CENTERPOINT ENERGY, INC. No Registrant makes any representations as to the information related solely to
The following combined discussion and analysis should be read in combination with the consolidated financial statements included in Item 8 herein. When discussingCenterPoint Energy's consolidated financial information, it includes the results ofHouston Electric and CERC, which, along withCenterPoint Energy , are collectively referred to as the Registrants. Where appropriate, information relating to a specific registrant has been segregated and labeled as such. Unless the context indicates otherwise, specific references toHouston Electric and CERC also pertain toCenterPoint Energy . In this combined Form 10-K, the terms "our," "we" and "us" are used as abbreviated references toCenterPoint Energy, Inc. together with its consolidated subsidiaries. OVERVIEW
Background
CenterPoint Energy, Inc. is a public utility holding company and owns interests in Enable.CenterPoint Energy's operating subsidiaries own and operate electric transmission, distribution and generation and natural gas distribution facilities, and provide energy performance contracting and sustainable infrastructure services. For a detailed description ofCenterPoint Energy's operating subsidiaries and discontinued operations, please read Note 1 to the consolidated financial statements.Houston Electric is an indirect, wholly-owned subsidiary ofCenterPoint Energy that provides electric transmission service to transmission service customers in theERCOT region and distribution service to REPs serving theTexas Gulf Coast area that includes the city ofHouston .CERC Corp. is an indirect, wholly-owned subsidiary ofCenterPoint Energy that owns and operates natural gas distribution facilities in six states, with operating subsidiaries that own and operate permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies, and provide temporary delivery of LNG and CNG throughout the contiguous 48 states.
Reportable Segments
In this Management's Discussion and Analysis, we discuss our results from continuing operations on a consolidated basis and individually for each of our reportable segments, which are listed below. We also discuss our liquidity, capital resources and critical accounting policies. We are first and foremost an energy delivery company and it is our intention to remain focused on these segments of the energy business. The results of our business operations are significantly impacted by weather, customer growth, economic conditions, cost management, competition, rate proceedings before regulatory agencies and other actions of the various regulatory agencies to whose jurisdiction we are subject, among other factors. During the fourth quarter of 2020,CenterPoint Energy's CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised ofHouston Electric andIndiana Electric . Also, the Natural Gas Distribution reportable segment was renamed Natural Gas. Additionally, during the fourth quarter of 2020,CenterPoint Energy's CODM requested that the CERC corporate functions be included within the financial results ofCenterPoint Energy's Natural Gas reportable segment for review purposes. During the fourth quarter of 2020, CERC's CODM requested that the CERC corporate functions be included within the financial results ofCERC's Natural Gas reportable segment for review purposes. As a result of this change, and following the divestiture of theEnergy Services Disposal Group , CERC now consists of a single reportable segment.Houston Electric also consists of a single reportable segment.
As of
•The Electric reportable segment includes electric transmission and distribution services inHouston Electric's transmission and distribution service territory that are subject to rate regulation and impacts of generation-related stranded costs and other true-up balances recoverable by the regulated electric utility and energy delivery services to electric customers and electric generation assets to serve its electric customers and optimize those assets in the 44 --------------------------------------------------------------------------------
wholesale power market in
•The Natural Gas reportable segment includes natural gas distribution services that are subject to rate regulation inCenterPoint Energy's and CERC's service territories, as well as home appliance maintenance and repair services to customers inMinnesota and home repair protection plans to natural gas customers inTexas andLouisiana through a third party. For further information about the Natural Gas reportable segment, see "Business - Our Business - Natural Gas" in Item 1 of Part I of this report. •The Midstream Investments reportable segment includesCenterPoint Energy's equity investment in Enable and is dependent upon the results of Enable, which are driven primarily by the volume of natural gas, NGLs and crude oil that Enable gathers, processes and transports across its systems and other factors as discussed below under "- Factors Influencing Midstream Investments." OnFebruary 16, 2021 , Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable's outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held byCenterPoint Energy , and in returnCenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units. For further information about the Midstream Investments reportable segment, see "Business - Our Business - Midstream Investments" in Item 1 of Part I of this report. For further information on the Enable Merger, see Note 22 to the consolidated financial statements.CenterPoint Energy's Corporate and Other includes office buildings and other real estate used for business operations, energy performance contracting and sustainable infrastructure services and other corporate support operations. EXECUTIVE SUMMARY We expect our and Enable's businesses to continue to be affected by the key factors and trends discussed below. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove to be incorrect, our actual results may vary materially from our expected results.
Factors Influencing Our Businesses and Industry Trends
We are an energy delivery company. The majority of our revenues are generated from the transmission and delivery of electricity and the sale of natural gas by our subsidiaries. OnFebruary 1, 2019 , we acquired Vectren for approximately$6 billion in cash. Through its subsidiaries, Vectren's operations consist of utility and non-utility businesses. The utility operations include three public utilities,Indiana Gas , SIGECO and VEDO, which, in the aggregate, provide natural gas distribution and transportation services to nearly 67% ofIndiana and about 20% ofOhio and electric transmission and distribution services to southwesternIndiana , including power generating and wholesale power operations. In total, these utility operations supply natural gas and electricity to over one million customers inIndiana andOhio . The non-utility operations included ESG and Infrastructure Services. ESG provides energy services through performance-based energy contracting operations and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects. ESG assists schools, hospitals, governmental facilities and other private institutions with reducing energy and maintenance costs by upgrading their facilities with energy-efficient equipment. ESG operates throughoutthe United States . Infrastructure Services, through its wholly-owned subsidiaries, provided underground pipeline and repair services to many utilities, including our utilities, as well as other industries. Concurrent with the completion of the Merger in 2019, we added two new reportable segments, Indiana Electric Integrated and Infrastructure Services. OnFebruary 3, 2020 ,CenterPoint Energy , through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell theInfrastructure Services Disposal Group . The transaction closed onApril 9, 2020 . For further information, see Note 4 to the consolidated financial statements. During the fourth quarter of 2020,CenterPoint Energy's CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised ofHouston Electric andIndiana Electric . See Note 18 for further changes on reportable segments during 2020. To assess our financial performance, our management primarily monitors net income and cash flows, among other things, from our reportable segments. Within these broader financial measures, we monitor margins, interest expense, capital spending and working capital requirements. In addition to these financial measures, we also monitor a number of variables that management considers important to our reportable segments, including the number of customers, throughput, use per customer, 45 --------------------------------------------------------------------------------
commodity prices and heating and cooling degree days. From an operational standpoint, we monitor operation and maintenance expense, safety factors, system reliability and customer satisfaction to gauge our performance.
The nature of our businesses requires significant amounts of capital investment, and we rely on internally generated cash, borrowings under our credit facilities, proceeds from commercial paper and issuances of debt and equity in the capital markets to satisfy these capital needs. With respect to CERC, we intend to use proceeds from any potential asset sales, including the potential dispositions of our Natural Gas businesses inArkansas andOklahoma , to satisfy a portion of its capital needs. We strive to maintain investment grade ratings for our securities to access the capital markets on terms we consider reasonable. A reduction in our ratings generally would increase our borrowing costs for new issuances of debt, as well as borrowing costs under our existing revolving credit facilities, and may prevent us from accessing the commercial paper markets. Disruptions in the financial markets can also affect the availability of new capital on terms we consider attractive. In those circumstances, we may not be able to obtain certain types of external financing or may be required to accept terms less favorable than they would otherwise accept. For that reason, we seek to maintain adequate liquidity for our businesses through existing credit facilities and prudent refinancing of existing debt. To the extent adverse economic conditions affect our suppliers and customers, results from our energy delivery businesses may suffer. For example, the economic impacts of COVID-19 have been felt nationwide, with every region of the country experiencing deep reductions in employment in the second quarter of 2020. We believe that all of the states that we serve have improved economically since then and continue to recover, although at different rates. Each state has a unique economy and is driven by different industrial sectors. Our largest customers reflect the diversity in industries in the states across our footprint. For example,Houston Electric is largely concentrated inHouston, Texas , a diverse economy where a higher percentage of employment is tied to the energy sector relative to other regions of the country. Although theHouston area represents a large part of our customer base, we have a diverse customer base throughout the eight states our utility businesses serve. InMinnesota , for instance, education and health services are the state's largest sectors, whereasArkansas has a large food manufacturing industry.Indiana andOhio are impacted by changes in the Midwest economy in general and changes in particular industries concentrated in the Midwest such as automotive, feed and grain processing. Some industries are driven by population growth like education and health care, while others may be influenced by strength in the national or international economy. Also, adverse economic conditions, coupled with concerns for protecting the environment and increased availability of alternate energy sources, may cause consumers to use less energy or avoid expansions of their facilities, including natural gas facilities, resulting in less demand for our services. Long-term national trends indicate customers have reduced their energy consumption, which could adversely affect our results. However, due to more affordable energy prices and continued economic improvement in the areas we serve, the trend toward lower usage has slowed. To the extent population growth is affected by lower energy prices and there is financial pressure on some of our customers who operate within the energy industry, there may be an impact on the growth rate of our customer base and overall demand. Despite the overall economic impact of the recession, housing growth has continued and accelerated in 2020. Lower interest rates have helped single family housing starts in theHouston andMinneapolis to exceed growth in previous years. Multifamily residential customer growth is affected by the cyclical nature of apartment construction. Beginning in 2019 and continuing through 2020, a new construction cycle inHouston helped overall residential customer growth to surpass the long-term trend of 2%. Management expects residential meter growth forHouston Electric to remain in line with long term trends at approximately 2%. Typical customer growth in the jurisdictions served by the Natural Gas reportable segment is approximately 1%.CERC's Natural Gas customer growth was 1.7% for 2020, which is slightly higher than in previous years. Management expects residential meter growth for CERC to remain in line with long term trends at approximately 1%. Performance of the Electric reportable segment and the Natural Gas reportable segment is significantly influenced by energy usage per customer, which is significantly impacted by weather conditions. ForHouston Electric , revenues are generally higher during the warmer months when more electricity is used for cooling purposes. ForIndiana Electric , a significant portion of its sales are for space heating and cooling. Consequently, as in certain past years,Indiana Electric's results of operations may be adversely affected by warmer-than-normal heating season weather or colder-than-normal cooling season weather. ForCERC's Natural Gas , demand for natural gas for heating purposes is generally higher in the colder months. Therefore, we compare our results on a weather-adjusted basis. In 2020, theHouston area experienced weather that was warmer than normal compared to 2019. Although the summer months were somewhat hotter than normal, the warmer than normal temperatures started early in the year with a mild winter. Our Natural Gas service territories experienced warmer weather in 2020 than it has since 2017. Historically, bothCenterPoint Energy's TDU and CERC's Natural Gas have utilized weather hedges to help reduce the impact of mild weather on their financial results.CenterPoint Energy's TDU and CERC's Natural Gas entered into a weather hedge for the 2019-2020 winter heating season inTexas where no weather normalization mechanisms exist. In CERC's non-Texas jurisdictions, weather 46 --------------------------------------------------------------------------------
normalization mechanisms or decoupling in the
In our Natural Gas Indiana andOhio service territories, normal temperature adjustment and decoupling mechanisms largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns. Our Natural Gas operations inOhio has a straight fixed variable rate design for its residential customers. This rate design mitigates approximately 90% of theOhio service territory's weather risk and risk of decreasing consumption specific to its small customer classes. WhileIndiana Electric has neither a normal temperature adjustment mechanism nor a decoupling mechanism, rate designs provide for a lost margin recovery mechanism that operates in tandem with conservation initiatives. Sales of natural gas to residential and commercial customers byIndiana Gas , SIGECO and VEDO are largely seasonal and are impacted by weather. Trends in the average consumption among natural gas residential and commercial customers have tended to decline as more efficient appliances and furnaces are installed, and as these utilities have implemented conservation programs. ForCERC's Natural Gas inMinnesota andArkansas , rate adjustment mechanisms counter the impact of changes in customer usage. In addition, in many of our service areas, particularly in theHouston area andMinnesota , as applicable to each registrant, we have benefited from growth in the number of customers. We anticipate that this trend will continue as the regions' economies continue to grow. The profitability of our businesses is influenced significantly by the regulatory treatment we receive from the various state and local regulators who set our electric and natural gas distribution rates.
For details related to our pending and completed regulatory proceedings and orders in 2020 and to date in 2021, see "-Liquidity and Capital Resources -Regulatory Matters" in Item 7 of Part II of this report, which discussion is incorporated herein by reference.
We believe the long-term outlook for ESG's performance contracting and sustainable infrastructure opportunities remains strong with continued national focus expected on energy conservation and sustainability, renewable energy and security as power prices across the country rise and customer focus on new, efficient and clean sources of energy grows. The regulation of natural gas pipelines and related facilities by federal and state regulatory agencies affectsCenterPoint Energy's and CERC's businesses. In accordance with natural gas pipeline safety and integrity regulations,CenterPoint Energy and CERC are making, and will continue to make, significant capital investments in their service territories, which are necessary to help operate and maintain a safe, reliable and growing natural gas system.CenterPoint Energy's and CERC's compliance expenses may also increase as a result of preventative measures required under these regulations. Consequently, new rates in the areas they serve are necessary to recover these increasing costs. Consistent with the regulatory treatment of pension costs, the Registrants defer the amount of pension expense that differs from the level of pension expense included in the Registrants' base rates for the Electric reportable segment and Natural Gas reportable segment in theirTexas jurisdictions.CenterPoint Energy expects to contribute a minimum of approximately$61 million to its pension plans in 2021. Factors Influencing Midstream Investments (CenterPoint Energy ) The results ofCenterPoint Energy's Midstream Investments reportable segment are dependent upon the results of Enable, which are driven primarily by the volume of natural gas, NGLs and crude oil that Enable gathers, processes and transports across its systems. These volumes depend significantly on the level of production from natural gas wells connected to Enable's systems across a number ofU.S. mid-continent markets. Aggregate production volumes are affected by the overall amount of oil and gas drilling and completion activities. Production must be maintained or increased by new drilling or other activity, because the production rate of oil and gas wells declines over time. Enable expects its business to continue to be impacted by the trends affecting the midstream industry. Enable's outlook is based on its management's assumptions regarding the impact of these trends that it has developed by interpreting the information currently available to it. If Enable management's assumptions or interpretation of available information prove to be incorrect, Enable's future financial condition and results of operations may differ materially from its expectations.
Enable's business is impacted by commodity prices, which have remained historically low and otherwise experienced significant volatility in recent years, including due to the effects of the COVID-19 pandemic, among other factors. Commodity prices impact the drilling and production of natural gas and crude oil in the areas served by Enable's systems, and the volumes
47
--------------------------------------------------------------------------------
on its systems can be negatively impacted if producers decrease drilling and
production in those areas served. A decrease in volumes on Enable's systems due
to a decrease in drilling or production by its producer customers could
adversely affect Enable's results. In addition, Enable's processing arrangements
expose it to commodity price fluctuations. Enable has attempted to mitigate the
impact of commodity prices on its business by entering into hedges, focusing on
contracting fee-based business and converting existing commodity-based contracts
to fee-based contracts. Prior to the COVID-19 pandemic, the price of natural
gas, NGLs and crude oil had begun to decline due to oversupply. The price of,
and global demand for, these commodities declined significantly during the first
half of 2020 as a result of the ongoing economic effects of the COVID-19
pandemic and the significant governmental measures being implemented to control
the spread of the virus, which was further exacerbated by the dispute in the
first quarter of 2020 over crude oil production levels between Russia and
members of OPEC led by Saudi Arabia . For further information on the impact of
these conditions on Enable, see "Significant Events-Enable Quarterly
Distributions" below. Subsequent to an agreement in April 2020 by a coalition of
nations to reduce production of crude oil and the increase in global economic
activity as governmental measures implemented to control the pandemic have
eased, the price of crude oil has begun to rise relative to the 2020 production
low. In response to crude oil price increases, crude oil, associated natural gas
and NGL production has begun to increase.
Enable's long-term view is that natural gas and crude oil will continue to be a
critical component of energy demand in the United States and worldwide because
natural gas has lower emissions and is a practical fuel for a variety of
applications. As electric energy demand continues to grow, Enable's management
believes that natural gas will continue to replace coal. As the global market
for LNG continues to develop, Enable's management believes that natural gas
supply in the United States is well positioned to address demand in the United
States , as well as in other areas of the world, including Western Europe and
Asia . As the desire to lower emissions continues, Enable's management believes
that natural gas will be seen as a practical alternative to higher-emissions
liquids fuels, such as bunker fuels in international shipping. Supplies of crude
oil have risen primarily from the success of unconventional drilling in tight
oil plays across the United States . Liquid fuels derived from crude oil have
remained a primary source of energy in the United States , and exports of crude
oil and liquid fuels from the United States have risen dramatically over the
last five years. As the supply of crude oil has increased in the United States ,
Enable's management believes that the United States will continue to be a source
of supply to the global crude oil market.
For information on the Enable Merger, see Note 22 to the consolidated financial statements.
Significant EventsFebruary 2021 Winter Storm Event. InFebruary 2021 , portions ofthe United States experienced an extreme and unprecedented winter weather event resulting in corresponding electricity generation shortages, including inTexas , and natural gas shortages and increased wholesale prices of natural gas inthe United States . ManyHouston Electric and, to a lesser extent, CERC customers have been severely impacted by outages in electricity and natural gas delivery during theFebruary 2021 Winter Storm Event. As a result of this weather event, the governors ofTexas ,Oklahoma andLouisiana have declared states of either disaster or emergencies in their respective states. Subsequently,President Biden also approved major disaster declarations for all or parts ofTexas ,Oklahoma andLouisiana .CenterPoint Energy has a corporate response planning team comprised of employees across the organization, including members of senior management, that assesses risks to its business, including for health, safety and environmental matters and personnel issues, and has addressed various impacts of theFebruary 2021 Winter Storm Event as such impacts have developed. The corporate response planning team has coordinated additional support for operations and other personnel responding directly to theFebruary 2021 Winter Storm Event. TheFebruary 2021 Winter Storm Event has had, and may continue to have, financial impacts onCenterPoint Energy, Houston Electric and CERC, including substantial increases in prices for natural gas, decreased revenues atHouston Electric due toERCOT -mandated outages, the need to raise additional external financing to pay for natural gas working capital, potential impacts to credit metrics, significant impacts to the REPs serving customers ofHouston Electric , including the REPs' ability to pay invoices, increases in bad debt expense, issues with counterparties and customers, litigation and investigations or inquiries from government or regulatory agencies and entities, and other financial impacts.CenterPoint Energy does not anticipate meaningful long-term changes to its credit profile or credit ratings given its anticipated access to external financing sources and the regulatory mechanisms that are in place to recover these excess costs. See Note 22 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors Affecting Future Earnings" and " - Liquidity and Capital Resources - Future Sources and Uses of Cash" below for further information. COVID-19 Impacts. OnMarch 11, 2020 , theWorld Health Organization declared the current COVID-19 outbreak to be a global pandemic, and onMarch 13, 2020 ,the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including business shutdowns and closures, travel restrictions, quarantines, 48 -------------------------------------------------------------------------------- curfews, shelter in place and "stay-at-home" orders in our service territories. State and local authorities have also implemented multi-step policies with the goal of re-opening various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. Governing authorities continue to reassess re-opening approaches and decisions for their respective jurisdictions given the number of COVID-19 cases and hospitalizations. The COVID-19 outbreak significantly worsened inthe United States during the winter months, which caused federal, state and local governments to reconsider restrictions on business and social activities, resulting in the curtailment of the re-opening of the economy. We have experienced some resulting disruptions to our business operations, as these restrictions significantly impacted, and may continue to impact, many sectors of the economy with various businesses curtailing or ceasing normal operations. For example, sincemid-March 2020 , we have had to restrict access to certain office locations aroundthe United States . However, as of the date of this Form 10-K, we have increased the permitted occupancy of certain of our offices and facilities. The rest of our office-based personnel continue to be productive through alternate work arrangements, leveraging a strong technology platform to support our employees working remotely to perform their duties or directly from their vehicles to serve our customers. Where we must maintain a presence in the field, we have adjusted our operational protocols to minimize exposure and risk to our field personnel, customers and the communities we serve, including, among other things, modifying our work schedules and reporting locations, potentially delaying certain work types as appropriate, such as maintenance and capital projects, and adjusting project scope and scale to adhere to safety protocols, while continuing to maintain the work activities necessary for safe and reliable service to our customers with increased safety precautions. While certain of our personnel have been, and may continue to be, quarantined, our operations and corporate functions have not been adversely affected to date. Certain of our Natural Gas service territories were impacted by Hurricane Laura inAugust 2020 , as well as Hurricanes Sally, Delta and Zeta inOctober 2020 . While our Natural Gas field personnel assessed and stabilized our impacted Natural Gas facilities, our electric operations mutual assistance crews fromTexas andIndiana worked safely to support the storm restoration efforts of other impacted utilities. Despite COVID-19 conditions, neither our personnel nor our facilities experienced significant performance or operational impacts from Hurricanes Laura, Sally, Delta and Zeta. Our first priority in our response to this pandemic has been the health and safety of our employees, our customers and other business counterparties. Because we provide a critical service to our customers, it is paramount that we keep our employees who operate our business safe and informed, and we have taken and are updating precautions for that purpose. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers' operations under the circumstances. When an employee tests positive for COVID-19, we investigate appropriately and take action to identify and notify potentially exposed individuals, coordinate testing and clean work locations, among other precautionary measures. If our employees feel sick or are awaiting COVID-19 test results, they do not report to their respective work locations to protect the health and safety of other employees. In addition, we have assessed and updated our existing business continuity plans for each of our business units in the context of this pandemic. We have a corporate response planning team who assesses risks to our business, including for health, safety and environmental matters and personnel issues, and addresses various impacts of the situation, as they have developed. Throughout the year, this corporate response planning team has provided periodic updates on COVID-19 to the Board of Directors, which has responsibility for, and is actively involved in, the oversight of risks that could impactCenterPoint Energy . We also have modified certain business practices (including those related to employee travel, employee work locations and participation in meetings, events and conferences) to conform to government restrictions and best practices encouraged by theCenters for Disease Control and Prevention , theWorld Health Organization and other governmental and regulatory authorities. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented. We are continuing to work with our suppliers on any potential impacts to our supply chain, including identifying any negative impacts to material supplies, working to mitigate them and pre-planning for longer-term emergency response protocols. SinceMarch 2020 , we have not experienced significant disruptions or challenges with respect to our supply chain from the COVID-19 pandemic as a result of the aforementioned efforts with our core vendors and suppliers. This is a continuously evolving situation and could lead to further disruption of economic activity in our markets; we will continue to monitor developments affecting our workforce, our customers and our suppliers and take additional precautions as we believe are warranted. The extended slowdown of economic growth, decreased demand for commodities and material changes in governmental or regulatory policy inthe United States has resulted in, and could continue to result in, lower growth, including, in certain instances, customer growth, and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. While residential electric usage has increased as individuals continue to stay at home or work remotely, our business has experienced reduced demand and usage among our electric and natural gas commercial and industrial customers as well as a decrease in revenues from disconnections and reconnections due to the disconnect moratoriums across our service territories due to COVID-19, which have either expired or may expire during the 49 -------------------------------------------------------------------------------- second quarter of 2021 in certain of the Registrants' service territories. Certain aspects ofHouston Electric's rate design could mitigate the negative impact of reduced demand among commercial and industrial users. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, has also been negatively impacted under the current economic conditions. ForHouston Electric , we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. Benefits under the COVID-19 ERP ended onSeptember 30, 2020 .Houston Electric has not experienced significant impacts with respect to its REPs meeting their payment obligations sinceMarch 2020 . In our Natural Gas service territories and forIndiana Electric , we informed customers that disconnections for non-payment had been temporarily suspended and in certain service territories continue to be temporarily suspended. However, the disconnect moratoriums have expired in certain of the Registrants' service territories. As a result of the disconnect moratoriums across our Natural Gas service territories and other payment deferrals or arrangements, days outstanding on receivables and uncollectible accounts have increased, resulting in an increase to allowance for credit losses. To the extent these conditions in our service territories persist, our bad debt expense from uncollectible accounts could continue to increase, negatively impacting our financial condition, results of operations and cash flows. Our Natural Gas service territories andIndiana Electric have either (1) received authority from their public utility commissions to defer bad debt expense associated with COVID-19 as a regulatory asset or (2) exercised existing authority to recover bad debt expense through an existing tracking mechanism. Additionally, while we have not experienced delays to date due to COVID-19 with respect to our regulatory proceedings, we could experience significant delays in scheduling proceedings or hearings and in obtaining orders from regulatory agencies. Any such delays could adversely affect our future results of operations. Due to macroeconomic conditions related in part to the COVID-19 pandemic and the decline in our Common Stock price, we identified a triggering event to perform an interim goodwill impairment test as ofMarch 31, 2020 and recognized a non-cash goodwill impairment charge of$185 million in ourIndiana Electric Integrated reporting unit for the three months endedMarch 31, 2020 . For further discussion of this impairment, see Note 10 to the consolidated financial statements.CenterPoint Energy and CERC performed their annual goodwill impairment tests in the third quarter of 2020 and determined that no goodwill impairment charge was required for any reporting unit as a result of those tests. No triggering events occurred and no impairment tests were performed for subsequent periods. As of the date of this Form 10-K, our electric facilities and natural gas distribution systems have remained operational and our customers have continued to receive service. Although we continue to assess the COVID-19 situation, we cannot estimate with any degree of certainty the full financial impact of the COVID-19 pandemic on our business. Nor can we predict the effect that the significant disruption and volatility currently being experienced in the markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time. However, we expect the COVID-19 pandemic to adversely impact us in future quarters due to the considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, closures or disruptions, among other things. The ultimate impacts to our business, financial condition, results of operations, liquidity and cash flows will depend on future developments and evolving factors, including, among others, the ultimate duration, scope and spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the development and availability of effective treatments, including those who may or may not take advantage of such treatments, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability and the timing and extent to which normal economic and operating conditions resume. For additional discussion regarding risks associated with the COVID-19 pandemic, see "Risk Factors" in Item 1A of Part I of this Form 10-K. Enable Quarterly Distributions. The price of, and global demand for, natural gas, NGLs and crude oil declined significantly in the first half of 2020 in part as a result of the ongoing spread and economic effects of the COVID-19 pandemic and the significant governmental measures being implemented to control the spread of COVID-19 and remained depressed relative to pre-pandemic levels. Further, financial market declines and volatility, together with deteriorating credit, liquidity concerns, decreasing production, and increasing inventories, are conditions that are associated with a general economic downturn. Producers announced and began to implement plans to reduce production and decrease the drilling and completion of wells in response to these conditions, which include reductions in the exploration, development and production activity across Enable's areas of operation. As a result, the effects of the COVID-19 pandemic and the decline in demand and price for natural gas, NGLs and crude oil have and may continue to negatively impact the demand for midstream services. In response to the impacts of these developments on its business, onApril 1, 2020 , Enable announced a reduction in its quarterly distributions per common unit from$0.3305 distributed for the fourth quarter 2019 to$0.16525 , representing a 50% reduction. To the extent such economic conditions persist or further deteriorate, quarterly distributions on Enable's common units may be subject to further reductions. For further information, see "-Liquidity and Capital Resources-Future Sources and Uses of Cash" below. 50 -------------------------------------------------------------------------------- CenterPoint Energy Financial Measures. OnApril 1, 2020 , in response to the current business environment and to strengthen its financial position and adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions,CenterPoint Energy announced targeted reductions in (i) its quarterly common stock dividend to$0.1500 per share; (ii) 2020 operation and maintenance expenses, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets; and (iii) 2020 capital spending. For further information, see "-Liquidity and Capital Resources-Future Sources and Uses of Cash" below. Enable Investment Impairment.CenterPoint Energy recognized a loss of$1,428 million on its investment in Enable for the year endedDecember 31, 2020 . This loss included an impairment charge on its investment in Enable of$1,541 million andCenterPoint Energy's interest in Enable's$225 million impairment on an equity method investment. For further discussion, see Note 11 to the consolidated financial statements. Board of Director Appointments. OnMay 6, 2020 , the Board of Directors appointedDavid J. Lesar andBarry T. Smitherman to the Board of Directors effective immediately. OnJune 30, 2020 , the Board of Directors appointedEarl M. Cummings to the Board of Directors, effectiveJuly 1, 2020 . OnFebruary 19, 2021 , the Board of Directors appointedWendy Montoya Cloonan to the Board of Directors, effective immediately. CenterPoint Energy Leadership Transition. OnJune 30, 2020 , the Board of Directors appointedDavid J. Lesar to the position of President and Chief Executive Officer, effectiveJuly 1, 2020 . OnSeptember 15, 2020 ,Jason P. Wells was appointed to the position of Executive Vice President and Chief Financial Officer, effectiveSeptember 28, 2020 .Business Review and Evaluation Committee . OnMay 6, 2020 , the Board of Directors established aBusiness Review and Evaluation Committee , which was designed to assist the Board of Directors in evaluating and optimizing the various businesses, assets and ownership interests currently held byCenterPoint Energy . InOctober 2020 , theBusiness Review and Evaluation Committee completed its review and made final recommendations to the full Board of Directors for its consideration. As announced inDecember 2020 ,CenterPoint Energy's business strategy incorporated theBusiness Review and Evaluation Committee's recommendations to increase its planned capital expenditures in its electric and Natural Gas businesses to support rate base growth and sell certain of its Natural Gas businesses located inArkansas andOklahoma as a means to efficiently finance a portion of such increased capital expenditures, among other recommendations. Enable Merger Agreement. OnFebruary 16, 2021 , Enable entered into the Enable Merger Agreement. At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable's outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held byCenterPoint Energy , and in returnCenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units. Business Divestitures. OnFebruary 3, 2020 ,CenterPoint Energy , through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell theInfrastructure Services Disposal Group . The transaction closed onApril 9, 2020 . OnFebruary 24, 2020 ,CenterPoint Energy , through its subsidiaryCERC Corp. , entered into the Equity Purchase Agreement to sell theEnergy Services Disposal Group . The transaction closed onJune 1, 2020 . For further information, see Note 4 to the consolidated financial statements. Regulatory Proceedings. A settlement was reached in theHouston Electric base rate case and a final order from the PUCT was received onMarch 9, 2020 . New rates were implemented onApril 23, 2020 . For details related to our pending and completed regulatory proceedings and orders in 2020 and to date in 2021, see "-Liquidity and Capital Resources -Regulatory Matters" below. Equity Transactions. OnMay 6, 2020 ,CenterPoint Energy entered into agreements for the private placements of its Series C Preferred Stock and its Common Stock. For more information about the private placements, see Note 13 to the consolidated financial statements. Debt Transactions. InJune 2020 ,Houston Electric issued$300 million aggregate principal amount of general mortgage bonds. InSeptember 2020 , SIGECO completed the remarketing of two series of tax-exempt debt of approximately$38 million aggregate principal amount. InSeptember 2020 , VCC terminated its$200 million credit agreement. InSeptember 2020 ,CERC Corp. provided notice of redemption relating to$593 million aggregate principal amount of its 4.50% senior notes due 2021, which were redeemed in full inOctober 2020 . InOctober 2020 ,CERC Corp. issued$500 million aggregate principal amount of senior notes. InDecember 2020 ,CenterPoint Energy provided notice of redemption relating to$250 million aggregate principal amount of its outstanding$500 million aggregate principal amount 3.85% senior notes due 2024, which were redeemed inJanuary 2021 . OnFebruary 4, 2021 , each ofCenterPoint Energy, Houston Electric ,CERC Corp. and VUHI replaced their 51 -------------------------------------------------------------------------------- existing revolving credit facilities with new credit facilities totaling$4.0 billion in commitments. For more information, see Note 14 to the consolidated financial statements. CERTAIN FACTORS AFFECTING FUTURE EARNINGS Our past earnings and results of operations are not necessarily indicative of our future earnings and results of operations. The magnitude of our and Enable's future earnings and results of our and Enable's operations will depend on or be affected by numerous factors that apply to all Registrants unless otherwise indicated including: •the performance of Enable, the amount of cash distributionsCenterPoint Energy receives from Enable, Enable's ability to redeem the Enable Series A Preferred Units in certain circumstances and the value ofCenterPoint Energy's interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as: •competitive conditions in the midstream industry, and actions taken by Enable's customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable; •the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable's interstate pipelines and its commodity risk management activities; •economic effects of the actions ofSaudi Arabia ,Russia and other oil-producing countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices; •the demand for crude oil, natural gas, NGLs and transportation and storage services; •environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; •recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; •the timing of payments from Enable's customers under existing contracts, including minimum volume commitment payments; •changes in tax status; and •access to debt and equity capital; •the expected benefits of the Merger and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the Merger; as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities; and the development of new opportunities and the performance of projects undertaken by ESG, including, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties, guarantees and other contractual and legal obligations; •the recording of impairment charges; •industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns; •timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; •future economic conditions in regional and national markets and their effect on sales, prices and costs; •weather variations and other natural phenomena, including the impact of severe weather events on operations and capital, including impacts from theFebruary 2021 Winter Storm Event; •the COVID-19 pandemic and its effect on our and Enable's operations, business and financial condition, our industries and the communities we serve,U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto; •volatility and a substantial recent decline in the markets for oil and natural gas as a result of the actions of crude-oil exporting nations and theOrganization of Petroleum Exporting Countries and reduced worldwide consumption due to the COVID-19 pandemic; •state and federal legislative and regulatory actions or developments affecting various aspects of our businesses (including the businesses of Enable), including, among others, energy deregulation or re-regulation, pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by our regulated businesses; •tax legislation, including the effects of the CARES Act and of the TCJA (which includes but is not limited to any potential changes to tax rates, tax credits and/or interest deductibility), as well as any changes under the Biden administration, and uncertainties involving state commissions' and local municipalities' regulatory requirements and determinations regarding the treatment of EDIT and our rates; 52 -------------------------------------------------------------------------------- •our ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms; •actions by credit rating agencies, including any potential downgrades to credit ratings; •matters affecting regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates; •the availability and prices of raw materials and services and changes in labor for current and future construction projects and operations and maintenance costs, including our ability to control such costs; •local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact the continued operation, cost recovery of generation plant costs and related assets, andCenterPoint Energy's carbon emissions reduction targets; •the impact of unplanned facility outages or other closures; •any direct or indirect effects on our or Enable's facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt our businesses or the businesses of third parties, or other catastrophic events such as fires, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences; •our ability to fund and invest planned capital and the timely recovery of our investments, including those related toIndiana Electric's generation transition plan as part of its most recent IRP; •our ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate; •the sufficiency of our insurance coverage, including availability, cost, coverage and terms and ability to recover claims; •the investment performance ofCenterPoint Energy's pension and postretirement benefit plans; •changes in interest rates and their impact on costs of borrowing and the valuation ofCenterPoint Energy's pension benefit obligation; •commercial bank and financial market conditions, our access to capital, the cost of such capital, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets; •changes in rates of inflation; •inability of various counterparties to meet their obligations to us; •non-payment for our services due to financial distress of our customers; •the extent and effectiveness of our and Enable's risk management and hedging activities, including, but not limited to financial and weather hedges; •timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or natural disasters or other recovery of costs; •the ability of REPs, including REP affiliates ofNRG and Vistra Energy Corp., to satisfy their obligations toCenterPoint Energy andHouston Electric ; •CenterPoint Energy's or Enable's potential business strategies and strategic initiatives, including the recommendations of theBusiness Review and Evaluation Committee of the Board of Directors, restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including our proposed sale of our Natural Gas businesses inArkansas andOklahoma and the Enable Merger, which we cannot assure will be completed or will have the anticipated benefits to us or Enable; •acquisition and merger activities involving us or our competitors, including the ability to successfully complete merger, acquisition and divestiture plans; •our or Enable's ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; •the outcome of litigation; •changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; •the impact of alternate energy sources on the demand for natural gas; •the timing and outcome of any audits, disputes and other proceedings related to taxes; •the effective tax rates; •political and economic developments, including energy and environmental policies under the Biden administration; •the transition to a replacement for the LIBOR benchmark interest rate; •the effect of changes in and application of accounting standards and pronouncements; and •other factors discussed in "Risk Factors" in Item 1A of this report and in other reports that the Registrants file from time to time with theSEC . 53 -------------------------------------------------------------------------------- CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONSCenterPoint Energy's results of operations are affected by seasonal fluctuations in the demand for electricity and natural gas.CenterPoint Energy's results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates its subsidiaries charge, debt service costs, income tax expense, its subsidiaries ability to collect receivables from REPs and customers and its ability to recover its regulatory assets. For information regarding factors that may affect the future results of our consolidated operations, please read "Risk Factors" in Item 1A of Part I of this report.
Income (loss) available to common shareholders for the years ended
Year Ended December 31, Favorable (Unfavorable)
2020 2019 (1) 2018 2020 to 2019 2019 to 2018
(in millions)
Electric $ 230 $ 419 $ 334 $ (189) $ 85
Natural Gas 278 251 98 27 153
Total Utility Operations 508 670 432 (162) 238
Midstream Investments (2) (1,116) 131 224 (1,247) (93)
Corporate & Other (3) (159) (236) (295) 77 59
Discontinued Operations (182) 109 (28) (291) 137
Total CenterPoint Energy $ (949) $ 674 $ 333 $ (1,623) $ 341
(1)Includes only
(2)For a discussion of earnings from
(3)Includes energy performance contracting and sustainable infrastructure services through ESG, unallocated corporate costs, interest income and interest expense, intercompany eliminations and the reduction of income allocated to preferred shareholders.
2020 Compared to 2019
Net Income.CenterPoint Energy reported a loss available to common shareholders of$949 million for 2020 compared to income available to common shareholders of$674 million for 2019.
The decrease in income available to common shareholders of
•the impairment of our investment in Enable, our share of Enable's impairment of an equity method investment and decreased earnings at Enable further discussed in Note 11 to the consolidated financial statements; •the impairment ofIndiana Electric further discussed in Note 6 to the consolidated financial statements; •loss and impairments on held for sale of the Infrastructure Services and Energy Services Disposal Groups; •impacts related to COVID-19; and •increased preferred stock dividend requirements.
These decreases were partially offset by:
•rate relief; •continued customer growth; •operation and maintenance expense discipline; and •the impact of twelve months in 2020 versus eleven months in 2019 for businesses acquired in the Merger. 2019 Compared to 2018
Net Income.
54
--------------------------------------------------------------------------------
The increase in income available to common shareholders of
•gains on marketable securities, net of losses on the underlying value of the indexed debt securities related to the ZENS; •the impact of eleven months of results in 2019 for businesses acquired in the Merger; •rate relief; •continued customer growth; and •operation and maintenance expense discipline.
These increases were partially offset by:
•increased interest expense primarily resulting from higher outstanding long-term debt used to finance the Merger and additional long-term debt acquired in the Merger, discussed further in Notes 4 and 14 to the consolidated financial statements; •decreased earnings at Enable further discussed in Note 11 to the consolidated financial statements; and •increased preferred stock dividend requirements. Discontinued Operations. OnFebruary 3, 2020 ,CenterPoint Energy , through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell theInfrastructure Services Disposal Group . Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed onApril 9, 2020 . For further information, see Note 4 to the consolidated financial statements. Additionally, onFebruary 24, 2020 ,CenterPoint Energy , through its subsidiaryCERC Corp. , entered into the Equity Purchase Agreement to sell theEnergy Services Disposal Group . Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction closed onJune 1, 2020 . For further information, see Note 4 to the consolidated financial statements.
Income Tax Expense. For a discussion of effective tax rate per period, see Note 15 to the consolidated financial statements.
As ofJanuary 1, 2020 ,CenterPoint Energy's CODM viewed net income as the measure of profit or loss for the reportable segments rather than the previous measure of operating income. Segment results include inter-segment interest income and expense, which may result in inter-segment profit and loss. During the fourth quarter of 2020,CenterPoint Energy's CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised ofHouston Electric andIndiana Electric . Also, the Natural Gas Distribution reportable segment was renamed Natural Gas. Additionally, during the fourth quarter of 2020,CenterPoint Energy's CODM requested that the CERC corporate functions be included within the financial results ofCenterPoint Energy's Natural Gas reportable segment for review purposes. Certain prior year amounts have been reclassified to conform to the current year presentation. Following the divestiture of the Infrastructure Services and Energy Services Disposal Groups, which accounted for a substantial portion ofCenterPoint Energy's non-utility activities,CenterPoint Energy is now focused on its utility operations conducted through two reportable segments, Electric and Natural Gas, which are collectively referred to herein as Utility Operations. The following discussion of results of operations by reportable segment concentrates onCenterPoint Energy's Utility Operations. A discussion ofCenterPoint Energy's Midstream Investments reportable segment results is included in the discussion ofCenterPoint Energy's consolidated results above. 55 --------------------------------------------------------------------------------
ELECTRIC
The following table provides summary data ofCenterPoint Energy's Electric reportable segment: Year Ended December 31, Favorable (Unfavorable) 2020 2019 (1) 2018 2020 to 2019 2019 to 2018 (in millions, except throughput, weather and customer data) Revenues$ 3,470 $ 3,519
147 149 - (2) 149
Revenues less Utility natural gas, fuel
and purchased power 3,323 3,370 3,232 (47) 138
Expenses:
Operation and maintenance 1,704 1,656 1,452 (48) (204)
Depreciation and amortization 663 739 917 76 178
Taxes other than income taxes 268 261 240 (7) (21)
Goodwill Impairment (2) 185 - - (185) -
Total expenses 2,820 2,656 2,609 (164) (47)
Operating Income 503 714 623 (211) 91
Other Income (Expense):
Interest and other finance charges (220) (225) (197) 5 (28)
Interest income 3 27 5 (24) 22
Other income (expense), net 16 (1) (8) 17 7
Income before income taxes 302 515 423 (213) 92
Income tax expense (benefit) 72 96 89 24 (7)
Net income $ 230 $ 419 $ 334 $ (189) $ 85
Throughput (in GWh):
Residential 32,630 31,605 30,405 3 % 4 %
Total 98,647 96,866 90,409 2 % 7 %
Weather (percentage of normal weather for
service area):
Cooling degree days 109 % 109 % 103 % - % 6 %
Heating degree days 85 % 96 % 104 % (11) % (8) %
Number of metered customers at end of
period:
Residential 2,433,474 2,372,135 2,198,225 3 % 8 %
Total 2,749,116 2,682,228 2,485,370 2 % 8 %
(1)Includes only February 1, 2019 through December 31, 2019 results of acquired
electric businesses due to the Merger.
(2)For information related to the goodwill impairment at the Indiana Electric
reporting unit, see Note 6 to the consolidated financial statements.
56
--------------------------------------------------------------------------------The following table provides variance explanations by major income statement caption for the Electric reportable segment:
Favorable (Unfavorable)
2020 to 2019 2019 to 2018
(in millions)
Revenues less Utility natural gas, fuel and purchased power Customer rates and impact of the change in rate design
$ (289) $ (4) Impacts of COVID-19 (40) - Weather impacts and other usage (17) (20)
Impacts from increased peak demand in 2019, collected in rates in 2020
19 -
Transmission Revenues, including TCOS and TCRF and impact of the change in rate design, inclusive of costs billed by transmission providers
363 67
Refund of protected and unprotected EDIT, offset in income tax expense
(31) 15
Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods
(14) (29)
Customer growth 37 28
Miscellaneous revenues, primarily related to service connections
11 15
AMS, offset in depreciation and amortization below (3) (29)
Bond Companies (124) (281)
Pass-Through Revenues (offset in operation and maintenance below)
2 -
Energy efficiency, offset in operation and maintenance 5 2
Eleven months of incremental margin from the acquisition of
- 374
Twelve months in 2020 versus eleven months in 2019 for
34 -
Total $
(47)
Operation and maintenance
Transmission costs billed by transmission providers, offset in
revenues $ (61) $ (57)
Labor and benefits (2) 15
Contract services 12 6
Support services (13) 24All other operation and maintenance expense, including materials and supplies and insurance
14 -
Merger related expenses, primarily severance and technology 20 (10)
Bond Companies 1 1
Energy efficiency, offset in revenues - (4)
Pass Through Expenses (offset in Revenues less Utility natural gas, fuel and purchased power)
(2) -
Eleven months of incremental operation and maintenance from
the acquisition of
- (179)
Twelve months in 2020 versus eleven months in 2019 for
(17) -
Total $
(48)
Depreciation and amortization
Ongoing additions to plant-in-service $ (31) $ (19)
AMS, offset by revenues (1) 28
Bond Companies 116 260
Eleven months of incremental depreciation and amortization
from acquisition of
- (91)
Twelve months in 2020 versus eleven months in 2019 for
(8) -
Total $
76
Taxes other than income taxes
Incremental capital projects placed in service $ (4) $ (1)
Franchise fees and other taxes (2) (6)
Eleven months of incremental taxes from acquired Electric Utility
- (14)
Twelve months in 2020 versus eleven months in 2019 for Indiana
Electric (1) -
Total $ (7) $ (21)
Goodwill impairment
See Note 6 for further information (185) -
Total $ (185) $ -
Interest expense and other finance charges Debt to fund incremental capital projects
$ (5) $ (25)
Bond Companies 12 19
Eleven months of incremental interest expense from acquisition
of
- (22)
Twelve months in 2020 versus eleven months in 2019 for Indiana
Electric due to Merger (2) -
Total $ 5 $ (28)
57
--------------------------------------------------------------------------------
Interest income
Investments in CenterPoint Energy Money Pool $ (20) $ 20
Bond Companies (4) 2
Total $ (24) $ 22
Other income (expense), net
Reduction to non-service benefit cost $
17 $ 2
Eleven months of incremental Other income (expense) from
acquisition of
- 5
Total $ 17 $ 7
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 15 to the consolidated financial statements.
NATURAL GAS
The following table provides summary data ofCenterPoint Energy's Natural Gas reportable segment: Year Ended December 31, Favorable (Unfavorable) 2020 2019 (1) 2018 2020 to 2019 2019 to 2018 (in millions, except throughput, weather and customer data) Revenues$ 3,631 $ 3,750
1,358 1,652 1,504 (294) 148
Revenues less Cost of revenues 2,273 2,098 1,527 175 571
Expenses:
Operation and maintenance 1,032 1,070 833 38 (237) Depreciation and amortization 454 420 280 (34) (140) Taxes other than income taxes 237 206 155 (31) (51) Total expenses 1,723 1,696 1,268 (27) (428) Operating Income 550 402 259 148 143 Other Income (Expense) Interest expense and other finance charges (153) (144) (122) (9) (22) Interest income 8 6 1 2 5 Other expense, net (2) (11) (9) 9 (2) Income from Continuing Operations Before Income Taxes 403 253 129 150 124 Income tax expense 125 2 31 (123) 29 Net Income$ 278 $ 251 $ 98 $ 27 $ 153 Throughput (in Bcf): Residential 237 246 186 (4) % 32 % Commercial and industrial 439 458 285 (4) % 61 % Total Throughput 676 704 471 (4) % 49 % Weather (percentage of 10-year average for service area): Heating degree days 91 % 101 % 106 % (10) % (5) % Number of customers at end of period: Residential 4,328,607 4,252,361 3,246,277 2 % 31 % Commercial and industrial 349,725 349,749 260,033 - % 35 % Total 4,678,332 4,602,110 3,506,310 2 % 31 %
(1)Includes only
(2)Includes Utility natural gas, fuel and purchased power and Non-utility cost of revenues, including natural gas.
58
--------------------------------------------------------------------------------The following table provides variance explanations by major income statement caption for the Natural Gas reportable segment:
Favorable (Unfavorable)
2020 to 2019 2019 to 2018
(in millions)
Revenues less Cost of revenues
Rate increases exclusive of the TCJA impact below $ 108 $ 13 Eleven months of incremental margin from acquired LDC businesses in the Merger
- 513
Impacts of COVID-19 (25) -
Weather and usage, excluding impacts from COVID-19 4 30
Customer growth 20 14
Refund of protected and unprotected EDIT, offset in income tax expense
(5) 6
Twelve months in 2020 versus eleven months in 2019 in
65 -
Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19
15 7
Energy efficiency, offset in operation and maintenance below (1) (14)
Gross receipts tax, offset in taxes other than income taxes
below (6) 2
Total $ 175 $ 571
Operation and maintenance
Labor and benefits $ (1) $ - Eleven months of incremental operation and maintenance from acquired LDC businesses in the Merger
- (201) Contracted services 20 - Support services (14) 8
Other operating and maintenance expense, including material and supplies and insurance
6 (3)
Twelve months in 2020 versus eleven months in 2019 in
(14) -
Energy efficiency, offset in revenues less cost of revenues above
1 14
Merger related expenses, primarily severance and technology 40 (55)
Total $
38
Depreciation and amortization
Incremental capital projects placed in service $
(23)
- (128)
Twelve months in 2020 versus eleven months in 2019 in
(11) -
Total $
(34)
Taxes other than income taxes
Gross receipts tax, offset in revenues less cost of revenues above
$ 6 $ (2) Eleven months of incremental taxes from acquired LDC businesses in the Merger
- (45)
Twelve months in 2020 versus eleven months in 2019 in
(6) -
Incremental capital projects placed in service (31) (4)
Total $
(31)
Interest expense and other finance charges Debt to fund incremental capital projects
$ (9) $ (22)
Total $ (9) $ (22)
Interest income
Money pool investments with CenterPoint Energy $ 2 $ 5
Total $ 2 $ 5
Other income (expense), net
Reduction to non-service benefit cost $ 9 $ (2)
Total $ 9 $ (2)
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 15 to the consolidated financial statements.
59
--------------------------------------------------------------------------------
HOUSTON ELECTRIC CONSOLIDATED RESULTS OF OPERATIONS
As of January 1, 2020 , Houston Electric's CODM viewed net income as the measure
of profit or loss for the reportable segments rather than the previous measure
of operating income. Houston Electric consists of a single reportable segment.
Houston Electric's results of operations are affected by seasonal fluctuations
in the demand for electricity. Houston Electric's results of operations are also
affected by, among other things, the actions of various governmental authorities
having jurisdiction over rates Houston Electric charges, debt service costs,
income tax expense, Houston Electric's ability to collect receivables from REPs
and Houston Electric's ability to recover its regulatory assets. For information
regarding factors that may affect the future results of Houston Electric's
consolidated operations, please read "Risk Factors" in Item 1A of Part I of this
report.
Year Ended December 31, Favorable (Unfavorable)
2020 2019 2018 2020 to 2019 2019 to 2018
(in millions, except throughput, weather and customer data)
Revenues $ 2,911 $ 2,990 $ 3,234 $ (79) $ (244)
Expenses:
Operation and maintenance 1,523 1,477 1,452 (46) (25)
Depreciation and amortization 560 648 917 88 269
Taxes other than income taxes 252 247 240 (5) (7)
Total 2,335 2,372 2,609 37 237
Operating Income 576 618 625 (42) (7)
Interest and other finance charges (199) (203) (197) 4 (6)
Interest income 3 27 5 (24) 22
Other income (expense), net 7 (6) (8) 13 2
Income before income taxes 387 436 425 (49) 11
Income tax expense (benefit) 53 80 89 27 9
Net income $ 334 $ 356 $ 336 $ (22) $ 20
Throughput (in GWh):
Residential 31,244 30,334 30,405 3 % - %
Total 93,768 92,180 90,409 2 % 2 %
Weather (percentage of 10-year average
for service area):
Cooling degree days 110 % 106 % 103 % 4 % 3 %
Heating degree days 72 % 96 % 104 % (24) % (8) %
Number of metered customers at end of
period:
Residential 2,303,315 2,243,188 2,198,225 3 % 2 %
Total 2,599,827 2,534,286 2,485,370 3 % 2 %
60--------------------------------------------------------------------------------
The following table provides variance explanations by major income statement caption for the Houston Electric T&D reportable segment:
Favorable (Unfavorable)
2020 to 2019 2019 to 2018
(in millions)
Revenues
Customer rates and impact of the change in rate design $ (298) $ (4)
Impacts of COVID-19 (31) -
Weather impacts and other usage (7) (28)
Impacts from increased peak demand in 2019, collected in rates in 2020
19 -
Transmission Revenues, including TCOS and TCRF and impact of the change in rate design, inclusive of costs billed by transmission providers
364 67
Refund of protected and unprotected EDIT, offset in income tax expense
(32) 15
Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods
(14) (29)
Customer growth 35 28
Miscellaneous revenues, primarily related to service connections
7 15
AMS, offset in depreciation and amortization below (3) (29)
Bond Companies (124) (281)
Energy efficiency, offset in operation and maintenance 5 2
Total $
(79)
Operation and maintenance
Transmission costs billed by transmission providers, offset in
revenues $ (61) $ (57)
Labor and benefits (2) 15
Contract services 6 6
Support services (6) 24All other operation and maintenance expense, including materials and supplies and insurance
14 -
Merger related expenses, primarily severance and technology 2 (10)
Bond Companies 1 1
Energy efficiency, offset in revenues - (4)
Total $
(46)
Depreciation and amortization
Ongoing additions to plant-in-service $ (31) $ (19)
AMS, offset by revenues 3 28
Bond Companies 116 260
Total $ 88 $ 269
Taxes other than income taxes
Incremental capital projects placed in service $ (4) $ (1)
Franchise fees and other taxes (1) (6)
Total $ (5) $ (7)
Interest expense and other finance charges Debt to fund incremental capital projects
$ (8) $ (25)
Bond Companies 12 19
Total $ 4 $ (6)
Interest income
Investments in CenterPoint Energy Money Pool $ (20) $ 20
Bond Companies (4) 2
Total $ (24) $ 22
Other income (expense), net
Reduction to non-service benefit cost $ 13 $ 2
Total $ 13 $ 2
Income Tax Expense. For a discussion of effective tax rate per period, see Note 15 to the consolidated financial statements.
61
--------------------------------------------------------------------------------
CERC CONSOLIDATED RESULTS OF OPERATIONS
As of January 1, 2020 , CERC's CODM viewed net income as the measure of profit or
loss for the reportable segments rather than the previous measure of operating
income. During the fourth quarter of 2020, CERC's CODM requested that the CERC
corporate functions be included within the financial results of CERC's Natural
Gas reportable segment for review purposes. As a result of this change and
following the divestiture of the Energy Services Disposal Group , CERC now
consists of a single reportable segment, Natural Gas, formerly named Natural Gas
Distribution. Certain prior year amounts have been reclassified to conform to
the current year presentation. CERC's results of operations are affected by
seasonal fluctuations in the demand for natural gas. CERC's results of
operations are also affected by, among other things, the actions of various
federal, state and local governmental authorities having jurisdiction over rates
CERC charges, debt service costs and income tax expense, CERC's ability to
collect receivables from customers and CERC's ability to recover its regulatory
assets. For information regarding factors that may affect the future results of
CERC's consolidated operations, please read "Risk Factors" in Item 1A of Part I
of this report.
Year Ended December 31, Favorable (Unfavorable)
2020 2019 2018 2020 to 2019 2019 to 2018
(in millions, except throughput, weather and customer data)
Revenues $ 2,763 $ 3,018
1,117 1,430 1,504 (313) (74)
Revenues less Cost of Revenues 1,646 1,588 1,527 58 61
Expenses:
Operation and maintenance 798 824 833 26 9
Depreciation and amortization 304 293 280 (11) (13)
Taxes other than income taxes 182 161 155 (21) (6)
Total expenses 1,284 1,278 1,268 (6) (10)
Operating Income 362 310 259 52 51
Other Income (Expense)
Interest expense and other finance
charges (111) (116) (122) 5 6
Interest income - 5 1 (5) 4
Other income (expense), net (7) (13) (9) 6 (4)
Income from Continuing Operations Before
Income Taxes 244 186 129 58 57
Income tax expense (benefit) 97 (3) 31 (100) 34
Income From Continuing Operations 147 189 98 (42) 91
Income (Loss) from Discontinued
Operations (net of tax expense (benefit)
of $(2) , $17 , and $37 , respectively) (66) 23 110 (89) (87)
Net Income $ 81 $ 212 $ 208 $ (131) $ 4
Throughput (in BCF):
Residential 167 188 186 (11) % 1 %
Commercial and industrial 260 292 285 (11) % 2 %
Total Throughput 427 480 471 (11) % 2 %
Weather (percentage of 10-year average
for service area):
Heating degree days 91 % 101 % 106 % (10) % (5) %
Number of customers at end of period:
Residential 3,349,828 3,287,343 3,246,277 2 % 1 %
Commercial and industrial 260,400 260,872 260,033 - % - %
Total 3,610,228 3,548,215 3,506,310 2 % 1 %
(1)Includes Utility natural gas and Non-utility cost of revenues, including natural gas.
Discontinued Operations. OnFebruary 24, 2020 ,CenterPoint Energy , through its subsidiaryCERC Corp. , entered into the Equity Purchase Agreement to sell theEnergy Services Disposal Group . Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction closed onJune 1, 2020 . For further information, see Note 4 to the consolidated financial statements. 62 --------------------------------------------------------------------------------
The following table provides variance explanations by major income statement
caption for
Favorable (Unfavorable)
2020 to 2019 2019 to 2018
(in millions)
Revenues less Cost of revenues
Rate increases exclusive of the TCJA impact below $ 62 $ 13
Impacts of COVID-19 (22) -
Weather and usage, excluding impacts from COVID-19 2 30
Refund of protected and unprotected EDIT, offset in income tax expense
(4) 6
Customer growth 14 14
Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19
18 11
Energy efficiency, offset in operation and maintenance below (8) (14)
Gross receipts tax, offset in taxes other than income taxes
below (4) 1
Total $ 58 $ 61
Operation and maintenance
Labor and benefits, primarily due to headcount $ (4) $ (15)
Contracted services 24 -
Support services (6) 8Other operation and maintenance expense, including material and supplies and insurance
4 12
Energy efficiency, offset in revenues less cost of revenues above
8 14
Merger related expenses, primarily severance and technology - (10)
Total $ 26 $ 9
Depreciation and amortization
Incremental capital projects placed in service $ (11) $ (13)
Total $ (11) $ (13)
Taxes other than income taxes
Gross receipts tax, offset in revenues less cost of revenues above
$ 4 $ (2)
Incremental capital projects placed in service (25) (4)
Total $ (21) $ (6)
Interest expense and other finance charges Debt to fund incremental capital projects
$ 5 $ 6
Total $ 5 $ 6
Interest income
Money pool investments with CenterPoint Energy $ (5) $ 4
Total $ (5) $ 4
Other income (expense), net
Reduction to non-service benefit cost $ 6 $ (4)
Total $ 6 $ (4)
Income Tax Expense. For a discussion of effective tax rate per period, see Note 15 to the consolidated financial statements.
63
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Historical Cash Flows
The net cash provided by (used in) operating, investing and financing activities for 2020, 2019 and 2018 is as follows:
Year Ended December 31,
2020 2019 2018
CenterPoint Houston CenterPoint Houston CenterPoint Houston
Energy Electric CERC Energy Electric CERC Energy Electric CERC
(in millions)
Cash provided by (used in):
Operating activities
2,136 $ 1,115 $ 814
Investing activities (1,265) (564) (452) (8,421) (1,495) (662) (1,207) (911) (697)
Financing activities (834) (416) (278) 2,776 442 173 3,053 (108) (104)
Operating Activities. The following items contributed to increased (decreased) net cash provided by operating activities:
Year Ended December 31,
2020 compared to 2019 2019 compared to 2018
Houston Houston
CenterPoint Energy Electric CERC CenterPoint Energy Electric CERC
(in millions)
Changes in net income after adjusting for
non-cash items $ (1,869) $ (129) $ (3) $ 299 $ (234) $ 9
Changes in working capital 726 98 227 (856) 60 (320)
Change in equity in earnings of unconsolidated affiliates 1,658 - - 77 -
184
Change in distributions from unconsolidated affiliates (1) (148) - - (6) -
(176)
Higher pension contribution 23 - - (40) - -
Other (33) 12 39 28 (23) (45)
$ 357 $ (19) $ 263 $ (498) $ (197) $ (348) (1)This change is partially offset by the change in distributions from Enable in excess of cumulative earnings in investing activities noted in the table below.
Investing Activities. The following items contributed to (increased) decreased net cash used in investing activities:
Year Ended December 31,
2020 compared to 2019 2019 compared to 2018
Houston Houston
CenterPoint Energy Electric CERC CenterPoint Energy Electric CERC
(in millions)
Proceeds from the sale of marketable
securities $ - $ - $ - $ (398) $ - $ -
Proceeds from the sale of assets (5) - - 5 - -
Purchase of investments 6 - - (6) - -
Acquisitions, net of cash acquired 5,991 - - (5,991) - -
Net change in capital expenditures (1) (90) (33) (39) (855) (103)
(143)
Net change in notes receivable from unconsolidated affiliates - 962 (123) - (481)
228
Change in distributions from Enable in
excess of cumulative earnings 38 - - 12 - (47)
Proceeds from divestitures 1,215 - 365 - - -
Other 1 2 7 19 - (3)
$ 7,156 $ 931 $ 210 $ (7,214) $ (584) $ 35 (1)The increase in capital expenditures in 2019 primarily resulted from businesses acquired in the Merger.
64
--------------------------------------------------------------------------------Financing Activities. The following items contributed to (increased) decreased net cash used in financing activities:
Year Ended December 31,
2020 compared to 2019 2019 compared to 2018
Houston Houston
CenterPoint Energy Electric CERC CenterPoint Energy Electric CERC
(in millions)
Net changes in commercial paper
outstanding $ (2,652) $ - $ (197) $ 3,434 $ - $ 855
Proceeds from issuances of preferred
stock, net 723 - - (1,740) - -
Proceeds from issuance of Common Stock, net 672 - - (1,844) -
-
Net changes in long-term debt outstanding, excluding commercial paper (2,539) (170) (93) (397) 274
(599)
Net changes in debt and equity issuance costs 12 5 (4) 27 (4)
5
Net changes in short-term borrowings - - - 39 -
39
Distributions to ZENS note holders - - - 398 -
-
Decreased (increased) payment of Common Stock dividends 185 - - (78) -
-
Increased payment of Preferred Stock dividends (19) - - (107) -
-
Net change in notes payable from
affiliated companies - 9 - - 58 570
Contribution from parent - (528) 88 - 390 (831)
Dividend to parent - (175) 40 - (167) 240
Capital contribution to parent associated
with the sale of CES - - (286) - - -
Other 8 1 1 (9) (1) (2)
$ (3,610) $ (858) $ (451) $ (277) $ 550 $ 277 Future Sources and Uses of Cash
The liquidity and capital requirements of the Registrants are affected primarily by results of operations, capital expenditures, debt service requirements, tax payments, working capital needs and various regulatory actions. Capital expenditures are expected to be used for investment in infrastructure for electric and natural gas distribution operations. These capital expenditures are anticipated to maintain reliability and safety, increase resiliency and expand our systems through value-added projects. In addition to dividend payments onCenterPoint Energy's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock, and in addition to interest payments on debt, the Registrants' principal anticipated cash requirements for 2021 include the following: CenterPoint Houston Energy Electric CERC (in millions) Estimated capital expenditures $
3,379
Scheduled principal payments on Securitization Bonds 211 211 - Minimum contributions to pension plans and other post-retirement plans 70 1 3 Maturing CenterPoint Energy term loans 700 - - Maturing CenterPoint Energy and VUHI senior notes 555 - - Maturing Houston Electric first mortgage bonds 102 102 - Maturing Houston Electric general mortgage bonds 300 300 -February 2021 Winter Storm Event. InFebruary 2021 , portions ofthe United States experienced an extreme and unprecedented winter weather event resulting in corresponding electricity generation shortages, including inTexas , and natural gas shortages and increased prices of natural gas inthe United States . As a result of this weather event, the governors ofTexas ,Oklahoma andLouisiana have declared states of either disaster or emergencies in their respective states. Subsequently,President Biden also approved major disaster declarations for all or parts ofTexas ,Oklahoma andLouisiana . As a result of theFebruary 2021 Winter Storm Event, fromFebruary 12, 2021 toFebruary 22, 2021 , management estimatesCenterPoint Energy spent approximately an incremental$2.5 billion more on natural gas supplies compared to plan (inclusive 65 -------------------------------------------------------------------------------- of an incremental$2.3 billion more spent by CERC on natural gas supplies compared to plan). These amounts are preliminary estimates throughFebruary 23, 2021 and are subject to final settlement. OnFebruary 13, 2021 , theRailroad Commission authorized eachTexas natural gas distribution utility to record in a regulatory asset the extraordinary expenses associated with theFebruary 2021 Winter Storm Event, including, but not limited to, natural gas cost and other costs related to the procurement and transportation of natural gas supply, subject to recovery in future proceedings.CenterPoint Energy's andCERC's Natural Gas utilities in their jurisdictions outside ofTexas have natural gas cost recovery mechanisms to recover the increased cost of natural gas. WhileCenterPoint Energy and CERC will seek to recover the increased costs from its customers (although neither full recovery nor the timing of that recovery is certain), in the interim,CenterPoint Energy and CERC will seek additional external financing to pay for such natural gas working capital, which may consist of short and long-term debt, but such external financing may not be available on favorable terms or at all. OnFebruary 24, 2021 , CERC received financing commitments totaling$1.7 billion on a 364-day term loan facility to bridge this working capital need. CERC will evaluate whether to execute of this facility or other potential financing alternatives. Management believes that these commitments, along with existing sources of liquidity, provide CERC with sufficient capital to address the anticipated settlement of natural gas purchases, including the associated upstream supply charges, at the end ofMarch 2021 . Any additional external debt financing and/or partial or delayed recovery may negatively impactCenterPoint Energy's or CERC's credit metrics, and may lead to a downgrade ofCenterPoint Energy's or CERC's credit rating. AlthoughCenterPoint Energy's and CERC's excess costs from the increase in natural gas prices are mitigated by available natural gas recovery mechanisms in their jurisdictions, until such amounts are ultimately recovered from customers,CenterPoint Energy and CERC will continue to incur increased finance-related costs, resulting in a significant use of cash. See Note 22 to the consolidated financial statements for further information. The Registrants expect that anticipated 2021 cash needs will be met with borrowings under their credit facilities, proceeds from the issuance of long-term debt, term loans or common stock, anticipated cash flows from operations, with respect toCenterPoint Energy and CERC, proceeds from commercial paper, with respect toCenterPoint Energy , distributions from Enable until the closing of the Enable Merger expected in the second half of 2021, including any proceeds therefrom, distributions from Energy Transfer or proceeds from dispositions of Energy Transfer common units or Energy Transfer Series G Preferred Units after the closing of the Enable Merger, and, with respect to CERC, proceeds from any potential asset sales, including the potential dispositions of our Natural Gas businesses inArkansas andOklahoma , should such dispositions close in 2021. Discretionary financing or refinancing may result in the issuance of equity securities ofCenterPoint Energy or debt securities of the Registrants in the capital markets or the arrangement of additional credit facilities or term bank loans. Issuances of equity or debt in the capital markets, funds raised in the commercial paper markets and additional credit facilities may not, however, be available on acceptable terms.
The following table sets forth the Registrants' actual capital expenditures by reportable segment for 2020 and estimates of the Registrants' capital expenditures currently planned for projects for 2021 through 2025:
2020 2021 2022 2023 2024 2025
CenterPoint Energy (in millions)
Electric $ 1,281 $ 1,960 $ 1,828 $ 1,996 $ 1,850 $ 1,434
Natural Gas 1,139 1,402 1,291 1,762 1,479 1,593
Corporate and Other 95 17 23 34 32 27
Discontinued Operations (1) (3) 21 - - - - -
Total $ 2,536 $ 3,379 $ 3,142 $ 3,792 $ 3,361 $ 3,054
Houston Electric (2) $ 1,021 $ 1,721 $ 1,513 $ 1,210 $ 1,093 $ 1,283
CERC
Natural Gas $ 797 $ 986 $ 848 $ 1,250 $ 944 $ 1,035
Discontinued Operations (1) 3 - - - - -
Total $ 800 $ 986 $ 848 $ 1,250 $ 944 $ 1,035
(1)On February 24, 2020 , CenterPoint Energy , through its subsidiary CERC Corp. ,
entered into the Equity Purchase Agreement to sell the Energy Services Disposal
Group , which represents substantially all of the businesses within the
historically reported Energy Services reportable segment. The transaction closed
on June 1, 2020 . For further information, see Note 4 to the consolidated
financial statements.
(2)
66
--------------------------------------------------------------------------------
(3)On February 3, 2020 , CenterPoint Energy , through its subsidiary VUSI, entered
into the Securities Purchase Agreement to sell the businesses within the
Infrastructure Services Disposal Group . The transaction closed on April 9, 2020 .
For further information, see Notes 4 to the consolidated financial statements.
The following table sets forth estimates of the Registrants' contractual
obligations as of
2026 and
Contractual Obligations Total 2021 2022-2023 2024-2025 thereafter
(in millions)
CenterPoint Energy
Securitization Bonds $ 747 $ 211 $ 375 $ 161 $ -
Other long-term debt (1) 12,710 1,669 2,885 1,074 7,082
Interest payments - Securitization Bonds
(2) 50 22 24 4 -
Interest payments - other long-term debt
(2) 5,904 435 778 684 4,007
Short-term borrowings 24 24 - - -
Operating leases (3) 37 8 12 7 10
Benefit obligations (4) - - - - -
Non-trading derivative liabilities 30 3 13 3 11
Commodity and other commitments (5) 4,631 725 1,029 947 1,930
Total contractual cash obligations (6) $ 24,133 $ 3,097 $ 5,116 $ 2,880 $ 13,040
Houston Electric
Securitization Bonds $ 747 $ 211 $ 375 $ 161 $ -
Other long-term debt (1) 4,272 402 500 - 3,370
Interest payments - Securitization Bonds
(2) 50 22 24 4 -
Interest payments - other long-term debt
(2) 2,997 163 303 274 2,257
Operating leases (3) 1 1 - - -
Benefit obligations (4) - - - - -
Total contractual cash obligations (6) $ 8,067 $ 799 $ 1,202 $ 439 $ 5,627
CERC
Long-term debt $ 2,428 $ -
1,333 88 169 153 923
Short-term borrowings 24 24 - - -
Operating leases (3) 24 4 8 5 7
Benefit obligations (4) - - - - -
Commodity and other commitments (5) 3,122 491 603 481 1,547
Total contractual cash obligations (6) $ 6,931 $ 607 (1)ZENS obligations are included in the 2026 and thereafter column at their contingent principal amount of$56 million as ofDecember 31, 2020 . These obligations are exchangeable for cash at any time at the option of the holders for 95% of the current value of the reference shares attributable to each ZENS ($871 million as ofDecember 31, 2020 ), as discussed in Note 12 to the consolidated financial statements. (2)The Registrants calculated estimated interest payments for long-term debt as follows: for fixed-rate debt and term debt, the Registrants calculated interest based on the applicable rates and payment dates; for variable-rate debt and/or non-term debt, the Registrants used interest rates in place as ofDecember 31, 2020 . The Registrants typically expect to settle such interest payments with cash flows from operations and short-term borrowings.
(3)For a discussion of operating leases, please read Note 21 to the consolidated financial statements.
(4)See Note 8(g) to the consolidated financial statements for information on the
Registrants' expected contributions to pension plans and other postretirement
plans in 2021.
67
--------------------------------------------------------------------------------(5)For a discussion of commodity and other commitments, please read Note 16(a) to the consolidated financial statements.
(6)This table does not include estimated future payments for expected future AROs. These payments are primarily estimated to be incurred after 2026. See Note 3(c) to the consolidated financial statements for further information.
Off-Balance Sheet Arrangements
Other thanHouston Electric's first mortgage bonds and general mortgage bonds issued as collateral for tax-exempt long-term debt ofCenterPoint Energy (see Note 14 to the consolidated financial statements) and operating leases, the Registrants have no off-balance sheet arrangements.
Regulatory Matters
COVID-19 Regulatory Matters
Governors, public utility commissions and other authorities in the states in which we operate have issued a number of different orders related to the COVID-19 pandemic, including orders addressing customer non-payment and disconnection. While certain jurisdictions are subject to mandatory stay-at-home and similar orders, essential businesses and activities are exempted from these orders, including utility operations and maintenance. Accordingly,CenterPoint Energy's crews continue to provide essential service by responding to calls, completing work orders and undertaking other critical work. To protect our customers and employees, we have implemented COVID-19 safety precautions. Although the disconnect moratoriums have either expired or may expire during the second quarter of 2021 in certain of the Registrants' service territories,CenterPoint Energy continues to support those customers who may need payment assistance, arrangements or extensions. We will continue to monitor developments in this area and adjust our response as guidelines and circumstances may require. Additionally, while we have not experienced delays to date due to COVID-19 with respect to our regulatory proceedings, we could experience significant delays in scheduling proceedings or hearings and in obtaining orders from regulatory agencies. OnMarch 26, 2020 , the PUCT issued two orders related to COVID-19 issues that affectHouston Electric . First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset costs resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility's request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor ofTexas , authorized a customer assistance program for certain residential customers of electric service in areas ofTexas open to customer choice, which includesHouston Electric's service territory. The order included several requirements for transmission and distribution utilities (includingHouston Electric ): ?Transmission and distribution utilities must file a tariff rider to collect funds to reimburse costs related to unpaid bills from eligible residential customers unemployed due to the impacts of COVID-19. The rider is based on$0.33 per MW hour ($0.00033 per KW hour) to be applied to all customer classes.Houston Electric filed its updated tariff implementing the rider onMarch 31, 2020 , which was approved by the PUCT onApril 2, 2020 . ?Transmission and distribution utilities entered into no-interest loan agreements withERCOT to provide for an initial fund balance for reimbursement. OnApril 13, 2020 , in connection with the PUCT's COVID-19 ERP,Houston Electric entered into a no-interest loan agreement withERCOT pursuant to whichERCOT loanedHouston Electric approximately$5 million . ?The fund administered by each transmission and distribution utility for the COVID-19 ERP can also receive donations and grants from governmental entities, corporations, and other entities. Any funds received from other sources shall be administered and treated in the same manner by the transmission and distribution utilities as the funds in the program from the rider. ?Transmission and distribution utilities may petition the PUCT for changes to the COVID-19 ERP, including the level of the rider in the event that the funds collected are not sufficient to cover reimbursements.
?REPs will identify eligible customers to the relevant transmission and distribution utilities, and the transmission and distribution utilities will cease charging REPs for associated delivery charges, except securitization related charges.
68
--------------------------------------------------------------------------------REPs will cease submitting disconnection for non-payment orders to transmission and distribution utilities for eligible customers.
?The funds collected through the rider will be used to reimburse the following entities and costs: REPs' energy charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice (reimbursement amounts are based on an average energy cost of$0.04 per KW hour); transmission and distribution utilities' delivery charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice; the third-party administrator to cover its reasonable costs of administering the COVID-19 ERP eligibility process; andERCOT for the loan to the transmission and distribution utilities. ?REPs will submit one spreadsheet with reimbursement claims to transmission and distribution utilities beginning onApril 30, 2020 and all subsequent requests that may be made on the 15th of each month, and transmission and distribution utilities will process reimbursement payments within 14 days. ?Transmission and distribution utilities will prepare reports and file them at the PUCT every 30 days showing aggregate amounts of reimbursements to the transmission and distribution utilities and REPs. The PUCT issued an order onAugust 27, 2020 to conclude the COVID-19 ERP. The PUCT determined that enrollment in the COVID-19 ERP would end onAugust 31, 2020 , and benefits under the program ended onSeptember 30, 2020 . Final claims for reimbursement were required to be submitted to transmission and distribution utilities byNovember 30, 2020 . Final program reports were required to be submitted to the PUCT byJanuary 15, 2021 . The transmission and distribution utilities riders remained in place and reimbursements continued after the end of the COVID-19 ERP to complete any remaining COVID-19 ERP cost recovery and disburse all reimbursement amounts or remaining balances. Commissions in all ofIndiana Electric's andCenterPoint Energy's andCERC's Natural Gas service territories have either (1) issued orders to record a regulatory asset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of disconnections and payment plans or (2) provided authority to recover bad debt expense through an existing tracking mechanism. In some of the states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs which ensure the safety and health of customers, employees, and contractors, that would not have been incurred in the normal course of business.CERC's Natural Gas service territories inMinnesota andArkansas will include any offsetting savings in the deferral. Other jurisdictions where the Registrants operate may require them to offset the deferral with savings as well.
Houston Electric Base Rate Case (
OnApril 5, 2019 , and subsequently adjusted in errata filings in May andJune 2019 ,Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately$194 million , among other requests. OnJanuary 23, 2020 ,Houston Electric filed a Stipulation and Settlement Agreement with the PUCT that provides for the following, among other things: •an overall revenue requirement increase of approximately$13 million ; •an ROE of 9.4%; •a capital structure of 57.5% debt/42.5% equity; •a refund of unprotected EDIT of$105 million plus carrying costs over approximately 30-36 months; and •recovery of all retail transmission related costs through the TCRF. Also,Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order fromHouston Electric's next base rate proceeding. No rate base items are required to be written off; however, approximately$12 million in rate case expenses were written off in 2019. A base rate application must be filed forHouston Electric no later than four years from the date of the PUCT's final order in the proceeding. Additionally,Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceeding with the PUCT be instituted regarding EDIT onHouston Electric's securitized assets. Furthermore, under the terms of the Stipulation and Settlement Agreement,Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness fromCenterPoint Energy but left the determination of whether to impose a dividend restriction up to the PUCT. The PUCT approved the Stipulation and Settlement Agreement at itsFebruary 14, 2020 69 -------------------------------------------------------------------------------- open meeting and issued a final order onMarch 9, 2020 . The PUCT declined to impose a dividend restriction in the final order. The rates were implemented onApril 23, 2020 .CenterPoint Energy andHouston Electric record pre-tax expense for (i) probable disallowances of capital investments and (ii) customer refund obligations and costs deferred in regulatory assets when recovery of such amounts is no longer considered probable.
InApril 2017 ,Houston Electric submitted a proposal toERCOT requesting its endorsement of the Freeport Area Master Plan, which included theBailey toJones Creek Project . OnNovember 21, 2019 , the PUCT issued its final approval ofHouston Electric's certificate of convenience and necessity application, based on an unopposed settlement agreement under whichHouston Electric would construct the project at an estimated cost of approximately$483 million . The actual capital costs of the project will depend on land acquisition costs, construction costs, minor changes to the routing of the line to mitigate environmental and other land use impacts, structure design to address soil and coastal wind conditions, and other factors. InApril 2020 , a federal court vacated theArmy Corps of Engineers Nationwide Permit 12, whichHouston Electric intended to use for the project. As a result,Houston Electric filed its individual permit application with theArmy Corps of Engineers in accordance with the federal court decision. However, subsequent to filing the individual permit application, the federal court stayed the effectiveness of its order as it applied to the construction of transmission lines such as theBailey toJones Creek Project . InJuly 2020 , the stay was extended by theU.S. Supreme Court to apply to a broader range of infrastructure projects and is expected to last through the full appellate process. As a result, theArmy Corps of Engineers proceeded with project review under the general Nationwide Permit 12 permit and authorized construction in the impacted areas inNovember 2020 .Houston Electric commenced pre-construction activities on the project in 2019, began construction in 2021 and anticipates completing construction and energizing the line before the end of 2021.
OnDecember 17, 2020 ,Houston Electric filed a certificate of convenience and necessity application with the PUCT for approval to build a 345 kV transmission line inWharton County, Texas connecting the Hillje substation onHouston Electric's transmission system to the planned 610 MW Space City Solar Generation facility being developed by third-party developerEDF Renewables . Depending on the route ultimately approved by the PUCT, the estimated capital cost of the transmission line project ranges from approximately$23 million to$71 million . The actual capital costs of the project will depend on actual land acquisition costs, construction costs, and other factors in addition to route selection. InJanuary 2021 ,Houston Electric executed a Standard Generation Interconnection Agreement for the Space City Solar Generation facility withEDF Renewables , which also provided security for the transmission line project in the form of a$23 million Letter of Credit, the amount of which is subject to change depending on the route approved. The PUCT is required to issue its final approval on the transmission line project no later thanDecember 2021 . Subject to PUCT approval,Houston Electric expects to complete construction and energization of the transmission line byJune 2022 .
Minnesota Base Rate Case (
OnOctober 28, 2019 , CERC filed a general rate case with the MPUC seeking approval for a revenue increase of approximately$62 million with a projected test year endedDecember 31, 2020 . The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 7.41% on a total rate base of approximately$1,307 million . CERC implemented interim rates reflecting$53 million for gas used on and afterJanuary 1, 2020 . InSeptember 2020 , a settlement that addressed all issues except the Inclusive Financing/Tariffed On Bill Financing (TOB) proposal by theCity of Minneapolis was signed by a majority of all parties and was filed with theOffice of Administrative Hearings . A stipulation between theCity of Minneapolis and CERC addressing the TOB proposal was filed onSeptember 2, 2020 . The settlement reflects a$38.5 million increase and was based on an overall after-tax rate of return of 6.86% and does not specify individual cost of capital components. OnJanuary 14, 2021 , the MPUC verbally approved the$38.5 million increase and decided not to include the TOB proposal in the current case, but recommended a new docket be established to gather further information and stakeholder input. A written final order is expected inMarch 2021 .
Indiana North Base Rate Case (
OnDecember 18, 2020 , Indiana North filed its base rate case with the IURC seeking approval for a revenue increase of approximately$21 million . This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana North's capital expenditure program, approved in 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 6.32% on total rate base of 70 -------------------------------------------------------------------------------- approximately$1,611 million . Indiana North has utilized a projected test year, reflecting its 2021 budget as the basis for the revenue increase requested, and proposes to implement rates in two phases. The first phase of rate implementation will occur as of the date of an order in this proceeding, expected inOctober 2021 , and the second phase of rate implementation will occur at the completion of the test year, as ofDecember 31, 2021 . UnderIndiana statutory requirements, the IURC has a minimum of 300 days and maximum of 360 days from the date of the filing of Indiana North's case-in-chief to issue an order.
Indiana South Base Rate Case (
OnOctober 30, 2020 , and as subsequently amended, Indiana South filed its base rate case with the IURC seeking approval for a revenue increase of approximately$29 million . This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana South's capital expenditure program, approved in 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 5.99% on total rate base of approximately$469 million . Indiana South has utilized a projected test year, reflecting its 2021 budget as the basis for the revenue increase requested, and proposes to implement rates in two phases. The first phase of rate implementation will occur as of the date of an order in this proceeding, expected inSeptember 2021 , and the second phase of rate implementation will occur at the completion of the test year, as ofDecember 31, 2021 . UnderIndiana statutory requirements, the IURC has a minimum 300 days and maximum of 360 days from the date of the filing of Indiana South's case-in-chief to issue an order. Intervenor testimony was filed with the IURC onFebruary 19, 2021 . Indiana South's rebuttal testimony is due to be filed with the IURC byMarch 19, 2021 .
Indiana Electric must either (i) make substantial investments in its existing generation resources to comply with environmental regulations or (ii) replace its existing generation with new resources.Indiana requires each electric utility to perform and submit an IRP every three years (unless extended) to the IURC that uses economic modeling to consider the costs and risks associated with available resource options to provide reliable electric service for the next 20-year period. OnFebruary 20, 2018 ,Indiana Electric filed a petition seeking authorization from the IURC to construct a new 700-850 MW natural gas combined cycle generating facility to replace the baseload capacity of its existing generation fleet at an approximate cost of$900 million , which included the cost of a new natural gas pipeline to serve the plant. As a part of this same proceeding,Indiana Electric also sought recovery underIndiana Senate Bill 251 of costs to be incurred for environmental investments to be made at itsF.B. Culley generating plant to comply with ELG and CCR rules. The F.B. Culley investments, estimated to be approximately$95 million , began in 2019 and will allow the F.B. Culley Unit 3 generating facility to comply with environmental requirements and continue to provide generating capacity toIndiana Electric's customers. UnderIndiana Senate Bill 251,Indiana Electric sought authority to recover 80% of the approved costs, including a return, using a tracking mechanism, with the remaining 20% of the costs deferred for recovery inIndiana Electric's next base rate proceeding. OnApril 24, 2019 , the IURC issued an order approving the environmental investments proposed for the F.B. Culley generating facility, along with recovery of prior pollution control investments made in 2014. The order denied the proposed gas combined cycle generating facility.Indiana Electric has conducted a new IRP, which was submitted to the IURC inJune 2020 , to identify an appropriate generation resource portfolio that includes the replacement of 730 MW of coal-fired generation facilities with a significant buildout of renewables supported by dispatchable natural gas combustion turbines.
OnAugust 14, 2019 ,Indiana Electric filed a petition with the IURC, seeking approval, as a federally mandated project, for the recovery of costs associated with the clean closure of the A.B. Brown ash pond pursuant toIndiana Senate Bill 251. This project, expected to last approximately 14 years, would result in the full excavation and recycling of the ponded ash through agreements with a beneficial reuse entity, totaling approximately$160 million . UnderIndiana Senate Bill 251,Indiana Electric seeks authority to recover via a tracking mechanism 80% of the approved costs, with a return on eligible capital investments needed to allow for the extraction of the ponded ash, with the remaining 20% of the costs deferred for recovery inIndiana Electric's next base rate proceeding. OnDecember 19, 2019 and subsequently onJanuary 10, 2020 ,Indiana Electric filed a settlement agreement with the intervening parties whereby the costs would be recovered as requested, with an additional commitment byIndiana Electric to offset the federally mandated costs by at least$25 million , representing a combination of total cash proceeds received from the ash reuser and total insurance proceeds to be received fromIndiana Electric's insurers under confidential settlement agreements of litigation filed against the insurers. OnMay 13, 2020 , the IURC approved the 71 --------------------------------------------------------------------------------
settlement agreement in full. On
Rate Change Applications
The Registrants are routinely involved in rate change applications before state regulatory authorities. Those applications include general rate cases, where the entire cost of service of the utility is assessed and reset. In addition,Houston Electric is periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS and DCRF) and annually files to adjust its EECRF. CERC is periodically involved in proceedings to adjust its capital tracking mechanisms inTexas (GRIP), its cost of service adjustments inArkansas ,Louisiana ,Mississippi andOklahoma (FRP, RSP, RRA and PBRC, respectively), its decoupling mechanism inMinnesota , and its energy efficiency cost trackers inArkansas ,Minnesota ,Mississippi andOklahoma (EECR, CIP, EECR and EECR, respectively).CenterPoint Energy is periodically involved in proceedings to adjust its capital tracking mechanisms inIndiana (CSIA for gas and TDSIC for electric) andOhio (DRR), its decoupling mechanism inIndiana (SRC for gas), and its energy efficiency cost trackers inIndiana (EEFC for gas and DSMA for electric) andOhio (EEFR).
The table below reflects significant applications pending or completed since the
Registrants' combined 2019 Form 10-K was filed with the
Annual
Increase
(Decrease) (1) Filing
Mechanism (in millions) Date Effective Date Approval Date Additional Information
CenterPoint
The requested amount is comprised primarily of
the following: 2021 Program and Evaluation,
Measurement and Verification costs of $39
million, 2019 over recovery of ($1) million
and 2019 earned bonus of $12 million . A
settlement was approved in October 2020
consisting of 2021 Program and Evaluation,
Measurement and Verification costs of $39
million, 2019 over recovery of ($1) million ,
2019 earned bonus of $11 million and a black
June March box reduction to revenue requirement of ($1 )
EECRF $11 2020 2021 October 2020 million.
April April See discussion above under Houston Electric
Rate Case 13 2019 2020 March 2020 Base Rate Case.
May May Based on net change in invested capital of
TCOS 17 March 2020 2020 2020 $204 million .
July Based on net change in invested capital of
TCOS 16 2020 September 2020 September 2020 $140 million .
CenterPoint Energy and
CERC -
Unanimous settlement agreement approved by the
Railroad Commission in June 2020 provides for
a $4 million annual increase in current
revenues, a refund for an Unprotected EDIT
Rider amortized over three years of which $2
million is refunded in the first year and
establishes a 9.65% ROE and a 56.95% equity
ratio for future GRIP filings for the
Beaumont/East Texas jurisdiction. New rates
were effective with October 2020 usage and
November June began to be reflected on customers' bills in
Rate Case 4 2019 November 2020 2020 November 2020.
CenterPoint Energy and CERC -
March June June Based on net change in invested capital of
GRIP 18 2020 2020 2020 $143 million .
CenterPoint
Energy and CERC -
Based on ROE of 9.5% with 50 basis point (+/-)
earnings band. Revenue reduction of $12
million based on prior test year true-up
earned return on equity of 11.79% combined
April with projected test year return on equity of
FRP (12) 2020 October 2020 September 2020 9.43%.
CenterPoint
Energy and CERC -
Based on ROE of 9.95% with 50 basis point
(+/-) earnings band. For the test year ended
June 2020 and net of TCJA effects considered
outside the earnings band, North Louisiana had
a $3 million increase to annual revenue based
on an adjusted ROE of 6.21% and South
Louisiana had a $1 million decrease to annual
RSP 2 September 2020 December 2020 December 2020 revenue based on an adjusted ROE of 10.79%.
CenterPoint
Energy and CERC -
Represents under-recovery of approximately $2
million recorded for and during the period
July 1, 2019 through June 30, 2020, including
approximately $1 million related to the period
Decoupling (1) N/A September 2020 September 2020 TBD July 1, 2018 through June 30, 2019.
May CIP Financial Incentive based on 2019
CIP Financial Incentive 9 2020 October 2020 August 2020 activity.
See discussion above under Minnesota Base Rate
Rate Case (1) 62 October 2019 TBD TBD Case.
72--------------------------------------------------------------------------------
Annual
Increase
(Decrease) (1) Filing
Mechanism (in millions) Date Effective Date Approval Date Additional Information
CenterPoint
Energy and CERC -
Based on ROE of 10% with 50 basis point (+/-)
earnings band. Revenue credit of approximately $2
million based on 2019 test year adjusted earned ROE
of 15.37%. The OCC approved a unanimous settlement
agreement that provides for a revenue credit to
March July July customers of $2 million , paid out monthly for the
PBRC (2) 2020 2020 2020 next twelve months.
CenterPoint
Energy and CERC -
Based on ROE of 9.292% with 100 basis point (+/-)
May earnings band. Revenue increase of $2 million based
RRA 2 2020 September 2020 September 2020 on 2019 test year adjusted earned ROE of 7.90%.
CenterPointEnergy - Indiana South - Gas (IURC)
Requested an increase of $13 million to rate base,
which reflects a $1 million annual increase in
current revenues. 80% of revenue requirement is
included in requested rate increase and 20% is
deferred until the next rate case. The mechanism
also includes refunds associated with the TCJA,
resulting in no change to the previous credit
provided, and a change in the total
April July July (over)/under-recovery variance of $1 million
CSIA 1 2020 2020 2020 annually.
Requested an increase of $13 million to rate base,
which reflects a $2 million annual increase in
current revenues. 80% of revenue requirement is
included in requested rate increase and 20% is
deferred until the next rate case. The mechanism
also includes refunds associated with the TCJA,
resulting in no change to the previous credit
provided, and a change in the total
(over)/under-recovery variance of $(1) million
CSIA 2 October 2020 January 2021 January 2021 annually.
See discussion above under Indiana South Base Rate
Rate Case (1) 29 October 2020 September 2021 TBD Case.
CenterPointEnergy - Indiana North - Gas (IURC)
Requested an increase of $35 million to rate base,
which reflects a $4 million annual increase in
current revenues. 80% of revenue requirement is
included in requested rate increase and 20% is
deferred until the next rate case. The mechanism
also includes refunds associated with the TCJA,
resulting in no change to the previous credit
provided, and a change in the total
April July July (over)/under-recovery variance of $14 million
CSIA 4 2020 2020 2020 annually.
Requested an increase of $32 million to rate base,
which reflects a $2 million annual increase in
current revenues. 80% of revenue requirement is
included in requested rate increase and 20% is
deferred until the next rate case. The mechanism
also includes refunds associated with the TCJA,
resulting in an increase of $(1) million to the
previous credit provided, and a change in the total
(over)/under-recovery variance of $(6) million
CSIA 2 October 2020 January 2021 January 2021 annually.
See discussion above under Indiana North Base Rate
Rate Case (1) 21 December 2020 October 2021 TBD Case.
Application to flow back to customers certain
benefits from the TCJA. Initial impact reflects
credits for 2018 of $(10) million and 2019 of $(9)
million, and 2020 of $(7) million , with mechanism
January July July that began upon approval from the PUCO effective
TSCR N/A 2019 2020 2020 July 1, 2020.
Application to flow back to customers certain
benefits from the TCJA. Impact reflects credits for
2021 of $(7) million and includes a reconciliation
TSCR N/A September 2020 January 2021 January 2021 through August 31, 2020 of $(14) million .
Requested an increase of $67 million to rate base
for investments made in 2019, which reflects a $10
million annual increase in current revenues. A
May September change in (over)/under-recovery variance of $2
DRR 9 2020 2020 December 2020 million annually is also included in rates.
CenterPoint
Energy -
Requested an increase of $34 million to rate base,
which reflects a $4 million annual increase in
current revenues. 80% of revenue requirement is
included in requested rate increase and 20% is
deferred until next rate case. The mechanism also
February May May includes a change in(over)/under-recovery variance
TDSIC 4 2020 2020 2020 of $2 million annually.
Requested an increase of $49 million to rate base,
which reflects a $10 million annual increase in
current revenues. 80% of the revenue requirement is
included in requested rate increase and 20% is
deferred until next rate case. The mechanism also
May included a change in(over)/under-recovery variance
ECA 10 2020 August 2020 October 2020 of $4 million annually.
Requested an increase of $36 million to rate base,
which reflects a $3 million annual increase in
current revenues. 80% of the revenue requirement is
included in requested rate increase and 20% is
deferred until next rate case. The mechanism also
includes a change in(over)/under-recovery variance
TDSIC 3 August 2020 November 2020 November 2020 of $(1) million .
73
--------------------------------------------------------------------------------
Annual
Increase
(Decrease) (1) Filing
Mechanism (in millions) Date Effective Date Approval Date Additional Information
Requested an increase of $28 million to rate base,
which reflects a $3 million annual increase in
current revenues. 80% of the revenue requirement
is included in requested rate increase and 20% is
deferred until next rate case. The mechanism also
includes a change in (over)/under-recovery
TDSIC (1) 3 February 2021 May 2021 TBD variance of less than $1 million .
Reflects an $8 million annual increase in current
revenues through a non-traditional rate making
approach related to a 50 MW universal solar array
CECA (1) 8 February 2021 TBD TBD placed in service in January 2021.
(1)Represents proposed increases (decreases) when effective date and/or approval
date is not yet determined. Approved rates could differ materially from proposed
rates.
Tax Reform
TCJA-related 2018 tax expense refunds are currently included in the Registrants'
existing rates and are therefore reducing the Registrants' current annual
revenue. The TCJA-related 2018 tax expense refunds for Houston Electric were
completed in September 2019 . However, in Houston Electric's rate case filed in
April 2019 , and subsequently adjusted in errata filings in May and June 2019 ,
pursuant to the Stipulation and Settlement Agreement, Houston Electric will
return unprotected EDIT net regulatory liability balance to customers, through a
separate rider and its wholesale transmission tariff over approximately three
years and the TCJA-related protected EDIT balance over ARAM. As of December 31,
2020 , the balances of the net unprotected EDIT regulatory liability and
protected EDIT regulatory liability were $66 million and $678 million ,
respectively.
CenterPoint Energy's electric and natural gas utilities in Indiana and Ohio
currently recover corporate income tax expense in approved rates charged to
customers. The IURC and the PUCO both issued orders which initiated proceedings
to investigate the impact of the TCJA on utility companies and customers within
Indiana and Ohio , respectively. In addition, the IURC and PUCO have ordered each
utility to establish regulatory liabilities to record all estimated impacts of
tax reform starting January 1, 2018 until the date when rates are adjusted to
capture these impacts. In Indiana , in response to Vectren's pre-Merger filing
for proposed changes to its rates and charges to consider the impact of the
lower federal income tax rates, the IURC approved an initial reduction to
current rates and charges, effective June 1, 2018 , to capture the immediate
impact of the lower corporate federal income tax rate. The refund of EDIT and
regulatory liabilities commenced in November 2018 for Indiana electric customers
and in January 2019 for Indiana natural gas customers. In Ohio , the initial rate
reduction to current rates and charges became effective upon conclusion of its
then pending base rate case on August 28, 2019 . In January 2019 , an application
was filed with the PUCO in compliance with its October 2018 order requiring
utilities to file for a request to adjust rates to reflect the impact of the
TCJA, requesting authority to implement a rider to flow back to customers the
tax benefits realized under the TCJA, including the refund of EDIT and
regulatory liabilities. On July 1, 2020 , the PUCO approved the initial rate
reduction to credit customers for the impact of the TCJA. This credit mechanism
results in an amortization of the unprotected balance of EDIT over a period of
six years, starting in 2018, with the protected balance amortized in accordance
with ARAM. The credit mechanism will be adjusted via an annual filing made each
October to reflect projected refunds for each calendar year.
ELG (
Under the Clean Water Act, theEPA sets technology-based guidelines for water discharges from new and existing electric generation facilities. InSeptember 2015 , theEPA finalized revisions to the existing steam electric ELG setting stringent technology-based water discharge limits for the electric power industry. TheEPA focused this rulemaking on wastewater generated primarily by pollution control equipment necessitated by the comprehensive air regulations, specifically setting strict water discharge limits for arsenic, mercury and selenium for scrubber waste waters. The ELG will be implemented when existing water discharge permits for the plants are renewed. In the case ofIndiana Electric's water discharge permits, in 2017 the IDEM issued final renewals for the F.B. Culley andA.B. Brown power plants. IDEM agreed that units identified for retirement byDecember 2023 would not be required to install new treatment technology to meet ELG, and approved a 2020 compliance date for dry bottom ash, which has been completed, and a 2023 compliance date for flue gas desulfurization wastewater treatment standards for the remaining coal-fired unit at F.B. Culley. OnApril 13, 2017 , as part of theU.S. President's Administration's regulatory reform initiative, which is focused on the number and nature of regulations, theEPA granted petitions to reconsider the ELG rule, and indicated it would stay the implementation deadlines in the rule during the pendency of the reconsideration. OnSeptember 13, 2017 , theEPA finalized a rule postponing certain interim compliance dates by two years, but did not postpone the final compliance deadline of December 74 -------------------------------------------------------------------------------- 31, 2023. OnApril 12, 2019 , theU.S. Court of Appeals for the Fifth Circuit vacated and remanded portions of the ELG rule that selected impoundment as the best available technology for legacy wastewater and leachate. OnOctober 13, 2020 , theEPA finalized revisions to the ELG rule, which established a two-year extension of the compliance deadline for the prohibition of wet sluicing of bottom ash. However, the ELG rule did not establish alternative deadlines for the prohibition of wet sluicing of fly ash, and the most recent revision to the CCR rule confirmed that ash ponds must commence closure no later thanOctober 2023 . As a result,CenterPoint Energy does not currently anticipate any changes to its current compliance plans based upon this most recent ELG update.
CPP and ACE Rule (
OnAugust 3, 2015 , theEPA released its CPP Rule, which required a 32% reduction in carbon emissions from 2005 levels. The final rule was published in theFederal Register onOctober 23, 2015 , and that action was immediately followed by litigation ultimately resulting in theU.S. Supreme Court staying implementation of the rule. OnAugust 31, 2018 , theEPA published its proposed CPP replacement rule, the ACE Rule, which was finalized onJuly 8, 2019 and requires states to implement a program of energy efficiency improvement targets for individual coal-fired electric generating units. OnJanuary 19, 2021 , the ACE Rule was struck down by theU.S. District Court of Appeals for the D.C. Circuit .CenterPoint Energy is currently unable to predict whether theBiden Administration will continue its defense of the CPP or ACE Rule, or what a new replacement rule would look like. OnMarch 1, 2020 ,CenterPoint Energy announced corporate carbon emission goals, which are expected to be used to guideIndiana Electric's transition to a low carbon fleet and positionIndiana Electric to comply with anticipated future regulatory requirements from the Biden administration to further reduce GHG emissions from its electric fleet.
Impact of Legislative Actions & Other Initiatives (
At this time, compliance costs and other effects associated with reductions in GHG emissions or obtaining renewable energy sources remain uncertain. While the requirements of a federal or state rule remain uncertain,Indiana Electric will continue to monitor regulatory activity regarding GHG emission standards that may affect its electric generating units.
MRT Rate Case (
InJune 2018 , MRT filed a general Natural Gas Act rate case, and inOctober 2019 , MRT filed a second rate case. MRT began collecting the rates proposed in the 2018 rate case, subject to refund, onJanuary 1, 2019 . OnNovember 5, 2019 , as supplemented onDecember 13, 2019 , MRT filed uncontested proposed settlements for the 2018 and 2019 rate cases. TheFERC approved both settlements onMarch 26, 2020 , and that order became final onApril 25, 2020 .
Other Matters
Credit Facilities
The Registrants may draw on their respective revolving credit facilities from time to time to provide funds used for general corporate and limited liability company purposes, including to backstopCenterPoint Energy's and CERC's commercial paper programs. The facilities may also be utilized to obtain letters of credit. For further details related to the Registrants' revolving credit facilities, please see Note 14 to the consolidated financial statements. Based on the consolidated debt to capitalization covenant in the Registrants' revolving credit facilities, the Registrants would have been permitted to utilize the full capacity of such revolving credit facilities, which aggregated approximately$4.9 billion as ofDecember 31, 2020 . OnFebruary 4, 2021 , the Registrants amended and restated each of their revolving credit facilities, which reduced the aggregate capacity of such facilities to$4.0 billion . 75 --------------------------------------------------------------------------------
As of
Amount
Utilized as of
Size of Letters of Weighted Average
Registrant Facility Loans Credit Commercial Paper Interest Rate Termination Date
(in millions)
CenterPoint Energy $ 2,400 $ - $ 11 $ 1,502 0.21% February 4, 2024
CenterPoint Energy (1) 400 - - 86 0.18% February 4, 2024
Houston Electric 300 - - - -% February 4, 2024
CERC 900 - - 255 0.18% February 4, 2024
Total $ 4,000 $ - $ 11 $ 1,843
(1)The credit facility was issued by VUHI and is guaranteed by SIGECO,
Borrowings under each of the revolving credit facilities are subject to customary terms and conditions. However, there is no requirement that the borrower makes representations prior to borrowing as to the absence of material adverse changes or litigation that could be expected to have a material adverse effect. Borrowings under each of the revolving credit facilities are subject to acceleration upon the occurrence of events of default that we consider customary. The revolving credit facilities also provide for customary fees, including commitment fees, administrative agent fees, fees in respect of letters of credit and other fees. In each of the revolving credit facilities, the spread to LIBOR and the commitment fees fluctuate based on the borrower's credit rating. Each of the Registrant's credit facilities provide for a mechanism to replace LIBOR with possible alternative benchmarks upon certain benchmark replacement events. The borrowers are currently in compliance with the various business and financial covenants in the four revolving credit facilities.
Long-term Debt
For detailed information about the Registrants' debt issuances in 2020, see Note 14 to the consolidated financial statements.
Securities Registered with the
OnMay 29, 2020 , the Registrants filed a joint shelf registration statement with theSEC registering indeterminate principal amounts ofHouston Electric's general mortgage bonds,CERC Corp.'s senior debt securities andCenterPoint Energy's senior debt securities and junior subordinated debt securities and an indeterminate number of shares of Common Stock, shares of preferred stock, depositary shares, as well as stock purchase contracts and equity units. The joint shelf registration statement will expire onMay 29, 2023 . For information related to the Registrants' debt and equity security issuances in 2020, see Notes 13 and 14 to the consolidated financial statements.
Temporary Investments
As of
The Registrants participate in a money pool through which they and certain of their subsidiaries can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of theCenterPoint Energy money pool are expected to be met with borrowings underCenterPoint Energy's revolving credit facility or the sale ofCenterPoint Energy's commercial paper. The net funding requirements of the CERC money pool are expected to be met with borrowings under CERC's revolving credit facility or the sale of CERC's commercial paper. The money pool may not provide sufficient funds to meet the Registrants' cash needs. The table below summarizesCenterPoint Energy money pool activity by Registrant as ofFebruary 22, 2021 : Weighted Average Interest Rate Houston Electric CERC (in millions) Money pool investments 0.21% $ (248) $ - 76
--------------------------------------------------------------------------------
Impact on Liquidity of a Downgrade in Credit Ratings
The interest on borrowings under the Registrants' credit facilities is based on their credit ratings. The interest on borrowings under the credit facilities is based on each respective borrower's credit ratings. As ofFebruary 22, 2021 , Moody's, S&P and Fitch had assigned the following credit ratings to senior debt of the Registrants: Moody's S&P Fitch Registrant Borrower/Instrument Rating Outlook (1) Rating Outlook (2) Rating Outlook (3) CenterPoint Energy CenterPoint Energy Senior Unsecured Debt Baa2 Stable BBB Stable BBB Stable CenterPoint Energy Vectren Corp. Issuer Rating n/a n/a BBB+ Stable n/a n/a CenterPoint Energy VUHI Senior Unsecured Debt A3 Stable BBB+ Stable n/a n/a CenterPoint Energy Indiana Gas Senior Unsecured Debt n/a n/a BBB+ Stable n/a n/a CenterPoint Energy SIGECO Senior Secured Debt A1 Stable A Stable n/a n/a Houston Electric Houston Electric Senior Secured Debt A2 Stable A Stable A Stable CERC CERC Corp. Senior Unsecured Debt A3 Stable BBB+ Stable A- Stable
(1)A Moody's rating outlook is an opinion regarding the likely direction of an issuer's rating over the medium term.
(2)An S&P outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term.
(3)A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.
The Registrants cannot assure that the ratings set forth above will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. The Registrants note that these credit ratings are included for informational purposes and are not recommendations to buy, sell or hold the Registrants' securities and may be revised or withdrawn at any time by the rating agency. Each rating should be evaluated independently of any other rating. Any future reduction or withdrawal of one or more of the Registrants' credit ratings could have a material adverse impact on the Registrants' ability to obtain short- and long-term financing, the cost of such financings and the execution of the Registrants' commercial strategies. A decline in credit ratings could increase borrowing costs under the Registrants' revolving credit facilities. If the Registrants' credit ratings had been downgraded one notch by S&P and Moody's from the ratings that existed as ofDecember 31, 2020 , the impact on the borrowing costs under the four revolving credit facilities would have been insignificant. A decline in credit ratings would also increase the interest rate on long-term debt to be issued in the capital markets and could negatively impact the Registrants' ability to complete capital market transactions and to access the commercial paper market. Additionally, a decline in credit ratings could increase cash collateral requirements and reduce earnings ofCenterPoint Energy's andCERC's Natural Gas reportable segments. Pipeline tariffs and contracts typically provide that if the credit ratings of a shipper or the shipper's guarantor drop below a threshold level, which is generally investment grade ratings from both Moody's and S&P, cash or other collateral may be demanded from the shipper in an amount equal to the sum of three months' charges for pipeline services plus the unrecouped cost of any lateral built for such shipper. If the credit ratings ofCERC Corp. decline below the applicable threshold levels, CERC might need to provide cash or other collateral of as much as$218 million as ofDecember 31, 2020 . The amount of collateral will depend on seasonal variations in transportation levels.
ZENS and Securities Related to ZENS (
IfCenterPoint Energy's creditworthiness were to drop such that ZENS holders thought its liquidity was adversely affected or the market for the ZENS were to become illiquid, some ZENS holders might decide to exchange their ZENS for cash. Funds for the payment of cash upon exchange could be obtained from the sale of the shares ofZENS-Related Securities thatCenterPoint Energy owns or from other sources.CenterPoint Energy owns shares ofZENS-Related Securities equal to approximately 100% of the reference shares used to calculate its obligation to the holders of the ZENS. ZENS exchanges result in a cash outflow because tax deferrals related to the ZENS and shares ofZENS-Related Securities would typically cease when ZENS are exchanged or otherwise retired and shares ofZENS-Related Securities are sold. The ultimate tax liability related to 77 -------------------------------------------------------------------------------- theZENS and ZENS-Related Securities continues to increase by the amount of the tax benefit realized each year, and there could be a significant cash outflow when the taxes are paid as a result of the retirement or exchange of the ZENS. If all ZENS had been exchanged for cash onDecember 31, 2020 , deferred taxes of approximately$471 million would have been payable in 2020. If all theZENS-Related Securities had been sold onDecember 31, 2020 , capital gains taxes of approximately$159 million would have been payable in 2020. For additional information about ZENS, see Note 12 to the consolidated financial statements.
Cross Defaults
Under each ofCenterPoint Energy's (including VUHI's),Houston Electric's and CERC's respective revolving credit facilities, as well as underCenterPoint Energy's term loan agreement, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding$125 million by the borrower or any of their respective significant subsidiaries will cause a default under such borrower's respective credit facility or term loan agreement. A default byCenterPoint Energy would not trigger a default under its subsidiaries' debt instruments or revolving credit facilities.
Possible Acquisitions,
From time to time, the Registrants consider the acquisition or the disposition of assets or businesses or possible joint ventures, strategic initiatives or other joint ownership arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are unpredictable. The Registrants may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to the Registrants at that time due to a variety of events, including, among others, maintenance of our credit ratings, industry conditions, general economic conditions, market conditions and market perceptions. As announced inDecember 2020 ,CenterPoint Energy's business strategy incorporated theBusiness Review and Evaluation Committee's recommendations to increase its planned capital expenditures in its electric and Natural Gas businesses to support rate base growth and sell certain of its Natural Gas businesses located inArkansas andOklahoma as a means to efficiently finance a portion of such increased capital expenditures, among other recommendations. For further information, see "-Recent Events-Business Review and Evaluation Committee " above. Additionally,CenterPoint Energy's process of evaluating and optimizing the various businesses, assets and ownership interests currently held by it considered, among other things, various plans, proposals and other strategic alternatives with respect to Enable andCenterPoint Energy's investment in Enable, which may result in the disposition of a portion or all of its ownership interest in Enable. InFebruary 2021 ,CenterPoint Energy announced its support of the Enable Merger, which is expected to close in the second half of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance.CenterPoint Energy may not realize any or all of the anticipated strategic, financial, operational or other benefits from the Enable Merger, if completed, or from any disposition or reduction of its resulting investment in Energy Transfer. There can be no assurances that any disposal of Energy Transfer common units or Energy Transfer Series G Preferred Units will be completed. Any disposal of such securities may involve significant costs and expenses, including in connection with any public offering, a significant underwriting discount. For information regarding the Enable Merger, see Note 22 to the consolidated financial statements.
InSeptember 2018 , CERC completed the Internal Spin, after which CERC's equity investment in Enable met the criteria for discontinued operations classification. As a result, the operations have been classified as Income from discontinued operations, net of tax, in CERC's Statements of Consolidated Income for the periods presented. For further information, see Note 4 to the consolidated financial statements.CenterPoint Energy receives quarterly cash distributions from Enable on its common units and Enable Series A Preferred Units. A reduction in the cash distributionsCenterPoint Energy receives from Enable could significantly impactCenterPoint Energy's liquidity. For additional information about cash distributions from Enable and the recently announced Enable Merger, see Notes 11 and 22 to the consolidated financial statements.
Hedging of Interest Expense for Future Debt Issuances
From time to time, the Registrants may enter into interest rate agreements to hedge, in part, volatility in theU.S. treasury rates by reducing variability in cash flows related to interest payments. For further information, see Note 9(a) to the consolidated financial statements. 78 --------------------------------------------------------------------------------
Weather Hedge (
CenterPoint Energy and CERC have historically entered into partial weather hedges for certain Natural Gas jurisdictions and electric operations'Texas service territory to mitigate the impact of fluctuations from normal weather.CenterPoint Energy and CERC remain exposed to some weather risk as a result of the partial hedges. For more information about weather hedges, see Note 9(a) to the consolidated financial statements.
Collection of Receivables from REPs (
Houston Electric's receivables from the distribution of electricity are collected from REPs that supply the electricityHouston Electric distributes to their customers. Before conducting business, a REP must register with the PUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, structural problems in the market served byERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay forHouston Electric's services or could cause them to delay such payments.Houston Electric depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs could adversely affectHouston Electric's cash flows. In the event of a REP's default,Houston Electric's tariff provides a number of remedies, including the option forHouston Electric to request that the PUCT suspend or revoke the certification of the REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. However,Houston Electric remains at risk for payments related to services provided prior to the shift to the replacement REP or the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations and claims might be made againstHouston Electric involving payments it had received from such REP. If a REP were to file for bankruptcy,Houston Electric may not be successful in recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, PUCT regulations authorize utilities, such asHouston Electric , to defer bad debts resulting from defaults by REPs for recovery in future rate cases, subject to a review of reasonableness and necessity.
Other Factors that Could Affect Cash Requirements
In addition to the above factors, the Registrants' liquidity and capital resources could also be negatively affected by:
•further reductions in the cash distributions we receive from Enable; •cash collateral requirements that could exist in connection with certain contracts, including weather hedging arrangements, and natural gas purchases, natural gas price and natural gas storage activities ofCenterPoint Energy's andCERC's Natural Gas reportable segment; •acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased natural gas prices, including as a result of theFebruary 2021 Winter Storm Event, and concentration of natural gas suppliers (CenterPoint Energy and CERC); •increased costs related to the acquisition of natural gas, including as a result of theFebruary 2021 Winter Storm Event (CenterPoint Energy and CERC); •increases in interest expense in connection with debt refinancings and borrowings under credit facilities or term loans or the use of alternative sources of financings due to the effects of COVID-19 and theFebruary 2021 Winter Storm Event on capital and other financial markets; •various legislative or regulatory actions; •incremental collateral, if any, that may be required due to regulation of derivatives (CenterPoint Energy ); •the ability of REPs, including REP affiliates ofNRG and Vistra Energy Corp., to satisfy their obligations toCenterPoint Energy andHouston Electric , including the negative impact on such ability related to COVID-19 and theFebruary 2021 Winter Storm Event; •slower customer payments and increased write-offs of receivables due to higher natural gas prices, changing economic conditions, COVID-19 or theFebruary 2021 Winter Storm Event (CenterPoint Energy and CERC); •the satisfaction of any obligations pursuant to guarantees; •the outcome of litigation; •contributions to pension and postretirement benefit plans; •restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and •various other risks identified in "Risk Factors" in Item 1A of Part I of this report. 79 --------------------------------------------------------------------------------
Certain Contractual Limits on Our Ability to
Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions. Additionally, certain provisions in note purchase agreements relating to debt issued by VUHI have the effect of restricting the amount of additional first mortgage bonds issued by SIGECO. For information about the total debt to capitalization financial covenants in the Registrants' and certain ofCenterPoint Energy's subsidiaries' revolving credit facilities, see Note 14 to the consolidated financial statements. CRITICAL ACCOUNTING POLICIES A critical accounting policy is one that is both important to the presentation of the Registrants' financial condition and results of operations and requires management to make difficult, subjective or complex accounting estimates. An accounting estimate is an approximation made by management of a financial statement element, item or account in the financial statements. Accounting estimates in the Registrants' historical consolidated financial statements measure the effects of past business transactions or events, or the present status of an asset or liability. The accounting estimates described below require the Registrants to make assumptions about matters that are highly uncertain at the time the estimate is made. Additionally, different estimates that the Registrants could have used or changes in an accounting estimate that are reasonably likely to occur could have a material impact on the presentation of their financial condition, results of operations or cash flows. The circumstances that make these judgments difficult, subjective and/or complex have to do with the need to make estimates about the effect of matters that are inherently uncertain. Estimates and assumptions about future events and their effects cannot be predicted with certainty. The Registrants base their estimates on historical experience and on various other assumptions that they believe to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Registrants' operating environment changes. The Registrants' significant accounting policies are discussed in Note 2 to the consolidated financial statements. The Registrants believe the following accounting policies involve the application of critical accounting estimates. Accordingly, these accounting estimates have been reviewed and discussed with the Audit Committee ofCenterPoint Energy's Board of Directors.
Accounting for Rate Regulation
Accounting guidance for regulated operations provides that rate-regulated entities account for and report assets and liabilities consistent with the recovery of those incurred costs in rates if the rates established are designed to recover the costs of providing the regulated service and if the competitive environment makes it probable that such rates can be charged and collected.CenterPoint Energy , for its Electric and Natural Gas reportable segments,Houston Electric and CERC apply this accounting guidance. Certain expenses and revenues subject to utility regulation or rate determination normally reflected in income are deferred on the balance sheet as regulatory assets or liabilities and are recognized in income as the related amounts are included in service rates and recovered from or refunded to customers. Regulatory assets and liabilities are recorded when it is probable that these items will be recovered or reflected in future rates. Determining probability requires significant judgment on the part of management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders and the strength or status of applications for rehearing or state court appeals. If events were to occur that would make the recovery of these assets and liabilities no longer probable, the Registrants would be required to write off or write down these regulatory assets and liabilities. For further detail on the Registrants' regulatory assets and liabilities, see Note 7 to the consolidated financial statements. Impairment of Long-Lived Assets, Including Identifiable Intangibles,Goodwill , Equity Method Investments, and Investments without a Readily Determinable Fair Value The Registrants review the carrying value of long-lived assets, including identifiable intangibles, goodwill, equity method investments, and investments without a readily determinable fair value whenever events or changes in circumstances indicate that such carrying values may not be recoverable, and at least annually, goodwill is tested for impairment as required by accounting guidance for goodwill and other intangible assets. Unforeseen events, changes in market conditions, and probable regulatory disallowances, where applicable, could have a material effect on the value of long-lived assets, including intangibles, goodwill, equity method investments, and investments without a readily determinable fair value due to changes in observable or estimated market value, future cash flows, interest rate, and regulatory matters could result in an impairment charge. The Registrants recorded no impairments to long-lived assets, including intangibles, equity method investments, or readily determinable fair value during 2019 and 2018.CenterPoint Energy recognized equity method investment impairment losses during 2020 as discussed below.CenterPoint Energy and CERC recognized goodwill impairment losses, discussed below, during 2020 and 2019, and the Registrants recorded no impairments to goodwill in 2018. 80 -------------------------------------------------------------------------------- In connection with its preparation of the financial statements for the three months endedMarch 31, 2020 ,CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units due to the macroeconomic conditions resulting from the COVID-19 pandemic and the related decline inCenterPoint Energy's Common Stock price.CenterPoint Energy recognized goodwill impairment losses, discussed below, during the year endedDecember 31, 2020 , and CERC recorded no impairments to goodwill within continuing operations during the year endedDecember 31, 2020 .CenterPoint Energy and CERC performed their annual goodwill impairment tests in the third quarter of 2020 and determined that no goodwill impairment charge was required for any reporting unit as a result of those tests. Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenue performance measures. The fair value could be different using different estimates and assumptions in these valuation techniques. Fair value measurements require significant judgment and unobservable inputs, including (i) projected timing and amount of future cash flows, which factor in planned growth initiatives, (ii) the regulatory environment, as applicable, and (iii) discount rates reflecting risk inherent in the future market prices. Determining the discount rates for the non-rate regulated businesses requires the estimation of the appropriate company specific risk premiums for those non-rate regulated businesses based on evaluation of industry and entity-specific risks, which includes expectations about future market or economic conditions existing on the date of the impairment test. Changes in these assumptions could have a significant impact on results of the impairment tests.CenterPoint Energy and CERC utilized a third-party valuation specialist to determine the key assumptions used in the estimate of fair value for each of its reporting units on the date of its interim and annual goodwill impairment test in 2020.
Annual goodwill impairment test
CenterPoint Energy and CERC completed their 2020 annual goodwill impairment test as ofJuly 1, 2020 and determined, based on an income approach or a weighted combination of income and market approaches, that no goodwill impairment charge was required for any reporting unit. The fair values of each reporting unit significantly exceeded the carrying value of the reporting unit. Although no goodwill impairment resulted from the 2020 annual test, an interim goodwill impairment test could be triggered by the following: actual earnings results that are materially lower than expected, significant adverse changes in the operating environment, an increase in the discount rate, changes in other key assumptions which require judgment and are forward looking in nature, ifCenterPoint Energy's market capitalization falls below book value for an extended period of time, or events affecting a reporting unit such as a contemplated disposal of all or part of a reporting unit.
Interim goodwill impairment test, excluding assets held for sale
CenterPoint Energy and CERC performed an interim goodwill impairment test as ofMarch 31, 2020 . The fair value of each reporting unit was derived using an income approach or a weighted combination of income and market approaches. Based on the results of the test,CenterPoint Energy recorded a goodwill impairment loss of$185 million at itsIndiana Electric reporting unit in the year endedDecember 31, 2020 . CERC recorded no goodwill impairment charge in its continuing operations for the year endedDecember 31, 2020 . The fair values of each reporting unit exceeded the carrying value of the reporting unit, with the exception ofCenterPoint Energy's Indiana Electric reporting unit. As ofMarch 31, 2020 , immediately following the impairment loss recorded byCenterPoint Energy in the three months endedMarch 31, 2020 ,Indiana Electric reporting unit's fair value approximated its carrying value, and the reporting unit had total goodwill of$936 million . The reporting unit is comprised entirely of businesses acquired in the Merger onFebruary 1, 2019 , when the carrying value of the acquired assets and liabilities were adjusted to fair value and as a result presented the greatest risk for impairment. The primary driver for the decline in fair value as of theMarch 31, 2020 interim goodwill impairment test date is an increase in discounts rates, or the weighted average cost of capital of market participants, on the rate regulated reporting units due in part to the decline in current macroeconomic conditions fromJuly 1, 2019 , the previous annual testing date at that time, toMarch 31, 2020 . An interim goodwill impairment test could be triggered and goodwill impairments recorded in future periods byCenterPoint Energy or CERC's reporting units due to any of the following:CenterPoint Energy's market capitalization falling below book value, adverse macroeconomic environment, turnover in key personnel, events affecting a reporting unit such as a contemplated disposal of all or part of a reporting unit, actual earnings results that are materially lower than expected, 81 --------------------------------------------------------------------------------
significant adverse changes in the operating or regulatory environment, or changes in discount rates or other key assumptions that require judgment and are forward looking in nature.
For further information, see Note 6 to the consolidated financial statements.
Assets held for sale and discontinued operations
Generally, a long-lived asset to be sold is classified as held for sale in the period in which management, with approval from the Board of Directors, as applicable, commits to a plan to sell, and a sale is expected to be completed within one year. The Registrants record assets and liabilities held for sale, or the disposal group, at the lower of their carrying value or their estimated fair value less cost to sell. If a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed.Goodwill is not allocated to a portion of a reporting unit that does not meet the definition of a business. A disposal group that meets the held for sale criteria and also represents a strategic shift to the Registrant is also reflected as discontinued operations on the Statements of Consolidated Income, and prior periods are recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax. OnFebruary 3, 2020 ,CenterPoint Energy , through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell theInfrastructure Services Disposal Group . InFebruary 2020 , certain assets and liabilities representing theInfrastructure Services Disposal Group met the held for sale criteria and represented all of the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units. The sale was considered an asset sale for tax purposes and closed onApril 9, 2020 . OnFebruary 24, 2020 ,CenterPoint Energy , through its subsidiaryCERC Corp. , entered into the Equity Purchase Agreement to sell theEnergy Services Disposal Group . This transaction did not include CEIP and its assets or MES. InFebruary 2020 , certain assets and liabilities representing theEnergy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES was converted from a wholly-owned corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units. The sale was considered an asset sale for tax purposes and closed onJune 1, 2020 .CenterPoint Energy and CERC disclosed in the 2019 Form 10-K that an anticipated loss on held for sale of$80 million was expected in 2020 for theEnergy Services Disposal Group . The primary driver for the increase in the actual loss on held for sale, including goodwill impairment, recorded byCenterPoint Energy and CERC in the year endedDecember 31, 2020 compared to the amounts previously anticipated is a result of an increase in portions of the derivative assets, net of derivative liabilities, excluded from the working capital adjustment within the Equity Purchase Agreement during the year endedDecember 31, 2020 . InOctober 2020 ,CenterPoint Energy collected the full and final settlement of the working capital adjustment under the Equity Purchase Agreement, and no gains or losses on this transaction are expected in future periods.
For further information, see Note 4 to the consolidated financial statements.
Equity Method Investments
Equity method investments are evaluated for impairment when factors indicate that a decrease in value of an investment has occurred and the carrying amount of the investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the best estimate of fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable's common unit price during the three months endedMarch 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable's announcement onApril 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry,CenterPoint Energy determined, in connection with its preparation of its financial statements for the three months endedMarch 31, 2020 , that an other than temporary decrease in the value of its investment in Enable had occurred.CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of$848 million as ofMarch 31, 2020 and recognized an impairment charge of$1,541 million during the year endedDecember 31, 2020 . Both the income approach and market approach were utilized to estimate the fair value ofCenterPoint Energy's equity investment in Enable, which includes common units, general partner interest, and incentive distribution rights held byCenterPoint Energy through CNP Midstream. Key assumptions in the market approach include recent market transactions of comparable companies and EBITDA to total 82 -------------------------------------------------------------------------------- enterprise multiples for comparable companies. Due to volatility of the quoted price of Enable's units, a volume weighted average price was used under the market approach to best approximate fair value at the measurement date. Key assumptions in the income approach include Enable's forecasted cash distributions, projected cash flows of incentive distribution rights, forecasted growth rate of Enable's cash distributions beyond 2020, and the discount rate used to determine the present value of the estimated future cash flows. A weighing of the different approaches was utilized to determine the estimated fair value of our investment in Enable.CenterPoint Energy based its assumptions on projected financial information that it believes is reasonable; however, actual results may differ materially from those projections. The determination of fair value considered a number of relevant factors including Enable's common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable's publicly traded common units. It is reasonably possible that the fair value ofCenterPoint Energy's investment in Enable will change in the near term due to one or more of the following: actual Enable cash distribution is materially lower than expected, significant adverse changes in Enable's operating environment, decline in Enable's common unit price, increase in the discount rate, and changes in other key assumptions which require judgment and/or are forward looking in nature. Further declines in the fair value of Enable could result in additional impairments.CenterPoint Energy did not identify a decrease in value as ofDecember 31, 2020 , and no impairments in its investment in Enable were recorded during the three months endedDecember 31, 2020 .
For further information, see Notes 11 and 22 to the consolidated financial statements.
Acquisition Accounting
The Registrants evaluate acquisitions to determine when a set of acquired activities and assets represent a business. When control of a business is obtained, the Registrants apply the acquisition method of accounting and record the assets acquired, liabilities assumed and any non-controlling interest obtained based on fair value at the acquisition date.
The fair values of tangible and intangible assets and liabilities subject to rate-setting provisions and earning a regulated return generally approximate their carrying values. The fair value of assets acquired and liabilities assumed that are not subject to the rate-setting provisions, including identifiable intangibles, are determined using the income and market approach, which estimation methods may require the use of significant judgment and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future market prices. Any excess of the purchase price over the fair value amounts assigned to assets and liabilities is recorded as goodwill. The results of operations of the acquired business are included in the Registrants' respective Statements of Consolidated Income beginning on the date of the acquisition. On the Merger Date, pursuant to the Merger Agreement,CenterPoint Energy consummated the Merger and acquired Vectren for approximately$6 billion in cash. The Merger is being accounted for in accordance with ASC 805, Business Combinations, withCenterPoint Energy as the accounting acquirer of Vectren. Identifiable assets acquired and liabilities assumed have been recorded at their estimated fair values on the Merger Date. Vectren's regulated operations, comprised of electric generation and electric and natural gas delivery services, are subject to the rate-setting authority of theFERC , the IURC and the PUCO, and are accounted for pursuant toU.S. generally accepted accounting principles for regulated operations. The rate-setting and cost-recovery provisions currently in place for Vectren's regulated operations provide revenues designed to recover the cost of providing utility service and a return on and recovery of investment in rate base assets and liabilities. Thus, the fair values of Vectren's tangible and intangible assets and liabilities subject to these rate-setting provisions approximate their carrying values. Accordingly, neither the assets nor liabilities acquired reflect any adjustments related to these amounts. The fair value of regulatory assets not earning a return have been determined using the income approach and include the use of significant judgment and unobservable inputs. The fair value of Vectren's assets acquired and liabilities assumed that are not subject to the rate-setting provisions, including identifiable intangibles, and the allocation of fair value to reporting units on the Merger Date was determined under the income approach using the multi-period excess earnings method, which is a specific discounted cash flow income approach, and for the measurement of certain assets and liabilities, the market approach was utilized. Fair value measurements require significant judgment and unobservable inputs, including (i) projected timing and amount of future cash flows, which factor in planned growth initiatives, (ii) the regulatory environment, as applicable, and (iii) discount rates reflecting risk inherent in the future market prices. Determining the discount rates for the non-rate regulated businesses required the estimation of the appropriate company specific risk premiums for those non-rate regulated businesses based on evaluation of industry and entity-specific risks, which included expectations about future market or economic conditions existing on the Merger Date. Changes in these assumptions could have a significant impact on the amount of the identified 83 -------------------------------------------------------------------------------- intangible assets and/or the resulting amount of goodwill assigned to each reporting unit.CenterPoint Energy utilized a third-party valuation specialist in determining the key assumptions used in the valuation of intangible assets acquired and the allocation of goodwill to each of its reporting units on the Merger Date.
For further information, see Note 4 to the consolidated financial statements.
Unbilled Revenues
Revenues related to electricity delivery and natural gas sales and services are generally recognized upon delivery to customers. However, the determination of deliveries to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month either electronically through AMS meter communications or manual readings. At the end of each month, deliveries to non-AMS customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is estimated. Information regarding deliveries to AMS customers after the last billing is obtained from actual AMS meter usage data. Unbilled electricity delivery revenue is estimated each month based on actual AMS meter data, daily supply volumes and applicable rates. Unbilled natural gas sales are estimated based on estimated purchased gas volumes, estimated lost and unaccounted for gas and tariffed rates in effect. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.
Pension and Other Retirement Plans
CenterPoint Energy sponsors pension and other retirement plans in various forms covering all employees who meet eligibility requirements.CenterPoint Energy uses several statistical and other factors that attempt to anticipate future events in calculating the expense and liability related to its plans. These factors include assumptions about the discount rate, expected return on plan assets and rate of future compensation increases as estimated by management, within certain guidelines. In addition,CenterPoint Energy's actuarial consultants use subjective factors such as withdrawal and mortality rates. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension and other retirement plans expense recorded. Please read "- Other Significant Matters - Pension Plans" for further discussion. NEW ACCOUNTING PRONOUNCEMENTS See Note 2(u) to the consolidated financial statements, incorporated herein by reference, for a discussion of new accounting pronouncements that affect the Registrants. OTHER SIGNIFICANT MATTERS Pension Plans (CenterPoint Energy ). As discussed in Note 8(b) to the consolidated financial statements,CenterPoint Energy maintains non-contributory qualified defined benefit pension plans covering eligible employees. Employer contributions for the qualified plans are based on actuarial computations that establish the minimum contribution required under ERISA and the maximum deductible contribution for income tax purposes. Under the terms ofCenterPoint Energy's pension plans, it reserves the right to change, modify or terminate the plan.CenterPoint Energy's funding policy is to review amounts annually and contribute an amount at least equal to the minimum contribution required under ERISA. Additionally,CenterPoint Energy maintains unfunded non-qualified benefit restoration plans that allows participants to receive the benefits to which they would have been entitled under the non-contributory qualified pension plan except for the federally mandated limits on qualified plan benefits or on the level of compensation on which qualified plan benefits may be calculated. 84 --------------------------------------------------------------------------------
Year Ended
2020 2019 2018
CenterPoint Energy (in millions)
Minimum funding requirements for qualified pension plans $ 76 $ 86 $ 60
Employer contributions to the qualified pension plans 76 86 60
Employer contributions to the non-qualified benefit
restoration plans 10 23 9
CenterPoint Energy expects to contribute a minimum of approximately $53 million
to the qualified pension plans and contributions aggregating approximately $8
million to the non-qualified benefit restoration plans in 2021.
Changes in pension obligations and assets may not be immediately recognized as
pension expense in CenterPoint Energy's Statements of Consolidated Income, but
generally are recognized in future years over the remaining average service
period of plan participants. As such, significant portions of pension expense
recorded in any period may not reflect the actual level of benefit payments
provided to plan participants.
As the sponsor of a plan, CenterPoint Energy is required to (a) recognize on its
Consolidated Balance Sheet an asset for the plan's over-funded status or a
liability for the plan's under-funded status, (b) measure a plan's assets and
obligations as of the end of the fiscal year and (c) recognize changes in the
funded status of the plans in the year that changes occur through adjustments to
other comprehensive income and, when related to its rate-regulated utilities
with recoverability of cost, to regulatory assets.
The projected benefit obligation for all defined benefit pension plans was
As ofDecember 31, 2020 , the projected benefit obligation exceeded the market value of plan assets ofCenterPoint Energy's pension plans by$372 million . Changes in interest rates or the market values of the securities held by the plan during 2021 could materially, positively or negatively, change the funded status and affect the level of pension expense and required contributions.Houston Electric and CERC participate inCenterPoint Energy's qualified and non-qualified pension plans covering substantially all employees. Pension cost by Registrant were as follows: Year Ended December 31, 2020 2019 2018 Houston Houston Houston CenterPoint Energy Electric CERC CenterPoint Energy Electric CERC
CenterPoint Energy Electric CERC
(in millions)
Pension cost $ 49 $ 19 $ 20 $ 93 $ 40 $ 35 $ 61 $ 25 $ 22
The calculation of pension cost and related liabilities requires the use of
assumptions. Changes in these assumptions can result in different expense and
liability amounts, and future actual experience can differ from the assumptions.
Two of the most critical assumptions are the expected long-term rate of return
on plan assets and the assumed discount rate.
As of December 31, 2020 , CenterPoint Energy's qualified pension plans had an
expected long-term rate of return on plan assets of 5.00%, which is 0.75% lower
than the 5.75% rate assumed as of December 31, 2019 . The expected rate of return
assumption was developed using the targeted asset allocation of our plans and
the expected return for each asset class. CenterPoint Energy regularly reviews
its actual asset allocation and periodically rebalances plan assets to reduce
volatility and better match plan assets and liabilities.
As of December 31, 2020 , the projected benefit obligation was calculated
assuming a discount rate of 2.45%, which is 0.75% lower than the 3.20% discount
rate assumed as of December 31, 2019 . The discount rate was determined by
reviewing yields on high-quality bonds that receive one of the two highest
ratings given by a recognized rating agency and the expected duration of pension
obligations specific to the characteristics of CenterPoint Energy's plans.
85--------------------------------------------------------------------------------
CenterPoint Energy's actuarially determined pension and other postemployment cost for 2020 and 2019 that is greater or less than the amounts being recovered through rates in the majority ofTexas jurisdictions is deferred as a regulatory asset or liability, respectively. Pension cost for 2021, including the nonqualified benefit restoration plan, is estimated to be$32 million before applicable regulatory deferrals and capitalization, based on an expected return on plan assets of 5.00% and a discount rate of 2.45% as ofDecember 31, 2020 . If the expected return assumption were lowered by 0.50% from 5.00% to 4.50%, 2021 pension cost would increase by approximately$10 million . As ofDecember 31, 2020 , the pension plans projected benefit obligation, including the unfunded nonqualified pension plans, exceeded plan assets by$372 million . If the discount rate were lowered by 0.50% from 2.45% to 1.95%, the assumption change would increaseCenterPoint Energy's projected benefit obligation by approximately$145 million and decrease its 2021 pension cost by approximately$4 million . The expected reduction in pension cost due to the decrease in discount rate is a result of the expected correlation between the reduced interest rate and appreciation of fixed income assets in pension plans with significantly more fixed income instruments than equity instruments. In addition, the assumption change would impactCenterPoint Energy's Consolidated Balance Sheets by increasing the regulatory asset recorded as ofDecember 31, 2020 by$124 million and would result in a charge to comprehensive income in 2020 of$17 million , net of tax of$4 million , due to the increase in the projected benefit obligation. Future changes in plan asset returns, assumed discount rates and various other factors related to the pension plans will impactCenterPoint Energy's future pension expense and liabilities.CenterPoint Energy cannot predict with certainty what these factors will be in the future.
© Edgar Online, source
