Regulatory Matters

9 Months Ended

Sep. 30, 2019

Regulatory Assets and Liabilities, Other Disclosures [Abstract]

Regulatory Matters

The following is a list of regulatory assets and liabilities reflected on the Registrants’ respective Condensed Consolidated Balance Sheets:



	September 30, 2019									December 31, 2018
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
Regulatory Assets:	(in millions)
Current regulatory assets (1)	$	18		$	—		$	18		$	77		$	—		$	77
Non-current regulatory assets:
Securitized regulatory assets	821			821			—			1,059			1,059			—
Unrecognized equity return (2)	(175		)	(175		)	—			(213		)	(213		)	—
Unamortized loss on reacquired debt (3)	63			63			—			68			68			—
Pension and postretirement-related regulatory asset (3)	683			35			27			725			33			30
Hurricane Harvey restoration costs (3)	68			64			4			68			64			4
Regulatory assets related to TCJA (3) (4)	30			23			7			33			23			10
Asset retirement obligation (3)	139			25			92			109			24			85
Other regulatory assets-not earning a return (5)	154			65			46			81			55			26
Other regulatory assets	411			30			13			37			11			26
Total non-current regulatory assets	2,194			951			189			1,967			1,124			181
Total regulatory assets	2,212			951			207			2,044			1,124			258
Regulatory Liabilities:
Current regulatory liabilities (6)	31			—			28			38			17			21
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4)	1,606			830			449			1,323			847			476
Estimated removal costs	1,430			259			634			886			269			617
Other regulatory liabilities	445			206			138			316			182			134
Total non-current regulatory liabilities	3,481			1,295			1,221			2,525			1,298			1,227
Total regulatory liabilities	3,512			1,295			1,249			2,563			1,315			1,248
Total regulatory assets and liabilities, net	$	(1,300	)	$	(344	)	$	(1,042	)	$	(519	)	$	(191	)	$	(990	)


(1)	Current regulatory assets are included in Prepaid expenses and other current assets in the Registrants’ respective Condensed Consolidated Balance Sheets.

(2)

The unrecognized equity return will be recognized as it is recovered in rates through 2024. The timing of CenterPoint Energy’s and Houston Electric’s recognition of the 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.



	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
	CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric
	(in millions)
Allowed equity return recognized	$	14	$	14	$	17	$	17	$	38	$	38	$	62	$	62


(3)	Substantially all of these regulatory assets are not earning a return.


(4)	The EDIT and deferred revenues will be recovered or refunded to customers as required by tax and regulatory authorities.


(5)	Regulatory assets acquired in the Merger and not earning a return were recorded at fair value as of the Merger Date. Such fair value adjustments are recognized over time until the regulatory asset is recovered.


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

Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area seeking approval for revenue increases of approximately $194 million, exclusive of the EDIT refund discussed below.

The key proposals of the rate case include:


•	a rate base of $6.4 billion with a 50% debt, 50% equity capital structure and a 10.4% ROE;


•	a prudency determination on all capital investments made by Houston Electric since January 1, 2010;


•	the establishment of a rider to refund unprotected EDIT resulting from the TCJA; and


•	updated depreciation rates and approval to recover other costs.

On September 16, 2019, the ALJs issued a PFD recommending a revenue increase of approximately $2.6 million, which is lower than as filed primarily due to the recommended rate base and operation and maintenance expense disallowances, lower equity capital structure, and lower return on equity. If the PFD were approved in its entirety, it would result, among other things, in a one-time refund obligation of capital previously recovered through Houston Electric’s TCOS and DCRF mechanisms, and a pre-tax write-off of approximately $120 million for rate base disallowance of assets recorded in CenterPoint Energy’s and Houston Electric’s Condensed Consolidated Balance Sheets as of September 30, 2019. The amount of any refunds for previously recovered capital would be determined in a separate proceeding with the PUCT. Furthermore, the PFD recommends a separate proceeding with the PUCT to determine the amount, if any, of $158 million EDIT on Houston Electric’s securitized assets to be provided to customers.

The PUCT has not yet begun deliberating on the PFD, which is prepared by judges at a different state agency. A final order from the PUCT is currently expected in the fourth quarter of 2019, but motions for rehearing, if granted, could result in the order being issued in 2020. CenterPoint Energy and Houston Electric cannot predict the outcome of the proceeding.

CenterPoint Energy and Houston Electric record pre-tax expense for disallowed capital investments and customer refund obligations when the amounts are deemed both probable and estimable.