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Derivative Instruments | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants, from time to time, utilize derivative instruments such as swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows. (a)Non-Trading Activities Commodity Derivative Instruments (CenterPoint Energy and CERC). CenterPoint Energy and CERC, through the Indiana Utilities they respectively own, enter into certain derivative instruments to mitigate the effects of commodity price movements. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges. Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as economic or cash flow hedges. The objective of these hedges is to offset risk associated with interest rates borne by the Registrants in connection with an anticipated future fixed rate debt offering or other exposure to variable rate debt. Houston Electric and the Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging financing activity, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. The table below summarizes CenterPoint Energy’s and Houston Electric’s outstanding interest rate hedging activity:
|  | September 30, 2024 |  |  |  | December 31, 2023
Hedging Classification |  | Notional Principal
|  | (in millions)
CenterPoint Energy: |  |  |  |  |  |  |  |
Cash flow hedge (1) (2) |  | $ | — |  |  |  |  | $ | 200 |  |  |
Economic hedge (3) |  | $ | 150 |  |  |  |  | $ | — |  |  |
Houston Electric: |  |  |  |  |  |  |  |
Cash flow hedge (2) |  | $ | — |  |  |  |  | $ | 100 |  |  |
Economic hedge (3) |  | $ | 150 |  |  |  |  | $ | — |  |  |
(1)Relates to interest rate derivative instruments at CenterPoint Energy that terminated on May 8, 2024. The interest rate swap agreements were designated as cash flow hedges of forecasted transactions. CenterPoint Energy records all changes in the fair value of cash flow hedges in accumulated other comprehensive income (loss) until the underlying hedged transaction occurs, when it reclassifies that amount into earnings. (2)Relates to interest rate derivative instruments at Houston Electric that terminated on February 26, 2024. The interest rate treasury lock agreements were designated as cash flow hedges of forecasted transactions. Houston Electric records all changes in the fair value of cash flow hedges to a regulatory asset or liability, which is amortized over the life of the associated debt being hedged. (3)Relates to interest rate derivative instruments at Houston Electric with a termination date of December 24, 2025. (b)Derivative Fair Values and Financial Statement Presentation CenterPoint Energy and Houston Electric had no interest rate derivatives designated as cash flow hedges outstanding as of September 30, 2024. Houston Electric’s interest rate derivatives not designated as cash flow hedges were not material as of September 30, 2024. CenterPoint Energy’s interest rate derivatives designated as cash flow hedges were not material as of December 31, 2023 and were included in current Non-trading derivative liabilities on CenterPoint Energy’s Condensed Consolidated Balance Sheets. Houston Electric’s interest rate derivatives designated as cash flow hedges were not material as of December 31, 2023 and were included in Prepaid expenses and other current assets on Houston Electric’s Condensed Consolidated Balance Sheets. The following tables provide a balance sheet overview of the Registrants’ derivative assets and liabilities in the periods presented:
|  |  |  | September 30, 2024 |  | December 31, 2023 |  |
|  | Balance Sheet Location |  | Derivative Assets Fair Value |  | Derivative Liabilities Fair Value |  | Derivative Assets Fair Value |  | Derivative Liabilities Fair Value |  |
| CenterPoint Energy: |  |  | (in millions) |  |
| Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
| Natural gas derivatives (1) | Current Assets: Non-trading derivative assets |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
| Natural gas derivatives (1) | Current Liabilities: Non-trading derivative liabilities |  | — |  |  | 5 |  |  | — |  |  | 9 |  |  |
| Natural gas derivatives (1) | Other Liabilities: Non-trading derivative liabilities |  | — |  |  | 2 |  |  | — |  |  | 3 |  |  |
| Indexed debt securities derivative (2) | Current Liabilities |  | — |  |  | 591 |  |  | — |  |  | 605 |  |  |
|  | Total |  | $ | 1 |  |  | $ | 598 |  |  | $ | — |  |  | $ | 617 |  |  |
(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the mark-to-market fair value of each natural gas contract was in a liability position with no offsetting amounts as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, the notional volume of natural gas derivatives were 32,251 MMBtu per day and 27,421 MMBtu per day, respectively. (2)Derivative component of the ZENS obligation that represents the ZENS holder’s option to receive the appreciated value of the reference shares at maturity and other payments to which they may be entitled. See Note 10 for further information.
|  |  |  | September 30, 2024 |  | December 31, 2023
|  | Balance Sheet Location |  | Derivative Assets Fair Value |  | Derivative Liabilities Fair Value |  | Derivative Assets Fair Value |  | Derivative Liabilities Fair Value
| CERC: |  |  | (in millions)
| Derivatives not designated as hedging instruments: |  |
| Natural gas derivatives (1) | Current Assets: Non-trading derivative assets |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
| Natural gas derivatives (1) | Current Liabilities: Non-trading derivative liabilities |  | — |  |  | 4 |  |  | — |  |  | 8 |
| Natural gas derivatives (1) | Other Liabilities: Non-trading derivative liabilities |  | — |  |  | 2 |  |  | — |  |  | 3 |
|  | Total |  | $ | 1 |  |  | $ | 6 |  |  | $ | — |  |  | $ | 11 |
(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the mark-to-market fair value of each natural gas contract was in a liability position with no offsetting amounts as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, the notional volume of natural gas derivatives were 27,644 MMBtu per day and 23,504 MMBtu per day, respectively. The table below provides the related income statement impacts of derivative activity for the periods presented:
|  |  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | Income Statement Location |  | 2024 |  | 2023 |  | 2024 |  | 2023
CenterPoint Energy: |  |  |  |  |  |  |  | (in millions)
Derivatives not designated as hedging instruments: |  |
Indexed debt securities derivative (1) |  | Gain (loss) on indexed debt securities |  | $ | (53) |  |  | $ | (47) |  |  | $ | 14 |  |  | $ | (52) |
(1)The indexed debt securities derivative is recorded at fair value and changes in the fair value are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income. Cash inflows and outflows associated with derivatives are included in operating activities on the statement of cash flows. (c) Credit Risk Contingent Features (CenterPoint Energy and CERC) Certain of CenterPoint Energy’s and CERC’s derivative instruments contain provisions that require CenterPoint Energy and CERC to maintain an investment grade credit rating on their respective long-term unsecured unsubordinated debt from S&P and Moody’s. If CenterPoint Energy’s or CERC’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or additional collateral. No collateral had been posted for CenterPoint Energy or CERC as of September 30, 2024 or December 31, 2023. The table below sets forth additional detail for the periods presented:
| September 30, 2024 |  | December 31, 2023
| CenterPoint Energy |  | CERC |  | CenterPoint Energy |  | CERC
| (in millions)
Aggregate fair value of derivatives containing material adverse change provisions in a net liability position | $ | 5 |  |  | $ | 4 |  |  | $ | 9 |  |  | $ | 8 |
Additional collateral required to be posted if credit risk contingent features triggered | 5 |  |  | 4 |  |  | 9 |  |  | 8 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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