CenterPoint Energy 2008 Annual Report Download - page 25

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CenterPoint Houston’s electric transmission business, along with those of other owners of transmission facilities
in Texas, supports the operation of the ERCOT ISO. The transmission business has planning, design, construction,
operation and maintenance responsibility for the portion of the transmission grid and for the load-serving substations
it owns, primarily within its certificated area. CenterPoint Houston participates with the ERCOT ISO and other
ERCOT utilities to plan, design, obtain regulatory approval for and construct new transmission lines necessary to
increase bulk power transfer capability and to remove existing constraints on the ERCOT transmission grid.
Recovery of True-Up Balance
The Texas electric restructuring law substantially amended the regulatory structure governing electric utilities in
order to allow retail competition for electric customers beginning in January 2002. The Texas electric restructuring
law required the Texas Utility Commission to conduct a ―true-up‖ proceeding to determine CenterPoint Houston’s
stranded costs and certain other costs resulting from the transition to a competitive retail electric market and to
provide for its recovery of those costs.
In March 2004, CenterPoint Houston filed its true-up application with the Texas Utility Commission, requesting
recovery of $3.7 billion, excluding interest, as allowed under the Texas electric restructuring law. In December
2004, the Texas Utility Commission issued its final order (True-Up Order) allowing CenterPoint Houston to recover
a true-up balance of approximately $2.3 billion, which included interest through August 31, 2004, and provided for
adjustment of the amount to be recovered to include interest on the balance until recovery, along with the principal
portion of additional excess mitigation credits (EMCs) returned to customers after August 31, 2004 and certain other
adjustments.
CenterPoint Houston and other parties filed appeals of the True-Up Order to a district court in Travis County,
Texas. In August 2005, that court issued its judgment on the various appeals. In its judgment, the district court:
• reversed the Texas Utility Commission’s ruling that had denied recovery of a portion of the capacity
auction true-up amounts;
• reversed the Texas Utility Commission’s ruling that precluded CenterPoint Houston from recovering the
interest component of the EMCs paid to REPs; and
• affirmed the True-Up Order in all other respects.
The district court’s decision would have had the effect of restoring approximately $650 million, plus interest, of
the $1.7 billion the Texas Utility Commission had disallowed from CenterPoint Houston’s initial request.
CenterPoint Houston and other parties appealed the district court’s judgment to the Texas Third Court of Appeals,
which issued its decision in December 2007. In its decision, the court of appeals:
• reversed the district court’s judgment to the extent it restored the capacity auction true-up amounts;
• reversed the district court’s judgment to the extent it upheld the Texas Utility Commission’s decision to
allow CenterPoint Houston to recover EMCs paid to Reliant Energy, Inc. (RRI);
• ordered that the tax normalization issue described below be remanded to the Texas Utility Commission as
requested by the Texas Utility Commission; and
• affirmed the district court’s judgment in all other respects.
In April 2008, the court of appeals denied all motions for rehearing and reissued substantially the same opinion as
it had rendered in December 2007.
In June 2008, CenterPoint Houston petitioned the Texas Supreme Court for review of the court of appeals
decision. In its petition, CenterPoint Houston seeks reversal of the parts of the court of appeals decision that (i)
denied recovery of EMCs paid to RRI, (ii) denied recovery of the capacity auction true up amounts allowed by the