Regulatory Accounting

The following is a list of regulatory assets and liabilities reflected on Houston Electric’s Consolidated Balance Sheets as of December 31, 2017 and 2016:



	December 31,
	2017			2016
	(in millions)
Securitized regulatory assets	$	1,590		$	1,919
Unrecognized equity return (1)	(287		)	(329		)
Unamortized loss on reacquired debt	75			84
Pension and postretirement-related regulatory asset	31			34
Hurricane Harvey restoration costs (2)	58			—
Excess deferred income taxes (3)	33			—
Other long-term regulatory assets (4)	70			85
Total regulatory assets	1,570			1,793

Current regulatory liabilities (5)	22			7
Non-current regulatory liabilities:
Excess deferred income taxes (3)	862			—
Estimated removal costs	285			345
Other long-term regulatory liabilities	116			185
Total non-current regulatory liabilities	1,263			530
Total regulatory liabilities	1,285			537

Total regulatory assets and liabilities, net	$	285		$	1,256

(1)

The unrecognized allowed equity return will be recognized as it is recovered in rates through 2024. During the years ended December 31, 2017, 2016 and 2015, Houston Electric recognized approximately $42 million, $64 million and $49 million, respectively, of the allowed equity return. The timing of Houston Electric’s recognition of the allowed equity return will vary each period based on amounts actually collected during the period. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.


(2)	Houston Electric is not earning a return on its Hurricane Harvey restoration costs.


(3)	EDIT will be recovered or refunded to customers as required by tax and regulatory activities. See Note 9 for additional information.


(4)	Other long-term regulatory assets that are not earning a return were not material as of December 31, 2017 and 2016.


(5)	Current regulatory liabilities are included in Other current liabilities in Houston Electric’s Consolidated Balance Sheets.

Hurricane Harvey. Houston Electric’s electric delivery system suffered damage as a result of Hurricane Harvey, a major storm classified as a Category 4 hurricane on the Saffir-Simpson Hurricane Wind Scale, that first struck the Texas coast on Friday, August 25, 2017 and remained over the Houston area for the next several days. The unprecedented flooding from torrential amounts of rainfall accompanying the storm caused significant damage to or destruction of residences and businesses served by Houston Electric.

Houston Electric estimates that total costs to restore the electric delivery facilities damaged as a result of Hurricane Harvey will be approximately $120 million and estimates that the total restoration costs covered by insurance will be approximately $28 million. Houston Electric will defer the uninsured storm restoration costs as management believes it is probable that such costs will be recovered through traditional rate adjustment mechanisms for capital costs and through the next base rate proceeding for operation and maintenance expenses. As a result, storm restoration costs did not materially affect Houston Electric’s reported net income for 2017.

As of December 31, 2017, Houston Electric recorded the following:



	(in millions)
Property, plant and equipment	$	42
Insurance proceeds received	(11		)
Net property, plant and equipment	31

Operation and maintenance expense	75
Insurance proceeds received	(3		)
Insurance receivable	(14		)
Net regulatory asset	$	58