Income Taxes

The Registrants reported the following effective tax rates:



	Three Months Ended March 31,
	2019		2018
CenterPoint Energy (1)	12	%	22	%
Houston Electric (2)	18	%	22	%
CERC - Continuing operations (3)	16	%	20	%
CERC - Discontinued operations (4)	—	%	25	%

(1)

CenterPoint Energy’s lower effective tax rate for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to remeasurement of state tax liability for changes in apportionment and filing methodologies resulting from the Merger and an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions.


(2)	Houston Electric’s lower effective tax rate for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators.


(3)	CERC’s lower effective tax rate on income from continuing operations for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions.


(4)	CERC’s effective tax rate from discontinued operations for the three months ended March 31, 2018 was a result of the 21% federal income tax rate plus allocable state income taxes. There is no comparable period in 2019 since the Internal Spin was completed in the third quarter of 2018.

The Registrants reported a net uncertain tax liability inclusive of interest and penalties of $1 million for the three months ended March 31, 2019. No significant changes to the uncertain tax liability are expected over the next twelve months. For Vectren, the 2016 tax year is currently under audit by the IRS. For CenterPoint Energy, tax years through 2016 have been audited and settled with the IRS, however, during 2018, CenterPoint Energy filed an amended 2014 tax return to claim additional tax credits that is currently under review by the IRS. For the 2017 – 2019 tax years, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process.