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Fair Value Measurements
12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Assets and liabilities that are recorded at fair value in the Registrants’ Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities, as well as natural gas inventory that has been designated as the hedged item in a fair value hedge.

Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. A market approach is utilized to value the Registrants’ Level 2 natural gas derivative assets or liabilities. CenterPoint Energy’s Level 2 indexed debt securities derivative is valued using an option model and a discounted cash flow model, which uses projected dividends on the ZENS-Related Securities and a discount rate as observable inputs.

Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data.

The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis and recognize transfers between levels at the end of the reporting period.  

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction closed on June 1, 2020. As a result, the following disclosures do not include the Energy Services Disposal Group. See Note 4 for further information.

The following tables present information about the Registrants’ assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of December 31, 2021 and December 31, 2020, and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.

CenterPoint Energy
December 31, 2021December 31, 2020

Level 1
Level 2Level 3Total
Level 1
Level 2Level 3Total
Assets(in millions)
Equity securities $1,439 $— $— $1,439 $873 $— $— $873 
Investments, including money market funds (1)
42 — — 42 43 — — 43 
Natural gas derivatives— 14 — 14 — — — — 
Total assets$1,481 $14 $— $1,495 $916 $— $— $916 
Liabilities    
Indexed debt securities derivative
$— $903 $— $903 $— $953 $— $953 
Interest rate derivatives
— 14 — 14 — 20 — 20 
Natural gas derivatives— — — — — 10 — 10 
Total liabilities$— $917 $— $917 $— $983 $— $983 
Houston Electric
December 31, 2021December 31, 2020

Level 1
Level 2Level 3Total
Level 1
Level 2Level 3Total
Assets(in millions)
Investments, including money market funds (1)
$27 $— $— $27 $26 $— $— $26 
Total assets$27 $— $— $27 $26 $— $— $26 

CERC
December 31, 2021December 31, 2020

Level 1
Level 2Level 3Total
Level 1
Level 2Level 3Total
Assets(in millions)
Investments, including money market funds (1)
$14 $— $— $14 $13 $— $— $13 
Total assets$14 $— $— $14 $13 $— $— $13 

(1)Amounts are included in Prepaid and Other Current Assets in the respective Consolidated Balance Sheets.

During 2021 and 2020, CenterPoint Energy did not have any assets or liabilities designated as Level 3.

Items Measured at Fair Value on a Nonrecurring Basis

As a result of classifying the Arkansas and Oklahoma Natural Gas businesses as held for sale, including the allocation of goodwill, CenterPoint Energy and CERC used a market approach consisting of the contractual sales price adjusted for estimated working capital and other contractual purchase price adjustments to determine fair value of the businesses classified as held for sale, which are Level 2 inputs. Neither CenterPoint Energy nor CERC recognized any gains or losses upon classification of held for sale during 2021. See Note 4 for further information.

Based on the severity of the decline in the price of Enable Common Units during the three months ended March 31, 2020 primarily due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per Enable Common Unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. The impairment analysis compared the estimated fair value of CenterPoint Energy’s investment in Enable to its carrying value. The fair value of the investment was determined using multiple valuation methodologies under both the market and income approaches. Both of these approaches incorporate significant estimates and assumptions, including:

Market Approach

• quoted price of Enable Common Units;
• recent market transactions of comparable companies; and
• EBITDA to total enterprise multiples for comparable companies.

Income Approach

• Enable’s forecasted cash distributions;
• projected cash flows of incentive distribution rights;
• forecasted growth rate of Enable’s cash distributions; and
• determination of the cost of equity, including market risk premiums.

Weighting of the Different Approaches

Significant unobservable inputs used include the growth rate applied to the projected cash distributions beyond 2020 and the discount rate used to determine the present value of the estimated future cash flows. Based on the significant unobservable estimates and assumptions required, CenterPoint Energy concluded that the fair value estimate should be classified as a Level 3
measurement within the fair value hierarchy. As a result of this analysis, CenterPoint Energy recorded an other than temporary impairment on its investment in Enable of $1,541 million during the year ended December 31, 2020, reducing the carrying value of the investment to its estimated fair value of $848 million as of March 31, 2020. See Note 11 for further discussion of the impairment.

During the year ended December 31, 2020, CenterPoint Energy recorded a goodwill impairment charge of $185 million in the Indiana Electric Integrated reporting unit, reducing the carrying value of the reporting unit to its fair value as of March 31, 2020. See Note 6 for further information.

As a result of classifying the Infrastructure Services and Energy Services Disposal Groups as held for sale, CenterPoint Energy and CERC recognized a goodwill impairment and loss on held for sale during the year ended December 31, 2020. CenterPoint Energy and CERC, as applicable, used the contractual sales price adjusted for estimated working capital and other contractual purchase price adjustments to determine fair value, which are Level 2 inputs. Using this market approach, the fair value of the Infrastructure Services Disposal Group as of March 31, 2020 was determined to be approximately $864 million and the fair value of the Energy Services Disposal Group as of March 31, 2020 was determined to be approximately $402 million. The same methodology was applied to estimate the fair value of the Infrastructure Services Disposal Group and Energy Services Disposal Group on the closing date and through the settlement of the net working capital adjustment, resulting in additional gains or losses upon sale during 2020 . See Note 4 for further information.

Estimated Fair Value of Financial Instruments

The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading” and short-term borrowings are estimated to be approximately equivalent to carrying amounts and have been excluded from the table below. The carrying amounts of non-trading derivative assets and liabilities and CenterPoint Energy’s equity securities, including ZENS related derivative liabilities, are stated at fair value and are excluded from the table below. The fair value of each debt instrument is determined by multiplying the principal amount of each debt instrument by a combination of historical trading prices and comparable issue data. These liabilities, which are not measured at fair value in the Registrants’ Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.
 December 31, 2021December 31, 2020
 
CenterPoint Energy (1)
Houston Electric (1)
CERC
CenterPoint Energy (1)
Houston Electric (1)
CERC
Long-term debt, including current maturities
(in millions)
Carrying amount
$16,086 $5,495 $4,380 $13,401 $5,019 $2,428 
Fair value
17,385 6,230 4,682 15,226 5,957 2,855 

(1)Includes Securitization Bond debt.