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U.S. Securities and Exchange Commission


(Release No. 35-27949; 70-10128)

CenterPoint Energy, Inc., et al.

Supplemental Order Releasing Jurisdiction to Issue Debt by CenterPoint Energy Houston Electric, LLC and Reservation of Jurisdiction

February 28, 2005

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, Wilmington, Delaware; and CenterPoint Energy Houston Electric, LLC ("CEHE"), Houston, Texas, an indirect electric public utility subsidiary of CenterPoint (collectively, "Applicants") have filed with the Securities and Exchange Commission ("Commission") a post-effective amendment under sections 6(a) and 7 of the Act and rule 54 under the Act, to their previously filed application-declaration ("Declaration"). On June 2, 2003 (HCAR No. 27683), the Commission issued a notice of the previously-filed declaration. On November 25, 2003, the Commission issued a supplemental notice (HCAR No. 27768).

I. Background

By orders dated June 30, 2003 (HCAR No. 27692) ("Omnibus Financing Order"), August 1, 2003 (HCAR No. 27705), and December 19, 2003 (HCAR No. 27778 ("December Order")), the Commission authorized CEHE to issue and sell up to $550 million of incremental external debt securities, such that the amount of CEHE external debt would not exceed $3.653 billion at any one time outstanding through June 30, 2005 ("Authorization Period"). The December Order also reserved jurisdiction over an additional $250 million of requested authority, which would increase the CEHE external debt to $3.903 billion during the Authorization Period, pending completion of the record. The Omnibus Financing Order also authorized CEHE to borrow from the Money Pool in an amount up to $600 million at any one time outstanding during the Authorization Period.

II. Requested Authority

Applicants ask the Commission to release jurisdiction over CEHE's request to issue an additional $200 million in incremental external debt securities, such that the total amount of CEHE external debt does not exceed $3.853 billion at any one time outstanding during the Authorization Period. Applicants also ask the Commission to reduce the amount of CenterPoint's external debt authorization by $200 million so that CenterPoint's external debt does not exceed $5.169 billion at any one time outstanding during the Authorization Period.1

Applicants represent that CEHE will use the additional financing authority to establish a $200 million dedicated revolving credit facility at CEHE (the "Facility"). Applicants undertake that the total amount of CEHE borrowings under the Facility and from the Money Pool, combined, will not exceed $600 million at any one time outstanding during the Authorization Period.

The availability of the Facility at CEHE would provide CEHE with an alternative source of money, where it could meet its short-term borrowing needs either from the Money Pool or from the Facility. The proposed Facility is intended to provide CEHE with a source of working capital at rates that are lower than those associated with intra-system borrowings through the Money Pool. CEHE will draw down funds from the Facility only if the cost of borrowing from the Facility is in fact less than the cost of borrowing from the Money Pool.

Applicants represent that CEHE would continue to comply with the Financing Parameters set forth in the Omnibus Financing Order, including a minimum common stock equity ratio of 30% (net of securitization debt).2

III. Rule 54

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

CenterPoint has no investments in FUCOs. It holds an investment in Texas Genco, LP (an EWG) through a wholly-owned indirect subsidiary company, Texas Genco Holdings, Inc. ("Texas Genco"). The investment in Texas Genco, LP is CenterPoint's only EWG investment, and CenterPoint does not intend to seek any long-term financing authority in connection with it.

As of September 30, 2004, CenterPoint's aggregate investment in Texas Genco was approximately $2.331 billion. At that time, CenterPoint held an 81% ownership interest in Texas Genco, which then owned both the fossil and nuclear generating assets of Texas Genco, LP. In December 2004, Texas Genco and Texas Genco, LP completed the sale of all of Texas Genco, LP's fossil generation assets to a third party for approximately $2.2 billion. In the second step of the transaction, which is subject to regulatory approvals and which is expected to be completed in the first half of 2005, the buyers will acquire Texas Genco and the remaining nuclear generation assets for approximately $700 million.

As of December 31, 2003, CenterPoint had negative retained earnings and is not in compliance with rule 53(a)(1). 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 transactions proposed herein that do not involve the issue and sale of securities (including guarantees) to finance an acquisition of an EWG or FUCO.

IV. Fees and Expenses

Applicants state that the expenses to be incurred in connection with the preparation and filing of the Declaration are estimated to be approximately $20,000, plus the arrangement and coordination fees, and upfront fees to bank participants to be paid in connection with the proposed transaction.

V. Conclusion

Applicants state that no state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.

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, except as to those matters over which jurisdiction has been reserved, the applicable standards of the Act are satisfied and no adverse findings are necessary.

IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that, except as to those matters over which jurisdiction has been reserved, jurisdiction is released and 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, pending completion of the record, over any other matters listed in the Omnibus Financing Order and the December Order.

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

Margaret H. McFarland
Deputy Secretary



Modified: 03/03/2005