CenterPoint Energy 2013 Annual Report Download - page 80

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Gas Operations
City of Houston Settlement. In January 2013, the City of Houston initiated a rate proceeding against Gas Operations claiming
regulatory disclosures indicated that Gas Operations was earning more on an annual basis than authorized. In February 2014, Gas
Operations and City of Houston agreed (i) to terminate the rate proceeding, and (ii) that Gas Operations would not seek a base
rate increase before Fall 2016.
Houston and South Texas Gas Reliability Infrastructure Programs (GRIP). The natural gas distribution business of CERC’s
(Gas Operations) Houston and South Texas Divisions each submitted annual GRIP filings on March 28, 2013. For the Houston
Division, the filing was to recover costs related to $55.8 million in incremental capital expenditures that were incurred in 2012.
The increase in revenue requirements for this filing period is $10.7 million annually based on an authorized rate of return of 8.65%.
For the South Texas Division, the filing was to recover costs related to $17.5 million in incremental capital expenditures that were
incurred in 2012. The increase in revenue requirements for this filing period is $2.9 million annually based on an authorized rate
of return of 8.75%. Rates were completely implemented by July 2013.
Arkansas Billing Determinant Rate Adjustment Tariff (BDA) Filing. Gas Operations’ Arkansas Division made its annual BDA
filing with the Arkansas Public Service Commission (APSC) on March 27, 2013 to request recovery of a calendar year 2012
shortfall of $6.8 million. No exceptions were noted by the APSC staff and the revised rates went into effect on June 1, 2013.
Mississippi Rate Regulation Adjustment Rider (RRA). Gas Operations’ Mississippi Division submitted an annual RRA filing
with the Mississippi Public Service Commission (MPSC) on May 1, 2013 to request recovery of a calendar year 2012 earnings
shortfall of approximately $3.2 million. The MPSC approved approximately $2.9 million, and the revised rates went into effect
in July 2013.
Cost of Service Adjustment (COSA) Rate Adjustments. 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, including a request
for an annual cost of service adjustment mechanism, or COSA, that adjusts rates annually for changes in invested capital as well
as certain operating expenses. In 2008, the Railroad Commission approved the implementation of rates increasing annual revenues
from the Texas Coast service territory by approximately $3.5 million. The approved rates were contested by a coalition of nine
cities in an appeal to the 353rd district court in Travis County, Texas. In 2010, the district court ruled that the Railroad Commission
lacked authority to impose the approved COSA mechanism both in those nine cities and in those areas in which the Railroad
Commission has original jurisdiction. The decision by the District Court placed at risk certain revenues collected pursuant to
COSA mechanisms. The Railroad Commission and Gas Operations appealed the court’s ruling on the COSA mechanism. In
January 2014, the Texas Supreme Court confirmed that the Railroad Commission had authority to approve the COSA rate
adjustments utilized by Gas Operations and remanded the case back to state district court.
Minneapolis Franchise. Gas Operations currently provides natural gas distribution services to approximately 124,000
customers in Minneapolis, Minnesota under a franchise that is due to expire at the end of 2014. In June 2013, the Minneapolis
City Council (City Council) voted to hold public hearings on August 1, 2013 to consider (i) authorizing the establishment of a
municipal electric utility and authorizing the city to own, operate, construct and extend electric facilities and acquire the property
of any existing electric public utility operating within Minneapolis, and (ii) authorizing the establishment of a municipal gas utility
and authorizing the city to own, operate, construct and extend gas and similar facilities and acquire the property of any existing
gas public utility operating within Minneapolis. On August 16, 2013, the City Council voted not to conduct a special election on
the question of whether the city should be authorized to establish a municipal utility. Additionally, the City Council directed city
staff to begin negotiations with Gas Operations on a franchise renewal and to work to complete the franchise agreement by June
2014.
Minnesota Rate Proceeding. On August 2, 2013, Gas Operations filed a general rate case in Minnesota to increase overall
revenue $44.3 million annually, based on a rate base of $700 million and return on equity (ROE) of 10.3%. In compliance with
state law, Gas Operations implemented interim rates reflecting $42.9 million dollars of the requested increase for gas used on and
after October 1, 2013. Evidentiary hearings were held before an Administrative Law Judge in January 2014, and Gas Operations
expects a final decision from the Minnesota Public Utilities Commission in its rate proceeding in mid-summer 2014. This rate
filing is intended to recover significant capital expenditures Gas Operations is making in Minnesota and includes moving $15.0
million of energy efficiency expenditures into base rates.