Regulatory Matters

3 Months Ended

Mar. 31, 2025

Equity Return

The Registrants are at times allowed by a regulator to defer an equity return as part of the recoverable carrying costs of a regulatory asset. A deferred equity return is capitalized for rate-making purposes, but it is not included in the Registrant’s regulatory assets on its Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of Consolidated Income as it is recovered in rates. The recoverable allowed equity return not yet recognized by the Registrants is as follows:


	March 31, 2025						December 31, 2024
	CenterPoint Energy (1)		Houston Electric (2)		CERC (3)		CenterPoint Energy (1)		Houston Electric (2)		CERC (3)
	(in millions)
Unrecognized equity return	$	276	$	114	$	97	$	251	$	94	$	92

(1)In addition to the amounts described in (2) and (3) below, represents CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with investments at SIGECO.

(2)Represents Houston Electric’s allowed equity return on certain storm restoration balances.

(3)Represents CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacement expenditures in Texas and Indiana Gas.

The table below reflects the amount of allowed equity return recognized by each Registrant in its Condensed Statements of Consolidated Income:








	Three Months Ended March 31,
	2025						2024
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	2	$	1	$	1	$	9	$	8	$	1

February 2021 Winter Storm Event

In February 2021, certain of the Registrants’ jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted their businesses. The February 2021 Winter Storm Event impacted wholesale prices of CenterPoint Energy’s and CERC’s natural gas purchases and their ability to serve customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations, experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the cost of natural gas purchased by CenterPoint Energy and CERC of approximately $2 billion. CenterPoint Energy and CERC have completed recovery of natural gas costs in Mississippi, Indiana, Louisiana and Texas, and continue to recover the natural gas cost in Minnesota. As of March 31, 2025, CenterPoint Energy and CERC had each recorded current regulatory assets of $67 million and non-current regulatory assets of $44 million associated with the February 2021 Winter Storm Event. As of December 31, 2024, CenterPoint Energy and CERC had each recorded current regulatory assets of $67 million and non-current regulatory assets of $67 million associated with the February 2021 Winter Storm Event.

As of March 31, 2025 and December 31, 2024, as authorized by the PUCT, both CenterPoint Energy and Houston Electric had each recorded a regulatory asset of $8 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, both CenterPoint Energy and Houston Electric had each recorded a regulatory asset of $19 million and $19 million as of March 31, 2025 and December 31, 2024, respectively, and requested reimbursement of costs associated with the February 2021 Winter Storm Event in Houston Electric’s rate case, which was filed on March 6, 2024. A final order approving a settlement agreement related to the Houston Electric rate case was issued by the PUCT on March 13, 2025. All regulatory assets and liabilities at issue in this proceeding will be amortized over five years beginning on the date rates take effect, April 28, 2025.

See Note 11(d) for further information regarding litigation related to the February 2021 Winter Storm Event.

Texas Public Securitization

The Texas Natural Gas Securitization Finance Corporation issued customer rate relief bonds in March 2023, and on March 23, 2023, CenterPoint Energy and CERC, collectively, received approximately $1.1 billion in cash proceeds from the issuance and sale of the state’s customer rate relief bonds. As CenterPoint Energy and CERC have no future financial obligations for the repayment of the state’s customer rate relief bonds, the customer rate relief bonds are not recorded on CenterPoint Energy’s or CERC’s balance sheets. The $1.1 billion in cash proceeds from the state’s customer rate relief bonds is considered to be a government grant. The state’s customer rate relief bonds are backed in part by customer rate relief property, including customer rate relief charges, which are non-bypassable uniform monthly volumetric charges to be paid by all existing and future sales customers as a component of each regulated utility’s gas cost, separate from their base rate. CERC only acts as a collection agent, whose duties include management, servicing and administration of a portion of the customer rate relief property which is associated with the customer rate relief charge imposed on customers of CERC under the guidance and direction from the Railroad Commission. The Texas Natural Gas Securitization Finance Corporation, and not CenterPoint Energy or CERC, is the owner of the customer rate relief property. The assets of the Texas Natural Gas Securitization Finance Corporation are not available to pay creditors of CenterPoint Energy, CERC, or their affiliates. While the customer rate relief charges will be included by CERC in their monthly billings, the billing amount is established by the Railroad Commission. CERC will remit all customer rate relief charges collected to the financing entity set up by the Railroad Commission. Therefore, the collection and

servicing of customer rate relief charges have no impact on the respective Condensed Statements of Consolidated Income of CenterPoint Energy or CERC.

Indiana Electric Securitization of Generation Retirements (CenterPoint Energy)

On January 4, 2023, the IURC issued an order in accordance with Indiana Senate Enrolled Act 386 authorizing the issuance of up to $350 million in securitization bonds to securitize qualified costs associated with the retirements of Indiana Electric’s A.B. Brown coal-fired generation facilities. The SIGECO Securitization Subsidiary issued $341 million aggregate principal amount of the SIGECO Securitization Bonds on June 29, 2023 and used a portion of the net proceeds from the issuance of the SIGECO Securitization Bonds to purchase the securitization property from SIGECO. No gain or loss was recognized.

The SIGECO Securitization Bonds are secured by the securitization property, which includes the right to recover, through non-bypassable securitization charges payable by SIGECO’s retail electric customers, the qualified costs of SIGECO authorized by the IURC order. The SIGECO Securitization Subsidiary, and not SIGECO, is the owner of the securitization property, and the assets of the SIGECO Securitization Subsidiary are not available to pay the creditors of SIGECO or its affiliates, other than the SIGECO Securitization Subsidiary. SIGECO has no payment obligations with respect to the SIGECO Securitization Bonds except to remit collections of securitization charges as set forth in a servicing agreement between SIGECO and the SIGECO Securitization Subsidiary. The non-bypassable securitization charges are subject to a true-up mechanism.

Houston Electric TEEEF

Pursuant to legislation passed in 2021, Houston Electric entered into two leases for TEEEF (temporary generation). Houston Electric defers costs associated with the short-term and long-term leases that are probable of recovery and would otherwise be charged to expense in a regulatory asset, including allowed debt returns, and determined that such regulatory assets remain probable of recovery as of March 31, 2025. Expenses associated with the short-term lease, including carrying costs, totaled $87 million and $89 million as of March 31, 2025 and December 31, 2024, respectively. Expenses associated with the long-term lease, including variable costs associated with the operation and maintenance of the TEEEF, depreciation expense on the right of use asset and carrying costs, are deferred to a regulatory asset as a recoverable cost under the 2021 Texas legislation and totaled $165 million and $158 million as of March 31, 2025 and December 31, 2024, respectively.

Right of use finance lease assets, such as assets acquired under the long-term leases, are evaluated for impairment under the long-lived asset impairment model by assessing if a capital disallowance from a regulator is probable through monitoring the outcome of rate cases and other proceedings. Houston Electric continues to monitor the ongoing proceedings and did not record any impairments or disallowances on its right of use assets or TEEEF regulatory assets in the three months ended March 31, 2025 or March 31, 2024.

Effective January 1, 2023, all temporary generation assets were leased under the long-term lease agreement. The long-term lease agreement includes up to 505 MW of TEEEF, all of which was delivered as of December 31, 2022, triggering lease commencement at delivery, with an initial term ending in 2029 for all TEEEF leases. The remaining finance lease liability associated with the commenced long-term TEEEF agreement was not significant as of March 31, 2025 and December 31, 2024 and relates to removal costs that will be incurred at the end of the lease term. As of March 31, 2025, Houston Electric had secured a first lien on the assets leased under the prepayment agreement, except for assets with lease payments totaling $75 million, which is being held in an escrow account, not controlled by Houston Electric, and the funds will be released either pro rata each month or when a first lien can be secured by Houston Electric on such assets.

On September 11, 2024, the TCA filed a complaint with the PUCT requesting that the PUCT modify its rulings with respect to its prior decisions related to the TEEEF filings made in 2022 and 2023. Specifically, the TCA requested that the PUCT end cost recovery and return on investment on all the large up to 32 MW and 5 MW TEEEF units approved in docket 53442. On October 2, 2024, Houston Electric filed a response to the TCA complaint and requested that the complaint be dismissed due to the principles of res judicata and collateral estoppel. On October 8, 2024, the TCA supplemented its complaint and on October 9, 2024, PUCT staff filed a statement of position stating that Houston Electric’s response provided a strong argument for dismissal of the complaint, but also stating that it would be prudent to have a thorough legal argument from the TCA. On October 10, 2024, the PUCT issued Order No. 2 finding the TCA complaint insufficient and requiring supplemental information or amendment from the TCA by October 24, 2024; the TCA filed supplemental information on October 24, 2024. On November 14, 2024, the PUCT issued Order No. 4 denying the motion to reconsider and extending a deadline. On December 16, 2024, the PUCT issued Order No. 5 granting waiver of the requirement for informal disposition and soliciting PUCT staff recommendation by January 16, 2025. On January 16, 2025, the PUCT staff filed a supplemental recommendation recommending that the TCA had not met its requirement to first present its complaint to the City of Houston prior to presenting it to the PUCT. On February 26, 2025, the TCA filed its complaint with the City of Houston. On April 1, 2025, the TCA filed

the response from the City of Houston dated March 12, 2025, which stated the matter is closed and the City of Houston does not have the authority to re-visit these dockets. The City of Houston also stated that the TCA may appeal to the PUCT and then district court.

On December 19, 2024, Houston Electric announced a proposal to release its 15 large 27 MW to 32 MW TEEEF units to the San Antonio area prior to the summer of 2025. The proposal is intended to help ERCOT address a potential energy shortfall and Load Shed risk and to provide additional electric generation capacity to support growing energy demand in the greater San Antonio region. Under the proposal, Houston Electric would not receive revenue or profit from ERCOT and would also not charge Houston-area customers for these TEEEF units for the period when they are in San Antonio serving ERCOT, which is currently expected to be for a period of up to two years. Houston Electric would anticipate receiving revenues from one or more future transactions after the period the units are utilized to temporarily serve an energy need in the San Antonio area, and would therefore plan to continue to not charge customers for these units for any future periods. On April 18, 2025, a proposal was filed with the PUCT, seeking approval of the aforementioned release to ERCOT, a corresponding reduction to TEEEF fleet capacity and a rate reduction to reflect the removal of the 15 large TEEEF units from Houston Electric’s TEEEF fleet. The proposal is subject to the negotiation and execution of definitive documentation among the relevant parties, as well as being subject to the approval of ERCOT and other stakeholders. It is not certain that mutually agreeable definitive documentation will be entered into at all or that all approvals will be obtained.

May 2024 Storm Events

Houston Electric’s electric delivery system suffered significant damage as a result of the May 2024 Storm Events. As is common with electric utilities serving coastal regions, the poles, towers, wires, street lights and pole-mounted equipment that comprise Houston Electric’s transmission and distribution system are not covered by property insurance. Houston Electric is deferring the related system restoration costs as management believes it is probable that such costs will be recovered through the regulatory process. The ultimate recovery of the costs (or a portion thereof) is expected to be sought through the issuance and sale of non-recourse securitization bonds for distribution-related costs and the TCOS capital mechanism for transmission-related costs. However, neither the amount nor timing of the recovery is certain.

On November 8, 2024, Houston Electric filed an Application for Determination of System Restoration Costs with the PUCT to determine the reasonableness and necessity of approximately $502 million of costs (including estimated case processing expenses and carrying costs) incurred or expected to be incurred to restore service following the May 2024 Storm Events. On March 19, 2025, Houston Electric filed a settlement agreement with the PUCT, under which Houston Electric would be entitled to recover a total of $396 million in distribution-related costs relating to the May 2024 Storm Events, along with carrying costs from the date those costs were incurred until system restoration bonds are issued. The settlement agreement also provided for the recovery of $29 million in transmission-related costs related to the May 2024 Storm Events that will be eligible for recovery through existing mechanisms established to recover transmission costs. Houston Electric agreed to defer $17.5 million of its distribution-related costs to the Hurricane Beryl cost determination proceeding and further agreed to an overall $10 million reduction in costs as part of the settlement agreement. The settlement agreement is scheduled to be considered at the PUCT open meeting on April 24, 2025. On January 24, 2025, Houston Electric filed a request for a Financing Order for the distribution costs included in the November 8, 2024 Application for Determination of System Restoration Costs. On April 23, 2025, Houston Electric filed a settlement agreement with the PUCT, under which Houston Electric would be entitled to securitize the approved distribution-related costs. The settlement agreement is expected to be considered at a future PUCT open meeting. Neither the amount nor timing of the recovery of the system restoration costs is certain.

Hurricane Beryl and Subsequent Storm Events

In 2024 and early 2025, Houston Electric’s service territory was damaged as a result of Hurricane Beryl and certain other significant storms. Houston Electric is deferring the related system restoration costs as management believes it is probable that such costs will be recovered through the regulatory process. As of March 31, 2025, Houston Electric had recorded system restoration costs, including carrying costs, related to Hurricane Beryl and certain other significant storms of $1.2 billion. The ultimate recovery of the system restoration costs (or a portion thereof) is expected to be sought through the issuance and sale of non-recourse securitization bonds for distribution-related costs. However, neither the amount nor timing of the recovery of the system restoration costs is certain.