CenterPoint Energy 2009 Annual Report Download - page 38

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Rate Proceedings. In May 2009, CenterPoint Houston filed an application at the Texas Utility Commission
seeking approval of certain estimated 2010 energy efficiency program costs, an energy efficiency performance
bonus for 2008 programs and carrying costs, totaling approximately $10 million. The application sought to begin
recovery of these costs through a surcharge effective July 1, 2010. In October 2009, the Texas Utility Commission
issued its order approving recovery of the 2010 energy efficiency program costs and a partial performance bonus,
plus carrying costs, but refused to permit CenterPoint Houston to recover a performance bonus of $2 million on
approximately $10 million in 2008 energy efficiency costs expended pursuant to the terms of a settlement agreement
reached in CenterPoint Houston’s 2006 rate proceeding. CenterPoint Houston has appealed the denial of the full
2008 performance bonus to the district court in Travis County, Texas, where the case remains pending.
CenterPoint Houston Rate Agreement. CenterPoint Houston’s transmission and distribution rates are subject to
the terms of a Settlement Agreement effective in October 2006. The Settlement Agreement provides that, until
June 30, 2010, CenterPoint Houston will not seek to increase its base rates and the other parties will not petition to
decrease those rates. The rate freeze is subject to adjustment for certain limited matters, including the results of the
appeals of the True-Up Order, the implementation of charges associated with securitizations, the impact of severe
weather such as hurricanes and certain other force majeure events. CenterPoint Houston must make a new base rate
filing not later than June 30, 2010, based on a test year ended December 31, 2009, unless the staff of the Texas
Utility Commission and certain cities notify it that such a filing is unnecessary.
Natural Gas Distribution
In almost all communities in which Gas Operations provides natural gas distribution services, it operates under
franchises, certificates or licenses obtained from state and local authorities. The original terms of the franchises, with
various expiration dates, typically range from 10 to 30 years, although franchises in Arkansas are perpetual. Gas
Operations expects to be able to renew expiring franchises. In most cases, franchises to provide natural gas utility
services are not exclusive.
Substantially all of Gas Operations is subject to cost-of-service regulation by the relevant state public utility
commissions and, in Texas, by the Railroad Commission of Texas (Railroad Commission) and those municipalities
served by Gas Operations that have retained original jurisdiction.
Texas. In March 2008, Gas Operations filed a request to change its rates with the Railroad Commission and the
47 cities in its Texas Coast service territory, an area consisting of approximately 230,000 customers in cities and
communities on the outskirts of Houston. In 2008, Gas Operations implemented rates increasing annual revenues by
approximately $3.5 million. The implemented rates were contested by 9 cities in an appeal to the 353rd District
Court in Travis County, Texas. In January 2010, that court reversed the Railroad Commission’s order in part and
remanded the matter to the Railroad Commission. The court concluded that the Railroad Commission did not have
statutory authority to impose on the complaining cities the cost of service adjustment mechanism which the Railroad
Commission had approved in its order. Certain parties filed a motion to modify the district court’s judgment and a
final decision is not expected until April 2010. We and CERC do not expect the outcome of this matter to have a
material adverse impact on our financial condition, results of operations or cash flows or those of CERC.
In July 2009, Gas Operations filed a request to change its rates with the Railroad Commission and the 29 cities in
its Houston service territory, consisting of approximately 940,000 customers in and around Houston. The request
seeks to establish uniform rates, charges and terms and conditions of service for the cities and environs of the
Houston service territory. As finally submitted to the Railroad Commission and the cities, the proposed new rates
would result in an overall increase in annual revenue of $20.4 million, excluding carrying costs on gas inventory of
approximately $2 million. In January 2010, Gas Operations withdrew its request for an annual cost of service
adjustment mechanism due to the uncertainty caused by the court’s ruling in the above-mentioned Texas Coast
appeal. In February 2010, the Railroad Commission issued its decision authorizing a revenue increase of $5.1
million annually, reflecting reduced depreciation rates of $1.2 million. The hearing examiner also recommended a
surcharge of $0.9 million per year to recover Hurricane Ike costs over three years.
Minnesota. In November 2006, the Minnesota Public Utilities Commission (MPUC) denied a request filed by Gas
Operations for a waiver of MPUC rules in order to allow Gas Operations to recover approximately $21 million in
unrecovered purchased gas costs related to periods prior to July 1, 2004. Those unrecovered gas costs were