SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27705; 70-10128)

CenterPoint Energy, Inc., et al.

Supplemental Order Authorizing Release of Jurisdiction for the Issuance of Additional Debt Securities

August 1, 2003

CenterPoint Energy, Inc. ("CenterPoint"), a registered holding company, its public-utility subsidiary company, CenterPoint Energy Houston Electric, LLC ("T&D Utility"), both of Houston, TX and Utility Holding, LLC, an intermediate holding company, Wilmington, DE (collectively, "Applicants"), have filed with the Securities and Exchange Commission ("Commission") a post-effective amendment under sections 6(a) and 7 of the Public Utility Holding Company Act of 1935, as amended ("Act") and rules 44 and 54 under the Act, to their previously filed application-declaration ("Application"). On June 2, 2003, the Commission issued a notice of the Application.¹ No request for a hearing was received.

I. Current Authority

By order dated June 30, 2003, in this filing ("Omnibus Financing Order"),² the Commission authorized CenterPoint, its utility subsidiaries and CenterPoint's direct and indirect nonutility subsidiaries, to engage in a program of external and intrasystem financing through June 30, 2005 ("Authorization Period"). Among other specific authorizations granted by the Omnibus Financing Order, the Commission authorized the

T&D Utility, to issue and sell external long-term debt securities in an incremental amount of $500 million and external short-term debt securities in an incremental amount of $500 million, subject to an overall incremental limit of $500 million in long-term and short-term debt securities (the "T&D Utility Additional Debt Limit"), such that the amount of T&D Utility external debt will not exceed $3.603 billion at any one time outstanding during the Authorization Period (the "T&D Utility Aggregate Debt Limit"). The Commission reserved jurisdiction pending completion of the record, over $250 million of the T&D Utility Additional Debt Limit such that the amount of T&D Utility external debt securities under the authorized T&D Utility Aggregate Debt Limit will not exceed $3.353 billion at any one time outstanding during the Authorization Period.

In the Omnibus Financing Order, the authorized financing transactions were subject to certain terms and conditions ("Financing Parameters"), including the maintenance by the T&D Utility of a minimum of 30% common equity capitalization. The Omnibus Financing Order also noted that, during the Authorization Period, the CenterPoint system's financing transactions will be largely limited to refinancing, replacing or extending the term of existing obligations.

By order dated May 28, 2003,³ the Commission authorized CenterPoint to pledge its interest in the common stock of Texas Genco Holdings, Inc. (the "Texas Genco Stock"), in connection with the refinancing of approximately $3.85 billion of CenterPoint debt ("CenterPoint Facility"). The drawn borrowing cost under the CenterPoint Facility, currently 450 basis points over the London Interbank Offered Rate, is based on CenterPoint's credit rating. Since February 28, 2003, CenterPoint has reduced the principal amount of the CenterPoint Facility by approximately $1 billion, from $3.85 billion to $2.846 billion.

II. Proposed Restructuring of the CenterPoint Facility

Applicants state that, based on the current favorable market conditions, CenterPoint is considering the restructuring of the $2.846 billion CenterPoint Facility to reduce the principal amount and the cost of borrowing under the facility. Depending on the response of the bank lenders, CenterPoint may renegotiate or replace the CenterPoint Facility.

Although the final structure has not yet been determined, Applicants currently contemplate that CenterPoint would repay the CenterPoint Facility with a combination of borrowings and repayments of intrasystem receivables as described below:

1. CenterPoint would enter into a new, significantly smaller bank facility currently contemplated to be approximately $1.25 billion (the "New Facility") that may be secured by a pledge of the Texas Genco Stock. Such secured interest would be subordinate to or pari passu with that of the B Loan below.⁴

2. CenterPoint would enter into a new three-year borrowing (the "B Loan") that is secured by a pledge of the Texas Genco Stock. Applicants contemplate that the amount of the B Loan would be at least $500 million and possibly greater than $1 billion, depending on the response of the capital markets.⁵

3. CenterPoint would issue unsecured debt under the authority in the Omnibus Financing Order; and

4. The T&D Utility would issue up to $500 million in secured or unsecured debt.

The proposed financing transactions will reduce the effective cost of money to the CenterPoint system. Applicants state that the transactions would not increase the overall amount of debt or adversely affect the capital structure of any entity or of the CenterPoint system as a whole. Nor would the transactions involve the grant of any new or additional security at CenterPoint.

III. Requested Authority

Applicants request a supplemental order of the Commission releasing jurisdiction over $250 million of the T&D Utility Additional Debt Limit such that the amount of T&D Utility external debt securities under the authorized T&D Utility Aggregate Debt Limit will not exceed $3.603 billion at any one time outstanding during the Authorization Period. Such financing transactions will be subject to the Financing Parameters and all other terms, conditions and limitations contained in the Omnibus Financing Order.

Applicants state that the proceeds from the T&D Utility borrowings will be used to repay existing intercompany receivables and so, the borrowings will not adversely affect the capitalization ratio of the T&D Utility. Applicants further state that the T&D Utility will continue to comply with the requirement that at all times during the Authorization Period, it must maintain common equity of at least 30% of its consolidated capitalization (common equity, preferred stock, long-term debt and short-term debt) as reflected in the most recent Form 10-K or Form 10-Q filed with the Commission adjusted to reflect changes in capitalization since the balance sheet date therein, unless otherwise authorized.

IV. Rule 54

Applicants state, for purposes of rule 54, that the conditions specified in rule 53(a) are satisfied, with the exception of 53(a)(1),⁶ and that none of the adverse conditions

specified in rule 53(b) exist. As a result, the Commission has considered the effect on the CenterPoint system of the capitalization or earnings of any CenterPoint subsidiary that is an EWG or FUCO, as each is defined in sections 32 and 33 of the Act, respectively, in determining whether to approve the proposed transactions. Further, CenterPoint states that it is attempting to dispose of its remaining interests in EWGs and FUCOs. CenterPoint represents that it will remain in compliance with the requirements of rule 53(a), other than rule 53(a)(1), at all times during the Authorization Period.

V. Conclusion

The Commission has examined the post-effective amendment under the applicable standards of the Act, and has concluded that the proposed transactions are consistent with those standards. The Commission has reached these conclusions on the basis of the complete record before us.

Applicants state that no federal or state commission other than this Commission has jurisdiction over the proposed transactions. Applicants state that fees and expenses in connection with the post-effective amendment will be approximately $20,000.

Due notice of the filing of the Application has been given in the manner prescribed by rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. Based on the facts in the record, the Commission finds that the applicable standards of the Act are satisfied and that no adverse findings are necessary.

IT IS ORDERED, that jurisdiction be released over $250 million of the T&D Utility Additional Debt Limit.

IT IS FURTHER ORDERED, under the applicable provisions of the Act and rules under the Act, that the post-effective amendment, be permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

¹ Holding Co. Act Release No. 27683.

² Holding Co. Act Release No. 27692.

³ Holding Co. Act Release No. 27680.

⁴ In SEC File No. 10148 CenterPoint is seeking authority to issue debt that would be secured by the Texas Genco Stock to refinance existing borrowings under the CenterPoint Facility. See Holding Co. Act Release No. 27697 (July 18, 2003).

⁵ Likewise, CenterPoint is seeking authority to engage in this secured financing in SEC File No. 10148. See Holding Co. Act Release No. 27697 (July 18, 2003).

⁶ As of December 31, 2002, the amount of CenterPoint's aggregate investment in exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs") was approximately $8 million. CenterPoint had negative retained earnings as of December 31, 2002. Thus, CenterPoint is not in compliance with the requirements of rule 53(a)(1).

http://www.sec.gov/divisions/investment/opur/filing/35-27705.htm