CenterPoint Energy 2010 Annual Report Download - page 28

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6
with interest rates of 4.192% and 5.234% and final maturity dates of February 2020 and February 2023,
respectively. Contemporaneously with the issuance of those bonds, the CTC was terminated and a transition charge
was implemented. During the year ended December 31, 2008, CenterPoint Houston recognized approximately
$5 million in operating income from the CTC.
As of December 31, 2010, we have not recognized an allowed equity return of $178 million on CenterPoint
Houston’s true-up balance because such return will be recognized as it is recovered in rates. During the years ended
December 31, 2008, 2009 and 2010, CenterPoint Houston recognized approximately $13 million, $13 million and
$15 million, respectively, of the allowed equity return.
Hurricane Ike
CenterPoint Houston’s electric delivery system suffered substantial damage as a result of Hurricane Ike, which
struck the upper Texas coast in September 2008. CenterPoint Houston deferred the system restoration costs as
management believed it was probable that such costs would be recovered through the regulatory process. As a result,
system restoration costs did not affect our or CenterPoint Houston’s reported operating income for 2008 or 2009.
CenterPoint Houston filed with the Texas Utility Commission an application for review and approval for recovery
of approximately $678 million, including approximately $608 million in system restoration costs identified as of the
end of February 2009, plus $2 million in regulatory expenses, $13 million in certain debt issuance costs and
$55 million in incurred and projected carrying costs calculated through August 2009. In July 2009, CenterPoint
Houston reached a settlement agreement with the parties to the proceeding. Under that settlement agreement,
CenterPoint Houston was entitled to recover a total of $663 million in costs relating to Hurricane Ike, along with
carrying costs from September 1, 2009 until system restoration bonds were issued. The Texas Utility Commission
issued an order in August 2009 approving the settlement agreement and authorizing recovery of $663 million, of
which $643 million was attributable to distribution service and eligible for securitization and the remaining
$20 million was attributable to transmission service and eligible for recovery through the existing mechanisms
established to recover transmission costs.
In August 2009, the Texas Utility Commission issued a financing order allowing CenterPoint Houston to
securitize $643 million in distribution service costs plus carrying charges from September 1, 2009 through the date
the system restoration bonds were issued, as well as certain up-front qualified costs capped at approximately
$6 million. In November 2009, CenterPoint Houston issued approximately $665 million of system restoration
bonds through its CenterPoint Energy Restoration Bond Company, LLC subsidiary with interest rates of 1.833% to
4.243% and final maturity dates ranging from February 2016 to August 2023. The bonds will be repaid over time
through a charge imposed on customers.
In accordance with the financing order, CenterPoint Houston also placed a separate customer credit in effect
when the storm restoration bonds were issued. That credit (ADFIT Credit) is applied to customers’ bills while the
bonds are outstanding to reflect the benefit of accumulated deferred federal income taxes (ADFIT) associated with
the storm restoration costs (including a carrying charge of 11.075%). The beginning balance of the ADFIT related to
storm restoration costs was approximately $207 million and will decline over the life of the system restoration bonds
as taxes are paid on the system restoration tariffs. The ADFIT Credit reduced operating income in 2010 by
approximately $23 million.
Customers
CenterPoint Houston serves nearly all of the Houston/Galveston metropolitan area. CenterPoint Houston’s
customers consist of 99 REPs, which sell electricity to over two million metered customers in CenterPoint
Houston’s certificated service area, and municipalities, electric cooperatives and other distribution companies
located outside CenterPoint Houston’s certificated service area. Each REP is licensed by, and must meet minimum
creditworthiness criteria established by, the Texas Utility Commission.
Sales to REPs that are subsidiaries of NRG Retail LLC (NRG Retail) represented approximately 48%, 44% and
38% of CenterPoint Houston’s transmission and distribution revenues in 2008, 2009 and 2010, respectively. Sales
to subsidiaries of TXU Energy Retail Company LLC (TXU Energy Retail) represented approximately 11%, 12%