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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27818; 70-10128)

CenterPoint Energy, Inc., et. al.

Supplemental Order Authorizing Release of Jurisdiction over the Issuance of an Additional $50 Million Principal Amount of External Debt by CenterPoint Energy Resources Corp.; and Reservation of Jurisdiction

March 19, 2004

CenterPoint Energy, Inc. ("CenterPoint"), Houston, Texas, a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("Act"); its subsidiary, Utility Holding, LLC,1 Wilmington, Delaware; and CenterPoint Energy Resources Corp. ("GasCo"), Houston, Texas, an indirect gas public utility subsidiary of CenterPoint (together, "Applicants") have filed with the Securities and Exchange Commission ("Commission") a post-effective amendment under sections 6 and 7 of the Act and rules 44 and 54 under the Act, to their previously filed application-declaration ("Declaration").

By order dated June 30, 2003 (Holding Company Act Release No. 35-27692) ("Omnibus Financing Order") the Commission authorized CenterPoint and its subsidiaries, including GasCo, to engage in certain financing and related transactions through June 30, 2005 ("Authorization Period"). The Commission reserved jurisdiction, pending completion of the record, over GasCo's issuance of external debt securities in an incremental amount of $500 million.2 By order dated October 28, 2003 (Holding Company Act Release No. 35-27743) ("October Order") the Commission released jurisdiction over the issuance of an incremental $50 million in external debt in connection with the refinancing of the 6 3/8% Term Enhanced ReMarketable Securities ("TERMS"). On November 3, 2003, GasCo issued $160 million aggregate principal amount of its 5.95% senior notes due 2014, using the proceeds from that issuance to redeem $140 million aggregate principal amount of the TERMS and to pay other costs relating to the issuance of the 5.95% senior notes. The remaining $30 million of the $50 million in incremental authority that was authorized in the October Order was not used to redeem the TERMS, and the authority relating to that $30 million granted in the October Order has now expired.

In the Declaration, GasCo requests the Commission to release jurisdiction over the issuance by GasCo of up to $50 million, out of the $480 million in incremental external debt securities over which jurisdiction is reserved, so that the amount of GasCo's external debt securities will not exceed $2.607 billion at any time outstanding during the Authorization Period.

GasCo has a revolving credit facility that provides for an aggregate of $200 million in committed credit and must be renewed annually ("Annual Facility"). As of December 31, 2003 $63 million was borrowed under the Annual Facility. The Annual Facility terminates on March 23, 2004. Rates for borrowings under the Annual Facility, including the facility fee, are the London interbank offered rate plus 250 basis points, based on current credit ratings and the applicable pricing grid. The Applicants believe, on the basis of currently available information, including current interest rates and other factors, that it would be in the best interest of GasCo to replace the Annual Facility with a three-year revolving credit facility that provides for an aggregate of up to $250 million in committed credit, if market conditions support those terms ("Three-Year Facility"). By entering into the Three-Year Facility GasCo will be afforded greater liquidity. Applicants expect that the interest rate on the Three-Year Facility will not be higher than the rate on the Annual Facility.

The proposed transaction will be subject to the terms and conditions set forth in the Omnibus Financing Order. In particular, GasCo 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, and adjusted to reflect changes in capitalization since the balance sheet date, unless otherwise authorized. Additionally, no securities may be issued in reliance on the authority requested in the Declaration unless: (1) the security to be issued, if rated, is rated investment grade by at least one nationally recognized statistical rating organization as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the Securities Exchange Act of 1934 ("NRSRO"); (2) all outstanding rated securities of the issuer are rated investment grade by at least one NRSRO; and (3) all outstanding rated securities of the top-level registered holding company are rated investment grade by at least one NRSRO.

The proposed transaction is subject to rule 54 under the Act, which refers to rule 53. Rule 54 provides that, in determining whether to approve certain transactions other than those involving exempt wholesale generators ("EWGs") or foreign utility companies ("FUCOs"), as defined under the Act, the Commission will not consider the effect of the capitalization or earnings of any subsidiary EWG or FUCO if the requirements of rule 53(a), (b) and (c) under the Act are satisfied.

As a result of the restructuring authorized in the order dated July 5, 2002 (Holding Company Act Release No. 35-27548 ("July Order")), CenterPoint has negative retained earnings. Thus, by reason of its ownership of an EWG, CenterPoint is not currently in compliance with the requirements of rule 53(a)(1) under the Act. As a result, the Commission has considered the effect on the CenterPoint system of the capitalization and earnings of all subsidiary companies of CenterPoint in determining whether to grant the Applicants the authority requested in the Declaration.

CenterPoint complies with, and will continue to comply with, the record-keeping requirements of rule 53(a)(2) under the Act, the limitation under rule 53(a)(3) under the Act on the use of domestic public-utility company personnel to render services to EWGs and FUCOs, and the requirements of rule 53(a)(4) under the Act concerning the submission of copies of certain filings under the Act to retail regulatory commissions. Further, none of the circumstances described in rule 53(b) under the Act has occurred or is continuing. Rule 53(c) under the Act is by its terms inapplicable to the proposed transaction as it does not involve the issue and sale of securities (including guarantees) to finance an acquisition of an EWG or FUCO.

Applicants state that no state or federal commission, other than this Commission, has jurisdiction over the proposed transaction. Applicants state that the fees, commissions and expenses paid or incurred or to be incurred in connection with the Declaration are estimated to be $20,000, plus the fees paid in connection with the Three-Year Facility. The fees paid in connection with the Three-Year Facility will comply with the requirements of the Omnibus Financing Order.

Due notice of the filing of the Declaration 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, as to the $50 million aggregate principal amount increase in external debt resulting from the termination of the Annual Facility and the entering into of the Three-Year Facility, the applicable standards of the Act are satisfied and that no adverse findings are necessary.

IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that the Declaration is permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.

IT IS FURTHER ORDERED, that jurisdiction continues to be reserved over GasCo's issuance and sale of the incremental amount of $430 million of long-term and short-term debt securities so that the total amount of GasCo external debt will not exceed $3.037 billion at any one time outstanding during the Authorization Period.

IT IS FURTHER ORDERED, that jurisdiction continues to be reserved, pending completion of the record, over the other matters listed in the Omnibus Financing Order.

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


Margaret H. McFarland
Deputy Secretary


Endnotes:


http://www.sec.gov/divisions/investment/opur/filing/35-27818.htm

Modified: 03/23/2004