Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Matters

The following is a list of regulatory assets and liabilities reflected on the Registrants’ respective Consolidated Balance Sheets as of December 31, 2020 and 2019. The “amortization through” columns indicate the latest year when a regulatory asset or regulatory liability category will be fully amortized:


	December 31, 2020
	CenterPoint Energy				Houston Electric				CERC
	Amortization Through	(in millions)			Amortization Through	(in millions)			Amortization Through	(in millions)
Regulatory Assets:
Current regulatory assets (1)	2021	$	33		n/a	$	—		2021	$	33
Non-current regulatory assets:
Securitized regulatory assets	2024	633			2024	633			n/a	—
Unrecognized equity return	Various	(150)		(2)	2024	(137)		(2)	Various	(13)
Unamortized loss on reacquired debt (3)	2055	57			2046	55			n/a	—
Pension and postretirement-related regulatory asset (3)	Various (a)	591			Various (a)	31			Various (a)	21
Hurricane Harvey restoration costs (3)	Various	59			2025	55			TBD (b)	4
Hurricane Laura restoration costs	TBD (b)	36			TBD (b)	36			TBD (b)	—
Regulatory assets related to TCJA (3) (4)	2025	25			2025	20			2023	5
Relief Program Incremental Costs (COVID-19)	TBD	25			TBD	5			TBD	17
Asset retirement obligation (3)	Perpetual	135			Perpetual	26			Perpetual	107
Other regulatory assets-not earning a return (5)	2056	165			2049	83			2056	44
Other regulatory assets	Various	518			Various	41			Various	35
Total non-current regulatory assets		2,094				848				220
Total regulatory assets		2,127				848				253
Regulatory Liabilities:
Current regulatory liabilities (6)	2021	72			2021	43			2021	29
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4)	Various	1,484			TBD	764			Various	421
Estimated removal costs	Various	1,470			Various	231			Various	656
Other regulatory liabilities	Various	494			Various	257			Various	149
Total non-current regulatory liabilities		3,448				1,252				1,226
Total regulatory liabilities		3,520				1,295				1,255

Total regulatory assets and liabilities, net		$	(1,393)			$	(447)			$	(1,002)

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

(b)The recovery and amortization of a portion of these amounts are expected to be determined in the next rate case.


	December 31, 2019
	CenterPoint Energy			Houston Electric			CERC
	(in millions)
Regulatory Assets:
Current regulatory assets (1)	$	12		$	—		$	12
Non-current regulatory assets:
Securitized regulatory assets	788			788			—
Unrecognized equity return	(168)		(2)	(168)		(2)	—
Unamortized loss on reacquired debt (3)	62			62			—
Pension and postretirement-related regulatory asset (3)	637			34			22
Hurricane Harvey restoration costs (3)	68			64			4
Regulatory assets related to TCJA (3) (4)	30			23			7
Asset retirement obligation (3)	131			26			94
Other regulatory assets-not earning a return (5)	147			57			48
Other regulatory assets	422			29			16
Total non-current regulatory assets	2,117			915			191
Total regulatory assets	2,129			915			203
Regulatory Liabilities:
Current regulatory liabilities (6)	47			—			47
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4)	1,582			821			442
Estimated removal costs	1,429			244			637
Other regulatory liabilities	463			223			140
Total non-current regulatory liabilities	3,474			1,288			1,219
Total regulatory liabilities	3,521			1,288			1,266

Total regulatory assets and liabilities, net	$	(1,392)		$	(373)		$	(1,063)

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


	CenterPoint Energy and Houston Electric
	Year Ended December 31,
	2020		2019		2018
	(in millions)
Allowed equity return recognized	$	31	$	45	$	74

(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. See Note 15 for additional information. The weighted average recovery periods of Regulatory assets related to TCJA for CenterPoint Energy, Houston Electric and CERC are 4 years, 5 years and 3 years, respectively.

(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. The weighted average

recovery periods of Other regulatory assets-not earning a return for CenterPoint Energy, Houston Electric and CERC are 14 years, 11 years and 27 years, respectively.

(6)Current regulatory liabilities are included in Other current liabilities in each of the Registrants’ respective 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 to change its rates, seeking approval for revenue increases of approximately $194 million, among other requests. On January 23, 2020, Houston Electric filed a Stipulation and Settlement Agreement with the PUCT that provided for the following, among other things:

•an overall revenue requirement increase of approximately $13 million;

•an ROE of 9.4%;

•a capital structure of 57.5% debt/42.5% equity;

•a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and

•recovery of all retail transmission related costs through the TCRF.

Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for Houston Electric no later than four years from the date of the PUCT’s final order in the proceeding. Additionally, Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceeding with the PUCT be instituted regarding EDIT on Houston Electric’s securitized assets. Furthermore, under the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy. The PUCT approved the Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the final order. The rates were implemented on April 23, 2020.

CenterPoint Energy and Houston Electric record pre-tax expense for (i) probable disallowances of capital investments and (ii) customer refund obligations and costs deferred in regulatory assets when recovery of such amounts is no longer considered probable.

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 either expired or may expire during the second quarter of 2021 in certain of 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. Houston Electric may seek recovery of such regulatory asset or liability in its next DCRF, TCRF or base rate case proceeding. CenterPoint Energy’s and Houston Electric’s COVID-19 ERP regulatory assets were $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 $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 territories in Minnesota and Arkansas 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.

ERCOT Loan Agreement (CenterPoint Energy and Houston Electric)

On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a no-interest loan agreement with ERCOT pursuant to which ERCOT loaned Houston Electric approximately $5 million to provide for an initial fund balance for reimbursement. The ERCOT loan was repaid on December 15, 2020.