UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
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(Mark One) |
☑ | 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 March 31, 20212022
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE TRANSITION PERIOD FROM __________________ TO __________________ |
Commission file number 1-31447
CenterPoint Energy, Inc.
(Exact name of registrant as specified in its charter)
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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 |
(Address of Principal Executive Offices) | | (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 |
| | | Chicago Stock Exchange, Inc. |
CenterPoint Energy Inc. | Depositary Shares for 1/20 of 7.00% Series B Mandatory Convertible Preferred Stock, $0.01 par value | CNP/PB | The New York Stock Exchange |
CenterPoint Energy Houston Electric, LLC | 9.15% First Mortgage Bonds due 2021 | n/a | The New York Stock Exchange |
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.
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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 every Interactive Data File required to be submitted 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 such files).
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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,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
CenterPoint Energy, Inc. | þ | 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).
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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 |
Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of April 29, 2021:20, 2022:
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CenterPoint Energy, Inc. | | 580,495,853629,448,787 | 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.
TABLE OF CONTENTS
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PART I. | | FINANCIAL INFORMATION | |
Item 1. | | | |
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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 3. | | | |
Item 4. | | | |
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PART II. | | OTHER INFORMATION | |
Item 1. | | | |
Item 1A. | | | |
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Item 6. | | | |
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GLOSSARY |
ACE | | Affordable Clean Energy |
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AMA | | Asset Management Agreement |
AMS | | Advanced Metering System |
APSC | | Arkansas Public Service Commission |
ARAM | | Average rate assumption method |
ARO | | Asset retirement obligation |
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ARP | | Alternative revenue program |
ARPA | | American Rescue Plan Act of 2021 |
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 LLC, a Delaware limited liability company and an affiliate of Summit Utilities, Inc. |
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ASUAT&T | | Accounting Standards UpdateAT&T Inc. |
AT&T Common | | AT&T Inc. common stock |
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Bcf | | Billion cubic feet |
Board | | Board of Directors of CenterPoint Energy, Inc. |
Bond Companies | | Bond Company III, Bond Company IV and Restoration Bond Company, each a wholly-owned, bankruptcy remote entity formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of Securitization Bonds |
Bond Company III | | CenterPoint Energy Transition Bond Company III, LLC, a wholly-owned subsidiary of Houston Electric |
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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Capital Dynamics | | Capital Dynamics, Inc. |
CARES Act | | Coronavirus Aid, Relief, and Economic Security Act |
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CCR | | Coal Combustion Residuals |
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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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CNG | | Compressed Natural Gas |
CNP Midstream | | CenterPoint Energy Midstream, Inc., a wholly-owned subsidiary of CenterPoint Energy |
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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 |
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 |
COVID-19 ERP | | COVID-19 Electricity Relief Program |
CPCN | | Certificate of Public Convenience and Necessity |
CPP | | Clean Power Plan |
CSIA | | Compliance and System Improvement Adjustment |
DCRF | | Distribution Cost Recovery Factor |
DOC | | U.S. Department of Commerce |
DRR | | Distribution Replacement Rider |
DSMA | | Demand Side Management Adjustment |
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ECA | | Environmental Cost Adjustment |
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GLOSSARY |
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 |
ELG | | Effluent Limitation Guidelines |
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GLOSSARY |
Elk GP Merger Sub | | Elk GP Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Energy Transfer |
Elk Merger Sub | | Elk Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Energy Transfer |
Enable | | Enable Midstream Partners, LP |
Enable Common Units | | Enable common units, representing limited partner interests in Enable |
Enable GP | | Enable GP, LLC, Enable’s general partner |
Enable Merger | | The proposed merger of Elk Merger Sub with and into Enable and the merger of Elk GP Merger Sub with and into Enable GP, in each case on the terms and subject to the conditions set forth in the Enable Merger Agreement, with Enable and Enable GP surviving as wholly-owned subsidiaries of Energy Transfer, which closed on December 2, 2021 |
Enable Merger Agreement | | Agreement and Plan of Merger by and among Energy Transfer, Elk Merger Sub LLC, Elk GP Merger Sub, Enable, Enable GP and, solely for the purposes of Section 2.1(a)(i) therein, Energy Transfer GP, and solely for the purposes of Section 1.1(b)(i) therein, CenterPoint Energy |
Enable Series A Preferred Units | | Enable’s 10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in Enable |
Energy Services | | Offered competitive variable and fixed-priced physical natural gas supplies primarily to commercial and industrial customers and electric and natural gas utilities through CES and CEIP |
Energy Services Disposal Group | | Substantially all of the businesses within CenterPoint Energy’s and CERC’s Energy Services reporting unit that were sold under the Equity Purchase Agreement |
Energy Systems Group | | Energy Systems Group, LLC, a wholly-owned subsidiary of Vectren |
Energy Transfer | | Energy Transfer LP, a Delaware limited partnership |
Energy Transfer Common Units | | Energy Transfer common units, representing limited partner interests in Energy Transfer |
Energy Transfer GP | | LE GP, LLC, a Delaware limited liability company and sole general partner of Energy Transfer |
Energy Transfer Series G Preferred Units | | Energy Transfer Series G Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in Energy Transfer |
EPA | | Environmental Protection Agency |
Equity Purchase Agreement | | Equity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Symmetry Energy Solutions Acquisition, LLC (f/k/a Athena Energy Services Buyer, LLC) |
ERCOT | | Electric Reliability Council of Texas |
ESG | | Energy Systems Group, LLC, a wholly-owned subsidiary of Vectren |
February 2021 Winter Storm Event | | The extreme and unprecedented winter weather event in February 2021 (Winter Storm Uri) resultingthat 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 |
Fitch | | Fitch Ratings, Inc. |
Form 10-Q | | Quarterly Report on Form 10-Q |
FRP | | Formula Rate Plan |
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GHG | | Greenhouse gases |
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GRIP | | Gas Reliability Infrastructure Program |
GSR | | Gas Supply Rate |
GWh | | Gigawatt-hours |
Houston Electric | | CenterPoint Energy Houston Electric, LLC and its subsidiaries |
IDEM | | Indiana Department of Environmental Management |
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GLOSSARY |
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., a wholly-owned subsidiary of Vectren |
Indiana North | | Gas operations of Indiana Gas |
Indiana South | | Gas operations of SIGECO |
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GLOSSARY |
Indiana Utilities | | The combination of Indiana Electric, Indiana North and Indiana South |
Infrastructure Services | | Provided underground pipeline construction and repair services through VISCO and its wholly-owned subsidiaries, Miller Pipeline, LLC and Minnesota Limited, LLC |
Infrastructure Services Disposal Group | | Businesses within the Infrastructure Services reporting unit that were sold under the Securities Purchase Agreement |
Interim Condensed Financial Statements | | Unaudited condensed consolidated interim financial statements and combined notes |
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IRP | | Integrated Resource Plan |
IRS | | Internal Revenue Service |
IURC | | Indiana Utility Regulatory Commission |
kV | | Kilovolt |
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LIBOR | | London Interbank Offered Rate |
LNG | | Liquefied Natural Gas |
LPSC | | Louisiana Public Service Commission |
LTIP | | Long-term Incentive Plan |
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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 |
MES | | CenterPoint Energy Mobile Energy Solutions, Inc. (now known as Mobile Energy Solutions, Inc.), previously a wholly-owned subsidiary of CERC Corp. |
MGP | | Manufactured gas plant |
MISO | | Midcontinent Independent System Operator |
MLP | | Master Limited Partnership |
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Moody’s | | Moody’s Investors Service, Inc. |
MPSC | | Mississippi Public Service Commission |
MPUC | | Minnesota Public Utilities Commission |
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MW | | MegawattsMegawatt |
NERC | | North American Electric Reliability Corporation |
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NGLs | | Natural gas liquids |
NOLs | | Net operating losses |
NRG | | NRG Energy, Inc. |
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OCC | | Oklahoma Corporation Commission |
OGE | | OGE Energy Corp. |
PBRC | | Performance Based Rate Change |
Posey Solar | | Posey Solar, LLC, a special purpose entity |
PowerTeam Services | | PowerTeam Services, LLC, a Delaware limited liability company, now known as Artera Services, LLC |
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PPA | | Power Purchase Agreement |
PRPs | | Potentially responsible parties |
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 |
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GLOSSARY |
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 |
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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 |
Scope 3 emissions | | Indirect source of emissions from a company’s end-users |
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GLOSSARY |
SEC | | Securities and Exchange Commission |
Securities Purchase Agreement | | Securities Purchase Agreement, dated as of February 3, 2020, by and among Vectren Utility Services, Inc., PowerTeam Services and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren |
Securitization Bonds | | Transition and system restoration bonds |
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 |
Series B Preferred Stock | | CenterPoint Energy’s 7.00% Series B Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
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Series C Preferred Stock | | CenterPoint Energy’s Series C Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
SIGECO | | Southern Indiana Gas and Electric Company, a wholly-owned subsidiary of Vectren |
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S&PSouthern Col Midco | | S&P Global RatingsSouthern Col Midco, LLC, a Delaware limited liability company and an affiliate of Summit Utilities, Inc. |
SRC | | Sales Reconciliation Component |
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Symmetry Energy Solutions Acquisition | | Symmetry Energy Solutions Acquisition, LLC, a Delaware limited liability company (f/k/a Athena Energy Services Buyer, LLC) and subsidiary of Energy Capital Partners, LLC |
TBD | | To be determined |
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TCJA | | Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017 |
TCOS | | Transmission Cost of Service |
TCRF | | Transmission Cost Recovery Factor |
TDSIC | | Transmission, Distribution and Storage System Improvement Charge |
TDU | | Transmission and distribution utility |
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Tenaska | | Tenaska Wind Holdings, LLC |
Texas RE | | Texas Reliability Entity |
TOB | | Tariffed On Bill |
Utility Holding | | Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy |
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Transition Services Agreement | | Transition Services Agreement by and between CenterPoint Energy Service Company, LLC and Southern Col Midco |
Vectren | | Vectren Corporation, a wholly-owned subsidiary of CenterPoint Energy as of February 1, 2019 |
VEDO | | Vectren Energy Delivery of Ohio, Inc., a wholly-owned subsidiary of Vectren |
VIE | | Variable interest entity |
VISCO | | Vectren Infrastructure Services Corporation, formerly a wholly-owned subsidiary of Vectren |
Vistra Energy Corp. | | Texas-based energy company focused on the competitive energy and power generation markets, whose major subsidiaries include Luminant and TXU Energy |
VRP | | Voluntary Remediation Program |
VUHI | | Vectren Utility Holdings, Inc., a wholly-owned subsidiary of Vectren |
WBD Common | | | | | | | | |
GLOSSARYWarner Bros. Discovery, Inc. Series A common stock |
ZENS | | 2.0% Zero-Premium Exchangeable Subordinated Notes due 2029 |
ZENS-Related Securities | | As of both March 31, 20212022 and December 31, 2020,2021, consisted of AT&T Common and Charter Common. As of April 8, 2022, consisted of AT&T Common, Charter Common and WBD Common |
20202021 Form 10-K | | Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 as filed with the SEC on February 25, 202122, 2022 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time the Registrants make statements concerning their 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 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.
The Registrants have based their forward-looking statements on management’s beliefs and assumptions based on information reasonably available to management at the time the statements are made. The Registrants caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, the Registrants cannot assure you that actual results will not differ materially from those expressed or implied by the Registrants’ forward-looking statements. In this Form 10-Q, unless context requires otherwise, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries, including Houston Electric, CERC and Vectren.
The following are some of the factors that could cause actual results to differ from those expressed or implied by the Registrants’ forward-looking statements and apply to all Registrants unless otherwise indicated:
•CenterPoint Energy’s business strategies and strategic initiatives, restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the performancecompleted sale of Enable, the amount of cash distributions CenterPoint Energy receives from Enable, Enable’s ability to redeem the Enable Series A Preferred Unitsour Natural Gas businesses in certain circumstancesArkansas and Oklahoma and the value of CenterPoint Energy’s interest in Enable, and factors that mayexit from midstream, which we cannot assure will have a material impact on such performance, cash distributions and value, including factors such as:
◦competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable;
◦the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines and its commodity risk management activities;
◦economic effects of the actions of certain crude oil-exporting countries and the Organization of Petroleum Exporting Countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices;
◦the demand for crude oil, natural gas, NGLs and transportation and storage services;
◦environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing;
◦recording of goodwill, long-lived asset or other than temporary impairment charges by or relatedanticipated benefits to Enable;
◦the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments;
◦changes in tax status; and
•access to debt and equity capital;
•the integration of the businesses acquired in the Merger, including the integration of technology systems; the outcome of shareholder litigation filed against Vectren that could reduce the benefits of the Merger; the ability to realize additional benefits and commercial opportunities from the Merger, including the development of new opportunities and the performance of projects undertaken by ESG, which are subject to, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties, guarantees and other contractual and legal obligations;
•the recording of impairment charges;us;
•industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns;
•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 most recent IRP;
•our ability to successfully construct and operate electric generating facilities, natural gas facilities, mobile generation and electric transmission facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;
•the recording of impairment charges;
•timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment, including the timing and recoveryamount of recovered natural gas purchase costs associated with the February 2021 Winter Storm Event;Event and those related to Houston Electric’s mobile generation;
•future economic conditions in regional and national markets and their effect on sales, prices and costs;
•weather variations and other natural phenomena, including the impact of severe weather events on operations and capital, includingsuch as impacts from the February 2021 Winter Storm Event;
•CenterPoint Energy’s or Enable’s business strategies and strategic initiatives, restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the announced sale of our Natural Gas businesses in
Arkansas and Oklahoma, which we cannot assure will be completed or will have the anticipated benefits to us, and the Enable Merger, which we cannot assure will be completed or will have the anticipated benefits to us or Enable;
•the outcome of litigation, including litigation related to the February 2021 Winter Storm Event;
•the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric, including the negative impact on such ability related to COVID-19 and the February 2021 Winter Storm Event;
•the COVID-19 pandemic and its effect on our and Enable’s operations, business and financial condition, our industries and the communities we serve, U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto;
•increases in commodity prices;
•volatility and a substantial decline in the markets for oil and natural gas as a result of, among other factors, the actions of certain crude-oil exporting countries and the Organization of Petroleum Exporting Countries, armed conflicts, including the conflict in Ukraine and reduced worldwide consumption due to the COVID-19 pandemic;related sanctions on certain Russian entities, and climate change concerns, including the increasing adoption and use of alternative energy sources;
•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;
•any direct or indirect effects on our or Enable’s facilities, resources, operations and financial condition resulting from terrorism, cyber-attacks,cyber attacks or intrusions, including as a result of global conflict such as the conflict in Ukraine, 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 of the TCJA (which includes but is not limited to any potential changes to tax rates, tax credits and/or interest deductibility), as well as any changes in tax laws under the Biden
current administration, and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of EDIT and our rates;
•our ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms;
•actions by credit rating 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 cost overruns 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 the continued operation,operations, cost recovery of generation plant costs and related assets, and CenterPoint Energy’s net zero and carbon emissions reduction targets;goals;
•the impact of unplanned facility outages or other closures;
•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 most recent IRP;
•our ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;
•the sufficiency of our insurance coverage, including availability, cost, coverage and 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;
•continued disruptions to the global supply chain, including tariffs and other legislation impacting the supply chain, that could prevent CenterPoint Energy from securing the resources needed to fully execute on its 10-year capital plan or achieve its net zero and carbon emissions reduction goals;
•the investment performance of CenterPoint Energy’s pension and postretirement benefit plans;
•changes in interest rates and their impact on costs of borrowing and the valuation of CenterPoint Energy’s pension benefit obligation;
•commercial bank and financial market conditions, our access to capital, the cost of such capital, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets;
•changes in rates of inflation;
•inability of various counterparties to meet their obligations to us;
•non-payment for our services due to financial distress of our customers;
•the extent and effectiveness of our and Enable’s risk management and hedging activities, including, but not limited to financial and weather hedges;
•timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or other severe weather events, or natural disasters or other recovery of costs;
•acquisition and merger activities involving us or our competitors, 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;
•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 alternate energy sources on the demand for natural gas;
•the timing and outcome of any audits, disputes and other proceedings related to taxes;
•the effective tax rates;
•political and economic developments, including energy and environmental policies under the Bidencurrent administration;
•the transition to a replacement for the LIBOR benchmark interest rate;
•CenterPoint Energy’s ability to execute on its initiatives, targets and goals, including its net zero and carbon emissions reduction goals and its operations and maintenance goals;
•the outcome of litigation, including litigation related to the February 2021 Winter Storm Event;
•the development of new opportunities and the performance of projects undertaken by Energy Systems Group, which are subject to, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties, guarantees and other contractual and legal obligations;
•the effect of changes in and application of accounting standards and pronouncements; and
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 the 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
(Unaudited)
| | | | | Three Months Ended | | | | Three Months Ended |
| | | | March 31, | | | | March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions, except per share amounts) | | | | (in millions, except per share amounts) |
Revenues: | Revenues: | | | Revenues: | | |
Utility revenues | Utility revenues | | | $ | 2,484 | | | $ | 2,073 | | Utility revenues | | | $ | 2,709 | | | $ | 2,484 | |
Non-utility revenues | Non-utility revenues | | | 63 | | | 94 | | Non-utility revenues | | | 54 | | | 63 | |
Total | Total | | | 2,547 | | | 2,167 | | Total | | | 2,763 | | | 2,547 | |
Expenses: | Expenses: | | | | | | Expenses: | | | | | |
Utility natural gas, fuel and purchased power | Utility natural gas, fuel and purchased power | | | 935 | | | 609 | | Utility natural gas, fuel and purchased power | | | 1,098 | | | 935 | |
Non-utility cost of revenues, including natural gas | Non-utility cost of revenues, including natural gas | | | 40 | | | 64 | | Non-utility cost of revenues, including natural gas | | | 35 | | | 40 | |
Operation and maintenance | Operation and maintenance | | | 669 | | | 674 | | Operation and maintenance | | | 688 | | | 669 | |
Depreciation and amortization | Depreciation and amortization | | | 307 | | | 282 | | Depreciation and amortization | | | 318 | | | 307 | |
Taxes other than income taxes | Taxes other than income taxes | | | 143 | | | 136 | | Taxes other than income taxes | | | 147 | | | 143 | |
Goodwill impairment | | | 0 | | | 185 | | |
| Total | Total | | | 2,094 | | | 1,950 | | Total | | | 2,286 | | | 2,094 | |
Operating Income | Operating Income | | | 453 | | | 217 | | Operating Income | | | 477 | | | 453 | |
Other Income (Expense): | Other Income (Expense): | | | | | | Other Income (Expense): | | | | | |
Loss on marketable securities | | | (23) | | | (144) | | |
Loss on equity securities | | Loss on equity securities | | | (17) | | | (23) | |
Gain on indexed debt securities | Gain on indexed debt securities | | | 26 | | | 135 | | Gain on indexed debt securities | | | 106 | | | 26 | |
Gain on sale | | Gain on sale | | | 303 | | | — | |
Interest expense and other finance charges | Interest expense and other finance charges | | | (113) | | | (139) | | Interest expense and other finance charges | | | (153) | | | (140) | |
Interest expense on Securitization Bonds | Interest expense on Securitization Bonds | | | (6) | | | (8) | | Interest expense on Securitization Bonds | | | (4) | | | (6) | |
Equity in earnings (loss) of unconsolidated affiliates, net | | | 108 | | | (1,475) | | |
| Other income (expense), net | | | (8) | | | 14 | | |
| Other income, net | | Other income, net | | | 18 | | | 19 | |
Total | Total | | | (16) | | | (1,617) | | Total | | | 253 | | | (124) | |
Income (Loss) from Continuing Operations Before Income Taxes | | | 437 | | | (1,400) | | |
Income tax expense (benefit) | | | 74 | | | (347) | | |
Income (Loss) from Continuing Operations | | | 363 | | | (1,053) | | |
Loss from Discontinued Operations (net of tax benefit of $-0- and $17, respectively) | | | 0 | | | (146) | | |
Net Income (Loss) | | | 363 | | | (1,199) | | |
Income from Continuing Operations Before Income Taxes | | Income from Continuing Operations Before Income Taxes | | | 730 | | | 329 | |
Income tax expense | | Income tax expense | | | 199 | | | 49 | |
Income from Continuing Operations | | Income from Continuing Operations | | | 531 | | | 280 | |
Income from Discontinued Operations (net of tax expense of $—, $25, respectively) | | Income from Discontinued Operations (net of tax expense of $—, $25, respectively) | | | — | | | 83 | |
Net Income | | Net Income | | | 531 | | | 363 | |
Income allocated to preferred shareholders | Income allocated to preferred shareholders | | | 29 | | | 29 | | Income allocated to preferred shareholders | | | 13 | | | 29 | |
Income (Loss) Available to Common Shareholders | | | $ | 334 | | | $ | (1,228) | | |
Income Available to Common Shareholders | | Income Available to Common Shareholders | | | $ | 518 | | | $ | 334 | |
| Basic earnings (loss) per common share - continuing operations | | | $ | 0.56 | | | $ | (2.15) | | |
Basic earnings (loss) per common share - discontinued operations | | | 0 | | | (0.29) | | |
Basic Earnings (Loss) Per Common Share | | | 0.56 | | | (2.44) | | |
Diluted earnings (loss) per common share - continuing operations | | | $ | 0.56 | | | $ | (2.15) | | |
Diluted earnings (loss) per common share - discontinued operations | | | 0 | | | (0.29) | | |
Diluted Earnings (Loss) Per Common Share | | | $ | 0.56 | | | $ | (2.44) | | |
Basic earnings per common share - continuing operations | | Basic earnings per common share - continuing operations | | | $ | 0.82 | | | $ | 0.41 | |
Basic earnings per common share - discontinued operations | | Basic earnings per common share - discontinued operations | | | — | | | 0.15 | |
Basic Earnings Per Common Share | | Basic Earnings Per Common Share | | | 0.82 | | | 0.56 | |
Diluted earnings per common share - continuing operations | | Diluted earnings per common share - continuing operations | | | $ | 0.82 | | | $ | 0.43 | |
Diluted earnings per common share - discontinued operations | | Diluted earnings per common share - discontinued operations | | | — | | | 0.13 | |
Diluted Earnings Per Common Share | | Diluted Earnings Per Common Share | | | $ | 0.82 | | | $ | 0.56 | |
| Weighted Average Common Shares Outstanding, Basic | Weighted Average Common Shares Outstanding, Basic | | | 552 | | | 502 | | Weighted Average Common Shares Outstanding, Basic | | | 629 | | | 552 | |
Weighted Average Common Shares Outstanding, Diluted | Weighted Average Common Shares Outstanding, Diluted | | | 631 | | | 502 | | Weighted Average Common Shares Outstanding, Diluted | | | 631 | | | 631 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
Net Income (Loss) | | | | | $ | 363 | | | $ | (1,199) | |
Other comprehensive income (loss): | | | | | | | |
Adjustment to pension and other postretirement plans (net of tax of $-0- and $1) | | | | | 2 | | | 1 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other comprehensive income (loss) from unconsolidated affiliates (net of tax of $-0- and $-0-) | | | | | 1 | | | (3) | |
Total | | | | | 3 | | | (2) | |
Comprehensive income (loss) | | | | | 366 | | | (1,201) | |
Income allocated to preferred shareholders | | | | | 29 | | | 29 | |
Comprehensive income (loss) available to common shareholders | | | | | $ | 337 | | | $ | (1,230) | |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2022 | | 2021 |
| | | | | (in millions) |
Net Income | | | | | $ | 531 | | | $ | 363 | |
Other comprehensive income: | | | | | | | |
Adjustment to pension and other postretirement plans (net of tax of $-0- and $-0-) | | | | | 1 | | | 2 | |
| | | | | | | |
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0- and $-0-) | | | | | 1 | | | — | |
| | | | | | | |
Other comprehensive income from unconsolidated affiliates (net of tax of $-0- and $-0-) | | | | | — | | | 1 | |
Total | | | | | 2 | | | 3 | |
Comprehensive income | | | | | 533 | | | 366 | |
Income allocated to preferred shareholders | | | | | 13 | | | 29 | |
Comprehensive income available to common shareholders | | | | | $ | 520 | | | $ | 337 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
ASSETS | | ASSETS | |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents ($142 and $139 related to VIEs, respectively) | $ | 146 | | | $ | 147 | | |
Investment in marketable securities | 848 | | | 871 | | |
Accounts receivable ($24 and $23 related to VIEs, respectively), less allowance for credit losses of $65 and $52, respectively | 780 | | | 676 | | |
Accrued unbilled revenues, less allowance for credit losses of $4 and $5, respectively | 343 | | | 505 | | |
Cash and cash equivalents ($104 and $92 related to VIEs, respectively) | | Cash and cash equivalents ($104 and $92 related to VIEs, respectively) | $ | 125 | | | $ | 230 | |
Investment in equity securities | | Investment in equity securities | 720 | | | 1,439 | |
| Accounts receivable ($29 and $29 related to VIEs, respectively), less allowance for credit losses of $39 and $44, respectively | | Accounts receivable ($29 and $29 related to VIEs, respectively), less allowance for credit losses of $39 and $44, respectively | 943 | | | 690 | |
Accrued unbilled revenues, less allowance for credit losses of $2 and $6, respectively | | Accrued unbilled revenues, less allowance for credit losses of $2 and $6, respectively | 432 | | | 513 | |
| Natural gas and coal inventory | Natural gas and coal inventory | 67 | | | 203 | | Natural gas and coal inventory | 54 | | | 186 | |
Materials and supplies | Materials and supplies | 310 | | | 297 | | Materials and supplies | 458 | | | 422 | |
| Non-trading derivative assets | | Non-trading derivative assets | 33 | | | 9 | |
Taxes receivable | Taxes receivable | 79 | | | 82 | | Taxes receivable | — | | | 1 | |
| Prepaid expenses and other current assets ($16 and $15 related to VIEs, respectively) | 646 | | | 139 | | |
Current assets held for sale | | Current assets held for sale | — | | | 2,338 | |
Regulatory assets | | Regulatory assets | 1,323 | | | 1,395 | |
Prepaid expenses and other current assets ($18 and $19 related to VIEs, respectively) | | Prepaid expenses and other current assets ($18 and $19 related to VIEs, respectively) | 100 | | | 132 | |
Total current assets | Total current assets | 3,219 | | | 2,920 | | Total current assets | 4,188 | | | 7,355 | |
Property, Plant and Equipment: | Property, Plant and Equipment: | | | | Property, Plant and Equipment: | | | |
Property, plant and equipment | Property, plant and equipment | 32,991 | | | 32,514 | | Property, plant and equipment | 34,495 | | | 33,673 | |
Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | 10,252 | | | 10,152 | | Less: accumulated depreciation and amortization | 10,282 | | | 10,189 | |
Property, plant and equipment, net | Property, plant and equipment, net | 22,739 | | | 22,362 | | Property, plant and equipment, net | 24,213 | | | 23,484 | |
Other Assets: | Other Assets: | | | | Other Assets: | | | |
Goodwill | Goodwill | 4,697 | | | 4,697 | | Goodwill | 4,294 | | | 4,294 | |
Regulatory assets ($597 and $633 related to VIEs, respectively) | 3,795 | | | 2,094 | | |
Regulatory assets ($372 and $420 related to VIEs, respectively) | | Regulatory assets ($372 and $420 related to VIEs, respectively) | 2,270 | | | 2,321 | |
| Non-trading derivative assets | | Non-trading derivative assets | 6 | | | 5 | |
| Investment in unconsolidated affiliates | 853 | | | 783 | | |
Preferred units – unconsolidated affiliate | 363 | | | 363 | | |
| Other non-current assets | Other non-current assets | 240 | | | 252 | | Other non-current assets | 231 | | | 220 | |
Total other assets | Total other assets | 9,948 | | | 8,189 | | Total other assets | 6,801 | | | 6,840 | |
Total Assets | Total Assets | $ | 35,906 | | | $ | 33,471 | | Total Assets | $ | 35,202 | | | $ | 37,679 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions, except share amounts) | | (in millions, except par value and shares) |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Short-term borrowings | Short-term borrowings | $ | 0 | | | $ | 24 | | Short-term borrowings | $ | — | | | $ | 7 | |
Current portion of VIE Securitization Bonds long-term debt | Current portion of VIE Securitization Bonds long-term debt | 212 | | | 211 | | Current portion of VIE Securitization Bonds long-term debt | 182 | | | 220 | |
Indexed debt, net | Indexed debt, net | 13 | | | 15 | | Indexed debt, net | 9 | | | 10 | |
Current portion of other long-term debt | Current portion of other long-term debt | 1,563 | | | 1,669 | | Current portion of other long-term debt | 1,582 | | | 308 | |
Indexed debt securities derivative | Indexed debt securities derivative | 927 | | | 953 | | Indexed debt securities derivative | 797 | | | 903 | |
Accounts payable | Accounts payable | 797 | | | 853 | | Accounts payable | 1,036 | | | 1,196 | |
| Taxes accrued | Taxes accrued | 229 | | | 265 | | Taxes accrued | 489 | | | 378 | |
Interest accrued | Interest accrued | 119 | | | 145 | | Interest accrued | 116 | | | 136 | |
Dividends accrued | Dividends accrued | 0 | | | 136 | | Dividends accrued | — | | | 131 | |
Customer deposits | Customer deposits | 120 | | | 119 | | Customer deposits | 110 | | | 111 | |
Non-trading derivative liabilities | Non-trading derivative liabilities | 2 | | | 3 | | Non-trading derivative liabilities | 1 | | | 2 | |
| Current liabilities held for sale | | Current liabilities held for sale | — | | | 562 | |
Other current liabilities | Other current liabilities | 344 | | | 432 | | Other current liabilities | 283 | | | 323 | |
Total current liabilities | Total current liabilities | 4,326 | | | 4,825 | | Total current liabilities | 4,605 | | | 4,287 | |
Other Liabilities: | Other Liabilities: | | | | Other Liabilities: | | | |
Deferred income taxes, net | Deferred income taxes, net | 3,687 | | | 3,603 | | Deferred income taxes, net | 3,951 | | | 3,904 | |
Non-trading derivative liabilities | Non-trading derivative liabilities | 14 | | | 27 | | Non-trading derivative liabilities | 5 | | | 12 | |
Benefit obligations | Benefit obligations | 675 | | | 680 | | Benefit obligations | 499 | | | 511 | |
Regulatory liabilities | Regulatory liabilities | 3,407 | | | 3,448 | | Regulatory liabilities | 3,250 | | | 3,153 | |
| Other non-current liabilities | Other non-current liabilities | 1,033 | | | 1,019 | | Other non-current liabilities | 834 | | | 836 | |
Total other liabilities | Total other liabilities | 8,816 | | | 8,777 | | Total other liabilities | 8,539 | | | 8,416 | |
Long-term Debt: | Long-term Debt: | | | | Long-term Debt: | | | |
VIE Securitization Bonds, net | VIE Securitization Bonds, net | 499 | | | 536 | | VIE Securitization Bonds, net | 317 | | | 317 | |
Other long-term debt, net | Other long-term debt, net | 13,549 | | | 10,985 | | Other long-term debt, net | 11,789 | | | 15,241 | |
Total long-term debt, net | Total long-term debt, net | 14,048 | | | 11,521 | | Total long-term debt, net | 12,106 | | | 15,558 | |
Commitments and Contingencies (Note 14) | 0 | | 0 | |
Commitments and Contingencies (Note 13) | | Commitments and Contingencies (Note 13) | 0 | | 0 |
Temporary Equity (Note 18) | | Temporary Equity (Note 18) | 1 | | | 3 | |
Shareholders’ Equity: | Shareholders’ Equity: | | | | Shareholders’ Equity: | | | |
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 2,402,400 shares outstanding, $2,402 liquidation preference (Note 19) | 2,363 | | | 2,363 | | |
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 551,865,588 shares and 551,355,861 shares outstanding, respectively | 6 | | | 6 | | |
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 800,000 shares and 800,000 shares outstanding, respectively, $800 and $800 liquidation preference, respectively (Note 18) | | Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 800,000 shares and 800,000 shares outstanding, respectively, $800 and $800 liquidation preference, respectively (Note 18) | 790 | | | 790 | |
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 629,432,406 shares and 628,923,534 shares outstanding, respectively | | Common stock, $0.01 par value, 1,000,000,000 shares authorized, 629,432,406 shares and 628,923,534 shares outstanding, respectively | 6 | | | 6 | |
Additional paid-in capital | Additional paid-in capital | 6,916 | | | 6,914 | | Additional paid-in capital | 8,532 | | | 8,529 | |
Accumulated deficit | (482) | | | (845) | | |
Retained earnings | | Retained earnings | 685 | | | 154 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (87) | | | (90) | | Accumulated other comprehensive loss | (62) | | | (64) | |
Total shareholders’ equity | Total shareholders’ equity | 8,716 | | | 8,348 | | Total shareholders’ equity | 9,951 | | | 9,415 | |
Total Liabilities and Shareholders’ Equity | Total Liabilities and Shareholders’ Equity | $ | 35,906 | | | $ | 33,471 | | Total Liabilities and Shareholders’ Equity | $ | 35,202 | | | $ | 37,679 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | | Cash Flows from Operating Activities: | |
Net income (loss) | $ | 363 | | | $ | (1,199) | | |
Net income | | Net income | $ | 531 | | | $ | 363 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 307 | | | 282 | | Depreciation and amortization | 318 | | | 307 | |
| Amortization of deferred financing costs | 7 | | | 7 | | |
| Deferred income taxes | Deferred income taxes | 66 | | | (377) | | Deferred income taxes | 28 | | | 66 | |
| Goodwill impairment and loss from reclassification to held for sale | 0 | | | 214 | | |
Goodwill impairment | 0 | | | 185 | | |
| Unrealized loss on marketable securities | 23 | | | 144 | | |
| Gain on divestitures | | Gain on divestitures | (303) | | | — | |
Loss on equity securities | | Loss on equity securities | 17 | | | 23 | |
Gain on indexed debt securities | Gain on indexed debt securities | (26) | | | (135) | | Gain on indexed debt securities | (106) | | | (26) | |
| Write-down of natural gas inventory | 0 | | | 3 | | |
Equity in (earnings) losses of unconsolidated affiliates | Equity in (earnings) losses of unconsolidated affiliates | (108) | | | 1,475 | | Equity in (earnings) losses of unconsolidated affiliates | — | | | (108) | |
Distributions from unconsolidated affiliates | Distributions from unconsolidated affiliates | 39 | | | 70 | | Distributions from unconsolidated affiliates | — | | | 39 | |
Pension contributions | Pension contributions | (8) | | | (2) | | Pension contributions | (2) | | | (8) | |
Changes in other assets and liabilities, excluding acquisitions: | | |
Changes in other assets and liabilities: | | Changes in other assets and liabilities: | |
Accounts receivable and unbilled revenues, net | Accounts receivable and unbilled revenues, net | 29 | | | 236 | | Accounts receivable and unbilled revenues, net | (201) | | | 29 | |
| Inventory | Inventory | 99 | | | 110 | | Inventory | 132 | | | 99 | |
Taxes receivable | Taxes receivable | 3 | | | 13 | | Taxes receivable | 1 | | | 3 | |
Accounts payable | Accounts payable | (55) | | | (192) | | Accounts payable | (85) | | | (55) | |
| Non-trading derivatives, net | (14) | | | (53) | | |
Margin deposits, net | 0 | | | 21 | | |
Interest and taxes accrued | (62) | | | (95) | | |
Net regulatory assets and liabilities | Net regulatory assets and liabilities | (2,297) | | | (27) | | Net regulatory assets and liabilities | 135 | | | (2,297) | |
Other current assets | 0 | | | (5) | | |
Other current liabilities | (59) | | | (37) | | |
Other non-current assets | 0 | | | 19 | | |
Other non-current liabilities | 17 | | | 1 | | |
Other, net | (5) | | | 4 | | |
Other current assets and liabilities | | Other current assets and liabilities | 82 | | | (121) | |
Other non-current assets and liabilities | | Other non-current assets and liabilities | (25) | | | 3 | |
Other operating activities, net | | Other operating activities, net | 58 | | | 2 | |
| Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | (1,681) | | | 662 | | Net cash provided by (used in) operating activities | 580 | | | (1,681) | |
Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | | | | Cash Flows from Investing Activities: | | | |
Capital expenditures | Capital expenditures | (594) | | | (664) | | Capital expenditures | (846) | | | (594) | |
| Distributions from unconsolidated affiliate in excess of cumulative earnings | 0 | | | 7 | | |
| Proceeds from sale of marketable securities | | Proceeds from sale of marketable securities | 702 | | | — | |
Proceeds from divestitures | | Proceeds from divestitures | 2,060 | | | — | |
| Other investing activities, net | | Other investing activities, net | 18 | | | (10) | |
| Other, net | (10) | | | 3 | | |
Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 1,934 | | | (604) | |
Cash Flows from Financing Activities: | | Cash Flows from Financing Activities: | | | |
Decrease in short-term borrowings, net | | Decrease in short-term borrowings, net | (43) | | | — | |
Payment of obligation for finance lease | | Payment of obligation for finance lease | (171) | | | — | |
Proceeds from (payments of) commercial paper, net | | Proceeds from (payments of) commercial paper, net | (1,941) | | | 38 | |
Proceeds from long-term debt | | Proceeds from long-term debt | 792 | | | 2,795 | |
Payments of long-term debt, including make-whole premiums | | Payments of long-term debt, including make-whole premiums | (1,113) | | | (388) | |
| Net cash used in investing activities | (604) | | | (654) | | |
Cash Flows from Financing Activities: | | | | |
| Proceeds from (payments of) commercial paper, net | 38 | | | (828) | | |
Proceeds from long-term debt | 2,795 | | | 0 | | |
Payments of long-term debt | (388) | | | (63) | | |
Borrowings from revolving credit facilities | 0 | | | 1,050 | | |
| Payment of debt issuance costs | Payment of debt issuance costs | (20) | | | 0 | | Payment of debt issuance costs | (8) | | | (20) | |
| Payment of dividends on Common Stock | Payment of dividends on Common Stock | (88) | | | (145) | | Payment of dividends on Common Stock | (107) | | | (88) | |
Payment of dividends on Preferred Stock | Payment of dividends on Preferred Stock | (48) | | | (42) | | Payment of dividends on Preferred Stock | (24) | | | (48) | |
| Other, net | (4) | | | (4) | | |
Other financing activities, net | | Other financing activities, net | (6) | | | (4) | |
| Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | 2,285 | | | (32) | | Net cash provided by (used in) financing activities | (2,621) | | | 2,285 | |
Net Decrease in Cash, Cash Equivalents and Restricted Cash | Net Decrease in Cash, Cash Equivalents and Restricted Cash | 0 | | | (24) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | (107) | | | — | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 167 | | | 271 | | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 254 | | | 167 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 167 | | | $ | 247 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 147 | | | $ | 167 | |
See Combined Notes to Interim Condensed Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
| | | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | 2022 | | 2021 |
| | | | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | Shares | | Amount |
| | | (in millions of dollars and shares) | | | (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 | Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares | | | Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares | | |
Balance, beginning of period | Balance, beginning of period | | | 3 | | | $ | 2,363 | | | 2 | | | $ | 1,740 | | Balance, beginning of period | | 1 | | | $ | 790 | | | 3 | | | $ | 2,363 | |
| Balance, end of period | Balance, end of period | | | 3 | | | 2,363 | | | 2 | | | 1,740 | | Balance, end of period | | 1 | | | 790 | | | 3 | | | 2,363 | |
Common Stock, $0.01 par value; authorized 1,000,000,000 shares | Common Stock, $0.01 par value; authorized 1,000,000,000 shares | | | | | | | | | | Common Stock, $0.01 par value; authorized 1,000,000,000 shares | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 551 | | | 6 | | | 502 | | | 5 | | Balance, beginning of period | | 629 | | | 6 | | | 551 | | | 6 | |
| Issuances related to benefit and investment plans | Issuances related to benefit and investment plans | | | 1 | | | 0 | | | 0 | | | 0 | | Issuances related to benefit and investment plans | | — | | | — | | | 1 | | | — | |
Balance, end of period | Balance, end of period | | | 552 | | | 6 | | | 502 | | | 5 | | Balance, end of period | | 629 | | | 6 | | | 552 | | | 6 | |
Additional Paid-in-Capital | Additional Paid-in-Capital | | | | | | | | | | Additional Paid-in-Capital | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 6,914 | | | | | 6,080 | | Balance, beginning of period | | | 8,529 | | | | | 6,914 | |
| Issuances related to benefit and investment plans | Issuances related to benefit and investment plans | | | 2 | | | | | 6 | | Issuances related to benefit and investment plans | | | 3 | | | | | 2 | |
| Balance, end of period | Balance, end of period | | | 6,916 | | | | | 6,086 | | Balance, end of period | | | 8,532 | | | | | 6,916 | |
Retained Earnings (Accumulated Deficit) | Retained Earnings (Accumulated Deficit) | | | | | | | | Retained Earnings (Accumulated Deficit) | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | (845) | | | | | 632 | | Balance, beginning of period | | | 154 | | | | | (845) | |
Net income (loss) | | | 363 | | | | | (1,199) | | |
Common Stock dividends declared (see Note 19) | | | 0 | | | | | (145) | | |
Preferred Stock dividends declared (see Note 19) | | | 0 | | | (42) | | |
Net income | | Net income | | | 531 | | | | | 363 | |
| Adoption of ASU 2016-13 | | | 0 | | | (7) | | |
| Balance, end of period | Balance, end of period | | | (482) | | | | | (761) | | Balance, end of period | | | 685 | | | | | (482) | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | (90) | | | | | (98) | | Balance, beginning of period | | | (64) | | | | | (90) | |
Other comprehensive income (loss) | | | 3 | | | | | (2) | | |
Other comprehensive income | | Other comprehensive income | | | 2 | | | | | 3 | |
Balance, end of period | Balance, end of period | | | (87) | | | | | (100) | | Balance, end of period | | | (62) | | | | | (87) | |
Total Shareholders’ Equity | Total Shareholders’ Equity | | | $ | 8,716 | | | | | $ | 6,970 | | Total Shareholders’ Equity | | | $ | 9,951 | | | | | $ | 8,716 | |
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 March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | | (in millions) |
Revenues | Revenues | | | $ | 684 | | | $ | 634 | | Revenues | | | $ | 746 | | | $ | 684 | |
Expenses: | Expenses: | | | | | | Expenses: | | | | | |
Operation and maintenance | Operation and maintenance | | | 373 | | | 359 | | Operation and maintenance | | | 395 | | | 373 | |
Depreciation and amortization | Depreciation and amortization | | | 141 | | | 129 | | Depreciation and amortization | | | 162 | | | 141 | |
Taxes other than income taxes | Taxes other than income taxes | | | 63 | | | 64 | | Taxes other than income taxes | | | 63 | | | 63 | |
Total | Total | | | 577 | | | 552 | | Total | | | 620 | | | 577 | |
Operating Income | Operating Income | | | 107 | | | 82 | | Operating Income | | | 126 | | | 107 | |
Other Income (Expense): | Other Income (Expense): | | | | | | Other Income (Expense): | | | | | |
Interest expense and other finance charges | Interest expense and other finance charges | | | (45) | | | (41) | | Interest expense and other finance charges | | | (48) | | | (45) | |
Interest expense on Securitization Bonds | Interest expense on Securitization Bonds | | | (6) | | | (8) | | Interest expense on Securitization Bonds | | | (4) | | | (6) | |
| Other income, net | Other income, net | | | 5 | | | 5 | | Other income, net | | | 4 | | | 5 | |
Total | Total | | | (46) | | | (44) | | Total | | | (48) | | | (46) | |
Income Before Income Taxes | Income Before Income Taxes | | | 61 | | | 38 | | Income Before Income Taxes | | | 78 | | | 61 | |
Income tax expense | Income tax expense | | | 8 | | | 5 | | Income tax expense | | | 17 | | | 8 | |
Net Income | Net Income | | | $ | 53 | | | $ | 33 | | Net Income | | | $ | 61 | | | $ | 53 | |
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 March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | | (in millions) |
Net income | Net income | | | $ | 53 | | | $ | 33 | | Net income | | | $ | 61 | | | $ | 53 | |
| Comprehensive income | Comprehensive income | | | $ | 53 | | | $ | 33 | | Comprehensive income | | | $ | 61 | | | $ | 53 | |
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)
ASSETS
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
ASSETS | | ASSETS | |
Current Assets: | Current Assets: | | | | Current Assets: | | | |
Cash and cash equivalents ($142 and $139 related to VIEs, respectively) | $ | 143 | | | $ | 139 | | |
Accounts receivable ($24 and $23 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively | 263 | | | 268 | | |
Cash and cash equivalents ($104 and $92 related to VIEs, respectively) | | Cash and cash equivalents ($104 and $92 related to VIEs, respectively) | $ | 104 | | | $ | 214 | |
Accounts and notes receivable ($29 and $29 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively | | Accounts and notes receivable ($29 and $29 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively | 280 | | | 263 | |
Accounts and notes receivable–affiliated companies | Accounts and notes receivable–affiliated companies | 674 | | | 7 | | Accounts and notes receivable–affiliated companies | 369 | | | 11 | |
Accrued unbilled revenues | Accrued unbilled revenues | 83 | | | 113 | | Accrued unbilled revenues | 95 | | | 127 | |
Materials and supplies | Materials and supplies | 202 | | | 195 | | Materials and supplies | 304 | | | 292 | |
| Prepaid expenses and other current assets ($16 and $15 related to VIEs, respectively) | 32 | | | 47 | | |
Prepaid expenses and other current assets ($18 and $19 related to VIEs, respectively) | | Prepaid expenses and other current assets ($18 and $19 related to VIEs, respectively) | 32 | | | 49 | |
Total current assets | Total current assets | 1,397 | | | 769 | | Total current assets | 1,184 | | | 956 | |
Property, Plant and Equipment: | Property, Plant and Equipment: | | | | Property, Plant and Equipment: | | | |
Property, plant and equipment | Property, plant and equipment | 13,889 | | | 13,593 | | Property, plant and equipment | 15,995 | | | 15,273 | |
Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | 3,967 | | | 3,930 | | Less: accumulated depreciation and amortization | 4,175 | | | 4,070 | |
Property, plant and equipment, net | Property, plant and equipment, net | 9,922 | | | 9,663 | | Property, plant and equipment, net | 11,820 | | | 11,203 | |
Other Assets: | Other Assets: | | | | Other Assets: | | | |
Regulatory assets ($597 and $633 related to VIEs, respectively) | 828 | | | 848 | | |
Regulatory assets ($372 and $420 related to VIEs, respectively) | | Regulatory assets ($372 and $420 related to VIEs, respectively) | 785 | | | 789 | |
| Other non-current assets | Other non-current assets | 38 | | | 36 | | Other non-current assets | 43 | | | 32 | |
Total other assets | Total other assets | 866 | | | 884 | | Total other assets | 828 | | | 821 | |
Total Assets | Total Assets | $ | 12,185 | | | $ | 11,316 | | Total Assets | $ | 13,832 | | | $ | 12,980 | |
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)
LIABILITIES AND MEMBER’S EQUITY
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
LIABILITIES AND MEMBER’S EQUITY | | LIABILITIES AND MEMBER’S EQUITY | |
Current Liabilities: | Current Liabilities: | | | | Current Liabilities: | | | |
| Current portion of VIE Securitization Bonds long-term debt | Current portion of VIE Securitization Bonds long-term debt | 212 | | | 211 | | Current portion of VIE Securitization Bonds long-term debt | $ | 182 | | | $ | 220 | |
Current portion of other long-term debt | Current portion of other long-term debt | 300 | | | 402 | | Current portion of other long-term debt | 300 | | | 300 | |
Accounts payable | Accounts payable | 333 | | | 281 | | Accounts payable | 474 | | | 510 | |
Accounts and notes payable–affiliated companies | Accounts and notes payable–affiliated companies | 41 | | | 96 | | Accounts and notes payable–affiliated companies | 98 | | | 568 | |
Taxes accrued | Taxes accrued | 103 | | | 158 | | Taxes accrued | 129 | | | 193 | |
Interest accrued | Interest accrued | 53 | | | 71 | | Interest accrued | 66 | | | 74 | |
| Other current liabilities | Other current liabilities | 115 | | | 117 | | Other current liabilities | 68 | | | 91 | |
Total current liabilities | Total current liabilities | 1,157 | | | 1,336 | | Total current liabilities | 1,317 | | | 1,956 | |
Other Liabilities: | Other Liabilities: | | | | Other Liabilities: | | | |
Deferred income taxes, net | Deferred income taxes, net | 1,051 | | | 1,041 | | Deferred income taxes, net | 1,142 | | | 1,122 | |
Benefit obligations | Benefit obligations | 75 | | | 75 | | Benefit obligations | 55 | | | 55 | |
Regulatory liabilities | Regulatory liabilities | 1,187 | | | 1,252 | | Regulatory liabilities | 1,135 | | | 1,152 | |
| Other non-current liabilities | Other non-current liabilities | 95 | | | 95 | | Other non-current liabilities | 100 | | | 98 | |
Total other liabilities | Total other liabilities | 2,408 | | | 2,463 | | Total other liabilities | 2,432 | | | 2,427 | |
Long-term Debt: | Long-term Debt: | | | | Long-term Debt: | | | |
VIE Securitization Bonds, net | VIE Securitization Bonds, net | 499 | | | 536 | | VIE Securitization Bonds, net | 317 | | | 317 | |
Other long-term debt, net | Other long-term debt, net | 4,957 | | | 3,870 | | Other long-term debt, net | 5,444 | | | 4,658 | |
Total long-term debt, net | Total long-term debt, net | 5,456 | | | 4,406 | | Total long-term debt, net | 5,761 | | | 4,975 | |
Commitments and Contingencies (Note 14) | 0 | | 0 | |
Commitments and Contingencies (Note 13) | | Commitments and Contingencies (Note 13) | 0 | | 0 |
Member’s Equity: | Member’s Equity: | | Member’s Equity: | |
Common stock | Common stock | 0 | | | 0 | | Common stock | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 2,548 | | | 2,548 | | Additional paid-in capital | 3,354 | | | 2,678 | |
Retained earnings | Retained earnings | 616 | | | 563 | | Retained earnings | 968 | | | 944 | |
| Total member’s equity | Total member’s equity | 3,164 | | | 3,111 | | Total member’s equity | 4,322 | | | 3,622 | |
Total Liabilities and Member’s Equity | Total Liabilities and Member’s Equity | $ | 12,185 | | | $ | 11,316 | | Total Liabilities and Member’s Equity | $ | 13,832 | | | $ | 12,980 | |
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)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | | | Cash Flows from Operating Activities: | | |
Net income | Net income | $ | 53 | | | $ | 33 | | Net income | $ | 61 | | | $ | 53 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | Depreciation and amortization | 141 | | | 129 | | Depreciation and amortization | 162 | | | 141 | |
Amortization of deferred financing costs | 3 | | | 3 | | |
Deferred income taxes | Deferred income taxes | (5) | | | (1) | | Deferred income taxes | 9 | | | (5) | |
| Changes in other assets and liabilities: | Changes in other assets and liabilities: | | | | Changes in other assets and liabilities: | | | |
Accounts and notes receivable, net | Accounts and notes receivable, net | 21 | | | 19 | | Accounts and notes receivable, net | 15 | | | 21 | |
Accounts receivable/payable–affiliated companies | Accounts receivable/payable–affiliated companies | (49) | | | (3) | | Accounts receivable/payable–affiliated companies | 38 | | | (49) | |
Inventory | Inventory | (7) | | | (10) | | Inventory | (12) | | | (7) | |
Accounts payable | Accounts payable | 14 | | | (2) | | Accounts payable | (62) | | | 14 | |
| Interest and taxes accrued | (73) | | | (80) | | |
| Net regulatory assets and liabilities | Net regulatory assets and liabilities | (63) | | | (11) | | Net regulatory assets and liabilities | (75) | | | (63) | |
Other current assets | 16 | | | 13 | | |
Other current liabilities | (2) | | | 8 | | |
Other assets | 3 | | | 0 | | |
Other liabilities | 0 | | | 8 | | |
Other, net | (5) | | | (3) | | |
Other current assets and liabilities | | Other current assets and liabilities | (56) | | | (59) | |
Other non-current assets and liabilities | | Other non-current assets and liabilities | (5) | | | 3 | |
Other operating activities, net | | Other operating activities, net | (2) | | | (2) | |
Net cash provided by operating activities | Net cash provided by operating activities | 47 | | | 103 | | Net cash provided by operating activities | 73 | | | 47 | |
Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | | | | Cash Flows from Investing Activities: | | | |
Capital expenditures | Capital expenditures | (314) | | | (286) | | Capital expenditures | (491) | | | (314) | |
Decrease (increase) in notes receivable–affiliated companies | (665) | | | 481 | | |
Increase in notes receivable–affiliated companies | | Increase in notes receivable–affiliated companies | (354) | | | (665) | |
| Other, net | (3) | | | (3) | | |
Net cash provided by (used in) investing activities | (982) | | | 192 | | |
Other investing activities, net | | Other investing activities, net | (3) | | | (3) | |
Net cash used in investing activities | | Net cash used in investing activities | (848) | | | (982) | |
Cash Flows from Financing Activities: | Cash Flows from Financing Activities: | | | | Cash Flows from Financing Activities: | | | |
| Proceeds from long-term debt | Proceeds from long-term debt | 1,096 | | | 0 | | Proceeds from long-term debt | 792 | | | 1,096 | |
Payments of long-term debt | Payments of long-term debt | (138) | | | (63) | | Payments of long-term debt | (38) | | | (138) | |
Increase (decrease) in notes payable–affiliated companies | (8) | | | 133 | | |
Decrease in notes payable–affiliated companies | | Decrease in notes payable–affiliated companies | (512) | | | (8) | |
Dividend to parent | Dividend to parent | 0 | | | (385) | | Dividend to parent | (37) | | | — | |
| Contribution from parent | | Contribution from parent | 637 | | | — | |
| Payment of debt issuance costs | Payment of debt issuance costs | (10) | | | 0 | | Payment of debt issuance costs | (8) | | | (10) | |
| Net cash provided by (used in) financing activities | 940 | | | (315) | | |
Payment of obligation for finance lease | | Payment of obligation for finance lease | (171) | | | — | |
Other, net | | Other, net | 1 | | | — | |
Net cash provided by financing activities | | Net cash provided by financing activities | 664 | | | 940 | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 5 | | | (20) | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | (111) | | | 5 | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 154 | | | 235 | | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 233 | | | 154 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 159 | | | $ | 215 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 122 | | | $ | 159 | |
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 March 31, | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | 2022 | | 2021 |
| | | | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | Shares | | Amount |
| | | (in millions, except share amounts) | | | (in millions, except share amounts) |
| Common Stock | Common Stock | | | | | | | | | | Common Stock | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 1,000 | | | $ | 0 | | | 1,000 | | | $ | 0 | | Balance, beginning of period | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | |
Balance, end of period | Balance, end of period | | | 1,000 | | | 0 | | | 1,000 | | | 0 | | Balance, end of period | | 1,000 | | | — | | | 1,000 | | | — | |
Additional Paid-in-Capital | Additional Paid-in-Capital | | | | | | | | | | Additional Paid-in-Capital | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 2,548 | | | | | 2,486 | | Balance, beginning of period | | | 2,678 | | | | | 2,548 | |
| Contribution from parent | | Contribution from parent | | | 675 | | | — | |
Other | | Other | | | 1 | | | — | |
Balance, end of period | Balance, end of period | | | 2,548 | | | | | 2,486 | | Balance, end of period | | | 3,354 | | | | | 2,548 | |
Retained Earnings | Retained Earnings | | | | | | | | Retained Earnings | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 563 | | | | | 780 | | Balance, beginning of period | | | 944 | | | | | 563 | |
Net income | Net income | | | 53 | | | | | 33 | | Net income | | | 61 | | | | | 53 | |
Dividend to parent | Dividend to parent | | | 0 | | | (385) | | Dividend to parent | | | (37) | | | — | |
Balance, end of period | Balance, end of period | | | 616 | | | | | 428 | | Balance, end of period | | | 968 | | | | | 616 | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss | | | | | | Accumulated Other Comprehensive Loss | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 0 | | | (15) | | Balance, beginning of period | | | — | | | — | |
| Balance, end of period | Balance, end of period | | | 0 | | | (15) | | Balance, end of period | | | — | | | — | |
Total Member’s Equity | Total Member’s Equity | | | $ | 3,164 | | | | | $ | 2,899 | | Total Member’s Equity | | | $ | 4,322 | | | | | $ | 3,164 | |
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 | | | | Three Months Ended |
| | | | March 31, | | | | March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | | (in millions) |
Revenues: | Revenues: | | | Revenues: | | |
Utility revenues | Utility revenues | | | $ | 1,168 | | | $ | 996 | | Utility revenues | | | $ | 1,376 | | | $ | 1,168 | |
Non-utility revenues | Non-utility revenues | | | 9 | | | 15 | | Non-utility revenues | | | 9 | | | 9 | |
Total | Total | | | 1,177 | | | 1,011 | | Total | | | 1,385 | | | 1,177 | |
Expenses: | Expenses: | | | | | | Expenses: | | | | | |
Utility natural gas | Utility natural gas | | | 623 | | | 472 | | Utility natural gas | | | 857 | | | 623 | |
Non-utility cost of revenues, including natural gas | Non-utility cost of revenues, including natural gas | | | 2 | | | 6 | | Non-utility cost of revenues, including natural gas | | | 1 | | | 2 | |
Operation and maintenance | Operation and maintenance | | | 198 | | | 209 | | Operation and maintenance | | | 187 | | | 198 | |
Depreciation and amortization | Depreciation and amortization | | | 80 | | | 74 | | Depreciation and amortization | | | 72 | | | 80 | |
Taxes other than income taxes | Taxes other than income taxes | | | 56 | | | 50 | | Taxes other than income taxes | | | 56 | | | 56 | |
| Total | Total | | | 959 | | | 811 | | Total | | | 1,173 | | | 959 | |
Operating Income | Operating Income | | | 218 | | | 200 | | Operating Income | | | 212 | | | 218 | |
Other Expense: | | | | | | |
Other Income (Expense): | | Other Income (Expense): | | | | | |
Gain on sale | | Gain on sale | | | 557 | | | — | |
Interest expense and other finance charges | Interest expense and other finance charges | | | (24) | | | (30) | | Interest expense and other finance charges | | | (21) | | | (24) | |
| Other expense, net | Other expense, net | | | (1) | | | (4) | | Other expense, net | | | — | | | (1) | |
Total | Total | | | (25) | | | (34) | | Total | | | 536 | | | (25) | |
Income From Continuing Operations Before Income Taxes | | | 193 | | | 166 | | |
Income Before Income Taxes | | Income Before Income Taxes | | | 748 | | | 193 | |
Income tax expense | Income tax expense | | | 42 | | | 35 | | Income tax expense | | | 194 | | | 42 | |
Income From Continuing Operations | | | 151 | | | 131 | | |
Loss from Discontinued Operations (net of tax benefit of $-0- and $11, respectively) | | | 0 | | | (64) | | |
| Net Income | Net Income | | | $ | 151 | | | $ | 67 | | Net Income | | | $ | 554 | | | $ | 151 | |
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 |
| | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
Net income (loss) | | | | | $ | 151 | | | $ | 67 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Comprehensive income (loss) | | | | | $ | 151 | | | $ | 67 | |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2022 | | 2021 |
| | | | | (in millions) |
Net income | | | | | $ | 554 | | | $ | 151 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Comprehensive income | | | | | $ | 554 | | | $ | 151 | |
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)
ASSETS
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
ASSETS | | ASSETS | |
Current Assets: | Current Assets: | | | | Current Assets: | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 1 | | | $ | 1 | | Cash and cash equivalents | $ | 4 | | | $ | 8 | |
Accounts receivable, less allowance for credit losses of $56 and $45, respectively | 349 | | | 233 | | |
Accrued unbilled revenues, less allowance for credit losses of $3 and $4, respectively | 167 | | | 260 | | |
Accounts receivable, less allowance for credit losses of $33 and $39, respectively | | Accounts receivable, less allowance for credit losses of $33 and $39, respectively | 426 | | | 240 | |
Accrued unbilled revenues, less allowance for credit losses of $2 and $5, respectively | | Accrued unbilled revenues, less allowance for credit losses of $2 and $5, respectively | 209 | | | 247 | |
Accounts and notes receivable–affiliated companies | Accounts and notes receivable–affiliated companies | 11 | | | 8 | | Accounts and notes receivable–affiliated companies | 17 | | | 16 | |
Materials and supplies | Materials and supplies | 64 | | | 58 | | Materials and supplies | 85 | | | 74 | |
Natural gas inventory | Natural gas inventory | 27 | | | 121 | | Natural gas inventory | 19 | | | 127 | |
| Taxes receivable | | Taxes receivable | 29 | | | 28 | |
| Current assets held for sale | | Current assets held for sale | — | | | 2,084 | |
Regulatory assets | | Regulatory assets | 1,269 | | | 1,289 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 381 | | | 26 | | Prepaid expenses and other current assets | 13 | | | 15 | |
Total current assets | Total current assets | 1,000 | | | 707 | | Total current assets | 2,071 | | | 4,128 | |
Property, Plant and Equipment: | Property, Plant and Equipment: | | | | Property, Plant and Equipment: | | | |
Property, plant and equipment | Property, plant and equipment | 9,070 | | | 8,972 | | Property, plant and equipment | 8,140 | | | 7,878 | |
Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | 2,466 | | | 2,414 | | Less: accumulated depreciation and amortization | 2,143 | | | 2,115 | |
Property, plant and equipment, net | Property, plant and equipment, net | 6,604 | | | 6,558 | | Property, plant and equipment, net | 5,997 | | | 5,763 | |
Other Assets: | Other Assets: | | | | Other Assets: | | | |
Goodwill | Goodwill | 757 | | | 757 | | Goodwill | 611 | | | 611 | |
Regulatory assets | Regulatory assets | 1,947 | | | 220 | | Regulatory assets | 534 | | | 577 | |
| Other non-current assets | Other non-current assets | 48 | | | 66 | | Other non-current assets | 30 | | | 31 | |
Total other assets | Total other assets | 2,752 | | | 1,043 | | Total other assets | 1,175 | | | 1,219 | |
Total Assets | Total Assets | $ | 10,356 | | | $ | 8,308 | | Total Assets | $ | 9,243 | | | $ | 11,110 | |
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)
LIABILITIES AND STOCKHOLDER’S EQUITY
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
LIABILITIES AND STOCKHOLDER’S EQUITY | | LIABILITIES AND STOCKHOLDER’S EQUITY | |
Current Liabilities: | Current Liabilities: | | | | Current Liabilities: | | | |
Short-term borrowings | Short-term borrowings | $ | 0 | | | $ | 24 | | Short-term borrowings | $ | — | | | $ | 7 | |
| Current portion of long-term debt | | Current portion of long-term debt | 1,275 | | | — | |
Accounts payable | Accounts payable | 273 | | | 296 | | Accounts payable | 293 | | | 365 | |
Accounts and notes payable–affiliated companies | 48 | | | 50 | | |
Accounts payable–affiliated companies | | Accounts payable–affiliated companies | 147 | | | 56 | |
Notes payable–affiliated companies | | Notes payable–affiliated companies | — | | | 224 | |
Taxes accrued | Taxes accrued | 90 | | | 74 | | Taxes accrued | 82 | | | 90 | |
Interest accrued | Interest accrued | 30 | | | 28 | | Interest accrued | 24 | | | 27 | |
Customer deposits | Customer deposits | 76 | | | 76 | | Customer deposits | 63 | | | 63 | |
| Current liabilities held for sale | | Current liabilities held for sale | — | | | 562 | |
Other current liabilities | Other current liabilities | 137 | | | 178 | | Other current liabilities | 105 | | | 113 | |
Total current liabilities | Total current liabilities | 654 | | | 726 | | Total current liabilities | 1,989 | | | 1,507 | |
Other Liabilities: | Other Liabilities: | | | | Other Liabilities: | | | |
Deferred income taxes, net | Deferred income taxes, net | 632 | | | 584 | | Deferred income taxes, net | 879 | | | 680 | |
| Benefit obligations | Benefit obligations | 83 | | | 83 | | Benefit obligations | 80 | | | 81 | |
Regulatory liabilities | Regulatory liabilities | 1,242 | | | 1,226 | | Regulatory liabilities | 1,054 | | | 979 | |
| Other non-current liabilities | 678 | | | 694 | | |
Other non–current liabilities | | Other non–current liabilities | 477 | | | 482 | |
Total other liabilities | Total other liabilities | 2,635 | | | 2,587 | | Total other liabilities | 2,490 | | | 2,222 | |
Long-Term Debt | Long-Term Debt | 4,349 | | | 2,428 | | Long-Term Debt | 1,905 | | | 4,380 | |
Commitments and Contingencies (Note 14) | 0 | | 0 | |
Commitments and Contingencies (Note 13) | | Commitments and Contingencies (Note 13) | 0 | | 0 |
Stockholder’s Equity: | Stockholder’s Equity: | | Stockholder’s Equity: | |
Common stock | Common stock | 0 | | | 0 | | Common stock | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 2,046 | | | 2,046 | | Additional paid-in capital | 1,553 | | | 2,226 | |
Retained earnings | Retained earnings | 662 | | | 511 | | Retained earnings | 1,296 | | | 765 | |
Accumulated other comprehensive income | Accumulated other comprehensive income | 10 | | | 10 | | Accumulated other comprehensive income | 10 | | | 10 | |
Total stockholder’s equity | Total stockholder’s equity | 2,718 | | | 2,567 | | Total stockholder’s equity | 2,859 | | | 3,001 | |
Total Liabilities and Stockholder’s Equity | Total Liabilities and Stockholder’s Equity | $ | 10,356 | | | $ | 8,308 | | Total Liabilities and Stockholder’s Equity | $ | 9,243 | | | $ | 11,110 | |
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)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | | | Cash Flows from Operating Activities: | | |
Net income | Net income | $ | 151 | | | $ | 67 | | Net income | $ | 554 | | | $ | 151 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | Depreciation and amortization | 80 | | | 74 | | Depreciation and amortization | 72 | | | 80 | |
| Amortization of deferred financing costs | 1 | | | 3 | | |
Deferred income taxes | Deferred income taxes | 41 | | | 23 | | Deferred income taxes | 196 | | | 41 | |
Goodwill impairment and loss from reclassification to held for sale | 0 | | | 132 | | |
| Write-down of natural gas inventory | 0 | | | 3 | | |
| Gain on divestitures | | Gain on divestitures | (557) | | | — | |
Changes in other assets and liabilities: | Changes in other assets and liabilities: | | | | Changes in other assets and liabilities: | | | |
Accounts receivable and unbilled revenues, net | Accounts receivable and unbilled revenues, net | (41) | | | 169 | | Accounts receivable and unbilled revenues, net | (176) | | | (41) | |
Accounts receivable/payable–affiliated companies | Accounts receivable/payable–affiliated companies | (5) | | | 0 | | Accounts receivable/payable–affiliated companies | 90 | | | (5) | |
Inventory | Inventory | 64 | | | 114 | | Inventory | 133 | | | 64 | |
| Accounts payable | Accounts payable | (10) | | | (159) | | Accounts payable | (74) | | | (10) | |
| Interest and taxes accrued | 18 | | | (11) | | |
Non-trading derivatives, net | 0 | | | (54) | | |
Margin deposits, net | 0 | | | 21 | | |
| Net regulatory assets and liabilities | Net regulatory assets and liabilities | (2,065) | | | 10 | | Net regulatory assets and liabilities | 125 | | | (2,065) | |
Other current assets | 2 | | | (1) | | |
Other current liabilities | (13) | | | (13) | | |
Other assets | (2) | | | 18 | | |
Other liabilities | (8) | | | (15) | | |
| Other current assets and liabilities | | Other current assets and liabilities | (14) | | | 7 | |
Other non-current assets and liabilities | | Other non-current assets and liabilities | (3) | | | (10) | |
Other operating activities, net | | Other operating activities, net | 1 | | | 1 | |
Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | (1,787) | | | 381 | | Net cash provided by (used in) operating activities | 347 | | | (1,787) | |
Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | | | | Cash Flows from Investing Activities: | | | |
Capital expenditures | Capital expenditures | (133) | | | (176) | | Capital expenditures | (197) | | | (133) | |
| Proceeds from divestiture | | Proceeds from divestiture | 2,060 | | | — | |
Other investing activities, net | | Other investing activities, net | (3) | | | 2 | |
| Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 1,860 | | | (131) | |
Cash Flows from Financing Activities: | | Cash Flows from Financing Activities: | | | |
Decrease in short-term borrowings, net | | Decrease in short-term borrowings, net | (43) | | | — | |
| Proceeds from (payments of) commercial paper, net | | Proceeds from (payments of) commercial paper, net | (776) | | | 226 | |
Proceeds from long-term debt | | Proceeds from long-term debt | — | | | 1,699 | |
Payments of long-term debt | | Payments of long-term debt | (425) | | | — | |
| Dividends to parent | | Dividends to parent | (743) | | | — | |
Payment of debt issuance costs | | Payment of debt issuance costs | — | | | (6) | |
Decrease in notes payable–affiliated companies | | Decrease in notes payable–affiliated companies | (224) | | | — | |
| Other, net | 2 | | | (1) | | |
| Net cash used in investing activities | (131) | | | (177) | | |
Cash Flows from Financing Activities: | | | | |
| Proceeds from (payments of) commercial paper, net | 226 | | | (172) | | |
Proceeds from long-term debt | 1,699 | | | 0 | | |
| Dividends to parent | 0 | | | (32) | | |
Debt issuance costs | (6) | | | 0 | | |
| Other, net | (1) | | | (1) | | |
Other financing activities, net | | Other financing activities, net | — | | | (1) | |
| Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | 1,918 | | | (205) | | Net cash provided by (used in) financing activities | (2,211) | | | 1,918 | |
Net Decrease in Cash, Cash Equivalents and Restricted Cash | Net Decrease in Cash, Cash Equivalents and Restricted Cash | 0 | | | (1) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | (4) | | | — | |
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 1 | | | 2 | | Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 8 | | | 1 | |
Cash, Cash Equivalents and Restricted Cash at End of Period | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1 | | | $ | 1 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 4 | | | $ | 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 March 31, | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | 2022 | | 2021 |
| | | | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | Shares | | Amount |
| | | (in millions, except share amounts) | | | (in millions, except share amounts) |
Common Stock | Common Stock | | | | | | Common Stock | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 1,000 | | | $ | 0 | | | 1,000 | | | $ | 0 | | Balance, beginning of period | | 1,000 | | | $ | — | | | 1,000 | | | $ | — | |
Balance, end of period | Balance, end of period | | | 1,000 | | | 0 | | | 1,000 | | | 0 | | Balance, end of period | | 1,000 | | | — | | | 1,000 | | | — | |
Additional Paid-in-Capital | Additional Paid-in-Capital | | | | | | | | | | Additional Paid-in-Capital | | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 2,046 | | | | | 2,116 | | Balance, beginning of period | | | 2,226 | | | | | 2,046 | |
| Contribution from parent | | Contribution from parent | | | 46 | | | — | |
Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses | | Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses | | | (720) | | | — | |
Other | | Other | | | 1 | | | — | |
Balance, end of period | Balance, end of period | | | 2,046 | | | | | 2,116 | | Balance, end of period | | | 1,553 | | | | | 2,046 | |
Retained Earnings | Retained Earnings | | | | | | | | Retained Earnings | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 511 | | | | | 515 | | Balance, beginning of period | | | 765 | | | | | 511 | |
Net income (loss) | | | 151 | | | | | 67 | | |
Net income | | Net income | | | 554 | | | | | 151 | |
Dividend to parent | Dividend to parent | | | 0 | | | | | (32) | | Dividend to parent | | | (23) | | | | | — | |
Adoption of ASU 2016-13 | | | — | | | (5) | | |
Balance, end of period | Balance, end of period | | | 662 | | | | | 545 | | Balance, end of period | | | 1,296 | | | | | 662 | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income | | | | | | | | Accumulated Other Comprehensive Income | | | | | | | |
Balance, beginning of period | Balance, beginning of period | | | 10 | | | | | 10 | | Balance, beginning of period | | | 10 | | | | | 10 | |
| Balance, end of period | Balance, end of period | | | 10 | | | | | 10 | | Balance, end of period | | | 10 | | | | | 10 | |
Total Stockholder’s Equity | Total Stockholder’s Equity | | | $ | 2,718 | | | | | $ | 2,671 | | Total Stockholder’s Equity | | | $ | 2,859 | | | | | $ | 2,718 | |
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 INTERIM CONDENSED FINANCIAL STATEMENTS
(1) Background and Basis of Presentation
General. This combined Form 10-Q is filed separately by 3 registrants: CenterPoint Energy, Inc., CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other Registrants or the subsidiaries of CenterPoint Energy other than itself or its subsidiaries.
Except as discussed in the lastpenultimate paragraph in Note 1211 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, 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 Registrants’ financial statements included in the Registrants’ combined 20202021 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. CenterPoint Energy, Inc. is a public utility holding company and owns interests in Enable, a publicly traded MLP, as described below.company. As of March 31, 2021,2022, CenterPoint Energy’s operating subsidiaries reported as continuing operations were as follows:
•Houston Electric providesowns and operates electric transmission service to transmission service customersand distribution facilities in the ERCOT region and distribution service to REPs serving the Texas Gulf Coastgulf coast area that includes the city of Houston.
•CERC Corp. (i) directly owns and operates natural gas distribution systems in 6 states;4 states and (ii) owns and operates permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) provides temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.CEIP.
•Vectren holds 3 public utilities through its wholly-owned subsidiary, VUHI, a public utility holding company:
•Indiana Gas provides energy delivery services to natural gas customers located in central and southern Indiana;
•SIGECO provides energy delivery services to electric and natural gas customers located in 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; and
•VEDO provides energy delivery services to natural gas customers located in and near Dayton in west-central Ohio.
•Vectren performs non-utility activities through ESG,Energy Systems Group, which provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.
On January 10, 2022, CERC Corp. completed the sale of its Arkansas and Oklahoma Natural Gas businesses. For additional information regarding discontinued operations and divestitures, see Note 3.
As of March 31, 2021,2022, CenterPoint Energy’s reportable segments were Electric and Natural Gas and Midstream Investments.Gas. Houston Electric and CERC each consist of a single reportable segment. For a description of CenterPoint Energy’s reportable segments, see Note 16.
As of March 31, 2021, CNP Midstream owned approximately 53.7% of the common units representing limited partner interests in Enable, which owns, operates and develops natural gas and crude oil infrastructure assets; CNP Midstream also owned 50% of the management rights and 40% of the incentive distribution rights in Enable GP. On February 16, 2021, Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if
and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held by CenterPoint Energy, and in return CenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units. For additional information regarding CenterPoint Energy’s interest in Enable, including the 14,520,000 Enable Series A Preferred Units directly owned by CenterPoint Energy, and the Enable Merger, see Note 9.15.
As of March 31, 2021,2022, CenterPoint Energy and Houston Electric had VIEs consisting of the Bond Companies, which are consolidated. The consolidated VIEs are wholly-owned, bankruptcy-remote, special purpose entities that were formed solely for
the purpose of securitizing transition and system restoration-related property. Creditors of CenterPoint Energy and Houston Electric have no recourse to any assets or revenues of the Bond Companies. The bonds issued by these VIEs are payable only from and secured by transition and system restoration property, and the bondholders have no recourse to the general credit of CenterPoint Energy or Houston Electric.
Basis of Presentation. The preparation of the Registrants’ financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The 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 the Condensed Statements of Consolidated Income are not necessarily indicative of amounts expected for a full-year period due to the effects of, among other things, (a) seasonal fluctuations in demand for energy, and energy services, (b) changes in energy commodity prices, (c) timing of maintenance and other expenditures and (d) acquisitions and dispositions of businesses, assets and other interests. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in Note 15 and to reflect the 2020 Form 10-K.
impacts of discontinued operations.
(2) New Accounting Pronouncements
The following table provides an overview of certain recently adopted accounting pronouncements applicable to all the Registrants.
| | | | | | | | | | | | | | | | | | | | |
Recently Adopted Accounting Standards |
ASU Number and Name | | Description | | Date of Adoption | | Financial Statement Impact upon Adoption |
ASU 2021-10: Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance | | This standard requires additional disclosure requirements when a business receives government assistance and uses a grant or contribution accounting model by analogy to other accounting guidance such as the grant model under International Accounting Standards (IAS) 20 Accounting for Government Grants and Disclosures of Government Assistance and GAAP ASC 958-605 Not for Profit. Transition method: Prospective or retrospective | | January 1, 2022 | | Adoption of this standard may result in additional disclosures related to the recovery of Texas natural gas costs associated with the February 2021 Winter Storm Event through the state securitization, which is expected to be accounted for as a government grant by analogy to IAS 20. The adoption of this standard did not have a material impact on the Registrants’ financial position, results of operations or cash flows.
|
Management believes that other recently adopted standards and recently issued accounting standards that are not yet effective will not have a material impact on the Registrants’ financial position, results of operations or cash flows upon adoption.
(3) Divestitures (CenterPoint Energy and CERC)
CenterPoint Energy completed the saleDivestiture of the Infrastructure Services Disposal Group onArkansas and Oklahoma Natural Gas Businesses. On April 9, 2020 for $850 million and collected a receivable of $4 million from PowerTeam Services in January29, 2021, for full and final settlement of the working capital adjustment in the Securities Purchase Agreement. CenterPoint Energy, through its subsidiary CERC Corp., completedentered 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 include 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 10, 2022.
The sale was considered an asset 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 as of December 31, 2021, 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 Energy Services Disposal Group on June 1, 2020 for $286 million in cash and collected a receivable for $79 million in October 2020 for full and final settlement of the working capital adjustment.. The earningsincome and expenses directly associated with these dispositions for the three months ended March 31, 2020 aredisposed 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
A summarytransaction. 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 Infrastructure Servicesdisposition of the Arkansas and Oklahoma Natural Gas businesses during the three months ended March 31, 2022. As of March 31, 2022, CenterPoint Energy Services Disposal Groups presentedand CERC had a receivable for working capital and other customary adjustments set forth in the Asset Purchase Agreement, and a gain or loss on sale in future periods may be incurred by CenterPoint Energy and CERC for differences between the estimated receivable as of March 31, 2022 and the actual amount of the payment.
As a result of the sale of the Arkansas and Oklahoma Natural Gas businesses, there were no assets or liabilities classified as held for sale as of March 31, 2022. The assets and liabilities of the Arkansas and Oklahoma Natural Gas businesses classified as held for sale in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets, as applicable, as of December 31, 2021 included the following:
| | | | | | | | | | | | | | |
| | December 31, 2021 |
| | CenterPoint Energy | | CERC |
| | (in millions) |
Receivables, net | | $ | 46 | | | $ | 46 | |
Accrued unbilled revenues | | 48 | | | 48 | |
Natural gas inventory | | 46 | | | 46 | |
Materials and supplies | | 9 | | | 9 | |
Property, plant and equipment, net | | 1,314 | | | 1,314 | |
Goodwill (1) | | 398 | | | 144 | |
Regulatory assets | | 471 | | | 471 | |
Other | | 6 | | | 6 | |
Total current assets held for sale | | $ | 2,338 | | | $ | 2,084 | |
| | | | |
Short term borrowings (2) | | $ | 36 | | | $ | 36 | |
Accounts payable | | 40 | | | 40 | |
Taxes accrued | | 7 | | | 7 | |
| | | | |
Customer deposits | | 12 | | | 12 | |
Regulatory liabilities | | 365 | | | 365 | |
Other | | 102 | | | 102 | |
Total current liabilities held for sale | | $ | 562 | | | $ | 562 | |
(1)See Note 9 for further information about the allocation of goodwill to the disposed businesses.
(2)Represents third-party AMAs associated with utility distribution service in Arkansas and Oklahoma. These transactions are accounted for as an inventory financing. For further information, see Note 11.
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 as applicable, is as follows:
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| | | | Three Months Ended March 31, 2020 |
| | | | CenterPoint Energy | | | | CERC |
| | | | Infrastructure Services Disposal Group | | | | Energy Services Disposal Group | | | | Total | | | | Energy Services Disposal Group |
| | | | (in millions) |
Revenues | | | | $ | 222 | | | | | $ | 886 | | | | | $ | 1,108 | | | | | $ | 886 | |
Expenses: | | | | | | | | | | | | | | | | |
Non-utility cost of revenues | | | | 44 | | | | | 808 | | | | | 852 | | | | | 808 | |
Operation and maintenance | | | | 163 | | | | | 20 | | | | | 183 | | | | | 20 | |
| | | | | | | | | | | | | | | | |
Taxes other than income taxes | | | | 1 | | | | | 1 | | | | | 2 | | | | | 1 | |
Total expenses | | | | 208 | | | | | 829 | | | | | 1,037 | | | | | 829 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Income (loss) from Discontinued Operations before income taxes | | | | 14 | | | | | 57 | | | | | 71 | | | | | 57 | |
Loss on classification to held for sale, net (1) | | | | (96) | | | | | (138) | | | | | (234) | | | | | (132) | |
Income tax benefit | | | | (5) | | | | | (12) | | | | | (17) | | | | | (11) | |
Net loss from Discontinued Operations | | | | $ | (77) | | | | | $ | (69) | | | | | $ | (146) | | | | | $ | (64) | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 (1) | | 2021 |
| (in millions) |
Income from Continuing Operations Before Income Taxes | $ | 9 | | | $ | 52 | |
| | | |
(1)Loss from classificationReflects January 1, 2022 to held forJanuary 9, 2022 results only due to of the sale is inclusive of goodwill impairment, gainsthe Arkansas and losses recognized upon sale, and for CenterPoint Energy, its costs to sell.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, Inc. entered into the Transition Services Agreement, whereby that subsidiary agreed to provide certain transition services such as accounting, customer operations, procurement, and CERCtechnology functions for a term of up to twelve months. Subject to the conditions in the Transition Services Agreement, Southern Col Midco may terminate these support services with 60 days prior written notice.
CenterPoint Energy’s charges to Southern Col Midco for reimbursement of transition services were $9 million during the three months ended March 31, 2022. Actual transitional services costs incurred are recorded net of amounts charged to Southern Col Midco. CenterPoint Energy had accounts receivable from Southern Col Midco of $7 million as of March 31, 2022 for transition services.
Discontinued Operations (CenterPoint Energy)
Enable Merger. On December 2, 2021, Enable, completed the previously announced Enable Merger pursuant to the Enable Merger Agreement entered into on February 16, 2021. At the closing of the Enable Merger on December 2, 2021, Energy Transfer acquired 100% of Enable’s outstanding common and preferred units, resulting in the exchange of Enable Common Units owned by CenterPoint Energy for Energy Transfer Common Units and the exchange of Enable Series A Preferred Units owned by CenterPoint Energy for Energy Transfer Series G Preferred Units.
During the three months ended March 31, 2022, CenterPoint Energy sold all of its remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units. See Note 10 for further information regarding Energy Transfer equity securities.
Additionally, CenterPoint Energy’s disposal of its interests in Enable represented a strategic shift that will have a major effect on CenterPoint Energy’s operations or financial results, and as such, its equity investment in Enable was classified and presented as held for sale. The equity in earnings of unconsolidated affiliates, net of tax, associated with CenterPoint Energy’s equity investment in Enable was reflected as discontinued operations on CenterPoint Energy’s Condensed Statements of Consolidated Income for the three months ended March 31, 2021.
A summary of discontinued operations presented in CenterPoint Energy’s Condensed Statements of Consolidated Income is as follows:
| | | | | | | | |
| | Three Months Ended March 31, 2021 |
| | Equity Method Investment in Enable |
| | (in millions) |
Equity in earnings of unconsolidated affiliate, net | | $ | 108 | |
Income from discontinued operations before income taxes | | 108 | |
Income tax expense | | 25 | |
Net income from discontinued operations | | $ | 83 | |
CenterPoint Energy has elected not to separately disclose discontinued operations on theirits respective Condensed Statements of Consolidated Cash Flows. Unregulated long-lived assets are not depreciated or amortized once they are classified as held for sale. The following table summarizes CenterPoint Energy’s and CERC’s cash flows from discontinued operations and certain supplemental cash flow disclosures, related to the Infrastructure Services and Energy Services Disposal Groups, as applicable:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | | CERC |
| | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Energy Services Disposal Group |
| | (in millions) |
| | | | | | |
| | | | | | |
Write-down of natural gas inventory | | $ | 0 | | | $ | 3 | | | $ | 3 | |
Capital expenditures | | 16 | | | 1 | | | 1 | |
Non-cash transactions: | | | | | | |
Accounts payable related to capital expenditures | | 2 | | | 4 | | | 4 | |
| | | | | | | | |
| | Three Months Ended March 31, 2021 |
| | CenterPoint Energy |
| | Equity Method Investment in Enable |
| | (in millions) |
Equity in earnings of unconsolidated affiliate - operating | | $ | (108) | |
Distributions from unconsolidated affiliate - operating | | 39 | |
| | |
Other Sale Related Matters
Distributions Received from Enable (CenterPoint Energy and CERC). Energy):
CES provided natural gas supply to CenterPoint Energy’s and CERC’s Natural Gas under contracts executed in a competitive bidding process, with the duration of some contracts extending into 2021. In addition, CERC is the natural gas transportation provider for a portion of CES’s customer base and will continue to be the transportation provider for these customers as long as these customers retain a relationship with the divested CES business.
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2021 |
| | | | | Per Unit | | Cash Distribution |
| | | | | (in millions, except per unit amounts) |
Enable Common Units | | | | | $ | 0.16525 | | | $ | 39 | |
Enable Series A Preferred Units | | | | | 0.62500 | | | 9 | |
Total CenterPoint Energy | | | | | | | $ | 48 | |
Transactions between CESwith Enable (CenterPoint Energy and CenterPoint Energy’s and CERC’s Natural Gas that were previously eliminated in consolidation have been reflected in continuing operations until June 1, 2020, which wasCERC):
| | | | | | | |
| | | Three Months Ended March 31, 2021 |
| | | (in millions) |
Natural gas expenses, includes transportation and storage costs | | | $ | 32 | |
Summarized Financial Information for Enable (CenterPoint Energy)
As a result of the date of closing of the Enable Merger in 2021, there were no assets classified as held for sale as of December 31, 2021. Summarized consolidated balance sheet information for Enable on the closing of the Energy Services Disposal Group. Revenues and expenses included in continuing operations wereEnable Merger is as follows:
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| | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | | CERC |
| | (in millions) |
Transportation revenue | | $ | 16 | | | $ | 16 | |
Natural gas expense | | 45 | | | 44 | |
Natural Gas had AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the | | | | | | | | |
| | December 2, |
| | 2021 |
| | (in millions) |
Current assets | | $ | 594 | |
Non-current assets | | 11,227 | |
Current liabilities | | 1,254 | |
Non-current liabilities | | 3,281 | |
Non-controlling interest | | 26 | |
Preferred equity | | 362 | |
Accumulated other comprehensive loss | | (1) | |
Enable partners’ equity | | 6,899 | |
| | |
Reconciliation of Investment in Enable: | | |
CenterPoint Energy’s ownership interest in Enable partners’ equity | | $ | 3,701 | |
CenterPoint Energy’s basis difference | | (2,732) | |
| | |
CenterPoint Energy���s equity method investment in Enable | | $ | 969 | |
Energy Services Disposal Group which expired in March 2021. The expired AMAs were replaced with new third-party AMAs beginning in April 2021. CenterPoint Energy and CERC had outstanding obligations related to the AMAs of $-0- and $24 million as of March 31, 2021 and December 31, 2020, respectively.
The Infrastructure Services Disposal Group provided pipeline construction and repair servicesSummarized unaudited consolidated income information for Enable is as follows:
| | | | | | | | | |
| | | Three Months Ended March 31, 2021 |
| | | | | (in millions) |
Operating revenues | | | | | $ | 970 | |
Cost of sales, excluding depreciation and amortization | | | | | 519 | |
Depreciation and amortization | | | | | 106 | |
| | | | | |
Operating income | | | | | 206 | |
Net income attributable to Enable Common Units | | | | | 155 | |
| | | | | |
| | | | | |
Reconciliation of Equity in Earnings, net: | | | | | |
CenterPoint Energy’s interest | | | | | $ | 83 | |
Basis difference amortization (1) | | | | | 25 | |
| | | | | |
| | | | | |
CenterPoint Energy’s equity in earnings, net (2) | | | | | $ | 108 | |
(1)Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s and CERC’s Natural Gas. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by Natural Gas utilitiesshare of Enable earnings adjusted for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the Natural Gas utility. Amounts charged for these services that are not capitalized are included primarily in Operation and maintenance expenses. Fees incurred byamortization of the basis difference of CenterPoint Energy’s investment in Enable and CERC’s Natural Gas for pipeline constructionits underlying equity in net assets of Enable. The basis difference was being amortized through the year 2048 and repair services are as follows:
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| | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | CERC |
| | (in millions) |
Pipeline construction and repair services capitalized | | $ | 34 | | | $ | 0 | |
Pipeline construction and repair service charges in operations and maintenance expense | | 1 | | | 1 | |
In the Securities Purchase Agreement, CenterPoint Energy agreed to a mechanism to reimburse PowerTeam Services subsequent toceased upon closing of the sale for certain amounts of specifically identified change orders that may be ultimately rejected by one of VISCO’s customersEnable Merger.
(2)Reported as part of on-going audits.discontinued operations on CenterPoint Energy’s maximum contractual exposure under the Securities Purchase Agreement, in addition to the amount reflected in the working capital adjustment, for these change orders is $21 million. CenterPoint Energy does not expect the ultimate outcomeCondensed Statements of this matter to have a material adverse effect on its financial condition, results of operations or cash flows. CenterPoint Energy anticipates this matter will be resolved in 2021.Consolidated Income.
(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 consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services. The revenues and related balances in the following tables exclude operating revenues and balances from the Energy Services Disposal Group and the Infrastructure Services Disposal Group, which are reflected as discontinued operations prior to the date of closing of each transaction. See Note 3 for further information. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in the Registrants’ combined 2020 Form 10-K.
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 tables disaggregate revenues by reportable segment and major source:
CenterPoint Energy
| | | | | | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2022 |
| | Electric | | Natural Gas | | Corporate and Other | | Total | | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) | | (in millions) |
Revenue from contracts | Revenue from contracts | | $ | 833 | | | $ | 1,655 | | | $ | 53 | | | $ | 2,541 | | Revenue from contracts | | $ | 898 | | | $ | 1,845 | | | $ | 45 | | | $ | 2,788 | |
Other (1) | Other (1) | | (3) | | | 8 | | | 1 | | | 6 | | Other (1) | | (5) | | | (21) | | | 1 | | | (25) | |
| Total revenues | Total revenues | | $ | 830 | | | $ | 1,663 | | | $ | 54 | | | $ | 2,547 | | Total revenues | | $ | 893 | | | $ | 1,824 | | | $ | 46 | | | $ | 2,763 | |
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| | | | | | | | |
| | Three Months Ended March 31, 2020 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 767 | | | $ | 1,296 | | | $ | 78 | | | $ | 2,141 | |
Other (1) | | 0 | | | 25 | | | 1 | | | 26 | |
| | | | | | | | |
Total revenues | | $ | 767 | | | $ | 1,321 | | | $ | 79 | | | $ | 2,167 | |
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| | | | | | | | |
| | Three Months Ended March 31, 2021 |
| | Electric | | Natural Gas | | Corporate and Other | | Total |
| | (in millions) |
Revenue from contracts | | $ | 833 | | | $ | 1,655 | | | $ | 53 | | | $ | 2,541 | |
Other (1) | | (3) | | | 8 | | | 1 | | | 6 | |
| | | | | | | | |
Total revenues | | $ | 830 | | | $ | 1,663 | | | $ | 54 | | | $ | 2,547 | |
(1)Primarily consists of income from ARPs weather hedge gains (losses) and leases. Total lease income was $2$1 million and $1$2 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
Houston Electric
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | | (in millions) |
Revenue from contracts | Revenue from contracts | | | $ | 687 | | | $ | 638 | | Revenue from contracts | | | $ | 756 | | | $ | 687 | |
Other (1) | Other (1) | | | (3) | | | (4) | | Other (1) | | | (10) | | | (3) | |
Total revenues | Total revenues | | | $ | 684 | | | $ | 634 | | Total revenues | | | $ | 746 | | | $ | 684 | |
(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three months ended March 31, 20212022 and 2020.2021.
CERC
| | | | | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| | 2021 | | 2020 | | | 2022 | | 2021 |
| | (in millions) | | | (in millions) |
Revenue from contracts | Revenue from contracts | | $ | 1,172 | | | $ | 984 | | | Revenue from contracts | | | $ | 1,409 | | | $ | 1,172 | |
Other (1) | Other (1) | | 5 | | | 27 | | | Other (1) | | | (24) | | | 5 | |
| Total revenues | Total revenues | | $ | 1,177 | | | $ | 1,011 | | | Total revenues | | | $ | 1,385 | | | $ | 1,177 | |
(1)Primarily consists of income from ARPs weather hedge gains (losses) and leases. Lease income was not significant for the three months ended March 31, 20212022 and 2020.2021.
Revenues from Contracts with Customers
Electric (CenterPoint Energy and Houston Electric). Houston Electric transmits and distributes electricity to customers over time, and customers consume the electricity when delivered. Indiana Electric generates, distributestransmits and transmitsdistributes 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 in their Condensed Consolidated Balance Sheets. As of March 31, 2021,2022, CenterPoint Energy’s contract assets primarily relate to ESGEnergy Systems Group contracts where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Condensed Consolidated Balance Sheets. As of March 31, 2021,2022, CenterPoint Energy’s contract liabilities primarily relate to ESGEnergy Systems Group contracts where revenue is recognized using the input method.
The opening and closing balances of accounts receivable related to ASC 606 revenues, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers, from continuing operationsexcluding balances related to assets held for sale, as of December 31, 20202021 and March 31, 2021,2022, respectively, are as follows:presented below.
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract Assets | | Contract Liabilities |
| (in millions) |
Opening balance as of December 31, 2020 | $ | 604 | | | $ | 505 | | | $ | 27 | | | $ | 18 | |
Closing balance as of March 31, 2021 | 675 | | | 343 | | | 23 | | | 23 | |
Increase (decrease) | $ | 71 | | | $ | (162) | | | $ | (4) | | | $ | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract Assets | | Contract Liabilities |
| (in millions) |
Opening balance as of December 31, 2021 | $ | 627 | | | $ | 513 | | | $ | 15 | | | $ | 16 | |
Closing balance as of March 31, 2022 | 876 | | | 432 | | | 16 | | | 27 | |
Increase (decrease) | $ | 249 | | | $ | (81) | | | $ | 1 | | | $ | 11 | |
The amount of revenue recognized induring the three-month periodthree months ended March 31, 20212022 that was included in the opening contract liability was $11$10 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, 2020 | $ | 225 | | | $ | 113 | | | | | $ | 3 | |
Closing balance as of March 31, 2021 | 216 | | | 83 | | | | | 8 | |
Increase (decrease) | $ | (9) | | | $ | (30) | | | | | $ | 5 | |
| | | | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | | | Contract Liabilities |
| (in millions) |
Opening balance as of December 31, 2021 | $ | 225 | | | $ | 127 | | | | | $ | 4 | |
Closing balance as of March 31, 2022 | 247 | | | 95 | | | | | 8 | |
Increase (decrease) | $ | 22 | | | $ | (32) | | | | | $ | 4 | |
The amount of revenue recognized induring the three-month periodthree months ended March 31, 20212022 that was included in the opening contract liability was $1 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.
CERC
| | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | | | |
| (in millions) | | |
Opening balance as of December 31, 2020 | $ | 214 | | | $ | 261 | | | | | | | |
Closing balance as of March 31, 2021 | 299 | | | 168 | | | | | | | |
Increase (decrease) | $ | 85 | | | $ | (93) | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Accounts Receivable | | Other Accrued Unbilled Revenues | | | | |
| (in millions) | | |
Opening balance as of December 31, 2021 | $ | 223 | | | $ | 247 | | | | | | | |
Closing balance as of March 31, 2022 | 408 | | | 209 | | | | | | | |
Increase (decrease) | $ | 185 | | | $ | (38) | | | | | | | |
CERC does not have any opening or closing contract asset or contract liability balances.
Remaining Performance Obligations (CenterPoint Energy). The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts and (2) when CenterPoint Energy expects to recognize this revenue. Such contracts include energy performance and sustainable infrastructure services contracts of ESG,Energy Systems Group, which are included in Corporate and Other.
| | | Rolling 12 Months | | Thereafter | | Total | | Rolling 12 Months | | Thereafter | | Total |
| | (in millions) | | | (in millions) | |
Revenue expected to be recognized on contracts in place as of March 31, 2021: | | | |
Revenue expected to be recognized on contracts in place as of March 31, 2022: | | Revenue expected to be recognized on contracts in place as of March 31, 2022: | | |
| Corporate and Other | Corporate and Other | $ | 259 | | | $ | 554 | | | $ | 813 | | | Corporate and Other | $ | 224 | | | $ | 535 | | | $ | 759 | | |
| | $ | 259 | | | $ | 554 | | | $ | 813 | | | | $ | 224 | | | $ | 535 | | | $ | 759 | | |
Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the 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 revenue 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 recognizes losses on financial assets that fall under the scope of Topic 326. Losses on financial assets are primarily recoverable through regulatory mechanisms and do not materially impact Houston Electric's allowance for credit losses. For a discussion of regulatory deferrals related to COVID-19 and the February 2021 Winter Storm Event, see Note 6.
(5) Employee Benefit Plans
The Registrants’ net periodic cost, before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes, includes the following components relating to pension and postretirement benefits:
Pension Benefits (CenterPoint Energy)
| | | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | 2022 | | 2021 |
| | | (in millions) | | | (in millions) |
Service cost (1) | Service cost (1) | | | $ | 10 | | | $ | 10 | | Service cost (1) | | $ | 8 | | | $ | 10 | |
Interest cost (2) | Interest cost (2) | | | 15 | | | 19 | | Interest cost (2) | | 15 | | | 15 | |
Expected return on plan assets (2) | Expected return on plan assets (2) | | | (26) | | | (28) | | Expected return on plan assets (2) | | (25) | | | (26) | |
| Amortization of net loss (2) | Amortization of net loss (2) | | | 9 | | | 10 | | Amortization of net loss (2) | | 7 | | | 9 | |
| Net periodic cost | Net periodic cost | | | $ | 8 | | | $ | 11 | | Net periodic cost | | $ | 5 | | | $ | 8 | |
(1)Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.
(2)Amounts presented in the table above are included in Other income, (expense), net in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of regulatory deferrals.
Postretirement Benefits
| | | | | | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
Service cost (1) | Service cost (1) | $ | 1 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Service cost (1) | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | |
Interest cost (2) | Interest cost (2) | 2 | | | 1 | | | 1 | | | 3 | | | 1 | | | 1 | | Interest cost (2) | 2 | | | 1 | | | 1 | | | 2 | | | 1 | | | 1 | |
Expected return on plan assets (2) | Expected return on plan assets (2) | (1) | | | (1) | | | 0 | | | (1) | | | (1) | | | 0 | | Expected return on plan assets (2) | (1) | | | (1) | | | — | | | (1) | | | (1) | | | — | |
Amortization of prior service cost (credit) (2) | Amortization of prior service cost (credit) (2) | (1) | | | (1) | | | 0 | | | (1) | | | (1) | | | 0 | | Amortization of prior service cost (credit) (2) | (1) | | | (1) | | | — | | | (1) | | | (1) | | | — | |
Amortization of net loss (2) | | Amortization of net loss (2) | (1) | | | (1) | | | — | | | — | | | — | | | — | |
| Net periodic cost (income) | $ | 1 | | | $ | (1) | | | $ | 1 | | | $ | 1 | | | $ | (1) | | | $ | 1 | | |
Net periodic cost (benefit) | | Net periodic cost (benefit) | $ | — | | | $ | (2) | | | $ | 1 | | | $ | 1 | | | $ | (1) | | | $ | 1 | |
(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 during 2021:2022:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Expected minimum contribution to pension plans during 2021 | $ | 61 | | | $ | 0 | | | $ | 0 | |
Expected contribution to postretirement benefit plans in 2021 | 9 | | | 1 | | | 3 | |
On March 11, 2021, the ARPA was signed into law which includes pension plan funding relief for the sponsoring employers. As a result, the expected minimum contribution to pension plans for 2021 as disclosed is likely to be significantly reduced. However, at this time, CenterPoint Energy is not able to quantify the reduction amount until further IRS guidance related to the pension funding relief under the ARPA becomes available. | | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Expected minimum contribution to pension plans during 2022 | $ | 7 | | | $ | — | | | $ | — | |
Expected contribution to postretirement benefit plans in 2022 | 8 | | | 1 | | | 3 | |
The table below reflects the contributions made to the pension and postretirement benefit plans during 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2021 |
| | | | | | | CenterPoint Energy | | Houston Electric | | CERC |
| | | | | | (in millions) |
Pension plans | | | | | | | $ | 8 | | | $ | 0 | | | $ | 0 | |
Postretirement benefit plans | | | | | | | 3 | | | 0 | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2022 |
| | | | | | | CenterPoint Energy | | Houston Electric | | CERC |
| | | | | | | (in millions) |
Pension plans | | | | | | | $ | 2 | | | $ | — | | | $ | — | |
Postretirement benefit plans | | | | | | | 2 | | | — | | | — | |
(6) Regulatory Matters
Equity Return
The Registrants are at times allowed by a regulator to defer an equity return as part of the recoverable carrying costs of a regulatory asset. A deferred equity return is capitalized for rate-making purposes, but it is not included in the Registrant’s regulatory assets on its Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of Consolidated Income as it is recovered in rates. The recoverable allowed equity return not yet recognized by the Registrants is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) | | CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) |
| (in millions) |
Allowed equity return not recognized | $ | 224 | | | $ | 130 | | | $ | 13 | | | $ | 229 | | | $ | 137 | | | $ | 13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) | | CenterPoint Energy (1) | | Houston Electric (2) | | CERC (3) |
| (in millions) |
Allowed equity return not recognized | $ | 195 | | | $ | 95 | | | $ | 16 | | | $ | 199 | | | $ | 100 | | | $ | 16 | |
(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 generally associated with federally mandated investments in Indiana.
(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 and certain storm restoration balances expected to be recovered in rates through 2024. The unrecognized equity return will be recognized as it is recovered2024 and certain storm restoration balances pending recovery in rates through 2024.the next rate proceeding. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.
(3)CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas.
The table below reflects the amount of allowed equity return recognized by each Registrant in its Condensed Statements of Consolidated Income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Allowed equity return recognized | $ | 8 | | | $ | 7 | | | $ | 0 | | | $ | 7 | | | $ | 6 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Allowed equity return recognized | $ | 10 | | | $ | 9 | | | $ | — | | | $ | 8 | | | $ | 7 | | | $ | — | |
| | | | | | | | | | | |
| |
| | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
February 2021 Winter Storm Event
In February 2021, certain of our jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted our businesses. 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. While demand for electricity reached extraordinary levels due to the extreme cold, the supply of electricity significantly decreased in part because of the inability of certain power generation facilities to supply electric power to the grid. Houston Electric does not own or operate any electric generation facilities. It transmits and distributes to customers of REPs electric power that the REPs obtain from power generation facilities owned by third parties. ERCOT serves as the independent system operator and regional reliability coordinator for member electric power systems in most of Texas. To comply with ERCOT’s orders, Houston Electric implemented controlled outages across its service territory, resulting in a substantial number of businesses and residents being without power, many for extended periods of time, in compliance with ERCOT’s directives as an emergency procedure to avoid prolonged large-scale state-wide blackouts and long-term damage to the electric system in Texas. In anticipation of this weather event, Houston Electric implemented its emergency operations plan’s processes and procedures necessary to respond to such events, including establishing an incident command center and calling for mutual assistance from other utilities where needed, among other measures. Throughout the February 2021 Winter Storm Event, Houston Electric remained in contact with its regulators and stakeholders, including federal, state and local officials, as well as the PUCT and ERCOT.
The February 2021 Winter Storm Event also impacted wholesale prices of CenterPoint Energy and CERC’s natural gas and their ability to service 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 price of natural gas purchased by CenterPoint Energy and CERC. On February 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility to record in a regulatory asset the extraordinary expenses associated with the February 2021 Winter Storm Event, including, but not limited to, natural gas cost and other costs related to the procurement and transportation of natural gas supply, subject to recovery in future regulatory proceedings. In addition, CenterPoint Energy’s and CERC’s Natural Gas utilities in jurisdictions outside of Texas deferred natural gas cost under existing recovery mechanisms and have either sought or intend to seek recovery of the increased cost of natural gas, which will be subject to customary regulatory prudency reviews that may impact the amounts recovered. Amounts for the under recovery of natural gas costs are reflected in regulatory assets and are probable of recovery; however, the timing of recovery for each jurisdiction for the estimated incremental gas cost attributable toassociated with the February 2021 Winter Storm Event are reflected in current and non-current regulatory assets on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. Recovery of natural gas costs within eachthe regulatory asset is uncertain. assets are probable and are subject to customary regulatory prudence reviews in all jurisdictions that may impact the amounts ultimately recovered. CenterPoint Energy and CERC, as applicable, have begun recovery of natural gas costs in Indiana, Louisiana, Mississippi and Minnesota. CenterPoint Energy and CERC have filed for securitization of natural gas costs in Texas, received commission approval and issuance of financing order in 2022, and expect the Texas Public Financing Authority to issue customer rate relief bonds in 2022. As part of the closing of the sale of CenterPoint Energy’s and CERC’s Natural Gas businesses in Arkansas and Oklahoma, CERC received as part of the purchase price $398 million for unrecovered natural gas costs associated with the February 2021 Winter Storm Event. In testimonies filed on December 22, 2021 and February 11, 2022, in CERC’s high gas cost prudency review case, the Minnesota Attorney General’s Office, Minnesota Department of Commerce, and Citizens Utility Board have proposed significant disallowances for all natural gas utilities, resulting in potential disallowances for CenterPoint Energy and CERC. Recommended disallowances for CERC include up to $45 million proposed by the Minnesota Department of Commerce, $82 million proposed by the Citizens Utility Board, and $409 million (or in the alternative $57 million) proposed by the Attorney General’s Office. The natural gas costs in Minnesota were incurred in accordance with the plan on file with the MPUC and CenterPoint Energy believes the costs were prudently incurred and are eligible for recovery through an existing mechanism. Additionally, due to the uncertainty of timing and method of recovery in some jurisdictions, CenterPoint Energy and CERC may not earn a return on amounts deferred in the regulatory assets associated with the February 2021 Winter Storm Event.
As of March 31, 2022, CenterPoint Energy and CERC have recorded current regulatory assets of $1,207 million and $1,176 million, respectively, and non-current regulatory assets of $297 million and $297 million, respectively, associated with the February 2021 Winter Storm Event. As of December 31, 2021, CenterPoint Energy and CERC have recorded current regulatory assets of $462$1,410 million and $347$1,336 million, respectively, of which $154 million related to Arkansas and Oklahoma has been recast to held for sale at both CenterPoint Energy and CERC, and non-current regulatory assets of $1.7 billion$583 million and $1.7 billion,$583 million, respectively, associated with the February 2021 Winter Storm Event. Dueof which $244 million related to the uncertainty of timingArkansas and method of recovery,Oklahoma has been recast to held for sale at both CenterPoint Energy and CERC, may not earn a return on all amounts deferred in the non-current regulatory asset associated with the February 2021 Winter Storm Event.
On February 21, 2021, in response to the 2021 February Winter Storm Event, the PUCT issued an order prohibiting REPs from sending a request to TDUs to disconnect such REPs’ customers for non-payment, effective February 21, 2021. As a result of this order, in the event a request for disconnect is received from a REP, Houston Electric will not execute any such disconnect request until the PUCT issues orders for disconnects to resume. As of both March 31, 2022 and December 31, 2021, as authorized by the PUCT, CenterPoint Energy and Houston Electric establishedrecorded a regulatory asset of $14$8 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, as of both March 31, 2022 and December 31, 2021, CenterPoint Energy and Houston Electric recorded a regulatory asset of $14$15 million to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.
See Notes 12 and 14(d)Note 13(d) for further information regarding debt financing transactions and litigation related to the February 2021 Winter Storm Event, respectively.Event.
COVID-19 Regulatory Matters
Governors, public utility commissions and other authorities in the states in which the Registrants operate issued a number of different orders related to the COVID-19 pandemic, including orders addressing customer non-payment and disconnection. Although the disconnect moratoriums have expired in certain of the Registrants’ service territories, CenterPoint Energy continues to support those customers who may need payment assistance, arrangements or extensions.
The COVID-19 ERP allows program expenses to be recovered in rates. CenterPoint Energy’s and Houston Electric’s COVID-19 ERP regulatory assets were $-0- as of March 31, 2021 and $6 million as of December 31, 2020.
Commissions in all of Indiana Electric’s and CenterPoint Energy’s and CERC’s Natural Gas service territories have either (1) issued orders to record a regulatory asset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of disconnections and payment plans or (2) provided authority to recover bad debt expense through an existing tracking mechanism. CenterPoint Energy and CERC have recorded estimated incremental uncollectible receivables to the associated regulatory asset of $29 million and $27 million, respectively, as of March 31, 2021 and $22 million and $19 million, respectively, as of December 31, 2020.
In some of the states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs which ensure the safety and health of customers, employees, and contractors, that would not have been incurred in the normal course of business. CERC’s Natural Gas service territories in Minnesota and Arkansas will include any offsetting savings in the deferral. Other jurisdictions where the Registrants operate may require them to offset the deferral with savings as well. The Arkansas FRP, filed on April 5, 2021, included a request for (1) the regulatory asset as of September 30, 2020 in working capital for the 2021 historical year using a thirteen-month average of the asset balance; (2) the regulatory asset as of September 30, 2020 in working capital for the 2021 projected year using a thirteen-month average of the asset balance; and (3) the amortization of the balance over the 2021 projected year twelve-month period beginning October 1, 2021.
(7) Derivative Instruments
The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants utilize derivative instruments such as swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows.
(a)Non-Trading Activities
Commodity Derivative Instruments (CenterPoint Energy). CenterPoint Energy, through the Indiana Utilities, enters into certain derivative instruments to mitigate the effects of commodity price movements. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset.
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 or accounted for as economic 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 the Registrants’ outstanding interest rate hedging activity:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | | December 31, 2021 |
Hedging Classification | Hedging Classification | | Notional Principal | Hedging Classification | | Notional Principal |
| | | | (in millions) | | | (in millions) |
Economic hedge (1) | Economic hedge (1) | | $ | 84 | | | | $ | 84 | | | Economic hedge (1) | | $ | 84 | | | | $ | 84 | | |
|
(1)Relates to interest rate derivative instruments at SIGECO.
Weather HedgesNormalization (CenterPoint Energy and CERC). CenterPoint Energy and CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on Natural Gas in Arkansas, Indiana, Louisiana, Mississippi, Minnesota Ohio and Oklahoma,Ohio, 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 Natural Gas compared to its other jurisdictions. As a result, fluctuations from normal weather may have a positive or negative effect on CenterPoint Energy’s and CERC’s Natural Gas’ results in Texas and on CenterPoint Energy’s electric operations’ results in its Texas and Indiana service territories.
CenterPoint Energy and CERC, as applicable, enter into winter season weather hedges from time to time for certain Natural Gas jurisdictions and electric operations’ service territory to mitigate the effect of fluctuations from normal weather on results of operations and cash flows. These weather hedges are based on heating degree days at 10-year normal weather. Houston Electric and Indiana Electric The Registrants do not currently enter into weather hedges.
(b)Derivative Fair Values and Income Statement Impacts
The following tables present information about derivative instruments and hedging activities. The first table provides a balance sheet overview of Derivative Liabilities,derivative assets and liabilities, while the last table provides a breakdown of the related income statement impacts.
Fair Value of Derivative Instruments and Hedged Items (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Derivative Liabilities Fair Value |
| | Balance Sheet Location | | | | March 31, 2021 | | | | December 31, 2020 |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| Derivatives not designated as hedging instruments: | | | | (in millions) |
| Natural gas derivatives (1) | Current Liabilities: Non-trading derivative liabilities | | | | $ | 2 | | | | | $ | 3 | |
| Natural gas derivatives (1) | Other Liabilities: Non-trading derivative liabilities | | | | 5 | | | | | 7 | |
| Interest rate derivatives | Other Liabilities: Non-trading derivative liabilities | | | | 9 | | | | | 20 | |
| Indexed debt securities derivative (2) | Current Liabilities | | | | 927 | | | | | 953 | |
| | | | | | | | | | |
| Total | | | | $ | 943 | | | | | $ | 983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2022 | | December 31, 2021 |
| | 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 | | $ | 33 | | | $ | — | | | $ | 9 | | | $ | — | |
| Natural gas derivatives (1) | Other Assets: Non-trading derivative assets | | 6 | | | — | | | 5 | | | — | |
| | | | | | | | | | |
| Interest rate derivatives | Current Liabilities: Non-trading derivative liabilities | | — | | | 1 | | | — | | | 2 | |
| | | | | | | | | | |
| Interest rate derivatives | Other Liabilities: Non-trading derivative liabilities | | — | | | 5 | | | — | | | 12 | |
| Indexed debt securities derivative (2) | Current Liabilities | | — | | | 797 | | | — | | | 903 | |
| | | | | | | | | | |
| Total | | $ | 39 | | | $ | 803 | | | $ | 14 | | | $ | 917 | |
(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the mark-to-market fair value of each natural gas contract is in a liabilityan 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. See Note 1110 for further information.
Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy)
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | Income Statement Location | | | 2021 | | 2020 | | Income Statement Location | | 2022 | | 2021 | |
Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | (in millions) | Derivatives not designated as hedging instruments: | | | | (in millions) |
Indexed debt securities derivative (1) | Indexed debt securities derivative (1) | | Gain (loss) on indexed debt securities | | | $ | 26 | | | $ | 135 | | Indexed debt securities derivative (1) | | Gain on indexed debt securities | | $ | 106 | | | $ | 26 | | |
| Total | | | $ | 26 | | | $ | 135 | | |
|
(1)The indexed debt securities derivative is recorded at fair value and changes in the fair value are recorded in CenterPoint Energy’s Statements of Consolidated Income.
(c) Credit Risk Contingent Features (CenterPoint Energy)
Certain of CenterPoint Energy’s derivative instruments 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 Moody’s. If
CenterPoint Energy’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment.
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
Aggregate fair value of derivatives with credit-risk-related contingent features in a liability position | Aggregate fair value of derivatives with credit-risk-related contingent features in a liability position | | $ | 9 | | | $ | 20 | | Aggregate fair value of derivatives with credit-risk-related contingent features in a liability position | | $ | 6 | | | $ | 14 | |
Fair value of collateral already posted | Fair value of collateral already posted | | 7 | | | 7 | | Fair value of collateral already posted | | 7 | | | 7 | |
Additional collateral required to be posted if credit risk contingent features triggered (1) | Additional collateral required to be posted if credit risk contingent features triggered (1) | | 2 | | | 3 | | Additional collateral required to be posted if credit risk contingent features triggered (1) | | — | | | 7 | |
(1)The maximum collateral required if further escalating collateral is triggered would equal the net liability position.
(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.
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, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or 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 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 the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data.
The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis.
The following tables present information about the Registrants’ assets and liabilities measured at fair value on a recurring basis as of March 31, 20212022 and December 31, 20202021 and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.
CenterPoint Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Level 1 | | Level 2 | | Level 3 | | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total |
Assets | (in millions) |
Corporate equities | $ | 850 | | | $ | 0 | | | $ | 0 | | | | | $ | 850 | | | $ | 873 | | | $ | 0 | | | $ | 0 | | | | $ | 873 | |
Investments, including money market funds (1) | 43 | | | 0 | | | 0 | | | | | 43 | | | 43 | | | 0 | | | 0 | | | | 43 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total assets | $ | 893 | | | $ | 0 | | | $ | 0 | | | | | $ | 893 | | | $ | 916 | | | $ | 0 | | | $ | 0 | | | | $ | 916 | |
Liabilities | | | | | | | | | | | | | | | | | | |
Indexed debt securities derivative | $ | 0 | | | $ | 927 | | | $ | 0 | | | | | $ | 927 | | | $ | 0 | | | $ | 953 | | | $ | 0 | | | | $ | 953 | |
Interest rate derivatives | 0 | | | 9 | | | 0 | | | | | 9 | | | 0 | | | 20 | | | 0 | | | | 20 | |
Natural gas derivatives | 0 | | | 7 | | | 0 | | | | | 7 | | | 0 | | | 10 | | | 0 | | | | 10 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities | $ | 0 | | | $ | 943 | | | $ | 0 | | | | | $ | 943 | | | $ | 0 | | | $ | 983 | | | $ | 0 | | | | $ | 983 | |
Houston Electric
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total |
Assets | Assets | (in millions) | Assets | (in millions) |
Equity securities | | Equity securities | $ | 720 | | | $ | — | | | $ | — | | | | $ | 720 | | | $ | 1,439 | | | $ | — | | | $ | — | | | | $ | 1,439 | |
Investments, including money market funds (1) | Investments, including money market funds (1) | $ | 27 | | | $ | 0 | | | $ | 0 | | | | $ | 27 | | | $ | 26 | | | $ | 0 | | | $ | 0 | | | | $ | 26 | | Investments, including money market funds (1) | 39 | | | — | | | — | | | | 39 | | | 42 | | | — | | | — | | | | 42 | |
| Total assets | $ | 27 | | | $ | 0 | | | $ | 0 | | | | $ | 27 | | | $ | 26 | | | $ | 0 | | | $ | 0 | | | | $ | 26 | | |
Natural gas derivatives | | Natural gas derivatives | — | | | 39 | | | — | | | | 39 | | | — | | | 14 | | | — | | | | 14 | |
| Total assets | | Total assets | $ | 759 | | | $ | 39 | | | $ | — | | | | $ | 798 | | | $ | 1,481 | | | $ | 14 | | | $ | — | | | | $ | 1,495 | |
Liabilities | | Liabilities | | | | | | | | | | | | | | | | | |
Indexed debt securities derivative | | Indexed debt securities derivative | $ | — | | | $ | 797 | | | $ | — | | | | $ | 797 | | | $ | — | | | $ | 903 | | | $ | — | | | | $ | 903 | |
Interest rate derivatives | | Interest rate derivatives | — | | | 6 | | | — | | | | 6 | | | — | | | 14 | | | — | | | | 14 | |
| Total liabilities | | Total liabilities | $ | — | | | $ | 803 | | | $ | — | | | | $ | 803 | | | $ | — | | | $ | 917 | | | $ | — | | | | $ | 917 | |
Houston Electric
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Level 1 | | Level 2 | | Level 3 | | | | Total | | Level 1 | | Level 2 | | Level 3 | | | | Total |
Assets | (in millions) |
Investments, including money market funds (1) | $ | 24 | | | $ | — | | | $ | — | | | | | $ | 24 | | | $ | 27 | | | $ | — | | | $ | — | | | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | |
Total assets | $ | 24 | | | $ | — | | | $ | — | | | | | $ | 24 | | | $ | 27 | | | $ | — | | | $ | — | | | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
CERC
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | Total |
Assets | Assets | (in millions) | Assets | (in millions) |
Corporate equities | $ | 2 | | | $ | 0 | | | $ | 0 | | | | $ | 2 | | | $ | 2 | | | $ | 0 | | | $ | 0 | | | | $ | 2 | | |
| Investments, including money market funds (1) | Investments, including money market funds (1) | 11 | | | 0 | | | 0 | | | | 11 | | | 11 | | | 0 | | | 0 | | | | 11 | | Investments, including money market funds (1) | $ | 14 | | | $ | — | | | $ | — | | | | $ | 14 | | | $ | 14 | | | $ | — | | | $ | — | | | | $ | 14 | |
Total assets | Total assets | $ | 13 | | | $ | 0 | | | $ | 0 | | | | $ | 13 | | | $ | 13 | | | $ | 0 | | | $ | 0 | | | | $ | 13 | | Total assets | $ | 14 | | | $ | — | | | $ | — | | | | $ | 14 | | | $ | 14 | | | $ | — | | | $ | — | | | | $ | 14 | |
|
(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 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.
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | CenterPoint Energy (1) | | Houston Electric (1) | | CERC | | CenterPoint Energy (1) | | Houston Electric (1) | | CERC | | CenterPoint Energy (1) | | Houston Electric (1) | | CERC | | CenterPoint Energy (1) | | Houston Electric (1) | | CERC |
Long-term debt, including current maturities | Long-term debt, including current maturities | (in millions) | Long-term debt, including current maturities | (in millions) |
| Carrying amount | Carrying amount | $ | 15,823 | | | $ | 5,968 | | | $ | 4,349 | | | $ | 13,401 | | | $ | 5,019 | | | $ | 2,428 | | Carrying amount | $ | 13,870 | | | $ | 6,243 | | | $ | 3,180 | | | $ | 16,086 | | | $ | 5,495 | | | $ | 4,380 | |
Fair value | Fair value | 16,848 | | | 6,485 | | | 4,580 | | | 15,226 | | | 5,957 | | | 2,855 | | Fair value | 14,056 | | | 6,378 | | | 3,277 | | | 17,385 | | | 6,230 | | | 4,682 | |
(1)Includes Securitization BondsBond debt.
(9) Unconsolidated AffiliatesGoodwill and Other Intangibles (CenterPoint Energy and CERC)
CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP, and, accordingly, accounts for its investment in Enable’s common units using the equity method of accounting. Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of March 31, 2021, CenterPoint Energy’s maximum exposure to loss related to Enable is limited to its investment in unconsolidated affiliate, its investment in Enable Series A Preferred Units and outstanding current accounts receivable from Enable.
On February 16, 2021, Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, resulting in the exchange of Enable common units owned by CenterPoint Energy at the transaction exchange ratio of 0.8595x Energy Transfer common units for each Enable common unit. CenterPoint Energy will also receive $5 million in cash in exchange for its interest in Enable GP and Energy Transfer Series G Preferred Units with an aggregate liquidation preference of approximately $385 million in exchange for all of its Enable Series A Preferred Units. Pursuant to previously disclosed support agreements, CenterPoint Energy and OGE, who collectively own approximately 79.2% of Enable’s common units, delivered written consents approving the Enable Merger Agreement and, on a non-binding, advisory basis, the compensation that will or may become payable to Enable’s named executive officers in connection with the transactions contemplated by the Enable Merger Agreement. The transactions contemplated under the Enable Merger Agreement are expected to be completed in the second half of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance. Upon the consummation of the transaction, the partnership agreements between CenterPoint Energy and OGE will terminate, and CenterPoint Energy will pay $30 million in cash to OGE (or other mutually agreed upon consideration). Because CenterPoint Energy will retain an investment in the midstream industry at the completion of this transaction, the transaction does not represent a strategic shift that will have a major effect on CenterPoint Energy’s operations or financial results, and as such, Enable is not classified and presented as discontinued operations. Equity method investments that do not qualify for discontinued operations are not presented as assets held for sale.
Investment in Unconsolidated Affiliates (CenterPoint Energy):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (in millions) |
Enable | $ | 852 | | | $ | 782 | |
Other | 1 | | | 1 | |
Total | $ | 853 | | | $ | 783 | |
As of March 31, 2021, Enable’s common unit price closed at $6.48 per unit.
Equity in Earnings (Losses) of Unconsolidated Affiliates, net (CenterPoint Energy):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 (1) |
| | | | | (in millions) |
Enable | | | | | $ | 108 | | | $ | (1,475) | |
| | | | | | | |
Total | | | | | $ | 108 | | | $ | (1,475) | |
(1)Included an impairment charge on CenterPoint Energy’s investment in Enable of $1,541 million.
Limited Partner Interest and Units Held in Enable (CenterPoint Energy):
| | | | | | | | | | | | | | | | | | |
| March 31, 2021 | |
| Limited Partner Interest (1) | | Common Units | | Enable Series A Preferred Units (2) | |
CenterPoint Energy (3) | 53.7 | % | | 233,856,623 | | | 14,520,000 | | |
OGE | 25.5 | % | | 110,982,805 | | | 0 | | |
Public unitholders | 20.8 | % | | 91,007,338 | | | 0 | | |
| | | | | | |
Total units outstanding | 100.0 | % | | 435,846,766 | | | 14,520,000 | | |
(1)Excludes the Enable Series A Preferred Units owned by CenterPoint Energy.
(2)The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Condensed Consolidated Balance Sheets, was $363 million as of both March 31, 2021 and December 31, 2020. There were no settled transactions in the three months ended March 31, 2021 that would indicate a stand-alone, observable, and readily determinable fair value for securities identical or similar to Enable Series A Preferred Units. NaN impairment charges or adjustment due to observable price changes were required or recorded during the current or prior reporting periods.
(3)Held indirectly through CNP Midstream.
Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal set forth in Enable’s Agreement of Limited Partnership.
Interests Held in Enable GP (CenterPoint Energy):
CenterPoint Energy and OGE held the following interests in Enable GP as of both March 31, 2021 and December 31, 2020:
| | | | | | | | | | | |
| March 31, 2021 |
| Management Rights (1) | | Incentive Distribution Rights (2) |
CenterPoint Energy (3) | 50 | % | | 40 | % |
OGE | 50 | % | | 60 | % |
(1)Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.
(2)If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, 0 incentive distributions have been made.
(3)Held indirectly through CNP Midstream.
Distributions Received from Enable (CenterPoint Energy):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | | | | | | Per Unit | | Cash Distribution | | Per Unit | | Cash Distribution |
| | | | | | | | (in millions, except per unit amounts) |
Enable common units | | | | | | | | | $ | 0.16525 | | | $ | 39 | | | $ | 0.3305 | | | $ | 77 | |
Enable Series A Preferred Units | | | | | | | | | 0.62500 | | | 9 | | | 0.6250 | | | 9 | |
Total CenterPoint Energy | | | | | | | | | | | $ | 48 | | | | | $ | 86 | |
Transactions with EnableGoodwill (CenterPoint Energy and CERC):
The transactions with Enable in the following tables exclude transactions with the Energy Services Disposal Group.
| | | | | | | | | | | | | | | | | |
| | | | CenterPoint Energy and CERC |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
Natural gas expenses, includes transportation and storage costs | | | | | $ | 32 | | | $ | 27 | |
| | | | | | | | | | | |
| CenterPoint Energy and CERC |
| March 31, 2021 | | December 31, 2020 |
| (in millions) |
Accounts payable for natural gas purchases from Enable | $ | 9 | | | $ | 9 | |
Accounts receivable for amounts billed for services provided to Enable | 1 | | | 1 | |
Summarized Financial Information for Enable (CenterPoint Energy)
Summarized unaudited consolidated income information for Enable is as follows:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
Operating revenues | | | | | $ | 970 | | | $ | 648 | |
Cost of sales, excluding depreciation and amortization | | | | | 519 | | | 226 | |
Depreciation and amortization | | | | | 106 | | | 104 | |
Goodwill and long-lived assets impairments | | | | | 0 | | | 28 | |
Operating income | | | | | 206 | | | 146 | |
Net income attributable to Enable common units | | | | | 155 | | | 103 | |
| | | | | | | |
| | | | | | | |
Reconciliation of Equity in Earnings (Losses), net: | | | | | | | |
CenterPoint Energy’s interest | | | | | $ | 83 | | | $ | 55 | |
Basis difference amortization (1) | | | | | 25 | | | 12 | |
Loss on dilution, net of proportional basis difference recognition | | | | | 0 | | | (1) | |
Impairment of CenterPoint Energy’s equity method investment in Enable | | | | | 0 | | | (1,541) | |
CenterPoint Energy’s equity in earnings (losses), net | | | | | $ | 108 | | | $ | (1,475) | |
(1)Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in net assets of Enable. The basis difference is being amortized through the year 2048 or will cease upon the sale of CenterPoint Energy’s investment in Enable.
Summarized unaudited consolidated balance sheet information for Enable is as follows:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (in millions) |
Current assets | $ | 449 | | | $ | 381 | |
Non-current assets | 11,315 | | | 11,348 | |
Current liabilities | 1,334 | | | 582 | |
Non-current liabilities | 3,249 | | | 4,052 | |
Non-controlling interest | 26 | | | 26 | |
Preferred equity | 362 | | | 362 | |
Accumulated other comprehensive loss | (5) | | | (6) | |
Enable partners’ equity | 6,798 | | | 6,713 | |
| | | |
| | | |
Reconciliation of Investment in Enable: | | | |
CenterPoint Energy’s ownership interest in Enable partners’ equity | $ | 3,645 | | | $ | 3,601 | |
CenterPoint Energy’s basis difference (1) | (2,793) | | | (2,819) | |
| | | |
CenterPoint Energy’s equity method investment in Enable | $ | 852 | | | $ | 782 | |
(1)The basis difference is being amortized through the year 2048 or will cease upon sale of CenterPoint Energy’s investment in Enable.
(10) Goodwill and Other Intangibles (CenterPoint Energy)
CenterPoint Energy’s goodwill by reportable segment as of March 31, 2021 and December 31, 2020 is as follows:
| | | | | | | | |
| | |
| | (in millions) |
Electric (1) | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | | | | | March 31, 2022 | | | (in millions) | Electric (1) | | $ | 936 | | | | | | | $ | 936 | | Natural Gas (2) | | 2,920 | | | | | | | 2,920 | | Corporate and Other | | 438 | | | | | | | 438 | | | | | | | | | | | Total | | $ | 4,294 | | | | | | | $ | 4,294 | |
CERC’s goodwill is as follows: | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | | | | | March 31, 2022 | | | (in millions) | Goodwill (2) | | $ | 611 | | | | | | | $ | 611 | |
| | $ | 936 | |
Natural Gas | | 3,323 | |
Corporate and Other | | 438 | |
| | |
Total | | $ | 4,697 | |
(1)Amount presented is net of the accumulated goodwill impairment charge of $185 million recorded in 2020.
(2)Excludes $398 million and $144 million, respectively, of goodwill attributable to the Arkansas and Oklahoma Natural Gas businesses which was reflected on CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets in Current assets held for sale as of December 31, 2021 and disposed following the completion of the sale in January 2022. For further information, see Note 3.
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. Goodwill attributable to the disposed Natural Gas businesses was classified as held for sale as of December 31, 2021 and excluded from the table above.
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, unless otherwise indicated.Income.
| | | | March 31, 2021 | | December 31, 2020 | | | March 31, 2022 | | December 31, 2021 |
| | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance | | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance |
| | | (in millions) | | | (in millions) |
Customer relationships | Customer relationships | | $ | 33 | | | $ | (9) | | | $ | 24 | | | $ | 33 | | | $ | (8) | | | $ | 25 | | Customer relationships | | $ | 33 | | | $ | (13) | | | $ | 20 | | | $ | 33 | | | $ | (12) | | | $ | 21 | |
| Trade names | Trade names | | 16 | | | (3) | | | 13 | | | 16 | | | (3) | | | 13 | | Trade names | | 16 | | | (5) | | | 11 | | | 16 | | | (5) | | | 11 | |
Construction backlog (1) | | 5 | | | (5) | | | 0 | | | 5 | | | (5) | | | 0 | | |
| Operation and maintenance agreements (1) | Operation and maintenance agreements (1) | | 12 | | | (1) | | | 11 | | | 12 | | | (1) | | | 11 | | Operation and maintenance agreements (1) | | 12 | | | (1) | | | 11 | | | 12 | | | (1) | | | 11 | |
Other | Other | | 2 | | | (1) | | | 1 | | | 2 | | | (1) | | | 1 | | Other | | 2 | | | (1) | | | 1 | | | 2 | | | (1) | | | 1 | |
Total | Total | | $ | 68 | | | $ | (19) | | | $ | 49 | | | $ | 68 | | | $ | (18) | | | $ | 50 | | Total | | $ | 63 | | | $ | (20) | | | $ | 43 | | | $ | 63 | | | $ | (19) | | | $ | 44 | |
(1)Amortization expense related to the operation and maintenance agreements and construction backlog is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Condensed Statements of Consolidated Income.
| | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | |
| | | | | 2021 | | 2020 | |
| | | | (in millions) | |
Amortization expense of intangible assets recorded in Depreciation and amortization | | | | | $ | 1 | | | $ | 1 | | |
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas | | | | | 0 | | | 1 | | |
| | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | |
| | | | | 2022 | | 2021 | |
| | | | (in millions) | |
Amortization expense of intangible assets recorded in Depreciation and amortization | | | | | $ | 1 | | | $ | 1 | | |
| | | | | | | | |
CenterPoint Energy estimates that amortization expense of intangible assets with finite lives for the next five years will be as follows:
| | | Amortization Expense (1) | | Amortization Expense |
| | CenterPoint Energy | |
| | (in millions) | | (in millions) |
Remaining nine months of 2021 | $ | 5 | | |
2022 | 6 | | |
Remaining nine months of 2022 | | Remaining nine months of 2022 | $ | 5 | |
2023 | 2023 | 6 | | 2023 | 6 | |
2024 | 2024 | 5 | | 2024 | 5 | |
2025 | 2025 | 5 | | 2025 | 5 | |
2026 | 2026 | 5 | | 2026 | 5 | |
2027 | | 2027 | 4 | |
(11)(10) Equity Securities and Indexed Debt Securities (ZENS) and Securities Related to ZENS (CenterPoint Energy)
(a) Investment inEquity Securities Related to ZENS
A subsidiary ofDuring the three months ended March 31, 2022, CenterPoint Energy holdsexecuted its previously announced plan to exit the midstream sector by selling the remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units it held
as discussed below. CenterPoint Energy used the proceeds from the these sales to redeem outstanding debt and pay incurred expenses associated with the early redemptions. See Note 11 for further information.
CenterPoint Energy’s sales of equity securities during the three months ended March 31, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | |
Equity Security/Date Sold | | Units Sold | | | | Proceeds (1) | | | |
| | | | | | (in millions) |
Energy Transfer Common Units | | | | | | | | | |
February and March 2022 | | 50,999,768 | | | | | $ | 515 | | | | |
Energy Transfer Series G Preferred Units | | | | | | | | | |
March 2022 | | 192,390 | | | | | $ | 187 | | | | |
| | | | | | | | | |
(1)Proceeds are net of transaction costs.
Gains and losses on equity securities, net of transaction costs, are recorded in Loss on Equity Securities in CenterPoint Energy’s Statements of Consolidated Income.
| | | | | | | | | | | | | | |
| | Gains (Losses) on Equity Securities |
| | Three Months Ended March 31, |
| | 2022 | | 2021 |
| | (in millions) |
AT&T Common | | $ | (10) | | | $ | 15 | |
Charter Common | | (93) | | | (38) | |
Energy Transfer Common Units | | 95 | | | — | |
Energy Transfer Series G Preferred Units | | (9) | | | — | |
| | | | |
| | $ | (17) | | | $ | (23) | |
| | | | |
CenterPoint Energy recorded net unrealized losses of $103 million and $23 million for the three months ended March 31, 2022 and 2021 respectively, for equity securities held as of March 31, 2022 and 2021.
CenterPoint Energy and its subsidiaries hold shares of certain securities detailed in the table below, which are securities with a readily determinable fair valueclassified as trading securities. Shares of AT&T Common and Charter 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 ZENS-Related Securities are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.
| | | | | | | | | | | | | Shares Held | | Carrying Value |
| | Shares Held | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 |
| | March 31, 2021 | | December 31, 2020 | | | | | | (in millions) |
AT&T Common | AT&T Common | 10,212,945 | | | 10,212,945 | | AT&T Common | | 10,212,945 | | | 10,212,945 | | | $ | 241 | | | $ | 251 | |
Charter Common | Charter Common | 872,503 | | | 872,503 | | Charter Common | | 872,503 | | | 872,503 | | | 476 | | | 569 | |
Energy Transfer Common Units | | Energy Transfer Common Units | | — | | | 50,999,768 | | | — | | | 420 | |
Energy Transfer Series G Preferred Units | | Energy Transfer Series G Preferred Units | | — | | | 192,390 | | | — | | | 196 | |
Other | | Other | | 3 | | | 3 | |
| | | $ | 720 | | | $ | 1,439 | |
|
(b) ZENS
In September 1999, CenterPoint Energy issued ZENS having an original principal amount of $1.0 billion of which $828 million remained outstanding as of March 31, 2021.2022. Each ZENS is 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 attributable to such note. The number and identity of the reference shares attributable to each ZENS are adjusted for certain corporate events.
CenterPoint Energy’s reference shares for each ZENS consisted of the following:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in shares) | | (in shares) |
AT&T Common | AT&T Common | 0.7185 | | | 0.7185 | | AT&T Common | 0.7185 | | | 0.7185 | |
Charter Common | Charter Common | 0.061382 | | | 0.061382 | | Charter Common | 0.061382 | | | 0.061382 | |
|
CenterPoint Energy pays interest on the ZENS at an annual rate of 2% plus the amount of any 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 cash 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 March 31, 2021,2022, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $52$33 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the reference shares attributable to the ZENS.
On May 17, 2021, AT&T announced that it had entered into a definitive agreement with Discovery, Inc. to combine their media assets into a new publicly traded company, Warner Bros. Discovery. The transaction closed on April 8, 2022. Pursuant to the definitive agreement, AT&T shareholders received 0.241917 shares of WBD Common for each share of AT&T Common owned, representing 71% of the new company. Upon the closing of the transaction, reference shares attributable to ZENS now consist of 0.7185 shares of AT&T Common, 0.061382 shares of Charter Common and 0.173817 shares of WBD Common.
(12)
(11) Short-term Borrowings and Long-term Debt
Inventory Financing. CenterPoint Energy’s and CERC’s Natural Gas hadbusinesses have third-party AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group that expired in March 2021. The expired AMAs were replaced with new third-party AMAs beginning in April 2021. CenterPoint Energy’s and CERC’s Natural Gas have AMAs with third parties associated with their utility distribution service in Arkansas, Indiana, Louisiana, Minnesota, Mississippi Oklahoma and Texas. The AMAs have varying terms, the longest of which expires in 2027. Pursuant to the provisions of the agreements, CenterPoint 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 throughout the year at the same cost, or simply purchases its full natural gas requirements at each delivery point from the asset manager. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had $-0- and $24$7 million outstanding obligations related to the AMAs as of March 31, 20212022 and December 31, 2020, respectively.2021, respectively, recorded in Short-term borrowings on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. Outstanding obligations related to third-party AMAs associated with utility distribution service in Arkansas and Oklahoma of $36 million as of December 31, 2021 are reflected in current liabilities held for sale on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. See Note 3 for further information.
Debt Transactions.During the three months ended March 31, 2022, the following debt instruments were issued or incurred:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Registrant | | Issuance Date | | Debt Instrument | | Aggregate Principal Amount | | Interest Rate | | Maturity Date |
| | (in millions) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Houston Electric | | February 2022 | | General Mortgage Bonds | | $ | 300 | | | 3.00% | | 2032 |
Houston Electric | | February 2022 | | General Mortgage Bonds | | 500 | | | 3.60% | | 2052 |
| | | | Total Houston Electric (1) | | 800 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Total CenterPoint Energy | | $ | 800 | | | | | |
(1)In February 2021, CERC Corp. received financing commitments totaling $1.7 billion on a 364-day term loan facility to bridge any working capital needs related to the February 2021 Winter Storm Event. In March 2021, CERC Corp. issued $700 million aggregate principal amount of 0.70% senior notes and $1.0 billion aggregate principal amount of floating rate senior notes (three-month LIBOR plus 0.5%) due 2023. Total proceeds, net of discounts and issuance expenses and fees, of approximately $1.69 billion$784 million were used for general corporate purposes, including to fund working capital. Upon the consummation of the senior notes offerings, in March 2021, CERC Corp. terminated all of the commitments for the 364-day term loan facility.
In March 2021, Houston Electric issued $400 million aggregate principal amount of 2.35% general mortgage bonds due 2031 and $700 million aggregate principal amount of 3.35% general mortgage bonds due 2051. Total proceeds, net of issuance expenses and fees, of approximately $1.08 billion were or will be used for general limited liability company purposes, including capital expenditures and the repayment of (i) all of Houston Electric’s outstanding $102 million 9.15% first mortgage bonds due 2021, which matured on March 15, 2021, (ii) all of Houston Electric’s outstanding $300 million of 1.85% general mortgage bonds due 2021, which were called for redemption in full on May 1, 2021, as discussed further below, and (iii) all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool.
Debt Redemption. Repayments and Redemptions. During the three months ended March 31, 2022, the following debt instruments were repaid at maturity or redeemed prior to maturity with proceeds received from the sale of Energy Transfer units discussed further in Note 10:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Registrant | | Repayment/Redemption Date | | Debt Instrument | | Aggregate Principal | | Interest Rate | | Maturity Date |
| | | | | | (in millions) | | | | |
CERC (1) | | January 2022 | | Floating Rate Senior Notes | | $ | 425 | | | Three-month LIBOR plus 0.5% | | 2023 |
| | | | Total CERC | | 425 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
CenterPoint Energy (2) | | January 2022 | | First Mortgage Bonds | | 5 | | | 0.82% | | 2022 |
CenterPoint Energy (3) | | March 2022 | | Senior Notes | | 250 | | | 3.85% | | 2024 |
CenterPoint Energy (4) | | March 2022 | | Senior Notes | | 350 | | | 4.25% | | 2028 |
| | | | Total CenterPoint Energy | | $ | 1,030 | | | | | |
(1)In April 2021, Houston ElectricJanuary 2022, CERC provided notice of partial redemption, relating to $300 millionand on January 31, 2022, CERC redeemed a portion of the outstanding $1 billion aggregate principal amount of its outstanding 1.85% general mortgage bonds due 2021. All of the outstanding bonds were called for redemption in full on May 1, 2021series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest.interest on the principal amount being redeemed.
(2)First Mortgage Bonds issued by SIGECO.
(3)In March 2022, CenterPoint Energy Term Loan. provided notice of redemption, and on March 31, 2022, CenterPoint Energy redeemed all of the remaining outstanding senior notes of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $2 million, the write off of issuance costs of $1 million and an applicable make-whole premium of approximately $7 million for a total redemption price of $260 million.
(4)In April 2021,March 2022, CenterPoint Energy amended its existing term loan agreement,provided notice of which $700partial redemption, and on March 31, 2022, CenterPoint Energy redeemed a portion ($350 million) of the outstanding $500 million is still outstanding, by extending its maturity from May 15, 2021aggregate principal amount of the series at a redemption price equal to June 14, 2021.100% of the principal amount, plus accrued and unpaid interest of approximately $6 million, the write off of issuance costs of $3 million and an applicable make-whole premium of approximately $34 million for a total redemption price of $393 million.
Credit Facilities. In February 2021, each of CenterPoint Energy, Houston Electric, CERC Corp. and VUHI replaced their existing revolving credit facilities with new amended and restated credit facilities. The size of the CenterPoint Energy facility decreased from $3.3 billion to $2.4 billion, while the sizes of the Houston Electric, CERC Corp. and VUHI facilities remained unchanged.
The Registrants had the following revolving credit facilities as of March 31, 2021:2022:
| Execution Date | Execution Date | | Registrant | | Size of Facility | | Draw Rate of LIBOR plus (1) | | Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio | | Debt for Borrowed Money to Capital Ratio as of March 31, 2021 (2) | | Termination Date | Execution Date | | Registrant | | Size of Facility | | Draw Rate of LIBOR plus (1) | | Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio | | Debt for Borrowed Money to Capital Ratio as of March 31, 2022 (2) | | Termination Date |
| | | | | (in millions) | | | | | | | | | | | | | (in millions) | | | | | | | | |
February 4, 2021 | February 4, 2021 | | CenterPoint Energy | | $ | 2,400 | | | 1.625% | | 65.0% | (3) | 57.4% | | February 4, 2024 | February 4, 2021 | | CenterPoint Energy | | $ | 2,400 | | | 1.625% | | 65.0% | (3) | 56.9% | | February 4, 2024 |
February 4, 2021 | February 4, 2021 | | CenterPoint Energy (4) | | 400 | | | 1.250% | | 65.0% | | 49.9% | | February 4, 2024 | February 4, 2021 | | CenterPoint Energy (4) | | 400 | | | 1.250% | | 65.0% | | 47.0% | | February 4, 2024 |
| February 4, 2021 | February 4, 2021 | | Houston Electric | | 300 | | | 1.375% | | 67.5% | (3) | 57.9% | | February 4, 2024 | February 4, 2021 | | Houston Electric | | 300 | | | 1.375% | | 67.5% | (3) | 53.7% | | February 4, 2024 |
February 4, 2021 | February 4, 2021 | | CERC | | 900 | | | 1.250% | | 65.0% | | 61.5% | | February 4, 2024 | February 4, 2021 | | CERC | | 900 | | | 1.250% | | 65.0% | | 52.7% | | February 4, 2024 |
| | Total | | $ | 4,000 | | | | 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 Houston 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 certification.
(4)This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program.
The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of March 31, 2021.2022.
The table below reflects the utilization of the Registrants’ respective revolving credit facilities:
| | | March 31, 2021 | | | December 31, 2020 | | March 31, 2022 | | | December 31, 2021 |
Registrant | Registrant | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | Registrant | | Loans | | Letters of Credit | | Commercial Paper (1) | | Weighted Average Interest Rate | | | Loans | | Letters of Credit | | Commercial Paper (1) | | Weighted Average Interest Rate |
| | | (in millions, except weighted average interest rate) | | | (in millions, except weighted average interest rate) |
CenterPoint Energy (1) | CenterPoint Energy (1) | | $ | 0 | | | $ | 11 | | | $ | 772 | | | 0.21 | % | | | $ | 0 | | | $ | 11 | | | $ | 1,078 | | | 0.23 | % | CenterPoint Energy (1) | | $ | — | | | $ | 11 | | | $ | 325 | | | 0.54 | % | | | $ | — | | | $ | 11 | | | $ | 1,400 | | | 0.34 | % |
CenterPoint Energy (2) | CenterPoint Energy (2) | | 0 | | | 0 | | | 210 | | | 0.18 | % | | | 0 | | | 0 | | | 92 | | | 0.22 | % | CenterPoint Energy (2) | | — | | | — | | | 260 | | | 0.58 | % | | | — | | | — | | | 350 | | | 0.21 | % |
| Houston Electric | Houston Electric | | 0 | | | 0 | | | 0 | | | 0 | % | | | 0 | | | 0 | | | 0 | | | 0 | % | Houston Electric | | — | | | — | | | — | | | — | % | | | — | | | — | | | — | | | — | % |
CERC | CERC | | 0 | | | 0 | | | 573 | | | 0.21 | % | | | 0 | | | 0 | | | 347 | | | 0.23 | % | CERC | | — | | | — | | | 123 | | | 0.54 | % | | | — | | | — | | | 899 | | | 0.26 | % |
Total | Total | | $ | 0 | | | $ | 11 | | | $ | 1,555 | | | | | $ | 0 | | | $ | 11 | | | $ | 1,517 | | | Total | | $ | — | | | $ | 11 | | | $ | 708 | | | | | $ | — | | | $ | 11 | | | $ | 2,649 | | |
(1)CenterPoint Energy’s outstandingOutstanding commercial paper generally has maturities of 60 days or less.less and each Registrants’ commercial paper program is backstopped by such Registrants’ long-term credit facilities. Houston Electric does not have a commercial paper program.
(2)This credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.
Liens. As of March 31, 2021,2022, Houston Electric’s assets were subject to liens securing approximately $5.4$5.8 billion of general mortgage bonds, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. TheseThe 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. As of March 15, 2021, 0 Houston Electric first mortgage bonds remained outstanding.31, 2022, Houston Electric could issue approximately $3.4$4.1 billion of additional first mortgage bonds and general mortgage bonds on the basis of retired bonds and 70% of property additions as of March 31, 2021. Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions.additions.
Other. As of March 31, 2021,2022, certain financial institutions agreed to issue, from time to time, up to $20 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on December 31, 2021.February 4, 2024. As of March 31, 2021,2022, such financial institutions had issued $1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.
(13)(12) Income Taxes
The Registrants reported the following effective tax rates:
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
CenterPoint Energy - Continuing operations (1) | CenterPoint Energy - Continuing operations (1) | | | 17 | % | | 25 | % | CenterPoint Energy - Continuing operations (1) | | | 27 | % | | 15 | % |
CenterPoint Energy - Discontinued operations (2) | CenterPoint Energy - Discontinued operations (2) | | | 0 | % | | 10 | % | CenterPoint Energy - Discontinued operations (2) | | | — | % | | 23 | % |
Houston Electric(2) | Houston Electric(2) | | | 13 | % | | 13 | % | Houston Electric(2) | | | 22 | % | | 13 | % |
CERC - Continuing operations (3) | | | 22 | % | | 21 | % | |
CERC - Discontinued operations (4) | | | 0 | % | | 15 | % | |
CERC (3) | | CERC (3) | | | 26 | % | | 22 | % |
|
(1)CenterPoint Energy’s lower effective tax rate on income from continuing operations for the three months ended March 31, 2021 compared to the higher effective tax rate on a loss from continuing operations for the three months ended March 31, 2020 was primarily driven by an increase in the amount of amortization of the net regulatory EDIT liability. The higher effective tax rate on the loss from continuing operations for the three months ended March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.
(2)CenterPoint Energy’s lower than statutory tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due to the non-deductible portions of goodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.
(3)CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 20212022 compared to the three months ended March 31, 20202021 was primarily driven by the impact of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma, and a decrease in EDIT amortization of the net regulatory EDIT liability.
(2)Houston Electric’s higher effective tax rate for the three months ended March 31, 2022 compared to the same period in 2021 was primarily driven by a decrease in the amount of amortization of the net regulatory EDIT liability.
(4)(3)CERC’s lower than statutoryhigher effective tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due2022 compared to the non-deductible portion of the goodwill impairment on the Energy Services Disposal Group.
On March 11, 2021, the ARPA was enacted in response to continued economic and health impacts of the COVID-19 pandemic. The ARPA expands the definition of “covered employee” under section 162(m) beginning in 2027, and extends the employee retention tax credit through December 31, 2021, among other provisions. CenterPoint Energy does not currently anticipate any material impacts from this legislation. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, deferring the payment of the employer share of payroll taxes for the remaining months of 2020 until 2021 and 2022, increasing the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerating refunds for minimum tax credit carryforwards, among other provisions. Based on the CARES Act NOL carryback provision, during the three monthssame period ended March 31, 2020, CenterPoint Energy recorded a $19 million benefit resulting from carryback claims to be filed to refund taxes paid.2021 was primarily driven by the impact of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma, and an increase in EDIT amortization of the net regulatory EDIT liability.
CenterPoint Energy reported a net uncertain tax liability, inclusive of interest and penalties, of $10$4 million as of March 31, 2021. Interest and penalties of $1 million were recorded on the uncertain tax liability for the three month period ending March 31, 2021.2022. The Registrants believe that it is reasonably possible that a decrease of up to $6$3 million in unrecognized tax benefits may occur in the next 12 months as a result of a lapse of statutes on older exposures, a tax settlement, and/or the acceptancea resolution of an application for an accounting method change. For CenterPoint Energy, taxopen audits.
Tax Audits and Settlements. Tax years through 2018 have been audited and settled with the IRS.IRS for CenterPoint Energy. For the 2019 through 20212019-2022 tax years, CenterPoint Energy is a participantthe Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2017 through 2019
2014-2019 tax years are still open for examination.currently under audit by the IRS.
(14)(13) Commitments and Contingencies
(a)Purchase Obligations (CenterPoint Energy and CERC)
Commitments include minimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas reportable segment and CenterPoint 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 and are not classified as non-trading derivative assets and liabilities in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets as of March 31, 20212022 and December 31, 2020.2021. 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 transportation contracts that do not meet the definition of a derivative.
On February 9, 2021, Indiana Electric entered into a BTA with a subsidiary of Capital Dynamics. Pursuant to the BTA, Capital Dynamics, with its partner Tenaska, willoriginally planned to build a 300 MW solar array in Posey County, Indiana through a special purpose entity, Posey Solar. Upon completion of construction, currently projected to be at the end of 2023, and subject to IURC approval, which was received on October 27, 2021, Indiana Electric will acquire Posey Solar and its solar array assets for a fixed purchase price. Due to rising cost for the project, caused in part by supply chain issues in the energy industry, the rising cost of commodities and community feedback, CenterPoint Energy, along with Capital Dynamics, announced plans in January 2022 to downsize the project to approximately 200 MW. Indiana Electric collaboratively agreed to the scope change and is currently working through contract negotiations, contingent on further IURC review and approval.
As of March 31, 2021,2022, undiscounted minimum purchase obligations are approximately:
| | | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | Natural Gas and Coal Supply | | Other (1) | | Natural Gas Supply | | Natural Gas and Coal Supply | | Other (1) | | Natural Gas Supply |
| | (in millions) | | | | (in millions) |
Remaining nine months of 2021 | $ | 429 | | | $ | 2 | | | $ | 271 | | |
2022 | 547 | | | 12 | | | 332 | | |
Remaining nine months of 2022 | | Remaining nine months of 2022 | $ | 521 | | | $ | 99 | | | $ | 348 | |
2023 | 2023 | 470 | | | 404 | | | 279 | | 2023 | 726 | | | 503 | | | 535 | |
2024 | 2024 | 392 | | | 198 | | | 259 | | 2024 | 638 | | | 181 | | | 507 | |
2025 | 2025 | 337 | | | 7 | | | 231 | | 2025 | 451 | | | 30 | | | 339 | |
2026 | 2026 | 304 | | | 7 | | | 226 | | 2026 | 324 | | | 30 | | | 246 | |
2027 and beyond | 1,634 | | | 137 | | | 1,331 | | |
2027 | | 2027 | 305 | | | 72 | | | 241 | |
2028 and beyond | | 2028 and beyond | 1,319 | | | 544 | | | 1,079 | |
(1)CenterPoint Energy’s undiscounted minimum payment obligations related to its 25-year agreement for its solar PPA in Warrick County, IndianaPPAs with commitments ranging from 15 to 25 years and its purchase commitment under its BTA in Posey County, Indiana are included above. The remaining undiscounted payment obligations relate primarily to technology hardware and software agreements.
Excluded from the table above are estimates for cash 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 pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.
(b) Guarantees and Product Warranties (CenterPoint Energy)
In the normal course of business, ESGEnergy Systems Group enters into contracts requiring it to timely install infrastructure, operate facilities, pay vendors and subcontractors and support warranty obligations and, at times, issue payment and performance bonds and other forms of assurance in connection with these contracts.
Specific to ESG’sEnergy Systems Group’s role as a general contractor in the performance contracting industry, as of March 31, 2021,2022, there were 5153 open surety bonds supporting future performance with an aggregate face amount of approximately $527 million. ESG’sEnergy Systems Group’s exposure is less than the face amount of the surety bonds and is limited to the level of uncompleted work under the contracts. As of March 31, 2021,2022, approximately 47%39% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to ESG.Energy Systems Group. In addition to these performance obligations, ESGEnergy Systems Group also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. As of March 31, 2021,2022, there were 3237 warranties totaling $554$549 million and an additional $1.2 billion in energy savings commitments not guaranteed by Vectren. Since ESG’sEnergy Systems Group’s inception in 1994, CenterPoint Energy believes ESGEnergy Systems Group has had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operatinghave operated effectively.
CenterPoint Energy assessed the fair value of its obligation for such guarantees as of March 31, 20212022 and 0no amounts were recorded on CenterPoint Energy’s Condensed Consolidated Balance Sheets.
CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of ESG.Energy Systems Group. These guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of subsidiary obligations to allow those subsidiaries to conduct business without posting other forms of assurance. As of March 31, 2021,2022, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting ESG’sEnergy Systems Group’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $517$511 million as of March 31, 2021.2022. This exposure primarily relates to energy savings guarantees on federal energy savings performance contracts. Other parent company level guarantees, certain of which do not contain a cap on potential liability, have been issued in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy considers the likelihood of a material amount being incurred as remote.
(c)Guarantees and Product Warranties (CenterPoint Energy and CERC)
On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction closed on June 1, 2020. In the normal course of business prior to June 1, 2020, the Energy Services Disposal Group through CES, traded natural gas under supply contracts and entered into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities prior to the closing of the sale of the Energy Services Disposal Group on June 1, 2020, CERC Corp. issued guarantees to certain of CES’s counterparties to guarantee the payment of CES’s obligations. When CES remained wholly owned by CERC Corp., these guarantees did not represent incremental consolidated obligations, but rather, these guarantees represented guarantees of CES’s obligations to allow it to conduct business without posting other forms of assurance.
A CERC Corp. guarantee primarily had a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by CES prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Throughout CERC Corp.’s ownership of CES and subsequent to the sale of the Energy Services Disposal Group through March 31, 2021,2022, CERC Corp. did not pay any amounts under guarantees of CES’s obligations.
Under the terms of the Equity Purchase Agreement, Symmetry Energy Solutions Acquisition must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after the closing of the transaction. Additionally, to the extent that CERC Corp. retains any exposure relating to certain guarantees of CES’s obligations 90 days after closing of the transaction, Symmetry Energy Solutions Acquisition will pay a 3% annualized fee on such exposure, increasing by 1% on an annualized basis every three months. As of March 31, 2021,2022, management estimates approximately $51$6 million of exposure remained outstanding under CERC Corp. guarantees issued prior to the closing of the transaction on June 1, 2020. On May 3, 2021, the estimated remaining exposure under these obligations decreased to $41 million. CES has provided replacement credit support to counterparties to whom CERC Corp. had issued guarantees prior to closing representing the full amount of CERC’s remaining exposure under the guarantees. CERC believes that counterparties to whom replacement credit support has been provided would seek payment if needed under such replacement credit support instead of a CERC Corp. guarantee. NaN additional guarantees were provided by CERC Corp. to CES subsequent to the closing of the transaction on June 1, 2020.
If CERC Corp. is required to pay a counterparty under a guarantee in respect of obligations of CES, Symmetry Energy Solutions Acquisition is required to promptly reimburse CERC Corp. for all amounts paid. If Symmetry Energy Solutions Acquisition fails to reimburse CERC Corp., CERC Corp. has the contractual right to seek payment from Shell Energy North America (US), L.P. in an amount up to $40 million in the aggregate. While there can be no assurance that payment under any of these guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.
CenterPoint Energy and CERC recorded 0no amounts on their respective Condensed Consolidated Balance Sheets as of March 31, 20212022 and December 31, 20202021 related to the performance of these guarantees.
(d) Legal, Environmental and Other Matters
Legal Matters
Minnehaha Academy (CenterPoint Energy and CERC). On August 2, 2017, a natural gas explosion occurred at the Minnehaha Academy in Minneapolis, Minnesota, resulting in the deaths of two school employees, serious injuries to others and significant property damage to the school. CenterPoint Energy and CERC cooperated with the investigation conducted by the National Transportation Safety Board, which concluded its investigation in December 2019 and issued a report without making any recommendations. Further, CenterPoint Energy and CERC contested and reached a settlement regarding approximately $200,000 in fines imposed by the Minnesota Office of Pipeline Safety. In early 2018, the Minnesota Occupational Safety and Health Administration concluded its investigation without any adverse findings against CenterPoint Energy or CERC. CenterPoint Energy, certain of its subsidiaries, including CERC, and the contractor company working in the school were named in wrongful death, property damage and personal injury litigation arising out of the incident and have now reached confidential settlement agreements in all litigation. CenterPoint Energy’s and CERC’s general and excess liability insurance policies provide coverage for third party bodily injury and property damage claims.
Litigation Related to the Merger (CenterPoint Energy). With respect to the Merger, in July 2018, 7 separate lawsuits were filed against Vectren and the individual directors of Vectren’s Board of Directors in the U.S. District Court for the Southern District of Indiana. These lawsuits alleged violations of Sections 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Vectren Proxy Statement filed on June 18, 2018 was materially incomplete because it omitted material information concerning the Merger. In August 2018, the 7 lawsuits were consolidated, and the Court denied the plaintiffs’ request for a preliminary injunction. In October 2018, the plaintiffs filed their Consolidated Amended Class Action Complaint. In December 2018, 2 plaintiffs voluntarily dismissed their lawsuits. In September 2019, the court granted the defendants’ motion to dismiss and dismissed the remaining plaintiffs’ claims with prejudice, which the plaintiffs appealed in October 2019. The U.S. Court of Appeals for the Seventh Circuit heard oral arguments in September 2020, and a ruling is expected in 2021. The defendants believe that the allegations asserted are without merit and intend to vigorously defend themselves against the claims raised. CenterPoint Energy does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows.
Litigation Related to the February 2021 Winter Storm Event. WithVarious legal matters are still proceeding with respect to the February 2021 Winter Storm Event,Event. As of March, 31, 2022, CenterPoint Energy CERCand Houston Electric have been named as a defendant in over 100 lawsuits related to the February 2021 Winter Storm Event. 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 and their compliance with NERC, ERCOT and PUCT rules and directives. CenterPoint Energy and Houston Electric, along with ERCOT, power generation companies, other TDUs, retail electric providers, and other entities, have received, and may continue to receive, claims and lawsuits filed by plaintiffs alleging wrongful death, personal injury, property damage and other injuries and damages. Additionally,CenterPoint Energy and Houston Electric, along with numerous other entities, have been named as defendants in such litigation, all of which is now pending in Texas state court in Harris County, Texas, as part of a multi-district litigation proceeding. The judge overseeing the multi-district litigation has issued an initial case management order, stayed discovery, and will first entertain dispositive motions in 5 representative or “bellwether” cases, which will likely be decided later this year and then likely appealed. CenterPoint Energy 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 have announced that they intend to conductconducted or are conducting 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, thisthe event, including the electric generation shortfall issues. Entities that have announced that they plan to conduct or are conducting such inquiries, investigations andSuch other reviewsentities include the United States Congress, FERC, NERC, Texas RE, ERCOT, Texas government entities and officials such as the Texas Governor’s office, the Texas Legislature, the Texas Attorney General, the PUCT, the City of Houston and other municipal and county entities in Houston Electric’s service territory, among other entities.territory.
Like other Texas TDUs, Houston Electric may become involved in certain of the above-referenced investigations, litigation or other regulatory and legal proceedings regarding their efforts to restore power and their compliance with NERC, ERCOT and PUCT rules and directives. CenterPoint Energy and Houston Electric are responding to inquiries from the Texas Attorney General and the Galveston County District Attorney’s Office, andAdditionally, CenterPoint Energy and CERC are respondinghave responded to inquiries from the Arkansas, Minnesota and Oklahoma Attorneys General. CenterPoint Energy, Houston Electric and CERC are subject to, and may be further subject to, litigation and claims. Such claims include, or in the future could include, wrongful death, personal injury and property damage claims, lawsuits for impacts on businesses and other organizations and entities and shareholder claims, among other claims or litigation matters. As of April 29, 2021, CenterPoint Energy and Houston Electric have been named as a defendant in approximately 60 lawsuits related to the February 2021 Winter Storm Event. CenterPoint Energy and Houston Electric intend to vigorously defend themselves against the claims raised. CenterPoint Energy, Houston Electric and CERC are unable to predict the outcome or consequences of any suchof the foregoing matters or to estimate a range of potential losses.
Litigation Related to the Enable Merger. In March 2021, several lawsuits were filed by persons claiming to be Enable unitholders against various defendants, including Enable, the members of Enable GP’s Board of Directors, Energy Transfer, and other parties to the Enable Merger Agreement, challenging the Enable Merger and the disclosures made in connection therewith. CenterPoint Energy has been named in one such lawsuit pending in the United States District Court for the Southern District of New York. The lawsuits allege violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Registration Statement on Form S-4 filed by Energy Transfer on March 19, 2021, was materially incomplete because it omitted material information about, among other things, Enable's and Energy Transfer's financial projections and the analyses conducted by Enable's financial advisors. The lawsuits further allege that the individual defendants, including, among others,
Energy Transfer and CenterPoint Energy, violated Section 20(a) of the Exchange Act as controlling persons of Enable. Plaintiffs seek to have the court enjoin the Enable Merger, require defendants to disseminate a new registration statement disclosing the allegedly omitted information, declare that defendants violated the Exchange Act, rescind the Enable Merger or award rescissory damages in the event the Enable Merger is consummated, along with attorneys’ fees, costs, and other relief. CenterPoint Energy’s dates to respond to the lawsuit in which it was sued have not yet been set. CenterPoint Energy cannot predict the outcome of litigation related to the Enable Merger Agreement, but believes the litigation is without merit, intends to defend vigorously against such litigation, and does not expect the ultimate outcome of such litigation to have a material adverse effect on its financial condition, results of operations or cash flows.
Environmental Matters
MGP Sites. CenterPoint Energy, CERC and their predecessors, operated MGPs in the past. In addition, certainincluding predecessors of CenterPoint Energy’s subsidiaries acquired through the MergerVectren, 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 are 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 have completed state-ordered remediation and continue state-ordered monitoring and water treatment. CenterPoint Energy and CERC recorded a liability as reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.
(ii)Indiana MGPs (CenterPoint Energy). In the Indiana Gas service territory, the existence, location and certain general characteristics of 26 gas manufacturing and storage sites have been identified for which CenterPoint Energy may have some remedial responsibility. A remedial investigation/feasibility study was completed at one of the sites under an agreed upon order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. The remaining sites have been submitted to the IDEM’s VRP. CenterPoint Energy has also identified its involvement in 5 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 believe they may have responsibility was based on remediation continuing for the minimum time frame given in the table below.
| | | March 31, 2021 | | March 31, 2022 |
| | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | (in millions, except years) | | (in millions, except years) |
Amount accrued for remediation | Amount accrued for remediation | $ | 12 | | | $ | 7 | | Amount accrued for remediation | $ | 17 | | | $ | 12 | |
Minimum estimated remediation costs | Minimum estimated remediation costs | 8 | | | 5 | | Minimum estimated remediation costs | 12 | | | 9 | |
Maximum estimated remediation costs | Maximum estimated remediation costs | 55 | | | 32 | | Maximum estimated remediation costs | 51 | | | 29 | |
Minimum years of remediation | Minimum years of remediation | 5 | | | 30 | | Minimum years of remediation | 5 | | 30 |
Maximum years of remediation | Maximum years of remediation | 50 | | | 50 | | 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.
CenterPoint Energy and 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 the Registrants or their predecessors contain or have contained asbestos insulation and other asbestos-containing materials. The 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 the Registrants anticipate that additional claims may be asserted in the future. Although their ultimate outcome cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their 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, 2021.2021, discussed further below. The EPA published the final Part B amendments in November 2020. The Part A amendments do not restrict Indiana Electric’s current beneficial reuse of its fly ash. CenterPoint Energy continues to evaluateevaluated the Part B amendments to determine potential impacts.impacts and determined that the Part B amendments did not have an impact on its current plans. Shortly after taking office in January 2021, President Biden signed an executive order requiring agencies to review environmental actions taken by the Trump administration, including the CCR Rule Phase I Reconsideration, the Part A amendments, and the Part B amendments; the EPA has completed its review of the Phase I Reconsideration, Part A amendments, and Part B amendments and determined that the most environmentally protective course is to implement the rules.
Indiana Electric has 3 ash ponds, 2 at the F.B. Culley facility (Culley East and Culley West) and 1 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 one1 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 iswas required to cease disposal of new ash in the ponds and commence closure of the ponds by April 11, 2021.2021, unless approved for an extension. CenterPoint Energy has applied for the extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through October 15, 2023. The inabilityEPA is still reviewing industry extension requests, including CenterPoint Energy’s extension request. Companies can continue to take these extensionsoperate ponds pending completion of the EPA’s evaluation of the requests for extension. If the EPA denies a full extension request, that denial may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or may adversely impact Indiana Electric’s future operations. Failure to comply with these requirementsa cease waste receipt could also result in an enforcement proceeding, includingresulting in the imposition of fines and penalties. On April 24, 2019, Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already 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.
Indiana Electric continues to refine site specific estimates of closure costs for its ten-acre10-acre Culley East pond. 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.
As of March 31, 2021,2022, CenterPoint Energy has recorded an approximate $88$90 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the settlements in the aforementioned insurance proceeding. In addition to these removal costs,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 2021, 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. The Registrants are evaluating the extent to which this decision will affect Clean Water Act permitting requirements and/or liability for their operations.
Other Environmental. From time to time, the Registrants identify the presence of environmental contaminants during operations or on property where their predecessors have conducted operations. Other such sites involving contaminants may be identified in the future. The Registrants have and expect to continue to remediate any identified sites consistent with state and federal legal obligations. From time to time, the Registrants have received notices, and may receive notices in the future, from regulatory authorities or others regarding status as a PRP in connection with sites found to require remediation due to the
presence of environmental contaminants. In addition, the Registrants have been, or may be, named from time to time as defendants in litigation related to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.
Other Proceedings
The 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, the Registrants are also defendants 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. The Registrants regularly analyze current information and, as necessary, provide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. The Registrants do not expect the disposition of these matters to have a material adverse effect on the Registrants’ financial condition, results of operations or cash flows.
(15)(14) Earnings Per Share (CenterPoint Energy)
The Series C Preferred Stock issued in May 2020 arewere considered participating securities since these shares participateparticipated in dividends on Common Stock on a pari passu, pro rata, as-converted basis. As a result, beginning June 30, 2020, earnings per share on Common Stock iswas computed using the two-class method required for participating securities.securities during the periods the Series C Preferred Stock was outstanding. As of May 7, 2021, all of the remaining outstanding Series C Preferred Stock were
converted into shares of Common Stock and earnings per share on Common Stock and, as such, the two-class method was no longer applicable beginning June 30, 2021.
The two-class method uses an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available only to common shareholders. Under the two-class method, income (loss) available to common shareholders from continuing operations is derived by subtracting the following from income (loss) from continuing operations:
•preferred share dividend requirement;
•deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the Series C Preferred Stock; and
•an allocation of undistributed earnings to preferred shareholders of participating securities (Series C Preferred Stock) based on the securities’ right to receive dividends.
Undistributed earnings are calculated by subtracting dividends declared on Common Stock, the preferred share dividend requirement and deemed dividends for the amortization of the beneficial conversion feature from net income. Net losses are not allocated to the Series C Preferred Stock as it does not have a contractual obligation to share in the losses of CenterPoint Energy.
The Series C Preferred Stock includes conversion features at a price that is below the fair value of the Common Stock on the commitment date. This beneficial conversion feature, which was approximately $32 million, represents the difference between the fair value per share of the Common Stock as of the commitment date and the conversion price, multiplied by the number of common shares issuable upon conversion. The beneficial conversion feature is recognized as a discount to Series C Preferred Stock and was amortized as a deemed dividend over the period from the issue date to the first allowable conversion date, which was November 6, 2020.
Basic earnings per common share is computed by dividing income available to common shareholders from continuing operations by the basic weighted average number of common shares outstanding during the period. Participating securities are excluded from basic weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing income available to common shareholders from continuing operations 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 share reflects the dilutive effect of potential common shares from share-based awards and convertible preferred shares. The dilutive effect of the restricted stock, Series B Preferred Stock and Series C Preferred Stock is computed using the if-converted method, as applicable, which assumes conversion of the restricted stock, Series B Preferred Stock and Series C Preferred Stock at the beginning of the period, giving income recognition for the add-back of the preferred share dividends, amortization of beneficial conversion feature, and undistributed earnings allocated to preferred shareholders. 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.
The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share.
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions, except per share and share amounts) |
Numerator: | | | | | | | |
Income (loss) from continuing operations | | | | | $ | 363 | | | $ | (1,053) | |
Less: Preferred stock dividend requirement (Note 19) | | | | | 29 | | | 29 | |
| | | | | | | |
Less: Undistributed earnings allocated to preferred shareholders | | | | | 23 | | | 0 | |
Income (loss) available to common shareholders from continuing operations - basic | | | | | 311 | | | (1,082) | |
Income (loss) available to common shareholders from discontinued operations - basic and diluted | | | | | 0 | | | (146) | |
Add back: Series B Preferred Stock dividend | | | | | 17 | | 0 | |
Add back: Undistributed earnings allocated to preferred shareholders | | | | | 23 | | 0 | |
Income (loss) available to common shareholders - diluted | | | | | $ | 351 | | | $ | (1,228) | |
Denominator: | | | | | | | |
Weighted average common shares outstanding - basic | | | | | 551,546,000 | | | 502,388,000 | |
Plus: Incremental shares from assumed conversions: | | | | | | | |
Restricted stock (1) | | | | | 3,114,000 | | | 0 | |
Series B Preferred Stock (2) | | | | | 35,937,000 | | | 0 | |
Series C Preferred Stock | | | | | 40,823,000 | | | 0 | |
Weighted average common shares outstanding - diluted | | | | | 631,420,000 | | | 502,388,000 | |
| | | | | | | |
Earnings (Loss) Per Common Share: | | | | | | | |
Basic earnings (loss) per common share - continuing operations | | | | | $ | 0.56 | | | $ | (2.15) | |
Basic earnings (loss) per common share - discontinued operations | | | | | 0 | | | (0.29) | |
Basic Earnings (Loss) Per Common Share | | | | | $ | 0.56 | | | $ | (2.44) | |
Diluted earnings (loss) per common share - continuing operations | | | | | $ | 0.56 | | | $ | (2.15) | |
Diluted earnings (loss) per common share - discontinued operations | | | | | 0 | | | (0.29) | |
Diluted Earnings (Loss) Per Common Share | | | | | $ | 0.56 | | | $ | (2.44) | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (in millions, except per share and share amounts) | | | | |
Numerator: | | | | | | | |
Income from continuing operations | $ | 531 | | | $ | 280 | | | | | |
Less: Preferred stock dividend requirement (Note 18) | 13 | | | 29 | | | | | |
| | | | | | | |
Less: Undistributed earnings allocated to preferred shareholders (1) | — | | | 23 | | | | | |
Income available to common shareholders from continuing operations - basic | 518 | | | 228 | | | | | |
Add back: Series B Preferred Stock dividend | — | | | 17 | | | | | |
Add back: Undistributed earnings allocated to preferred shareholders (1) | — | | | 23 | | | | | |
Income available to common shareholders from continuing operations - diluted | 518 | | | 268 | | | | | |
Income available to common shareholders from discontinued operations - basic and diluted | — | | | 83 | | | | | |
Income available to common shareholders - basic and diluted | $ | 518 | | | $ | 351 | | | | | |
Denominator: | | | | | | | |
Weighted average common shares outstanding - basic | 629,134,000 | | | 551,546,000 | | | | | |
Plus: Incremental shares from assumed conversions: | | | | | | | |
Restricted stock | 2,170,000 | | | 3,114,000 | | | | | |
Series B Preferred Stock | — | | | 35,937,000 | | | | | |
Series C Preferred Stock | — | | | 40,823,000 | | | | | |
Weighted average common shares outstanding - diluted | 631,304,000 | | | 631,420,000 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Earnings Per Common Share: | | | | | | | |
Basic earnings per common share - continuing operations | $ | 0.82 | | | $ | 0.41 | | | | | |
Basic earnings per common share - discontinued operations | — | | | 0.15 | | | | | |
Basic Earnings Per Common Share | $ | 0.82 | | | $ | 0.56 | | | | | |
Diluted earnings per common share - continuing operations | $ | 0.82 | | | $ | 0.43 | | | | | |
Diluted earnings per common share - discontinued operations | — | | | 0.13 | | | | | |
Diluted Earnings Per Common Share | $ | 0.82 | | | $ | 0.56 | | | | | |
(1)2,567,000 incremental common shares from assumed conversions of restricted stock have not been included in the computation of dilutedThere were no undistributed earnings (loss) per shareto be allocated to participating securities for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.
(2)The computation of diluted earnings per common share outstanding for the three months ended March 31, 2020 excludes 35,923,000 potentially dilutive shares from the denominator, because the shares would be anti-dilutive.2022.
(16)(15) Reportable Segments
The Registrants’ determination of reportable segments considers the strategic operating units under which its CODM manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. Each Registrant’s CODM views net income as the measure of profit or loss for the reportable segments. Certain prior year amounts have been reclassified for discontinued operations as described below. Additionally, during the three months ended March 31, 2022, CenterPoint Energy sold certain assets previously owned by entities within Corporate and Other to conform tobusinesses within the currentElectric and Natural Gas reportable segments. Prior year reportable segment presentationamounts were reclassified as a result of this transaction in the three months ended March 31, 2022 and as described in the Registrants’ combined 20202021 Form 10-K.
In 2021, CenterPoint Energy’s equity investment in Enable was classified and presented as held for sale and discontinued operations. On December 2, 2021, Enable completed the previously announced Enable Merger pursuant to the Enable Merger Agreement entered into on February 16, 2021. See Note 3 for further information.
As of March 31, 2021,2022, reportable segments by Registrant were as follows:
CenterPoint Energy
•CenterPoint Energy’s Electric reportable segment consistsconsisted of electric transmission and distribution services to transmission service customersin the Texas gulf coast area in the ERCOT region and distribution services to REPs serving the Texas Gulf Coast area and electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.operations in the MISO region.
•CenterPoint Energy’s Natural Gas reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio Oklahoma and Texas; and (ii) permanent pipeline connections through
interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.CEIP.
•CenterPoint Energy’s Midstream Investments reportable segment consists of the equity investment in Enable (excluding the Enable Series A Preferred Units). See Note 9 regarding the impact of the Enable Merger.
CenterPoint Energy’s Corporate and Other category consists of energy performance contracting and sustainable infrastructure services through ESGEnergy Systems Group and other corporate operations which support all of the business operations of CenterPoint Energy.
Houston Electric
•Houston Electric’s single reportable segment consistsconsisted of electric transmission services to transmission service customers in the ERCOT region and distribution services to REPs serving the Texas Gulf Coastgulf coast area.
CERC
•CERC’s single reportable segment consistsconsisted of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Louisiana, Minnesota, Mississippi Oklahoma and Texas; and (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES.CEIP.
Financial data for reportable segments is as follows, including Corporate and Other and Discontinued Operations for reconciliation purposes:
CenterPoint Energy
| | | | | | | | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| | Revenues from External Customers | | Equity in Earnings of Unconsolidated Affiliates | | Net Income (Loss) | | Revenues from External Customers | | Equity in Earnings of Unconsolidated Affiliates | | Net Income (Loss) | | | Revenues from External Customers | | | Net Income | | Revenues from External Customers | | | Net Income (Loss) | |
| | (in millions) | | | (in millions) | |
Electric | Electric | $ | 830 | | (1) | $ | 0 | | | $ | 75 | | | $ | 767 | | (1) | $ | 0 | | | $ | (134) | | | Electric | $ | 893 | | (1) | | $ | 82 | | | $ | 830 | | (1) | | $ | 75 | | |
Natural Gas | Natural Gas | 1,663 | | | 0 | | | 229 | | | 1,321 | | | 0 | | | 201 | | | Natural Gas | 1,824 | | | | 398 | | | 1,663 | | | | 229 | | |
Midstream Investments (2) | 0 | | | 108 | | | 71 | | | 0 | | | (1,475) | | | (1,127) | | | |
| Corporate and Other | Corporate and Other | 54 | | | 0 | | | (12) | | | 79 | | | 0 | | | 7 | | | Corporate and Other | 46 | | | | 51 | | | 54 | | | | (24) | | |
| Continuing Operations | Continuing Operations | $ | 2,547 | | | $ | 108 | | | 363 | | | $ | 2,167 | | | $ | (1,475) | | | (1,053) | | | Continuing Operations | $ | 2,763 | | | | 531 | | | $ | 2,547 | | | | 280 | | |
Discontinued Operations, net | Discontinued Operations, net | | | | | 0 | | | | | | | (146) | | | Discontinued Operations, net | | | | — | | | | | | 83 | | |
Consolidated | Consolidated | | $ | 363 | | | $ | (1,199) | | | Consolidated | | | $ | 531 | | | | $ | 363 | | |
(1)Houston Electric revenues from major external customers are as follows (CenterPoint Energy and Houston Electric):
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | (in millions) |
Affiliates of NRG | Affiliates of NRG | | | $ | 195 | | | $ | 156 | | Affiliates of NRG | | | $ | 225 | | | $ | 195 | |
Affiliates of Vistra Energy Corp. | Affiliates of Vistra Energy Corp. | | | 88 | | | 81 | | Affiliates of Vistra Energy Corp. | | | 105 | | | 88 | |
(2)Includes the impairment of CenterPoint Energy’s equity method investment in Enable of $1,541 million recorded during the three months ended March 31, 2020.
| | | Total Assets | | Total Assets |
| | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (in millions) | | (in millions) |
Electric | Electric | $ | 15,410 | | | $ | 14,493 | | Electric | $ | 17,258 | | | $ | 16,547 | |
Natural Gas | Natural Gas | 17,208 | | | 14,976 | | Natural Gas | 16,306 | | | 16,267 | |
Midstream Investments | 994 | | | 913 | | |
| Corporate and Other, net of eliminations (1) | Corporate and Other, net of eliminations (1) | 2,294 | | | 3,089 | | Corporate and Other, net of eliminations (1) | 1,638 | | | 2,527 | |
| Continuing Operations | | Continuing Operations | 35,202 | | | 35,341 | |
Assets Held for Sale | | Assets Held for Sale | — | | | 2,338 | |
Consolidated | Consolidated | $ | 35,906 | | | $ | 33,471 | | Consolidated | $ | 35,202 | | | $ | 37,679 | |
| | | | |
(1)Total assets included pension and other postemployment-related regulatory assets of $533$423 million and $540$427 million as of March 31, 20212022 and December 31, 2020,2021, respectively.
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.
(17)(16) Supplemental Disclosure of Cash Flow Information
CenterPoint Energy and CERC elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. The table below provides supplemental disclosure of cash flow information and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups prior to the closinginformation:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Cash Payments/Receipts: | | | | | | | | | | | |
Interest, net of capitalized interest | $ | 134 | | | $ | 63 | | | $ | 24 | | | $ | 159 | | | $ | 70 | | | $ | 21 | |
Income tax refunds, net | (15) | | | — | | | — | | | (4) | | | — | | | — | |
Non-cash transactions: | | | | | | | | | | | |
Accounts payable related to capital expenditures | 307 | | | 232 | | | 79 | | | 166 | | | 140 | | | 56 | |
ROU assets obtained in exchange for lease liabilities (1) | — | | | — | | | — | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
(1) Excludes ROU assets obtained through prepayment of the respective transactions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Cash Payments/Receipts: | | | | | | | | | | | |
Interest, net of capitalized interest | $ | 159 | | | $ | 70 | | | $ | 21 | | | $ | 148 | | | $ | 68 | | | $ | 35 | |
Income tax payments, net | (4) | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Non-cash transactions: | | | | | | | | | | | |
Accounts payable related to capital expenditures | 166 | | | 140 | | | 56 | | | 200 | | | 110 | | | 66 | |
ROU assets obtained in exchange for lease liabilities | 1 | | | 0 | | | 0 | | | 14 | | | 0 | | | 5 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
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.Flows:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
Cash and cash equivalents (1) | Cash and cash equivalents (1) | $ | 146 | | | $ | 143 | | | $ | 1 | | | $ | 147 | | | $ | 139 | | | $ | 1 | | Cash and cash equivalents (1) | $ | 125 | | | $ | 104 | | | $ | 4 | | | $ | 230 | | | $ | 214 | | | $ | 8 | |
Restricted cash included in Prepaid expenses and other current assets | Restricted cash included in Prepaid expenses and other current assets | 21 | | | 16 | | | 0 | | | 20 | | | 15 | | | 0 | | Restricted cash included in Prepaid expenses and other current assets | 22 | | | 18 | | | — | | | 24 | | | 19 | | | — | |
| Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | $ | 167 | | | $ | 159 | | | $ | 1 | | | $ | 167 | | | $ | 154 | | | $ | 1 | | Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | $ | 147 | | | $ | 122 | | | $ | 4 | | | $ | 254 | | | $ | 233 | | | $ | 8 | |
(1)Houston Electric’s Cash and cash equivalents as of March 31, 20212022 and December 31, 20202021 included $142$104 million and $139$92 million, respectively, of cash related to the Bond Companies.
(18)(17) Related Party Transactions (Houston Electric and CERC)
Houston Electric and CERC participate in CenterPoint Energy’s money pool through which they can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper.
The table below summarizes CenterPoint Energy money pool activity:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | (in millions, except interest rates) | | (in millions, except interest rates) |
Money pool investments (borrowings) (1) | Money pool investments (borrowings) (1) | $ | 665 | | | $ | 0 | | | $ | (8) | | | $ | 0 | | Money pool investments (borrowings) (1) | $ | 354 | | | $ | — | | | $ | (512) | | | $ | (224) | |
Weighted average interest rate | Weighted average interest rate | 0.21 | % | | 0.21 | % | | 0.24 | % | | 0.24 | % | Weighted average interest rate | 0.55 | % | | 0.55 | % | | 0.34 | % | | 0.34 | % |
(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 using 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 operation and maintenance expenses:
| | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | Houston Electric | | CERC | | Houston Electric | | CERC | | | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | (in millions) | | | | (in millions) |
Corporate service charges | Corporate service charges | | $ | 43 | | | $ | 50 | | | $ | 49 | | | $ | 55 | | Corporate service charges | | | $ | 39 | | | $ | 45 | | | $ | 43 | | | $ | 50 | |
Net affiliate service charges (billings) | Net affiliate service charges (billings) | | (1) | | | 1 | | | (6) | | | 6 | | Net affiliate service charges (billings) | | | (6) | | | 6 | | | (1) | | | 1 | |
The table below presents transactions among Houston Electric, CERC and their parent, CenterPoint Energy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | | | | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | | | | | | | (in millions) |
Cash dividends paid to parent | | | | | | | | | | $ | 0 | | | $ | 0 | | | $ | 385 | | | $ | 32 | |
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| | | | Three Months Ended March 31, |
| | | | | | 2022 | | 2021 |
| | | | | | | | | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | | | | | | | | (in millions) |
Cash dividends paid to parent | | | | | | | | | | $ | 37 | | | $ | 23 | | | $ | — | | | $ | — | |
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses | | | | | | | | | | — | | | 720 | | | — | | | — | |
Cash contribution from parent | | | | | | | | | | 637 | | | — | | | — | | | — | |
Non-cash capital contribution from parent in payment for property, plant and equipment below | | | | | | | | | | 38 | | | 46 | | | — | | | — | |
Payable to parent for property, plant and equipment below | | | | | | | | | | 52 | | | 41 | | | — | | | — | |
Property, plant and equipment from parent (1) | | | | | | | | | | 90 | | | 87 | | | — | | | — | |
(1) Property, plant and equipment purchased from CenterPoint Energy at its net carrying value on the date of purchase.
(19)(18) Equity
Dividends Declared and Paid (CenterPoint Energy)
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| | | | | | Dividends Declared Per Share | | | | | | Dividends Paid Per Share |
| | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 | | | | | | 2021 | | 2020 |
Common Stock | | | | | | $ | 0 | | | $ | 0.2900 | | | | | | | $ | 0.1600 | | | $ | 0.2900 | |
Series A Preferred Stock | | | | | | 0 | | | 30.6250 | | | | | | | 30.6250 | | | 30.6250 | |
Series B Preferred Stock | | | | | | 0 | | | 17.5000 | | | | | | | 17.5000 | | | 17.5000 | |
Series C Preferred Stock (1) | | | | | | 0 | | | 0 | | | | | | | 0.1600 | | | 0 | |
CenterPoint Energy did not declare dividends on its Common Stock or Series A Preferred Stock during either of the three months ended March 31, 2022 or 2021. The table below provides information about dividends paid during each of these periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Dividends Paid Per Share |
| | | | | | Three Months Ended March 31, | | |
| | | | | | | | | | 2022 | | 2021 | | | | |
Common Stock | | | | | | | | | | $ | 0.170 | | | $ | 0.160 | | | | | |
Series A Preferred Stock | | | | | | | | | | 30.625 | | | 30.625 | | | | | |
Series B Preferred Stock | | | | | | | | | | — | | | 17.500 | | | | | |
Series C Preferred Stock (1) | | | | | | | | | | — | | | 0.160 | | | | | |
(1)The Series C Preferred Stock iswas entitled to participate in any dividend or distribution (excluding those payable in Common Stock) with the Common Stock on a pari passu, pro rata, as-converted basis. The per share amount reflects the dividend per share of Common Stock as if the Series C Preferred Stock were converted into Common Stock. All of the outstanding Series C Preferred Stock was converted to Common Stock during April and May 2021.
Preferred Stock (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liquidation Preference Per Share | | Shares Outstanding as of | | Outstanding Value as of |
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 |
| | (in millions, except shares and per share amounts) |
Series A Preferred Stock | | $ | 1,000 | | | 800,000 | | | 800,000 | | | $ | 790 | | | $ | 790 | |
Series B Preferred Stock | | 1,000 | | | 977,400 | | | 977,400 | | | 950 | | | 950 | |
Series C Preferred Stock | | 1,000 | | | 625,000 | | | 625,000 | | | 623 | | | 623 | |
| | | | 2,402,400 | | | 2,402,400 | | | $ | 2,363 | | | $ | 2,363 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liquidation Preference Per Share | | Shares Outstanding as of | | Outstanding Value as of |
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 |
| | (in millions, except shares and per share amounts) |
Series A Preferred Stock | | $ | 1,000 | | | 800,000 | | | 800,000 | | | $ | 790 | | | $ | 790 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | 800,000 | | | 800,000 | | | $ | 790 | | | $ | 790 | |
Income Allocated to Preferred Shareholders (CenterPoint Energy)
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | | | 2022 | | 2021 |
| | | (in millions) | | | (in millions) |
Series A Preferred Stock | Series A Preferred Stock | | | $ | 12 | | | $ | 12 | | Series A Preferred Stock | | | $ | 13 | | | $ | 12 | |
Series B Preferred Stock | Series B Preferred Stock | | | 17 | | | 17 | | Series B Preferred Stock | | | — | | | 17 | |
| Total income allocated to preferred shareholders | Total income allocated to preferred shareholders | | | $ | 29 | | | $ | 29 | | Total income allocated to preferred shareholders | | | $ | 13 | | | $ | 29 | |
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, President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. Under the terms of the retention incentive agreement, Mr. Lesar will receive equity-based awards under CenterPoint Energy’s LTIP covering a total of 1 million shares of Common Stock (Total Stock Award) to be granted in multiple annual awards. Mr. Lesar received 400 thousand restricted stock units in July 2021 that will vest in December 2022 and 400 thousand restricted stock units in February 2022 that will vest in December 2023. In February 2023, restricted stock units covering the remaining 200 thousand shares, or such lesser number of restricted stock units as may be required pursuant to the annual individual award limitations under CenterPoint Energy’s LTIP, will be awarded to Mr. Lesar and will vest in December 2023. In the event any shares under the Total Stock Award remain unawarded, in February 2024, a fully vested stock bonus award of the remaining shares will be granted.For accounting purposes, the 1 million shares under the Total Stock Award, consisting of both the awarded and unawarded equity-based awards described above, were considered granted in July 2021. In the event of death, disability, termination without cause or resignation for good reason, as defined in the retention incentive agreement, that occurs prior to the full Total Stock Award being awarded, CenterPoint Energy will pay 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 unawarded equity-based awards are redeemable for cash upon events that are not probable at the grant date, the equity associated with the unawarded equity-based awards will be classified as Temporary Equity on CenterPoint Energy’s Condensed Consolidated Balance Sheets.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated comprehensive income (loss) are as follows:
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| Three Months Ended March 31, |
| 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Beginning Balance | $ | (90) | | | $ | 0 | | | $ | 10 | | | $ | (98) | | | $ | (15) | | | $ | 10 | |
Other comprehensive loss before reclassifications: | | | | | | | | | | | |
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Other comprehensive income (loss) from unconsolidated affiliates | 1 | | | 0 | | | 0 | | | (3) | | | 0 | | | 0 | |
Amounts reclassified from accumulated other comprehensive loss: | | | | | | | | | | | |
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Actuarial losses (1) | 2 | | | 0 | | | 0 | | | 2 | | | 0 | | | 0 | |
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Tax expense | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | 0 | |
Net current period other comprehensive income (loss) | 3 | | | 0 | | | 0 | | | (2) | | | 0 | | | 0 | |
Ending Balance | $ | (87) | | | $ | 0 | | | $ | 10 | | | $ | (100) | | | $ | (15) | | | $ | 10 | |
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| Three Months Ended March 31, |
| 2022 | | 2021 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Beginning Balance | $ | (64) | | | $ | — | | | $ | 10 | | | $ | (90) | | | $ | — | | | $ | 10 | |
Other comprehensive loss before reclassifications: | | | | | | | | | | | |
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Other comprehensive income (loss) from unconsolidated affiliates | — | | | — | | | — | | | 1 | | | — | | | — | |
Amounts reclassified from accumulated other comprehensive income (loss): | | | | | | | | | | | |
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Actuarial losses (1) | 1 | | | — | | | — | | | 2 | | | — | | | — | |
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Reclassification of deferred loss from cash flow hedges realized in net income | 1 | | | — | | | — | | | — | | | — | | | — | |
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Net current period other comprehensive income | 2 | | | — | | | — | | | 3 | | | — | | | — | |
Ending Balance | $ | (62) | | | $ | — | | | $ | 10 | | | $ | (87) | | | $ | — | | | $ | 10 | |
(1)Amounts are included in the computation of net periodic cost and are reflected in Other income, (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income.
(19) Leases
In 2021 Houston Electric entered into a temporary short-term lease and a long-term lease, each for mobile generation. The short-term lease agreement allows Houston Electric to take delivery of mobile generation assets on a short-term basis with a term ending in the third quarter of 2022. 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 $51 million and $20 million as of March 31, 2022 and December 31, 2021, respectively.
Houston Electric took delivery of an additional 128 MW of mobile generation under the long-term lease in the first quarter of 2022 and remitted a cash payment under the lease of $171 million. 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 as of March 31, 2022. The remaining finance lease liability associated with the commenced long-term mobile generation agreement was not significant as of March 31, 2022 and December 31, 2021 and relates to removal costs that will be incurred at the end of the lease term. The long-term lease agreement includes up to 505 MW of mobile generation of which 253 MW and 125 MW was delivered as of March 31, 2022 and December 31, 2021, respectively, triggering lease commencement at delivery, and has an initial term ending in 2029 for all mobile generation leases. As of March 31, 2022, Houston Electric has secured a first lien on all the generation equipment leases and no amount of the payments made by Houston Electric were held in escrow.
The components of lease cost, included in Operation and maintenance expense on the Registrants’ respective Statements of Consolidated Income, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease cost | $ | 2 | | | $ | — | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 1 | |
Short-term lease cost | 46 | | | 46 | | | — | | | 10 | | | 10 | | | — | |
Variable lease cost | (1) | | | (1) | | | — | | | — | | | — | | | — | |
Total lease cost (1) | $ | 47 | | | $ | 45 | | | $ | 1 | | | $ | 12 | | | $ | 10 | | | $ | 1 | |
(1) CenterPoint Energy and Houston Electric defer finance lease costs for mobile generation to Regulatory assets for recovery rather than to Depreciation and Amortization in the Statements of Consolidated Income.
The components of lease income were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Operating lease income | $ | 1 | | | $ | — | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 1 | |
Variable lease income | — | | | — | | | — | | | — | | | — | | | — | |
Total lease income | $ | 1 | | | $ | — | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 1 | |
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | | | | | |
| (in millions, except lease term and discount rate) |
Assets: | | | | | | | | | | | | | | | | | |
Operating ROU assets (1) | $ | 16 | | | $ | 1 | | | $ | 7 | | | $ | 22 | | | $ | 1 | | | $ | 12 | | | | | | | |
Finance ROU assets (2) | 344 | | | 343 | | | — | | | 179 | | | 179 | | | — | | | | | | | |
Total leased assets | $ | 360 | | | $ | 344 | | | $ | 7 | | | $ | 201 | | | $ | 180 | | | $ | 12 | | | | | | | |
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Liabilities: | | | | | | | | | | | | | | | | | |
Current operating lease liability (3) | $ | 4 | | | $ | — | | | $ | 2 | | | $ | 6 | | | $ | 1 | | | $ | 2 | | | | | | | |
Non-current operating lease liability (4) | 12 | | | 1 | | | 5 | | | 17 | | | — | | | 11 | | | | | | | |
Total leased liabilities (5) | $ | 16 | | | $ | 1 | | | $ | 7 | | | $ | 23 | | | $ | 1 | | | $ | 13 | | | | | | | |
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Weighted-average remaining lease term (in years) - operating leases | 5.2 | | 4.3 | | 4.5 | | 6.2 | | 4.1 | | 6.5 | | | | | | |
Weighted-average discount rate - operating leases | 3.20 | % | | 3.00 | % | | 3.52 | % | | 3.10 | % | | 2.86 | % | | 3.20 | % | | | | | | |
Weighted-average remaining lease term (in years) - finance leases | 7.3 | | 7.3 | | — | | | 7.5 | | 7.5 | | — | | | | | | | |
Weighted-average discount rate - finance leases | 2.21 | % | | 2.21 | % | | — | | | 2.21 | % | | 2.21 | % | | — | | | | | | | |
(1)Reported within Other assets in the Registrants’ respective Consolidated Balance Sheets.
(2)Reported within Property, Plant and Equipment in the Registrants’ respective Consolidated Balance Sheets. Finance lease assets are recorded net of accumulated amortization.
(3)Reported within Current other liabilities in the Registrants’ respective Consolidated Balance Sheets.
(4)Reported within Other liabilities in the Registrants’ respective Consolidated Balance Sheets.
(5)Finance lease liabilities were not material as of December 31, 2021 or 2020 and are reported within Other long-term debt in the Registrants’ respective Consolidated Balance Sheets when applicable.
As of March 31, 2022, finance lease liabilities were not significant to the Registrants. As of March 31, 2022, maturities of operating lease liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Remainder of 2022 | $ | 4 | | | $ | 1 | | | $ | 1 | |
2023 | 4 | | | — | | | 2 | |
2024 | 3 | | | — | | | 2 | |
2025 | 2 | | | — | | | 1 | |
2026 | 2 | | | — | | | 1 | |
2027 and beyond | 3 | | | — | | | 1 | |
Total lease payments | 18 | | | 1 | | | 8 | |
Less: Interest | 2 | | | — | | | 1 | |
Present value of lease liabilities | $ | 16 | | | $ | 1 | | | $ | 7 | |
As of March 31, 2022, future minimum finance lease payments were not significant to the Registrants, exclusive of approximately $347 million of legally-binding undiscounted minimum lease payments for finance leases for approximately 252 MW of mobile generation leases signed but not yet commenced. As of March 31, 2022, maturities of undiscounted operating lease payments to be received are as follows:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
Remainder of 2022 | $ | 5 | | | $ | 1 | | | $ | 3 | |
2023 | 5 | | | — | | | 3 | |
2024 | 5 | | | — | | | 3 | |
2025 | 5 | | | — | | | 3 | |
2026 | 6 | | | — | | | 4 | |
2027 | 6 | | | — | | | 4 | |
2028 and beyond | 136 | | | — | | | 132 | |
Total lease payments to be received | $ | 168 | | | $ | 1 | | | $ | 152 | |
Other information related to leases is as follows:
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| Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 |
| 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 | $ | 2 | | | $ | — | | | $ | 1 | | | $ | 2 | | | $ | — | | | $ | 1 | |
Financing cash flows from finance leases included in the measurement of lease liabilities | 171 | | | 171 | | | — | | | — | | | — | | | — | |
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See Note 16 for information on ROU assets obtained in exchange for operating lease liabilities.
(20) Subsequent Events (CenterPoint Energy)
CenterPoint Energy Dividend Declarations
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Equity Instrument | | Declaration Date | | Record Date | | Payment Date | | Per Share | | |
Common Stock | | April 23, 202122, 2022 | | May 20, 202119, 2022 | | June 10, 20219, 2022 | | $ | 0.16000.1700 | | | |
| | | | | | | | | | |
Series B Preferred Stock | | April 23, 2021 | | May 15, 2021 | | June 1, 2021 | | 17.5000 | | | |
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Enable Distributions Declarations (CenterPoint Energy)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity Instrument | | Declaration Date | | Record Date | | Payment Date | | Per Unit Distribution | | Expected Cash Distribution (in millions) |
Enable common units | | April 26, 2021 | | May 13, 2021 | | May 25, 2021 | | $ | 0.16525 | | | $ | 39 | |
Enable Series A Preferred Units (1) | | April 26, 2021 | | April 26, 2021 | | May 14, 2021 | | 0.58730 | | | 9 | |
(1)On February 18, 2021, the Enable Series A Preferred Units converted to the floating rate period where the distribution rate is equal to the sum of three-month LIBOR, as calculated on each applicable date of determination, and 8.50%.
In April 2021, CenterPoint Energy received two notifications of intent by shareholders to convert their Series C Preferred Stock to Common Stock. The table below details the two notifications.
| | | | | | | | | | | | | | | | | | | | |
Date of Notice | | Conversion Date | | Shares of Series C Preferred Stock Converted | | Shares of Common Stock to be Issued |
April 5, 2021 | | April 5, 2021 | | 400,000 | | 26,126,714 |
April 16, 2021 | | April 16. 2021 | | 37,500 | | 2,449,379 |
Conversion of the remaining Series C Preferred Stock is mandatory on May 7, 2021, the 12-month anniversary date of the preferred stock purchase agreements. The remaining 187,500 shares of Series C Preferred Stock are expected to convert into 12,246,897 shares of Common Stock.
Sale 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 of storm-related incremental natural gas costs incurred in the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The assets include 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 is anticipated to close by the end of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance and state regulatory approvals.
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 the Interim Condensed Financial Statements contained in this combined Form 10-Q and the Registrants’ combined 20202021 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
February 2021 Winter Storm Event. In February 2021, portions of the United States experienced an extreme and unprecedented winter weather event resulting in corresponding electricity generation shortages, including in Texas, and natural gas shortages and increased wholesale prices of natural gas in the United States. Many customers of Houston Electric’s REPs and, to a lesser extent, of CERC were severely impacted by outages in electricity and natural gas delivery during the February 2021 Winter Storm Event. As a result of this weather event, the governors of Texas, Oklahoma and Louisiana declared states of either disaster or emergencies in their respective states. Subsequently, President Biden also approved major disaster declarations for all or parts of Texas, Oklahoma and Louisiana.
CenterPoint Energy has a corporate response planning team comprised of employees across the organization, including members of senior management, that assesses risks to its business, including for health, safety and environmental matters and personnel issues, and has addressed various impacts of the February 2021 Winter Storm Event. The corporate response planning team coordinated additional support for operations and other personnel that responded directly to the February 2021 Winter Storm Event.
The February 2021 Winter Storm Event has had, and may continue to have, financial impacts on CenterPoint Energy, Houston Electric and CERC, including substantial increases in prices for natural gas, decreased revenues at Houston Electric due to ERCOT-mandated outages, additional interest expense related to external financing to pay for natural gas working capital, potential impacts to credit metrics, significant impacts to the REPs, including the REPs’ ability to pay invoices from Houston Electric, increases in bad debt expense, issues with counterparties and customers, litigation and investigations or inquiries from government or regulatory agencies and entities, and other financial impacts. CenterPoint Energy does not anticipate meaningful long-term changes to its credit profile or credit ratings given its access to external financing sources and the regulatory mechanisms that are in place to seek recovery of these excess costs. For more information regarding regulatory impacts, debt transactions and litigation, see Notes 6, 12 and 14 to the Interim Condensed Financial Statements and “—Liquidity and Capital Resources” below.
Sale of Arkansas and Oklahoma Natural Gas Businesses. On April 29, 2021, CenterPoint Energy, through its subsidiaryJanuary 10, 2022, CERC Corp., entered into an Asset Purchase Agreement to sell completed the sale of its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion in cash, including recovery of approximately $425 million of storm-related incremental natural gas costs incurred in the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The transaction is anticipated to close by the end of 2021, subject to satisfaction of customary closing conditions.businesses. For furtheradditional information regarding discontinued operations and divestitures, see Note 203 to the Interim Condensed Financial Statements.
Enable Merger Agreement. On February 16, 2021, Enable entered into the Enable Merger Agreement. At the closingSale of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held byEquity Securities. During the three months ended March 31, 2022, CenterPoint Energy and in return CenterPoint Energy will receivesold its remaining Energy Transfer common unitsCommon Units and Energy Transfer Series G Preferred Units.Units for net proceeds of $702 million. For more information, see Notes 1Note 10 to the Interim Condensed Financial Statements.
Debt Transactions. During the three months ended March 31, 2022, Houston Electric issued $800 million in new debt and 9CenterPoint Energy and CERC repaid or redeemed a combined $1,030 million of debt, excluding scheduled principal payments on Securitization Bonds. For information about debt transactions to date in 2022, see Note 11 to the Interim Condensed Financial Statements.
Regulatory Proceedings. For detailsinformation related to our pending and completed regulatory proceedings to date in 2021,2022, see “—Liquidity and Capital Resources —Regulatory Matters” below.
Debt Transactions. In February 2021, each of CenterPoint Energy, Houston Electric, CERC Corp. and VUHI replaced their existing revolving credit facilities with new amended and restated credit facilities. Also, in February 2021, CERC Corp. received financing commitments totaling $1.7 billion on a 364-day term loan facility to bridge any working capital needs related to the February 2021 Winter Storm Event.In March 2021, CERC Corp. issued $1.7 billion aggregate principal amount of senior notes and Houston Electric issued $1.1 billion aggregate principal amount of general mortgage bonds. Upon the
consummation of its senior notes offerings, in March 2021, CERC Corp. terminated all of the commitments for the 364-day term loan facility. Additionally, in March 2021, Houston Electric repaid all of its remaining outstanding $102 million first mortgage bonds at maturity. In April 2021, Houston Electric provided notice of redemption relating to $300 million aggregate principal amount of its outstanding general mortgage bonds (which were redeemed on May 1, 2021) and CenterPoint Energy amended its existing term loan agreement to provide for a 30-day extension of its maturity date. For more information, see Note 12 to the Interim Condensed Financial Statements.
Series C Preferred Stock Conversions. In April 2021, CenterPoint Energy received two notifications of intent by shareholders to convert their Series C Preferred Stock to Common Stock. For further information, see Note 20 to the Interim Condensed Financial Statements.
CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONS
For information regarding factors that may affect the future results of our consolidated operations, please read “Risk Factors” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K.10-K and in Item 1A of Part II of this combined Form 10-Q.
Income (loss) available to common shareholders for the three months ended March 31, 20212022 and 20202021 was as follows:
| | | | | Three Months Ended March 31, | | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | Favorable (Unfavorable) | | | | | 2022 | | 2021 | | Favorable (Unfavorable) |
| | | (in millions) | | | | | (in millions) |
Electric | Electric | | | | 75 | | | (134) | | | $ | 209 | | | Electric | | | | $ | 82 | | | $ | 75 | | | $ | 7 | |
Natural Gas | Natural Gas | | | | 229 | | | 201 | | | 28 | | | Natural Gas | | | | 398 | | | 229 | | | 169 | |
Total Utility Operations | Total Utility Operations | | | | 304 | | | 67 | | | 237 | | | Total Utility Operations | | | | 480 | | | 304 | | | 176 | |
Midstream Investments (1) | | | | 71 | | | (1,127) | | | 1,198 | | | |
| Corporate & Other (2)(1) | Corporate & Other (2)(1) | | | | (41) | | | (22) | | | (19) | | | Corporate & Other (2)(1) | | | | 38 | | | (53) | | | 91 | |
Discontinued Operations | Discontinued Operations | | | | — | | | (146) | | | 146 | | | Discontinued Operations | | | | — | | | 83 | | | (83) | |
Total CenterPoint Energy | Total CenterPoint Energy | | | | $ | 334 | | | $ | (1,228) | | | 1,562 | | | Total CenterPoint Energy | | | | $ | 518 | | | $ | 334 | | | $ | 184 | |
(1)For a discussion of the components of equity in earnings from CenterPoint Energy’s equity investment in Enable, see Note 9 to the Interim Condensed Financial Statements.
(2)Includes energy performance contracting and sustainable infrastructure services through ESG,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 March 31, 20212022 compared to three months ended March 31, 20202021
Income available to common shareholders increased $1,562$184 million primarily due to the following items in the first quarter of 2020 which did not repeat in the first quarter of 2021:items:
•the impairmentgain, net of our investmenttransaction costs, associated with the sale of the Arkansas and Oklahoma Natural Gas businesses in Enable further discussed in Note 9 to the Interim Condensed Financial Statements;January 2022; and
•impairment of Indiana Electric;the dividend requirement associated with the Series B Preferred Stock in 2021.
These increases were partially offset by:
•losses from discontinued operations;a decrease in earnings associated with midstream common and preferred units; and
•partially offset byincreased costs associated with the favorable income tax impactearly redemption of the CARES Act.long-term debt.
Excluding those items, income available to common shareholders increased $73$9 million primarily due to the following key factors:
•rate relief, net of increases in depreciation and amortization and taxes other than income taxes;
•favorable weather and usage, net of the impacts of COVID-19;
•continued customer growth;growth.
These increases were partially offset by:
•increased operation and maintenance expense discipline;
•reduced interest expense; and
•increased earnings at Enable.interest expense.
Income Tax Expense. For a discussion of effective tax rate per period, see Note 1312 to the Interim Condensed Financial Statements.
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. Certain priorDuring the three months ended March 31, 2022, CenterPoint Energy sold certain assets previously owned by entities within Corporate and Other to businesses within the Electric and Natural Gas reportable segments. Prior year amounts have beenwere reclassified to conform toas a result of the current year presentation describedtransaction in the Registrants’ combined 2020 Form 10-K.three months ended March 31, 2022.
The following discussion of results of operations by reportable segment concentrates on CenterPoint Energy’s Utility Operations, conducted through two reportable segments, Electric and Natural Gas. A discussion of CenterPoint Energy’s Midstream Investments reportable segment results is included in the discussion of CenterPoint Energy’s consolidated results above.
Electric (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of the Electric reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP”Businesses” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K.10-K and in Item 1A of Part II of this combined Form 10-Q.
The following table provides summary data of the Electric reportable segment:
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | Favorable (Unfavorable) | | | | 2022 | | 2021 | | Favorable (Unfavorable) |
| | | (in millions, except operating statistics) | | | | (in millions, except operating statistics) |
Revenues | Revenues | | | $ | 830 | | | $ | 767 | | | $ | 63 | | Revenues | | | $ | 893 | | | $ | 830 | | | $ | 63 | |
Cost of revenues (1) | Cost of revenues (1) | | | 45 | | | 35 | | | (10) | | Cost of revenues (1) | | | 41 | | | 45 | | | 4 | |
Revenues less Cost of revenues | Revenues less Cost of revenues | | | 785 | | | 732 | | | 53 | | Revenues less Cost of revenues | | | 852 | | | 785 | | | 67 | |
Expenses: | Expenses: | | | | | | | Expenses: | | | | | | | |
Operation and maintenance | Operation and maintenance | | | 416 | | | 403 | | | (13) | | Operation and maintenance | | | 437 | | | 411 | | | (26) | |
Depreciation and amortization | Depreciation and amortization | | | 169 | | | 154 | | | (15) | | Depreciation and amortization | | | 192 | | | 174 | | | (18) | |
Taxes other than income taxes | Taxes other than income taxes | | | 67 | | | 68 | | | 1 | | Taxes other than income taxes | | | 68 | | | 67 | | | (1) | |
Goodwill impairment | | | — | | | 185 | | | 185 | | |
| Total expenses | Total expenses | | | 652 | | | 810 | | | 158 | | Total expenses | | | 697 | | | 652 | | | (45) | |
Operating Income | Operating Income | | | 133 | | | (78) | | | 211 | | Operating Income | | | 155 | | | 133 | | | 22 | |
Other Income (Expense) | | | | | | | |
Other Income (Expense): | | Other Income (Expense): | | | | | | | |
Interest expense and other finance charges | Interest expense and other finance charges | | | (56) | | | (55) | | | (1) | | Interest expense and other finance charges | | | (57) | | | (56) | | | (1) | |
| Other income, net | Other income, net | | | 7 | | | 7 | | | — | | Other income, net | | | 5 | | | 7 | | | (2) | |
Income (Loss) from Continuing Operations Before Income Taxes | | | 84 | | | (126) | | | 210 | | |
Income Before Income Taxes | | Income Before Income Taxes | | | 103 | | | 84 | | | 19 | |
Income tax expense | Income tax expense | | | 9 | | | 8 | | | (1) | | Income tax expense | | | 21 | | | 9 | | | (12) | |
Net Income (Loss) | | | $ | 75 | | | $ | (134) | | | 209 | | |
Net Income | | Net Income | | | $ | 82 | | | $ | 75 | | | $ | 7 | |
Throughput (in GWh): | Throughput (in GWh): | | | | | | Throughput (in GWh): | | | | | | | |
Residential | Residential | | | 6,070 | | 5,679 | | 7 | % | Residential | | | 6,346 | | 6,070 | | 5 | % |
Total | Total | | | 21,241 | | 21,243 | | — | % | Total | | | 23,155 | | 21,241 | | 9 | % |
Weather (percentage of 10-year average for service area): | Weather (percentage of 10-year average for service area): | | | Weather (percentage of 10-year average for service area): | | |
Cooling degree days | Cooling degree days | | | 109 | % | | 187 | % | | (78) | % | Cooling degree days | | | 62 | % | | 109 | % | | (47) | % |
Heating degree days | Heating degree days | | | 95 | % | | 80 | % | | 15 | % | Heating degree days | | | 129 | % | | 95 | % | | 34 | % |
Number of metered customers at end of period: | Number of metered customers at end of period: | | | Number of metered customers at end of period: | | |
Residential | Residential | | | 2,448,439 | | 2,389,585 | | 2 | % | Residential | | | 2,502,253 | | 2,448,439 | | 2 | % |
Total | Total | | | 2,765,496 | | 2,701,004 | | 2 | % | Total | | | 2,824,100 | | 2,765,496 | | 2 | % |
(1)Includes Utility natural gas, fuel and purchased power.
The following table provides variance explanations for the three months ended March 31, 20212022 compared to three months ended March 31, 20202021 by major income statement caption for the Electric reportable segment:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) |
Revenues less Cost of revenues | | | | |
Transmission Revenues, including TCOS and TCRF, and impact of the change in rate design, inclusive of costs billed by transmission providers, partially offset in operation and maintenance | | | | $ | 13629 | |
Customer growth | | | | 8 | |
Bond Companies, offset in other line items | | 9 | | | |
Refund of protected and unprotected EDIT, offset in income tax expense | | 8 | | | |
Weather, efficiency improvements and other usage impacts | | 8 | | | |
Customer growth | | 6 | |
Weather impacts and other usage | | | | 3 | |
Impacts from increased peak demand in 2020, collected inCustomer rates in 2021 | | 4 | | 2 | |
Bond Companies equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | 2 | | | |
Miscellaneous revenues | | 2 | | | |
Impacts from increased peak demand in 2021, collected in rates in 2022 | | 1 | | | |
Energy efficiency and pass-through offset in operation and maintenance | | | | 1 | |
Miscellaneous revenues, primarily related right-of-way revenue(2) | | | | (3) | |
Refund of protected and unprotected EDIT, offset in income tax expense | | | | (10) | |
Impacts on usage of COVID-19 | | | | (12) | |
Customer rates and impact of the change in rate design | | | | (79) | |
Total | | | | $ | 5367 | | | |
Operation and maintenance | | | | |
Support services | | | | $ | 7 | |
Contract services | | | | 5 | |
Labor and benefits | | | | 1 | |
Energy efficiency, offset in revenues | | | | (1) | |
Bond Companies, offset in other line items | | | | (1) | |
All other operation and maintenance expense, including materials and supplies and insurance | | | | (3) | |
| | | | |
Transmission costs billed by transmission providers, offset in revenues less cost of revenues | | $ | (22) | | | |
| | | | |
Contract services | | (21)(7) | | | |
All other operation and maintenance expense, including materials and supplies and insurance | | (5) | | | |
Bond Companies, offset in other line items | | 1 | | | |
Energy efficiency and pass-through offset in revenues | | 3 | | | |
| | | | |
Support services | | 4 | | | |
Total | | | | $ | (13)(26) | | | |
Depreciation and amortization | | | | |
Bond Companies, offset in other line items | | | | $ | (6)(12) | | | |
Ongoing additions to plant-in-service | | (6) | | (9) | |
Total | | | | $ | (15)(18) | | | |
Taxes other than income taxes | | | | |
Franchise fees and other taxes | | | | $ | 2 | | | |
Incremental capital projects placed in service | | (3) | | (1) | |
Total | | | | $ | 1 | |
Goodwill Impairment(1) | | | | |
Indiana Electric goodwill impairment charge in 2020 | | | | $ | 185 | |
| | | | $ |
| 185 | | | |
| | | | |
Interest expense and other finance charges | | | | |
Bond Companies, offset in other line items | | | | $ | 2 | | | |
DebtIncremental borrowings to fund incremental capital projectsexpenditures | | | | (3) | | | |
Total | | | | $ | (1) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Other income, (expense), net | | | | |
Reduction to non-service benefit costOther non-operating income | | | | $ | 2 (2) | | | |
| | | | |
| | | | |
Investments in CenterPoint Energy Money Pool interest income | | | | (1) | |
Bond Companies interest income, offset in other line items | | | | (1) | |
Total | | | | $ | — (2) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 1312 to the Interim Condensed Financial Statements.
Natural Gas (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of CenterPoint Energy’s Natural Gas reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas' Business,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP”Businesses” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K.10-K and in Item 1A of Part II of this combined Form 10-Q.
The following table provides summary data of CenterPoint Energy’s Natural Gas reportable segment:
| | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | 2021 | | 2020 | | Favorable (Unfavorable) | | | | 2022 | | 2021 | | Favorable (Unfavorable) |
| | | (in millions, except operating statistics) | | | | (in millions, except operating statistics) |
Revenues | Revenues | | $ | 1,663 | | | $ | 1,321 | | | $ | 342 | | Revenues | | | $ | 1,824 | | | $ | 1,663 | | | $ | 161 | |
Cost of revenues (1) | Cost of revenues (1) | | 893 | | | 580 | | | (313) | | Cost of revenues (1) | | | 1,058 | | | 893 | | | (165) | |
Revenues less Cost of revenues | Revenues less Cost of revenues | | 770 | | | 741 | | | 29 | | Revenues less Cost of revenues | | | 766 | | | 770 | | | (4) | |
Expenses: | Expenses: | | | | | | Expenses: | | | | | | | |
Operation and maintenance | Operation and maintenance | | 256 | | | 272 | | | 16 | | Operation and maintenance | | | 246 | | | 250 | | | 4 | |
Depreciation and amortization | Depreciation and amortization | | 122 | | | 111 | | | (11) | | Depreciation and amortization | | | 112 | | | 128 | | | 16 | |
Taxes other than income taxes | Taxes other than income taxes | | 74 | | | 67 | | | (7) | | Taxes other than income taxes | | | 77 | | | 74 | | | (3) | |
Total expenses | Total expenses | | 452 | | | 450 | | | (2) | | Total expenses | | | 435 | | | 452 | | | 17 | |
Operating Income | Operating Income | | 318 | | | 291 | | | 27 | | Operating Income | | | 331 | | | 318 | | | 13 | |
Other Income (Expense) | | | | | | |
Other Income (Expense): | | Other Income (Expense): | | | | | | | |
Gain on sale | | Gain on sale | | | 303 | | | — | | | 303 | |
Interest expense and other finance charges | Interest expense and other finance charges | | (33) | | | (41) | | | 8 | | Interest expense and other finance charges | | | (30) | | | (33) | | | 3 | |
| Other expense, net | | — | | | (2) | | | 2 | | |
Income from Continuing Operations Before Income Taxes | | 285 | | | 248 | | | 37 | | |
| Income Before Income Taxes | | Income Before Income Taxes | | | 604 | | | 285 | | | 319 | |
Income tax expense | Income tax expense | | 56 | | | 47 | | | (9) | | Income tax expense | | | 206 | | | 56 | | | (150) | |
Net Income | Net Income | | $ | 229 | | | $ | 201 | | | 28 | | Net Income | | | $ | 398 | | | $ | 229 | | | $ | 169 | |
| Throughput (in Bcf): | Throughput (in Bcf): | | | | | | Throughput (in Bcf): | | | | | | | |
Residential | Residential | | 128 | | 107 | | 20 | % | Residential | | | 123 | | 128 | | (4) | % |
Commercial and Industrial | Commercial and Industrial | | 145 | | 146 | | (1) | % | Commercial and Industrial | | | 137 | | 145 | | (6) | % |
Total | Total | | 273 | | 253 | | 8 | % | Total | | | 260 | | 273 | | (5) | % |
Weather (percentage of 10-year average for service area): | Weather (percentage of 10-year average for service area): | | | | | | Weather (percentage of 10-year average for service area): | | | | | | |
Heating degree days | Heating degree days | | 103 | % | | 85 | % | | 18 | % | Heating degree days | | | 109 | % | | 103 | % | | 6 | % |
Number of metered customers at end of period: | Number of metered customers at end of period: | | | Number of metered customers at end of period: | | |
Residential | Residential | | 4,343,863 | | 4,266,685 | | 2 | % | Residential | | | 3,926,192 | | 4,343,863 | | (10) | % |
Commercial and Industrial | Commercial and Industrial | | 351,363 | | 350,009 | | — | % | Commercial and Industrial | | | 297,270 | | 351,363 | | (15) | % |
Total | Total | | 4,695,226 | | 4,616,694 | | 2 | % | Total | | | 4,223,462 | | 4,695,226 | | (10) | % |
(1)Includes Utility natural gas, fuel and purchased power and Non-utility cost of revenues, including natural gas.
The following table provides variance explanations for the three months ended March 31, 20212022 compared to three months ended March 31, 20202021 by major income statement caption for the Natural Gas reportable segment:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) | | |
Revenues less Cost of revenues | | | | |
WeatherNine days in 2022 versus three months in 2021 for Arkansas and usage, excluding impacts from COVID-19Oklahoma Natural Gas businesses due to sale | | | | $ | 21 (86) | | | |
Energy efficiency, offset in operation and maintenance | | (2) | | | |
Customer growth | | 4 | | | |
Refund of protected and unprotected EDIT, offset in income tax expense | | 74 | | | |
Gross receipts tax, offset in taxes other than income taxes | | | | 5 | |
Energy efficiency, offset in operation and maintenance9 | | | |
| | | | |
3 Weather and usage | | 9 | | | |
Non-volumetric and miscellaneous revenue | | 14 | | | |
Customer rates and impact of the change in rate design, exclusive of the TCJA impact | | | | 1 | |
Refund of protected and unprotected EDIT, offset in income tax expense44 | | | | (2) | |
Impacts of COVID-19, including usage and other miscellaneous charges | | | | (3) | |
Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19 | | | | (3) | |
Total | | | | $ | 29 (4) | | | |
Operation and maintenance | | | | |
| | | | |
Other operating and maintenance expensesexpense, including materials and supplies and insurance | | | | $ | 7 (21) | |
| | | | |
Support ServicesLabor and benefits | | (6) | | | | 4 | |
Merger related expenses, primarily severance and technology | | | | 2 | |
ContractedContract services | | | | 2 | |
Materials and supplies(1) | | | | 2 | |
Bad Debt | | | | 1 | |
Insurance | | | | 1 | |
Energy efficiency, offset in revenues less cost of revenues | | 2 | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | (3)30 | | | |
Total | | | | $ | 164 | | | |
Depreciation and amortization | | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | 15 | | | |
Indiana lower depreciation rates from recent rate order | | 5 | | | |
Incremental capital projects placed in service | | (4) | | (11) | |
| | | | |
Total | | | | $ | (11)16 | | | |
Taxes other than income taxes | | | | |
Incremental capital projects placed in service | | | | $ | (2) | |
Gross receipts tax, offset in revenues less cost of revenues | | $ | (9) | | | |
Incremental capital projects placed in service | | (5)(1) | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | 7 | | | |
Total | | $ | (3) | | | |
Gain on Sale | | | | |
Net gain on sale of Arkansas and Oklahoma Natural Gas businesses | | $ | (7)303 | | | |
Total | | $ | 303 | | | |
Interest expense and other finance charges | | | | |
Reduced interest rates on outstanding borrowings, partially offset by incremental borrowingsNine days in 2022 versus three months in 2021 for capital expendituresArkansas and Oklahoma Natural Gas businesses due to sale | | | | $ | 83 | | | |
| | | | |
Total | | | | $ | 83 | | | |
| | | | |
| | | | |
| | | | |
Other expense, net | | | | |
Reduction to non-service benefit cost | | | | $ | 1 | |
Money pool investments with CenterPoint Energy interest income | | | | 1 | |
Total | | | | $ | 2 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 1312 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 as the measure of profit or loss for its reportable segment. Houston Electric consists of a single reportable segment. Houston Electric’s results of operations are affected by seasonal fluctuations in the demand for electricity. Houston Electric’s results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates Houston Electric charges, debt service costs, income tax expense, Houston Electric’s ability to collect receivables from REPs and Houston Electric’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations of Houston Electric’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP”Businesses” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K.10-K and in Item 1A of Part II of this combined Form 10-Q.
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2021 | | 2020 | | Favorable (Unfavorable) | | | | 2022 | | 2021 | | Favorable (Unfavorable) |
| | | (in millions, except operating statistics) | | | | (in millions, except operating statistics) |
Revenues: | Revenues: | | | Revenues: | | |
TDU | TDU | | | $ | 640 | | | $ | 596 | | | 44 | | TDU | | | $ | 693 | | | $ | 640 | | | $ | 53 | |
Bond Companies | Bond Companies | | | 44 | | | 38 | | | 6 | | Bond Companies | | | 53 | | | 44 | | | 9 | |
Total revenues | Total revenues | | | 684 | | | 634 | | | 50 | | Total revenues | | | 746 | | | 684 | | | 62 | |
Expenses: | Expenses: | | | | | | | Expenses: | | | | | | | |
Operation and maintenance, excluding Bond Companies | Operation and maintenance, excluding Bond Companies | | | 371 | | | 358 | | | (13) | | Operation and maintenance, excluding Bond Companies | | | 394 | | | 371 | | | (23) | |
Depreciation and amortization, excluding Bond Companies | Depreciation and amortization, excluding Bond Companies | | | 105 | | | 99 | | | (6) | | Depreciation and amortization, excluding Bond Companies | | | 114 | | | 105 | | | (9) | |
Taxes other than income taxes | Taxes other than income taxes | | | 63 | | | 64 | | | 1 | | Taxes other than income taxes | | | 63 | | | 63 | | | — | |
Bond Companies | Bond Companies | | | 38 | | | 31 | | | (7) | | Bond Companies | | | 49 | | | 38 | | | (11) | |
Total expenses | Total expenses | | | 577 | | | 552 | | | (25) | | Total expenses | | | 620 | | | 577 | | | (43) | |
Operating Income | Operating Income | | | 107 | | | 82 | | | 25 | | Operating Income | | | 126 | | | 107 | | | 19 | |
Other Income (Expense) | Other Income (Expense) | | | | | | | Other Income (Expense) | | | | | | | |
Interest expense and other finance charges | Interest expense and other finance charges | | | (45) | | | (41) | | | (4) | | Interest expense and other finance charges | | | (48) | | | (45) | | | (3) | |
Interest expense on Securitization Bonds | Interest expense on Securitization Bonds | | | (6) | | | (8) | | | 2 | | Interest expense on Securitization Bonds | | | (4) | | | (6) | | | 2 | |
| Other income, net | Other income, net | | | 5 | | | 5 | | | — | | Other income, net | | | 4 | | | 5 | | | (1) | |
Income from Continuing Operations Before Income Taxes | | | 61 | | | 38 | | | 23 | | |
Income Before Income Taxes | | Income Before Income Taxes | | | 78 | | | 61 | | | 17 | |
Income tax expense | Income tax expense | | | 8 | | | 5 | | | (3) | | Income tax expense | | | 17 | | | 8 | | | (9) | |
Net Income | Net Income | | | $ | 53 | | | $ | 33 | | | 20 | | Net Income | | | $ | 61 | | | $ | 53 | | | $ | 8 | |
Throughput (in GWh): | Throughput (in GWh): | | | | | | | Throughput (in GWh): | | | | | | | |
Residential | Residential | | | 5,701 | | 5,351 | | 7 | % | Residential | | | 5,988 | | 5,701 | | 5 | % |
Total | Total | | | 19,739 | | 20,102 | | (2) | % | Total | | | 21,934 | | 19,739 | | 11 | % |
Weather (percentage of 10-year average for service area): | Weather (percentage of 10-year average for service area): | | | Weather (percentage of 10-year average for service area): | | |
Cooling degree days | Cooling degree days | | | 112 | % | | 185 | % | | (73) | % | Cooling degree days | | | 62 | % | | 112 | % | | (50) | % |
Heating degree days | Heating degree days | | | 104 | % | | 68 | % | | 36 | % | Heating degree days | | | 129 | % | | 104 | % | | 25 | % |
Number of metered customers at end of period: | Number of metered customers at end of period: | | | Number of metered customers at end of period: | | |
Residential | Residential | | | 2,318,030 | | 2,260,352 | | 3 | % | Residential | | | 2,370,818 | | 2,318,030 | | 2 | % |
Total | Total | | | 2,615,917 | | 2,552,739 | | 2 | % | Total | | | 2,673,393 | | 2,615,917 | | 2 | % |
The following table provides variance explanations for the three months ended March 31, 20212022 compared to three months ended March 31, 20202021 by major income statement caption for Houston Electric:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) | | |
Revenues | | | | |
Transmission Revenues, including TCOS and TCRF, and impact of the change in rate design, inclusive of costs billed by transmission providers | | | | $ | 13629 | |
Customer growth | | | | 8 | |
Weather impacts and other usage | | | | 6 | |
Bond Companies, offset in other line items | | 9 | | | |
Refund of protected and unprotected EDIT, offset in income tax expense | | 8 | | | |
| | | | |
Weather impacts and other usage | | 8 | | | |
Customer growth | | 6 | |
Impacts from increased peak demand in 2020, collected in rates in 2021 | | | | 2 | |
Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | 2 | | | |
Impacts from increased peak demand in 2021, collected in rates in 2022 | | 1 | | | |
Miscellaneous revenues, primarily related to right-of-way revenues, and service connections | | 1 | | | |
Energy efficiency, offset in operation and maintenance | | | | 1 | |
Miscellaneous revenues, primarily related to right-of-way revenues(2) | | | | (5) | |
Refund of protected and unprotected EDIT, offset in income tax expense | | | | (10) | |
Impacts on usage of COVID-19 | | | | (12) | |
Customer rates and impact of the change in rate design | | | | (83) | |
Total | | | | $ | 5062 | | | |
Operation and maintenance, excluding Bond Companies | | | | |
Support services | | | | $ | 6 | |
Contract services | | | | 2 | |
Labor and benefits | | | | 1 | |
Energy efficiency, offset in revenues | | | | (1) | |
| | | | |
| | | | |
Transmission costs billed by transmission providers, offset in revenues | | $ | (22) | | | |
Contract services | | (21)(5) | | | |
Other operation and maintenance expense | | (3) | | | |
Labor and benefits | | 1 | | | |
| | | | |
| | | | |
Energy efficiency, offset in revenues | | 2 | | | |
Support services | | 4 | | | |
Total | | | | $ | (13)(23) | | | |
Depreciation and amortization, excluding Bond Companies | | | | |
Ongoing additions to plant-in-service | | | | $ | (6)(9) | | | |
Total | | | | $ | (6)(9) | | | |
Taxes other than income taxes | | | | |
Franchise fees and other taxes | | | | $ | 23 | | | |
Incremental capital projects placed in service | | (3) | | (1) | |
Total | | | | $ | 1— | | | |
Bond Companies expense | | | | |
Operations and maintenance and depreciation expense, offset in other line items | | | | $ | (7)(11) | | | |
| | | | $ | (7)(11) | | | |
Interest expense and other finance charges | | | | |
DebtIncremental borrowings to fund incremental capital projectsexpenditures | | | | $ | (4)(3) | | | |
Total | | | | $ | (4)(3) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Interest expense on Securitization Bonds | | | | |
Lower outstanding principal balance, offset in other line items | | $ | 2 | | | |
Total | | $ | 2 | |
Total | | | | $ | 2 | |
Other income, (expense), net | | | | |
Reduction to non-service benefit costOther non-operating income | | | | $ | 2 | |
Investments in CenterPoint Energy Money Pool interest income(1) | | | | (1) | |
Bond Companies interest income, offset in other line items | | | | (1) | |
| | | | |
Total | | | | $ | — (1) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate per period, see Note 1312 to the 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 its reportable segment. CERC’s results of operations are affected by seasonal fluctuations in the demand for natural gas. CERC’s results of operations are also affected by, among other things, the actions of various federal, state and local governmental authorities having jurisdiction over rates CERC charges, debt service costs and income tax expense, CERC’s ability to collect receivables from customers and CERC’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations for CERC’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas’ Business,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP”Businesses” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K.10-K and in Item 1A of Part II of this combined Form 10-Q.
| | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | 2021 | | 2020 | | Favorable (Unfavorable) | | | | 2022 | | 2021 | | Favorable (Unfavorable) |
| | | (in millions, except operating statistics) | | | | (in millions, except operating statistics) |
Revenues | Revenues | | $ | 1,177 | | | $ | 1,011 | | | $ | 166 | | Revenues | | | $ | 1,385 | | | $ | 1,177 | | | $ | 208 | |
Cost of revenues (1) | Cost of revenues (1) | | 625 | | | 478 | | | (147) | | Cost of revenues (1) | | | 858 | | | 625 | | | (233) | |
Revenues less Cost of revenues | Revenues less Cost of revenues | | 552 | | | 533 | | | 19 | | Revenues less Cost of revenues | | | 527 | | | 552 | | | (25) | |
Expenses: | Expenses: | | | | | | Expenses: | | | | | | | |
Operation and maintenance | Operation and maintenance | | 198 | | | 209 | | | 11 | | Operation and maintenance | | | 187 | | | 198 | | | 11 | |
Depreciation and amortization | Depreciation and amortization | | 80 | | | 74 | | | (6) | | Depreciation and amortization | | | 72 | | | 80 | | | 8 | |
Taxes other than income taxes | Taxes other than income taxes | | 56 | | | 50 | | | (6) | | Taxes other than income taxes | | | 56 | | | 56 | | | — | |
Total expenses | Total expenses | | 334 | | | 333 | | | (1) | | Total expenses | | | 315 | | | 334 | | | 19 | |
Operating Income | Operating Income | | 218 | | | 200 | | | 18 | | Operating Income | | | 212 | | | 218 | | | (6) | |
Other Income (Expense) | | | | | | |
Other Income (Expense): | | Other Income (Expense): | | | | | | | |
Gain on sale | | Gain on sale | | | 557 | | | — | | | 557 | |
Interest expense and other finance charges | Interest expense and other finance charges | | (24) | | | (30) | | | 6 | | Interest expense and other finance charges | | | (21) | | | (24) | | | 3 | |
| Other expense, net | Other expense, net | | (1) | | | (4) | | | 3 | | Other expense, net | | | — | | | (1) | | | 1 | |
Income from Continuing Operations Before Income Taxes | | 193 | | | 166 | | | 27 | | |
Income Before Income Taxes | | Income Before Income Taxes | | | 748 | | | 193 | | | 555 | |
Income tax expense | Income tax expense | | 42 | | | 35 | | | (7) | | Income tax expense | | | 194 | | | 42 | | | (152) | |
Income From Continuing Operations | | 151 | | | 131 | | | 20 | | |
Loss from Discontinued Operations (net of tax benefit of $-0- and $11, respectively) | | — | | | (64) | | | 64 | | |
| Net Income | Net Income | | $ | 151 | | | $ | 67 | | | 84 | | Net Income | | | $ | 554 | | | $ | 151 | | | $ | 403 | |
Throughput (in Bcf): | Throughput (in Bcf): | | | | | | Throughput (in Bcf): | | | | | | | |
Residential | Residential | | 93 | | 74 | | 26 | % | Residential | | | 86 | | 93 | | (8) | % |
Commercial and Industrial | Commercial and Industrial | | 87 | | 90 | | (3) | % | Commercial and Industrial | | | 78 | | 87 | | (10) | % |
Total | Total | | 180 | | 164 | | 10 | % | Total | | | 164 | | 180 | | (9) | % |
Weather (percentage of 10-year average for service area): | Weather (percentage of 10-year average for service area): | | | | | | Weather (percentage of 10-year average for service area): | | | | | | |
Heating degree days | Heating degree days | | 102 | % | | 86 | % | | 16 | % | Heating degree days | | | 117 | % | | 102 | % | | 15 | % |
Number of metered customers at end of period: | Number of metered customers at end of period: | | | Number of metered customers at end of period: | | |
Residential | Residential | | 3,362,902 | | 3,299,011 | | 2 | % | Residential | | | 2,934,085 | | 3,362,902 | | (13) | % |
Commercial and Industrial | Commercial and Industrial | | 261,944 | | 261,120 | | — | % | Commercial and Industrial | | | 207,348 | | 261,944 | | (21) | % |
Total | Total | | 3,624,846 | | 3,560,131 | | 2 | % | Total | | | 3,141,433 | | 3,624,846 | | (13) | % |
(1)Includes Utility natural gas and Non-utility cost of revenues, including natural gas.
The following table provides variance explanations for the three months ended March 31, 20212022 compared to three months ended March 31, 20202021 by major income statement caption for CERC:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) | | |
Revenues less Cost of revenues | | | | |
Weather and usage, excluding impacts from COVID-19 | | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | 17 (86) | |
| | | | |
Customer growth | | | | 5 | |
Gross receipts tax, offset in taxes other than income taxes3 | | | | 5 | |
Energy efficiency, offset in operation and maintenance | | | | 4 | |
Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19 | | | | (1) | |
Refund of protected and unprotected EDIT, offset in income tax expense | | | | (2) | |
Impacts of COVID-19, including usage and other miscellaneous charges4 | | | |
(3)Energy efficiency, offset in operation and maintenance | | 5 | | | |
Gross receipts tax, offset in taxes other than income taxes | | 6 | | | |
| | | | |
Weather and usage | | 7 | | | |
Non-volumetric and miscellaneous revenue | | 13 | | | |
Customer rates and impact of the change in rate design, exclusive of the TCJA impact | | 23 | | (6) | |
Total | | | | $ | 19 (25) | | | |
Operation and maintenance | | | | |
Other operatingNine days in 2022 versus three months in 2021 for Arkansas and maintenance expense and support servicesOklahoma Natural Gas businesses due to sale | | | | $ | 6 | |
Merger related expenses, primarily severance and technology30 | | | | 2 | |
Materials and supplies | | | | 2 | |
Contracted services | | | | 2 | |
Labor and benefits | | | | 1 | |
Bad Debt(1) | | | | 1 | |
Insurance | | | | 1 | |
Energy efficiency, offset in revenues less cost of revenues | | | | (4)(5) | |
| | | | |
TotalOther operating and maintenance expense, including materials and supplies and insurance | | | | $ | 11 | |
Depreciation and amortization(13) | | | | |
Incremental capital projects placed in service | | | | $ | (6) | |
Total | | | | $ | (6) | |
Taxes other than income taxes | | | | |
Incremental capital projects placed in service | | | | $ | (1) | |
Gross receipts tax, offset in revenues less cost of revenues | | | | (5) | |
Total | | | | $ | (6) | |
Interest expense and other finance charges | | | | |
Reduced interest rates on outstanding borrowings, partially offset by incremental borrowings for capital expenditures | | | | $ | 6 | |
Total | | | | $ | 6 | |
| | | | |
| | | | |
| | | | |
Other expense, netTotal | | $ | 11 | | | |
Depreciation and amortization | | | | |
ReductionNine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to non-service benefit costsale | | | | $ | 2 | |
Money pool investments with CenterPoint Energy interest income15 | | | |
1 Incremental capital projects placed in service | | (7) | | | |
| | | | |
Total | | $ | 8 | | | |
Taxes other than income taxes | | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | 7 | | | |
Incremental capital projects placed in service | | (1) | | | |
Gross receipts tax, offset in revenues less cost of revenues | | (6) | | | |
Total | | $ | — | | | |
Gain on Sale | | | | |
Net gain on sale of Arkansas and Oklahoma Natural Gas businesses | | $ | 557 | | | |
Total | | $ | 557 | | | |
Interest expense and other finance charges | | | | |
Nine days in 2022 versus three months in 2021 for Arkansas and Oklahoma Natural Gas businesses due to sale | | $ | 3 | | | |
Total | | $ | 3 | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate per period, see Note 1312 to the Interim Condensed Financial Statements.
CERTAIN FACTORS AFFECTING FUTURE EARNINGS
For information on other developments, factors and trends that may have an impact on the 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 and “Risk Factors” in Item 1A of Part I of the Registrants’ combined 20202021 Form 10-K, in Item 1A of Part II of this combined Form 10-Q 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 three months ended March 31, 20212022 and 2020:2021:
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
Cash provided by (used in): | Cash provided by (used in): | | Cash provided by (used in): | |
Operating activities | Operating activities | $ | (1,681) | | | $ | 47 | | | $ | (1,787) | | | $ | 662 | | | $ | 103 | | | $ | 381 | | Operating activities | $ | 580 | | | $ | 73 | | | $ | 347 | | | $ | (1,681) | | | $ | 47 | | | $ | (1,787) | |
Investing activities | Investing activities | (604) | | | (982) | | | (131) | | | (654) | | | 192 | | | (177) | | Investing activities | 1,934 | | | (848) | | | 1,860 | | | (604) | | | (982) | | | (131) | |
Financing activities | Financing activities | 2,285 | | | 940 | | | 1,918 | | | (32) | | | (315) | | | (205) | | Financing activities | (2,621) | | | 664 | | | (2,211) | | | 2,285 | | | 940 | | | 1,918 | |
Operating Activities. The following items contributed to increased (decreased) net cash provided by operating activities for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020:2021:
| | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
Changes in net income after adjusting for non-cash items | Changes in net income after adjusting for non-cash items | $ | 1,616 | | | $ | 28 | | | $ | (29) | | Changes in net income after adjusting for non-cash items | $ | (248) | | | $ | 43 | | | $ | (7) | |
Changes in working capital | Changes in working capital | (57) | | | (25) | | | (51) | | Changes in working capital | (26) | | | 3 | | | (56) | |
Increase in regulatory assets (1) | (2,270) | | | (52) | | | (2,075) | | |
Change in net regulatory assets and liabilities (1) | | Change in net regulatory assets and liabilities (1) | 2,432 | | | (12) | | | 2,190 | |
Change in equity in earnings of unconsolidated affiliates(2) | Change in equity in earnings of unconsolidated affiliates(2) | (1,583) | | | — | | | — | | Change in equity in earnings of unconsolidated affiliates(2) | 108 | | | — | | | — | |
Change in distributions from unconsolidated affiliates (2) | Change in distributions from unconsolidated affiliates (2) | (31) | | | — | | | — | | Change in distributions from unconsolidated affiliates (2) | (39) | | | — | | | — | |
| Higher pension contribution | (6) | | | — | | | — | | |
Lower pension contribution | | Lower pension contribution | 6 | | | — | | | — | |
Other | Other | (12) | | | (7) | | | (13) | | Other | 28 | | | (8) | | | 7 | |
| | $ | (2,343) | | | $ | (56) | | | $ | (2,168) | | | $ | 2,261 | | | $ | 26 | | | $ | 2,134 | |
|
(1)The increasechange in net regulatory assets and liabilities at CenterPoint Energy and CERC is primarily due to the incurredextraordinary natural gas costs associated with the February 2021 Winter Storm Event. See Note 6 to the Interim Condensed Financial Statements for more information on the February 2021 Winter Storm Event.
(2)This changeIn September 2021, CenterPoint Energy’s equity investment in Enable met the held for sale criteria and is partially offset byreflected as discontinued operations on CenterPoint Energy’s Condensed Statements of Consolidated Income. For further information, see Note 3 to the change in distributions from Enable in excess of cumulative earnings in investing activities noted in the table below.Interim Condensed Financial Statements.
Investing Activities. The following items contributed to (increased) decreased net cash used in investing activities for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020:2021:
| | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
| Proceeds from the sale of equity securities | | Proceeds from the sale of equity securities | $ | 702 | | | $ | — | | | $ | — | |
| Capital expenditures | Capital expenditures | $ | 70 | | | $ | (28) | | | $ | 43 | | Capital expenditures | (252) | | | (177) | | | (64) | |
Net change in notes receivable from affiliated companies | Net change in notes receivable from affiliated companies | — | | | (1,146) | | | — | | Net change in notes receivable from affiliated companies | — | | | 311 | | | — | |
Change in distributions from Enable in excess of cumulative earnings | (7) | | | — | | | — | | |
| Proceeds from divestitures | | Proceeds from divestitures | 2,060 | | | — | | | 2,060 | |
| Other | Other | (13) | | | — | | | 3 | | Other | 28 | | | — | | | (5) | |
| | $ | 50 | | | $ | (1,174) | | | $ | 46 | | | $ | 2,538 | | | $ | 134 | | | $ | 1,991 | |
Financing Activities. The following items contributed to (increased) decreased net cash used in financing activities for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020:2021:
| | | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) | | (in millions) |
Net changes in commercial paper outstanding | Net changes in commercial paper outstanding | $ | 866 | | | $ | — | | | $ | 398 | | Net changes in commercial paper outstanding | $ | (1,979) | | | $ | — | | | $ | (1,002) | |
| Net changes in long-term debt outstanding, excluding commercial paper | Net changes in long-term debt outstanding, excluding commercial paper | 2,470 | | | 1,021 | | | 1,699 | | Net changes in long-term debt outstanding, excluding commercial paper | (2,728) | | | (204) | | | (2,124) | |
Net changes in long-term revolving credit facilities | (1,050) | | | — | | | — | | |
Net changes in debt issuance costs | (20) | | | (10) | | | (6) | | |
| Decreased payment of Common Stock dividends | 57 | | | — | | | — | | |
Increased payment of preferred stock dividends | (6) | | | — | | | — | | |
Net changes in debt issuance costs | | Net changes in debt issuance costs | 12 | | | 2 | | | 6 | |
Net changes in short-term borrowings | | Net changes in short-term borrowings | (43) | | | — | | | (43) | |
| Payment of obligation for finance lease | | Payment of obligation for finance lease | (171) | | | (171) | | | — | |
Increased payment of common stock dividends | | Increased payment of common stock dividends | (19) | | | — | | | — | |
Decreased payment of preferred stock dividends | | Decreased payment of preferred stock dividends | 24 | | | — | | | — | |
Net change in notes payable from affiliated companies | Net change in notes payable from affiliated companies | — | | | (141) | | | — | | Net change in notes payable from affiliated companies | — | | | (504) | | | (224) | |
| Contribution from parent | | Contribution from parent | — | | | 637 | | | — | |
Dividend to parent | Dividend to parent | — | | | 385 | | | 32 | | Dividend to parent | — | | | (37) | | | (743) | |
| Other | | Other | (2) | | | 1 | | | 1 | |
| | | $ | (4,906) | | | $ | (276) | | | $ | (4,129) | |
| $ | 2,317 | | | $ | 1,255 | | | $ | 2,123 | | |
Future Sources and Uses of Cash
The liquidity and capital requirements of the Registrants are affected primarily by results of operations, capital expenditures, debt service requirements, tax payments, working capital needs and various regulatory actions. Capital expenditures are expected to be used for investment in infrastructure. These capital expenditures are anticipated to maintain reliability and safety, increase resiliency and expand our systems through value-added projects. In addition to dividend payments on CenterPoint Energy’s Series A Preferred Stock Series B Preferred Stock, Series C Preferred Stock and Common Stock, and in addition to interest payments on debt, the Registrants’ principal anticipated cash requirements for the remaining nine months of 20212022 include the following:
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| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
Estimated capital expenditures | | $ | 2,778 | | | $ | 1,365 | | | $ | 866 | |
Scheduled principal payments on Securitization Bonds | | 174 | | | 174 | | | — | |
Minimum contributions to pension plans and other post-retirement plans | | 70 | | | 1 | | | 3 | |
Maturing CenterPoint Energy term loans | | 700 | | | — | | | — | |
Maturing CenterPoint Energy and VUHI senior notes | | 555 | | | — | | | — | |
Maturing Houston Electric general mortgage bonds | | 300 | | | 300 | | | — | |
February 2021 Winter Storm Event. In February 2021, portions of the United States experienced an extreme and unprecedented winter weather event resulting in corresponding electricity generation shortages, including in Texas, and natural gas shortages and increased wholesale prices of natural gas in the United States. As a result of this weather event, the governors of Texas, Oklahoma and Louisiana declared states of either disaster or emergencies in their respective states. Subsequently, President Biden also approved major disaster declarations for all or parts of Texas, Oklahoma and Louisiana.
As a result of the February 2021 Winter Storm Event, from February 12, 2021 to February 22, 2021, management estimates CenterPoint Energy spent approximately an incremental $2.2 billion more on natural gas supplies (inclusive of an incremental $2.1 billion more spent by CERC on natural gas supplies). These amounts are preliminary estimates as of April 29, 2021 and remain subject to final settlement. While CenterPoint Energy and CERC will seek to recover the increased costs from its customers (although timing of recovery is uncertain), in the interim, CERC has issued additional external debt financing to pay for such natural gas working capital. For further details, see Note 12 to the Interim Condensed Financial Statements. The proceeds from the debt financing, along with existing sources of liquidity, provide CERC with sufficient capital to address the settlement of natural gas purchases, including the associated upstream supply charges, at the end of March 2021. Any additional external debt financing and/or partial or delayed recovery may negatively impact CenterPoint Energy’s or CERC’s credit metrics, and may lead to a downgrade of CenterPoint Energy’s or CERC’s credit rating.
Although CenterPoint Energy’s and CERC’s excess costs from the increase in natural gas prices are subject to available natural gas recovery mechanisms in their jurisdictions (although timing of recovery is uncertain), until such amounts are
ultimately recovered from customers, CenterPoint Energy and CERC will continue to incur increased finance-related costs, resulting in a significant use of cash. See “— Regulatory Matters — February 2021 Winter Storm Event” below. | | | | | | | | | | | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
Estimated capital expenditures | | $ | 2,986 | | | $ | 1,475 | | | $ | 1,182 | |
Scheduled principal payments on Securitization Bonds | | 182 | | | 182 | | | — | |
Minimum contributions to pension plans and other post-retirement plans | | 11 | | | 1 | | | 3 | |
Finance lease for mobile generation | | 347 | | | 347 | | | — | |
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The Registrants expect that anticipated cash needs for the remaining nine months of 20212022 will be met with borrowings under their credit facilities, proceeds from the issuance of long-term debt, term loans, or common stock, anticipated cash flows from operations, and, with respect to CenterPoint Energy and CERC, proceeds from commercial paper, with respect to CenterPoint Energy, distributions from Enable until the closing of the Enable Merger expected in the second half of 2021, including any proceeds therefrom, distributions from Energy Transfer or proceeds from dispositions of Energy Transfer common units or Energy Transfer Series G Preferred Units after the expected closing of the Enable Merger, and, with respect to CERC, proceeds from any potential asset sales, including the announced sale of our Natural Gas businesses in Arkansas and Oklahoma, which is expected to close by the end of 2021, subject to satisfaction of customary closing conditions.paper. Discretionary financing or refinancing may result in the issuance of equity securities of CenterPoint Energy or debt securities of the Registrants in the capital markets or the arrangement of additional credit facilities 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 on acceptable terms. For further information about the Enable Merger and the announced sale of our Arkansas and Oklahoma Natural Gas businesses, see Notes 9 and 20, respectively, to the Interim Condensed Financial Statements.
Off-Balance Sheet Arrangements
Other than Houston Electric’s general mortgage bonds issued as collateral for tax-exempt long-term debt of CenterPoint Energy as discussed in Note 12,11 and guarantees as discussed in Note 14(b)13(b) to the Interim Condensed Financial Statements, we have no off-balance sheet arrangements.
Regulatory Matters
COVID-19 Regulatory MattersFebruary 2021 Winter Storm Event
For further information about COVID-19 regulatory matters,the February 2021 Winter Storm Event, see Note 6 to the Interim Condensed Financial Statements.
February 2021 Winter Storm Event
The Texas Legislature conducted in late February and March initial hearings on the February 2021 Winter Storm Event. Immediately after the February 2021 Winter Storm Event, five unaffiliated directors of the ERCOT Board resigned. Three ERCOT market segment directors have also resigned and their replacements were appointed. Presently, the Texas legislature is considering legislation that would require unaffiliated directors of ERCOT to be Texas residents. On March 3, 2021, the ERCOT Board terminated the employment agreement with the ERCOT President and CEO with 60 days’ notice. On April 27, 2021, the ERCOT Board announced a new interim President and CEO. Following the February 2021 Winter Storm Event, all three PUCT commissioners have also either resigned or announced their resignation. To date, Governor Abbott has announced two new PUCT commissioners and both have been confirmed by the Texas Senate. Under consideration at the Texas Legislature is legislation requiring the number of appointed PUCT commissioners to be increased from three to five. For the two additional PUCT commissioner appointees, one will be appointed by the Texas Lieutenant Governor and one will be appointed by the Texas Speaker of the House.
On February 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility to record in a regulatory asset the extraordinary expenses associated with the February 2021 Winter Storm Event, including, but not limited to, natural gas cost and other costs related to the procurement and transportation of natural gas supply, subject to recovery in future proceedings. In addition, CenterPoint Energy’s and CERC’s Natural Gas utilities in jurisdictions outside of Texas deferred natural gas cost under existing recovery mechanisms and have either sought or intend to seek recovery of the increased cost of natural gas, which will be subject to customary regulatory prudency reviews that may impact the amounts recovered. Amounts for the under recovery of natural gas costs are reflected in regulatory assets and are probable of recovery; however, the timing of recovery for each jurisdiction for the estimated incremental gas cost attributable to the February 2021 Winter Storm Event within each regulatory asset is uncertain.
The table below presents the estimated incremental natural gas costs included in regulatory assets as of March 31, 2021 by state as a result of the February 2021 Winter Storm Event and CenterPoint Energy’s and CERC’s requested recovery status as of April 29, 2021:
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State | | Recovery Status | | Legislative Activity | | Estimated Incremental Gas Cost (in millions) |
Arkansas | | Filed application on April 16, 2021 to recover over a five-year period beginning May 1, 2021. On April 28, 2021, APSC approved CERC to begin recovery effective May 2021 at a customer deposit interest rate of 0.8% over a five year period, subject to a true-up after APSC determines appropriate allocation, length of recovery, and carrying charge. A hearing is scheduled in August 2021. | | A securitization bill has been passed and recovery via the securitization is beyond 2021. | | $ | 343 | |
Louisiana | | Filed application on April 16, 2021 for North Louisiana to recover over a three-year period beginning May 1, 2021. LPSC approved on April 22, 2021. | | None. | | 75 |
Minnesota | | Filed application on March 15, 2021 requesting to recover over a two-year period beginning May 1, 2021. | | None. | | 470 |
Mississippi | | Recovery expected to begin September 2021 through normal gas cost recovery. | | None. | | 3 |
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Oklahoma | | Filed application on February 25, 2021 to defer incremental gas costs is pending at the OCC. | | A securitization bill has passed in the Oklahoma legislature. | | 79 |
Texas | | Cost currently deferred to a regulatory asset pending recovery method. | | A securitization bill is progressing through the Texas legislature. Approval of the bill could occur as early as the second quarter of 2021 which could allow recovery by the first quarter of 2022. | | 1,105 | |
| | | | Total CERC | | $ | 2,075 | |
Indiana North | | Recovery expected to begin September 2021 through normal gas recovery. | | None. | | 96 |
Indiana South | | Recovery expected to begin August 2021 through normal gas recovery. | | None. | | 18 |
| | | | Total CenterPoint Energy | | $ | 2,189 | |
For additional information about February 2021 Winter Storm Event regulatory matters, see Note 6 to the Interim Condensed Financial Statements.
Indiana Electric CPCN (CenterPoint Energy)
On February 9, 2021, Indiana Electric entered into a BTA with a subsidiary of Capital Dynamics. Under the agreement, Capital Dynamics, with its partner Tenaska, willcontracted to build a 300 MW solar array in Posey County, Indiana through a special purpose entity, Posey Solar. Upon completion of construction, which is projected to be at the end of 2023, and subject to approval by the IURC, Indiana Electric will acquire Posey Solar and its solar array assets for a fixed purchase price. On February 23, 2021, Indiana Electric filed a CPCN with the IURC seeking approval to purchase the project. Indiana Electric is also seekingsought approval for a 100 MW solar PPA with Clenera LLC in Warrick County, Indiana. The request accountsaccounted 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. A hearing was conducted on June 21, 2021. On October 27, 2021, the IURC issued an order approving the CPCN, authorizing Indiana Electric to purchase the Posey solar project through a BTA and approved recovery of costs via a levelized rate over the anticipated 35-year life. The IURC also approved the Warrick County solar PPA but denied the request to preemptively offset imputed debt in the PPA cost. Due to rising cost for the project, caused in part by supply chain issues in the energy industry, the rising costs of commodities and community feedback, we, along with Capital Dynamics, announced plans in January, 2022 to downsize the Posey solar project to approximately 200 MW. The Posey solar project is scheduledexpected to beginbe in service by 2023. Indiana Electric collaboratively agreed to the scope change and is currently working through contract negotiations, contingent on further IURC review and approval.
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. Indiana Electric has also requested depreciation expense and post in-service carrying costs to be deferred in a decisionregulatory asset until the date Indiana South’s base rates include a return on and recovery of depreciation expense on the CPCN is expectedfacility. A hearing was conducted on January 26 through 28, 2022. The estimated $334 million turbine facility would 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. A new approximately 23.5 mile pipeline requiring FERC approval would also be constructed and operated by Texas Gas Transmission, LLC to supply natural gas to the turbine facility. Construction of the turbines will begin following receipt of necessary regulatory approvals by the fourthIURC and FERC, which are anticipated in the second half of 2022 and first quarter of 2021.2023, respectively. The turbines are targeted to be operational in first quarter of 2025. Subject to IURC approval, recovery of the proposed natural gas combustion turbines and regulatory asset will be requested in the next Indiana Electric rate case expected in 2023.
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 LLC, which is developing a solar project in Vermillion County, Indiana, and 150 MW of solar power, under a 20-year PPA, from Origis Energy USA Inc., which is developing a solar project in Knox County, Indiana. Subject to necessary approvals, both solar arrays are expected to be in service by 2023. For more information regarding uncertainties related to our solar projects, see Item 1A of Part II of this combined Form 10-Q and “ —Solar Panel Issues” below.
Indiana Electric Securitization of Planned Generation Retirements (CenterPoint Energy)
The State of Indiana has enacted legislation, Senate Bill 386, that would enable CenterPoint Energy to request approval from the IURC to securitize the remaining book value and removal costs associated with generating facilities to be retired in the
next twenty-four months. The Governor of Indiana signed the legislation on April 19, 2021. CenterPoint Energy intends to seek securitization in the futuresecond quarter of 2022 to make a filing with the IURC to securitize qualified costs associated with its planned retirements of coal generation retirements.facilities.
Space City Solar Transmission Interconnection ProjectSubsidiary Restructuring
In July 2021, Indiana North and SIGECO filed petitions with the IURC for the approval of a new financial services agreement and the confirmation of Indiana North’s financing authority, and final orders were issued by the IURC on December 28, 2021. VEDO filed a similar application with the PUCO in September 2021 and the PUCO issued an order on January 26, 2022 adopting recommendations by PUCO staff. CenterPoint Energy is evaluating the transfer of Indiana North and VEDO from VUHI to CERC in order to better align its organizational structure with management and financial reporting. Both the IURC and PUCO have approved the transaction. In order to effect the restructuring, VUHI has approached certain of its debt holders with an offer to exchange existing VUHI debt for CERC debt. The orders allow the reissuance of existing debt of Indiana North and VEDO to CERC, to continue to amortize existing issuance expenses and discounts, and to treat any potential exchange fees as discounts to be amortized over the life of the debt.
Texas Legislation (CenterPoint Energy and Houston Electric)
Houston Electric continues to review the effects of the legislation and is working with the PUCT regarding proposed rulemakings and pursuing implementation of these items where applicable. For example, in 2021 Houston Electric entered into two leases for temporary emergency electric energy (mobile generation): (1) a temporary short-term lease of 220 MW as of December 31, 2021 and reduced to 92 MW as of March 31, 2022 as assets were delivered under the long-term lease agreement and (2) a 7.5 year lease for up to 505 MW of mobile generation of which 253 MW and 125 MW was delivered as of March 31, 2022 and December 31, 2021. On December 17, 2020,April 5, 2022, CenterPoint Energy and Houston Electric filed a certificate of convenience and necessity applicationits DCRF with the PUCT seeking recovery of deferred costs and the applicable return as of December 31, 2021 under these lease agreements, approximating $200 million. The annual revenue increase requested for approval to build a 345 kV transmission linethese lease agreements is approximately $60 million. These mobile generation leases will support resiliency in Wharton County, Texas connectingmajor weather events and were deployed during the Hillje substation on Houston Electric’s transmission systemrestoration process for Hurricane Nicholas. For additional information, see Note 19 to the planned 610 MW Space City Solar Generation facility being developed by third-party developer EDF Renewables. Depending on the route ultimately approved by the PUCT, the estimated capital cost of the transmission line project ranges from approximately $23 million to $71 million. The actual capital costs of the project will depend on actual land acquisition costs, construction costs, and other factors inInterim Condensed Financial Statements.
In addition to route selection. In January 2021,these measures taken by Houston Electric executedto support system preparedness and reliability, in February 2022, the City of Houston launched the first-of-its-kind long-term strategic power resilience initiative called “Resilient Now.” In a Standard Generation Interconnection Agreementjoint effort, Houston Electric is working with the City of Houston to develop the Master Energy Plan for the Space City Solar Generation facility with EDF Renewables, which also provided securitycity to help the community thrive through economic changes, digital transformation, and advancing environmental goals for the transmission line project in the formbenefit of a $23 million letter of credit, the amount of which is subject to change depending on the route approved. A hearing at the PUCT is scheduledits communities. The Master Energy Plan could develop into capital opportunities for June 2021. The PUCT is required to issue its final decision on the transmission line project no later than December 2021. Subject to PUCT approval, Houston Electric, expectsincluding relating to complete constructioninfrastructure modernization, residential weatherization, and energization of the transmission line by June 2022.investments around electric vehicles infrastructure.
Minnesota Base Rate CaseCases (CenterPoint Energy and CERC)
On October 28, 2019,November 1, 2021, CERC filed a general rate case with the MPUC seeking approval for a revenue increase of approximately $62$67 million with a projected test year ended December 31, 2020.2022. The revenue increase is based upon a requested ROE of 10.15%10.2% and an overall after-tax rate of return of 7.41%7.06% on a total rate base of approximately $1,307 million.$1.8 billion. CERC requested that an interim rate increase of approximately $52 million be implemented January 1, 2022 while the rate case is litigated. An alternative request was also filed on November 1, 2021. The alternative request proposed a final rate increase of $40 million that would be implemented in the rate case on January 1, 2022, and offered: an increase in rates for plant investment only using the overall rate of return approved in the prior rate case, an asymmetrical capital true-up, extension of the recovery of gas costs incurred to serve customers in February 2021 from the then current 27 month mechanism to 63 months, an income tax rider, continuation of the existing property tax rider and continued deferral of COVID-19 incremental costs along with additional adjustments. On December 30, 2021, the MPUC issued a written order denying the alternative request but extended the amortization period for extraordinary gas costs to 63-months beginning on January 1, 2022. The MPUC also issued written orders on the general rate case filing which (1) accepted CERC’s rate-increase application with a time for final determination of September 1, 2022, (2) authorized the implementation of interim rates reflecting $53 million for gas used on and after January 1, 2020. In September 2020,2022, of $42 million based on an overall rate of return of 6.46%, and (3) referred the case to the Office of Administrative Hearings for a settlement that addressed all issues except the Inclusive Financing/Tariffedcontested case proceeding. On Bill Financing (TOB) proposal by the CityMarch 14, 2022, an Offer of Minneapolis was signed by a majority of all parties andSettlement was filed with the Office of Administrative Hearings. A stipulation betweenHearings which would resolve all issues in the Cityrate case. The Settlement provides for a general revenue increase of Minneapolis$48.5 million and CERC addressing the TOB proposal was filed on September 2, 2020. The settlement reflects a $38.5 million increase and was based on an overall after-tax rate of return of 6.86%6.65% and does not specify individual cost of capital components. On March 1, 2021,is currently subject to review and approval by the MPUC issued a written final order approving the $38.5 million increase and rejected the TOB stipulation. The order also required CERC and the City of Minneapolis to submit a future filing to allow for further development of a potential TOB pilot program and additional or expanded low-income conservation improvement programs. A compliance filing was submitted on March 12, 2021 proposing a finalMPUC. Final rate implementation on June 1stis expected before the end of 2022.
Minnesota Legislation (CenterPoint Energy and CERC)
The Natural Gas Innovation Act was passed by the interim refund occurringMinnesota legislature in June 2021 contingent on finalwith 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. Specifically, the Natural Gas Innovation Act allows a natural gas utility to submit an innovation plan for approval by the MPUC approval.which could propose the use of renewable energy resources and innovative technologies such as:
Indiana South Base Rate Case•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).
CERC expects to submit its first innovation plan to the MPUC in 2022. 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.
Solar Panel Issues (CenterPoint Energy)
On October 30, 2020,The DOC recently announced the commencement of an investigation into circumvention of anti-dumping and as subsequently amended, Indiana South filedcountervailing duties by manufacturers of solar cells and panels located in Cambodia, Malaysia, Thailand, and Vietnam. If an affirmative determination is made by the DOC, it could impose duties with both forward-looking and retroactive application. The DOC is expected to present its base rate case with the IURC seeking approval for a revenue increase of approximately $29 million. This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana South’s capital expenditure program, approved in 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 5.99% on total rate base of approximately $469 million. Indiana South has utilized a projected test year, reflecting its 2021 budget as the basis for the revenue increase requested, and proposes to implement rates in two phases. The first phase of rate implementation will occur aspreliminary findings of the dateinvestigation in August or September of an order in2022, but a final determination is not expected to be issued until January 2023 (which deadline can be extended by the DOC to April 1, 2023). CenterPoint Energy’s current and future solar projects may be significantly impacted by this proceeding, expected in September 2021,investigation through project delays, cancellations and increased costs to the second phase of rate implementation will occur at the completion of the test year, as of December 31, 2021. On April 16, 2021, Indiana South announced that an agreement in principle has been reached with certain parties. On April 23, 2021, a Stipulationprojects. For more information regarding potential delays, cancellations and Settlement Agreement was filed resolving all issuessupply chain disruptions, see “Item 1A. Risk Factors” in the case. The settlement recommended a revenue increaseRegistrants’ 2021 Form 10-K and Item 1A of $20.5 million based on a 9.7% ROE and an overall after-tax ratePart II of return of 5.78% on total rate base of approximately $469 million. A settlement hearing is scheduled for June 24, 2021. A final order is expected in the second half of 2021. Under Indiana statutory requirements, the IURC has 300 days from the date of the filing of Indiana South’s case-in-chief to issue an order.this combined Form 10-Q.
Indiana North Base Rate Case (CenterPoint Energy)
On December 18, 2020, Indiana North filed its base rate case with the IURC seeking approval for a revenue increase of approximately $21 million. This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana North’s capital expenditure program, approved in 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 6.32% on total rate base of approximately $1,611 million. Indiana North has utilized a projected test year, reflecting its 2021 budget as the basis for the revenue increase requested, and proposes to implement rates in two phases. The first phase of rate implementation will occur as of the date of an order in this proceeding, expected in October 2021, and the second phase of rate implementation will occur at the completion of the test year, as of December 31, 2021. Hearings at the IURC are currently scheduled to occur in May and
June 2021. Under Indiana statutory requirements, the IURC has a minimum of 300 days and maximum of 360 days from the date of the filing of Indiana North’s case-in-chief to issue an order.
Rate Change Applications
The Registrants are routinely involved in rate change applications before state regulatory authorities. Those applications include general rate cases, where the entire cost of service of the utility is assessed and reset. In addition, Houston Electric is periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS and DCRF) and annually files to adjust its EECRF. CERC is periodically involved in proceedings to adjust its capital tracking mechanisms in Texas (GRIP), its cost of service adjustments in Arkansas, Louisiana and Mississippi (RSP and Oklahoma (FRP, RSP, RRA, and PBRC, respectively), its decoupling mechanism in Minnesota, and its energy efficiency cost trackers in Arkansas, Minnesota and Mississippi and Oklahoma (EECR, CIP, EECR(CIP and EECR, respectively). CenterPoint Energy is periodically involved in proceedings to adjust its capital tracking mechanisms in Indiana (CSIA for gas and TDSIC for electric) and Ohio (DRR), its decoupling mechanism in Indiana (SRC for gas), and its energy efficiency cost trackers in Indiana (EEFC for gas and DSMA for electric) and Ohio (EEFR). The table below reflects significant applications pending or completed since the Registrants’ combined 20202021 Form 10-K was filed with the SEC.SEC through April 29, 2022.
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CenterPoint Energy and Houston Electric (PUCT) |
TCOSDCRF (1)
| | 9 | | March 2021 | | April 2021146 | | April 2021 | | Based on net change in invested capital of $80 million. |
CenterPoint Energy and CERC - Arkansas (APSC) |
FRP (1)
| | 13 | | April 2021 | | TBD | | TBD | | Based on ROE of 9.50% with 50 basis point (+/-) earnings band. Revenue increase of $13 million based on prior test year true-up earned return on equity of 11.43% combined with projected test year earned return on equity of 3.59%. The initial term of Rider FRP will terminate on September 10, 2021; a request to extend the Rider FRP term for an additional five years was filed on May 5, 2021. |
CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) |
GRIP (1)
| | 28 | | March 20212022 | | TBD | | TBD | | Based on net change in distribution invested capital since its last base rate proceeding of over $1 billion for the period January 1, 2019 through December 31, 2021. In addition, request includes approximately $200 million in mobile generation facilities during the calendar year ending December 31, 2021. The requested overall revenue increase is $146 million with a proposed effective date of September 1, 2022. |
TCOS | | 64 | | February 2022 | | April 2022 | | April 2022 | | Based on net change of invested capital of $197$574 million. |
CenterPoint Energy and CERC - Minnesota (MPUC) | | | | | | | | | | |
Decoupling | | N/A | | September 2020 | | September 2020 | | March 2021 | | Represents under-recovery of approximately $2 million recorded for and during the period July 1, 2019 through June 30, 2020, including approximately $1 million related to the period July 1, 2018 through June 30, 2019. |
Rate Case (1)
| | 39 | | October 2019 | | June 2021 | | TBD | | See discussion above under Minnesota Base Rate Case.
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| | 10 | | May 2021 | | TBD | | TBD | | CIP Financial Incentive based on 2020 activity. |
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CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) |
GRIP (1) | | 34 | | March 2022 | | TBD | | TBD | | Based on net change in invested capital for calendar year 2021 of $213 million. |
CenterPoint Energy and CERC - Minnesota (MPUC) |
Rate Case (1) | | 67 | | November 2021 | | TBD | | TBD | | See discussion above under Minnesota Base Rate Case. |
Decoupling | | N/A | | September 2021 | | September 2021 | | April 2022 | | Represents under-recovery of approximately $19 million recorded for and during the period July 1, 2020 through June 30, 2021, including an approximately $5 million adjustment related to the implementation of final rates from the general rate case filed in 2019. |
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CenterPoint Energy and CERC - Mississippi (MPSC) |
RRA(1) | | 43 | | April
20212022 | | TBD | | TBD | | Based on ROE of 9.81%9.568% with 100 basis point (+/-) earnings band. Revenue increase of approximately $4$3 million based on 20202021 test year adjusted earned ROE of 6.97%7.74%. |
CenterPoint Energy and CERC - Oklahoma (OCC) |
PBRC (1)
| | (1) | | March 2021 | | TBD | | TBD | | Based on ROE of 10% with 50 basis point (+/-) earnings band. Revenue credit Interim increase of approximately $1 million based on 2020 test year adjusted earned ROE of 12.42%.to be implemented May 31, 2022. |
CenterPoint Energy - Indiana South - Gas (IURC)Ohio (PUCO) |
Rate CaseDRR (1)
| | 29 | | October 2020 | | September 2021 | | TBD | | See discussion above under Indiana South Base Rate Case.
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CSIA (1)
| | (1)9 | | April
20212022 | | July 2021TBD | | TBD | | Requested an increase of $11$63 million to rate base for investments made in 2021, which reflects a $(1 million) annual decrease in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of less than $1 million annually. |
CenterPoint Energy - Indiana North - Gas (IURC) |
Rate Case (1)
| | 21 | | December 2020 | | October 2021 | | TBD | | See discussion above under Indiana North Base Rate Case.
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CSIA (1)
| | 5 | | April 2021 | | July 2021 | | TBD | | Requested an increase of $37 million to rate base, which reflects a $5$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 refunds associated with the TCJA, resulting in no change to the previous credit provided, and aA change in the total (over)/under-recovery variance of $6 million annually.$(4 million) annually is also included in rates. |
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Mechanism | | Annual Increase (Decrease) (1) (in millions) | | Filing Date | | Effective Date | | Approval Date | | Additional Information |
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CenterPoint Energy - Ohio (PUCO) |
DRR (1)
| | 9 | | April 2021 | | September 2021 | | TBD | | Requested an increase of $71 million to rate base for investments made in 2020, which reflects a $9 million annual increase in current revenues. A change in (over)/under-recovery variance of $5 million annually is also included in rates. |
CenterPoint Energy - Indiana Electric (IURC) |
TDSIC (1) | | 3 | | February 20212022 | | May 2021TBD | | TBD | | Requested an increase of $28$42 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 of less than $1 million. |
CECA (1) | | 8(2) | | February 2021 | | June 20212022 | | TBD | | Reflects an $8TBD | | Requested a decrease of less than $1 million to rate base, which reflects a $3 million annual increasedecrease in current revenues throughrevenues. The mechanism also includes a change in (over)/under-recovery variance of less than $1 million. This mechanism includes a non-traditional rate making approach related to a 50 MW universal solar array placed in service in January 2021. |
ECA(1)
| | 2 | | May 2021 | | August 2021 | | TBD | | Requested an increase of $39 million to rate base, which reflects a $2 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 included a change in (over)/under-recovery variance of less than $1 million annually. |
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(1)Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates.
CPPGreenhouse Gas Regulation and ACE RuleCompliance (CenterPoint Energy)
On August 3, 2015, the EPA released its CPP Rule,rule, which required a 32% reduction in carbon emissions from 2005 levels. The final rule was published in the Federal Register on October 23, 2015, and that action was immediately followed by litigation ultimately resulting in the U.S. Supreme Court staying implementation of the rule. On August 31, 2018,July 8, 2019, the EPA published its proposed CPP replacement rule, the ACE Rule,rule, which was finalized on July 8, 2019 and(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.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 Rulerule — 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. District Court of Appeals for the D.C. Circuit.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 that seek review of the lower court’s decision vacating the ACE rule. CenterPoint Energy is currently unable to predict whether the Biden Administration will continue its defense of the CPP or ACE Rule, or what a new replacement rule for either the ACE rule or CPP would look like. require.
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. Shortly after taking officesector and proceeded to lead negotiations at the global climate conference in January 2021, President Biden issued a series of executive orders designed to address climate change. President Biden has also signed an executive order requiring agencies to review environmental actions taken by the Trump administration, which would have included the ACE Rule, and the Biden administration has issued a memorandum to departments and agencies to refrain from proposing or issuing rules until a departmental or agency head appointed or designated by the Biden administration has reviewed and approved the rule. Reentry into the Paris Agreement and President Biden’s executive orders may result in the development of additional regulations or changes to existing regulations, and onGlasgow, Scotland. On April 22, 2021, President Biden announced a new goalgoals of 50% reduction of economy-wide GHG emissions, and 100% carbon-free electricity by 2035. On March 1, 2020,2035, which formed the basis of the U.S. commitments announced in Glasgow. In September 2021, CenterPoint Energy announced corporate carbonits new net zero emissions goals for both Scope 1 and Scope 2 emissions by 2035 as well as a goal to reduce 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 exclude emissions related to purchased power in Indiana between 2024 and 2026 as estimated. CenterPoint Energy’s Scope 3 estimates do not take into account the emissions of transport customers and emissions related to upstream extraction. These emission goals which are expected to be used to guideposition 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. In addition, the EPA has indicated that it intends to implement new regulations targeting reductions in methane emissions, which are likely to 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 leasing facilities that provide temporary emergency electric energy to aid in restoring power to distribution customers during certain widespread power outages as allowed by a new law enacted after the February 2021 Winter Storm Event, 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 new net zero emissions goals are aligned with Indiana Electric’s generation transition plan and are expected to a low carbon fleet and 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 or legislators could harm its reputation.
To address these developments, CenterPoint Energy announced its new net zero emissions goals for both Scope 1 and Scope 2 emissions by 2035. In June of 2020, Indiana Electric identified a preferred generation resource in its most recent IRP submitted to the IURC that aligns with its new net zero emissions goals and includes the replacement of 730 MWs of coal-fired generation facilities with a significant portion comprised of renewables, including solar and wind, supported by dispatchable natural gas combustion turbines, including a pipeline to serve such natural gas generation, as well as storage. 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 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 newly adopted net zero emissions goals support global efforts to reduce the impacts of climate change.
To the extent climate changes result in warmer temperatures in the Registrants’ service territories, financial results from the Biden administrationRegistrants’ 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 further reduce GHG emissionsrepair damaged facilities and restore service to customers. CenterPoint Energy’s recently announced 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, leasing facilities that provide temporary emergency electric energy to aid in restoring power to distribution customers during certain widespread power outages as allowed by a new law enacted after the February 2021 Winter Storm Event. Houston Electric transmits and distributes to customers of REPs electric power that the REPs obtain from its electric fleet.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
The Registrants may draw on their respective revolving credit facilities from time to time to provide funds used for general corporate and limited liability company purposes, including to backstop 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 the Registrants’ revolving credit facilities, please see Note 1211 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 billion as of March 31, 2021.2022. As of April 29, 2021,20, 2022, the Registrants had the following revolving credit facilities and utilization of such facilities:
| | | Amount Utilized as of April 29, 2021 | | | Amount Utilized as of April 20, 2022 | |
Registrant | Registrant | | Size of Facility | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | Termination Date | Registrant | | Size of Facility | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | Termination Date |
| | | (in millions) | | | | | | | (in millions) | | | | |
CenterPoint Energy | CenterPoint Energy | | $ | 2,400 | | | $ | — | | | $ | 11 | | | $ | 846 | | | 0.21% | | February 4, 2024 | CenterPoint Energy | | $ | 2,400 | | | $ | — | | | $ | 11 | | | $ | 443 | | | 0.70% | | February 4, 2024 |
CenterPoint Energy (1) | CenterPoint Energy (1) | | 400 | | | — | | | — | | | 192 | | | 0.18% | | February 4, 2024 | CenterPoint Energy (1) | | 400 | | | — | | | — | | | 245 | | | 0.62% | | February 4, 2024 |
| Houston Electric | Houston Electric | | 300 | | | — | | | — | | | — | | | —% | | February 4, 2024 | Houston Electric | | 300 | | | — | | | — | | | — | | | —% | | February 4, 2024 |
CERC | CERC | | 900 | | | — | | | — | | | 545 | | | 0.19% | | February 4, 2024 | CERC | | 900 | | | — | | | — | | | 96 | | | 0.60% | | February 4, 2024 |
Total | Total | | $ | 4,000 | | | $ | — | | | $ | 11 | | | $ | 1,583 | | | Total | | $ | 4,000 | | | $ | — | | | $ | 11 | | | $ | 784 | | |
(1)The credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.
Borrowings under each of the revolving credit facilities are subject to customary terms and conditions. However, there is no requirement that the borrower makes representations prior to borrowing 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 revolving credit facilities, the spread to LIBOR 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 LIBOR with possible alternative benchmarks upon certain benchmark replacement events. The borrowers are currently in compliance with the various business and financial covenants in the four revolving credit facilities.
Long-term Debt
For detailed information about the Registrants’ debt transactions in 2021,2022, see Note 1211 to the Interim Condensed Financial Statements.
Securities Registered with the SEC
On May 29, 2020, 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 shares of 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 May 29, 2023. For information related to the Registrants’ debt issuances in 2021,2022, see Note 1211 to the Interim Condensed Financial Statements.
Temporary Investments
As of April 29, 2021,20, 2022, the Registrants had no temporary investments.
Money Pool
The Registrants participate in a money pool through which they and certain 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 CenterPoint Energy’s revolving credit facility or the sale of CenterPoint 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 April 29, 2021:20, 2022:
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| Weighted Average Interest Rate | | Houston Electric | | CERC |
| | | (in millions) |
Money pool investments (borrowings) | 0.20% | | $ | 569 | | | $ | — | |
| | | | | | | | | | | | | | | | | |
| Weighted Average Interest Rate | | Houston Electric | | CERC |
| | | (in millions) |
Money pool investments (borrowings) | 0.67% | | $ | 145 | | | $ | — | |
Impact on Liquidity of a Downgrade in Credit Ratings
The interest rate on borrowings under the credit facilities is based on each respective borrower’s credit ratings. As of April 29, 2021,20, 2022, Moody’s, S&P and Fitch had assigned the following credit ratings to the borrowers:
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| | | | Moody’s | | S&P | | Fitch |
Registrant | | Borrower/Instrument | | Rating | | Outlook (1) | | Rating | | Outlook (2) | | Rating | | Outlook (3) |
CenterPoint Energy | | CenterPoint Energy Senior Unsecured Debt | | Baa2 | | Stable | | BBB | | Stable | | BBB | | Stable |
CenterPoint Energy | | Vectren Corp. Issuer Rating | | n/a | | n/a | | BBB+ | | Stable | | n/a | | n/a |
CenterPoint Energy | | VUHI Senior Unsecured Debt | | A3 | | Stable | | BBB+ | | Stable | | n/a | | n/a |
CenterPoint Energy | | Indiana Gas Senior Unsecured Debt | | 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 | | A2 | | Stable | | A | | Stable | | A | | Stable |
CERC | | CERC Corp. Senior Unsecured Debt | | A3 | | NegativeStable | | BBB+ | | Stable | | A- | | Stable |
(1)A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term.
(2)An S&P 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. The Registrants note that these credit ratings are included for informational purposes and are not recommendations to buy, sell or hold the 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 the Registrants’ credit ratings could have a material adverse impact on the Registrants’ ability to obtain short- and long-term financing, the cost of such financings and the execution of the Registrants’ commercial strategies.
A decline in credit ratings could increase borrowing costs under the Registrants’ revolving credit facilities. If the Registrants’ credit ratings had been downgraded one notch by S&P and Moody’s from the ratings that existed as of March 31, 2021,2022, the impact on the borrowing costs under the four revolving credit facilities would have been 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 the 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 CenterPoint Energy’s and CERC’s Natural Gas reportable segments.
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 might need to provide cash or other collateral of as much as $162$203 million as of March 31, 2021.2022. The amount of collateral will depend on seasonal variations in transportation levels.
ZENS and Securities Related to ZENS (CenterPoint Energy)
If CenterPoint Energy’s creditworthiness were to drop such that ZENS holders thought its 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 ZENS-Related Securities that CenterPoint Energy owns or from other sources. CenterPoint Energy owns shares of ZENS-Related Securities equal to
approximately 100% of the reference shares used to calculate its obligation to the holders of the ZENS. ZENS exchanges result in a cash outflow because tax deferrals related to the ZENS and shares of ZENS-Related Securities would typically cease when ZENS are exchanged or otherwise retired and shares of ZENS-Related Securities 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 March 31, 2021,2022, deferred taxes of approximately $490$575 million would have been payable in 2021.2022. If all the ZENS-Related Securities had been sold on March 31, 2021,2022, capital gains taxes of approximately $152$124 million would have been payable in 20212022 based on 20212022 tax rates in effect. For additional information about ZENS, see Note 1110 to the Interim Condensed Financial Statements.
Cross Defaults
Under each of CenterPoint Energy’s (including VUHI’s), Houston Electric’s and CERC’s respective revolving credit facilities, as well as under CenterPoint Energy’s term loan agreement, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $125 million by the borrower or any of their respective significant subsidiaries will cause a default under such borrower’s respective credit facility or term loan agreement. A default by CenterPoint Energy would not trigger a default under its subsidiaries’ debt instruments or revolving credit facilities.
Possible Acquisitions, Divestitures and Joint Ventures
From time to time, the 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. The 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 the 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. As announced in December 2020,September 2021, CenterPoint Energy’s business strategy incorporated the Business Review and Evaluation Committee’s recommendationsEnergy plans to increase its planned capital expenditures in its electricElectric and natural gasNatural Gas businesses to support rate base growth and sell certainmay explore asset sales, in addition to the recently completed sale of its Natural Gas businesses located in Arkansas and Oklahoma, as a means to efficiently finance a portion of such increased capital expenditures, among other recommendations. 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 of storm-related incremental natural gas costs incurred in the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement.expenditures. For further information, regarding the announced sale of our Arkansas and Oklahoma Natural Gas businesses, see Note 203 to the Interim Condensed Financial Statements.
Additionally, CenterPoint Energy’s process of evaluating and optimizing the various businesses, assets and ownership interests currently held by it considered, among other things, various plans, proposals and other strategic alternatives with respect to Enable and CenterPoint Energy’s investment in Enable, which may result in the disposition of a portion or all of its ownership interest in Enable. In February 2021, CenterPoint Energy announced its support of the Enable Merger, which is expected to close in the second half of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance. CenterPoint Energy may not realize any or all of the anticipated strategic, financial, operational or other benefits from the Enable Merger, if completed, or from any disposition or reduction of its anticipated resulting investment in Energy Transfer. There can be no assurances that any disposal of Energy Transfer common units or Energy Transfer Series G Preferred Units will be completed. Any disposal of such securities may involve significant costs and expenses, including in connection with any public offering, a significant underwriting discount. For information regarding the Enable Merger, see Note 9 to the Interim Condensed Financial Statements.
Enable Midstream Partners (CenterPoint Energy)
CenterPoint Energy receives quarterly cash distributions from Enable on its common units and Enable Series A Preferred Units. A reduction in the cash distributions CenterPoint Energy receives from Enable could significantly impact CenterPoint Energy’s liquidity. For additional information about cash distributions from Enable, see Notes 9 and 20 to the Interim Condensed Financial Statements.
Hedging of Interest Expense for Future Debt Issuances
From time to time, the Registrants may enter into 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 7(a) to the Interim Condensed Financial Statements.
Weather Hedge (CenterPoint Energy and CERC)
CenterPoint Energy and CERC have historically entered into partial weather hedges for certain Natural Gas jurisdictions and electric operations’ Texas service territory to mitigate the impact of fluctuations from normal weather. CenterPoint Energy and CERC remain exposed to some weather risk as a result of the partial hedges. For more information about weather hedges, see Note 7(a) to the Interim Condensed Financial Statements.
Collection of Receivables from REPs (CenterPoint Energy and Houston Electric)
Houston Electric’s receivables from the distribution of electricity are collected from REPs that supply the electricity Houston Electric distributes to their customers. Before conducting business, a REP must register with the PUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, the February 2021 Winter Storm Event, structural problems in the market served by ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for Houston Electric’s services or could cause them to delay such payments. Houston Electric depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs could adversely affect Houston Electric’s cash flows. In the event of a REP default, Houston Electric’s tariff provides a number of remedies, including the option for Houston Electric to request that the PUCT suspend or revoke the certification of the REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. However, Houston Electric remains at risk for payments related to services provided prior to the shift to the replacement REP or the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations and claims might be made against Houston Electric involving payments it had received from such REP. If a REP were to file for bankruptcy, Houston Electric may not be successful in recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, PUCT regulations authorize utilities, such as Houston Electric, to defer bad debts resulting from defaults by REPs for recovery in future rate cases, subject to a review of reasonableness and necessity.
Other Factors that Could Affect Cash Requirements
In addition to the above factors, the Registrants’ liquidity and capital resources could also be negatively affected by:
•further reductions in the cash distributions we receive from Enable;
•cash collateral requirements that could exist in connection with certain contracts, including weather hedging arrangements, and natural gas purchases, natural gas price and natural gas storage activities of CenterPoint Energy’s and CERC’s Natural Gas reportable segment;
•acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased natural gas prices including as a result of the February 2021 Winter Storm Event, and concentration of natural gas suppliers (CenterPoint Energy and CERC);
•increased costs related to the acquisition of natural gas including as a result of the February 2021 Winter Storm Event (CenterPoint Energy and CERC);
•increases in interest expense in connection with debt refinancings and borrowings under credit facilities or term loans or the use of alternative sources of financings due to the effects of COVID-19 and the February 2021 Winter Storm Event on capital and other financial markets;financings;
•increases in commodity prices;
•various legislative or regulatory actions, including recovery of costs such as those associated with the outcomemobile generation leases;
•incremental collateral, if any, that may be required due to regulation of litigation, including litigation related to the February 2021 Winter Storm Event;derivatives (CenterPoint Energy);
•the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric, including the negative impact on such ability related to COVID-19 and the February 2021 Winter Storm Event;
•various legislative or regulatory actions;
•incremental collateral, if any, that may be required due to regulation of derivatives (CenterPoint Energy);
•slower customer payments and increased write-offs of receivables due to higher natural gas prices, changing economic conditions COVID-19 or the February 2021 Winter Storm Event (CenterPoint Energy and CERC);
•the satisfaction of any obligations pursuant to guarantees;
•contributions to pension and postretirement benefit plans;
•restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and
Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money
Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions. Additionally, certainCertain provisions in note purchase agreements relating to debt issued by VUHI have the effect of restricting the amount of additional first mortgage bonds issued by SIGECO.
For information about the total debt to capitalization financial covenants in the Registrants’ and certain of CenterPoint Energy’s subsidiaries’ revolving credit facilities, see Note 1211 to the Interim Condensed Financial Statements.
CRITICAL ACCOUNTING POLICIES
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.
There have been no significant changes in our critical accounting policies during the three months ended March 31, 2022, 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 2021 Form 10-K.
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 March 31, 2021,2022, CenterPoint Energy had outstanding long-term debt, lease obligations and obligations under its ZENS that subject it to the risk of loss associated with movements in market interest rates.
CenterPoint Energy’s floating rate obligations aggregated $3.4$2.1 billion and $2.4$4.5 billion as of March 31, 20212022 and December 31, 2020,2021, respectively. If the floating interest rates were to increase by 10% from March 31, 20212022 rates, CenterPoint Energy’s combined interest expense would increase by approximately $1.7$2 million annually.
As of March 31, 20212022 and December 31, 2020,2021, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating $12.5$11.8 billion and $11.1$11.7 billion, respectively, in principal amount and having a fair value of $13.5$12.0 billion and $12.9$13.0 billion, respectively. Because these instruments are fixed-rate, they do not expose CenterPoint 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 $376$443 million if interest rates were to decline by 10% from levels at March 31, 2021.2022. In general, such an increase in fair value would impact earnings and cash flows only if CenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.
In general, such an increase in fair value would impact earnings and cash flows only if CenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.
The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $13$9 million as of March 31, 20212022 was a fixed-rate obligation and, therefore, did not expose CenterPoint 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 $2$1 million if interest rates were to decline by 10% from levels at March 31, 2021.2022. Changes in the fair value of the derivative component, a $927$797 million recorded liability at March 31, 2021,2022, are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income and, therefore, it 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 March 31, 20212022 levels, the fair value of the derivative component liability would decrease by approximately $1 million, which would be recorded as an unrealized gain in CenterPoint Energy’s Condensed Statements of Consolidated Income.
Equity Market Value Risk (CenterPoint Energy)
CenterPoint Energy is exposed to equity market value risk through its ownership of 10.2 million shares of AT&T Common, and 0.9 million shares of Charter Common and 2.5 million shares of WBD Common, which CenterPoint Energy holds to facilitate its ability to meet its obligations under the ZENS. See Note 1110 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 March 31, 20212022 aggregate market value of these shares would result in a net loss of less than $1 million, which would be recorded as a loss in CenterPoint Energy’s Condensed Statements of Consolidated Income.
Commodity Price Risk From Non-Trading Activities (CenterPoint Energy)
CenterPoint Energy’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms. CenterPoint Energy’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years. This authority has been utilized to secure fixed price natural gas using both physical purchases and financial derivatives. As of March 31, 2021,2022, the recorded fair value of non-trading energy derivative liabilitiesassets was $7$39 million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.Indiana.
Although CenterPoint Energy’s regulated operations are exposed to limited commodity price risk, natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered. Constructive regulatory orders, such as those authorizing lost margin recovery, other innovative rate designs and recovery of unaccounted for natural gas and other natural gas-related expenses, also mitigate the effect natural gas costs may have on CenterPoint Energy’s financial condition. In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy.
Item 4.CONTROLS AND PROCEDURES
In accordance with Exchange Act Rules 13a-15 and 15d-15, the Registrants carried out separate evaluations, under the supervision and with the participation of each company’s management, including the principal executive officer and principal financial officer, of the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, the principal executive officer and principal financial officer, in each case, concluded that the disclosure controls and procedures were effective as of March 31, 20212022 to provide assurance that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
There has been no change in the Registrants’ internal controls over financial reporting that occurred during the three months ended March 31, 20212022 that has materially affected, or is reasonably likely to materially affect, the Registrants’ internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
For a description of certain legal and regulatory proceedings, please read Note 14(d)13(d) to the 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 — Regulation” and “— Environmental Matters” in Item 1 and “Legal Proceedings” in Item 3 of the Registrants’ combined 20202021 Form 10-K.
Item 1A.RISK FACTORS
ThereSee below the new risk factor affecting CenterPoint Energy’s and Houston Electric’s businesses, in addition to those risk factors discussed in “Risk Factors” in Item 1A of Part I of the combined 2021 Form 10-K, which could materially affect the Registrants’ financial condition or future results. Except for the updates below, there have been no material changes from the risk factors disclosed in the Registrants’ combined 20202021 Form 10-K.
Increases in the cost or reduction in supply of solar energy system components due to tariffs or trade restrictions imposed by the U.S. government may have an adverse effect on our business, financial condition and results of operations.
China is a major producer of solar cells and other solar products. Certain solar cells, modules, laminates and panels from China are subject to various antidumping and countervailing duty rates, depending on the exporter supplying the product,
imposed by the U.S. government as a result of determinations that the U.S. was materially injured as a result of such imports being sold at less than fair value and subsidized by the Chinese government. In March 2022, the DOC announced that it would initiate an investigation into whether imports of solar cells and panels produced in Cambodia, Malaysia, Thailand and Vietnam are circumventing rules, such as anti-dumping and countervailing duties, intended to impose a tariff on imports of solar cells and panels manufactured in China. If an affirmative finding is made by the DOC, it could impose duties on imports of solar cells and panels from Cambodia, Malaysia, Thailand and Vietnam with both forward-looking and retroactive application. If enacted, these or similar duties could put upward pressure on prices of these solar energy products, which may reduce our ability to acquire these items in a timely and cost-efficient manner. If we are unable to secure such solar energy products in a timely and cost-efficient manner, we may be forced to delay, downsize and/or cancel solar projects and we may not be able to procure the resources needed to fully execute on our ten-year capital plan or achieve our net zero emissions goals. Additionally, delays or cancellations by developers of third-party solar power facilities expected to interconnect with CenterPoint Energy’s and Houston Electric’s system may have adverse impacts, such as delayed or reduced potential future revenues.We cannot predict what additional actions the U.S. government may adopt with respect to tariffs or other trade regulations in the future or what actions may be taken by other countries in retaliation for such measures. If an affirmative finding is made by the DOC or other additional measures are imposed, our business, financial condition and results of operations may be adversely affected.
Item 5.OTHER INFORMATION
None.
Item 6.EXHIBITS
Exhibits filed 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 the Registrants, any other persons, any state of affairs or other matters.
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the 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 the Registrants and its subsidiaries on a consolidated basis. The Registrants hereby agree to furnish a copy of any such instrument to the SEC upon request.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | 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 | | | | x | | | | |
2.3* | | | | CenterPoint Energy’s Form 8-K dated February 24, 2020 | | 1-31447 | | | | x | | | | x |
†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 |
3.5 | | | | CERC Form 10-K for the year ended December 31, 1998 | | 1-13265 | | 3(a)(3) | | | | | | x |
3.6 | | | | CERC Form 10-Q for the quarter ended June 30, 2003 | | 1-13265 | | 3(a)(4) | | | | | | x |
3.7 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | | x | | | | |
3.8 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.2 | | | | x | | |
3.9 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(b) | | | | | | x |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
3.10 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | | x | | | | |
3.11 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 3.1 | | x | | | | |
3.12 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 3.1 | | x | | | | |
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 | | x | | | | |
4.2 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 4.1 | | x | | | | |
4.3 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.1 | | x | | | | |
4.4 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.2 | | x | | | | |
4.5 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.3 | | x | | | | |
4.6 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.1 | | x | | | | |
4.7 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.2 | | x | | x | | |
4.8 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.3 | | x | | | | x |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
4.9 | | $400,000,000 Credit Agreement dated as of February 4, 2021 among VUHI, as Borrower, Indiana Gas, SIGECO and VEDO, as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto , Inc., as Borrower, Indiana Gas Company, Inc., Southern Indiana Gas and Electric Company and Vectren Energy Delivery of Ohio, Inc. as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.4 | | x | | | | |
4.10 | | $1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein | | CenterPoint Energy’s Form 8-K dated May 15, 2019 | | 1-31447 | | 4.1 | | x | | | | |
4.11 | | First Amendment to Term Loan Agreement, dated as of April 26, 2021, by and among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent, and the banks named therein | | CenterPoint Energy’s Form 8-K dated April 26, 2021 | | 1-31447 | | 4.1 | | x | | | | |
4.12 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.1 | | x | | | | |
4.13 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.2 | | x | | | | |
4.14 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.3 | | x | | | | |
4.15 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.4 | | x | | | | |
4.16 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.5 | | x | | | | |
4.17 | | | | CERC’s Form 8-K dated February 5, 1998 | | 1-13265 | | 4.1 | | | | | | x |
†4.18 | | | | | | | | | | | | | | x |
†4.19 | | | | | | | | | | | | | | x |
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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 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
4.20 | | | | Houston Electric’s Form 10-Q for the quarter ended September 30, 2002 | | 1-3187 | | 4(j)(1) | | | | x | | |
4.21 | | | | Houston Electric’s Form 8-K dated March 8, 2021 | | 1-3187 | | 4.4 | | | | x | | |
†4.22 | | | | | | | | | | | | x | | |
10.1 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(q)(12) | | x | | | | |
10.2 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(q)(13) | | x | | | | |
10.3 | | | | Form 8-K of CenterPoint Energy, Inc. dated May 6, 2020 | | 1-31447 | | 10.1 | | x | | | | |
10.4 | | | | CenterPoint Energy’s Form 8-K dated February 16, 2021 | | 1-31447 | | 10.1 | | x | | | | |
10.5 | | | | CenterPoint Energy’s Form 8-K dated February 16, 2021 | | 1-31447 | | 10.2 | | x | | | | |
10.6 | | | | CenterPoint Energy’s Form 8-K dated April 27, 2017 | | 1-31447 | | 10.1 | | x | | | | |
10.7 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(t)(2) | | 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 |
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Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
3.4 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(2) | | | | | | x |
3.5 | | | | CERC Form 10-K for the year ended December 31, 1998 | | 1-13265 | | 3(a)(3) | | | | | | x |
3.6 | | | | CERC Form 10-Q for the quarter ended June 30, 2003 | | 1-13265 | | 3(a)(4) | | | | | | x |
3.7 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | | x | | | | |
3.8 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.2 | | | | x | | |
3.9 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(b) | | | | | | x |
3.10 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | | x | | | | |
3.11 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 3.1 | | x | | | | |
3.12 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 3.1 | | x | | | | |
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 | | x | | | | |
4.2 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 4.1 | | x | | | | |
4.3 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.1 | | x | | | | |
4.4 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.2 | | x | | x | | |
4.5 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.3 | | x | | | | x |
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Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
4.6 | | $400,000,000 Credit Agreement dated as of February 4, 2021 among VUHI, as Borrower, Indiana Gas, SIGECO and VEDO, as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto , Inc., as Borrower, Indiana Gas Company, Inc., Southern Indiana Gas and Electric Company and Vectren Energy Delivery of Ohio, Inc. as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.4 | | x | | | | |
4.7 | | | | Houston Electric’s Form 10-Q for the quarter ended September 30, 2002 | | 1-3187 | | 4(j)(1) | | | | x | | |
4.8 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2002 | | 1-3187 | | 4(k)(10) | | | | x | | |
4.9 | | | | CenterPoint Energy’s Form 8-K dated January 9, 2009 | | 1-3187 | | 4.2 | | | | x | | |
4.10 | | | | Houston Electric’s Form 8-K dated February 23, 2022 | | 1-3187 | | 4.4 | | | | x | | |
†4.11 | | | | | | | | | | | | x | | |
10.1 | | | | CenterPoint Energy’s Definitive Proxy Statement filed on March 11, 2022 | | 1-31447 | | Appendix A | | x | | | | |
10.2 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.2 | | x | | | | |
10.3 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.3 | | x | | | | |
10.4 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.4 | | x | | | | |
10.5 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.5 | | x | | | | |
10.6 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.6 | | x | | | | |
10.7 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.7 | | x | | | | |
10.8 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.8 | | x | | | | |
10.9 | | | | CenterPoint Energy’s Form 10-Q for the quarter ended September 30, 2008 | | 1-31447 | | 10.1 | | x | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
10.10 | | | | CenterPoint Energy’s Form 8-K dated April 22, 2022 | | 1-31447 | | 10.10 | | x | | | | |
†10.11 | | | | | | | | | | x | | | | |
10.12 | | | | CenterPoint Energy’s Form 8-K dated December 22, 2008 | | 1-31447 | | 10.1 | | x | | | | |
10.13 | | | | CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 | | 1-31447 | | 10.4 | | x | | | | |
†10.14 | | | | | | | | | | x | | | | |
10.15 | | | | CenterPoint Energy’s Form 8-K dated December 22, 2008 | | 1-31447 | | 10.3 | | x | | | | |
10.16 | | | | CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 | | 1-31447 | | 10.6 | | x | | | | |
10.17 | | | | CenterPoint Energy’s Form 8-K dated December 9, 2019 | | 1-31447 | | 10.1 | | x | | | | |
†10.18 | | | | | | | | | | 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 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC |
†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 Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | |
| CENTERPOINT ENERGY, INC. |
| CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC |
| CENTERPOINT ENERGY RESOURCES CORP. |
| |
| |
By: | /s/ KristieStacey L. ColvinPeterson |
| KristieStacey L. ColvinPeterson |
| Senior Vice President and Chief Accounting Officer |
| |
Date: May 6, 20213, 2022