CenterPoint Energy 2008 Annual Report Download - page 106

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(c) Rate Proceedings
Texas. In March 2008, Gas Operations filed a request to change its rates with the Railroad Commission of Texas
(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. The request sought to establish uniform
rates, charges and terms and conditions of service for the cities and environs of the Texas Coast service territory. Of
the 47 cities, 23 either affirmatively approved or allowed the filed rates to go into effect by operation of law. Nine
other cities were represented by the Texas Coast Utilities Coalition (TCUC) and 15 cities were represented by the
Gulf Coast Coalition of Cities (GCCC). In July 2008, Gas Operations reached a settlement agreement with the
GCCC. That settlement agreement, if implemented across the entire Texas Coast service territory, would allow Gas
Operations a $3.4 million annual increase in revenues. The TCUC cities denied the rate change request and Gas
Operations appealed the denial of rates to the Railroad Commission. The Railroad Commission issued an order in
October 2008, which, if implemented across the entire Texas Coast service territory, would result in an annual
revenue increase of $3.7 million. Both the Railroad Commission order and the settlement provide for an annual rate
adjustment mechanism to reflect changes in operating expenses and revenues as well as changes in capital
investment and associated changes in revenue-related taxes. In December 2008, the Railroad Commission issued an
order on rehearing. Parties have filed second motions for rehearing on this order. However, in December 2008, Gas
Operations implemented the approved rates for the nine TCUC cities and the environs, subject to refund. The
impact of the Railroad Commission’s order on rehearing on the settled rates is still under review, and how rates will
be conformed among all cities in the Texas Coast service territory is unknown at this time. A final decision from the
Railroad Commission regarding the second motions for rehearing is expected no later than March 2009.
In September 2008, CenterPoint Houston filed an application with the Texas Utility Commission requesting an
interim update to its wholesale transmission rate. The filing resulted in a revenue requirement increase of
$22.5 million over rates then in effect. Approximately 74% will be paid by distribution companies other than
CenterPoint Houston. The remaining 26% represents CenterPoint Houston’s share. That amount cannot be included
in rates until 2010 under the terms of the rate freeze implemented in the settlement of CenterPoint Houston’s 2006
rate proceeding. In November 2008, the Texas Utility Commission approved CenterPoint Houston’s request. The
interim rates became effective for service on and after November 5, 2008.
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
identified as a result of revisions to previously approved calculations of unrecovered purchased gas costs. Following
that denial, Gas Operations recorded a $21 million adjustment to reduce pre-tax earnings in the fourth quarter of
2006 and reduced the regulatory asset related to these costs by an equal amount. In March 2007, following the
MPUC’s denial of reconsideration of its ruling, Gas Operations petitioned the Minnesota Court of Appeals for
review of the MPUC’s decision, and in May 2008 that court ruled that the MPUC had been arbitrary and capricious
in denying Gas Operations a waiver. The court ordered the case remanded to the MPUC for reconsideration under
the same principles the MPUC had applied in previously granted waiver requests. The MPUC sought further review
of the court of appeals decision from the Minnesota Supreme Court, and in July 2008, the Minnesota Supreme Court
agreed to review the decision. In January 2009, the Minnesota Supreme Court heard oral arguments. While there is
no deadline for a decision, a decision is expected by the end of the third quarter of 2009. While no prediction can be
made as to the ultimate outcome, this matter will have no negative impact on the Company’s financial condition,
results of operations or cash flows.
In November 2008, Gas Operations filed a request with the MPUC to increase its rates for utility distribution
service. If approved by the MPUC, the proposed new rates would result in an overall increase in annual revenue of
$59.8 million. The proposed increase would allow Gas Operations to recover increased operating costs, including
higher bad debt and collection expenses, the cost of improved customer service and inflationary increases in other
expenses. It also would allow recovery of increased costs related to conservation improvement programs and
provide a return for the additional capital invested to serve its customers. In addition, Gas Operations is seeking an
adjustment mechanism that would annually adjust rates to reflect changes in use per customer. In December 2008,
the MPUC accepted the case and approved an interim rate increase of $51.2 million, which became effective on
January 2, 2009, subject to refund. The MPUC is allowed ten months to issue a final decision; however, an
extension of time can occur in certain circumstances.