CenterPoint Energy 2008 Annual Report Download - page 91

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69
The decrease in asset retirement obligations results in an increase in removal cost regulatory liabilities as discussed
in Note 2(e).
(e) Regulatory Assets and Liabilities
The Company applies the accounting policies established in Statement of Financial Accounting Standards
(SFAS) No. 71, ―Accounting for the Effects of Certain Types of Regulation‖ (SFAS No. 71), to the Electric
Transmission & Distribution business segment and the Natural Gas Distribution business segment and to portions of
the Interstate Pipelines business segment.
The following is a list of regulatory assets/liabilities reflected on the Company’s Consolidated Balance Sheets as
of December 31, 2007 and 2008:
December 31,
2007
2008
(In millions)
Electric generation-related regulatory assets (1) ................................................................................................
$ 545
$ 3
Securitized regulatory asset (1) ................................................................................................................................
2,131
2,430
Unrecognized equity return ................................................................................................................................
(220)
(207)
Unamortized loss on reacquired debt ................................................................................................
79
73
Hurricane Ike restoration cost (2) .............................................................................................................................
—
435
Pension and postretirement-related regulatory asset (3) ................................................................
360
848
Other long-term regulatory assets.............................................................................................................................
98
102
Total regulatory assets (2) ................................................................................................................................
2,993
3,684
Electric generation-related regulatory liabilities................................................................................................
44
—
Estimated removal costs ................................................................................................................................
734
779
Other long-term regulatory liabilities ................................................................................................
50
42
Total regulatory liabilities ................................................................................................................................
828
821
Total regulatory assets and liabilities, net ................................................................................................
$ 2,165
$ 2,863
__________
(1) As discussed in Note 8(b), the Company securitized approximately $483 million of electric generation-
related regulatory assets in February 2008.
(2) Pending review and approval by the Public Utility Commission of Texas (Texas Utility Commission), the
Company is not recording a return on its Hurricane Ike restoration costs, see Note 3(a). Other regulatory
assets that are not earning a return were not material at December 31, 2007 and 2008.
(3) Upon adoption of SFAS No. 158, ―Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132(R)‖ (SFAS
No. 158), the Company recorded a regulatory asset for its unrecognized costs associated with operations
that have historically recovered and currently recover pension and postretirement expenses in rates.
The Company’s rate-regulated businesses recognize removal costs as a component of depreciation expense in
accordance with regulatory treatment. As of December 31, 2007 and 2008, these removal costs of $734 million and
$779 million, respectively, are classified as regulatory liabilities in the Company’s Consolidated Balance Sheets.
A portion of the amount of removal costs that relate to asset retirement obligations have been reclassified from a
regulatory liability to an asset retirement liability in accordance with Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 47, ―Accounting for Conditional Asset Retirement Obligations‖ (FIN 47).
(f) Depreciation and Amortization Expense
Depreciation is computed using the straight-line method based on economic lives or a regulatory-mandated
recovery period. Amortization expense includes amortization of regulatory assets and other intangibles.
See Notes 2(e) and 3(a) for additional discussion of these items.