CenterPoint Energy 2009 Annual Report Download - page 110

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(b) Recovery of True-Up Balance
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 Choice Plan (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 retail electric providers (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 RRI Energy, Inc. (RRI) (formerly known as Reliant
Energy, Inc. and Reliant Resources, Inc.);
• 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
district court, (iii) affirmed the Texas Utility Commission’s rulings that denied recovery of approximately
$378 million related to depreciation and (iv) affirmed the Texas Utility Commission’s refusal to permit CenterPoint
Houston to utilize the partial stock valuation methodology for determining the market value of its former generation
assets. Two other petitions for review were filed with the Texas Supreme Court by other parties to the appeal. In
those petitions parties contend that (i) the Texas Utility Commission was without authority to fashion the
methodology it used for valuing the former generation assets after it had determined that CenterPoint Houston could
not use the partial stock valuation method, (ii) in fashioning the method it used for valuing the former generating
assets, the Texas Utility Commission deprived parties of their due process rights and an opportunity to be heard, (iii)
the net book value of the generating assets should have been adjusted downward due to the impact of a purchase
option that had been granted to RRI, (iv) CenterPoint Houston should not have been permitted to recover
construction work in progress balances without proving those amounts in the manner required by law and (v) the
Texas Utility Commission was without authority to award interest on the capacity auction true up award.