Related Party Transactions (Houston Electric and CERC)

6 Months Ended

Jun. 30, 2022

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:


	June 30, 2022						December 31, 2021
	Houston Electric			CERC			Houston Electric			CERC
	(in millions, except interest rates)
Money pool investments (borrowings) (1)	$	272		$	—		$	(512)		$	(224)
Weighted average interest rate	1.85		%	1.85		%	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.

As a result of the Restructuring, CERC acquired Indiana Gas and VEDO, which had notes payable to VUH for borrowings under the VUH money pool in the amount of $217 million and a weighted average interest rate of 0.21% as of December 31, 2021. These notes were repaid to VUH on June 30, 2022 in connection with the Restructuring.

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 June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Corporate service charges	$	37	$	51	$	47	$	58	$	76	$	109	$	90	$	114
Net affiliate service charges (billings)	(9)		9		(1)		1		(15)		15		(2)		2

The table below presents transactions among Houston Electric, CERC and their parent, CenterPoint Energy.


	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	30	$	72	$	—	$	—	$	67	$	111	$	—	$	—
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses	—		—		—		—		—		720		—		—
Cash contribution from parent	506		125		—		—		1,143		125		—		—
Net assets acquired in the Restructuring (1)	—		2,345		—		—		—		2,345		—		—
Non-cash capital contribution from parent in payment for property, plant and equipment below	—		—		—		—		38		54		—		—
Cash paid to parent for property, plant and equipment below	13		13		—		—		65		61		—		—
Property, plant and equipment from parent (2)	13		13		—		—		103		115		—		—

(1) The Restructuring was a common control transaction that required the recasting of financial information to the earliest period presented. Therefore, the net asset transfer is not reflected during the current period on CERC’s Condensed Statements of Consolidated Changes in Equity.

(2) Property, plant and equipment purchased from CenterPoint Energy at its net carrying value on the date of purchase.

Common Control Transaction

The Restructuring has been accounted for as a common control transaction as there is no change in the control over the assets acquired and liabilities assumed. As a result, CERC acquired these businesses at CenterPoint Energy’s historical basis in these entities and prior year amounts were recast to reflect the Restructuring as if it occurred at the earliest period presented for which CenterPoint Energy had common control.

The following table presents the as reported and recast amounts for CERC’s Condensed Consolidated Balance Sheet.


	December 31, 2021
	As Reported		Recast
	(in millions)
Total Assets	$	11,110	$	16,153
Total Liabilities	8,109		11,020
Retained Earnings	765		1,017
Total Equity	3,001		5,133

The following table presents the as reported and recast amounts for CERC’s Condensed Statements of Consolidated Income.


	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
	As Reported		Recast		As Reported		Recast
	(in millions)
Net income	$	58	$	73	$	209	$	295