CenterPoint Energy 2009 Annual Report Download - page 96

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74
(e) Regulatory Assets and Liabilities
CenterPoint Energy applies the guidance for accounting for regulated operations, 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 CenterPoint Energy’s Consolidated Balance
Sheets as of December 31, 2008 and 2009:
December 31,
2008 2009
(In millions)
Securitized regulatory asset (1) ...................................................................................................
.
$ 2,430 $ 2,886
Unrecognized equity return ......................................................................................................
.
(207) (232)
Unamortized loss on reacquired deb
t
..........................................................................................
.
73 67
Hurricane Ike restoration cost (1) ................................................................................................
.
435 5
Pension and postretiremen
t
-related regulatory asse
t
...................................................................
.
848 781
Other lon
g
-term re
g
ulator
y
assets(2) ...........................................................................................
.
105 170
Total re
g
ulator
y
assets (1) .....................................................................................................
.
3,684 3,677
Estimated removal costs ..............................................................................................................
.
779 818
Other long-term regulatory liabilities ..........................................................................................
.
42 103
Total regulatory liabilities .....................................................................................................
.
821 921
Total regulatory assets and liabilities, ne
t
.............................................................................
.
$ 2,863 $ 2,756
__________
(1) As discussed in Note 8(b), CenterPoint Houston securitized approximately $665 million of Hurricane Ike
restoration costs in November 2009. CenterPoint Houston did not record a return on Hurricane Ike
restoration costs until approval by the Public Utility Commission of Texas (Texas Utility Commission) was
received in 2009. Other regulatory assets that are not earning a return were not material at December 31,
2008 and 2009.
(2) CenterPoint Houston’s actuarially determined pension expense for 2009 in excess of the 2007 base year
amount is being deferred for rate making purposes until its next general rate case pursuant to Texas law.
CenterPoint Houston deferred as a regulatory asset $32 million in pension and other postemployment
expenses during the year ended December 31, 2009.
CenterPoint Energy’s rate-regulated businesses recognize removal costs as a component of depreciation expense
in accordance with regulatory treatment. As of December 31, 2008 and 2009, these removal costs of $779 million
and $818 million, respectively, are classified as regulatory liabilities in CenterPoint Energy’s Consolidated Balance
Sheets. A portion of the amount of removal costs that related to asset retirement obligations has been reclassified
from a regulatory liability to an asset retirement liability in accordance with accounting guidance for conditional
asset retirement obligations. At December 31, 2008 and 2009, CenterPoint Energy’s asset retirement obligations
were $63 million and $82 million, respectively. The increase in asset retirement obligation in 2009 of $19 million is
primarily attributable to the decrease in the credit-adjusted risk-free rate used to value the asset retirement obligation
as of the end of the period.
(f) Depreciation and Amortization Expense
Depreciation is computed using the straight-line method based on economic lives or regulatory-mandated
recovery periods. Amortization expense includes amortization of regulatory assets and other intangibles.
See Notes 2(e) and 3(a) for additional discussion of these items.
The following table presents depreciation and amortization expense for 2007, 2008 and 2009 (in millions).
2007 2008 2009
Depreciation expense ............................................................................................. $ 455 $ 478 $496
Amortization expense ............................................................................................ 176 230 247
Total depreciation and amortization expense .................................................. $ 631 $ 708 $ 743