CenterPoint Energy 2009 Annual Report Download - page 113

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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. CenterPoint Energy and CERC do not expect the outcome of this matter to have a
material adverse impact on the financial condition, results of operations or cash flows of either CenterPoint Energy
or 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.
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.
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 MPUC sought further review of the court of appeals decision from the
Minnesota Supreme Court. In July 2009, the Minnesota Supreme Court reversed the decision of the Minnesota
Court of Appeals and upheld the MPUC’s decision to deny the requested variance. The court’s decision had no
negative impact on CenterPoint Energy’s or CERC’s financial condition, results of operations or cash flows, as the
costs at issue were written off at the time they were disallowed.
In November 2008, Gas Operations filed a request with the MPUC to increase its rates for utility distribution
service by $59.8 million annually. In addition, Gas Operations sought 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. In
January 2010, the MPUC issued its decision authorizing a revenue increase of $41 million per year, with an overall
rate of return of 8.09% (10.24% return on equity).The difference between the rates approved by the MPUC and
amounts collected under the interim rates, $10 million as of December 31, 2009, is recorded in other current
liabilities and will be refunded to customers. The MPUC also authorized Gas Operations to implement a pilot
program for residential and small volume commercial customers that is intended to decouple gas revenues from
customers’ natural gas usage. In February 2010, CERC filed a request for rehearing of the order by the MPUC. No