Regulatory Matters

12 Months Ended

Dec. 31, 2021

The following is a list of regulatory assets and liabilities, excluding amounts related to the Arkansas and Oklahoma Natural Gas businesses classified as held for sale, reflected on the Registrants’ respective Consolidated Balance Sheets as of December 31, 2021 and 2020. For information about regulatory assets and liabilities in held for sale, see Note 4.


	December 31, 2021
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Regulatory Assets:
Future amounts recoverable from ratepayers related to:
Benefit obligations (1)	$	412	$	—	$	5
Asset retirement obligations & other	240		45		192
Net deferred income taxes	41		29		2
Total future amounts recoverable from ratepayers	693		74		199
Amounts deferred for future recovery related to:
Extraordinary gas costs	1,528		—		1,454
Cost recovery riders	124		—		—
Hurricane and February 2021 Winter Storm Event restoration costs	105		105		—

Other regulatory assets	94		57		37
Gas recovery costs	29		—		29
Decoupling	25		—		25
COVID-19 incremental costs	23		8		15
Emergency generation costs	21		21		—
Unrecognized equity return	(28)		(3)		(4)
Total amounts deferred for future recovery	1,921		188		1,556
Amounts currently recovered in customer rates related to:
Authorized trackers and cost deferrals	504		24		11
Securitized regulatory assets	420		420		—
Unamortized loss on reacquired debt and hedging	92		67		—
Gas recovery costs	72		—		40
Extraordinary gas costs	66		—		66
Regulatory assets related to TCJA	48		46		2
Hurricane Harvey restoration costs	43		43		—
Benefit obligations	28		24		4
Unrecognized equity return (2)	(171)		(97)		(12)

Total amounts recovered in customer rates (3)	1,102		527		111
Total Regulatory Assets	$	3,716	$	789	$	1,866
Total Current Regulatory Assets (4)	$	1,395	$	—	$	1,289
Total Non-Current Regulatory Assets	$	2,321	$	789	$	577

Regulatory Liabilities:
Regulatory liabilities related to TCJA	$	1,389	$	738	$	400
Estimated removal costs	1,304		229		452
Other regulatory liabilities	481		205		128
Total Regulatory Liabilities	$	3,174	$	1,172	$	980
Total Current Regulatory Liabilities (5)	$	21	$	20	$	1
Total Non-Current Regulatory Liabilities	$	3,153	$	1,152	$	979


	December 31, 2020
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Regulatory Assets:
Future amounts recoverable from ratepayers related to:
Benefit obligations (1)	$	550	$	—	$	4
Asset retirement obligations & other	173		39		125
Net deferred income taxes	37		25		3
Total future amounts recoverable from ratepayers	760		64		132
Amounts deferred for future recovery related to:

Cost recovery riders	221		—		—
Other regulatory assets	90		38		52
Hurricane restoration costs	36		36		—
COVID-19 incremental costs	23		5		18
Gas recovery costs	9		—		9
Decoupling	2		—		2



Unrecognized equity return	(42)		—		(5)
Total amounts deferred for future recovery	339		79		76
Amounts currently recovered in customer rates related to:
Securitized regulatory assets	633		633		—
Authorized trackers and cost deferrals	332		30		20
Unamortized loss on reacquired debt and hedging	111		73		—
Hurricane Harvey restoration costs	55		55		—
Benefit obligations	37		31		6
Regulatory assets related to TCJA	25		20		5
Gas recovery costs	7		—		7
Unrecognized equity return (2)	(187)		(137)		(8)


Total amounts recovered in customer rates	1,013		705		30
Total Regulatory Assets	$	2,112	$	848	$	238
Total Current Regulatory Assets	$	18	$	—	$	18
Total Non-Current Regulatory Assets	$	2,094	$	848	$	220
Regulatory Liabilities:
Regulatory liabilities related to TCJA	$	1,484	$	764	$	421
Estimated removal costs	1,470		231		656
Other regulatory liabilities	566		300		178
Total Regulatory Liabilities	$	3,520	$	1,295	$	1,255
Total Current Regulatory Liabilities (5)	$	72	$	43	$	29
Total Non-Current Regulatory Liabilities	$	3,448	$	1,252	$	1,226

(1)Pension and postretirement-related regulatory assets balances are measured annually, and the ending amortization period may change based on the actuarial valuation.

(2)Represents the following: (a) CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with investments in Indiana; (b) Houston Electric’s allowed equity return on its true-up balance of stranded costs, other changes and related interest resulting from the formerly integrated electric utilities prior to Texas deregulation to be recovered in rates through 2024 and certain storm restoration balances pending recovery in the next rate proceeding; and (c) CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas.

(3)Of the $1.1 billion, $527 million and $111 million currently being recovered in customer rates related to CenterPoint Energy, Houston Electric and CERC, respectively, $558 million, $459 million and $7 million is earning a return, respectively. The weighted average recovery period of regulatory assets currently being recovered in base rates, not earning a return, which totals $175 million, $67 million and $69 million for CenterPoint Energy, Houston Electric and CERC, respectively, is 11 years, 23 years and 2 years, respectively. Regulatory assets not earning a return with perpetual or undeterminable lives have been excluded from the weighted average recovery period calculation.

(4)Current regulatory assets for CenterPoint Energy and CERC include extraordinary gas costs of $1,256 million and $1,182 million, respectively.

(5)Current regulatory liabilities are included in Other current liabilities in each of the Registrants’ respective Consolidated Balance Sheets.

The table below reflects the amount of allowed equity return recognized by each Registrant in its Statements of Consolidated Income:


	Year Ended December 31,
	2021						2020						2019
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	40	$	37	$	1	$	31	$	31	$	—	$	45	$	45	$	—

February 2021 Winter Storm Event

In February 2021, certain of the Registrants’ jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted their businesses. 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 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. Houston Electric 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’s and CERC’s natural gas purchases and their ability to serve customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations, experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the 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. The Texas governor signed legislation in June 2021 that authorizes the Railroad Commission to use securitization financing and the issuance of customer rate relief bonds for recovery of extraordinary natural gas costs incurred by natural gas utilities as a result of the February 2021 Winter Storm Event. On November 12, 2021, the RRC issued a Regulatory Asset Determination Order which authorized CERC to include $1.1 billion in a regulatory asset which should be

included for recovery through customer rate relief bond financing. In addition, CenterPoint Energy’s and CERC’s Natural Gas utilities in jurisdictions outside of Texas deferred under-recovered natural gas cost as regulatory assets under existing recovery mechanisms and are seeking recovery of the increased cost of natural gas. As of December 31, 2021, CenterPoint Energy and CERC have recorded current regulatory assets of $1,410 million and $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 $583 million and $583 million respectively, of which $244 million related to Arkansas and Oklahoma has been recast to held for sale at both CenterPoint Energy and CERC, associated with the February 2021 Winter Storm Event. See Note 4 for further information.

Amounts for the under recovery of natural gas costs are reflected in regulatory assets included in Prepaid expenses and other current assets and Regulatory assets on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. Recovery of natural gas costs within the regulatory 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 of 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, Department of Commerce, and Citizens Utility Board have proposed significant disallowances for all natural gas utilities, resulting in a potential disallowances for CenterPoint Energy and CERC. Recommended disallowances for CERC include up to $45 million proposed by the 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. The MPUC has ordered that the amortization period for extraordinary gas costs resulting from the February 2021 Winter Storm Event be increased from a 27-months to 63-months beginning on January 1, 2022, and that CERC forego recovery of the associated carrying costs. 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.

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, Houston Electric did not execute any requests for disconnection from any REPs until the PUCT issued orders for disconnects to resume. In June 2021, the PUCT issued an updated order relating to disconnections and REPs resumed the distribution of disconnection notices thereafter. As of December 31, 2021, as authorized by the PUCT, CenterPoint Energy and Houston Electric recorded a regulatory asset of $8 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, as of December 31, 2021, CenterPoint Energy and Houston Electric recorded a regulatory asset of $15 million to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.

See Notes 14 and 16(e) for further information regarding debt financing transactions and litigation related to the February 2021 Winter Storm Event, respectively.

COVID-19 Regulatory Matters

Governors, public utility commissions and other authorities in the states in which the Registrants operate have 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 the Registrants’ service territories, CenterPoint Energy continues to support those customers who may need payment assistance, arrangements or extensions.

On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to accrual of regulatory assets granting authority for utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to the COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory.

The PUCT issued an order on August 27, 2020 to conclude the COVID-19 ERP. The PUCT determined that enrollment in the COVID-19 ERP would end on August 31, 2020 and benefits under the program ended on September 30, 2020. Final claims for reimbursement were required to be submitted to the transmission and distribution utilities by November 30, 2020. The transmission and distribution utilities must file a tariff rider cancellation seven days before the date on which it is estimated that revenues from the COVID-19 ERP are approximately equal to its program expenses. Final program reports were required to be submitted to the PUCT by January 15, 2021. The COVID-19 ERP allows for any over/under collection of program expenses to be recorded as a regulatory asset or liability. In December 2021, Houston Electric filed with the PUCT a proposal to reduce the TCRF revenue requirement by the final amount of COVID-19 ERP regulatory liability balance. On January 25, 2022, the PUCT issued approval of the TCRF update with rates effective March 1, 2022.

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- million as of December 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 December 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 territory in Minnesota 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 Mississippi RRA, filed on April 30, 2021, included the unamortized balance of the regulatory asset as of December 31, 2020 in rate base per Docket No. 2018-AD-141 Order Authorizing Utility Response and Accounting for COVID-19. The Minnesota general rate case filing, filed on November 1, 2021, included a request to recover the COVID-19 regulatory asset balance as of June 30, 2021 over a two-year amortization period.