Regulatory Matters

(a) Regulatory Assets and Liabilities

The following is a list of regulatory assets/liabilities reflected on CenterPoint Houston’s Consolidated Balance Sheets as of December 31, 2013 and 2012:



	December 31,
	2013			2012
	(in millions)
Securitized regulatory asset	$	3,179		$	3,545
Unrecognized equity return (1)	(508		)	(553		)
Unamortized loss on reacquired debt	111			119
Pension and postretirement-related regulatory asset (2)	90			165
Other long-term regulatory assets (3)	127			112
Total regulatory assets	2,999			3,388

Estimated removal costs	349			346
Other long-term regulatory liabilities	160			127
Total regulatory liabilities	509			473

Total regulatory assets and liabilities, net	$	2,490		$	2,915


(1)	As of December 31, 2013, CenterPoint Houston has not recognized an allowed equity return of $508 million because such return will be recognized as it is recovered in rates. During the years ended December 31, 2013, 2012 and 2011, CenterPoint Houston recognized approximately $45 million, $47 million and $21 million, respectively, of the allowed equity return.


(2)	CenterPoint Houston’s actuarially determined pension and other postemployment expense in excess of the amount being recovered through rates is being deferred for rate making purposes. Deferred pension and other postemployment expenses of $5 million and $14 million as of December 31, 2013 and 2012, respectively, were not earning a return.


(3)	Other regulatory assets that are not earning a return were not material as of December 31, 2013 and 2012.

(b) Resolution of True-Up Appeal

In March 2004, CenterPoint Houston filed a true-up application with the Public Utility Commission of Texas (Texas Utility Commission) requesting recovery of $3.7 billion, excluding interest, as allowed under the Texas Electric Choice Plan. The legislation provided for a transition period to move to a new market structure and provided a mechanism for the formerly integrated electric utilities to recover stranded and certain other costs resulting from the transition to competition. In December 2004, the Texas Utility Commission issued a final order (True-Up Order) allowing CenterPoint Houston to recover a true-up balance of approximately $2.3 billion. To reflect the impact of the True-Up Order, in 2004 and 2005, CenterPoint Energy recorded a net after-tax extraordinary loss of $947 million.

Various parties, including CenterPoint Houston, appealed the True-Up Order. In March 2011, the Texas Supreme Court issued a unanimous ruling on such appeals in which it affirmed in part and reversed in part the decision of the Texas Utility Commission. The case was remanded to the Texas Utility Commission, and in October 2011, the Texas Utility Commission approved a final order (the Remand Order) which provided that (i) CenterPoint Houston was entitled to recover an additional true-up balance of $1.695 billion (the Recoverable True-Up Balance), (ii) no further interest would accrue on the Recoverable True-Up Balance, and (iii) CenterPoint Houston would reimburse certain parties for their reasonable rate case expenses.

In January 2012, CenterPoint Energy Transition Bond Company IV, LLC (Bond Company IV), a new special purpose subsidiary of CenterPoint Houston, issued $1.695 billion of transition bonds to securitize the Recoverable True-Up Balance.

As a result of the Remand Order, in 2011 CenterPoint Houston recorded a pre-tax extraordinary gain of $921 million ($598 million after taxes of $232 million) and $352 million ($229 million after-tax) of Other Income related to a portion of interest on the appealed amount. An additional $405 million ($263 million after-tax) will be recorded as an equity return over the life of the transition bonds.