Leases

6 Months Ended

Jun. 30, 2022

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 $72 million and $20 million as of June 30, 2022 and December 31, 2021, respectively.

Houston Electric took delivery of an additional 128 MW of mobile generation under the long-term lease during the six months ended June 30, 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 at that time. The remaining finance lease liability associated with the commenced long-term mobile generation agreement was not significant as of June 30, 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 June 30, 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 June 30, 2022, Houston Electric has secured a first lien on all the generation equipment long-term leases and no amount of the payments made by Houston Electric under long-term leases were held in escrow.

The components of lease cost, included in Operation and maintenance expense on the Registrants’ respective Condensed Statements of Consolidated Income, are as follows:


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	2	$	—	$	—	$	2	$	—	$	1
Short-term lease cost	37		37		—		25		25		—
Variable lease cost	—		—		—		—		—		—
Total lease cost (1)	$	39	$	37	$	—	$	27	$	25	$	1

	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	2	$	—	$	1	$	4	$	—	$	2
Short-term lease cost	84		83		—		35		35		—
Variable lease cost	—		—		—		—		—		—
Total lease cost (1)	$	86	$	83	$	1	$	39	$	35	$	2

(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 Condensed Statements of Consolidated Income.

The components of lease income were as follows:


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	1	$	—	$	1	$	1	$	—	$	—
Variable lease income	1		—		—		1		—		—
Total lease income	$	2	$	—	$	1	$	2	$	—	$	—


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	3	$	—	$	1	$	3	$	—	$	1
Variable lease income	1		—		—		1		—		—
Total lease income	$	4	$	—	$	1	$	4	$	—	$	1

Supplemental balance sheet information related to leases was as follows:


	June 30, 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)	$	15		$	1		$	7		$	22		$	1		$	12
Finance ROU assets (2)	332			332			—			179			179			—
Total leased assets	$	347		$	333		$	7		$	201		$	180		$	12

Liabilities:
Current operating lease liability (3)	$	4		$	—		$	2		$	6		$	1		$	2
Non-current operating lease liability (4)	11			1			5			17			—			11
Total leased liabilities (5)	$	15		$	1		$	7		$	23		$	1		$	13

Weighted-average remaining lease term (in years) - operating leases	5.1			4.7			4.3			6.2			4.1			6.5
Weighted-average discount rate - operating leases	3.13		%	3.20		%	3.54		%	3.10		%	2.86		%	3.20		%
Weighted-average remaining lease term (in years) - finance leases	7.0			7.0			—			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 Condensed Consolidated Balance Sheets.

(2)Reported within Property, Plant and Equipment in the Registrants’ respective Condensed Consolidated Balance Sheets. Finance lease assets are recorded net of accumulated amortization.

(3)Reported within Current other liabilities in the Registrants’ respective Condensed Consolidated Balance Sheets.

(4)Reported within Other liabilities in the Registrants’ respective Condensed Consolidated Balance Sheets.

(5)Finance lease liabilities were not material as of June 30, 2022 or December 31, 2021 and are reported within Other long-term debt in the Registrants’ respective Condensed Consolidated Balance Sheets when applicable.

As of June 30, 2022, finance lease liabilities were not significant to the Registrants. As of June 30, 2022, maturities of operating lease liabilities were as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2022	$	3	$	1	$	1
2023	4		—		2
2024	4		—		2
2025	2		—		1
2026	2		—		1
2027 and beyond	2		—		—
Total lease payments	17		1		7
Less: Interest	2		—		—
Present value of lease liabilities	$	15	$	1	$	7

As of June 30, 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 June 30, 2022, maturities of undiscounted operating lease payments to be received are as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2022	$	3	$	—	$	2
2023	6		1		3
2024	6		1		3
2025	6		1		3
2026	7		—		4
2027	6		—		4
2028 and beyond	136		—		132
Total lease payments to be received	$	170	$	3	$	151

Other information related to leases is as follows:


	Three Months Ended June 30, 2022						Three Months Ended June 30, 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	$	1	$	—	$	—	$	2	$	—	$	1

	Six Months Ended June 30, 2022						Six Months Ended June 30, 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	$	3	$	—	$	1	$	3	$	—	$	2
Financing cash flows from finance leases included in the measurement of lease liabilities	171		171		—		—		—		—

See Note 16 for information on ROU assets obtained in exchange for operating lease liabilities.