | | | x |
†32.2.1 | | | | | | | | | | x | | | | |
†32.2.2 | | | | | | | | | | | | x | | |
†32.2.3 | | | | | | | | | | | | | | 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 |
†101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | x | | x | | x |
†101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | x | | x | | x |
†101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document | | | | | | | | x | | x | | x |
†101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | x | | x | | x |
†104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | x | | x | | x |
| | | | | |
* | Schedules to this agreement have been omitted pursuant to Items 601(a)(5) and 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. |
| |
| |
| CENTERPOINT ENERGY, INC. |
| |
| |
By: | /s/ Kristie L. Colvin |
| Kristie L. Colvin |
| Senior Vice President and Chief Accounting Officer |
| (Duly Authorized Officer and Principal Accounting Officer) |
Date: November 3, 2017October 26, 2023