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CenterPoint Energy Houston Electric responds to proposed rate reductions

CenterPoint Energy Houston Electric LLC responded Oct. 10 to the recommendations of administrative law judges in its pending rate case with the Public Utility Commission of Texas.

In April, the CenterPoint Energy Inc. subsidiary filed an application seeking approval for an annual base rate increase of approximately $161 million. The utility in a later filing amended its request to $154.6 million.

In September, the administrative law judges at the Texas State Office of Administrative Hearings filed a proposal for decision, or PFD, recommending an overall revenue increase of $2.6 million, or 0.11%. The administrative law judges recommended a return on equity of 9.42% and a capital structure of 55% debt, 45% equity and an overall rate of return of 6.65%. In their proposal, the administrative law judges noted PUCT staff and several intervenors in the proceeding had requested an overall rate decrease.

In an Oct. 10 filing responding to the PFD, CenterPoint Energy Houston asserted the PFD contained calculating errors that, when corrected, resulted in a recommended increase of $31.5 million, not $2.6 million.

"Yet, even with the Company's corrected revenue requirement increase amount, the PFD would actually decrease the Company's operating income by nearly $30 million and require write-offs for certain disallowed rate base items," the utility said. "In addition, the PFD would negatively impact the Company's credit metrics and risk a downgrade by credit rating agencies."

In a separate Oct. 11 8-K filing, CenterPoint Energy Houston said the PFD, "would result in an operating income reduction from Houston Electric's request of $138 million." If the PFD is approved, the utility expects it would incur a pre-tax write-off of approximately $120 million and a one-time refund of capital recovery from its transmission cost of service and distribution cost recovery factor mechanisms.

Texas regulators have not yet begun deliberating on the PFD, and a final order is expected later in 2019. (PUCT Control No. 49421)