Revenue Recognition and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition and Allowance for Credit Losses

Revenues from Contracts with Customers

In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services. The revenues and related balances in the following tables exclude operating revenues and balances from the Energy Services Disposal Group and the Infrastructure Services Disposal Group, which are reflected as discontinued operations prior to the date of closing of each transaction. See Note 3 for further information. Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in the Registrants’ combined 2020 Form 10-K.

ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period.

The following tables disaggregate revenues by reportable segment and major source:

CenterPoint Energy

	Three Months Ended June 30, 2021
	Electric		Natural Gas		Corporate  and Other		Total
	(in millions)
Revenue from contracts	$	933	$	718	$	64	$	1,715
Other (1)	4		22		1		27
Total revenues	$	937	$	740	$	65	$	1,742
	Six Months Ended June 30, 2021
	Electric		Natural Gas		Corporate  and Other		Total
	(in millions)
Revenue from contracts	$	1,766	$	2,373	$	117	$	4,256
Other (1)	1		30		2		33
Total revenues	$	1,767	$	2,403	$	119	$	4,289

	Three Months Ended June 30, 2020
	Electric		Natural Gas		Corporate  and Other		Total
	(in millions)
Revenue from contracts	$	850	$	634	$	82	$	1,566
Other (1)	(2)		10		1		9
Total revenues	$	848	$	644	$	83	$	1,575
	Six Months Ended June 30, 2020
	Electric		Natural Gas		Corporate  and Other		Total
	(in millions)
Revenue from contracts	$	1,617	$	1,930	$	160	$	3,707
Other (1)	(2)		35		2		35
Total revenues	$	1,615	$	1,965	$	162	$	3,742

(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. Total lease income was $2 million and $1 million for the three months ended June 30, 2021 and 2020, respectively, and $4 million and $2 million for the six months ended June 30, 2021 and 2020, respectively.

Houston Electric

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in millions)
Revenue from contracts	$	791	$	722	$	1,478	$	1,360
Other (1)	(5)		(2)		(8)		(6)
Total revenues	$	786	$	720	$	1,470	$	1,354

(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three and six months ended June 30, 2021 and 2020.

CERC

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in millions)
Revenue from contracts	$	558	$	472	$	1,730	$	1,456
Other (1)	16		11		21		38
Total revenues	$	574	$	483	$	1,751	$	1,494

(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. Lease income was not significant for the three and six months ended June 30, 2021 and 2020.

Revenues from Contracts with Customers

Electric (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. Indiana Electric generates, distributes and transmits electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, such as the PUCT and the IURC, is recognized as electricity is delivered and represents amounts both billed and unbilled. Discretionary services requested by customers are provided at a point in time with control transferring upon the completion of the service. Revenue for discretionary services provided by Houston Electric is recognized upon completion of service based on the tariff rates set by the PUCT. Payments for electricity distribution and discretionary services are aggregated and received on a monthly basis. Houston Electric performs transmission services over time as a stand-ready obligation to provide a reliable network of transmission systems. Revenue is recognized upon time elapsed, and the monthly tariff rate set by the regulator. Payments are received on a monthly basis. Indiana Electric customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.

Natural Gas (CenterPoint Energy and CERC). CenterPoint Energy and CERC distribute and transport natural gas to customers over time, and customers consume the natural gas when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by the state governing agency for that service area, is recognized as natural gas is delivered and represents amounts both billed and unbilled. Discretionary services requested by the customer are satisfied at a point in time and revenue is recognized upon completion of service and the tariff rates set by the applicable state regulator. Payments of natural gas distribution, transportation and discretionary services are aggregated and received on a monthly basis.

Contract Balances. When the timing of delivery of service is different from the timing of the payments made by customers and when the right to consideration is conditioned on something other than the passage of time, the Registrants recognize either a contract asset (performance precedes billing) or a contract liability (customer payment precedes performance). Those customers that prepay are represented by contract liabilities until the performance obligations are satisfied. The Registrants’ contract assets are included in Accrued unbilled revenues in their Condensed Consolidated Balance Sheets. As of June 30, 2021, CenterPoint Energy’s contract assets primarily relate to ESG contracts where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Condensed Consolidated Balance Sheets. As of June 30, 2021, CenterPoint Energy’s contract liabilities primarily relate to ESG contracts where revenue is recognized using the input method.

The opening and closing balances of accounts receivable related to ASC 606 revenues, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers from continuing operations as of December 31, 2020 and June 30, 2021, respectively, are presented below. The closing balances as of June 30, 2021 for CenterPoint Energy and CERC have been updated to exclude amounts reflected as held for sale on their respective Condensed Consolidated Balance Sheets.

CenterPoint Energy

	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Assets		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2020	$	604	$	505	$	27	$	18
Closing balance as of June 30, 2021	505		272		24		22
Increase (decrease)	$	(99)	$	(233)	$	(3)	$	4

The amount of revenue recognized in the six-month period ended June 30, 2021 that was included in the opening contract liability was $15 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between CenterPoint Energy’s performance and the customer’s payment.

Houston Electric

	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2020	$	225	$	113	$	3
Closing balance as of June 30, 2021	260		116		6
Increase	$	35	$	3	$	3

The amount of revenue recognized in the six-month period ended June 30, 2021 that was included in the opening contract liability was $2 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.

CERC

	Accounts Receivable		Other Accrued Unbilled Revenues
	(in millions)
Opening balance as of December 31, 2020	$	214	$	261
Closing balance as of June 30, 2021	114		81
Decrease	$	(100)	$	(180)

CERC does not have any opening or closing contract asset or contract liability balances.

Remaining Performance Obligations (CenterPoint Energy). The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts and (2) when CenterPoint Energy expects to recognize this revenue. Such contracts include energy performance and sustainable infrastructure services contracts of ESG, which are included in Corporate and Other.

	Rolling 12 Months		Thereafter		Total
	(in millions)
Revenue expected to be recognized on contracts in place as of June 30, 2021:
Corporate and Other	$	253	$	538	$	791
	$	253	$	538	$	791

Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the transaction price. For contracts for which revenue from the satisfaction of the performance obligations is recognized in the amount invoiced, the practical expedient was elected and revenue expected to be recognized on these contracts has not been disclosed.

Allowance for Credit Losses

CenterPoint Energy and CERC segregate financial assets that fall under the scope of Topic 326, primarily trade receivables due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, among others. Houston Electric recognizes losses on financial assets that fall under the scope of Topic 326. Losses on financial assets are primarily recoverable through regulatory mechanisms and do not materially impact Houston Electric's allowance for credit losses. For a discussion of regulatory deferrals related to COVID-19 and the February 2021 Winter Storm Event, see Note 6.