0001130310 cnp:~~NaturalGasExpensesMember~~HoustonElectricMember cnp:~~EnableMidstreamPartnersMember~~OperationAndMaintenanceExpenseMember cnp:CenterpointEnergyMember 2019-01-01 ~~2019-09-30~~2019-03-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 10-Q



(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2019~~March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE TRANSITION PERIOD FROM __________________ TO __________________

Commission file number 1-31447

CenterPoint Energy, Inc.

(Exact name of registrant as specified in its charter)



Texas			74-0694415
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1111 Louisiana	Houston	Texas	77002
(Address of Principal Executive Offices)			(Zip Code)

(713) 207-1111

Registrant's telephone number, including area code

Commission file number 1-3187

CenterPoint Energy Houston Electric, LLC

(Exact name of registrant as specified in its charter)



Texas			22-3865106
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1111 Louisiana	Houston	Texas	77002
(Address of Principal Executive Offices)			(Zip Code)

(713) 207-1111

Registrant's telephone number, including area code

Commission file number 1-13265

CenterPoint Energy Resources Corp.

(Exact name of registrant as specified in its charter)



Delaware			76-0511406
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1111 Louisiana	Houston	Texas	77002
(Address of Principal Executive Offices)			(Zip Code)

(713) 207-1111

Registrant's telephone number, including area code



Securities registered pursuant to Section 12(b) of the Act:
Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
CenterPoint Energy, Inc.	Common Stock, $0.01 par value	CNP	The New York Stock Exchange
			Chicago Stock Exchange, Inc.
CenterPoint Energy, Inc.	Depositary Shares for 1/20 of 7.00% Series B Mandatory Convertible Preferred Stock, $0.01 par value	CNP/PB	The New York Stock Exchange
CenterPoint Energy Houston Electric, LLC	9.15% First Mortgage Bonds due 2021	n/a	The New York Stock Exchange
CenterPoint Energy Houston Electric, LLC	6.95% General Mortgage Bonds due 2033	n/a	The New York Stock Exchange
CenterPoint Energy Resources Corp.	6.625% Senior Notes due 2037	n/a	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



CenterPoint Energy, Inc.	Yes	þ	No	o
CenterPoint Energy Houston Electric, LLC	Yes	þ	No	o
CenterPoint Energy Resources Corp.	Yes	þ	No	o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



CenterPoint Energy, Inc.	Yes	þ	No	o
CenterPoint Energy Houston Electric, LLC	Yes	þ	No	o
CenterPoint Energy Resources Corp.	Yes	þ	No	o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



	Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company	Emerging growth company
CenterPoint Energy, Inc.	þ	o	o	☐	☐
CenterPoint Energy Houston Electric, LLC	o	o	þ	☐	☐
CenterPoint Energy Resources Corp.	o	o	þ	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



CenterPoint Energy, Inc.	Yes	☐	No	þ
CenterPoint Energy Houston Electric, LLC	Yes	☐	No	þ
CenterPoint Energy Resources Corp.	Yes	☐	No	þ

Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of ~~October 25, 2019:~~May 1, 2020:



CenterPoint Energy, Inc.	~~502,241,723~~502,656,951	shares of common stock outstanding, excluding 166 shares held as treasury stock
CenterPoint Energy Houston Electric, LLC	1,000	common shares outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc.
CenterPoint Energy Resources Corp.	1,000	shares of common stock outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc.

CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	CenterPoint Energy, Inc. Financial Statements (unaudited)	1
	CenterPoint Energy Houston Electric, LLC Financial Statements (unaudited)	7
	CenterPoint Energy Resources Corp. Financial Statements (unaudited)	13
	Combined Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)	19
	(1) Background and Basis of Presentation	19
	(2) New Accounting Pronouncements	21
	(3) ~~Mergers~~Held for Sale and ~~Acquisitions~~Discontinued Operations	21
	(4) Revenue Recognition	2425
	(5) Employee Benefit Plans	28
	(6) Regulatory Accounting	3129
	(7) Derivative Instruments	3231
	(8) Fair Value Measurements	3836
	(9) Unconsolidated Affiliates	4140
	(10) Goodwill and Other Intangibles	4443
	(11) Indexed Debt Securities (ZENS) and Securities Related to ZENS	4645
	(12) Short-term Borrowings and Long-term Debt	4745
	(13) Income Taxes	5047
	(14) Commitments and Contingencies	5048
	(15) Earnings Per Share	5552
	(16) Reportable Segments	5553
	(17) Supplemental Disclosure of Cash Flow Information	5956
	(18) Related Party Transactions	5956
	(19) ~~Leases~~Equity	6057
	(20) ~~Equity~~	63
	~~(21)~~ Subsequent Events	6559
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6661
	Recent Events	6661
	Consolidated Results of Operations	6663
	Results of Operations by Reportable Segment	7167
	Certain Factors Affecting Future Earnings	8277
	Liquidity and Capital Resources	8278
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	9493
Item 4.	Controls and Procedures	9594

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	9695
Item 1A.	Risk Factors	9695
Item 6.	Exhibits	97
	Signatures	101



GLOSSARY
ACE		Affordable Clean Energy
~~ALJ~~		~~Administrative Law Judge~~
AMA		Asset Management Agreement
AMS		Advanced Metering System
APSC		Arkansas Public Service Commission
ARAM		Average rate assumption method
ARO		Asset retirement obligation
ARP		Alternative revenue program
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
AT&T Common		AT&T Inc. common stock
Athena Energy Services		Athena Energy Services Buyer, LLC, a Delaware limited liability company and subsidiary of Energy Capital Partners, LLC
Bailey to Jones Creek Project		A transmission project in the greater Freeport, Texas area, which includes enhancements to two existing substations and the construction of a new 345 kV double-circuit line to be located in the counties of Brazoria, Matagorda and Wharton
Bcf		Billion cubic feet
Bond Companies		Bond Company II, Bond Company III, Bond Company IV and Restoration Bond Company, each a wholly-owned, bankruptcy remote entity formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of Securitization Bonds
Bond Company II		CenterPoint Energy Transition Bond Company II, LLC, a wholly-owned subsidiary of Houston Electric
Bond Company III		CenterPoint Energy Transition Bond Company III, LLC, a wholly-owned subsidiary of Houston Electric
Bond Company IV		CenterPoint Energy Transition Bond Company IV, LLC, a wholly-owned subsidiary of Houston Electric
~~Brazos Valley Connection~~CARES Act		~~A portion of the Houston region transmission project between Houston Electric’s Zenith substation~~Coronavirus Aid, Relief, and ~~the Gibbons Creek substation owned by the Texas Municipal Power Agency~~Economic Security Act
CCR		Coal Combustion Residuals
CECA		Clean Energy Cost Adjustment
CECL		Current expected credit losses
CEIP		CenterPoint Energy Intrastate Pipelines, LLC, a wholly-owned subsidiary of CERC Corp.
CenterPoint Energy		CenterPoint Energy, Inc., and its subsidiaries
CERC		CERC Corp., together with its subsidiaries
CERC Corp.		CenterPoint Energy Resources Corp.
CES		CenterPoint Energy Services, Inc., a wholly-owned subsidiary of CERC Corp.
Charter Common		Charter Communications, Inc. common stock
CIP		Conservation Improvement Program
CME		Chicago Mercantile Exchange
CNG		Compressed Natural Gas
CNP Midstream		CenterPoint Energy Midstream, Inc., a wholly-owned subsidiary of CenterPoint Energy
CODM		Chief Operating Decision Maker, the Registrants’ Chief Executive Officer
Common Stock		CenterPoint Energy, Inc. common stock, par value $0.01 per share
~~CPCN~~COVID-19		~~Certificate of Public Convenience~~Novel coronavirus disease 2019 and ~~Necessity~~related global outbreak that was subsequently declared a pandemic by the World Health Organization
COVID-19 ERP		COVID-19 Electricity Relief Program
CPP		Clean Power Plan



GLOSSARY
CSIA		Compliance and System Improvement Adjustment
DCRF		Distribution Cost Recovery Factor
DRR		Distribution Replacement Rider
DSMA		Demand Side Management Adjustment
~~ECA~~EBITDA		~~Environmental Cost Adjustment~~Earnings before income taxes, depreciation and amortization
EDIT		Excess deferred income taxes
EECR		Energy Efficiency Cost Recovery



~~GLOSSARY~~
EECRF		Energy Efficiency Cost Recovery Factor
EEFC		Energy Efficiency Funding Component
EEFR		Energy Efficiency Funding Rider
ELG		Effluent Limitation Guidelines
~~EMV~~		~~Evaluation, measurement and valuation~~
Enable		Enable Midstream Partners, LP
Enable GP		Enable GP, LLC, Enable’s general partner
Enable Series A Preferred Units		Enable’s 10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in Enable
Energy Services		Offers competitive variable and fixed-priced physical natural gas supplies primarily to commercial and industrial customers and electric and natural gas utilities through CES and its subsidiary, CEIP
Energy Services Disposal Group		Substantially all of the businesses within CenterPoint Energy’s and CERC’s Energy Services reporting unit that will be sold under the Equity Purchase Agreement
EPA		Environmental Protection Agency
Equity Purchase Agreement		Equity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Athena Energy Services
ERCOT		Electric Reliability Council of Texas
ESG		Energy Systems Group, LLC, a wholly-owned subsidiary of Vectren
FERC		Federal Energy Regulatory Commission
Fitch		Fitch, Inc.
Form 10-Q		Quarterly Report on Form 10-Q
FRP		Formula Rate Plan
Gas Daily		Platts gas daily indices
GHG		Greenhouse gases
GRIP		Gas Reliability Infrastructure Program
GWh		Gigawatt-hours
Houston Electric		CenterPoint Energy Houston Electric, LLC and its subsidiaries
IDEM		Indiana Department of Environmental Management
Indiana Electric		Operations of SIGECO’s electric transmission and distribution services, and includes its power generating and wholesale power operations
Indiana Gas		Indiana Gas Company, Inc., a wholly-owned subsidiary of Vectren
Indiana North		Gas operations of Indiana Gas
Indiana South		Gas operations of SIGECO
Indiana Utilities		The combination of Indiana Electric, Indiana North and Indiana South
Infrastructure Services		Provides underground pipeline construction and repair services through Vectren’s wholly-owned subsidiaries, Miller Pipeline, LLC and Minnesota Limited, LLC
Infrastructure Services Disposal Group		Businesses within the Infrastructure Services reporting unit that were sold under the Securities Purchase Agreement
Interim Condensed Financial Statements		Unaudited condensed consolidated interim financial statements and combined notes
~~Internal Spin~~		The series of internal transactions consummated on September 4, 2018 whereby CERC (i) contributed its equity investment in Enable consisting of Enable common units and its interests in Enable GP to CNP Midstream and (ii) transferred all of its interest in CNP Midstream to CenterPoint Energy
IRP		Integrated Resource Plan
IRS		Internal Revenue Service

iii



GLOSSARY
IURC		Indiana Utility Regulatory Commission
kV		Kilovolt
KW		Kilowatts
LIBOR		London Interbank Offered Rate
~~MATS~~LNG		~~Mercury and Air Toxics Standards~~Liquefied Natural Gas
Merger		The merger of Merger Sub with and into Vectren on the terms and subject to the conditions set forth in the Merger Agreement, with Vectren continuing as the surviving corporation and as a wholly-owned subsidiary of CenterPoint Energy, Inc.
Merger Agreement		Agreement and Plan of Merger, dated as of April 21, 2018, among CenterPoint Energy, Vectren and Merger Sub
Merger ~~Date~~		~~February 1, 2019~~
~~Merger~~ Sub		Pacer Merger Sub, Inc., an Indiana corporation and wholly-owned subsidiary of CenterPoint Energy
MES		CenterPoint Energy Mobile Energy Solutions, Inc., a wholly-owned subsidiary of CERC Corp.
MGP		Manufactured gas plant

~~iii~~



~~GLOSSARY~~
~~MISO~~		~~Midcontinent Independent System Operator~~
MLP		Master Limited Partnership
MMBtu		One million British thermal units
Moody’s		Moody’s Investors Service, Inc.
MPSC		Mississippi Public Service Commission
MPUC		Minnesota Public Utilities Commission
MRT		Enable Mississippi River Transmission, LLC
MW		Megawatts
NGD		Natural gas distribution business
NGLs		Natural gas liquids
NOLs		Net operating losses
NRG		NRG Energy, Inc.
NYMEX		New York Mercantile ~~Exchange~~
~~NYSE~~		~~New York Stock~~ Exchange
OCC		Oklahoma Corporation Commission
OGE		OGE Energy Corp.
PBRC		Performance Based Rate Change
~~PFD~~PowerTeam Services		~~Proposal for decision~~PowerTeam Services, LLC, a Delaware limited liability company
PRPs		Potentially responsible parties
PUCO		Public Utilities Commission of Ohio
PUCT		Public Utility Commission of Texas
Railroad Commission		Railroad Commission of Texas
RCRA		Resource Conservation and Recovery Act of 1976
Registrants		CenterPoint Energy, Houston Electric and CERC, collectively
Reliant Energy		Reliant Energy, Incorporated
REP		Retail electric provider
Restoration Bond Company		CenterPoint Energy Restoration Bond Company, LLC, a wholly-owned subsidiary of Houston Electric
~~Revised Policy Statement~~		~~Revised Policy Statement on Treatment of Income Taxes~~
ROE		Return on equity
ROU		Right of use
RRA		Rate Regulation Adjustment
~~RRI~~		~~Reliant Resources, Inc.~~
RSP		Rate Stabilization Plan
SEC		Securities and Exchange Commission
Securities Purchase Agreement		Securities Purchase Agreement, dated as of February 3, 2020, by and among VUSI, PowerTeam Services, and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren
Securitization Bonds		Transition and system restoration bonds



GLOSSARY
Series A Preferred Stock		CenterPoint Energy’s Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share
Series B Preferred Stock		CenterPoint Energy’s 7.00% Series B Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share
~~SERP~~Series C Preferred Stock		~~Supplemental Executive Retirement Plan~~CenterPoint Energy’s Series C Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share
SIGECO		Southern Indiana Gas and Electric Company, a wholly-owned subsidiary of Vectren
S&P		S&P Global Ratings
SRC		Sales Reconciliation Component
TBD		To be determined
TCEH Corp.		Formerly Texas Competitive Electric Holdings Company LLC, predecessor to Vistra Energy Corp. whose major subsidiaries include Luminant and TXU Energy



~~GLOSSARY~~
TCJA		Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017
TCOS		Transmission Cost of Service
TCRF		Transmission Cost Recovery Factor
TDSIC		Transmission, Distribution and Storage System Improvement Charge
TDU		Transmission and distribution utility
~~Transition Agreements~~		~~Services Agreement, Employee Transition Agreement, Transitional Seconding Agreement and other agreements entered into in connection with the formation of Enable~~
TSCR		Tax Savings Credit Rider
Utility Holding		Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy
VCC		Vectren Capital Corp., a wholly-owned subsidiary of Vectren
Vectren		Vectren Corporation, a wholly-owned subsidiary of CenterPoint Energy as of ~~the Merger Date~~February 1, 2019
VEDO		Vectren Energy Delivery of Ohio, Inc., a wholly-owned subsidiary of Vectren
VIE		Variable interest entity
Vistra Energy Corp.		Texas-based energy company focused on the competitive energy and power generation markets
VRP		Voluntary Remediation Program
VUHI		Vectren Utility Holdings, Inc., a wholly-owned subsidiary of Vectren
ZENS		2.0% Zero-Premium Exchangeable Subordinated Notes due 2029
ZENS-Related Securities		As of both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, consisted of AT&T Common and Charter Common
~~2018~~2019 Form 10-K		Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

From time to time the Registrants make statements concerning their expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will” or other similar words.

The Registrants have based their forward-looking statements on management’s beliefs and assumptions based on information reasonably available to management at the time the statements are made. The Registrants caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, the Registrants cannot assure you that actual results will not differ materially from those expressed or implied by the Registrants’ forward-looking statements. In this Form 10-Q, unless context requires otherwise, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries, including Houston Electric, CERC and Vectren.

The following are some of the factors that could cause actual results to differ from those expressed or implied by the Registrants’ forward-looking statements and apply to all Registrants unless otherwise indicated:

the performance of Enable, the amount of cash distributions CenterPoint Energy receives from Enable, Enable’s ability to redeem the Enable Series A Preferred Units in certain circumstances and the value of CenterPoint Energy’s interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as:


◦	competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable;

◦

the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines;


◦	economic effects of the recent actions of Saudi Arabia, Russia and other oil-producing countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices;


◦	the demand for crude oil, natural gas, NGLs and transportation and storage services;


◦	environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing;


◦	recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable;


◦	the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments;


◦	changes in tax status; and


◦	access to debt and equity capital;

the COVID-19 pandemic and its effect on our and Enable’s operations, business and financial condition, our industries and the communities we serve, U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto;

volatility and a substantial recent decline in the markets for oil and natural gas as a result of the actions of crude-oil exporting nations and the Organization of Petroleum Exporting Countries and reduced worldwide consumption due to the COVID-19 pandemic;

the expected benefits of the Merger and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the Merger, as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities;

the recording of impairment charges, including any impairment or loss associated with the sale of the Infrastructure Services and Energy Services Disposal Groups;

industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns;

~~the outcome of the pending Houston Electric rate case;~~

timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment;

future economic conditions in regional and national markets and their effect on sales, prices and costs;

weather variations and other natural phenomena, including the impact of severe weather events on operations and capital;

state and federal legislative and regulatory actions or developments affecting various aspects of our businesses (including the businesses of Enable), including, among others, energy deregulation or re-regulation, pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by our regulated businesses;

tax legislation, including the effects of the CARES Act and of the TCJA (which includes any potential changes to interest deductibility) and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of EDIT and our rates;

CenterPoint Energy’s and CERC’s ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms;


•	the timing and extent of changes in commodity prices, particularly natural gas and coal, and the effects of geographic and seasonal commodity price differentials on CERC and Enable;

the ability of CenterPoint Energy’s and CERC’s non-utility business operating in the Energy Services ~~reportable segment~~Disposal Group to effectively optimize opportunities related to natural gas price volatility and storage activities, including weather-related impacts;

actions by credit rating agencies, including any potential downgrades to credit ratings;

~~changes in interest rates and their impact on costs of borrowing and the valuation of CenterPoint Energy’s pension benefit obligation;~~

problems with regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates;

the availability and prices of raw materials and services and changes in labor for current and future construction projects;

local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact the continued operation, and/or cost recovery of generation plant costs and related assets;

the impact of unplanned facility outages or other closures;

any direct or indirect effects on our or Enable’s facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt our businesses or the businesses of third parties, or other catastrophic events such as fires, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences;

our ability to invest planned capital and the timely recovery of our investments, including those related to Indiana Electric’s ~~generation transition plan;~~anticipated IRP;

our ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;

vii

our ability to control operation and maintenance costs;

the sufficiency of our insurance coverage, including availability, cost, coverage and terms and ability to recover claims;

the investment performance of CenterPoint Energy’s pension and postretirement benefit plans;

changes in interest rates and their impact on costs of borrowing and the valuation of CenterPoint Energy’s pension benefit obligation;

commercial bank and financial market conditions, our access to capital, the cost of such capital, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets;

changes in rates of inflation;

inability of various counterparties to meet their obligations to us;

non-payment for our services due to financial distress of our customers;

the extent and effectiveness of our and Enable’s risk management and hedging activities, including, but not limited to financial and weather hedges and commodity risk management activities;

timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or natural disasters or other recovery of ~~costs,~~costs;

the ability of REPs, including ~~costs associated with Hurricane Harvey;~~REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric;

CenterPoint Energy’s or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the proposed sale of CES, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable;

the performance of projects undertaken by our non-utility businesses and the success of efforts to realize value from, invest in and develop new opportunities and other factors affecting those non-utility businesses, including, but not limited to, the level of success in bidding contracts, fluctuations in volume and mix of contracted work, mix of projects received under blanket contracts, failure to properly estimate cost to construct projects or unanticipated cost increases in completion

~~vii~~

of the contracted work, changes in energy prices that affect demand for construction services and projects and cancellation and/or reductions in the scope of projects by customers and obligations related to warranties and guarantees;

acquisition and merger activities involving us or our competitors, including the ability to successfully complete merger, acquisition and divestiture plans;

our or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations;

the outcome of litigation;

the ~~ability~~development of ~~REPs,~~new opportunities and the performance of projects undertaken by ESG, including, ~~REP affiliates~~among other factors, the level of ~~NRG~~success in bidding contracts and ~~Vistra Energy Corp., formerly known as TCEH Corp.,~~cancellation and/or reductions in the scope of projects by customers, and obligations related to ~~satisfy their obligations to CenterPoint Energy~~warranties and ~~Houston Electric;~~guarantees;

changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation;

the impact of alternate energy sources on the demand for natural gas;

the timing and outcome of any audits, disputes and other proceedings related to taxes;

the effective tax rates;

the transition to a replacement for the LIBOR benchmark interest rate;

the effect of changes in and application of accounting standards and pronouncements; and


•	other factors discussed in “Risk Factors” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K, which are incorporated herein by reference, in Item 1A of Part II of this Form 10-Q and other reports the Registrants file from time to time with the SEC.

viii

You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and the Registrants undertake no obligation to update or revise any forward-looking statements. Investors should note that the Registrants announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, the Registrants may use the Investors section of CenterPoint Energy’s website (www.centerpointenergy.com) to communicate with investors about the Registrants. It is possible that the financial and other information posted there could be deemed to be material information. The information on CenterPoint Energy’s website is not part of this combined Form 10-Q.

~~viii~~ix

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2019			2018			2019			2018			2020			2019
	(in millions, except per share amounts)
Revenues:
Utility revenues	$	1,539		$	1,299		$	5,255		$	4,534		$	2,073		$	2,171
Non-utility revenues	1,203			913			3,816			3,019			94			58
Total	2,742			2,212			9,071			7,553			2,167			2,229
Expenses:
Utility natural gas, fuel and purchased power	179			134			1,178			959			609			797
Non-utility cost of revenues, including natural gas	852			864			3,013			2,927			64			47
Operation and maintenance	871			567			2,616			1,714			674			748
Depreciation and amortization	334			326			987			982			282			300
Taxes other than income taxes	114			95			353			307			136			126
Goodwill Impairment													185			—
Total	2,350			1,986			8,147			6,889			1,950			2,018
Operating Income	392			226			924			664			217			211
Other Income (Expense):
Gain on marketable securities	59			43			206			66
Loss on indexed debt securities	(62		)	(44		)	(216		)	(316		)
Interest and other finance charges	(134		)	(90		)	(389		)	(259		)
Interest on Securitization Bonds	(9		)	(16		)	(31		)	(46		)
Equity in earnings of unconsolidated affiliates, net	77			81			213			208
Gain (loss) on marketable securities													(144		)	83
Gain (loss) on indexed debt securities													135			(86		)
Interest expense and other finance charges													(139		)	(121		)
Interest expense on Securitization Bonds													(8		)	(12		)
Equity in earnings (loss) of unconsolidated affiliates, net													(1,475		)	62
Interest income													—			12
Interest income from Securitization Bonds													1			2
Other income, net	9			9			40			16			13			6
Total	(60		)	(17		)	(177		)	(331		)	(1,617		)	(54		)
Income Before Income Taxes	332			209			747			333
Income tax expense	62			51			113			85
Net Income	270			158			634			248
Income (Loss) from Continuing Operations Before Income Taxes													(1,400		)	157
Income tax expense (benefit)													(347		)	14
Income (Loss) from Continuing Operations													(1,053		)	143
Income (loss) from discontinued operations (net of tax expense (benefit) of ($17) and $8, respectively)													(146		)	26
Net Income (Loss)													(1,199		)	169
Preferred stock dividend requirement	29			5			88			5			29			29
Income Available to Common Shareholders	$	241		$	153		$	546		$	243
Income (Loss) Available to Common Shareholders													$	(1,228	)	$	140

Basic Earnings Per Common Share	$	0.48		$	0.35		$	1.09		$	0.56
Diluted Earnings Per Common Share	$	0.47		$	0.35		$	1.08		$	0.56
Basic earnings (loss) per common share - continuing operations													$	(2.15	)	$	0.23
Basic earnings (loss) per common share - discontinued operations													(0.29		)	0.05
Basic Earnings (Loss) Per Common Share													(2.44		)	0.28
Diluted earnings (loss) per common share - continuing operations													$	(2.15	)	$	0.23
Diluted earnings (loss) per common share - discontinued operations													(0.29		)	0.05
Diluted Earnings (Loss) Per Common Share													$	(2.44	)	$	0.28

Weighted Average Common Shares Outstanding, Basic	502			432			502			431			502			502
Weighted Average Common Shares Outstanding, Diluted	505			435			505			435			502			504

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Net income $ 270
$ 158
$ 634
$ 248
Other comprehensive income (loss):
Adjustment to pension and other postretirement plans (net of tax of $-0-, $1, $2 and $2) 2
1
5
4
Net deferred gain (loss) from cash flow hedges (net of tax of $-0-, $1, $-0- and $2) (2 ) 3
(3 ) 6
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0-, $-0-, $-0- and $-0-) —
—
1
—
Other comprehensive loss from unconsolidated affiliates (net of tax of $-0-, $-0-, $-0- and $-0-) (2 ) —
(2 ) —
Total (2 ) 4
1
10
Comprehensive income $ 268
$ 162
$ 635
$ 258



		Three Months Ended
		March 31,
		2020			2019
	(in millions)
Net income (loss)		$	(1,199	)	$	169
Other comprehensive income (loss):
Adjustment to pension and other postretirement plans (net of tax of $1 and $1)		1			1
Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-)		—			(1		)
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0- and $-0-)		—			1
Other comprehensive loss from unconsolidated affiliates (net of tax of $-0- and $-0-)		(3		)	—
Total		(2		)	1
Comprehensive income (loss)		(1,201		)	170
Preferred stock dividend requirement		29			29
Comprehensive income (loss) available to common shareholders		$	(1,230	)	$	141

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
Current Assets:
Cash and cash equivalents ($224 and $335 related to VIEs, respectively)	$	259	$	4,231
Cash and cash equivalents ($190 and $216 related to VIEs, respectively)					$	220	$	241
Investment in marketable securities	746		540		678		822
Accounts receivable ($48 and $56 related to VIEs, respectively), less bad debt reserve of $21 and $18, respectively	1,091		1,190
Accrued unbilled revenues	403		378
Accounts receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $30 and $21, respectively					711		702
Accrued unbilled revenues, less bad debt reserve of $3 and $-0-, respectively					320		469
Natural gas inventory	299		194		97		209
Materials and supplies	273		200		278		263
Non-trading derivative assets	120		100
Taxes receivable	69		—		93		106
Prepaid expenses and other current assets ($19 and $34 related to VIEs, respectively)	156		192
Current assets held for sale					1,647		1,002
Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively)					120		123
Total current assets	3,416		7,025		4,164		3,937
Property, Plant and Equipment:
Property, plant and equipment	30,066		20,267		30,830		30,324
Less: accumulated depreciation and amortization	9,738		6,223		9,852		9,700
Property, plant and equipment, net	20,328		14,044		20,978		20,624
Other Assets:
Goodwill	5,179		867		4,697		4,882
Regulatory assets ($821 and $1,059 related to VIEs, respectively)	2,194		1,967
Non-trading derivative assets	64		38
Regulatory assets ($758 and $788 related to VIEs, respectively)					2,120		2,117
Investment in unconsolidated affiliates	2,469		2,482		850		2,408
Preferred units – unconsolidated affiliate	363		363		363		363
Intangible assets, net	356		65
Non-current assets held for sale					—		962
Other	273		158		223		236
Total other assets	10,898		5,940		8,253		10,968
Total Assets	$	34,642	$	27,009	$	33,395	$	35,529

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

(Unaudited)

LIABILITIES AND SHAREHOLDERS’ EQUITY


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(in millions, except share amounts)						(in millions, except share amounts)
Current Liabilities:
Current portion of VIE Securitization Bonds long-term debt	$	229		$	458		$	204		$	231
Indexed debt, net	21			24			18			19
Current portion of other long-term debt	618			—			1,204			618
Indexed debt securities derivative	817			601			758			893
Accounts payable	888			1,240			739			884
Taxes accrued	193			204			177			239
Interest accrued	121			121			126			158
Dividends accrued	—			187
Customer deposits	122			86			124			124
Non-trading derivative liabilities	50			126			9			7
Current liabilities held for sale							383			455
Other	375			255			300			350
Total current liabilities	3,434			3,302			4,042			3,978
Other Liabilities:
Deferred income taxes, net	3,851			3,239			3,562			3,928
Non-trading derivative liabilities	32			5			14			15
Benefit obligations	812			796			746			750
Regulatory liabilities	3,481			2,525			3,480			3,474
Non-current liabilities held for sale							—			43
Other	672			402			751			738
Total other liabilities	8,848			6,967			8,553			8,948
Long-term Debt:
VIE Securitization Bonds, net	817			977			710			746
Other long-term debt, net	13,197			7,705			13,120			13,498
Total long-term debt, net	14,014			8,682			13,830			14,244
Commitments and Contingencies (Note 14)
Shareholders’ Equity:
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized
Series A Preferred Stock, $0.01 par value, $800 aggregate liquidation preference, 800,000 shares outstanding	790			790			790			790
Series B Preferred Stock, $0.01 par value, $978 aggregate liquidation preference, 977,500 shares outstanding	950			950			950			950
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 502,235,354 shares and 501,197,784 shares outstanding, respectively	5			5
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 502,647,495 shares and 502,242,061 shares outstanding, respectively							5			5
Additional paid-in capital	6,072			6,072			6,086			6,080
Retained earnings	636			349
Retained earnings (accumulated deficit)							(761		)	632
Accumulated other comprehensive loss	(107		)	(108		)	(100		)	(98		)
Total shareholders’ equity	8,346			8,058			6,970			8,359
Total Liabilities and Shareholders’ Equity	$	34,642		$	27,009		$	33,395		$	35,529

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
	(in millions)						(in millions)
Cash Flows from Operating Activities:
Net income	$	634		$	248
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	(1,199	)	$	169
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	987			982			282			300
Depreciation and amortization on assets held for sale							—			13
Amortization of deferred financing costs	22			34			7			7
Amortization of intangible assets in non-utility cost of revenues	19			—			1			9
Deferred income taxes	8			33			(377		)	(14		)
Unrealized gain on marketable securities	(206		)	(66		)
Loss on indexed debt securities	216			316
Goodwill impairment and loss from reclassification to held for sale							214			—
Goodwill impairment							185			—
Unrealized loss (gain) on marketable securities							144			(83		)
Loss (gain) on indexed debt securities							(135		)	86
Write-down of natural gas inventory	5			2			3			1
Equity in earnings of unconsolidated affiliates, net of distributions	13			(15		)
Equity in (earnings) losses of unconsolidated affiliates							1,475			(62		)
Distributions from unconsolidated affiliates							70			74
Pension contributions	(94		)	(67		)	(2		)	(2		)
Changes in other assets and liabilities, excluding acquisitions:
Accounts receivable and unbilled revenues, net	521			355			236			138
Inventory	(85		)	(10		)	110			120
Taxes receivable	(69		)	(38		)	13			—
Accounts payable	(646		)	(262		)	(192		)	(332		)
Fuel cost recovery	68			53			11			58
Non-trading derivatives, net	(66		)	63			(53		)	(40		)
Margin deposits, net	(33		)	2			21			19
Interest and taxes accrued	(89		)	(53		)	(95		)	(116		)
Net regulatory assets and liabilities	(101		)	44			(38		)	(3		)
Other current assets	31			11			(5		)	16
Other current liabilities	(118		)	16			(37		)	(101		)
Other assets	81			(3		)	19			58
Other liabilities	(22		)	24			1			(39		)
Other operating activities, net	10			10			3			(5		)
Net cash provided by operating activities	1,086			1,679			662			271
Cash Flows from Investing Activities:
Capital expenditures	(1,822		)	(1,121		)	(664		)	(537		)
Acquisitions, net of cash acquired	(5,991		)	—			—			(5,987		)
Distributions from unconsolidated affiliate in excess of cumulative earnings	—			30			7			—
Proceeds from sale of marketable securities	—			398
Other investing activities, net	38			19			3			(15		)
Net cash used in investing activities	(7,775		)	(674		)	(654		)	(6,539		)
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net	—			(39		)
Proceeds from (payments of) commercial paper, net	1,584			(1,551		)	(828		)	2,692
Proceeds from long-term debt, net	2,916			997			—			721
Payments of long-term debt	(1,225		)	(368		)	(63		)	(994		)
Long-term revolving credit facility, net							1,050			135
Debt issuance costs	(19		)	(36		)	—			(8		)
Payment of dividends on Common Stock	(433		)	(360		)	(145		)	(144		)
Payment of dividends on Preferred Stock	(101		)	—			(42		)	(43		)
Proceeds from issuance of Series A Preferred Stock, net	—			790
Distribution to ZENS note holders	—			(398		)
Other financing activities, net	(14		)	(5		)	(4		)	(14		)
Net cash provided by (used in) financing activities	2,708			(970		)	(32		)	2,345
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(3,981		)	35
Net Decrease in Cash, Cash Equivalents and Restricted Cash							(24		)	(3,923		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	4,278			296			271			4,278
Cash, Cash Equivalents and Restricted Cash at End of Period	$	297		$	331		$	247		$	355

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount
	(in millions of dollars and shares, except per share amounts)
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares
Balance, beginning of period	2	$	1,740		—	$	—		2	$	1,740		—	$	—		2	$	1,740		2	$	1,740
Issuances of Series A Preferred Stock	—	—			1	790			—	—			1	790
Balance, end of period	2	1,740			1	790			2	1,740			1	790			2	1,740			2	1,740
Common Stock, $0.01 par value; authorized 1,000,000,000 shares
Balance, beginning of period	502	5			431	4			501	5			431	4			502	5			501	5
Issuances related to benefit and investment plans	—	—			—	—			1	—			—	—			—	—			1	—
Balance, end of period	502	5			431	4			502	5			431	4			502	5			502	5
Additional Paid-in-Capital
Balance, beginning of period		6,065				4,215				6,072				4,209				6,080				6,072
Issuances related to benefit and investment plans		7				6				—				12				6				(12		)
Balance, end of period		6,072				4,221				6,072				4,221				6,086				6,060
Retained Earnings
Retained Earnings (Accumulated Deficit)
Balance, beginning of period		552				513				349				543				632				349
Net income		270				158				634				248
Common Stock dividends declared ($0.2875, $0.2775, $0.5750 and $0.5550 per share, respectively)		(145		)		(120		)		(289		)		(240		)
Series A Preferred Stock dividends declared ($30,625, $-0-, $30.625, and $-0- per share, respectively)		(24		)		—				(24		)		—
Series B Preferred Stock dividends declared ($17.5000, $-0-, $35.0000, and $-0- per share, respectively)		(17		)		—				(34		)		—
Net income (loss)																		(1,199		)		169
Common Stock dividends declared ($0.2900 and $-0- per share, respectively)																		(145		)		—
Series A Preferred Stock dividends declared ($30.6250 and $-0- per share, respectively)																		(25		)		—
Series B Preferred Stock dividends declared ($17.5000 and $-0- per share, respectively)																		(17		)		—
Adoption of ASU 2016-13																		(7		)
Balance, end of period		636				551				636				551				(761		)		518
Accumulated Other Comprehensive Loss
Balance, beginning of period		(105		)		(62		)		(108		)		(68		)		(98		)		(108		)
Other comprehensive income		(2		)		4				1				10
Other comprehensive income (loss)																		(2		)		1
Balance, end of period		(107		)		(58		)		(107		)		(58		)		(100		)		(107		)
Total Shareholders’ Equity		$	8,346			$	5,508			$	8,346			$	5,508			$	6,970			$	8,216

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2019			2018			2019			2018				2020			2019
	(in millions)												(in millions)
Revenues	$	859		$	897		$	2,310		$	2,506			$	634		$	686
Expenses:
Operation and maintenance	359			369			1,086			1,062				359			368
Depreciation and amortization	168			242			519			737				129			175
Taxes other than income taxes	63			59			186			180				64			62
Total	590			670			1,791			1,979				552			605
Operating Income	269			227			519			527				82			81
Other Income (Expense):
Interest and other finance charges	(41		)	(32		)	(123		)	(101		)
Interest on Securitization Bonds	(9		)	(16		)	(31		)	(46		)
Interest expense and other finance charges														(41		)	(40		)
Interest expense on Securitization Bonds														(8		)	(12		)
Interest income														1			4
Interest income from Securitization Bonds														1			2
Other income (expense), net	7			—			17			(6		)		3			(2		)
Total	(43		)	(48		)	(137		)	(153		)		(44		)	(48		)
Income Before Income Taxes	226			179			382			374				38			33
Income tax expense	41			36			70			78				5			6
Net Income	$	185		$	143		$	312		$	296			$	33		$	27

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
	2019		2018		2019			2018			2020		2019
	(in millions)									(in millions)
Net income	$	185	$	143	$	312		$	296		$	33	$	27
Other comprehensive income:
Net deferred gain (loss) from cash flow hedges (net of tax of $-0-, $1, $-0- and $2)	—		3		(1		)	7
Other comprehensive loss:
Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-)											—		(1		)
Total	—		3		(1		)	7			—		(1		)
Comprehensive income	$	185	$	146	$	311		$	303		$	33	$	26

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
Current Assets:
Cash and cash equivalents ($224 and $335 related to VIEs, respectively)	$	228	$	335
Accounts and notes receivable ($48 and $56 related to VIEs, respectively), less bad debt reserve of $1 and $1, respectively	341		283
Cash and cash equivalents ($190 and $216 related to VIEs, respectively)					$	196	$	216
Accounts and notes receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $1 and $1, respectively					244		238
Accounts and notes receivable–affiliated companies	787		20		11		523
Accrued unbilled revenues	136		110		92		117
Materials and supplies	144		135		157		147
Taxes receivable	—		5
Prepaid expenses and other current assets ($19 and $34 related to VIEs, respectively)	30		61
Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively)					36		49
Total current assets	1,666		949		736		1,290
Property, Plant and Equipment:
Property, plant and equipment	12,621		12,148		13,058		12,829
Less: accumulated depreciation and amortization	3,795		3,746		3,844		3,797
Property, plant and equipment, net	8,826		8,402		9,214		9,032
Other Assets:
Regulatory assets ($821 and $1,059 related to VIEs, respectively)	951		1,124
Regulatory assets ($758 and $788 related to VIEs, respectively)					891		915
Other	20		32		29		25
Total other assets	971		1,156		920		940
Total Assets	$	11,463	$	10,507	$	10,870	$	11,262

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

LIABILITIES AND MEMBER’S EQUITY


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(in millions)						(in millions)
Current Liabilities:
Current portion of VIE Securitization Bonds long-term debt	$	229		$	458		$	204		$	231
Accounts payable	232			262			259			268
Accounts and notes payable–affiliated companies	65			78			175			76
Taxes accrued	107			115			61			123
Interest accrued	44			64			51			69
Non-trading derivative liabilities	—			24
Other	69			89			78			63
Total current liabilities	746			1,090			828			830
Other Liabilities:
Deferred income taxes, net	1,005			1,023			1,036			1,030
Benefit obligations	84			91			72			75
Regulatory liabilities	1,295			1,298			1,271			1,288
Other	61			65			80			69
Total other liabilities	2,445			2,477			2,459			2,462
Long-term Debt:
VIE Securitization Bonds, net	817			977			710			746
Other, net	3,972			3,281			3,974			3,973
Total long-term debt, net	4,789			4,258			4,684			4,719
Commitments and Contingencies (Note 14)
Member’s Equity:
Common stock	—			—			—			—
Additional paid-in capital	2,486			1,896			2,486			2,486
Retained earnings	1,012			800			428			780
Accumulated other comprehensive loss	(15		)	(14		)	(15		)	(15		)
Total member’s equity	3,483			2,682			2,899			3,251
Total Liabilities and Member’s Equity	$	11,463		$	10,507		$	10,870		$	11,262

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
	(in millions)						(in millions)
Cash Flows from Operating Activities:
Net income	$	312		$	296		$	33		$	27
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	519			737			129			175
Amortization of deferred financing costs	8			8			3			3
Deferred income taxes	(39		)	(24		)	(1		)	(15		)
Changes in other assets and liabilities:
Accounts and notes receivable, net	(84		)	(95		)	19			21
Accounts receivable/payable–affiliated companies	(7		)	(12		)	(3		)	(32		)
Inventory	(9		)	(10		)	(10		)	1
Accounts payable	3			(6		)	(2		)	2
Taxes receivable	5			(9		)	—			5
Interest and taxes accrued	(28		)	(50		)	(80		)	(58		)
Non-trading derivatives, net	(25		)	—			—			(25		)
Net regulatory assets and liabilities	(58		)	(66		)	(11		)	(44		)
Other current assets	15			13			13			13
Other current liabilities	(3		)	(9		)	8			(7		)
Other assets	8			4			—			3
Other liabilities	(13		)	16			8			(1		)
Other operating activities, net	(9		)	(5		)	(3		)	(2		)
Net cash provided by operating activities	595			788			103			66
Cash Flows from Investing Activities:
Capital expenditures	(744		)	(678		)	(286		)	(258		)
Increase in notes receivable–affiliated companies	(772		)	—
Decrease (increase) in notes receivable–affiliated companies							481			(979		)
Other investing activities, net	12			15			(3		)	—
Net cash used in investing activities	(1,504		)	(663		)
Net cash provided by (used in) investing activities							192			(1,237		)
Cash Flows from Financing Activities:
Proceeds from long-term debt, net	696			398			—			696
Payments of long-term debt	(390		)	(368		)	(63		)	(175		)
Increase (decrease) in notes payable–affiliated companies	(1		)	15			133			(1		)
Dividend to parent	(100		)	(123		)	(385		)	(24		)
Contribution from parent	590			—			—			590
Debt issuance costs	(8		)	(4		)	—			(7		)
Other financing activities, net	(1		)	—			—			(1		)
Net cash provided by (used in) financing activities	786			(82		)	(315		)	1,078
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(123		)	43
Net Decrease in Cash, Cash Equivalents and Restricted Cash							(20		)	(93		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	370			274			235			370
Cash, Cash Equivalents and Restricted Cash at End of Period	$	247		$	317		$	215		$	277

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of period	1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—
Balance, end of period	1,000	—			1,000	—			1,000	—			1,000	—			1,000	—			1,000	—
Additional Paid-in-Capital
Balance, beginning of period		2,486				1,697				1,896				1,696				2,486				1,896
Contribution from Parent		—				—				590				—				—				590
Other		—				(1		)		—				—
Balance, end of period		2,486				1,696				2,486				1,696				2,486				2,486
Retained Earnings
Balance, beginning of period		887				763				800				673				780				800
Net income		185				143				312				296				33				27
Dividend to parent		(60		)		(60		)		(100		)		(123		)		(385		)		(24		)
Balance, end of period		1,012				846				1,012				846				428				803
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Loss
Balance, beginning of period		(15		)		4				(14		)		—				(15		)		(14		)
Other comprehensive income (loss)		—				3				(1		)		7
Other comprehensive loss																		—				(1		)
Balance, end of period		(15		)		7				(15		)		7				(15		)		(15		)
Total Member’s Equity		$	3,483			$	2,549			$	3,483			$	2,549			$	2,899			$	3,274

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended						Nine Months Ended							Three Months Ended
	September 30,						September 30,							March 31,
	2019			2018			2019			2018				2020			2019
	(in millions)												(in millions)
Revenues:
Utility revenues	$	389		$	402		$	2,077		$	2,032			$	996		$	1,195
Non-utility revenues	737			910			2,759			3,008				15			17
Total	1,126			1,312			4,836			5,040				1,011			1,212
Expenses:
Utility natural gas	113			134			928			959				472			687
Non-utility cost of revenues, including natural gas	687			864			2,627			2,927				6			10
Operation and maintenance	195			211			656			666				209			233
Depreciation and amortization	75			77			228			222				74			73
Taxes other than income taxes	33			33			120			120				50			49
Total	1,103			1,319			4,559			4,894				811			1,052
Operating Income (Loss)	23			(7		)	277			146
Other Income (Expense):
Interest and other finance charges	(28		)	(30		)	(87		)	(92		)
Operating Income														200			160
Other Expense:
Interest expense and other finance charges														(30		)	(29		)
Other expense, net	(3		)	—			(6		)	(5		)		(4		)	(3		)
Total	(31		)	(30		)	(93		)	(97		)		(34		)	(32		)
Income (Loss) From Continuing Operations Before Income Taxes	(8		)	(37		)	184			49
Income tax expense (benefit)	(1		)	(2		)	25			14
Income (Loss) From Continuing Operations	(7		)	(35		)	159			35
Income from discontinued operations (net of tax of $-0-, $13, $-0- and $44, respectively)	—			44			—			140
Net Income (Loss)	$	(7	)	$	9		$	159		$	175
Income From Continuing Operations Before Income Taxes														166			128
Income tax expense														35			18
Income From Continuing Operations														131			110
Income (loss) from discontinued operations (net of tax expense (benefit) of ($11) and $8, respectively)														(64		)	28
Net Income														$	67		$	138

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Net income (loss) $ (7 ) $ 9
$ 159
$ 175
Comprehensive income (loss) $ (7 ) $ 9
$ 159
$ 175



		Three Months Ended
		March 31,
		2020		2019
	(in millions)
Net income		$	67	$	138
Comprehensive income		$	67	$	138

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
Current Assets:
Cash and cash equivalents	$	2	$	14	$	1	$	2
Accounts receivable, less bad debt reserve of $16 and $17, respectively	428		894
Accrued unbilled revenues	83		268
Accounts receivable, less bad debt reserve of $24 and $15, respectively					324		322
Accrued unbilled revenues, less bad debt reserve of $2 and $-0-, respectively					140		249
Accounts and notes receivable–affiliated companies	100		120		11		10
Materials and supplies	73		65		74		71
Natural gas inventory	228		194		30		135
Non-trading derivative assets	120		100
Taxes receivable	4		—
Current assets held for sale					675		691
Prepaid expenses and other current assets	36		115		8		9
Total current assets	1,074		1,770		1,263		1,489
Property, Plant and Equipment:
Property, plant and equipment	7,892		7,431		8,210		8,079
Less: accumulated depreciation and amortization	2,330		2,205		2,312		2,270
Property, plant and equipment, net	5,562		5,226		5,898		5,809
Other Assets:
Goodwill	867		867		757		757
Regulatory assets	189		181		192		191
Non-trading derivative assets	64		38
Non-current assets held for sale					—		213
Other	173		132		40		53
Total other assets	1,293		1,218		989		1,214
Total Assets	$	7,929	$	8,214	$	8,150	$	8,512

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

LIABILITIES AND STOCKHOLDER’S EQUITY


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
Current Liabilities:
Current portion of long-term debt					$	593	$	—
Accounts payable	$	393	$	856	235		333
Accounts and notes payable–affiliated companies	48		50		48		47
Taxes accrued	66		82		80		84
Interest accrued	31		38		31		38
Customer deposits	74		75		75		74
Non-trading derivative liabilities	44		102
Current liabilities held for sale					275		368
Other	143		137		134		167
Total current liabilities	799		1,340		1,471		1,111
Other Liabilities:
Deferred income taxes, net	455		406		498		470
Non-trading derivative liabilities	18		5
Benefit obligations	95		93		80		80
Regulatory liabilities	1,221		1,227		1,235		1,219
Non-current liabilities held for sale					—		27
Other	381		329		411		418
Total other liabilities	2,170		2,060		2,224		2,214
Long-Term Debt	2,477		2,371		1,784		2,546
Commitments and Contingencies (Note 14)
Stockholder’s Equity:
Common stock	—		—		—		—
Additional paid-in capital	2,015		2,015		2,116		2,116
Retained earnings	463		423		545		515
Accumulated other comprehensive income	5		5		10		10
Total stockholder’s equity	2,483		2,443		2,671		2,641
Total Liabilities and Stockholder’s Equity	$	7,929	$	8,214	$	8,150	$	8,512

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
	(in millions)						(in millions)
Cash Flows from Operating Activities:
Net income	$	159		$	175		$	67		$	138
Less: Income from discontinued operations, net of tax	—			140
Income from continuing operations	159			35
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	228			222			74			73
Depreciation and amortization on assets held for sale							—			4
Amortization of deferred financing costs	8			7			3			3
Deferred income taxes	26			6			23			21
Goodwill impairment and loss from reclassification to held for sale							132			—
Write-down of natural gas inventory	5			2			3			1
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	653			449			169			102
Accounts receivable/payable–affiliated companies	(9		)	—			—			(18		)
Inventory	(47		)	1			114			119
Taxes receivable	(4		)	—
Accounts payable	(458		)	(261		)	(159		)	(255		)
Fuel cost recovery	68			53			9			58
Interest and taxes accrued	(23		)	(9		)	(11		)	(8		)
Non-trading derivatives, net	(60		)	60			(54		)	(26		)
Margin deposits, net	(33		)	2			21			19
Net regulatory assets and liabilities	(1		)	73			1			19
Other current assets	11			7			(1		)	7
Other current liabilities	(9		)	24			(13		)	(8		)
Other assets	(3		)	5			18			(12		)
Other liabilities	2			(2		)	(15		)	10
Net cash provided by operating activities from continuing operations	513			674
Net cash provided by operating activities from discontinued operations	—			176
Other operating activities, net							—			1
Net cash provided by operating activities	513			850			381			248
Cash Flows from Investing Activities:
Capital expenditures	(546		)	(411		)	(176		)	(146		)
Decrease in notes receivable–affiliated companies	27			—
Increase in notes receivable–affiliated companies							—			(106		)
Other investing activities, net	4			5			(1		)	2
Net cash used in investing activities from continuing operations	(515		)	(406		)
Net cash provided by investing activities from discontinued operations	—			47
Net cash used in investing activities	(515		)	(359		)	(177		)	(250		)
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net	—			(39		)
Proceeds from (payments of) commercial paper, net	100			(800		)	(172		)	11
Proceeds from long-term debt	—			599
Dividends to parent	(119		)	(286		)	(32		)	(20		)
Debt issuance costs	—			(5		)
Decrease in notes payable–affiliated companies	—			(570		)
Contribution from parent	—			600
Other financing activities, net	(2		)	(1		)	(1		)	(2		)
Net cash used in financing activities from continuing operations	(21		)	(502		)
Net cash provided by financing activities from discontinued operations	—			—
Net cash used in financing activities	(21		)	(502		)	(205		)	(11		)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(23		)	(11		)	(1		)	(13		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	25			12			2			25
Cash, Cash Equivalents and Restricted Cash at End of Period	$	2		$	1		$	1		$	12

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount			Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of period	1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—		1,000	$	—
Balance, end of period	1,000	—			1,000	—			1,000	—			1,000	—			1,000	—			1,000	—
Additional Paid-in-Capital
Balance, beginning of period		2,015				2,528				2,015				2,528				2,116				2,015
Dividends related to CNP Midstream		—				(1,460		)		—				(1,460		)
Contribution from parent		—				600				—				600				—				—
Balance, end of period		2,015				1,668				2,015				1,668				2,116				2,015
Retained Earnings
Balance, beginning of period		486				529				423				574				515				423
Net income		(7		)		9				159				175				67				138
Dividend to parent		(16		)		(75		)		(119		)		(286		)		(32		)		(20		)
Adoption of ASU 2016-13																		(5		)		—
Balance, end of period		463				463				463				463				545				541
Accumulated Other Comprehensive Income
Balance, beginning of period		5				6				5				6				10				5
Balance, end of period		5				6				5				6				10				5
Total Stockholder’s Equity		$	2,483			$	2,137			$	2,483			$	2,137			$	2,671			$	2,561

See Combined Notes to Unaudited Condensed Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

COMBINED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Background and Basis of Presentation

General. This combined Form 10-Q is filed separately by three registrants: CenterPoint Energy, Inc., CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other Registrants or the subsidiaries of CenterPoint Energy other than itself or its subsidiaries.

Except as discussed in the last paragraph in Note 12 to the Registrants’ Condensed Consolidated Financial Statements, no registrant has an obligation in respect of any other Registrant’s debt securities, and holders of such debt securities should not consider the financial resources or results of operations of any Registrant other than the obligor in making a decision with respect to such securities.

Included in this combined Form 10-Q are the Interim Condensed Financial Statements of CenterPoint Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Combined Notes to the Unaudited Condensed Consolidated Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated. The Interim Condensed Financial Statements are unaudited, omit certain financial statement disclosures and should be read with the Registrants’ financial statements included in the Registrants’ combined ~~2018~~2019 Form 10-K.

Background. CenterPoint Energy, Inc. is a public utility holding company and owns interests in Enable as described below. On the Merger Date, pursuant to the Merger Agreement, CenterPoint Energy consummated the previously announced Merger and acquired Vectren for approximately $6 billion in cash. On the Merger Date, Vectren became a wholly-owned subsidiary of CenterPoint Energy.

As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy’s operating subsidiaries reported as continuing operations were as follows:

Houston Electric owns and operates electric transmission and distribution facilities in the Texas Gulf Coast area that includes the city of ~~Houston; and~~Houston.

CERC (i) owns and operates natural gas distribution systems in 6 ~~states~~states; (ii) owns and ~~(ii) obtains~~operates permanent pipeline connections through interconnects with various interstate and ~~offers competitive variable~~intrastate pipeline companies through CEIP; and ~~fixed-price physical natural gas supplies~~(iii) provides temporary delivery of LNG and ~~services primarily to commercial and industrial customers and electric and natural gas utilities in over 30~~CNG throughout the contiguous 48 states through ~~its wholly-owned subsidiary, CES.~~MES.

Vectren holds three public utilities through its wholly-owned subsidiary, VUHI, a public utility holding company:

Indiana Gas provides energy delivery services to natural gas customers located in central and southern Indiana;

SIGECO provides energy delivery services to electric and natural gas customers located near Evansville in southwestern Indiana and owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market; and

VEDO provides energy delivery services to natural gas customers located near Dayton in west-central Ohio.

Vectren performs non-utility activities ~~through:~~

~~Infrastructure Services, which provides underground pipeline construction and repair services~~ through wholly-owned subsidiaries Miller Pipeline, LLC and Minnesota Limited, LLC and serves natural gas utilities across the United States, focusing on recurring integrity, station and maintenance work and opportunities for large transmission pipeline construction projects; and

ESG, which provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.

As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy, indirectly through CNP Midstream, owned approximately 53.7% of the common units representing limited partner interests in Enable, 50% of the management rights and 40% of the incentive distribution rights in Enable GP and also directly owned an aggregate of 14,520,000 Enable Series A Preferred Units. Enable owns, operates and develops natural gas and crude oil infrastructure assets.

As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy and Houston Electric had VIEs consisting of the Bond Companies, which are consolidated. The consolidated VIEs are wholly-owned, bankruptcy-remote, special purpose entities that were formed solely for the purpose of securitizing transition and system restoration-related property. Creditors of CenterPoint Energy and Houston Electric have no recourse to any assets or revenues of the Bond Companies. The bonds issued by these VIEs are payable only from and secured by transition and system restoration property, and the bondholders have no recourse to the general credit of CenterPoint Energy or Houston Electric.

Basis of Presentation. The preparation of the Registrants’ financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Interim Condensed Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the respective periods. Amounts reported in the Condensed Statements of Consolidated Income are not necessarily indicative of amounts expected for a full-year period due to the effects of, among other things, (a) seasonal fluctuations in demand for energy and energy services, (b) changes in energy commodity prices, (c) timing of maintenance and other expenditures and (d) acquisitions and dispositions of businesses, assets and other interests. Certain prior year amounts have been reclassified to conform to the current year presentation. ~~See Note 9 for further discussion.~~

Concurrent with the completion of the Merger, CenterPoint Energy added two new reportable segments, Indiana Electric Integrated and Infrastructure Services, to its five reportable segments disclosed in the Registrants’ combined 2018 Form 10-K. Additionally, CenterPoint Energy’s Natural Gas Distribution reportable segment now includes the gas operations of SIGECO (Indiana South), Indiana Gas and VEDO and CenterPoint Energy’s Corporate and Other reportable segment now includes ESG. Houston Electric’s and CERC’s reportable segments were not impacted by the Merger. For a description of the Registrants’ reportable segments, see Note 16.

~~Significant Accounting Policies.~~Discontinued Operations. ~~In addition to the significant accounting policies disclosed in the Registrants’ combined 2018 Form 10-K,~~On February 3, 2020, CenterPoint Energy, ~~has adopted~~through its subsidiary VUSI, entered into the ~~following new or enhanced significant accounting policies subsequent~~Securities Purchase Agreement to ~~the consummation of the Merger:~~

~~Principles of Consolidation~~. ~~Businesses within~~sell the Infrastructure Services ~~reportable segment~~Disposal Group, which provide underground pipeline construction and repair services through wholly-owned subsidiaries Miller Pipeline, LLC and Minnesota Limited, LLC and serve natural gas utilities across the United States, focusing on recurring integrity, station and maintenance work and opportunities for ~~customers that include NGD utilities. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by NGD utilities for these~~large transmission pipeline construction ~~and repair services are not eliminated in consolidation when capitalized and included in rate base by the NGD utility.~~projects. The transaction closed on April 9, 2020. See Note 3 for further information.

~~Guarantees~~.Additionally, on February 24, 2020, CenterPoint Energy, ~~recognizes guarantee obligations at fair value. CenterPoint~~through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy ~~discloses parent company guarantees of a subsidiary’s obligation when that guarantee results~~Services Disposal Group, which obtains and offers competitive variable and fixed-price physical natural gas supplies and services primarily to commercial and industrial customers and electric and natural gas utilities in over 30 states. The transaction is expected to close in the ~~exposure~~second quarter of ~~a material obligation of the parent company even if the probability of fulfilling such obligation is considered remote.~~2020. See Note ~~14(b).~~ 3 for further information.

~~Income Taxes~~COVID-19 Impacts.~~. Investment tax credits are deferred~~On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and ~~amortized~~on March 13, 2020, the United States declared a national emergency. In response to ~~income over~~these declarations and the ~~approximate lives~~rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders in the Registrants’ service territories. The Registrants have experienced some resulting disruptions to their business operations, as these restrictions have significantly impacted many sectors of the ~~related property.~~

~~MISO Transactions. Indiana Electric is a member~~economy, with businesses curtailing or ceasing normal operations. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of ~~MISO. MISO-related purchase~~the virus, the consequences of governmental and ~~sale transactions are recorded using settlement information provided~~other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by ~~the MISO. These purchase~~governmental authorities, customers, suppliers and sale transactions are accounted for on at least a net hourly position, meaning net purchases within that interval are recorded on CenterPoint Energy’s Condensed Statements of Consolidated Income in Utility natural gas, fuel and purchased power, and net sales within that interval are recorded on CenterPoint Energy’s Condensed Statements of Consolidated Income in Utility revenues. On occasion, prior period transactions are resettled outside the routine process due to a change in the MISO’s tariff or a material interpretation thereof. Expenses associated with resettlements are recorded once the resettlement is probableother thirds parties, workforce availability, and the ~~resettlement amount can be estimated. Revenues associated~~timing and extent to which normal economic and operating conditions resume. While the Registrants continue to assess the COVID-19 situation and cannot estimate with ~~resettlements are recognized when~~any degree of certainty the ~~amount is determinable~~full impact of the COVID-19 outbreak on their liquidity, financial condition and ~~collectability is reasonably assured.~~future results of operations, the Registrants expect the COVID-19 situation to adversely impact future quarters. See Notes 5 and 6 for further information on COVID-19’s impact on the Registrants.

(2) New Accounting Pronouncements

The following table provides an overview of certain recently adopted or issued accounting pronouncements applicable to all the Registrants, unless otherwise noted.



~~Issued, Not Yet Effective Accounting Standards~~
~~ASU Number and Name~~	~~Description~~	~~Effective Date~~	~~Financial Statement Impact~~ ~~upon Adoption~~
~~ASU~~ 2016-13- Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This standard, including standards amending this standard, requires a new model called CECL to estimate credit losses for (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Transition ~~method~~:method: modified retrospective	January 1, 2020 ~~Early adoption is permitted~~	The ~~adoption of this~~Registrants adopted the standard ~~may result in an~~and recognized a cumulative-effect adjustment ~~to the carrying value~~ of the ~~Registrants’~~transition to opening retained earnings and allowance for doubtful accounts ~~receivable. The Registrants do not anticipate the adoption of this standard will have a material~~with no impact on ~~the Registrants’ financial position,~~ results of operations orand cash flows. See Note 4 for more information.
ASU 2018-13- Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement	This standard eliminates, modifies and adds certain disclosure requirements for fair value measurements. Transition ~~method~~method:: prospective for additions and one modification and retrospective for all other amendments	Adoption of eliminations and modifications as of September 30, ~~2018; Additions will be adopted~~2018 and additions as of January 1, 2020	The adoption of this standard did not impact the Registrants’ financial position, results of operations or cash flows. Note 8 reflects the disclosures modified and added upon adoption.
~~ASU 2018-15- Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40)~~ Accounting Standards Update (ASU) No. 2019-12: Income Taxes (Topic 740): ~~Customer's~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~	Income Taxes This standard aligns accounting for implementation costs incurred in a cloud computing arrangement that is accounted for as a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update also prescribes the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense and requires additional quantitative and qualitative disclosures. ~~Transition method: retrospective or prospective~~	~~January 1, 2020~~This standard simplifies accounting for income taxes by eliminating certain exceptions to the guidance for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes that are partially based on income and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ~~Early adoption is permitted~~Transition method: prospective for all amendments that apply to the Registrants	~~The~~January 1, 2020	Upon adoption, ~~of this standard will require~~ the Registrants are not required to ~~capitalize certain costs to implement cloud computing arrangements~~apply the intraperiod tax allocation exception when there is a current-period loss from continuing operations. Accordingly, CenterPoint Energy determined the tax effect of income from continuing operations without considering the tax effects of items that are ~~accounted for as service contracts within Prepaid expenses and other current assets on~~not included in continuing operations (i.e., discontinued operations). Additionally, CenterPoint Energy is no longer required to limit the ~~Registrants’ condensed consolidated balance sheets and record~~year-to-date tax benefit recognized when the ~~amortization of such assets within Operation and maintenance expenses on~~year-to-date benefit exceeds the Registrants’ condensed statements of consolidated income. The Registrants do not anticipate the adoption of this standard will have a material impact on the Registrants’ financial position, results of operations, cash flows or disclosures.anticipated full year benefit.

Management believes that other recently adopted ~~standards and recently~~or issued accounting standards that are not yet effective will not have a material impact on the Registrants’ financial position, results of operations or cash flows upon adoption.

(3) ~~Mergers~~Held for Sale and ~~Acquisitions~~Discontinued Operations (CenterPoint ~~Energy)~~Energy and CERC)

~~Merger with Vectren.~~Divestiture of Infrastructure Services (CenterPoint Energy). On ~~the Merger Date, pursuant to the Merger Agreement,~~February 3, 2020, CenterPoint Energy, ~~consummated~~through its subsidiary VUSI, entered into the ~~previously announced Merger~~Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.

In February 2020, certain assets and ~~acquired Vectren~~liabilities representing the Infrastructure Services Disposal Group met the held for ~~approximately $6 billion in cash. Each share~~sale criteria and represented all of ~~Vectren common stock issued and outstanding~~the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was ~~canceled~~considered an asset sale for tax purposes, requiring net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the Infrastructure Services Disposal Group and ~~converted~~to be recognized as a deferred income tax benefit by CenterPoint Energy upon closing.

Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy’s financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for cost to sell.

Because the Infrastructure Services Disposal Group met the held for sale criteria during the three months ended March 31, 2020 and the proposed sale was completed on April 9, 2020, all Infrastructure Services Disposal Group assets and liabilities as of March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.

Divestiture of Energy Services (CenterPoint Energy and CERC). On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the ~~right~~Equity Purchase Agreement to ~~receive $72.00~~sell the Energy Services Disposal Group. This transaction does not include CEIP and its assets. The transaction is expected to close in ~~cash per share, without interest. At~~ the ~~closing, each stock unit payable in Vectren common stock or whose value is determined with reference~~second quarter of 2020.

In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the ~~value of Vectren common stock, whether vested or unvested, was canceled with cash consideration paid in~~businesses within the reporting unit. In accordance with the ~~terms~~Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the ~~Merger Agreement. These amounts did not include~~transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax asset of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and to be recognized as a ~~stub period cash dividend~~deferred tax expense by CenterPoint Energy upon closing.

Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of ~~$0.41145 per share, which was declared, with~~ CenterPoint Energy’s ~~consent, by Vectren’s board~~and CERC’s respective financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC recorded a goodwill impairment of ~~directors~~approximately $62 million and a loss on ~~January 16, 2019,~~assets held for sale of approximately $70 million, plus an additional loss of $6 million for cost to sell recorded only at CenterPoint Energy.

Because the Energy Services Disposal Group met the held for sale criteria and ~~paid~~the proposed sale is expected to ~~Vectren stockholders~~be completed within one year, all Energy Services Disposal Group assets and liabilities as of ~~the record date~~March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of ~~February 1,~~December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.

~~Pursuant to the Merger Agreement~~The assets and ~~immediately subsequent to the close~~liabilities of the ~~Merger,~~Infrastructure Services and Energy Services Disposal Groups classified as held for sale in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets, as applicable, include the following:



	March 31, 2020
	CenterPoint Energy								CERC
	Infrastructure Services Disposal Group		Energy Services Disposal Group			Total			Energy Services Disposal Group
	(in millions)
Receivables, net	$	216	$	355		$	571		$	355
Accrued unbilled revenues	57		2			59			2
Natural gas inventory	—		52			52			52
Materials and supplies	6		—			6			—
Non-trading derivative assets	—		213			213			213
Property, plant and equipment, net	313		29			342			29
Goodwill	138		—			138			—
Loss on assets held for sale	—		(70		)	(70		)	(70		)
Other	242		94			336			94
Total current assets held for sale	$	972	$	675		$	1,647		$	675

Accounts payable	$	46	$	206		$	252		$	206
Taxes accrued	2		—			2			—
Non-trading derivative liabilities	—		36			36			36
Benefit obligations	—		4			4			4
Other	60		29			89			29
Total current liabilities held for sale	$	108	$	275		$	383		$	275



	December 31, 2019
	CenterPoint Energy						CERC
	Infrastructure Services Disposal Group		Energy Services Disposal Group		Total		Energy Services Disposal Group
	(in millions)
Receivables, net	$	192	$	445	$	637	$	445
Accrued unbilled revenues	109		8		117		8
Natural gas inventory	—		67		67		67
Materials and supplies	6		—		6		—
Non-trading derivative assets	—		136		136		136
Other	4		35		39		35
Total current assets held for sale	311		691		1,002		691
Property, plant and equipment, net	295		26		321		26
Goodwill	220		62		282		62
Non-trading derivative assets	—		58		58		58
Other	234		67		301		67
Total non-current assets held for sale	749		213		962		213
Total assets held for sale	$	1,060	$	904	$	1,964	$	904

Accounts payable	$	45	$	299	344		$	299
Taxes accrued	2		—		2		—
Non-trading derivative liabilities	—		44		44		44
Other	40		25		65		25
Total current liabilities held for sale	87		368		455		368
Non-trading derivative liabilities	—		14		14		14
Benefit obligations	—		4		4		4
Other	16		9		25		9
Total non-current liabilities held for sale	16		27		43		27
Total liabilities held for sale	$	103	$	395	$	498	$	395

Because the Infrastructure Services and Energy Services Disposal Groups met the held for sale criteria and their disposals also represent a strategic shift to CenterPoint Energy ~~cash settled $78 million in outstanding share-based awards issued prior to the Merger Date by Vectren to its employees. As~~and CERC, as applicable, they are reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, as applicable, and as a result, prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

A summary of the ~~Merger,~~Infrastructure Services and Energy Services Disposal Groups presented in CenterPoint ~~Energy assumed a liability for these share-based awards of $41 million~~Energy’s and ~~recorded an incremental cost of $37 million in Operation and maintenance expenses on its~~CERC’s Condensed Statements of Consolidated Income, ~~during~~as applicable, is as follows:



	Three Months Ended March 31,
	2020			2019 (1)			2020			2019		2020			2019		2020			2019
	CenterPoint Energy																CERC
	Infrastructure Services Disposal Group						Energy Services Disposal Group					Total					Energy Services Disposal Group
	(in millions)
Revenues	$	222		$	146		$	886		$	1,242	$	1,108		$	1,388	$	886		$	1,242
Expenses:															—
Non-utility cost of revenues	44			43			808			1,185		852			1,228		808			1,185
Operation and maintenance	163			96			20			17		183			113		20			17
Depreciation and amortization	—			9			—			4		—			13		—			4
Taxes other than income taxes	1			—			1			—		2			—		1			—
Total	208			148			829			1,206		1,037			1,354		829			1,206
Income (loss) from Discontinued Operations before income taxes	14			(2		)	57			36		71			34		57			36
Loss from classification to held for sale (2)	96			—			138			—		234			—		132			—
Income tax expense (benefit)	(5		)	—			(12		)	8		(17		)	8		(11		)	8
Net income (loss) from Discontinued Operations	$	(77	)	$	(2	)	$	(69	)	$	28	$	(146	)	$	26	$	(64	)	$	28


(1)	Reflects February 1, 2019 to March 31, 2019 results only due to the Merger.


(2)	Loss from classification to held for sale is inclusive of goodwill impairment and, for CenterPoint Energy, its costs to sell.

CenterPoint Energy and CERC have elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. Long-lived assets are not depreciated or amortized once they are classified as held for sale. The following table summarizes CenterPoint Energy’s and CERC’s cash flows from discontinued operations and certain supplemental cash flow disclosures related to the ~~nine months ended September 30, 2019~~Infrastructure Services and Energy Services Disposal Groups, as applicable:



	Three Months Ended March 31,
	2020		2019		2020		2019		2020		2019
	CenterPoint Energy								CERC
	Infrastructure Services Disposal Group				Energy Services Disposal Group				Energy Services Disposal Group
	(in millions)
Depreciation and amortization	$	—	$	9	$	—	$	4	$	—	$	4
Amortization of intangible assets in Non-utility cost of revenues	—		2		—		—		—		—
Write-down of natural gas inventory	—		—		3		1		3		1
Capital expenditures	16		27		1		1		1		1
Non-cash transactions:
Accounts payable related to capital expenditures	2		3		4		6		4		6

Other Sale Related Matters (CenterPoint Energy and CERC). CES provides natural gas supply to CenterPoint Energy’s and CERC’s NGD under contracts executed in a competitive bidding process, with the duration of some contracts extending into 2021. In addition, CERC is the natural gas transportation provider for a portion of CES’s customer base and will continue to be the ~~accelerated vesting of~~transportation provider for these customers as long as these customers retain a relationship with the ~~awards in~~divested CES business.

Revenues and expenses incurred by CenterPoint Energy and CERC for natural gas transportation and supply are as follows:



	Three Months Ended March 31,
	2020		2019		2020		2019
	CenterPoint Energy				CERC
	(in millions)
Transportation revenue	$	16	$	16	$	16	$	16
Natural gas expense	45		64		44		63

The Infrastructure Services Disposal Group provides pipeline construction and repair services to CenterPoint Energy’s and CERC’s NGD. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by NGD utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the ~~Merger Agreement.~~

Subsequent to the close of the Merger, CenterPoint Energy recognized severance totaling $61 million to employees terminated immediately subsequent to the Merger close, inclusive of change of control severance payments to executives of Vectren under existing agreements, and which isNGD utility. Amounts charged for these services that are not capitalized are included primarily in Operation and maintenance ~~expenses on its Condensed Statements of Consolidated Income during the nine months ended September 30, 2019.~~

~~In connection with the Merger, VUHI and VCC made offers to prepay certain outstanding guaranteed senior notes as required pursuant to certain note purchase agreements previously entered into~~expenses. Fees incurred by ~~VUHI and VCC. See Note 12 for further details.~~

~~Following the closing, shares of Vectren common stock, which previously traded under the ticker symbol “VVC” on the NYSE, ceased trading on and were delisted from the NYSE.~~

The Merger is being accounted for in accordance with ASC 805, Business Combinations, with CenterPoint Energy as the accounting acquirer of Vectren. Identifiable assets acquired and liabilities assumed have been recorded at their estimated fair values on the Merger Date.

Vectren’s regulated operations, comprised of electric generation and electric and natural gas energy delivery services, are subject to the rate-setting authority of the FERC, the IURC and the PUCO, and are accounted for pursuant to U.S. generally accepted accounting principles for regulated operations. The rate-setting and cost-recovery provisions currently in place for Vectren’s regulated operations provide revenues derived from costs including a return on investment of assets and liabilities included in rate base. Thus, the fair values of Vectren’s tangible and intangible assets and liabilities subject to these rate-setting provisions approximate their carrying values. Accordingly, neither the assets and liabilities acquired, nor the unaudited pro forma financial information, reflect any adjustments related to these amounts. The fair value of regulatory assets not earning a return have been determined using the income approach and are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs.

The fair value of Vectren’s assets acquired and liabilities assumed that are not subject to the rate-setting provisions, including identifiable intangibles, have been determined using the income approach and the market approach. The valuation of Vectren’s long-term debt is primarily considered a Level 2 fair value measurement. All other valuations are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future market prices.

~~The following table presents the preliminary purchase price allocation as of September 30, 2019 (in millions):~~

Cash and cash equivalents $ 16
Other current assets 598
Property, plant and equipment, net 5,146
Identifiable intangibles 322
Regulatory assets 338
Other assets 151
Total assets acquired 6,571
Current liabilities 690
Regulatory liabilities 944
Other liabilities 860
Long-term debt 2,401
Total liabilities assumed 4,895
Net assets acquired 1,676
Goodwill 4,306
Total purchase price consideration $ 5,982

CenterPoint Energy has not completed a final valuation analysis necessary to determine the fair market values of all of Vectren’s assets and liabilities or the allocation of its purchase price. The preliminary amounts may change as CenterPoint Energy completes its analysis of key valuation assumptions and various tax matters. The preliminary amounts are subject to revision to the extent that additional information is obtained about the facts and circumstances that existed as of the Merger Date. The final allocation could differ materially from this preliminary purchase price allocation and, as such, no assurances can be provided regarding the preliminary purchase accounting. The final allocation may include changes in the fair value of (1) property, plant and equipment,

(2) intangible assets and goodwill, (3) deferred taxes and (4) other assets and liabilities. Changes in the preliminary purchase price allocation since the initial estimates reported in the first quarter of 2019 primarily included additional information obtained related to intangible assets.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recognized as goodwill, which is primarily attributable to significant potential strategic benefits to CenterPoint Energy, including growth opportunities for more rate-regulated investment, more customers for existing products and services and additional products and services for existing customers. Additionally, CenterPoint Energy believes the Merger will increase geographic and business diversity as well as scale in attractive jurisdictions and economies. CenterPoint Energy anticipates that the value assigned to goodwill will not be deductible for tax purposes.

~~The estimated fair value of the identifiable intangible assets and related useful lives as included in the preliminary purchase price allocation include:~~

Weighted Average Useful Lives Estimated Fair Value
(in years) (in millions)
Operation and maintenance agreements 24 $ 12
Customer relationships 18 220
Construction backlog 1 28
Trade names 10 62
Total $ 322

Amortization expense related to the operation and maintenance agreements and construction backlog was $7 million and $19 million for the three and nine months ended September 30, 2019, respectively, and is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s ~~Condensed Statements of Consolidated Income. Amortization expense related to customer relationships~~ and ~~trade names was $5 million~~CERC’s NGD for pipeline construction and $13 million for the three and nine months ended September 30, 2019, respectively, and is included in Depreciation and amortization expense on CenterPoint Energy’s Condensed Statements of Consolidated Income.

~~The results of operations for Vectren included in CenterPoint Energy’s Interim Condensed Financial Statements from the Merger Date~~repair services are as follows:

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
(in millions)
Operating revenues $ 756
$ 1,917
Net income 67
86

The following unaudited pro forma financial information reflects the consolidated results of operations of CenterPoint Energy, assuming the Merger had taken place on January 1, 2018. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved had the Merger taken place on the dates indicated or of the future consolidated results of operations of the combined company.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Operating revenues $ 2,742
$ 2,877
$ 9,317
$ 9,521

Net income 279
212
(1) 649
(2) 282
(3)



	Three Months Ended March 31,
	2020		2019 (1)		2020		2019 (1)
	CenterPoint Energy				CERC
	(in millions)
Pipeline construction and repair services capitalized	$	34	$	19	$	—	$	1
Pipeline construction and repair service charges in operations and maintenance expense	1		4		1		1


(1)	~~Pro forma net income was adjusted~~Represents charges for the period February 1, 2019 through March 31, 2019 only due to ~~exclude $18 million of Vectren Merger-related transaction costs incurred in 2018 and reflected in~~ the ~~historical income statements.~~Merger.


~~(2)~~	~~Pro forma net income was adjusted to exclude $37 million of Vectren Merger-related transaction costs incurred in 2019.~~


~~(3)~~	Pro forma net income was adjusted to include $38 million and $1 million, respectively, of Vectren and CenterPoint Energy Merger-related transaction costs incurred from October 1, 2018 to September 30, 2019.

CenterPoint Energy incurred integration costs in connection with the Merger of $19 million and $67 million for the three and nine months ended September 30, 2019, respectively, which were included in Operation and maintenance expenses in CenterPoint Energy’s Condensed Statements of Consolidated Income.

~~Acquisition of Utility Pipeline Construction Company.~~ An acquisition was made during the nine months ended September 30, 2019 by CenterPoint Energy’s Infrastructure Services reportable segment, resulting in goodwill and intangible assets of approximately $6 million and $8 million, respectively. The intangible assets primarily relate to backlog and customer relationships. The allocation of the $25 million purchase price is preliminary and subject to change. The results of operations for the acquired company have been included in the consolidated financial statements from the date of acquisition and are not significant to the consolidated financial results of CenterPoint Energy. Pro forma results of operations have not been presented for the acquisition because the effects of the acquisition were not significant to CenterPoint Energy’s consolidated financial results for all periods presented.

(4) Revenue Recognition and Provision for Doubtful Accounts

~~The following tables disaggregate revenues by reportable segment and major source:~~

~~CenterPoint Energy~~

Three Months Ended September 30, 2019
Houston Electric T&D (1)
Indiana
Electric Integrated (1)
Natural Gas Distribution (1) Energy
Services (2) Infrastructure Services (2) Corporate and Other (2) Total
(in millions)
Revenue from contracts $ 861
$ 165
$ 518
$ 81
$ 377
$ 91
$ 2,093
Derivatives income —
—
—
664
—
—
664
Other (3)
(2 ) —
6
—
—
2
6
Eliminations —
—
(9 ) (11 ) (1 ) —
(21 )
Total revenues $ 859
$ 165
$ 515
$ 734
$ 376
$ 93
$ 2,742

Nine Months Ended September 30, 2019
Houston Electric T&D (1)
Indiana
Electric Integrated (1) (4)
Natural Gas Distribution (1) (4) Energy
Services (2) Infrastructure Services (2) (4) Corporate and Other (2) (4) Total
(in millions)
Revenue from contracts $ 2,319
$ 388
$ 2,581
$ 341
$ 849
$ 210
$ 6,688
Derivatives income 3
—
—
2,505
—
—
2,508
Other (3)
(9 ) —
2
—
—
5
(2 )
Eliminations —
—
(29 ) (92 ) (2 ) —
(123 )
Total revenues $ 2,313
$ 388
$ 2,554
$ 2,754
$ 847
$ 215
$ 9,071

Three Months Ended September 30, 2018
Houston Electric T&D (1) Indiana
Electric Integrated (1) Natural Gas Distribution (1) Energy
Services (2) Infrastructure Services (2) Corporate and Other (2) Total
(in millions)
Revenue from contracts $ 904
$ —
$ 398
$ 82
$ —
$ 1
$ 1,385
Derivatives income —
—
—
838
—
—
838
Other (3)
(7 ) —
12
—
—
2
7
Eliminations —
—
(8 ) (10 ) —
—
(18 )
Total revenues $ 897
$ —
$ 402
$ 910
$ —
$ 3
$ 2,212

Nine Months Ended September 30, 2018
Houston Electric T&D (1) Indiana
Electric Integrated (1) Natural Gas Distribution (1) Energy
Services (2) Infrastructure Services (2) Corporate and Other (2) Total
(in millions)
Revenue from contracts $ 2,525
$ —
$ 2,093
$ 338
$ —
$ 4
$ 4,960
Derivatives income (4 ) —
—
2,727
—
—
2,723
Other (3)
(19 ) —
(35 ) —
—
7
(47 )
Eliminations —
—
(26 ) (57 ) —
—
(83 )
Total revenues $ 2,502
$ —
$ 2,032
$ 3,008
$ —
$ 11
$ 7,553


~~(1)~~	~~Reflected in Utility revenues in the Condensed Statements of Consolidated Income.~~


~~(2)~~	~~Reflected in Non-utility revenues in the Condensed Statements of Consolidated Income.~~

~~(3)~~

Primarily consists of income from ARPs and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period.


~~(4)~~	~~Reflects revenues from Vectren subsidiaries for the period from February 1, 2019 to September 30, 2019.~~

~~Houston Electric~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Revenue from contracts $ 861
$ 904
$ 2,319
$ 2,525
Other (1) (2 ) (7 ) (9 ) (19 )
Total revenues $ 859
$ 897
$ 2,310
$ 2,506

~~(1)~~

~~CERC~~

Three Months Ended September 30,
2019 2018
Natural Gas Distribution (1)
Energy
Services
(2)
Corporate and Other (2) Total Natural Gas Distribution (1)
Energy
Services
(2)
Corporate and Other (2) Total
(in millions)
Revenue from contracts $ 393
$ 81
$ 3
$ 477
$ 398
$ 82
$ —
$ 480
Derivatives income —
664
—
664
—
838
—
838
Other (3)
5
—
—
5
12
—
—
12
Eliminations (9 ) (11 ) —
(20 ) (8 ) (10 ) —
(18 )
Total revenues $ 389
$ 734
$ 3
$ 1,126
$ 402
$ 910
$ —
$ 1,312

Nine Months Ended September 30,
2019 2018
Natural Gas Distribution (1)
Energy
Services (2)
Corporate and Other (2) Total Natural Gas Distribution (1)
Energy
Services (2)
Corporate and Other (2) Total
(in millions)
Revenue from contracts $ 2,101
$ 341
$ 4
$ 2,446
$ 2,093
$ 338
$ —
$ 2,431
Derivatives income —
2,505
—
2,505
—
2,727
—
2,727
Other (3)
5
—
—
5
(35 ) —
—
(35 )
Eliminations (29 ) (91 ) —
(120 ) (26 ) (57 ) —
(83 )
Total revenues $ 2,077
$ 2,755
$ 4
$ 4,836
$ 2,032
$ 3,008
$ —
$ 5,040


~~(1)~~	~~Reflected in Utility revenues in the Condensed Statements of Consolidated Income.~~


~~(2)~~	~~Reflected in Non-utility revenues in the Condensed Statements of Consolidated Income.~~

~~(3)~~

Revenues from Contracts with Customers

In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services. The revenues and related balances in the following tables exclude operating revenues and balances from the Energy Services Disposal Group and Infrastructure Services Disposal Group, which are now reflected as discontinued operations and assets held for sale.

The following tables disaggregate revenues by reportable segment and major source:

CenterPoint Energy



	Three Months Ended March 31, 2020
	Houston Electric T&D		Indiana Electric Integrated		Natural Gas Distribution		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	638	$	129	$	1,293	$	81	$	2,141
Other (1)	—		—		25		1		26
Total revenues	$	638	$	129	$	1,318	$	82	$	2,167



	Three Months Ended March 31, 2019
	Houston Electric T&D			Indiana Electric Integrated (2)		Natural Gas Distribution (2)		Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	690		$	83	$	1,413	$	41	$	2,227
Other (1)	(1		)	—		2		1		2
Total revenues	$	689		$	83	$	1,415	$	42	$	2,229


(1)	Primarily consists of income from ARPs, weather hedge gains (losses) and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation

in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period. Total lease income was $1 million and $2 million for the three months ended March 31, 2020 and 2019, respectively.


(2)	Reflects revenues from Vectren subsidiaries for the period from February 1, 2019 to March 31, 2019.

Houston Electric



	Three Months Ended March 31,
	2020			2019
	(in millions)
Revenue from contracts	$	638		$	690
Other (1)	(4		)	(4		)
Total revenues	$	634		$	686

(1)

Primarily consists of income from ARPs, weather hedge gains (losses) and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period. Lease income was not significant for the three months ended March 31, 2020 and 2019.

CERC



	Three Months Ended March 31,
	2020						2019
	Natural Gas Distribution		Corporate and Other		Total		Natural Gas Distribution		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	981	$	3	$	984	$	1,205	$	1	$	1,206
Other (1)	27		—		27		6		—		6
Total revenues	$	1,008	$	3	$	1,011	$	1,211	$	1	$	1,212

(1)

Houston Electric T&D (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by ~~state regulators,~~the PUCT, is recognized as electricity is delivered and represents amounts both billed and unbilled. Discretionary services requested by customers are provided at a point in time with control transferring upon the completion of the service. Revenue for discretionary services is recognized upon completion of service based on the tariff rates set by ~~state regulators.~~the PUCT. Payments for electricity distribution and discretionary services are aggregated and received on a monthly basis. Houston Electric performs transmission services over time as a stand-ready obligation to provide a reliable network of transmission systems. Revenue is recognized upon time elapsed, and the monthly tariff rate set by ~~state regulators.~~the PUCT. Payments are received on a monthly basis.

Indiana Electric Integrated (CenterPoint Energy). Indiana Electric generates, distributes and transmits electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, is recognized as electricity is delivered and represents amounts both billed and unbilled. Customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.

Natural Gas Distribution (CenterPoint Energy and CERC). ~~Natural~~CERC distributes and transports natural gas is~~distributed and transported~~ to customers over time, and customers consume the natural gas when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by

the state governing agency for that service area, is recognized as natural gas is delivered and represents amounts both billed and unbilled. Discretionary services requested by the customer are satisfied at a point in time and revenue is recognized upon completion of service and the tariff rates set by the applicable state regulator. Payments of natural gas distribution, transportation and discretionary services are aggregated and received on a monthly basis.

~~Energy Services (CenterPoint Energy and CERC).~~ ~~The majority of CES natural gas sales contracts are considered a derivative, as the contracts typically have a stated minimum or contractual volume of delivery.~~

For contracts in which CES delivers the full requirement of the natural gas needed by the customer and a volume is not stated, a contract as defined under ASC 606 is created upon the customer’s exercise of its option to take natural gas. CES supplies natural gas to retail customers over time as customers consume the natural gas when delivered. For wholesale customers, CES supplies natural gas at a point in time because the wholesale customer is presumed to have storage capabilities. Control is transferred to both types of customers upon delivery of natural gas. Revenue is recognized on a monthly basis based on the estimated volume of natural gas delivered and the price agreed upon with the customer. Payments are received on a monthly basis.

AMAs are natural gas sales contracts under which CES also assumes management of a customer’s physical storage and/or transportation capacity. AMAs have two distinct performance obligations, which consist of natural gas sales and natural gas delivery because delivery could occur separate from the sale of natural gas (e.g., from storage to customer premises). Most AMAs’ natural gas sales performance obligations are accounted for as embedded derivatives. The transaction price is allocated between the sale of natural gas and the delivery based on the stand-alone selling price as stated in the contract. CES performs natural gas delivery over time as customers take delivery of the natural gas and recognizes revenue on an aggregated monthly basis based on the volume of natural gas delivered and the fees stated within the contract. Payments are received on a monthly basis.

~~Infrastructure Services (CenterPoint Energy).~~ ~~Infrastructure Services provides u~~nderground pipeline construction and repair services. The contracts are generally less than one year in duration and consist of fixed price, unit, and time and material customer contracts. Under unit or time and material contracts, Infrastructure Services performs construction and repair services under specific work-orders at prices established by master service agreements. The performance obligation is defined at the work-order level. These services are billed to customers monthly or more frequently for work completed based on units completed or the costs of time and material incurred and generally require payment within 30 days of billing. Infrastructure Services has the right to consideration from customers in an amount that corresponds directly with the performance obligation satisfied, and therefore recognizes revenue at a point in time in the amount to which it has the right to invoice, which results in accrued unbilled revenues~~at the end of each accounting period.~~

Under fixed price contracts, Infrastructure Services performs larger scale construction and repair services. Each contract is typically accounted for as a single performance obligation. Services performed under fixed price contracts are typically billed per the terms of the contract, which can range from completion of specific milestones to scheduled billing intervals. Billings occur monthly or more frequently for work completed and generally require payment within 30 days of billing. Revenue for fixed price contracts is recognized over time as control is transferred using the input method, considering costs incurred relative to total expected cost. Total expected cost is therefore a significant judgment affecting the amount and timing of revenue recognition. Infrastructure Services’ revenues are not subject to significant returns, refunds or warranty obligations.

Contract Balances. When the timing of delivery of service is different from the timing of the payments made by customers and when the right to consideration is conditioned on something other than the passage of time, the Registrants recognize either a contract asset (performance precedes billing) or a contract liability (customer payment precedes performance). Those customers that prepay are represented by contract liabilities until the performance obligations are satisfied. The Registrants’ contract assets are included in Accrued unbilled revenues in their Condensed Consolidated Balance Sheets. ~~On an aggregate basis as~~As of ~~September 30, 2019,~~March 31, 2020, the ~~Registrants’~~CenterPoint Energy’s contract assets primarily relate to ESG contracts ~~in the Infrastructure Services segment~~ where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Condensed Consolidated Balance Sheets. ~~On an aggregate basis as~~As of ~~September 30, 2019, the Registrants’~~March 31, 2020, CenterPoint Energy’s contract liabilities primarily relate to ESG contracts where revenue is recognized using the input method.

The opening and closing balances of accounts receivable, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers from continuing operations for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are as follows:

CenterPoint Energy



	Accounts Receivable		Other Accrued Unbilled Revenues			Contract Assets		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2019	$	566	$	469		$	6	$	30
Closing balance as of March 31, 2020	612		320			13		23
Increase (decrease)	$	46	$	(149	)	$	7	$	(7	)

Accounts Receivable Other Accrued Unbilled Revenues
Contract
Assets
Contract Liabilities
(in millions)
Opening balance as of December 31, 2018 (1)
$ 763
$ 575
$ 37
$ 47
Closing balance as of September 30, 2019 779
403
75
42
Increase (decrease) $ 16
$ (172 ) $ 38
$ (5 )


~~(1)~~	~~Opening balances related to Vectren are as of February 1, 2019.~~

The amount of revenue recognized in the ~~nine-month~~three-month period ended ~~September 30, 2019~~March 31, 2020 that was included in the opening contract liability was ~~$46~~$25 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between CenterPoint Energy’s performance and the customer’s payment.

Houston Electric

Accounts Receivable Other Accrued Unbilled Revenues Contract Liabilities
(in millions)
Opening balance as of December 31, 2018 $ 234
$ 110
$ 3
Closing balance as of September 30, 2019 325
136
4
Increase $ 91
$ 26
$ 1



	Accounts Receivable			Other Accrued Unbilled Revenues			Contract Liabilities
	(in millions)
Opening balance as of December 31, 2019	$	210		$	117		$	3
Closing balance as of March 31, 2020	209			92			8
Increase	$	(1	)	$	(25	)	$	5

The amount of revenue recognized in the ~~nine-month~~three-month period ended ~~September 30, 2019~~March 31, 2020 that was included in the opening contract liability was $3$1 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.

CERC

Accounts Receivable Other Accrued Unbilled Revenues
(in millions)
Opening balance as of December 31, 2018 $ 282
$ 263
Closing balance as of September 30, 2019 137
82
Decrease $ (145 ) $ (181 )



	Accounts Receivable		Other Accrued Unbilled Revenues
	(in millions)
Opening balance as of December 31, 2019	$	222	$	249
Closing balance as of March 31, 2020	265		140
Decrease	$	43	$	(109	)

CERC does not have any opening or closing contract asset or contract liability balances.

Remaining Performance Obligations (CenterPoint Energy). The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting

period for contracts and (2) when CenterPoint Energy expects to recognize this revenue. Such contracts include ~~fixed price~~energy performance and sustainable infrastructure services contracts of ESG, which are included in ~~the Infrastructure Services reportable segment.~~Corporate and Other.

Rolling 12 Months Thereafter Total
(in millions)
Revenue expected to be recognized on contracts in place as of September 30, 2019:
Fixed price (bid) $ 365
$ —
$ 365
$ 365
$ —
$ 365



	Rolling 12 Months		Thereafter		Total
	(in millions)
Revenue expected to be recognized on contracts in place as of March 31, 2020:
Corporate and Other	$	218	$	569	$	787
	$	218	$	569	$	787

Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the transaction price. For contracts for which revenue from the satisfaction of the performance obligations is recognized in the amount invoiced, the practical expedient was elected and revenue expected to be recognized on these contracts has not been disclosed.

Provision of Doubtful Accounts

The Registrants adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related amendments on January 1, 2020 using a modified retrospective method. ASU 2016-13 replaces the “incurred loss” model with a CECL model for financial assets measured at amortized cost and for certain off-balance sheet credit exposures. Adoption of this standard did not have a material impact on the Registrants’ respective consolidated financial statements. CenterPoint Energy and CERC applied the $5 million cumulative-effect adjustment of the transition to opening retained earnings as of the effective date, which included $2 million related to the Energy Services Disposal Group. There was no material cumulative-effect adjustment for Houston Electric. The disclosures for periods prior to adoption will be presented in accordance with accounting standards in effect for those periods.

CenterPoint Energy and CERC segregate financial assets that fall under the scope of Topic 326, primarily trade receivables due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, among others. Houston Electric had no material changes in its methodology to recognize losses on financial assets that fall under the scope of Topic 326, primarily due to the nature of its customers and regulatory environment.

(5) Employee Benefit Plans

As a result of the Merger, CenterPoint Energy now maintains three additional qualified defined benefit pension plans which are closed to new participants, a non-qualified SERP and a postretirement benefit plan. The defined benefit pension plans cover eligible full-time regular employees and retirees of Vectren and are primarily non-contributory. The postretirement benefit plan provides health care and life insurance benefits, which are a combination of self-insured and fully insured programs, to eligible Vectren retirees on both a contributory and non-contributory basis.

CenterPoint Energy, through its Infrastructure Services reportable segment, participates in several industry wide multi-employer pension plans for its collective bargaining employees which provide for monthly benefits based on length of service. The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits

to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers and (3) if CenterPoint Energy stops participation in some of its multi-employer pension plans, CenterPoint Energy may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

~~CenterPoint Energy, through Vectren, also acquired additional defined contribution retirement savings plans qualified under sections 401(a) and 401(k) of the Internal Revenue Code.~~

The Registrants’ net periodic cost, before considering amounts subject to overhead allocations for capital expenditure projects or for amounts subject to deferral for regulatory purposes, includes the following components relating to pension and postretirement benefits:

Pension Benefits (CenterPoint Energy)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2019			2018			2019			2018				2020			2019
	(in millions)												(in millions)
Service cost (1)	$	10		$	10		$	30		$	28			$	10		$	10
Interest cost (2)	25			20			73			59				19			23
Expected return on plan assets (2)	(27		)	(27		)	(79		)	(80		)		(28		)	(25		)
Amortization of prior service cost (2)	2			3			6			7				—			2
Amortization of net loss (2)	13			10			39			32				10			13
Settlement cost (3) (2)	1			—			2			—
Curtailment gain (4) (2)	—			—			(1		)	—
Curtailment gain (2) (3)														—			(1		)
Net periodic cost	$	24		$	16		$	70		$	46			$	11		$	22


(1)	Amounts presented in the table above are included in Operation and maintenance expense in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.


(2)	Amounts presented in the table above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals.


(3)	A one-time, non-cash settlement cost is required when the total lump sum distributions or other settlements of plan benefit obligations during a plan year exceed the service cost and interest cost components of the net periodic cost for that year. CenterPoint Energy recognized a non-cash settlement cost of $1 million in June and September 2019, respectively, due to lump sum settlement payments.


~~(4)~~	A curtailment gain or loss is required when the expected future services of a significant number of employees are reduced or eliminated for the accrual of benefits. In February 2019, CenterPoint Energy recognized a pension curtailment gain of $1 million related to Vectren employees whose employment was terminated after the Merger closed.

Postretirement Benefits


	Three Months Ended September 30,																		Three Months Ended March 31,
	2019									2018									2020								2019
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC		CenterPoint Energy			Houston Electric			CERC
	(in millions)																		(in millions)
Service cost (1)	$	2		$	—		$	—		$	—		$	—		$	1		$	—		$	—		$	—	$	1		$	—		$	—
Interest cost (2)	4			1			2			3			2			1			3			1			1		4			2			1
Expected return on plan assets (2)	(3		)	(1		)	—			(1		)	(1		)	—			(1		)	(1		)	—		(2		)	(1		)	—
Amortization of prior service cost (credit) (2)	(1		)	(1		)	—			(1		)	(1		)	—			(1		)	(1		)	—		(1		)	(1		)	—
Net periodic cost (income)	$	2		$	(1	)	$	2		$	1		$	—		$	2		$	1		$	(1	)	$	1	$	2		$	—		$	1

	Nine Months Ended September 30,
	2019									2018
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)
Service cost (1)	$	3		$	—		$	1		$	1		$	—		$	1
Interest cost (2)	12			5			4			10			6			3
Expected return on plan assets (2)	(6		)	(3		)	(1		)	(4		)	(3		)	(1		)
Amortization of prior service cost (credit) (2)	(3		)	(4		)	—			(3		)	(4		)	1
Net periodic cost (income)	$	6		$	(2	)	$	4		$	4		$	(1	)	$	4


(1)	Amounts presented in the tables above are included in Operation and maintenance expense in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of amounts capitalized and regulatory deferrals.


(2)	Amounts presented in the tables above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals.

The table below reflects the expected contributions to be made to the pension and postretirement benefit plans during ~~2019:~~2020:

CenterPoint Energy Houston Electric CERC
(in millions)
Expected minimum contribution to pension plans during 2019 $ 94
$ —
$ —
Expected contribution to postretirement benefit plans in 2019 20
10
4



	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Expected minimum contribution to pension plans during 2020	$	83	$	—	$	—
Expected contribution to postretirement benefit plans in 2020	17		10		4

The table below reflects the contributions made to the pension and postretirement benefit plans during ~~2019:~~2020:


	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019							Three Months Ended March 31, 2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC			CenterPoint Energy		Houston Electric		CERC
	(in millions)												(in millions)
Pension plans	$	65	$	—	$	—	$	94	$	—	$	—		$	2	$	—	$	—
Postretirement benefit plans	4		3		1		12		8		3			4		2		1

COVID-19 Impacts. The Registrants remeasure the funded status of each plan as of December 31 each year, and at an interim period when a curtailment, settlement, or material plan amendment occurs. On the measurement date, actuarial gains or losses are recognized in accumulated other comprehensive income, or when cost is recovered through regulated rates, as a regulatory asset or liability. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. The fair value of pension plan assets on the plan remeasurement date impacts the funded status, net period cost, and the required cash contributions; however, changes to pension plan assets do not impact the Condensed Statements of Consolidated Income or Condensed Consolidated Balance Sheets in interim periods when a plan remeasurement is not required. An interim remeasurement of the plans was not required, and therefore did not occur, during the three months ended March 31, 2020.

(6) Regulatory Matters

~~The following is a list of regulatory assets~~Equity Return (CenterPoint Energy and ~~liabilities reflected on the Registrants’ respective Condensed Consolidated Balance Sheets:~~

September 30, 2019 December 31, 2018
CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
Regulatory Assets: (in millions)
Current regulatory assets (1)
$ 18
$ —
$ 18
$ 77
$ —
$ 77
Non-current regulatory assets:
Securitized regulatory assets 821
821
—
1,059
1,059
—
Unrecognized equity return (2)
(175 ) (175 ) —
(213 ) (213 ) —
Unamortized loss on reacquired debt (3)
63
63
—
68
68
—
Pension and postretirement-related regulatory asset (3)
683
35
27
725
33
30
Hurricane Harvey restoration costs (3)
68
64
4
68
64
4
Regulatory assets related to TCJA (3) (4)
30
23
7
33
23
10
Asset retirement obligation (3)
139
25
92
109
24
85
Other regulatory assets-not earning a return (5) 154
65
46
81
55
26
Other regulatory assets 411
30
13
37
11
26
Total non-current regulatory assets 2,194
951
189
1,967
1,124
181
Total regulatory assets 2,212
951
207
2,044
1,124
258
Regulatory Liabilities:
Current regulatory liabilities (6) 31
—
28
38
17
21
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4) 1,606
830
449
1,323
847
476
Estimated removal costs 1,430
259
634
886
269
617
Other regulatory liabilities 445
206
138
316
182
134
Total non-current regulatory liabilities 3,481
1,295
1,221
2,525
1,298
1,227
Total regulatory liabilities 3,512
1,295
1,249
2,563
1,315
1,248
Total regulatory assets and liabilities, net $ (1,300 ) $ (344 ) $ (1,042 ) $ (519 ) $ (191 ) $ (990 )
Houston Electric)


~~(1)~~	~~Current regulatory assets are included in Prepaid expenses and other current assets in the Registrants’ respective Condensed Consolidated Balance Sheets.~~

As of March 31, 2020, CenterPoint Energy and Houston Electric have not recognized an allowed equity return of $162 million because such return will be recognized as it is recovered in future rates. The timing of CenterPoint Energy’s and Houston Electric’s recognition of the equity return will vary each period based on amounts actually collected during that period. The unrecognized

~~(2)~~

The unrecognized equity return will be recognized as it is recovered in rates through 2024. The timing of CenterPoint Energy’s and Houston Electric’s recognition of the equity return will vary each period based on amounts actually collected during the period. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.

equity return will be recognized as it is recovered in rates through 2024. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
CenterPoint Energy Houston Electric CenterPoint Energy Houston Electric CenterPoint Energy Houston Electric CenterPoint Energy Houston Electric
(in millions)
Allowed equity return recognized $ 14
$ 14
$ 17
$ 17
$ 38
$ 38
$ 62
$ 62



	Three Months Ended March 31,
	2020				2019
	CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric
	(in millions)
Allowed equity return recognized	$	6	$	6	$	11	$	11


~~(3)~~	~~Substantially all of these regulatory assets are not earning a return.~~


~~(4)~~	~~The EDIT and deferred revenues will be recovered or refunded to customers as required by tax and regulatory authorities.~~


~~(5)~~	Regulatory assets acquired in the Merger and not earning a return were recorded at fair value as of the Merger Date. Such fair value adjustments are recognized over time until the regulatory asset is recovered.


~~(6)~~	~~Current regulatory liabilities are included in Other current liabilities in each of the Registrants’ respective Condensed Consolidated Balance Sheets.~~

Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately $194 million, ~~exclusive of~~among other requests. On January 23, 2020, Houston Electric filed a Stipulation and Settlement Agreement with the ~~EDIT refund discussed below.~~PUCT that provided for the following, among other things:

~~The key proposals~~an overall revenue requirement increase of ~~the rate case include:~~approximately $13 million;

an ROE of 9.4%;

a ~~rate base of $6.4 billion with a 50% debt, 50% equity~~ capital structure ~~and a 10.4% ROE;~~of 57.5% debt/42.5% equity;

a ~~prudency determination on all capital investments made by Houston Electric since January 1, 2010;~~

~~the establishment~~refund of ~~a rider to refund~~ unprotected EDIT ~~resulting from the TCJA;~~of $105 million plus carrying costs over approximately 30-36 months; and

~~updated depreciation rates and approval to recover other costs.~~recovery of all retail transmission related costs through the TCRF.

~~On September 16, 2019, the ALJs issued a PFD recommending a revenue increase of approximately $2.6 million, which~~Also, Houston Electric is ~~lower than as filed primarily due~~not required to the recommended rate base and operation and maintenance expense disallowances, lower equity capital structure, and lower return on equity. If the PFD were approved in its entirety, it would result, among other things, inmake a one-time refund ~~obligation~~ of capital ~~previously recovered through Houston Electric’s~~recovery from its TCOS and DCRF ~~mechanisms,~~mechanisms. Future TCOS filings will take into account both ADFIT and ~~a pre-tax write-off of approximately $120 million for~~EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base ~~disallowance~~items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for Houston Electric no later than four years from the date of ~~assets recorded~~the PUCT’s final order in ~~CenterPoint Energy’s and~~the proceeding. Additionally, Houston ~~Electric’s Condensed Consolidated Balance Sheets as of September 30, 2019. The amount of any refunds for previously recovered capital would be determined~~Electric will not file a DCRF in 2020, nor will a ~~separate proceeding with the PUCT. Furthermore, the PFD recommends a~~subsequent separate proceeding with the PUCT ~~to determine the amount, if any, of $158 million~~be instituted regarding EDIT on Houston Electric’s securitized ~~assets~~assets. Furthermore, under the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to ~~be provided~~adopt certain ring-fencing measures to ~~customers.~~

increase its financial separateness from CenterPoint Energy. The PUCT ~~has not yet begun deliberating on~~approved the ~~PFD, which is prepared by judges~~Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a ~~different state agency. A~~ final order ~~from the~~on March 9, 2020. The PUCT ~~is currently expected~~declined to impose a dividend restriction in the ~~fourth quarter of 2019, but motions for rehearing, if granted, could result in the order being issued in~~final order. The rates were implemented on April 23, 2020. ~~CenterPoint Energy and Houston Electric cannot predict the outcome of the proceeding.~~

CenterPoint Energy and Houston Electric record pre-tax expense for ~~disallowed~~(i) probable disallowances of capital investments and (ii) customer refund obligations and costs deferred in regulatory assets when ~~the~~recovery of such amounts ~~are deemed both probable and estimable.~~is no longer considered probable.

COVID-19 Regulatory Matters

Governors, public utility commissions and other authorities in the states in which the Registrants operate have issued a number of different orders related to the COVID-19 pandemic. On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory.

The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of the COVID-19 ERP. The transmission and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete cost recovery and disburse all reimbursement amounts or remaining balances.

Similarly, regulatory authorities have issued orders addressing customer non-payment and disconnection. In Indiana, the IURC issued an order that, among other things, permits utilities to voluntarily suspend or waive late fees and reconnection fees and reconnect customers who have been disconnected due to non-payment, provided that such actions are taken on a non-discriminatory basis and apply to all customers. Commissions in other states have issued similar orders. In CenterPoint Energy’s and CERC’s NGD service territories and for Indiana Electric, CenterPoint Energy and CERC, as applicable, have temporarily suspended disconnections for non-payment and will continue to support those customers who may need payment assistance, arrangements or extensions.

In the other states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs and savings.

(7) Derivative Instruments

The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants utilize derivative instruments such as physical forward contracts, swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of 2020. The following disclosures include the Energy Services Disposal Group and are identified as held for sale or discontinued operations.


(a)	Non-Trading Activities

Commodity Derivative Instruments (CenterPoint Energy and CERC). CenterPoint Energy, through its Indiana Utilities, and CERC, through ~~CES,~~the Energy Services Disposal Group, enter into certain derivative instruments to mitigate the effects of commodity price movements. Certain financial instruments used to hedge portions of the natural gas inventory of the Energy Services ~~reportable segment~~Disposal Group are designated as fair value hedges for accounting purposes. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges.

Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as economic or cash flow hedges. The objective of these hedges is to offset risk associated with interest rates borne by the Registrants in connection with an anticipated future fixed rate debt offering or other exposure to variable rate debt. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging financing activity, and thus

the gains and losses on derivatives are deferred in a regulatory liability or asset. For the impacts of cash flow hedges to Accumulated other comprehensive income, see Note ~~20.~~19.

The table below summarizes the Registrants’ outstanding interest rate hedging activity:


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
Hedging Classification	Notional Principal								Notional Principal
	CenterPoint Energy (1)		Houston Electric		CenterPoint Energy		Houston Electric		CenterPoint Energy (1)		Houston Electric		CenterPoint Energy (1)		Houston Electric
	(in millions)								(in millions)
Economic hedge	$	84	$	—	$	—	$	—	$	84	$	—	$	84	$	—
Cash flow hedge	—		—		450		450


(1)	Relates to interest rate derivative instruments at SIGECO.

Weather Hedges (CenterPoint Energy and CERC). CenterPoint Energy and CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on NGD in Arkansas, Indiana, Louisiana, Mississippi, Minnesota, Ohio and Oklahoma, as applicable. CenterPoint Energy’s and CERC’s NGD in Texas and CenterPoint Energy’s electric operations in Texas and Indiana do not have such mechanisms, although fixed customer charges are historically higher in Texas for NGD compared to its other jurisdictions. As a result, fluctuations from normal weather may have a positive or negative effect on CenterPoint Energy’s and CERC’s NGD’s results in Texas and on CenterPoint Energy’s electric operations’ results in its Texas and Indiana service territories.

CenterPoint Energy and CERC, as applicable, enter into winter season weather hedges from time to time for certain NGD jurisdictions and electric operations’ service territory to mitigate the effect of fluctuations from normal weather on results of operations and cash flows. These weather hedges are based on heating degree days at 10-year normal weather. Houston Electric and Indiana Electric do not enter into weather hedges.

~~The tables below summarize CenterPoint Energy’s and CERC’s current weather hedge gain (loss) activity:~~

Three Months Ended September 30,
2019 2018
Texas Operations Winter Season Bilateral Cap CenterPoint Energy CERC Winter Season Bilateral Cap CenterPoint Energy CERC
(in millions)
NGD 2018 – 2019 $ 9
$ —
$ —
2017 – 2018 $ 8
$ —
$ —
Electric operations 2018 – 2019 8
—
—
2017 – 2018 9
—
—
Total (1) $ —

$ —

$ —

$ —

Nine Months Ended September 30,
2019 2018
Texas Operations Winter Season Bilateral Cap CenterPoint Energy CERC Winter Season Bilateral Cap CenterPoint Energy CERC
(in millions)
NGD 2018 – 2019 $ 9
$ —
$ —
2017 – 2018 $ 8
$ —
$ —
Electric operations 2018 – 2019 8
3
—
2017 – 2018 9
(4 ) —
Total (1) $ 3
$ —
$ (4 ) $ —


~~(1)~~	~~Weather hedge gains (losses) are recorded in Revenues in the Condensed Statements of Consolidated Income.~~


(b)	Derivative Fair Values and Income Statement Impacts

The following tables present information about derivative instruments and hedging activities. The first three tables provide a balance sheet overview of Derivative Assets and Liabilities, while the last two tables provide a breakdown of the related income statement impacts. The Energy Services Disposal Group’s derivative balances are reported in assets or liabilities held for sale. See Note 3 for further information.

Fair Value of Derivative Instruments and Hedged Items

CenterPoint Energy


		September 30, 2019				December 31, 2018					March 31, 2020				December 31, 2019
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value		Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
		(in millions)									(in millions)
Derivatives designated as cash flow hedges:
Interest rate derivatives	Current Liabilities: Non-trading derivative liabilities	$	—	$	—	$	—	$	24
Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:									Derivatives designated as fair value hedges:
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	7		—		1		7		Current Liabilities: Current liabilities held for sale	18		—		12		—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Natural gas derivatives (1) (2) (3)	Current Assets: Non-trading derivative assets	123		3		103		3		Current Assets: Current assets held for sale	215		2		139		3
Natural gas derivatives (1) (2) (3)	Other Assets: Non-trading derivative assets	65		—		38		—		Other Assets: Non-current assets held for sale	—		—		58		—
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	69		154		62		173		Current Liabilities: Non-trading derivative liabilities	—		9		—		7
Natural gas derivatives (1) (2) (3)	Other Liabilities: Non-trading derivative liabilities	13		68		16		25		Current Liabilities: Current liabilities held for sale	113		217		73		177
Natural gas derivatives (1) (2) (3)										Other Liabilities: Non-trading derivative liabilities	—		14		—		15
Natural gas derivatives (1) (2) (3)										Other Liabilities: Non-current liabilities held for sale	—		—		10		39
Interest rate derivatives	Other Liabilities	—		15		—		—		Other Liabilities	—		26		—		10
Indexed debt securities derivative	Current Liabilities	—		817		—		601		Current Liabilities	—		758		—		893
Total CenterPoint Energy	Total CenterPoint Energy	$	277	$	1,057	$	220	$	833	Total CenterPoint Energy	$	346	$	1,026	$	292	$	1,144

(1)

The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling ~~2,252~~2,126 Bcf or a net 232 Bcf long position and 2,226 Bcf or a net 374 Bcf long position ~~and 1,674 Bcf or a net 140 Bcf long position~~ as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure.

(2)

Natural gas contracts are ~~presented on a net basis in CenterPoint Energy’s Condensed Consolidated Balance Sheets as they are~~ subject to master netting arrangements. This netting applies to all undisputed amounts due or past ~~due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within CenterPoint Energy’s Condensed Consolidated Balance Sheets.~~due. The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below.


(3)	Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

~~Houston Electric~~

September 30, 2019 December 31, 2018
Balance Sheet Location
Derivative
Assets
Fair Value

Derivative
Liabilities
Fair Value

Derivative
Assets
Fair Value

Derivative
Liabilities
Fair Value
(in millions)
Derivatives designated as cash flow hedges:
Interest rate derivatives Current Liabilities: Non-trading derivative liabilities $ —
$ —
$ —
$ 24
Total Houston Electric $ —
$ —
$ —
$ 24

CERC


			September 30, 2019				December 31, 2018						March 31, 2020				December 31, 2019
		Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value			Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
			(in millions)										(in millions)
Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:										Derivatives designated as fair value hedges:
Natural gas derivatives (1) (2) (3)		Current Liabilities: Non-trading derivative liabilities	$	7	$	—	$	1	$	7		Current Liabilities: Current liabilities held for sale	$	18	$	—	$	12	$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Natural gas derivatives (1) (2) (3)		Current Assets: Non-trading derivative assets	123		3		103		3			Current Assets: Current assets held for sale	215		2		139		3
Natural gas derivatives (1) (2) (3)		Other Assets: Non-trading derivative assets	65		—		38		—			Other Assets: Non-current assets held for sale	—		—		58		—
Natural gas derivatives (1) (2) (3)		Current Liabilities: Non-trading derivative liabilities	69		148		62		173			Current Liabilities: Current liabilities held for sale	113		217		73		177
Natural gas derivatives (1) (2) (3)		Other Liabilities: Non-trading derivative liabilities	13		54		16		25			Other Liabilities: Non-current liabilities held for sale	—		—		10		39
Total CERC	Total CERC		$	277	$	205	$	220	$	208	Total CERC		$	346	$	219	$	292	$	219

(1)

(2)

Natural gas contracts are ~~presented on a net basis in CERC’s Condensed Consolidated Balance Sheets as they are~~ subject to master netting arrangements. This netting applies to all undisputed amounts due or past due ~~and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within CERC’s Condensed Consolidated Balance Sheets.~~ The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below.


(3)	Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

Cumulative Basis Adjustment for Fair Value Hedges (CenterPoint Energy and CERC)


		September 30, 2019											March 31, 2020
	Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item						Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
		CenterPoint Energy		CERC		CenterPoint Energy			CERC				CenterPoint Energy			CERC			CenterPoint Energy			CERC
		(in millions)											(in millions)
Hedged items in fair value hedge relationship:	Hedged items in fair value hedge relationship:											Hedged items in fair value hedge relationship:
Natural gas inventory	Current Assets: Natural gas inventory	$	42	$	42	$	(7	)	$	(7	)	Current Assets: Current assets held for sale	$	45		$	45		$	(19	)	$	(19	)
Borrowed natural gas												Current Liabilities: Current liabilities held for sale	(2		)	(2		)	—			—
Gas imbalance receivable												Current Assets: Current assets held for sale	2			2			(2		)	(2		)
Gas imbalance payable												Current Liabilities: Current liabilities held for sale	—			—			1			1
Total	Total	$	42	$	42	$	(7	)	$	(7	)	Total	$	45		$	45		$	(20	)	$	(20	)


		December 31, 2018									December 31, 2019
	Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item				Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
		CenterPoint Energy		CERC		CenterPoint Energy		CERC			CenterPoint Energy		CERC		CenterPoint Energy			CERC
		(in millions)									(in millions)
Hedged items in fair value hedge relationship:	Hedged items in fair value hedge relationship:									Hedged items in fair value hedge relationship:
Natural gas inventory	Current Assets: Natural gas inventory	$	57	$	57	$	1	$	1	Current Assets: Current assets held for sale	$	47	$	47	$	(13	)	$	(13	)
Total	Total	$	57	$	57	$	1	$	1	Total	$	47	$	47	$	(13	)	$	(13	)

Offsetting of Natural Gas Derivative Assets and Liabilities (CenterPoint Energy and CERC)

CenterPoint Energy


	September 30, 2019									December 31, 2018									March 31, 2020									December 31, 2019
	Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)
	(in millions)																		(in millions)
Current Assets: Non-trading derivative assets	$	199		$	(79	)	$	120		$	166		$	(66	)	$	100
Other Assets: Non-trading derivative assets	78			(14		)	64			54			(16		)	38
Current Assets: Current assets held for sale																			$	346		$	(133	)	$	213		$	224		$	(88	)	$	136
Other Assets: Non-current assets held for sale																			—			—			—			68			(10		)	58
Current Liabilities: Non-trading derivative liabilities	(157		)	107			(50		)	(183		)	81			(102		)	(9		)	—			(9		)	(7		)	—			(7		)
Current Liabilities: Current liabilities held for sale																			(219		)	183			(36		)	(180		)	136			(44		)
Other Liabilities: Non-trading derivative liabilities	(68		)	36			(32		)	(25		)	20			(5		)	(14		)	—			(14		)	(15		)	—			(15		)
Other Liabilities: Non-current liabilities held for sale																			—			—			—			(39		)	25			(14		)
Total CenterPoint Energy	$	52		$	50		$	102		$	12		$	19		$	31		$	104		$	50		$	154		$	51		$	63		$	114

CERC

September 30, 2019 December 31, 2018

Gross Amounts Recognized (1)
Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2) Gross Amounts Recognized (1) Gross Amounts Offset in the Consolidated Balance Sheets Net Amount Presented in the Consolidated Balance Sheets (2)
(in millions)
Current Assets: Non-trading derivative assets $ 199
$ (79 ) $ 120
$ 166
$ (66 ) $ 100
Other Assets: Non-trading derivative assets 78
(14 ) 64
54
(16 ) 38
Current Liabilities: Non-trading derivative liabilities (151 ) 107
(44 ) (183 ) 81
(102 )
Other Liabilities: Non-trading derivative liabilities (54 ) 36
(18 ) (25 ) 20
(5 )
Total CERC $ 72
$ 50
$ 122
$ 12
$ 19
$ 31



	March 31, 2020									December 31, 2019
	Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)
	(in millions)
Current Assets: Current assets held for sale	$	346		$	(133	)	$	213		$	224		$	(88	)	$	136
Other Assets: Non-current assets held for sale	—			—			—			68			(10		)	58
Current Liabilities: Current liabilities held for sale	(219		)	183			(36		)	(180		)	136			(44		)
Other Liabilities: Non-current liabilities held for sale	—			—			—			(39		)	25			(14		)
Total CERC	$	127		$	50		$	177		$	73		$	63		$	136


(1)	Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.


(2)	The derivative assets and liabilities on the Registrant’s respective Condensed Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.

Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy and CERC)

Three Months Ended September 30,
2019 2018

Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)
Non-utility cost of revenues, including natural gas
CenterPoint Energy CERC CenterPoint Energy CERC
(in millions)
Total amounts presented in the statements of income in which the effects of hedges are recorded $ 852
$ 687
$ 864
$ 864
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged items - Natural gas inventory 2
2
1
1
Derivatives designated as hedging instruments (2 ) (2 ) (1 ) (1 )
Amounts excluded from effectiveness testing recognized in earnings immediately (59 ) (59 ) 6
6


	Nine Months Ended September 30,												Three Months Ended March 31,
	2019						2018						2020						2019
	Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)												Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)
	Non-utility cost of revenues, including natural gas												Income from discontinued operations
	CenterPoint Energy			CERC			CenterPoint Energy			CERC			CenterPoint Energy			CERC			CenterPoint Energy			CERC
	(in millions)												(in millions)
Total amounts presented in the statements of income in which the effects of hedges are recorded	$	3,013		$	2,627		$	2,927		$	2,927		$	887		$	786		$	1,251		$	1,171
Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged items - Natural gas inventory	(8		)	(8		)	(13		)	(13		)
Hedged items in fair value hedging relationships													(7		)	(7		)	(6		)	(6		)
Derivatives designated as hedging instruments	8			8			13			13			7			7			6			6
Amounts excluded from effectiveness testing recognized in earnings immediately	(138		)	(138		)	(73		)	(73		)	(38		)	(38		)	(14		)	(14		)


(1)	Income statement impact associated with cash flow hedge activity is related to gains and losses reclassified from Accumulated other comprehensive income into income. Amounts are immaterial for each Registrant in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

CenterPoint Energy


			Three Months Ended September 30,						Nine Months Ended September 30,									Three Months Ended March 31,
		Income Statement Location	2019			2018			2019			2018				Income Statement Location		2020		2019
			(in millions)														(in millions)
Effects of derivatives not designated as hedging instruments on the income statement:	Effects of derivatives not designated as hedging instruments on the income statement:														Effects of derivatives not designated as hedging instruments on the income statement:
Commodity contracts		Gains (losses) in Non-utility revenues	$	69		$	2		$	159		$	70			Income from discontinued operations		$	75	$	4
Indexed debt securities derivative		Loss on indexed debt securities	(62		)	(44		)	(216		)	(316		)		Gain (loss) on indexed debt securities		135		(86		)
Total CenterPoint Energy	Total CenterPoint Energy		$	7		$	(42	)	$	(57	)	$	(246	)	Total CenterPoint Energy			$	210	$	(82	)

CERC


			Three Months Ended September 30,				Nine Months Ended September 30,							Three Months Ended March 31,
		Income Statement Location	2019		2018		2019		2018			Income Statement Location		2020		2019
			(in millions)										(in millions)
Effects of derivatives not designated as hedging instruments on the income statement:	Effects of derivatives not designated as hedging instruments on the income statement:										Effects of derivatives not designated as hedging instruments on the income statement:
Commodity contracts		Gains (losses) in Non-utility revenues	$	69	$	2	$	159	$	70		Income from discontinued operations		$	75	$	4
Total CERC	Total CERC		$	69	$	2	$	159	$	70	Total CERC			$	75	$	4


(c)	Credit Risk Contingent Features (CenterPoint Energy and CERC)

CenterPoint Energy and CERC enter into financial derivative contracts containing material adverse change provisions. These provisions could require CenterPoint Energy or CERC to post additional collateral if the S&P or Moody’s credit ratings of CenterPoint Energy, Inc. or its subsidiaries, including CERC Corp., are downgraded.


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	CenterPoint Energy		CERC		CenterPoint Energy		CERC		CenterPoint Energy		CERC		CenterPoint Energy		CERC
	(in millions)								(in millions)
Aggregate fair value of derivatives containing material adverse change provisions in a net liability position	$	1	$	1	$	1	$	1	$	1	$	1	$	1	$	1
Fair value of collateral already posted	—		—		—		—		—		—		—		—
Additional collateral required to be posted if credit risk contingent features triggered	1		1		—		—		1		1		1		1

(8) Fair Value Measurements

Assets and liabilities that are recorded at fair value in the Registrants’ Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities, as well as natural gas inventory that has been designated as the hedged item in a fair value hedge.

Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. A market approach is utilized to value the Registrants’ Level 2 natural gas derivative assets or liabilities. CenterPoint Energy’s Level 2 indexed debt securities derivative is valued using an option model and a discounted cash flow model, which uses projected dividends on the ZENS-Related Securities and a discount rate as observable inputs.

Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data. A market approach is utilized to value the Registrants’ Level 3 assets or liabilities. As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy’s and CERC’s Level 3 assets and liabilities are comprised of physical natural gas forward contracts and options. Level 3 physical natural gas forward contracts and options are valued using a discounted cash flow model which includes illiquid forward price curve locations (ranging from ~~$1.38~~$1.15 to ~~$6.09~~$4.83 per MMBtu for CenterPoint Energy, with a volumetrically weighted average of $2.22 per MMBtu, and from ~~$1.38~~$1.15 to ~~$6.09~~$4.83 per MMBtu for ~~CERC)~~CERC, with a volumetrically weighted average of $2.22 per MMBtu) as an unobservable input. CenterPoint Energy’s and CERC’s Level 3 physical natural gas forward contracts and options derivative assets and liabilities consist of both long and short positions (forwards and options). Forward price decreases (increases) as of ~~September 30, 2019~~March 31, 2020 would have resulted in lower (higher) values, respectively, for long forwards and options and higher (lower) values, respectively, for short forwards and options.

The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis. The Registrants also recognize purchases of Level 3 financial assets and liabilities at their fair ~~market~~ value at the end of the reporting period.

The following tables present information about the Registrants’ assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.

CenterPoint Energy


	September 30, 2019											December 31, 2018											March 31, 2020											December 31, 2019
	Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total
Assets	(in millions)																						(in millions)
Corporate equities	$	748	$	—	$	—	$	—		$	748	$	542	$	—	$	—	$	—		$	542	$	680	$	—	$	—	$	—		$	680	$	825	$	—	$	—	$	—		$	825
Investments, including money market funds (2)	50		—		—		—			50		66		—		—		—			66		48		—		—		—			48		49		—		—		—			49
Natural gas derivatives (3)(4)	—		234		43		(93		)	184		—		173		47		(82		)	138
Hedged portion of natural gas inventory	—		—		—		—			—		1		—		—		—			1
Natural gas derivatives (3)(4)(5)																							—		305		41		(133		)	213		—		250		42		(98		)	194
Hedged portion of gas imbalance payable																							1		—		—		—			1		—		—		—		—			—
Total assets	$	798	$	234	$	43	$	(93	)	$	982	$	609	$	173	$	47	$	(82	)	$	747	$	729	$	305	$	41	$	(133	)	$	942	$	874	$	250	$	42	$	(98	)	$	1,068
Liabilities
Indexed debt securities derivative	$	—	$	817	$	—	$	—		$	817	$	—	$	601	$	—	$	—		$	601	$	—	$	758	$	—	$	—		$	758	$	—	$	893	$	—	$	—		$	893
Interest rate derivatives	—		15		—		—			15		24		—		—		—			24		—		26		—		—			26		—		10		—		—			10
Natural gas derivatives (3)(4)	—		203		22		(143		)	82		—		191		17		(101		)	107
Hedged portion of natural gas inventory	7		—		—		—			7		—		—		—		—			—
Natural gas derivatives																							—		23		—		—			23		—		22		—		—			22
Natural gas derivatives (3)(4)(5)																							—		201		18		(183		)	36		—		195		24		(161		)	58
Hedged portion of natural gas inventory (5)																							19		—		—		—			19		13		—		—		—			13
Hedged portion of gas imbalance receivable																							2		—		—		—			2		—		—		—		—			—
Total liabilities	$	7	$	1,035	$	22	$	(143	)	$	921	$	24	$	792	$	17	$	(101	)	$	732	$	21	$	1,008	$	18	$	(183	)	$	864	$	13	$	1,120	$	24	$	(161	)	$	996

Houston Electric


	September 30, 2019										December 31, 2018										March 31, 2020										December 31, 2019
	Level 1		Level 2		Level 3		Netting		Total		Level 1		Level 2		Level 3		Netting		Total		Level 1		Level 2		Level 3		Netting		Total		Level 1		Level 2		Level 3		Netting		Total
Assets	(in millions)																				(in millions)
Investments, including money market funds (2)	$	33	$	—	$	—	$	—	$	33	$	48	$	—	$	—	$	—	$	48	$	31	$	—	$	—	$	—	$	31	$	32	$	—	$	—	$	—	$	32
Total assets	$	33	$	—	$	—	$	—	$	33	$	48	$	—	$	—	$	—	$	48	$	31	$	—	$	—	$	—	$	31	$	32	$	—	$	—	$	—	$	32
Liabilities
Interest rate derivatives	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	—	$	24
Total liabilities	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	—	$	24

CERC


	September 30, 2019											December 31, 2018											March 31, 2020											December 31, 2019
	Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total
Assets	(in millions)																						(in millions)
Corporate equities	$	2	$	—	$	—	$	—		$	2	$	2	$	—	$	—	$	—		$	2	$	1	$	—	$	—	$	—		$	1	$	2	$	—	$	—	$	—		$	2
Investments, including money market funds (2)	11		—		—		—			11		11		—		—		—			11		11		—		—		—			11		11		—		—		—			11
Natural gas derivatives (3)(4)	—		234		43		(93		)	184		—		173		47		(82		)	138
Hedged portion of natural gas inventory	—		—		—		—			—		1		—		—		—			1
Natural gas derivatives (3)(4)(5)																							—		305		41		(133		)	213		—		250		42		(98		)	194
Hedged portion of gas imbalance payable																							1		—		—		—			1		—		—		—		—			—
Total assets	$	13	$	234	$	43	$	(93	)	$	197	$	14	$	173	$	47	$	(82	)	$	152	$	13	$	305	$	41	$	(133	)	$	226	$	13	$	250	$	42	$	(98	)	$	207
Liabilities
Natural gas derivatives (3)(4)	$	—	$	183	$	22	$	(143	)	$	62	$	—	$	191	$	17	$	(101	)	$	107
Hedged portion of natural gas inventory	7		—		—		—			7		—		—		—		—			—
Natural gas derivatives (3)(4)(5)																							$	—	$	201	$	18	$	(183	)	$	36	$	—	$	195	$	24	$	(161	)	$	58
Hedged portion of natural gas inventory (5)																							19		—		—		—			19		13		—		—		—			13
Hedged portion of gas imbalance receivable																							2		—		—		—			2		—		—		—		—			—
Total liabilities	$	7	$	183	$	22	$	(143	)	$	69	$	—	$	191	$	17	$	(101	)	$	107	$	21	$	201	$	18	$	(183	)	$	57	$	13	$	195	$	24	$	(161	)	$	71


(1)	Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy and CERC to settle positive and negative positions and also include cash collateral posted with the same counterparties as follows:



	March 31, 2020				December 31, 2019
	CenterPoint Energy		CERC		CenterPoint Energy		CERC
	(in millions)
Cash collateral posted with the same counterparties	$	50	$	50	$	63	$	63

September 30, 2019 December 31, 2018
CenterPoint Energy CERC CenterPoint Energy CERC
(in millions)
Cash collateral posted with the same counterparties $ 50
$ 50
$ 19
$ 19


(2)	Amounts are included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.


(3)	Natural gas derivatives include no material amounts related to physical forward transactions with Enable.

(4)

Level 1 natural gas derivatives include exchange-traded derivatives cleared by the CME, which deems that financial instruments cleared by the CME are settled daily in connection with posted cash payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes and are presented in Level 1 net of posted cash; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.


(5)	Amounts are classified as held for sale in the Registrants’ respective Condensed Consolidated Balance Sheets.

The following table presents additional information about assets or liabilities, including derivatives that are measured at fair value on a recurring basis for which CenterPoint Energy and CERC have utilized Level 3 inputs to determine fair value:


	Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended March 31,
	2019						2018						2019						2018							2020						2019
	CenterPoint Energy			CERC			CenterPoint Energy			CERC			CenterPoint Energy			CERC			CenterPoint Energy			CERC				CenterPoint Energy			CERC			CenterPoint Energy			CERC
	(in millions)																								(in millions)
Beginning balance	$	20		$	20		$	(628	)	$	13		$	30		$	30		$	(622	)	$	46			$	18		$	18		$	30		$	30
Total gains	4			4			1			1			16			16			4			4
Total gains (losses)																										15			15			(1		)	(1		)
Total settlements	(1		)	(1		)	(1		)	(1		)	(18		)	(18		)	(36		)	(36		)		(10		)	(10		)	(15		)	(15		)
Transfers into Level 3	—			—			—			—			(1		)	(1		)	(2		)	(2		)		—			—			1			1
Transfers out of Level 3	(2		)	(2		)	650			9			(6		)	(6		)	678			10				—			—			(2		)	(2		)
Ending balance (1)	$	21		$	21		$	22		$	22		$	21		$	21		$	22		$	22			$	23		$	23		$	13		$	13

The amount of total gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date:
	$	2		$	2		$	11		$	11		$	13		$	13		$	9		$	9			$	14		$	14		$	(2	)	$	(2	)


(1)	CenterPoint Energy and CERC did not have significant Level 3 ~~sales~~purchases or ~~purchases~~sales during the three ~~or nine~~ months ended ~~September 30,~~March 31, 2020 or 2019. The Level 3 assets and liabilities as of March 31, 2020 and 2019 ~~or 2018.~~are classified in the CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets as held for sale.

Items Measured at Fair Value on a Nonrecurring Basis

Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 primarily due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. The impairment analysis compared the estimated fair value of CenterPoint Energy’s investment in Enable to its carrying value. The fair value of the investment was determined using multiple valuation methodologies under both the market and income approaches. Both of these approaches incorporate significant estimates and assumptions, including:

Market Approach

• quoted price of Enable’s common units;

• recent market transactions of comparable companies; and

• EBITDA to total enterprise multiples for comparable companies.

Income Approach

• Enable’s forecasted cash distributions;

• projected cash flows of incentive distribution rights;

• forecasted growth rate of Enable’s cash distributions; and

• determination of the cost of equity, including market risk premiums.

Weighting of the Different Approaches

Significant unobservable inputs used include the growth rate applied to the projected cash distributions beyond 2020 and the discount rate used to determine the present value of the estimated future cash flows. Based on the significant unobservable estimates and assumptions required, CenterPoint Energy concluded that the fair value estimate should be classified as a Level 3 measurement within the fair value hierarchy. As a result of this analysis, CenterPoint Energy recorded an other than temporary impairment on its investment in Enable of $1,541 million, reducing the fair value of the investment to $848 million. See Note 9 for further discussion of the impairment.

As of March 31, 2020, CenterPoint Energy recorded a goodwill impairment charge of $185 million in the Indiana Electric Integrated reporting unit. See Note 10 for further information.

CenterPoint Energy recognized a goodwill impairment charge of $82 million upon classifying the Infrastructure Services Disposal Group as held for sale and CenterPoint Energy and CERC recognized a goodwill impairment charge of approximately $62 million and a loss on assets held for sale of approximately $70 million upon classifying the Energy Services Disposal Group as held for sale. Using a market approach, the fair value of the Infrastructure Services Disposal Group as of March 31, 2020 is determined to be approximately $864 million and the fair value of the Energy Services Disposal Group as of March 31, 2020 is determined to be approximately $402 million. For both Disposal Groups, CenterPoint Energy and CERC, as applicable, used the contractual sales price adjusted for estimated working capital, and other contractual purchase price adjustments, which are Level 2 inputs. See Note 3 for further information.

Estimated Fair Value of Financial Instruments

The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading” and short-term borrowings are estimated to be approximately equivalent to carrying amounts and have been excluded from the table below. The carrying amounts of non-trading derivative assets and liabilities and CenterPoint Energy’s ZENS indexed debt securities derivative ~~and hedging instruments~~ are stated at fair value and are excluded from the table below. The fair value of each debt instrument is determined by multiplying the principal amount of each debt instrument by a combination of historical trading prices and comparable issue data. These liabilities, which are not measured at fair value in the Registrants’ Condensed Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)								(in millions)
CenterPoint Energy
Long-term debt, including current maturities (1)	$	14,861	$	15,994	$	9,140	$	9,308	$	15,238	$	16,047	$	15,093	$	16,067
Houston Electric
Long-term debt, including current maturities (1)	$	5,018	$	5,595	$	4,717	$	4,770	$	4,888	$	5,368	$	4,950	$	5,457
CERC
Long-term debt, including current maturities	$	2,477	$	2,783	$	2,371	$	2,488	$	2,377	$	2,637	$	2,546	$	2,803


(1)	Includes Securitization Bonds debt.

(9) Unconsolidated Affiliates (CenterPoint Energy and CERC)

CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP, and, accordingly, accounts for its investment in Enable’s common units using the equity method of accounting. Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy’s maximum exposure to loss related to Enable is limited to its investment in unconsolidated affiliate, its investment in Enable Series A Preferred Units and outstanding current accounts receivable from Enable.

Investment in Unconsolidated Affiliates (CenterPoint Energy):



	March 31, 2020		December 31, 2019
	(in millions)
Enable	$	848	$	2,406
Other	2		2
Total	$	850	$	2,408

September 30, 2019 December 31, 2018
(in millions)
Enable $ 2,467
$ 2,482
Other (1)
2
—
Total $ 2,469
$ 2,482


~~(1)~~	Represents the equity investment in ProLiance Holdings, LLC related primarily to an investment in LA Storage, LLC, a joint venture in a development project for salt-cavern natural gas storage, which was acquired in the Merger. This presentation reflects preliminary fair value of the equity investment on the acquisition date and is subject to change. See Note 3.

CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. AsConsiderable judgment is used in determining if an impairment loss is other than temporary and the amount of ~~September 30, 2019, CenterPoint Energy’s investment~~any impairment. Based on the severity of the decline in ~~Enable is $10.55 per unit and~~ Enable’s common unit price ~~closed at $12.03~~during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit ~~(approximately $347 million above carrying value). The lowest close price for Enable’s common units in October 2019 was $10.07, which was approximately $112 million below carrying value.~~by 50%, and the market outlook indicating excess supply of crude oil and natural gas and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy ~~performed~~determined, in connection with its preparation of the financial statements, that an ~~analysis~~other than temporary decrease in the value of its investment in Enable ~~as of September 30, 2019 and determined it will recover~~had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of ~~$2.5 billion.~~$848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units. See Note 8 for further discussion of the determination of fair value of CenterPoint Energy’s investment in Enable.

Equity in Earnings of Unconsolidated Affiliates, net (CenterPoint Energy):



		Three Months Ended March 31,
		2020			2019
	(in millions)
Enable		$	(1,475	)	$	62
Other		—			—
Total		$	(1,475	)	$	62

CenterPoint Energy recognized a loss of $1,475 million from its investment in Enable for the three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million.

Limited Partner Interest and Units Held in Enable (CenterPoint Energy):



	March 31, 2020
	Limited Partner Interest (1)		Common Units (2)	Enable Series A Preferred Units (3)
CenterPoint Energy	53.7	%	233,856,623	14,520,000
OGE	25.5	%	110,982,805	—
Public unitholders	20.8	%	90,604,066	—
Total units outstanding	100.0	%	435,443,494	14,520,000

September 30, 2019

Limited Partner Interest (1)

Common Units (2)

Enable Series A Preferred Units (3)
CenterPoint Energy 53.7 % 233,856,623
14,520,000
OGE 25.5 % 110,982,805
—
Public unitholders 20.8 % 90,310,731
—
Total units outstanding 100.0 % 435,150,159
14,520,000


(1)	Excludes the Enable Series A Preferred Units owned by CenterPoint Energy.


(2)	Held indirectly through CNP Midstream by CenterPoint Energy.

(3)

The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Condensed Consolidated Balance Sheets, was $363 million as of ~~September 30, 2019~~March 31, 2020 and $363 million as of December 31, ~~2018.~~2019. No impairment charges or adjustment due to observable price changes were ~~made~~required or recorded during the current or prior reporting periods.

Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal set forth in Enable’s Agreement of Limited Partnership.

Interests Held in Enable GP (CenterPoint Energy):



	March 31, 2020
	Management Rights (1)		Incentive Distribution Rights (2)
CenterPoint Energy (3)	50	%	40	%
OGE	50	%	60	%

September 30, 2019

Management Rights (1)

Incentive Distribution Rights (2)
CenterPoint Energy (3)
50 % 40 %
OGE 50 % 60 %


(1)	Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.

(2)

Enable ispreviously expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to Enable GP and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, no incentive distributions have been made.


(3)	Held indirectly through CNP Midstream.

Distributions Received from Enable (CenterPoint ~~Energy and CERC)~~Energy):

CenterPoint Energy


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Per Unit		Cash Distribution		Per Unit		Cash Distribution		Per Unit		Cash Distribution		Per Unit		Cash Distribution		Per Unit		Cash Distribution		Per Unit		Cash Distribution
	(in millions, except per unit amounts)
Enable common units (1)	$	0.3305	$	77	$	0.3180	$	74	$	0.9665	$	226	$	0.9540	$	223	$	0.3305	$	77	$	0.3180	$	74
Enable Series A Preferred Units	0.6250		9		0.6250		9		1.8750		27		1.8750		27		0.6250		9		0.6250		9
Total CenterPoint Energy			$	86			$	83			$	253			$	250			$	86			$	83

~~CERC~~

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Per Unit Cash Distribution Per Unit Cash Distribution
(in millions, except per unit amounts)
Enable common units (1)
$ 0.3180
$ 74
$ 0.9540
$ 223
Total CERC $ 74
$ 223


(1)	~~Prior~~On April 1, 2020, Enable announced a 50% reduction in its quarterly distribution per common unit from $0.3305 to ~~the Internal Spin in September 2018, distributions from Enable were received by CERC. After such date, distributions from Enable were received by CenterPoint Energy.~~$0.16525.

Transactions with Enable (CenterPoint Energy and CERC):

The transactions with Enable in the following tables exclude transactions with the Energy Services Disposal Group, which are now reflected as discontinued operations and liabilities held for sale.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
CenterPoint Energy
Natural gas expenses, including transportation and storage costs (1)
$ 26
$ 23
$ 89
$ 89
Reimbursement of support services (2)
—
1
3
4
CERC
Natural gas expenses, including transportation and storage costs (1)
26
23
89
89
Reimbursement of support services (2)
—
1
3
4



		Three Months Ended March 31,
		2020		2019
	(in millions)
CenterPoint Energy
Natural gas expenses, includes transportation and storage costs		$	27	$	27
CERC
Natural gas expenses, includes transportation and storage costs		27		27


~~(1)~~	~~Included in Non-utility costs of revenues, including natural gas on CenterPoint Energy’s and CERC’s respective Condensed Statements of Consolidated Income.~~


~~(2)~~	~~Represents amounts billed for certain support services provided to Enable. Actual support services costs are recorded net of reimbursement.~~


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
CenterPoint Energy
Accounts payable for natural gas purchases from Enable	$	9	$	11	$	9	$	9
Accounts receivable for amounts billed for services provided to Enable	3		2
CERC
Accounts payable for natural gas purchases from Enable	9		11		9		9
Accounts receivable for amounts billed for services provided to Enable	3		2

Summarized unaudited consolidated income information for Enable is as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019
2018
(in millions)
Operating revenues $ 699
$ 928
$ 2,229
$ 2,481
Cost of sales, excluding depreciation and amortization 263
516
958
1,335
Depreciation and amortization 108
100
323
292
Operating income 175
171
507
436
Net income attributable to Enable common units 123
129
351
320
Reconciliation of Equity in Earnings (Losses), net:
CenterPoint Energy’s interest $ 66
$ 70
$ 189
$ 173
Basis difference amortization (1) 11
11
35
35
Loss on dilution, net of proportional basis difference recognition —
—
(11 ) —
CenterPoint Energy’s equity in earnings, net $ 77
$ 81
$ 213
$ 208



		Three Months Ended March 31,
		2020			2019
	(in millions)
Operating revenues		$	648		$	795
Cost of sales, excluding depreciation and amortization		226			378
Depreciation and amortization		104			105
Goodwill and long-lived assets impairments		28			—
Operating income		146			165
Net income attributable to Enable common units		103			113
Reconciliation of Equity in Earnings (Losses), net:
CenterPoint Energy’s interest		$	55		$	61
Basis difference amortization (1)		12			12
Loss on dilution, net of proportional basis difference recognition		(1		)	(11		)
Impairment of CenterPoint Energy’s equity method investment in Enable		(1,541		)	—
CenterPoint Energy’s equity in earnings, net		$	(1,475	)	$	62


(1)	Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in net assets of Enable. The basis difference is being amortized through the year 2048.

Summarized unaudited consolidated balance sheet information for Enable is as follows:

September 30, 2019 December 31, 2018
(in millions)
Current assets $ 417
$ 449
Non-current assets 12,018
11,995
Current liabilities 819
1,615
Non-current liabilities 4,076
3,211
Non-controlling interest 37
38
Preferred equity 362
362
Accumulated other comprehensive loss (4 ) —
Enable partners’ equity 7,145
7,218
Reconciliation of Investment in Enable:
CenterPoint Energy’s ownership interest in Enable partners’ equity $ 3,838
$ 3,896
CenterPoint Energy’s basis difference (1,371 ) (1,414 )
CenterPoint Energy’s equity method investment in Enable $ 2,467
$ 2,482



	March 31, 2020			December 31, 2019
	(in millions)
Current assets	$	333		$	389
Non-current assets	11,784			11,877
Current liabilities	391			780
Non-current liabilities	4,374			4,077
Non-controlling interest	27			37
Preferred equity	362			362
Accumulated other comprehensive loss	(9		)	(3		)
Enable partners’ equity	6,972			7,013
Reconciliation of Investment in Enable:
CenterPoint Energy’s ownership interest in Enable partners’ equity	$	3,739		$	3,767
CenterPoint Energy’s basis difference (1)	(2,891		)	(1,361		)
CenterPoint Energy’s equity method investment in Enable	$	848		$	2,406

~~Discontinued Operations (CERC):~~

On September 4, 2018, CERC completed the Internal Spin. CERC executed the Internal Spin to, among other things, enhance the access of CERC and CenterPoint Energy to low cost debt and equity through increased transparency and understandability of the financial statements, improve CERC’s credit quality by eliminating the exposure to Enable’s midstream business and provide clarity of internal reporting and performance metrics to enhance management’s decision making for CERC and CNP Midstream.

The Internal Spin represents a significant strategic shift that has a material effect on CERC’s operations and financial results and, as a result, CERC’s distribution of its equity investment in Enable met the criteria for discontinued operations classification. CERC has no continuing involvement with Enable other than its natural gas purchases from Enable. Therefore, CERC’s equity in earnings and related income taxes have been classified as Income from discontinued operations, net of tax, in CERC’s Condensed Statements of Consolidated Income for the periods presented. The following table presents amounts included in Income from discontinued operations, net of tax in CERC’s Condensed Statements of Consolidated Income.

Three months ended September 30, 2018 Nine months ended September 30, 2018
(in millions)
Equity in earnings of unconsolidated affiliate, net $ 57
$ 184
Income tax expense 13
44
Income from discontinued operations, net of tax $ 44
$ 140


(1)	Includes the impairment of CenterPoint Energy’s equity method investment in Enable of $1,541 million recorded during the three months ended March 31, 2020. The basis difference is being amortized through the year 2048.

(10) Goodwill and Other Intangibles (CenterPoint Energy and CERC)

Goodwill and intangible assets related to the Infrastructure Services and Energy Services Disposal Groups are classified as held for sale on CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets, as applicable, and are excluded from the tabular disclosures below. See Note 3 for further information.

CenterPoint Energy’s goodwill by reportable segment as of March 31, 2020 and December 31, ~~2018 and changes in the carrying amount of goodwill as of September 30,~~ 2019 is as follows:


	December 31, 2018		Additions (1)		September 30, 2019			December 31, 2019		Impairment		March 31, 2020
	(in millions)						(in millions)
Indiana Electric Integrated	$	—	$	1,008	$	1,008		$	1,121	$	185	$	936
Natural Gas Distribution	746		2,529		3,275			3,312		—		3,312
Energy Services (2)	110		—		110
Infrastructure Services	—		355		355
Corporate and Other	11		420		431			449		—		449
Total	$	867	$	4,312	$	5,179		$	4,882	$	185	$	4,697


~~(1)~~	~~The allocation of goodwill to reportable segments subsequent to the Merger is preliminary and subject to change. See Note 3.~~


~~(2)~~	~~Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.~~

CERC’s goodwill by reportable segment as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 is as follows:


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(in millions)				(in millions)
Natural Gas Distribution	$	746	$	746	$	746	$	746
Energy Services (1)	110		110
Corporate and Other	11		11		11		11
Total	$	867	$	867	$	757	$	757


~~(1)~~	~~Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.~~

CenterPoint Energy and CERC perform goodwill impairment tests at least annually and evaluate goodwill when events or changes in circumstances indicate that its carrying value may not be recoverable. The impairment evaluation for goodwill is performed by comparing the fair value of each reporting unit with the carrying amount of the reporting unit, including goodwill. The reporting units approximate the reportable segments, with the exception of ESG, which is a separate reporting unit but included in CenterPoint Energy’s Corporate and Other. The estimated fair value of the reporting unit is primarily determined based on an income approach or a weighted combination of income and market approaches. If the carrying amount is in excess of the estimated fair value of the reporting unit, then the excess amount is the impairment charge that should be recorded, not to exceed the carrying amount of goodwill. ~~See Note 2.~~

In connection with their preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units due to the macroeconomic conditions related in part to the COVID-19 pandemic and the resulting decrease in CenterPoint Energy’s enterprise market capitalization below book value from the decline in CenterPoint Energy’s common stock price.

CenterPoint Energy’s interim impairment test in the first quarter of 2020 resulted in a non-cash goodwill impairment charge

in the amount of $185 million for the Indiana Electric Integrated reportable segment. The Indiana Electric Integrated reporting unit fair value analysis resulted in an implied fair value of goodwill of $936 million for this reporting unit, and as a result, the non-cash impairment charge was recorded in the three months ended March 31, 2020.

CenterPoint Energy estimated the value of the Indiana Electric Integrated reporting unit using primarily an income approach. Under the income approach, the fair value of the reporting unit is determined by using the present value of future expected cash flows, which include management’s projections of the amount and ~~CERC performed~~timing of future capital expenditures and the ~~annual goodwill impairment test~~cash inflows from the related regulatory recovery. These estimated future cash flows are then discounted using a rate that approximates the weighted average cost of capital of a market participant. The selection of the discount rate requires significant judgment.

With the exception of Indiana Electric Integrated discussed above, the fair value of each of CenterPoint Energy’s and CERC’s reporting units exceeded their carrying value, resulting in ~~the third quarter of 2019 and determined that~~ no goodwill impairment ~~charge was required~~from the March 31, 2020 interim impairment test. See Note 3 for ~~any reporting unit. The reporting units approximate the reportable segments, with the exception of ESG, which is a separate reporting unit but~~goodwill impairments included ~~in CenterPoint Energy’s Corporate and Other reportable segment.~~within discontinued operations.

The tables below present information on CenterPoint Energy’s other intangible assets recorded in ~~Intangible~~Other non-current assets ~~net~~ on CenterPoint Energy’s Condensed Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CenterPoint Energy’s Condensed Statements of Consolidated Income, unless otherwise indicated.

September 30, 2019 December 31, 2018
Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance
(in millions)
Customer relationships (1)
$ 306
$ (40 ) $ 266
$ 86
$ (27 ) $ 59
Covenants not to compete 4
(3 ) 1
4
(3 ) 1
Trade names (1)
62
(4 ) 58
—
—
—
Construction backlog (1) (2)
28
(18 ) 10
—
—
—
Operation and maintenance agreements (1) (2)
12
(1 ) 11
—
—
—
Other (1)
24
(14 ) 10
16
(11 ) 5
Total $ 436
$ (80 ) $ 356
$ 106
$ (41 ) $ 65



	March 31, 2020							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
	(in millions)
Customer relationships	$	33	$	(5	)	$	28	$	33	$	(4	)	$	29
Trade names	16		(1		)	15		16		(1		)	15
Construction backlog (1)	5		(4		)	1		5		(4		)	1
Operation and maintenance agreements (1)	12		(1		)	11		12		—			12
Other	2		(1		)	1		2		(1		)	1
Total	$	68	$	(12	)	$	56	$	68	$	(10	)	$	58


(1)	~~The fair value of intangible assets acquired through acquisitions is preliminary and subject to change. See Note 3.~~


~~(2)~~	Amortization expense related to the operation and maintenance agreements and construction backlog is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Condensed Statements of Consolidated Income.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization (1)
$ 7
$ 2
$ 20
$ 7
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas (2)
7
—
19
—


~~(1)~~	Includes $5 million and $13 million for the three and nine months ended September 30, 2019, respectively, of amortization expense related to intangibles acquired in the Merger. The fair value of intangible assets, and related amortization

~~assumptions, acquired through acquisitions during the nine months ended September 30, 2019, is preliminary and subject to change. See Note 3.~~


~~(2)~~	The fair value of intangible assets, and related amortization assumptions, acquired through acquisitions during the nine months ended September 30, 2019, is preliminary and subject to change. See Note 3.

The tables below present information on CERC’s other intangible assets recorded in Other non-current assets on CERC’s Condensed Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CERC’s Condensed Statements of Consolidated Income.



		Three Months Ended March 31,
		2020		2019
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization		$	1	$	—
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas		1		7

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization $ 2
$ 2
$ 7
$ 7

CenterPoint Energy ~~and CERC estimate~~estimates that amortization expense of intangible assets with finite lives for the next five years will be as follows:


	Amortization Expense				Amortization Expense
	CenterPoint Energy		CERC		(in millions)
	(in millions)
Remaining three months of 2019	$	15	$	4
2020	32		6
Remaining nine months of 2020					$	6
2021	31		6		6
2022	32		6		6
2023	31		5		6
2024	29		5		5
2025					5

(11) Indexed Debt Securities (ZENS) and Securities Related to ZENS (CenterPoint Energy)

(a) Investment in Securities Related to ZENS

A subsidiary of CenterPoint Energy holds shares of certain securities detailed in the table below, which are classified as trading securities and are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS. Unrealized gains and losses resulting from changes in the market value of the ZENS-Related Securities are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.


	Shares Held		Shares Held
	September 30, 2019	December 31, 2018	March 31, 2020	December 31, 2019
AT&T Common	10,212,945	10,212,945	10,212,945	10,212,945
Charter Common	872,503	872,912	872,503	872,503

(b) ZENS

In September 1999, CenterPoint Energy issued ZENS having an original principal amount of $1.0 billion of which $828 million remained outstanding as of ~~September 30, 2019.~~March 31, 2020. Each ZENS is exchangeable at the holder’s option at any time for an amount of cash equal to 95% of the market value of the reference shares attributable to such note. The number and identity of the reference shares attributable to each ZENS are adjusted for certain corporate events.

CenterPoint Energy’s reference shares for each ZENS consisted of the following:


	September 30, 2019	December 31, 2018	March 31, 2020	December 31, 2019
	(in shares)		(in shares)
AT&T Common	0.7185	0.7185	0.7185	0.7185
Charter Common	0.061382	0.061382	0.061382	0.061382

CenterPoint Energy pays interest on the ZENS at an annual rate of 2% plus the amount of any quarterly cash dividends paid in respect of the ~~ZENS-Related Securities.~~reference shares attributable to the ZENS. The principal amount of the ZENS is subject to increases or decreases to the extent that the annual yield from interest and cash dividends on the ~~ZENS-Related Securities~~reference shares attributable to the ZENS is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of ~~September 30, 2019,~~March 31, 2020, the ZENS, having an original principal amount of $828 million and a contingent principal amount of ~~$80~~$70 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the ~~ZENS-Related Securities.~~reference shares attributable to the ZENS.

(12) Short-term Borrowings and Long-term Debt


(a)	Short-term Borrowings (CenterPoint Energy and CERC)

Inventory Financing. NGD has AMAs associated with its utility distribution service in Arkansas, Louisiana, Mississippi, Oklahoma and Texas. The AMAs have varying terms, the longest of which expires in 2021. Pursuant to the provisions of the agreements, NGD sells natural gas and agrees to repurchase an equivalent amount of natural gas during the winter heating seasons at the same cost. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had no outstanding obligations related to the AMAs as of both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


(b)	Long-term Debt

~~Debt Transactions.~~ ~~During the nine months ended September 30, 2019, the following debt instruments were issued or incurred:~~

Issuance Date Debt Instrument Aggregate Principal Amount
Interest Rate as of
September 30, 2019
Maturity Date
(in millions)
Houston Electric January 2019 General mortgage bonds $ 700
4.25 % 2049
CenterPoint Energy (1)
February 2019 Variable rate term loan 25
2.88 % 2020
CenterPoint Energy May 2019 Variable rate term loan 1,000
2.81 % 2021
CenterPoint Energy August 2019 Unsecured senior notes 500
2.50 % 2024
CenterPoint Energy August 2019 Unsecured senior notes 400
2.95 % 2030
CenterPoint Energy August 2019 Unsecured senior notes 300
3.70 % 2049


~~(1)~~	~~Draw down by VCC on its variable rate term loan.~~

Proceeds from Houston Electric’s debt issuance were used for general limited liability company purposes, including capital expenditures. Proceeds from VCC’s draw down of its term loan were used for general corporate purposes. Proceeds from CenterPoint Energy’s debt issuances were used for general corporate purposes, including the repayment of commercial paper.

~~Acquired Debt (CenterPoint Energy).~~ ~~The table below summarizes the long-term external debt of Vectren and its subsidiaries that remained outstanding as of September 30, 2019:~~

(in millions)
Long-term debt:
Senior notes due 2020 to 2045 (1)
$ 637
Variable rate term loan due 2020 (2)
300
Variable rate term loan due 2020 (3)
200
First mortgage bonds due 2022 to 2055 (4)
293
Commercial paper (5)
278
Bank revolver (6)
—
Total Vectren debt $ 1,708

~~(1)~~

Consists of $532 million of senior notes issued by VUHI, $96 million of senior notes issued by Indiana Gas, and $9 million of senior notes issued by VCC. The senior notes have stated interest rates that range from 3.33% to 7.08%. The senior notes issued by VUHI are guaranteed by SIGECO, Indiana Gas and VEDO. The senior notes issued by VCC are guaranteed by Vectren. In connection with the Merger, two of CenterPoint Energy’s acquired wholly-owned subsidiaries, VUHI and VCC, made offers to prepay certain outstanding guaranteed senior notes as required pursuant to certain note purchase agreements previously entered into by VUHI and VCC. In turn, VUHI and VCC borrowed $568 million and $191 million, respectively, from CenterPoint Energy to fund note redemptions effected pursuant to these prepayment offers. To fund these prepayments and payments of approximately $5 million of accrued interest, CenterPoint Energy issued approximately $764 million of commercial paper.


~~(2)~~	Issued by VUHI and guaranteed by SIGECO, Indiana Gas and VEDO. As of September 30, 2019, the term loan was fully drawn upon. The term loan’s interest rate is currently priced at one-month LIBOR, plus a credit spread ranging from 70 to 90 basis points depending on credit rating.


~~(3)~~	Issued by VCC and guaranteed by Vectren. As of September 30, 2019, the term loan was fully drawn upon, exclusive of any potential incremental term loans under the related facility’s accordion feature. The term loan’s interest rate is currently priced at one-month LIBOR, plus a credit spread of 70 basis points.


~~(4)~~	The first mortgage bonds issued by SIGECO subject SIGECO’s properties to a lien under the related mortgage indenture. The first mortgage bonds have stated interest rates that range from 2.375% to 6.72%.


~~(5)~~	~~Issued by VUHI with maturities up to 30 days.~~


~~(6)~~	~~Represents borrowings under the VCC credit facility, which is guaranteed by Vectren.~~

~~Maturities (CenterPoint Energy).~~ ~~As of September 30, 2019, maturities of CenterPoint Energy’s long-term debt were as follows:~~

(in millions)
Remaining three months of 2019 $ 69
2020 831
2021 2,761
2022 2,998
2023 713
2024 1,184
2025 and thereafter 6,447

Credit Facilities. The Registrants had the following revolving credit facilities as of ~~September 30, 2019:~~March 31, 2020:


Execution Date	Registrant	Size of Facility		Draw Rate of LIBOR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of September 30, 2019 (2)	Termination Date	Registrant	Size of Facility		Draw Rate of LIBOR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of March 31, 2020 (2)	Termination Date
		(in millions)								(in millions)
March 3, 2016	CenterPoint Energy	$	3,300	1.500%	65%	(3)	58.6%	March 3, 2022	CenterPoint Energy	$	3,300	1.500%	65%	(3)	59.0%	March 3, 2022
July 14, 2017	CenterPoint Energy (4)	400		1.125%	65%		52.9%	July 14, 2022	CenterPoint Energy (4)	400		1.125%	65%		50.4%	July 14, 2022
July 14, 2017	CenterPoint Energy (5)	200		1.250%	65%		57.1%	July 14, 2022	CenterPoint Energy (5)	200		1.250%	65%		56.5%	July 14, 2022
March 3, 2016	Houston Electric	300		1.125%	65%	(3)	48.7%	March 3, 2022	Houston Electric	300		1.250%	65%	(3)	53.4%	March 3, 2022
March 3, 2016	CERC	900		1.250%	65%		47.5%	March 3, 2022	CERC	900		1.250%	65%		43.6%	March 3, 2022
	Total	$	5,100						Total	$	5,100


(1)	Based on current credit ratings.


(2)	As defined in the revolving credit facility agreements, excluding Securitization Bonds.

(3)

For CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase from 65% to 70% if Houston Electric experiences damage from a natural disaster in its service territory and CenterPoint Energy certifies to the administrative agent that Houston Electric has incurred system restoration costs reasonably likely to exceed $100 million in a consecutive 12-month period, all or part of which Houston Electric intends to seek to recover through securitization financing. Such temporary increase in the financial covenant would be in effect from the date CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of such certification.


(4)	This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $10 million swing line sublimit and a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program.


(5)	This credit facility was issued by VCC, is guaranteed by Vectren and includes a $40 million swing line sublimit and an $80 million letter of credit sublimit.

The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of ~~September 30, 2019.~~March 31, 2020.

The table below reflects the utilization of the Registrants’ respective revolving credit facilities:


	September 30, 2019								December 31, 2018								March 31, 2020								December 31, 2019
Registrant	Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)																(in millions, except weighted average interest rate)
CenterPoint Energy (1)	$	—	$	6	$	1,383	2.28	%	$	—	$	6	$	—	—	%	$	900	$	6	$	1,169	2.17	%	$	—	$	6	$	1,633	1.95	%
CenterPoint Energy (2)	—		—		278		2.30	%	—		—		—		—		150		—		76		2.19	%	—		—		268		2.08	%
CenterPoint Energy (3)	—		—		—		—	%	—		—		—		—		—		—		—		—	%	—		—		—		—	%
Houston Electric	—		—		—		—	%	—		4		—		—		—		—		—		—	%	—		—		—		—	%
CERC	—		1		310		2.28	%	—		1		210		2.93	%	—		1		205		2.80	%	—		1		377		1.94	%
Total	$	—	$	7	$	1,971			$	—	$	11	$	210			$	1,050	$	7	$	1,450			$	—	$	7	$	2,278


(1)	CenterPoint Energy’s outstanding commercial paper generally has maturities of 60 days or less.


(2)	This credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.


(3)	This credit facility was issued by VCC and is guaranteed by Vectren.

Other. As of ~~September 30, 2019,~~March 31, 2020, certain financial institutions agreed to issue, from time to time, up to $50 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on December 31, ~~2019.~~2020. As of ~~September 30, 2019,~~March 31, 2020, such financial institutions had issued ~~$21~~$20 million of letters of credit on behalf of Vectren and certain of its subsidiaries.

Houston Electric had $68 million and $68 million of general mortgage bonds outstanding as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, as collateral for long-term debt of CenterPoint Energy that matures in 2028. These bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations.

(13) Income Taxes

The Registrants reported the following effective tax rates:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
CenterPoint Energy (1)
19 % 24 % 15 % 26 %
Houston Electric (2)
18 % 20 % 18 % 21 %
CERC - Continuing operations (3) (4)
13 % 5 % 14 % 29 %
CERC - Discontinued operations (5)
n/a
23 % n/a
24 %



	Three Months Ended March 31,
	2020		2019
CenterPoint Energy - Continuing operations (1)	25	%	9	%
CenterPoint Energy - Discontinued operations (2)	10	%	24	%
Houston Electric (3)	13	%	18	%
CERC - Continuing operations (4)	21	%	14	%
CERC - Discontinued operations (5)	15	%	22	%

(1)

CenterPoint Energy’s ~~lower~~higher effective tax rate on the loss from continuing operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~same periods for 2018~~three months ended March 31, 2019 was primarily due to lower earnings from the ~~following:~~impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of ~~amortization of the net regulatory EDIT liability; the effect of state tax law changes that resulted in the~~ remeasurement of state deferred ~~taxes; and the impact of~~tax liabilities for changes in ~~valuation allowances on certain state net operating losses.~~apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.


(2)	CenterPoint Energy’s lower effective tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was primarily due to the non-deductible portions of goodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.


(3)	Houston ~~Electric’s~~Electric's lower effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~same periods for 2018~~three months ended March 31, 2019 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability.

~~(3)~~(4)

CERC’s higher effective tax rate on ~~loss~~income from continuing operations for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~same period for 2018~~three months ended March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT liability, which was partially offset by the absence of a change in the valuation allowance on certain state net operating losses in the three months ended September 30, 2019, the effects of which are compounded by the book loss in the three months ended September 30, 2019.


~~(4)~~	CERC’s lower effective tax rate on income from continuing operations for the nine months ended September 30, 2019 compared to the same period for 2018 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability, which was partially offset by the impact of changes in the valuation allowances on certain state net operating losses in 2019.liability.

(5)

CERC’s lower effective tax rate on ~~income~~the loss from discontinued operations for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2020 was ~~a result~~due to the non-deductible portion of the ~~21% federal income tax rate plus allocable state income taxes. There are no comparable periods in 2019 since~~goodwill impairment on the ~~Internal Spin was completed in the third quarter of 2018.~~Energy Services Disposal Group.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, deferring the payment of the employer share of payroll taxes for the remaining months of 2020 until 2021 and 2022, increasing the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerating refunds for minimum tax credit carryforwards, among other provisions. The tax effects of changes in tax laws are recognized in the period in which the law is enacted. As such, CenterPoint Energy recorded a $19 million benefit resulting from carryback claims expected to be filed to refund taxes paid in prior years.

The Registrants reported a net uncertain tax liability, inclusive of interest and penalties, of ~~less than $1~~$8 million as of ~~September 30, 2019, which reflects a release of approximately~~March 31, 2020. A net $1 million ~~following~~decrease from December 31, 2019 was primarily driven by a favorable court of appeals decision resulting in a reduction of the ~~completion~~associated state tax reserve. The Registrants believe that it is reasonably possible that a decrease of ~~Vectren’s 2016 IRS audit. No significant changes~~up to ~~the uncertain~~$5 million in unrecognized tax ~~liability are expected over~~benefits may occur in the next ~~twelve months.~~12 months as a result of a lapse of statutes on older exposures and/or the filing

of applications for accounting method changes. For ~~legacy~~ CenterPoint Energy, tax years through ~~2016~~2017 have been audited and settled with the ~~IRS; however, CenterPoint Energy filed amended returns for 2014 and 2015 to claim additional tax credits that are currently under review by the~~ IRS. For the ~~2017 - 2019~~2018-2020 tax years, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process. Legacy Vectren is not currently under audit with the IRS, and the 2017-2019 tax years are still open.

(14) Commitments and Contingencies


(a)	Purchase Obligations (CenterPoint Energy and CERC)

Commitments include minimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas Distribution ~~and Energy Services~~ reportable ~~segments~~segment and CenterPoint Energy’s Indiana Electric Integrated reportable segment. Contracts with minimum payment provisions have various quantity requirements and durations and are not classified as non-trading derivative

assets and liabilities in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. These contracts meet an exception as “normal purchases contracts” or do not meet the definition of a derivative. Natural gas and coal supply commitments also include transportation contracts that do not meet the definition of a derivative.

As of ~~September 30, 2019,~~March 31, 2020, minimum purchase obligations are approximately:


	CenterPoint Energy		CERC		CenterPoint Energy (1)		CERC (1)
	(in millions)				(in millions)
Remaining three months of 2019	$	217	$	160
2020	745		528
Remaining nine months of 2020					$	464	$	309
2021	614		429		601		417
2022	412		235		409		234
2023	330		177		327		175
2024	265		169		263		168
2025 and beyond	1,846		1,483
2025					208		163
2026 and beyond					1,622		1,329


(1)	Excludes Energy Services Disposal Group obligations.

Indiana Electric Integrated also has other purchased power agreements that do not have minimum thresholds but do require payment when energy is generated by the provider. Costs arising from certain of these commitments are pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.

CenterPoint Energy’s and CERC’s NGD have AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group. The AMAs have varying terms, the longest of which expires in 2021. For further information, see Note 3.


(b)	Guarantees and Product Warranties (CenterPoint Energy)

In the normal course of business, ESG enters into contracts requiring it to timely install infrastructure, operate facilities, pay vendors and subcontractors and support warranty obligations and, at times, issue payment and performance bonds and other forms of assurance in connection with these contracts.

Specific to ESG’s role as a general contractor in the performance contracting industry, as of ~~September 30, 2019,~~March 31, 2020, there were 6362 open surety bonds supporting future performance with an aggregate face amount of approximately ~~$627~~$563 million. ESG’s exposure is less than the face amount of the surety bonds and is limited to the level of uncompleted work under the contracts. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~35%~~34% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to ESG. In addition to these performance obligations, ESG also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. Since ESG’s inception in 1994, CenterPoint Energy believes ESG has had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operating effectively. CenterPoint Energy assessed the fair value of its obligation for such guarantees as of ~~September 30, 2019~~March 31, 2020 and no amounts were recorded on CenterPoint Energy’s Condensed Consolidated Balance Sheets. ~~The Merger purchase price allocation, including the fair value of liabilities for guarantees on the Merger Date, remains preliminary. See Note 3.~~

CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of ESG. These guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of subsidiary obligations to allow those subsidiaries to conduct business without posting other forms of assurance. As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting ESG’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees

to be approximately ~~$498~~$513 million as of ~~September 30, 2019.~~March 31, 2020. This exposure primarily relates to energy savings guarantees on federal energy savings performance contracts. Other parent company level guarantees, certain of which do not contain a cap on potential liability, have been issued in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy considers the likelihood of a material amount being incurred as remote.


(c)	Guarantees and Product Warranties (CenterPoint Energy and CERC)

In the normal course of business, the Energy Services Disposal Group trades natural gas under supply contracts and enters into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities, CERC Corp. has issued guarantees to the Energy Services Disposal Group’s counterparties to guarantee the payment of the Energy Services Disposal Group’s obligations. While the Energy Services Disposal Group remains wholly-owned by CERC Corp., these guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of the Energy Services Disposal Group’s obligations to allow the Energy Services Disposal Group to conduct business without posting other forms of assurance. As of March 31, 2020, the face amount of CERC Corp.’s guarantees of the Energy Services Disposal Group’s obligations was approximately $1.5 billion.

A CERC Corp. guarantee primarily has a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by the Energy Services Disposal Group prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Since CERC Corp. has owned the Energy Services Disposal Group, CERC Corp. has not paid any amounts under any guarantees of the Energy Services Disposal Group’s obligations. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. Under the terms of the Equity Purchase Agreement, Athena Energy Services must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after closing of the sale. Additionally, to the extent that CERC Corp. retains any exposure relating to the guarantees of the Energy Services Disposal Group obligations 90 days after closing, Athena Energy Services will pay a 3% annualized fee on such exposure, increasing by 1% on an annualized basis every three months.

CenterPoint Energy and CERC recorded 0 amounts on their respective Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 related to these guarantees.


(d)	Legal, Environmental and Other Matters

Legal Matters

~~Gas Market Manipulation Cases (CenterPoint Energy and CERC)~~. CenterPoint Energy, its predecessor, Reliant Energy, and certain of their former subsidiaries were named as defendants in a large number of lawsuits filed against numerous gas market participants in a number of federal and western state courts in connection with the operation of the natural gas markets in 2000-2002. CenterPoint Energy and its affiliates were released or dismissed from all such cases, except for one case in federal court in Nevada

in which CES, a subsidiary of CERC, was a defendant. Plaintiffs in that case alleged a conspiracy to inflate Wisconsin natural gas prices in 2000-2002. In October 2018, CES reached an agreement to settle all claims against CES and CES’s claims for indemnity. During the third quarter of 2019, the federal district court issued final approval of the settlement and dismissed the case, and CES completed the required settlement payments; the settlement agreement has now become final. This settlement did not have a material adverse effect on CenterPoint Energy’s or CERC’s financial condition, results of operations or cash flows.

Minnehaha Academy (CenterPoint Energy and CERC). On August 2, 2017, a natural gas explosion occurred at the Minnehaha Academy in Minneapolis, Minnesota, resulting in the deaths of two school employees, serious injuries to others and significant property damage to the school. CenterPoint Energy, certain of its subsidiaries, including CERC, and the contractor company working in the school have been named in litigation arising out of this incident. CenterPoint Energy and CERC have reached confidential settlement agreements on all wrongful death and property damage claims and with some personal injury claimants. Additionally, CenterPoint Energy and CERC ~~are cooperating~~cooperated with the ~~ongoing~~ investigation conducted by the National Transportation Safety ~~Board.~~Board, which concluded its investigation in December 2019 and issued a report without making any recommendations. Further, CenterPoint Energy and CERC contested and ~~have since~~ reached a settlement regarding approximately $200,000 in fines imposed by the Minnesota Office of Pipeline Safety. In early 2018, the Minnesota Occupational Safety and Health Administration concluded its investigation without any adverse findings against CenterPoint Energy or CERC. CenterPoint Energy’s and CERC’s general and excess liability insurance policies provide coverage for third party bodily injury and property damage claims.

Litigation Related to the Merger (CenterPoint Energy). With respect to the Merger, in July 2018, seven separate lawsuits were filed against Vectren and the individual directors of Vectren’s Board of Directors in the U.S. District Court for the Southern District of Indiana. These lawsuits alleged violations of Sections 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Vectren Proxy Statement filed on June 18, 2018 was materially incomplete because it omitted material information concerning the Merger. In August 2018, the seven lawsuits were consolidated, and the Court denied the plaintiffs’ request for a preliminary injunction. In October 2018, the plaintiffs filed their Consolidated Amended Class Action Complaint. In December 2018, two plaintiffs voluntarily dismissed their lawsuits. In September 2019, the court granted the defendants’ motion to dismiss and dismissed the remaining plaintiffs’ claims with prejudice, which the plaintiffs appealed in October 2019. The defendants believe that the allegations asserted are without merit and intend to vigorously defend themselves against the claims raised. CenterPoint Energy

does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows.

Environmental Matters

MGP Sites. CenterPoint Energy, CERC and their predecessors operated MGPs in the past. In addition, certain of CenterPoint Energy’s subsidiaries acquired through the Merger operated MGPs in the past. The costs CenterPoint Energy or CERC, as applicable, expect to incur to fulfill their respective obligations are estimated by management using assumptions based on actual costs incurred, the timing of expected future payments and inflation factors, among others. While CenterPoint Energy and CERC have recorded all costs which they presently are obligated to incur in connection with activities at these sites, it is possible that future events may require remedial activities which are not presently foreseen, and those costs may not be subject to PRP or insurance recovery.


(i)	Minnesota MGPs (CenterPoint Energy and CERC). With respect to certain Minnesota MGP sites, CenterPoint Energy and CERC have completed state-ordered remediation and continue state-ordered monitoring and water treatment. CenterPoint Energy and CERC recorded a liability as reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.

(ii)

Indiana MGPs (CenterPoint Energy). In the Indiana Gas service territory, the existence, location and certain general characteristics of 26 gas manufacturing and storage sites have been identified for which CenterPoint Energy may have some remedial responsibility. A remedial investigation/feasibility study was completed at one of the sites under an agreed upon order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. The remaining sites have been submitted to the IDEM’s VRP. CenterPoint Energy has also identified its involvement in five manufactured gas plant sites in SIGECO’s service territory, all of which are currently enrolled in the IDEM’s VRP. CenterPoint Energy is currently conducting some level of remedial activities, including groundwater monitoring at certain sites.


(iii)	Other MGPs (CenterPoint Energy and CERC). In addition to the Minnesota and Indiana sites, the EPA and other regulators have investigated MGP sites that were owned or operated by CenterPoint Energy or CERC or may have been owned by one of their former affiliates.

Total costs that may be incurred in connection with addressing these sites cannot be determined at this time. The estimated accrued costs are limited to CenterPoint Energy’s and CERC’s share of the remediation efforts and are therefore net of exposures of other PRPs. The estimated range of possible remediation costs for the sites for which CenterPoint Energy and CERC believe they may have responsibility was based on remediation continuing for the minimum time frame given in the table below.


	September 30, 2019				March 31, 2020
	CenterPoint Energy		CERC		CenterPoint Energy		CERC
	(in millions, except years)				(in millions, except years)
Amount accrued for remediation	$	9	$	7	$	11	$	7
Minimum estimated remediation costs	7		4		7		5
Maximum estimated remediation costs	51		32		53		32
Minimum years of remediation	5		30		5		30
Maximum years of remediation	50		50		50		50

The cost estimates are based on studies of a site or industry average costs for remediation of sites of similar size. The actual remediation costs will depend on the number of sites to be remediated, the participation of other PRPs, if any, and the remediation methods used.

CenterPoint Energy and CERC do not expect the ultimate outcome of these matters to have a material adverse effect on the financial condition, results of operations or cash flows of either CenterPoint Energy or CERC.

Asbestos. Some facilities owned by the Registrants or their predecessors contain or have contained asbestos insulation and other asbestos-containing materials. The Registrants are from time to time named, along with numerous others, as defendants in lawsuits filed by a number of individuals who claim injury due to exposure to asbestos, and the Registrants anticipate that additional claims may be asserted in the future. Although their ultimate outcome cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.

CCR Rule (CenterPoint Energy). In April 2015, the EPA finalized its CCR Rule, which regulates ash as non-hazardous material under the RCRA. The final rule allows beneficial reuse of ash, and the majority of the ash generated by Indiana Electric’s generating plants will continue to be reused. In July 2018, the EPA released its final CCR Rule Phase I Reconsideration which extended the deadline to October 31, 2020 for ceasing placement of ash in ponds that exceed groundwater protections standards or that fail to meet location restrictions. While the EPA Phase I Reconsideration moves forward, the existing CCR compliance obligations remain in effect. In August 2019, the EPA proposed additional amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. These amendments have not yet been finalized. The proposed revisions would not restrict Indiana Electric’s current beneficial reuse of its fly ash.

Indiana Electric has three ash ponds, two at the F.B. Culley facility (Culley East and Culley West) and one at the A.B. Brown facility. Under the existing CCR Rule, Indiana Electric is required to perform integrity assessments, including ground water monitoring, at its F.B. Culley and A.B. Brown generating stations. The ground water studies are necessary to determine the remaining service life of the ponds and whether a pond must be retrofitted with liners or closed in place, with bottom ash handling conversions completed. Indiana Electric’s Warrick generating unit is not included in the scope of the CCR Rule as this unit has historically been part of a larger generating station that predominantly serves an adjacent industrial facility. In March 2018, Indiana Electric began posting ground water data monitoring reports annually to its public website in accordance with the requirements of the CCR Rule. This data preliminarily indicates potential groundwater impacts very close to Indiana Electric’s ash impoundments, and further analysis is ongoing. The CCR Rule required companies to complete location restriction determinations by October 18, 2018. Indiana Electric completed its evaluation and determined that one F.B. Culley pond (Culley East) and the A.B. Brown pond fail the aquifer placement location restriction. As a result of this failure, Indiana Electric is required to cease disposal of new ash in the ponds and commence closure of the ponds by October 31, 2020. CenterPoint Energy plans to seek extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through December 31, 2023. The inability to take these extensions may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or adversely impact Indiana Electric’s future operations. Failure to comply with these requirements could also result in an enforcement proceeding including the imposition of fines and penalties. On April 24, 2019, Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already commenced closure activities. CenterPoint Energy believes the language in the IURC order is favorable for future recovery of closure costs for Indiana Electric’s remaining ponds.

Indiana Electric continues to refine site specific estimates of closure costs. In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. The proceeds of these settlements will offset costs that have been and will be incurred to close the ponds. In March 2019, Indiana Electric entered into agreements with third parties for the excavation and beneficial reuse of the ash at the A.B. Brown ash pond. On August 14, 2019, Indiana Electric filed its petition with the IURC for recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs associated with the excavation and recycling of the ponded ash. In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. Any

~~proceeds received will offset costs that have been and will be incurred to close the ponds.~~ On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR Rule. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.

As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy has recorded an approximate ~~$75~~$69 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the ~~anticipated outcome of~~settlements in the aforementioned insurance proceeding. In addition to these removal costs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.

Other Environmental. From time to time, the Registrants identify the presence of environmental contaminants during operations or on property where their predecessors have conducted operations. Other such sites involving contaminants may be identified in the future. The Registrants have and expect to continue to remediate any identified sites consistent with state and federal legal obligations. From time to time, the Registrants have received notices, and may receive notices in the future, from regulatory authorities or others regarding status as a PRP in connection with sites found to require remediation due to the presence of environmental contaminants. In addition, the Registrants have been, or may be, named from time to time as defendants in litigation related to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.

Other Proceedings

The Registrants are involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business. From time to time, the

Registrants are also defendants in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry. Some of these proceedings involve substantial amounts. The Registrants regularly analyze current information and, as necessary, provide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. The Registrants do not expect the disposition of these matters to have a material adverse effect on the Registrants’ financial condition, results of operations or cash flows.

(15) Earnings Per Share (CenterPoint Energy)

The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share. Basic earnings per common share is determined by dividing Income available to common shareholders - basic by the Weighted average common shares outstanding - basic for the applicable period. Diluted earnings per common share is determined by the inclusion of potentially dilutive common stock equivalent shares that may occur if securities to issue Common Stock were exercised or converted into Common Stock.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions, except share and per share amounts)
Numerator:
Income available to common shareholders - basic $ 241
$ 153
$ 546
$ 243
Add back: Series B Preferred Stock dividend —
—
—
—
Income available to common shareholders - diluted $ 241
$ 153
$ 546
$ 243

Denominator:
Weighted average common shares outstanding - basic 502,228,000
431,554,000
501,986,000
431,437,000
Plus: Incremental shares from assumed conversions:
Restricted stock 2,852,000
3,337,000
2,852,000
3,337,000
Series B Preferred Stock (1)
—
—
—
—
Weighted average common shares outstanding - diluted 505,080,000
434,891,000
504,838,000
434,774,000

Earnings per common share:
Basic earnings per common share $ 0.48
$ 0.35
$ 1.09
$ 0.56
Diluted earnings per common share $ 0.47
$ 0.35
$ 1.08
$ 0.56



	Three Months Ended March 31,
	2020			2019

Continuing Operations Numerator:
Income (loss) from continuing operations	$	(1,053	)	$	143
Less: Preferred stock dividend requirement	29			29
Income (loss) available to common shareholders - basic	(1,082		)	114
Add back: Series B Preferred Stock dividend (2)	—			—
Income (loss) available to common shareholders from continuing operations - diluted	$	(1,082	)	$	114
Discontinued Operations Numerator:
Income (loss) from discontinued operations	$	(146	)	$	26

Denominator:
Weighted average common shares outstanding - basic	502,388,000			501,521,000
Plus: Incremental shares from assumed conversions:
Restricted stock (1)	—			2,423,000
Series B Preferred Stock (2)	—			—
Weighted average common shares outstanding - diluted	502,388,000			503,944,000

Earnings (loss) per common share:
Basic earnings (loss) per common share - continuing operations	$	(2.15	)	$	0.23
Basic earnings (loss)per common share - discontinued operations	(0.29		)	0.05
Basic Earnings (Loss) Per Common Share	$	(2.44	)	$	0.28

Diluted earnings (loss) per common share - continuing operations	$	(2.15	)	$	0.23
Diluted earnings (loss) per common share - discontinued operations	(0.29		)	0.05
Diluted Earnings (Loss) Per Common Share	$	(2.44	)	$	0.28


(1)	2,567,000 incremental shares from assumed conversions of restricted stock have not been included in the computation of diluted earnings (loss) per share for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.

(2)

The potentially dilutive impact from Series B Preferred Stock applies the if-converted method in calculating diluted earnings per common share. Under this method, diluted earnings per common share is adjusted for the more dilutive effect of the Series B Preferred Stock as a result of either its accumulated dividend for the period in the numerator or the assumed-converted common share equivalent in the denominator. The computation of diluted earnings per common share outstanding for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 excludes Series B Preferred Stock dividends of $17 million and ~~$51~~$17 million, respectively, and ~~33,537,000~~35,923,000 and ~~33,537,000~~34,354,000 potentially dilutive shares, respectively, because to include them would be anti-dilutive. However, these could be potentially dilutive in the future.

(16) Reportable Segments

The Registrants’ determination of reportable segments considers the strategic operating units under which the ~~Registrants manage~~Registrants’ CODM manages sales, ~~allocate~~allocates resources and ~~assess~~assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. ~~The Registrants use operating~~As of January 1, 2020, the Registrants’ CODM views net income as the measure of profit or loss for the reportable segments ~~other~~rather than ~~Midstream Investments, where equity in earnings is used.~~the previous measure of operating income. Certain prior year amounts have been reclassified to conform to the current year presentation.

As of ~~September 30, 2019,~~March 31, 2020, reportable segments by Registrant were as follows:

Registrants

Houston Electric T&D

Indiana Electric Integrated

Natural Gas Distribution

~~Energy~~

~~Services~~

~~Infrastructure Services~~

Midstream Investments

~~Corporate and Other~~

CenterPoint Energy

Houston Electric

CERC

~~The~~CenterPoint Energy’s and Houston Electric’s Houston Electric T&D reportable segment consists of electric transmission and distribution services in the Texas Gulf Coast area.

~~The~~CenterPoint Energy’s Indiana Electric Integrated reportable segment consists of electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.

CenterPoint Energy’s Natural Gas Distribution reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and ~~Texas.~~Texas; (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP, formerly included in the Energy Services reportable segment; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES, formerly included in the Energy Services reportable segment.

CERC’s Natural Gas Distribution reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and ~~Texas.~~

•~~The~~Texas; (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP, formerly included in the Energy Services reportable ~~segment consists~~segment; and (iii) temporary delivery of ~~non-rate regulated natural gas sales~~LNG and ~~services operations.~~CNG throughout the contiguous 48 states through MES, formerly included in the Energy Services reportable segment.

•~~The Infrastructure Services reportable segment consists of underground pipeline construction and repair services.~~

~~The~~CenterPoint Energy’s Midstream Investments reportable segment consists of the equity investment in Enable (excluding the Enable Series A Preferred Units).

CenterPoint Energy’s Corporate and Other ~~reportable segment~~ consists of energy performance contracting and sustainable infrastructure services through ESG and other corporate operations which support all of the business operations of CenterPoint Energy.

CERC’s Corporate and Other ~~reportable segment~~ consists primarily of corporate operations which support all of the business operations of CERC.

Discontinued Operations

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group, which consists of underground pipeline construction and repair services. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. See Note 3 for further information.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group, which consists of non-rate regulated natural gas sales and service operations. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. See Note 3 for further information.

Financial data for reportable segments is as follows:

CenterPoint Energy

Three Months Ended September 30,
2019 2018
Revenues from
External
Customers Net
Intersegment
Revenues Operating
Income Revenues from
External
Customers Net
Intersegment
Revenues Operating
Income
(in millions)
Houston Electric T&D $ 859
(1) $ —
$ 269
$ 897
(1) $ —
$ 227
Indiana Electric Integrated 165
—
48
—
—
—
Natural Gas Distribution 515
9
27
402
8
3
Energy Services 734
11
2
910
10
(9 )
Infrastructure Services 376
1
42
—
—
—
Midstream Investments (2)
—
—
—
—
—
—
Corporate and Other 93
—
4
3
—
5
Eliminations —
(21 ) —
—
(18 ) —
Consolidated $ 2,742
$ —
$ 392
$ 2,212
$ —
$ 226


	Nine Months Ended September 30,																		Three Months Ended March 31,
	2019									2018									2020
	Revenues from External Customers			Net Intersegment Revenues			Operating Income (Loss)			Revenues from External Customers			Net Intersegment Revenues			Operating Income (Loss)			Revenues from External Customers			Equity in Earnings of Unconsolidated Affiliates			Depreciation and Amortization		Interest Income				Interest Expense				Income Tax Expense (Benefit)			Net Income (Loss)
	(in millions)																		(in millions)
Houston Electric T&D	$	2,313	(1)	$	—		$	522		$	2,502	(1)	$	—		$	523		$	638	(3)	$	—		$	129	$	1		(1)	$	(41	)	(2)	$	5		$	37
Indiana Electric Integrated	388			—			64			—			—			—			129			—			25		—				(6		)		3			(171		)
Natural Gas Distribution	2,554			29			241			2,032			26			166			1,318			—			111		1				(32		)		56			204
Energy Services	2,754			92			64			3,008			57			(20		)
Infrastructure Services	847			2			50			—			—			—
Midstream Investments (2)	—			—			—			—			—			—
Midstream Investments																			—			(1,475		)	—		—				(14		)		(361		)	(1,127		)
Corporate and Other																			82			—			17		48				(96		)		(50		)	4
Eliminations																			—			—			—		(50		)		50				—			—
Continuing Operations																			$	2,167		$	(1,475	)	$	282	$	—			$	(139	)		$	(347	)	(1,053		)
Discontinued Operations, net																																						(146		)
Consolidated																																						$	(1,199	)

																			Three Months Ended March 31,
																			2019
																			Revenues from External Customers			Equity in Earnings of Unconsolidated Affiliates			Depreciation and Amortization		Interest Income				Interest Expense				Income Tax Expense (Benefit)			Net Income (Loss)
																			(in millions)
Houston Electric T&D																			$	689	(3)	$	—		$	175	$	4		(1)	$	(40	)	(2)	$	6		$	30
Indiana Electric Integrated																			83			—			16		—				(3		)		(2		)	(9		)
Natural Gas Distribution																			1,415			—			95		1				(23		)		26			120
Midstream Investments																			—			62			—		2				(12		)		28			24
Corporate and Other	215			—			(17		)	11			—			(5		)	42			—			14		46				(84		)		(44		)	(22		)
Eliminations	—			(123		)	—			—			(83		)	—			—			—			—		(41		)		41				—			—
Consolidated	$	9,071		$	—		$	924		$	7,553		$	—		$	664		$	2,229		$	62		$	300	$	12			$	(121	)		$	14		143
Discontinued Operations, net																																						26
Consolidated																																						$	169


(1)	Excludes interest income from Securitization Bonds of $1 million and $2 million for the three months ended March 31, 2020 and 2019, respectively.


(2)	Excludes interest expense on Securitization Bonds of $8 million and $12 million for the three months ended March 31, 2020 and 2019, respectively.


(3)	CenterPoint Energy’s Houston Electric T&D&D’s revenues from major external customers are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Affiliates of NRG $ 231
$ 213
$ 547
$ 543
Affiliates of Vistra Energy Corp. 83
79
196
192


~~(2)~~	~~CenterPoint Energy’s Midstream Investments’ equity in earnings, net are as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Enable $ 77
$ 81
$ 213
$ 208



	Three Months Ended March 31,
	2020		2019
	(in millions)
Affiliates of NRG	$	156	$	151
Affiliates of Vistra Energy Corp.	81		54

Houston Electric

Houston Electric consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been

included.


~~(1)~~	~~Houston Electric T&D revenues from major external customers are as follows:~~

Houston Electric’s T&D revenues from major external customers are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
	(in millions)								(in millions)
Affiliates of NRG	$	231	$	213	$	547	$	543	$	156	$	151
Affiliates of Vistra Energy Corp.	83		79		196		192		81		54

CERC

Three Months Ended September 30,
2019 2018
Revenues from
External
Customers Net
Intersegment
Revenues Operating
Income Revenues from
External
Customers Net
Intersegment
Revenues Operating
Income
(Loss)
(in millions)
Natural Gas Distribution $ 389
$ 9
$ 20
$ 402
$ 8
$ 3
Energy Services 734
11
2
910
10
(9 )
Other Operations 3
—
1
—
—
(1 )
Eliminations —
(20 ) —
—
(18 ) —
Consolidated $ 1,126
$ —
$ 23
$ 1,312
$ —
$ (7 )


	Nine Months Ended September 30,															Three Months Ended March 31,
	2019							2018								2020
	Revenues from External Customers		Net Intersegment Revenues			Operating Income		Revenues from External Customers		Net Intersegment Revenues			Operating Income (Loss)			Revenues from External Customers		Depreciation and Amortization		Interest Income			Interest Expense			Income Tax Expense (Benefit)			Net Income (Loss)
	(in millions)															(in millions)
Natural Gas Distribution	$	2,077	$	29		$	212	$	2,032	$	26		$	166		$	1,008	$	74	$	1		$	(21	)	$	44		$	134
Energy Services	2,755		91			64		3,008		57			(20		)
Corporate and Other	4		—			1		—		—			—			3		—		21			(31		)	(9		)	(3		)
Eliminations	—		(120		)	—		—		(83		)	—			—		—		(22		)	22			—			—
Continuing Operations																$	1,011	$	74	$	—		$	(30	)	$	35		131
Discontinued Operations, net																													(64		)
Consolidated	$	4,836	$	—		$	277	$	5,040	$	—		$	146															$	67

																Three Months Ended March 31,
																2019
																Revenues from External Customers		Depreciation and Amortization		Interest Income			Interest Expense			Income Tax Expense (Benefit)			Net Income (Loss)
																(in millions)
Natural Gas Distribution																$	1,211	$	73	$	1		$	(19	)	$	26		$	119
Corporate and Other																1		—		20			(31		)	(8		)	(9		)
Eliminations																—		—		(21		)	21			—			—
Continuing Operations																$	1,212	$	73	$	—		$	(29	)	$	18		110
Discontinued Operations, net																													28
Consolidated																													$	138

CenterPoint Energy and CERC


	Total Assets															Total Assets
	September 30, 2019								December 31, 2018							March 31, 2020					December 31, 2019
	CenterPoint Energy				CERC				CenterPoint Energy				CERC			CenterPoint Energy		CERC			CenterPoint Energy		CERC
	(in millions)															(in millions)
Houston Electric T&D	$	11,463			$	—			$	10,509			$	—		$	10,870	$	—		$	11,264	$	—
Indiana Electric Integrated ~~(1)~~	3,009				—				—				—			3,015		—			3,168		—
Natural Gas Distribution ~~(1)~~	13,235				7,018				6,956				6,956			13,979		7,562			14,105		7,698
Energy Services	1,264				1,264				1,558				1,558
Infrastructure Services (1)	1,284				—				—				—
Midstream Investments	2,529				—				2,482				—			915		—			2,473		—
Corporate and Other (1)	4,884			(2)	121				6,156			(2)	66
Eliminations	(3,026		)		(474		)		(652		)		(366		)
Corporate and Other, net of eliminations																2,969		(87		)	2,555		(90		)
Continuing Operations																31,748		7,475			33,565		7,608
Assets Held for Sale																1,647		675			1,964		904
Consolidated	$	34,642			$	7,929		��	$	27,009			$	8,214		$	33,395	$	8,150		$	35,529	$	8,512


~~(1)~~	Total assets by reportable segment include assets acquired in the Merger, which are based on preliminary fair value estimates and allocations on the acquisition date and are subject to change. See Note 3.


~~(2)~~	Includes pension and other postemployment-related regulatory assets of $625 million and $665 million, respectively, as of September 30, 2019 and December 31, 2018. Additionally, total assets as of December 31, 2018 included $3.9 billion of temporary investments included in Cash and cash equivalents on CenterPoint Energy’s Consolidated Balance Sheets.

(17) Supplemental Disclosure of Cash Flow Information

CenterPoint Energy and CERC elected not to separately disclose discontinued operations on their respective Condensed Statements of Consolidated Cash Flows. See Note 3 for certain supplemental cash flow disclosures related to the Infrastructure Services and Energy Services Disposal Groups. The table below provides supplemental disclosure of cash flow ~~information:~~information and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups.


	Nine Months Ended September 30,												Three Months Ended March 31,
	2019						2018						2020						2019
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy			Houston Electric		CERC
	(in millions)												(in millions)
Cash Payments/Receipts:
Interest, net of capitalized interest	$	364	$	203	$	88	$	301	$	173	$	85	$	148	$	68	$	35	$	154		$	86	$	35
Income taxes, net	174		93		3		89		122		3
Income tax refunds, net													—		—		—		(4		)	—		—
Non-cash transactions:
Accounts payable related to capital expenditures	178		91		75		140		87		66		200		110		66		166			98		49
Capital distribution associated with the Internal Spin	—		—		—		—		—		1,460
ROU assets obtained in exchange for lease liabilities (1)	43		1		28		—		—		—		14		—		5		29			1		26


(1)	~~Includes~~2019 includes the transition impact of adoption of ASU 2016-02 Leases.

The table below provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the amount reported in the Condensed Statements of Consolidated Cash ~~Flows:~~Flows and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups.


	September 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)												(in millions)
Cash and cash equivalents	$	259	$	228	$	2	$	4,231	$	335	$	14	$	220	$	196	$	1	$	241	$	216	$	2
Restricted cash included in Prepaid expenses and other current assets	38		19		—		46		34		11		27		19		—		30		19		—
Restricted cash included in Other	—		—		—		1		1		—
Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows	$	297	$	247	$	2	$	4,278	$	370	$	25	$	247	$	215	$	1	$	271	$	235	$	2

(18) Related Party Transactions (Houston Electric and CERC)

Houston Electric and CERC participate in aCenterPoint Energy’s money pool through which they can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper.

The table below summarizes CenterPoint Energy money pool activity:


	September 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
	Houston Electric			CERC			Houston Electric			CERC			Houston Electric			CERC			Houston Electric			CERC
	(in millions, except interest rates)												(in millions, except interest rates)
Money pool investments (borrowings) (1)	$	772		$	87		$	(1	)	$	114		$	(133	)	$	—		$	481		$	—
Weighted average interest rate	2.32		%	2.32		%	2.42		%	2.42		%	1.98		%	1.98		%	1.98		%	1.98		%


(1)	Included in Accounts and notes receivable (payable)–affiliated companies on Houston Electric’s and CERC’s respective Condensed Consolidated Balance Sheets.

Houston Electric and CERC affiliate related net interest income (expense) were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Houston Electric CERC Houston Electric CERC Houston Electric CERC Houston Electric CERC
(in millions)
Interest income (expense) (1) $ 5
$ 1
$ 1
$ (2 ) $ 14
$ 3
$ 1
$ (4 )



	Three Months Ended March 31,
	2020				2019
	Houston Electric		CERC		Houston Electric		CERC

Interest income (expense) (1)	$	1	$	—	$	3	$	1


(1)	Interest income is included in Other income (expense), net and interest expense is included in Interest and other finance charges on Houston Electric’s and CERC’s respective Condensed Statements of Consolidated Income.

CenterPoint Energy provides some corporate services to Houston Electric and CERC. The costs of services have been charged directly to Houston Electric and CERC using methods that management believes are reasonable. These methods include negotiated usage rates, dedicated asset assignment and proportionate corporate formulas based on operating expenses, assets, gross margin, employees and a composite of assets, gross margin and employees. Houston Electric provides certain services to CERC. These services are billed at actual cost, either directly or as an allocation and include fleet services, shop services, geographic services, surveying and right-of-way services, radio communications, data circuit management and field operations. Additionally, CERC provides certain services to Houston Electric. These services are billed at actual cost, either directly or as an allocation and include line locating and other miscellaneous services. These charges are not necessarily indicative of what would have been incurred had Houston Electric and CERC not been affiliates.

Amounts charged for these services were as follows and are included primarily in operation and maintenance expenses:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Houston Electric CERC Houston Electric CERC Houston Electric CERC Houston Electric CERC
(in millions)
Corporate service charges $ 38
$ 31
$ 47
$ 36
$ 132
$ 106
$ 138
$ 105
Net affiliate service charges (billings) (3 ) 3
(3 ) 3
(7 ) 7
(8 ) 8

Infrastructure Services provides pipeline construction and repair services to CERC. Amounts charged for operation and maintenance expenses by Infrastructure Services to CERC were not significant from February 1, 2019 to September 30, 2019. Additionally, CERC, through CES, sells natural gas to Indiana Electric for use in electric generation activities. Amounts charged by CERC to Indiana Electric were not significant from February 1, 2019 to September 30, 2019.



	Three Months Ended March 31,
	2020					2019
	Houston Electric			CERC		Houston Electric			CERC
	(in millions)
Corporate service charges	$	49		$	55	$	52		$	43
Net affiliate service charges (billings)	(6		)	6		(2		)	2

The table below presents transactions among Houston Electric, CERC and their parent, Utility Holding.


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	60	$	16	$	60	$	75	$	100	$	119	$	123	$	286	$	385	$	32	$	24	$	20
Cash contribution from parent	—		—		—		600		590		—		—		600		—		—		590		—
Capital distribution to parent associated with the Internal Spin	—		—		—		1,460		—		—		—		1,460

(19)~~Leases~~

The Registrants adopted ASC 842, Leases, and all related amendments on January 1, 2019 using the modified retrospective transition method and elected not to recast comparative periods in the year of adoption as permitted by the standard. There was no adjustment to retained earnings as a result of transition. As a result, disclosures for periods prior to adoption will be presented in accordance with accounting standards in effect for those periods. The Registrants also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed them to carry forward the historical lease classification. Additionally, the Registrants elected the practical expedient related to land easements, which allows the carry forward of the accounting treatment for land easements on existing agreements. The total ROU assets obtained in exchange for new operating lease liabilities upon adoption were $30 million, $1 million and $27 million for CenterPoint Energy, Houston

~~Electric and CERC, respectively. The Merger was completed on February 1, 2019, and as such the amounts recorded upon adoption are exclusive of Vectren’s leases.~~

An arrangement is determined to be a lease at inception based on whether the Registrant has the right to control the use of an identified asset. ROU assets represent the Registrants’ right to use the underlying asset for the lease term and lease liabilities represent the Registrants’ obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Registrants are the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. Each Registrant uses the implicit rate for agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases.

The Registrants have lease agreements with lease and non-lease components and have elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings. For classes of leases in which lease and non-lease components are not combined, consideration is allocated between components based on the stand-alone prices. Variable payments are not significant to the Registrants.

The Registrants’ lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. Agreements in which the Registrants are lessors do not include provisions for the lessee to purchase the assets. Because risk is minimal, the Registrants do not take any significant actions to manage risk associated with the residual value of their leased assets.

The Registrants’ lease agreements are primarily equipment and real property leases, including land and office facility leases. The Registrants’ lease terms may include options to extend or terminate a lease when it is reasonably certain that those options will be exercised. Operating lease payments exclude approximately $16 million of legally-binding undiscounted minimum lease payments for leases signed but not yet commenced. The Registrants have elected an accounting policy that exempts leases with terms of one year or less from the recognition requirements of ASU 842.

~~The components of lease cost, included in Operation and maintenance expense on the Registrants’ respective Condensed Statements of Consolidated Income, are as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2019
CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
(in millions)
Operating lease cost $ 8
$ —
$ 1
$ 19
$ —
$ 4
Short-term lease cost 23
7
—
46
12
—
Variable lease cost 1
—
—
1
—
—
Total lease cost $ 32
$ 7
$ 1
$ 66
$ 12
$ 4

~~Supplemental balance sheet information related to leases was as follows:~~

September 30, 2019
CenterPoint Energy Houston Electric CERC
(in millions, except lease term and discount rate)
Assets:
Operating ROU assets (1)
$ 67
$ 1
$ 25
Total leased assets $ 67
$ 1
$ 25
Liabilities:
Current operating lease liability (2)
$ 21
$ —
$ 4
Non-current operating lease liability (3)
46
1
21
Total leased liabilities $ 67
$ 1
$ 25

Weighted-average remaining lease term (in years) - operating leases 5.2
5.4
7.9
Weighted-average discount rate - operating leases 3.41 % 3.51 % 3.66 %


~~(1)~~	~~Reported within Other assets in the Condensed Consolidated Balance Sheets.~~


~~(2)~~	~~Reported within Current other liabilities in the Condensed Consolidated Balance Sheets.~~


~~(3)~~	~~Reported within Other liabilities in the Condensed Consolidated Balance Sheets.~~

~~As of September 30, 2019, maturities of operating lease liabilities were as follows:~~

CenterPoint Energy
Houston
Electric
CERC
(in millions)
Remaining three months of 2019 $ 6
$ —
$ 1
2020 22
1
5
2021 15
—
5
2022 9
—
4
2023 7
—
3
2024 3
—
2
2025 and beyond 12
—
9
Total lease payments 74
1
29
Less: Interest 7
—
4
Present value of lease liabilities $ 67
$ 1
$ 25

~~The following table sets forth information concerning the Registrants’ obligations under non-cancelable long-term operating leases as of December 31, 2018:~~

CenterPoint Energy
Houston
Electric
CERC
(in millions)
2019 $ 6
$ 1
$ 5
2020 6
—
5
2021 5
—
4
2022 4
—
4
2023 3
—
3
2024 and beyond 12
—
11
Total (1)
$ 36
$ 1
$ 32


~~(1)~~	~~The Merger was completed on February 1, 2019. As such, these amounts are exclusive of Vectren’s leases.~~

~~As of September 30, 2019, maturities of undiscounted operating lease payments to be received are as follows:~~

CenterPoint Energy
Houston
Electric
CERC
(in millions)
Remaining three months of 2019 $ 1
$ —
$ —
2020 2
1
—
2021 2
—
—
2022 2
—
—
2023 2
—
—
2024 2
—
—
2025 and beyond 10
—
—
Total lease payments to be received $ 21
$ 1
$ —

~~Other information related to leases is as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2019
CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
(in millions)
Operating cash flows from operating leases included in the measurement of lease liabilities $ 6
$ —
$ 2
$ 18
$ 1
$ 4

~~(20)~~ Equity

Dividends Declared and Paid (CenterPoint Energy)

CenterPoint Energy paid dividends on its Common Stock during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ as presented in the table below:

Declaration Date Record Date Payment Date Per Share
Total
(in millions)
December 12, 2018

February 21, 2019

March 14, 2019
$ 0.2875
$ 144
April 25, 2019

May 16, 2019

June 13, 2019
0.2875
144
July 31, 2019

August 15, 2019

September 12, 2019
0.2875
145
Total 2019 $ 0.8625
$ 433

December 13, 2017

February 15, 2018

March 8, 2018
$ 0.2775
$ 120
April 26, 2018

May 17, 2018

June 14, 2018
0.2775
120
July 26, 2018

August 16, 2018

September 13, 2018
0.2775
120
Total 2018 $ 0.8325
$ 360



Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)
February 3, 2020	February 20, 2020	March 12, 2020	$	0.2900	$	145
Total 2020			$	0.2900	$	145

December 12, 2018	February 21, 2019	March 14, 2019	$	0.2875	$	144
Total 2019			$	0.2875	$	144

~~CenterPoint Energy declared no dividends on its Series A Preferred Stock or Series B Preferred Stock during the three or nine months ended September 30, 2018.~~

CenterPoint Energy paid dividends on its Series A Preferred Stock during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 as presented in the table below:


Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)		Record Date	Payment Date	Per Share		Total (in millions)
February 3, 2020							February 14, 2020	March 2, 2020	$	30.6250	$	25
Total 2020									$	30.6250	$	25

December 12, 2018	February 15, 2019	March 1, 2019	$	32.1563	$	26	February 15, 2019	March 1, 2019	$	32.1563	$	26
July 31, 2019	August 15, 2019	September 3, 2019	30.6250		24
Total 2019			$	62.7813	$	50			$	32.1563	$	26

CenterPoint Energy paid dividends on its Series B Preferred Stock during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 as presented in the table below:


Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)		Record Date	Payment Date	Per Share		Total (in millions)
February 3, 2020							February 14, 2020	March 2, 2020	$	17.5000	$	17
Total 2020									$	17.5000	$	17

December 12, 2018	February 15, 2019	March 1, 2019	$	17.5000	$	17	February 15, 2019	March 1, 2019	$	17.5000	$	17
April 25, 2019	May 15, 2019	June 3, 2019	17.5000		17
July 31, 2019	August 15, 2019	September 3, 2019	17.5000		17
Total 2019			$	52.5000	$	51			$	17.5000	$	17

Dividend Requirement on Preferred Stock (CenterPoint Energy)


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
	2019		2018		2019		2018			2020		2019
	(in millions)								(in millions)
Series A Preferred Stock	$	12	$	5	$	37	$	5		$	12	$	12
Series B Preferred Stock	17		—		51		—			17		17
Total preferred stock dividend requirement	$	29	$	5	$	88	$	5		$	29	$	29

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated comprehensive income (loss) are as follows:



	Three Months Ended September 30,															Three Months Ended March 31,
	2019								2018							2020								2019
	CenterPoint Energy			Houston Electric			CERC		CenterPoint Energy			Houston Electric		CERC		CenterPoint Energy			Houston Electric			CERC		CenterPoint Energy			Houston Electric			CERC
	(in millions)															(in millions)
Beginning Balance	$	(105	)	$	(15	)	$	5	$	(62	)	$	4	$	6	$	(98	)	$	(15	)	$	10	$	(108	)	$	(14	)	$	5
Other comprehensive income (loss) before reclassifications:
Deferred gain (loss) from interest rate derivatives (1)	(2		)	—			—		4			3		—		—			—			—		(1		)	(1		)	—
Other comprehensive loss from unconsolidated affiliates	(2		)	—			—		—			—		—		(3		)	—			—		—			—			—
Amounts reclassified from accumulated other comprehensive loss:
Actuarial losses (2)	2			—			—		2			—		—		2			—			—		2			—			—
Reclassification of deferred loss from cash flow hedges realized in net income																—			—			—		1			—			—
Tax expense	—			—			—		(2		)	—		—		(1		)	—			—		(1		)	—			—
Net current period other comprehensive income	(2		)	—			—		4			3		—
Net current period other comprehensive income (loss)																(2		)	—			—		1			(1		)	—
Ending Balance	$	(107	)	$	(15	)	$	5	$	(58	)	$	7	$	6	$	(100	)	$	(15	)	$	10	$	(107	)	$	(15	)	$	5

Nine Months Ended September 30,
2019 2018
CenterPoint Energy Houston Electric CERC CenterPoint Energy Houston Electric CERC
(in millions)
Beginning Balance $ (108 ) $ (14 ) $ 5
$ (68 ) $ —
$ 6
Other comprehensive income (loss) before reclassifications:
Deferred gain (loss) from interest rate derivatives (1) (3 ) (1 ) —
8
8
—
Other comprehensive loss from unconsolidated affiliates (2 ) —
—
—
—
—
Amounts reclassified from accumulated other comprehensive loss:
Prior service cost (2) 1
—
—
1
—
—
Actuarial losses (2) 6

—
5
—
—
Reclassification of deferred loss from cash flow hedges realized in net income 1
—
—
—
—
—
Tax expense (2 ) —
—
(4 ) (1 ) —
Net current period other comprehensive income (loss) 1
(1 ) —
10
7
—
Ending Balance $ (107 ) $ (15 ) $ 5
$ (58 ) $ 7
$ 6

(1)

Gains and losses are reclassified from Accumulated other comprehensive income into income when the hedged transactions affect earnings. The reclassification amounts are included in Interest and other finance charges in each of the Registrants’ respective Statements of Consolidated Income. Over the next twelve months estimated amortization from Accumulated Comprehensive Income into income is expected to be immaterial.


(2)	Amounts are included in the computation of net periodic cost and are reflected in Other income (expense), net in each of the Registrants’ respective Statements of Consolidated Income.

Series C Preferred Stock Private Placement (CenterPoint Energy)

On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 725,000 shares of its Series C Preferred Stock, at a price of $1,000 share, resulting in gross proceeds of $725 million.

The Series C Preferred Stock is entitled to participate in any dividend or distribution (excluding those payable in Common Stock) with the Common Stock on a pari passu, pro rata, as-converted basis. At liquidation, the Series C Preferred Stock will rank pari passu to the existing Series A Preferred Stock and Series B Preferred Stock and senior to the Common Stock, but will participate in a liquidation only on an as-converted to Common Stock basis.

Conversion of the Series C Preferred Stock is mandatory upon the occurrence of any of the following triggers: (i) the 12-month anniversary date of the preferred stock purchase agreements, (ii) a bankruptcy event, and (iii) a fundamental change in CenterPoint Energy, including, among other things certain change of control events. Upon a mandatory conversion, each share of Series C Preferred Stock will convert into the number of Common Stock equal to the quotient of $1,000 divided by the prevailing conversion price, which is initially $15.31. In a conversion at the 12-month anniversary date, in lieu of issuing Common Stock, CenterPoint Energy may, at its election, make a cash payment equal to the product of (i) the then current market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion. Following the six-month anniversary date of the issuance of the Series C Preferred Stock, holders of Series C Preferred Stock also have an optional right to convert their holdings to Common Stock at any time, subject to a limit on conversion of no more than 4.9% of the outstanding Common Stock. The conversion price is subject to adjustment for subdivisions and combinations, dividends or distributions payable in common stock. If all of the 725,000 shares of Series C Preferred Stock converted at the current conversion price, CenterPoint Energy would issue an incremental 47,354,670 shares of Common Stock.

CenterPoint Energy may not issue more than a specified amount of outstanding Common Stock upon conversion of Preferred Stock. Once such specified amount has been reached, each Series C Preferred Stock holder electing to convert or subject to mandatory conversion will receive a cash payment equal to the product of (i) the market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion.

Series C Preferred Stock holders have no voting rights, except that the affirmative vote of a majority of outstanding Series C Preferred Stock is required for the company to (i) create any class or series of securities that is senior to the Series C Preferred Stock; (ii) reclassify or amend any authorized securities of CenterPoint Energy if reclassification would render the relevant security on a parity with or senior to the Series C Preferred Stock; or (iii) increase the authorized amount or issue any additional shares of Series C Preferred Stock.

The vote of at least 66 2/3% of the outstanding shares of Series C Preferred Stock is needed to amend the terms of the Series C Preferred Stock in any manner that would adversely alter or change the rights of the Series C Preferred Stock, subject to certain exceptions.

Common Stock Private Placement (CenterPoint Energy)

On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 41,977,612 shares of its Common Stock, at a price of $16.08 share, resulting in gross proceeds of $675 million.

~~(21)~~(20) Subsequent Events (CenterPoint Energy)

CenterPoint Energy Dividend Declarations

Equity Instrument

Declaration Date

Record Date

Payment Date

Per Share

Declaration Date

Record Date

Payment Date

Per Share

Common Stock(1)

October 17, 2019

November 21, 2019

December 12, 2019

0.2875

April 24, 2020

May 21, 2020

June 11, 2020

0.1500

Series B Preferred Stock

October 17, 2019

November 15, 2019

December 2, 2019

17.5000

April 24, 2020

May 15, 2020

June 1, 2020

17.5000


(1)	On April 1, 2020, in response to the reduction in cash flow related to the reduction in Enable quarterly common unit distributions announced by Enable on April 1, 2020, CenterPoint Energy announced a reduction of its quarterly common stock dividend per share from $0.2900 to $0.1500.

Enable Distributions Declarations (CenterPoint Energy)

Equity Instrument Declaration Date Record Date Payment Date Per Unit Distribution
Expected Cash Distribution
(in millions)
Enable common units
November 5, 2019

November 19, 2019

November 26, 2019
$ 0.3305
$ 77
Enable Series A Preferred Units
November 5, 2019

November 5, 2019

November 14, 2019
0.6250
9

Equity Instrument

Declaration Date

Record Date

Payment Date

Per Unit Distribution

Expected Cash Distribution

(in millions)

Enable common units (1)

May 5, 2020

May 19, 2020

May 27, 2020

0.16525

Enable Series A Preferred Units

May 5, 2020

May 15, 2020

0.62500


(1)	On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction.

Divestiture of Infrastructure Services (CenterPoint Energy)

On April 9, 2020, CenterPoint Energy completed the previously announced sale of the Infrastructure Services Disposal Group to PowerTeam Services for $850 million in cash, subject to an adjustment for working capital and other contractual adjustments. The net proceeds of the sale were used to repay a portion of outstanding CenterPoint Energy debt. See Note 3 for further information.

ERCOT Loan Agreement (CenterPoint Energy and Houston Electric)

On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a no-interest loan agreement with ERCOT to provide for an initial fund balance for reimbursement for approximately $5 million.

Private Placements

On May 6, 2020, CenterPoint Energy entered into agreements for the private placements of its Series C Preferred Stock and its Common Stock. For more information about the private placements, see Note 19.


Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

~~No Registrant makes any representations as to the information related solely to CenterPoint Energy or the subsidiaries of CenterPoint Energy other than itself.~~

The following combined discussion and analysis should be read in combination with the Interim Condensed Financial Statements contained in this Form 10-Q and the Registrants’ combined ~~2018~~2019 Form 10-K. When discussing CenterPoint Energy’s consolidated financial information, it includes the results of Houston Electric and CERC, which, along with CenterPoint Energy, are collectively referred to as the Registrants. Where appropriate, information relating to a specific Registrant has been segregated and labeled as such. In this Form 10-Q, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries. No Registrant makes any representations as to the information related solely to CenterPoint Energy or the subsidiaries of CenterPoint Energy other than itself.

RECENT EVENTS

~~Merger with Vectren.~~COVID-19 Impacts. On ~~February 1, 2019, pursuant~~March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders in our service territories. CenterPoint Energy has experienced some resulting disruptions to its business operations, as these restrictions have significantly impacted many sectors of the economy with various businesses curtailing or ceasing normal operations. For example, since mid-March, we have had to restrict access to our administrative offices around the United States. However, we continue to be productive through alternate work arrangements, leveraging a strong technology platform to support our employees working remotely at home to perform their duties or directly from their vehicles to serve our customers. Where we must maintain a presence in the field, we have adjusted our operational protocols to minimize exposure and risk to our field personnel, customers and the communities we serve, including, among other things, modifying our work schedules and reporting locations, delaying certain work types, such as maintenance and capital projects, and adjusting project scope and scale to adhere to safety protocols, while continuing to maintain the work activities necessary for safe and reliable service to our customers with increased safety precautions.

Our first priority in our response to this crisis has been the health and safety of our employees, our customers and other business counterparties. Because we provide a critical service to our customers, it is paramount that we keep our employees who operate our business safe and informed, and we have taken and are updating precautions for that purpose. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers’ operations under the circumstances. In addition, we have assessed and updated our existing business continuity plans for each of our business units in the context of this pandemic. We have a corporate response planning team who assesses risks to the ~~Merger Agreement, CenterPoint Energy consummated~~business, including for health, safety and environmental matters and personnel issues, and addresses various impacts of the ~~previously announced Merger~~situation, as they have been developing. We also have modified certain business practices (including those related to employee travel, employee work locations and ~~acquired Vectren~~cancellation of physical participation in meetings, events and conferences) to conform to government restrictions and best practices encouraged by the Centers for ~~approximately $6 billion~~Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented. We are also working with our suppliers to understand the potential impacts to our supply chain, including identifying any negative impacts to material supplies, working to mitigate them and pre-planning for longer-term emergency response protocols. This is a rapidly evolving situation and could lead to extended disruption of economic activity in ~~cash.~~our markets; we will continue to monitor developments affecting our workforce, our customers and our suppliers and take additional precautions as we believe are warranted.

An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively impacted under the current economic conditions. In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment will be temporarily suspended. For ~~more information about~~Houston Electric, we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. To the ~~Merger,~~extent these conditions in our service territories persist, our bad debt expense from uncollectible accounts could increase, negatively impacting our financial condition, results of operations and cash flows. With respect to our regulatory proceedings, we could experience significant delays in scheduling proceedings or hearings and in obtaining orders from regulatory agencies. Any such delays could adversely affect our future results of operations.

Due to current macroeconomic conditions and the decline in our common stock price, we identified a triggering event to perform an interim goodwill impairment test and recognized a non-cash goodwill impairment charge of $185 million in our Indiana Electric Integrated reporting unit for the three months ended March 31, 2020. For further discussion of this impairment, see ~~Notes 1 and 3~~Note 10 to the Interim Condensed Financial Statements. ~~Concurrent~~

As of the date of this Form 10-Q, our efforts to respond to the challenges presented by the conditions described above and minimize the impacts to our business have yielded results. Our electric facilities and natural gas distribution systems have remained operational and our customers have continued to receive service. Although we continue to assess the COVID-19 situation, we cannot estimate with any degree of certainty the full financial impact of the COVID-19 pandemic on our business. Nor can we predict the effect that the significant disruption and volatility currently being experienced in the markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time. However, we expect the COVID-19 pandemic to adversely impact us in future quarters due to the considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, closures or disruptions, among other things. The ultimate impacts to our business, financial condition, results of operations, liquidity and cash flows will depend on future developments, including, among others, the ultimate duration and geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the development of effective treatments, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. For additional discussion regarding risks associated with the COVID-19 pandemic, see “Risk Factors” in Item 1A of Part II of this Form 10-Q.

Enable Quarterly Distributions. The price of, and global demand for, natural gas, NGLs and crude oil have declined significantly as a result of the ongoing spread and economic effects of the COVID-19 pandemic and the significant governmental measures being implemented to control the spread of COVID-19. In addition, the recent dispute over crude oil production levels between Russia and members of the Organization of the Petroleum Exporting Countries led by Saudi Arabia have exacerbated the sharp decline in the price of NGLs and crude oil. Despite the subsequent agreement in April 2020 by a coalition of nations including Russia and Saudi Arabia to reduce production of crude oil, the price of NGLs and crude oil have remained significantly depressed and, in the case of crude oil, have at times reached a negative price. Further, financial market declines and volatility, together with deteriorating credit, liquidity concerns, decreasing production, and increasing inventories, are conditions that are associated with a general economic downturn. Producers have announced and begun to implement plans to reduce production and decrease the drilling and completion of wells in response to these conditions, which include reductions in the ~~Merger,~~ exploration, development and production activity across Enable’s areas of operation. As a result, the effects of the COVID-19 pandemic and the decline in demand and price for natural gas, NGLs and crude oil have begun and may continue to negatively impact the demand for midstream services. In response to the impacts of these developments on its business, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.

CenterPoint Energy ~~added two new reportable segments, Indiana Electric Integrated~~Financial Measures. On April 1, 2020, in response to the current business environment and ~~Infrastructure Services,~~ to strengthen its ~~five reportable segments disclosed~~financial position and adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions, CenterPoint ~~Energy’s 2018 Form 10-K.~~Energy announced targeted reductions in (i) its quarterly common stock dividend to $0.1500 per share; (ii) 2020 operation and maintenance expenses, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets; and (iii) 2020 capital spending. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.

Enable Investment Impairment. CenterPoint Energy recognized a ~~description~~loss of $1,475 million on its investment in Enable for the ~~Registrants’ reportable segments,~~three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million. For further discussion, see Note 169 to the Interim Condensed Financial Statements.

~~Debt Transactions.~~ CenterPoint EnergyLeadership Transition. On February 19, 2020, the Board of Directors appointed John W. Somerhalder II to the position of Interim President and Chief Executive Officer. On April 1, 2020, the Board of Directors appointed Kristie L. Colvin to the position of Interim Executive Vice President and Chief Financial Officer in addition to her position as Chief Accounting Officer. In ~~January 2019, Houston Electric issued $700 million aggregate principal amount~~conjunction with their respective appointments, Mr. Somerhalder and Ms. Colvin also have been appointed to serve on the Board of ~~general mortgage bonds, in May 2019,~~Directors of Enable GP.

Business Divestitures. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into ~~a $1.0 billion variable rate term loan and in August 2019,~~the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020. On February 24, 2020, CenterPoint Energy, ~~issued $1.2 billion aggregate principal amount~~through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of ~~senior notes.~~2020. For ~~more~~further information, ~~about the 2019 debt transactions,~~ see Note 123 to the Interim Condensed Financial Statements.

Regulatory Proceedings. On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates. A settlement has been reached and a final order from the PUCT was received on March 9, 2020 and were implemented on April 23, 2020. For details related to

our pending and completed regulatory proceedings and orders related to the TCJA to date in ~~2019,~~2020, see “—Liquidity and Capital Resources —Regulatory Matters” below.

Private Placements. On May 6, 2020, CenterPoint Energy entered into agreements for the private placements of its Series C Preferred Stock and its Common Stock. For more information about the private placements, see Note 19 to the Interim Condensed Financial Statements.

New Directors and Board of Directors Committee. On May 6, 2020, at the recommendation of the Governance Committee, the Board of Directors appointed David J. Lesar and Barry T. Smitherman to the Board of Directors effective immediately. Messrs. Lesar and Smitherman have been elected to serve as directors of CenterPoint Energy until the expiration of their respective terms on the date of its annual meeting of shareholders in 2021 and until their successors are elected and qualified. Messrs. Lesar and Smitherman are expected to stand for election as directors at the annual meeting of shareholders in 2021. Messrs. Lesar and Smitherman will serve on the Board of Directors’ newly established Business Review and Evaluation Committee, which will assist the Board in evaluating and optimizing the various businesses, assets and ownership interests currently held by CenterPoint Energy.

CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONS

For information regarding factors that may affect the future results of our consolidated operations, please read “Risk Factors” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions, except per share amounts)
Revenues $ 2,742
$ 2,212
$ 9,071
$ 7,553
Expenses 2,350
1,986
8,147
6,889
Operating Income 392
226
924
664
Interest and Other Finance Charges (134 ) (90 ) (389 ) (259 )
Interest on Securitization Bonds (9 ) (16 ) (31 ) (46 )
Equity in Earnings of Unconsolidated Affiliate, net 77
81
213
208
Other Income (Expense), net 6
8
30
(234 )
Income Before Income Taxes 332
209
747
333
Income Tax Expense 62
51
113
85
Net Income 270
158
634
248
Preferred Stock Dividend Requirement 29
5
88
5
Income Available to Common Shareholders $ 241
$ 153
$ 546
$ 243
Basic Earnings Per Common Share $ 0.48
$ 0.35
$ 1.09
$ 0.56
Diluted Earnings Per Common Share $ 0.47
$ 0.35
$ 1.08
$ 0.56



	Three Months Ended March 31,
	2020			2019

Revenues	$	2,167		$	2,229
Expenses	1,950			2,018
Operating Income	217			211
Interest Expense and Other Finance Charges	(139		)	(121		)
Interest Expense on Securitization Bonds	(8		)	(12		)
Equity in Earnings of Unconsolidated Affiliates, net	(1,475		)	62
Interest Income	—			12
Interest Income from Securitization Bonds	1			2
Other Income (Expense), net	4			3
Income (Loss) from Continuing Operations Before Income Taxes	(1,400		)	157
Income Tax Expense (Benefit)	(347		)	14
Income (Loss) from Continuing Operations	(1,053		)	143
Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($17) and $8, respectively)	(146		)	26
Net Income (Loss)	(1,199		)	169
Preferred Stock Dividend Requirement	29			29
Income (Loss) Available to Common Shareholders	$	(1,228	)	$	140
Basic Earnings (Loss) Per Common Share:
Basic earnings (loss) per common share - continuing operations	$	(2.15	)	$	0.23
Basic earnings (loss) per common share - discontinued operations	(0.29		)	0.05
Basic Earnings (Loss) Per Common Share	$	(2.44	)	$	0.28
Diluted Earnings (Loss) Per Common Share:
Diluted earnings (loss) per common share - continuing operations	$	(2.15	)	$	0.23
Diluted earnings (loss) per common share - discontinued operations	(0.29		)	0.05
Diluted Earnings (Loss) Per Common Share	$	(2.44	)	$	0.28

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~March 31, 2019

CenterPoint Energy reported ~~income~~a loss available to common shareholders of ~~$241~~$1,228 million ($~~0.47~~2.44 loss per diluted common share) for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$153~~income available to common shareholders of $140 million ($~~0.35~~0.28 per diluted common share) for the three months ended ~~September 30, 2018.~~March 31, 2019.

The ~~increase in income available to common shareholders~~decrease of ~~$88 million was primarily due to the following key factors:~~

~~a $166 million increase in operating income discussed below in Results of Operations by Reportable Segment;~~

~~a $16 million increase in gain on marketable securities, included in Other Income (Expense), net shown above; and~~

~~a $7 million decrease in interest expense related to lower outstanding balances of the Securitization Bonds.~~

~~These increases were partially offset by the following:~~

a $44 million increase in interest expense, primarily as a result of higher outstanding long-term debt used to finance the Merger and additional long-term debt acquired through the Merger, discussed further in Notes 3 and 12 to the Interim Condensed Financial Statements;

~~a $24 million increase in preferred stock dividend requirements primarily as a result of the Merger;~~

~~an $18 million increase in losses on the underlying value of the indexed debt securities related to the ZENS, included in Other Income (Expense), net shown above;~~

~~a $11 million increase in income tax expense due to higher income before income taxes that was partially offset by the lower effective tax rate as explained below; and~~

~~a $4 million decrease to equity in earnings from the investment in Enable, discussed further in Note 9 to the Interim Condensed Financial Statements.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

CenterPoint Energy reported income available to common shareholders of $546 million ($1.08 per diluted common share) for the nine months ended September 30, 2019 compared to $243 million ($0.56 per diluted common share) for the nine months ended September 30, 2018.

~~The increase of $303~~$1,368 million in income available to common shareholders was primarily due to the following key factors:

a ~~$260~~$1,151 million ~~increase~~decrease in ~~operating~~net income from the Midstream Investments reportable segment further discussed ~~below in~~under Results of Operations by Reportable ~~Segment;~~Segment below;

a ~~$140~~$172 million increase in ~~gain on marketable securities, included in Other Income (Expense),~~loss from discontinued operations, net ~~shown above;~~

~~a $100 million decrease in losses on the underlying value of indexed debt securities~~ related to the ~~ZENS, included in Other Income (Expense), net shown above (losses recorded from Meredith Corporation’s acquisition of Time Inc. in March 2018~~Infrastructure Services and ~~AT&T Inc.’s acquisition of Time Warner Inc. in June 2018);~~

a $24 million increase in other miscellaneous non-operating income included in Other Income (Expense), net shown above that included $16 million in higher interest income, a $5 million increase in dividend income and $3 million in additional income from miscellaneous items;

~~a $15 million decrease in interest expense related to lower outstanding balances of the Securitization Bonds; and~~

~~a $5 million increase to equity in earnings from the investment in Enable,~~Energy Services Disposal Groups further discussed ~~further~~ in Note 93 to the Interim Condensed Financial ~~Statements.~~Statements; and

a $162 million decrease in net income from the Indiana Electric Integrated reportable segment further discussed under Results of Operations by Reportable Segment below.

These ~~increases~~decreases were partially offset by the following:

~~a $130~~an $84 million increase in ~~interest expense, primarily as a result~~net income from the Natural Gas Distribution reportable segment further discussed under Results of higher outstanding long-term debt used to finance the Merger and additional long-term debt acquired through the Merger, discussed further in Notes 3 and 12 to the Interim Condensed Financial Statements;Operations by Reportable Segment below;

a ~~$83~~$26 million increase in ~~preferred stock dividend requirements primarily as a result~~net income from Corporate and Other further discussed under Results of ~~the Merger;~~Operations by Reportable Segment below; and

a ~~$28~~$7 million increase in net income ~~tax expense due to higher income before income taxes that was partially offset~~from the Houston Electric T&D reportable segment further discussed under Results of Operations by ~~the lower effective tax rate as explained~~Reportable Segment below.

Income Tax Expense - Continuing Operations

CenterPoint Energy’s effective tax rate from continuing operations reported for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~19%~~25% compared to 9% for the three months ended March 31, 2019. The higher effective tax rate for the three months ended March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.

Income Tax Expense - Discontinued Operations

CenterPoint Energy’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 10% compared to 24% for the three months ended ~~September 30, 2018. CenterPoint Energy’s effective tax rate reported for the nine months ended September 30, 2019 was 15% compared to 26% for the nine months ended September 30, 2018.~~March 31, 2019. The lower effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was primarily due to the ~~following: an increase in~~non-deductible portions of goodwill impairments on the ~~amount of amortization of the net regulatory EDIT liability; the effect of state tax law changes that resulted in the remeasurement of state deferred taxes;~~Energy Services and ~~the impact of changes in valuation allowances on certain state net operating losses.~~Infrastructure Services Disposal Groups.

HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS

~~OF CONSOLIDATED RESULTS OF OPERATIONS~~Income Tax Expense - Continuing Operations

Houston Electric’s results of operations are affected by seasonal fluctuations in the demand for electricity. Houston Electric’s results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates Houston Electric charges, debt service costs, income tax expense, Houston Electric’s ability to collect receivables from REPs and Houston Electric’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations of Houston Electric’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s ~~Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2018 Form 10-K and in Item 1A of Part II of this Form 10-Q.~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Revenues (1)
$ 859

$ 897

$ 2,310

$ 2,506
Expenses 590

670

1,791

1,979
Operating income 269

227

519

527
Interest and other finance charges (41 ) (32 ) (123 ) (101 )
Interest on Securitization Bonds (9 ) (16 ) (31 ) (46 )
Other income (expense), net 7
—
17
(6 )
Income before income taxes 226

179

382

374
Income tax expense 41
36
70
78
Net income $ 185

$ 143

$ 312

$ 296

~~(1)~~

Excludes weather hedge gain (loss) of $-0- and $-0- for the three months ended September 30, 2019 and 2018, respectively, and $3 million and $(4) million for the nine months ended September 30, 2019 and 2018, respectively, recorded in Utility revenues on CenterPoint Energy’s Condensed Statements of Consolidated Income. See Note 7(a) to the Interim Condensed Financial Statements for more information on the weather hedge.

~~Three months ended September 30, 2019 compared to three months ended September 30, 2018~~

~~Houston Electric reported net income of $185 million for the three months ended September 30, 2019 compared to net income of $143 million for the three months ended September 30, 2018.~~

~~The increase of $42 million in net income was primarily due to the following key factors:~~

~~a $47 million increase in TDU operating income discussed below in Results of Operations by Reportable Segment;~~

~~a $7 million decrease in interest expense related to lower outstanding balances of the Securitization Bonds; and~~

~~a $7 million increase in Other income (expense), net due to increased interest income primarily from investments in the CenterPoint Energy money pool.~~

~~These increases were partially offset by the following:~~

~~a $9 million increase in interest expense due to higher outstanding other long-term debt;~~

~~a $5 million decrease in operating income from the Bond Companies; and~~

~~a $5 million increase of income tax expense due to higher income before income taxes that was partially offset by the lower~~ effective tax rate ~~as explained below.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

~~Houston Electric reported net income of $312 million for the nine months ended September 30, 2019 compared to net income of $296 million for the nine months ended September 30, 2018.~~

~~The increase of $16 million in net income was primarily due to the following key factors:~~

~~a $23 million increase in Other income (expense), net due to increased interest income of $19 million primarily~~ from ~~investments in the CenterPoint Energy money pool and $4 million from miscellaneous other non-operating income;~~

~~a $15 million decrease in interest expense related to lower outstanding balances of the Securitization Bonds;~~

an $8 million increase in TDU operating income discussed below in Results of Operations by Reportable Segment, exclusive of a $3 million gain in the nine months ended September 30, 2019 and a $4 million loss in the nine months ended September 30, 2018 from weather hedges recorded at CenterPoint Energy; and

~~an $8 million decrease in income tax expense primarily due to the lower effective tax rate as explained below that was partially offset by higher income before income taxes.~~

~~These increases were partially offset by the following:~~

~~a $22 million increase in interest expense due to higher outstanding other long-term debt; and~~

~~a $16 million decrease in operating income from the Bond Companies.~~

~~Income Tax Expense~~

~~Houston Electric’s effective tax rate~~continuing operations reported for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~18%~~25% compared to ~~20%~~9% for the three months ended ~~September 30, 2018. Houston Electric’s~~March 31, 2019. The higher effective tax rate for the three months ended March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.

Income Tax Expense - Discontinued Operations

CenterPoint Energy’s effective tax rate from discontinued operations reported for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~18%~~10% compared to ~~21%~~24% for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The lower effective tax rate for ~~both the three and nine months ended September 30, 2019 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability.~~

~~CERC’S MANAGEMENT’S NARRATIVE ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS~~

CERC’s results of operations are affected by seasonal fluctuations in the demand for natural gas and price movements of energy commodities as well as the optimization of margins through natural gas basis differentials. CERC’s results of operations are also affected by, among other things, the actions of various federal, state and local governmental authorities having jurisdiction over rates CERC charges, competition in CERC’s various business operations, the effectiveness of CERC’s risk management activities, debt service costs and income tax expense. For more information regarding factors that may affect the future results of operations for CERC’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2018 Form 10-K and in Item 1A of Part II of this Form 10-Q.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Revenues $ 1,126
$ 1,312
$ 4,836
$ 5,040
Expenses 1,103
1,319
4,559
4,894
Operating Income (Loss) 23
(7 ) 277
146
Interest and other finance charges (28 ) (30 ) (87 ) (92 )
Other expense, net (3 ) —
(6 ) (5 )
Income (loss) from continuing operations before income taxes (8 ) (37 ) 184
49
Income tax expense (benefit) (1 ) (2 ) 25
14
Income (loss) from continuing operations (7 ) (35 ) 159
35
Income from discontinued operations, net of tax —
44
—
140
Net Income (Loss) $ (7 ) $ 9
$ 159
$ 175

~~Three months ended September 30, 2019 compared to three months ended September 30, 2018~~

~~CERC reported a net loss of $7 million for~~ the three months ended ~~September 30, 2019 compared to net income of $9 million for the three months ended September 30, 2018.~~

~~The decrease of $16 million in net income~~March 31, 2020 was primarily due to the ~~following key factors:~~

~~a $44 million decrease in income from discontinued operations, net~~non-deductible portions of ~~tax, discussed further in Notes 9~~goodwill impairments on the Energy Services and ~~13 to the Interim Condensed Financial Statements; and~~

~~a $3 million increase in Other expense, net primarily due to higher pension accruals.~~

~~These decreases were partially offset by the following:~~

~~a $30 million increase in operating income discussed below in Results of Operations by Reportable Segment; and~~

~~a $2 million decrease in interest and other finance charges.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

~~CERC reported net income of $159 million for the nine months ended September 30, 2019 compared to net income of $175 million for the nine months ended September 30, 2018.~~

~~The decrease of $16 million in net income was primarily due to the the following key factors:~~

~~a $140 million decrease in income from discontinued operations, net of tax, discussed further in Notes 9 and 13 to the Interim Condensed Financial Statements; and~~

~~an $11 million increase in income tax expense due to higher income from continuing operations, partially offset by the lower effective tax rate as explained below.~~Infrastructure Services Disposal Groups.

~~These decreases were partially offset by the following:~~HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS

~~a $131 million increase in operating income discussed below in Results of Operations by Reportable Segment; and~~

~~a $5 million decrease in interest and other finance charges.~~

Income Tax Expense - Continuing Operations

CenterPoint Energy’s effective tax rate from continuing operations reported for the three months ended March 31, 2020 was 25% compared to 9% for the three months ended March 31, 2019. The higher effective tax rate for the three months ended March 31, 2020 was primarily due to lower earnings from the impairment of CenterPoint Energy’s investment in Enable. Other effective tax rate drivers include the non-deductible goodwill impairment at the Indiana Electric Integrated reporting unit, the impact of NOL carryback claims allowed under the CARES Act, and an increase in the amount of remeasurement of state deferred tax liabilities for changes in apportionment, the effects of which were compounded by the book loss in the three months ended March 31, 2020.

Income Tax Expense - Discontinued Operations

CenterPoint Energy’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 10% compared to 24% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was primarily due to the non-deductible portions of goodwill impairments on the Energy Services and Infrastructure Services Disposal Groups.

HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS

OF CONSOLIDATED RESULTS OF OPERATIONS

Houston Electric’s results of operations are affected by seasonal fluctuations in the demand for electricity. Houston Electric’s results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates Houston Electric charges, debt service costs, income tax expense, Houston Electric’s ability to collect receivables from REPs and Houston Electric’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations of Houston Electric’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.



		Three Months Ended March 31,
		2020			2019
	(in millions)
Revenues (1)		$	634		$	686
Expenses		552			605
Operating Income		82			81
Interest Expense and Other Finance Charges		(41		)	(40		)
Interest Expense on Securitization Bonds		(8		)	(12		)
Interest Income		1			4
Interest Income from Securitization Bonds		1			2
Other Income (Expense), net		3			(2		)
Income before Income Taxes		38			33
Income Tax Expense		5			6
Net Income		$	33		$	27


(1)	Excludes weather hedge gains of $4 million and $3 million for the three months ended March 31, 2020 and 2019, respectively, recorded in Utility revenues on CenterPoint Energy’s Condensed Statements of Consolidated Income. See Note 7(a) to the Interim Condensed Financial Statements for more information on the weather hedge.

Three months ended March 31, 2020 compared to three months ended March 31, 2019

Houston Electric reported net income of $33 million for the three months ended March 31, 2020 compared to net income of $27 million for the three months ended March 31, 2019.

The increase of $6 million in net income from the Houston Electric T&D reportable segment is discussed below in Results of Operations by Reportable Segment, exclusive of weather hedges recorded at CenterPoint Energy.

Income Tax Expense

Houston Electric’s effective tax rate reported for the three months ended March 31, 2020 was 13% compared to 18% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability.

CERC’S MANAGEMENT’S NARRATIVE ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS

CERC’s results of operations are affected by seasonal fluctuations in the demand for natural gas and price movements of energy commodities as well as the optimization of margins through natural gas basis differentials. CERC’s results of operations are also affected by, among other things, the actions of various federal, state and local governmental authorities having jurisdiction over rates CERC charges, competition in CERC’s various business operations, the effectiveness of CERC’s risk management activities, debt service costs and income tax expense. For more information regarding factors that may affect the future results of operations for CERC’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.



		Three Months Ended March 31,
		2020			2019
	(in millions)
Revenues		$	1,011		$	1,212
Expenses		811			1,052
Operating Income		200			160
Interest Expense and Other Finance Charges		(30		)	(29		)
Other Expense, net		(4		)	(3		)
Income from Continuing Operations Before Income Taxes		166			128
Income Tax Expense		35			18
Income from Continuing Operations		131			110
Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($11) and $8, respectively)		(64		)	28
Net Income		$	67		$	138

Three months ended March 31, 2020 compared to three months ended March 31, 2019

CERC reported net income of $67 million for the three months ended March 31, 2020 compared to net income of $138 million for the three months ended March 31, 2019.

The decrease in net income of $71 million was primarily due to a $92 million decrease in income from discontinued operations, net of tax, discussed further in Note 3 to the Interim Condensed Financial Statements.

This decrease in net income was partially offset by the following:

a $15 million increase in net income from the Natural Gas Distribution reportable segment discussed further under Results of Operations by Reportable Segment below; and

a $6 million increase in net income from Corporate and Other.

Income Tax Expense - Continuing Operations

CERC’s effective tax rate on income from continuing operations for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~13%~~21% compared to 5%14% for the three months ended ~~September 30, 2018.~~March 31, 2019. CERC’s higher effective tax rate on income from continuing operations for the ~~nine months ended September 30, 2019 was 14% compared to 29% for the nine months ended September 30, 2018. CERC’s higher effective tax rate on loss from continuing operations for the~~ three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT ~~liability, which was partially offset by the absence of a change in the valuation allowance on certain state net operating losses in 2019, the effects of which are compounded by the book loss in~~liability.

Income Tax Expense - Discontinued Operations

CERC’s effective tax rate from discontinued operations reported for the three months ended ~~September 30,~~March 31, 2020 was 15% compared to 22% for the three months ended March 31, 2019. ~~CERC’s~~The lower effective tax rate for the ~~nine~~three months ended ~~September 30, 2019 compared~~March 31, 2020 was due to the ~~nine months ended September 30, 2018 was primarily due to an increase in~~non-deductible portion of goodwill impairment on the ~~amount of amortization of the net regulatory EDIT liability, which was partially offset by the impact of changes in valuation allowances on certain state net operating losses in 2019.~~Energy Services Disposal Group.

RESULTS OF OPERATIONS BY REPORTABLE SEGMENT

As of ~~September 30, 2019,~~January 1, 2020, the Registrants’ CODM views net income as the measure of profit or loss for the reportable segments rather than the previous measure of operating income. Certain prior year amounts have been reclassified to conform to the current year presentation.

Discontinued Operations. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.

As of March 31, 2020, reportable segments by Registrant were as follows:

Registrants

Houston Electric T&D

Indiana Electric Integrated

Natural Gas Distribution

~~Energy~~

~~Services~~

~~Infrastructure Services~~

Midstream Investments

~~Corporate and Other~~

CenterPoint Energy

Houston Electric

CERC

~~The Midstream Investments reportable segment consists of CenterPoint Energy’s equity investment in Enable and is therefore not included in the operating income table below.~~ Included in revenues are intersegment sales, which are accounted for as if the sales were to third parties at current market prices. See Note 16 to the Interim Condensed Financial Statements for details of reportable segments by Registrant.

~~The following table presents operating income (loss) for each reportable segment:~~

Three Months Ended September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
(in millions)
CenterPoint Energy
Houston Electric T&D $ 269
$ 227
$ 522
$ 523
Indiana Electric Integrated 48
—
64
—
Natural Gas Distribution 27
3
241
166
Energy Services 2
(9 ) 64
(20 )
Infrastructure Services 42
—
50
—
Corporate and Other 4
5
(17 ) (5 )
Total CenterPoint Energy Consolidated Operating Income $ 392
$ 226
$ 924
$ 664
Houston Electric
Houston Electric T&D $ 269
$ 227
$ 519
$ 527
CERC
Natural Gas Distribution $ 20
$ 3
$ 212
$ 166
Energy Services 2
(9 ) 64
(20 )
Other Operations 1
(1 ) 1
—
Total CERC Consolidated Operating Income (Loss) $ 23
$ (7 ) $ 277
$ 146

Houston Electric T&D (CenterPoint ~~Energy and Houston Electric)~~Energy)

For information regarding factors that may affect the future results of operations of the Houston Electric T&D reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of the Houston Electric T&D reportable segment:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020			2019
	(in millions, except throughput and customer data)
Revenues:
Utility Revenues:
TDU(1)	$	776	$	735	$	2,043	$	2,009	$	600		$	595
Bond Companies	83		162		270		493		38			94
Total revenues	859		897		2,313		2,502
Total utility revenues									638			689
Expenses:
Operation and maintenance, excluding Bond Companies	357		367		1,080		1,056		358			366
Depreciation and amortization, excluding Bond Companies	95		95		282		293		99			93
Taxes other than income taxes	63		59		186		180		64			62
Bond Companies	75		149		243		450		31			84
Total expenses	590		670		1,791		1,979		552			605
Operating Income	$	269	$	227	$	522	$	523	86			84
Operating Income:
TDU	$	261	$	214	$	495	$	480
Bond Companies (1)	8		13		27		43
Total segment operating income	$	269	$	227	$	522	$	523
Other Income (Expense)
Interest expense and other finance charges									(41		)	(40		)
Interest expense on Securitization Bonds									(8		)	(12		)
Interest income									1			4
Interest income from Securitization Bonds									1			2
Other income (expense), net									3			(2		)
Income from Continuing Operations Before Income Taxes									42			36
Income tax expense									5			6
Net Income (1)									$	37		$	30
Throughput (in GWh):
Residential	11,224		10,555		24,392		24,486		5,351			5,183
Total	28,379		27,015		71,417		70,347		20,102			19,019
Number of metered customers at end of period:
Residential	2,232,740		2,188,211		2,232,740		2,188,211		2,260,352			2,206,563
Total	2,523,450		2,475,018		2,523,450		2,475,018		2,552,739			2,494,761

(1)

~~Operating~~Net income for CenterPoint Energy’s Houston Electric T&D reportable segment differs from ~~the Bond Companies, together with $1~~net income for Houston Electric due to weather hedge gains (losses) recorded at CenterPoint Energy that are not recorded at Houston Electric. Utility revenues in CenterPoint Energy’s Condensed Statements of Consolidated Income included weather hedge gains (losses) of $4 million and $4$3 million ~~of interest income~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, respectively, ~~and $3 million of interest income~~ for ~~both~~CenterPoint Energy’s Houston Electric T&D reportable segment. See Note 7(a) to the ~~three and nine months ended September 30, 2018, are necessary to pay interest~~Interim Condensed Financial Statements for more information on ~~the Securitization Bonds.~~weather hedges.

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~March 31, 2019

~~The~~CenterPoint Energy’s Houston Electric T&D reportable segment reported ~~operating~~net income of ~~$269~~$37 million for the three months ended ~~September 30, 2019, consisting of $261~~March 31, 2020, compared to $30 million ~~from the TDU and $8 million related to the Bond Companies. For~~for the three months ended ~~September 30, 2018, operating income totaled $227 million, consisting of $214 million from the TDU and $13 million related to the Bond Companies.~~March 31, 2019.

~~TDU operating~~

Net income increased ~~$47~~$7 million, primarily due to the following key factors:

decreased operation and maintenance expenses of ~~$29~~$17 million, inclusive of a $6 million decrease in severance costs, primarily due to ~~the following:~~


◦	~~decreased support services costs of $12 million;~~


◦	~~other miscellaneous operation and maintenance expense decreases of $9 million; and~~


◦	~~decreased labor and benefits costs of $6 million.~~

~~higher usage of $12 million primarily due to warmer than normal weather;~~lower labor and benefits costs, lower support services costs, and lower contract services costs;

•customer growth of $9$7 million from the addition of ~~over 48,000~~almost 58,000 customers; and

~~rate increases of $7~~a $5 million ~~related~~increase in Other income (expense), net due to ~~distribution capital investments, exclusive of the TCJA mentioned below; and~~

~~higher transmission-related revenues of $18 million, exclusive of the TCJA mentioned below, partially offset by higher transmission costs billed by transmission providers of $16 million.~~income associated with corporate-owned life insurance.

These increases to ~~operating~~net income were partially offset by the following:

higher depreciation and amortization expense, primarily because of ongoing additions to plant in service, and other taxes of $9 million;

lower equity return of ~~$3 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during the preceding 12 months; and~~

~~lower revenue of $3 million related to the impact of the TCJA.~~

~~Lower depreciation and amortization expenses related to AMS of~~ $5 ~~million were offset by a corresponding decrease in related revenues.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

The Houston Electric T&D reportable segment reported operating income of $522 million for the nine months ended September 30, 2019, consisting of $495 million from the TDU and $27 million related to the Bond Companies. For the nine months ended September 30, 2018, operating income totaled $523 million, consisting of $480 million from the TDU and $43 million related to the Bond Companies.

~~TDU operating income increased $15 million, primarily due to the following key factors:~~

~~customer growth of $22 million from the addition of over 48,000 customers;~~

~~rate increases of $20 million related to distribution capital investments, exclusive of the TCJA mentioned above;~~

~~higher transmission-related revenues of $56 million, exclusive of the TCJA mentioned above, partially offset by higher transmission costs billed by transmission providers of $38 million;~~

~~decreased operation and maintenance expenses of $17 million, net of $10 million of Merger-related severance costs, primarily due to lower labor and benefits costs and lower support services costs; and~~

~~higher miscellaneous revenues of $13 million primarily related to right-of-way revenues.~~

~~These increases to operating income were partially offset by the following:~~

~~lower equity return of $24~~ million, primarily related to the annual true-up of transition charges to correct over-collections that occurred during the preceding 12 months;

~~higher depreciation and amortization expense,~~lower miscellaneous revenues of $3 million, primarily ~~because of ongoing additions~~related to ~~plant in service, and other taxes of $22 million;~~right-of-way revenues;

decreased interest income of $3 million, primarily due to lower ~~usage of $16 million;~~investments in the CenterPoint Energy money pool; and

~~lower revenue~~higher transmission costs billed by transmission providers of ~~$15~~$9 million, ~~related to the impact~~partially offset by higher transmission-related revenues of ~~the TCJA.~~$7 million.

Lower depreciation and amortization expenses related to AMS of ~~$27~~$1 million were offset by a corresponding decrease in related revenues.

Indiana Electric Integrated (CenterPoint Energy)

For information regarding factors that may affect the future results of operations of the Indiana Electric Integrated reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of CenterPoint Energy’s Indiana Electric Integrated reportable segment:


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019 (1)		Three Months Ended March 31,
	(in millions, except throughput and customer data)				2020			2019 (1)
Revenues	$	165	$	388

Utility Revenues					$	129		$	83
Expenses:
Utility natural gas, fuel and purchased power	46		112		35			26
Operation and maintenance	42		136		44			48
Depreciation and amortization	25		66		25			16
Taxes other than income taxes	4		10		4			2
Goodwill Impairment					185			—
Total expenses	117		324		293			92
Operating Income	$	48	$	64
Operating Loss					(164		)	(9		)
Other Income (Expense):
Interest expense and other finance charges					(6		)	(3		)
Other income (expense), net					2			1
Loss from Continuing Operations Before Income Taxes					(168		)	(11		)
Income tax expense (benefit)					3			(2		)
Net Loss					$	(171	)	$	(9	)
Throughput (in GWh):
Retail	1,416		3,277		1,078			704
Wholesale	139		291		63			58
Total	1,555		3,568		1,141			762
Number of metered customers at end of period:
Residential	128,381		128,381		129,233			128,194
Total	147,337		147,337		148,265			147,047


(1)	Represents February 1, 2019 through ~~September 30,~~March 31, 2019 results only due to the Merger.

Three months ended ~~September 30,~~March 31, 2020 compared to three months ended March 31, 2019

~~The~~CenterPoint Energy’s Indiana Electric Integrated reportable segment reported ~~operating income~~a net loss of ~~$48~~$171 million for the three months ended ~~September 30,~~March 31, 2020, compared to $9 million for the three months ended March 31, 2019. ~~These results are not comparable to~~

The net loss increased $162 million as a result of the ~~prior year as this reportable segment was acquired in the Merger as~~following key factors:

a $185 million goodwill impairment charge further discussed in Note 310 to the Interim Condensed Financial ~~Statements.~~Statements;

~~Nine~~a $9 million increase in depreciation and amortization expense from the inclusion of expense for three months ~~ended September 30,~~in 2020 versus two months included in 2019 due to the Merger on February 1, 2019;

~~The~~

a $5 million increase in state and federal income taxes driven by growth in earnings and the non-deductible goodwill impairment;

a $3 million decrease in customer margin due to unfavorable weather not protected by weather normalization mechanisms; and

a $3 million increase in interest expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019.

These increases were partially offset by the following:

a $34 million increase in electric margin from the inclusion of results for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019;

a $3 million increase in margin associated with the Indiana Electric ~~Integrated reportable segment reported operating income of $64~~infrastructure replacement TDSIC program; and

a $4 million ~~for the period ended September 30, 2019, which includes~~decrease in operation and maintenance ~~expenses~~expense inclusive of ~~$20~~a $19 million ~~for~~reduction in Merger-related severance and incentive compensation ~~costs. These results are not comparable~~costs in 2019 and a timing related reduction of plant maintenance expenditures of $2 million, partially offset by a $17 million increase from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the ~~prior year as this reportable segment was acquired in the~~ Merger ~~as discussed in Note 3 to the Interim Condensed Financial Statements.~~on February 1, 2019.

Natural Gas Distribution (CenterPoint Energy)

For information regarding factors that may affect the future results of operations of CenterPoint Energy’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of CenterPoint Energy’s Natural Gas Distribution reportable segment:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020			2019 (1)
	(in millions, except throughput and customer data)
Revenues	$	524	$	410	$	2,583	$	2,058
Revenues:
Utility revenues									$	1,306		$	1,399
Non-utility revenues									12			16
Total revenues									1,318			1,415
Expenses:
Utility natural gas, fuel and purchased power	125		120		1,118		972
Utility natural gas									574			771
Non-utility cost of revenues, including natural gas									6			10
Operation and maintenance	221		183		767		592		267			310
Depreciation and amortization	108		73		308		210		111			95
Taxes other than income taxes	43		31		149		118		67			60
Total expenses	497		407		2,342		1,892		1,025			1,246
Operating Income	$	27	$	3	$	241	$	166	293			169
Other Income (Expense):
Interest expense and other finance charges									(32		)	(23		)
Interest income									1			1
Other income (expense), net									(2		)	(1		)
Income from Continuing Operations Before Income Taxes									260			146
Income tax expense									56			26
Net Income									$	204		$	120
Throughput (in Bcf):
Residential	16		13		160		123		107			114
Commercial and industrial	88		53		326		208		146			136
Total Throughput	104		66		486		331		253			250
Number of customers at end of period:
Residential	4,194,232		3,205,916		4,194,232		3,205,916		4,266,685			4,219,795
Commercial and industrial	344,858		255,244		344,858		255,244		350,009			350,419
Total	4,539,090		3,461,160		4,539,090		3,461,160		4,616,694			4,570,214


(1)	Includes only February 1, 2019 through March 31, 2019 results of acquired natural gas businesses due to the Merger.

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~March 31, 2019

CenterPoint Energy’s Natural Gas Distribution reportable segment reported ~~operating~~net income of ~~$27~~$204 million for the three months ended ~~September 30, 2019~~March 31, 2020 compared to $3$120 million for the three months ended ~~September 30, 2018.~~March 31, 2019.

~~Operating~~

Net income increased ~~$24~~by $84 million primarily as a result of the following key factors:

~~lower operation~~a $65 million increase in margin related to an additional month of earnings in 2020 related to the Indiana and ~~maintenance expenses of $12 million primarily driven by lower support services costs and lower labor and benefits costs~~Ohio jurisdictions acquired in ~~CERC’s NGD service territories;~~the Merger on February 1, 2019;

rate increases of $9$46 million in Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed ~~below, from rate filings in CERC’s NGD service territories;~~below;

a $7$44 million ~~increase~~reduction in ~~operating income associated with~~operation and maintenance expense, primarily due to a $53 million decrease in Merger-related severance costs in 2019, offset by an additional month of operation and maintenance expense in the ~~natural gas businesses~~Indiana and Ohio jurisdictions acquired in the Merger ~~which includes the addition of over~~on February 1, ~~million customers in Indiana and Ohio; and~~2019;

a $3$5 million increase in revenues associated with customer growth from the addition of over ~~47,000~~46,000 new ~~customers~~customers; and

an increase in ~~CERC’s NGD service territories.~~revenue of $4 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas, Indiana, Ohio and Mississippi.

These increases were partially offset by the following:

a $8$30 million ~~decrease~~increase in ~~revenues, primarily~~state and federal income taxes driven by ~~the timing~~growth in earnings and an additional month of ~~a decoupling mechanism (a revenue stabilization mechanism used to adjust revenues impacted by changes~~expense in ~~natural gas consumption, including usage and weather) in Minnesota in CERC’s NGD service territory; and~~

~~lower revenue of $2 million~~2020 related to the ~~impact~~Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;

a $16 million increase in depreciation and amortization and a $12 million increase in other non-income related taxes, primarily due to capital projects placed in service in 2020 and an additional month of expense in 2020 related to the ~~TCJA~~Indiana and Ohio jurisdictions acquired in ~~CERC’s NGD service territories.~~the Merger on February 1, 2019;

$10 million of lower revenue attributed to milder weather and lower customer usage; and

a $9 million increase in interest expense due to incremental financing to fund capital projects and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019.

Increased ~~operation and maintenance expenses related to increased gross receipts taxes of $1 million were offset by corresponding increases in the related revenues in CERC’s service territories. Decreased~~ operation and maintenance expenses related to energy efficiency programs of $2$1 million ~~were offset by corresponding decreases in the related revenues in CERC’s NGD service territories.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

~~CenterPoint Energy’s Natural Gas Distribution reportable segment reported operating~~and decreased taxes other than income ~~of $241 million for the nine months ended September 30, 2019 compared to $166 million for the nine months ended September 30, 2018.~~

~~Operating income increased $75 million primarily as a result of the following key factors:~~

~~rate increases of $30 million, exclusive of the TCJA impact discussed below, from rate filings in CERC’s NGD service territories;~~

a $29 million increase in operating income associated with the natural gas businesses acquired in the Merger for the period from February 1, 2019 through September 30, 2019, which includes operation and maintenance expenses of $44 million for Merger-related severance and incentive compensation costs, as well as the addition of over 1 million customers in Indiana and Ohio;

~~a $22 million increase in revenues for usage, partially driven by the timing of a decoupling mechanism discussed above in Minnesota in CERC’s NGD service territory; and~~

~~an $11 million increase in revenues associated with customer growth from the addition of over 47,000 new customers in CERC’s NGD service territories.~~

~~These increases were partially offset by the following:~~

~~lower revenue of $16 million related to the impact of the TCJA in CERC’s NGD service territories; and~~

~~increased depreciation and amortization expense of $7 million, primarily due to ongoing additions to plant-in-service, in CERC’s NGD service territories.~~

~~Increased operation and maintenance expenses related to increased gross receipts~~ taxes of $2$5 million were offset by corresponding increases ~~in the related revenues in CERC’s NGD service territories. Decreased operation~~ and ~~maintenance expenses related to energy efficiency programs of $13 million and rate case amortization of $1 million were offset by corresponding~~ decreases in the related ~~revenues in CERC’s NGD service territories.~~revenues.

Natural Gas Distribution (CERC)

For information regarding factors that may affect the future results of operations of CERC’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides summary data of CERC’s Natural Gas Distribution reportable segment:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020			2019
	(in millions, except throughput and customer data)
Revenues	$	398	$	410	$	2,106	$	2,058
Revenues:
Utility revenues									$	996		$	1,195
Non-utility revenues									12			16
Total revenues									1,008			1,211
Expenses:			—
Utility natural gas	105		120		980		972		472			687
Non-utility cost of revenues, including natural gas									6			10
Operation and maintenance	169		183		579		592		204			227
Depreciation and amortization	71		73		216		210		74			73
Taxes other than income taxes	33		31		119		118		50			49
Total expenses	378		407		1,894		1,892		806			1,046
Operating Income	$	20	$	3	$	212	$	166	202			165
Other Income (Expense):
Interest expense and other finance charges									(21		)	(19		)
Interest income									1			1
Other income (expense), net									(4		)	(2		)
Income from Continuing Operations Before Income Taxes									178			145
Income tax expense									44			26
Net Income									$	134		$	119
Throughput (in Bcf):
Residential	12		13		125		123		74			91
Commercial and industrial	53		53		214		208		90			98
Total Throughput	65		66		339		331		164			189
Number of customers at end of period:
Residential	3,250,810		3,205,916		3,250,810		3,205,916		3,299,011			3,261,669
Commercial and industrial	257,655		255,244		257,655		255,244		261,120			261,709
Total	3,508,465		3,461,160		3,508,465		3,461,160		3,560,131			3,523,378

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~

~~CERC’s Natural Gas Distribution reportable segment reported operating income of $20 million for the three months ended September 30,~~March 31, 2019 ~~compared to $3 million for the three months ended September 30, 2018.~~

~~Operating income increased $17 million primarily as a result of the following key factors:~~

~~lower operation and maintenance expenses of $12 million primarily driven by lower support services costs and lower labor and benefits costs;~~

~~rate increases of $9 million, exclusive of the TCJA impact discussed below; and~~

~~a $3 million increase in revenues associated with customer growth from the addition of over 47,000 new customers.~~

~~These increases were partially offset by the following:~~

a $8 million decrease in revenues, primarily driven by the timing of a decoupling mechanism (a revenue stabilization mechanism used to adjust revenues impacted by changes in natural gas consumption, including usage and weather) in Minnesota; and

~~lower revenue of $2 million related to the impact of the TCJA.~~

Increased operation and maintenance expenses related to increased gross receipts taxes of $1 million were offset by corresponding increases in the related revenues. Decreased operation and maintenance expenses related to energy efficiency programs of $2 million were offset by corresponding decreases in the related revenues.

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

CERC’s Natural Gas Distribution reportable segment reported ~~operating~~net income of ~~$212~~$134 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$166~~$119 million for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

~~Operating~~Net income increased ~~$46~~$15 million primarily as a result of the following key factors:

rate increases of ~~$30~~$28 million in Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed below;

a ~~$22~~$17 million ~~increase~~reduction in ~~revenues for usage, partially driven by the timing~~operation and maintenance expense, inclusive of a ~~decoupling mechanism~~$10 million decrease in ~~Minnesota discussed above;~~Merger-related severance costs in 2019, primarily due to lower labor benefits and support services costs;

higher revenue of $5 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas and Mississippi; and

~~an $11~~a $2 million increase in revenues associated with customer growth from the addition of ~~over 47,000~~almost 37,000 new customers.

These increases were partially offset primarily by the following:

an $18 million increase in state and federal income taxes and interest expense, primarily due to increased taxable income;

$8 million of lower revenue ~~of $16 million related~~attributed to milder weather and lower customer usage as compared to the ~~impact of the TCJA;~~three months ended March 31, 2019;

a $5 million increase in property and other non-income related taxes, primarily due to increases in local tax rates and property valuations;

a $2 million increase in interest expense, primarily due to increased debt financing to fund an increase in capital projects in 2020; and

~~increased~~a $1 million increase in depreciation and amortization ~~expense~~from an increase of ~~$7 million, primarily due to ongoing additions to plant-in-service.~~incremental capital projects placed in service in 2020.

~~Increased operation and maintenance expenses related to increased gross receipts taxes of $2 million were offset by corresponding increases in the related revenues.~~ Decreased operation and maintenance expenses related to energy efficiency programs of ~~$13~~$5 million and ~~rate case amortization~~taxes other than income taxes of $1$4 million were offset by corresponding decreases in the related revenues.

~~Energy Services (CenterPoint Energy and CERC)~~

For information regarding factors that may affect the future results of operations of the Energy Services reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2018 Form 10-K and in Item 1A of Part II of this Form 10-Q.

~~The following table provides summary data of the Energy Services reportable segment:~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions, except throughput and customer data)
Revenues $ 745
$ 920
$ 2,846
$ 3,065
Expenses:
Non-utility cost of revenues, including natural gas 716
897
2,696
2,998
Operation and maintenance 23
28
73
74
Depreciation and amortization 4
4
12
12
Taxes other than income taxes —
—
1
1
Total expenses 743
929
2,782
3,085
Operating Income (Loss) $ 2
$ (9 ) $ 64
$ (20 )

Timing impacts related to mark-to-market gain (loss) $ (2 ) $ 1
$ 47
$ (71 )
Throughput (in Bcf) 283
307
960
993
Approximate number of customers at end of period (1)
31,000
30,000
31,000
30,000


~~(1)~~	Does not include approximately 66,000 and 67,000 natural gas customers as of September 30, 2019 and 2018, respectively, that are under residential and small commercial choice programs invoiced by their host utility.

~~Three months ended September 30, 2019 compared to three months ended September 30, 2018~~

The Energy Services reportable segment reported operating income of $2 million for the three months ended September 30, 2019 compared to an operating loss of $9 million for the three months ended September 30, 2018.

~~Operating income increased $11 million primarily as a result of the following key factors:~~


•	~~a $10 million increase in margin due to fewer opportunities to optimize natural gas supply costs in the third quarter of 2018; and~~

~~a $4 million decrease in operation and maintenance expenses, primarily due to lower support services expenses.~~

~~These increases were partially offset by a $3 million decrease from mark-to-market accounting for derivatives associated with certain natural gas purchases and sales used to lock in economic margins.~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

The Energy Services reportable segment reported operating income of $64 million for the nine months ended September 30, 2019 compared to an operating loss of $20 million for the nine months ended September 30, 2018.

Operating income increased $84 million primarily as a result of a $118 million increase from mark-to-market accounting for derivatives associated with certain natural gas purchases and sales used to lock in economic margins. This increase was partially offset by a $34 million decrease in margin due to fewer opportunities to optimize natural gas costs relative to last year, primarily in the first quarter of 2019. Specifically, weather-facilitated market impacts in various regions of the continental United States during the three months ended March 31, 2018 allowed Energy Services to increase its margins in the first quarter of 2018.

~~Infrastructure Services (CenterPoint Energy)~~

For information regarding factors that may affect the future results of operations of the Infrastructure Services reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2018 Form 10-K and in Item 1A of Part II of this Form 10-Q.

~~The following table provides summary data of the Infrastructure Services reportable segment:~~

Three Months Ended September 30, 2019
Nine Months Ended September 30, 2019 (1)
(in millions)
Revenues $ 377
$ 849
Expenses:
Non-utility cost of revenues, including natural gas 96
228
Operation and maintenance 223
530
Depreciation and amortization 15
39
Taxes other than income taxes 1
2
Total expenses 335
799
Operating Income $ 42
$ 50
Backlog at period end (2):

Blanket contracts (3)
$ 637
$ 637
Bid contracts (4)
301
301
Total $ 938
$ 938


~~(1)~~	~~Represents February 1, 2019 through September 30, 2019 results only due to the Merger.~~


~~(2)~~	Backlog represents the amount of revenue Infrastructure Services expects to realize from work to be performed on uncompleted contracts in the next twelve months, including new contractual agreements on which work has not begun. Infrastructure Services operates primarily under two types of contracts, blanket contracts and bid contracts.

~~(3)~~

Using blanket contracts, customers are not contractually committed to specific volumes of services; however, Infrastructure Services expects to be chosen to perform work needed by a customer in a given time frame. These contracts are typically awarded on an annual or multi-year basis. For blanket work, backlog represents an estimate of the amount of revenue that Infrastructure Services expects to realize from work to be performed in the next twelve months on existing contracts or contracts management expects to be renewed or awarded.


~~(4)~~	~~Using bid contracts, customers are contractually committed to a specific service to be performed for a specific price, whether in total for a project or on a per unit basis.~~

~~Three months ended September 30, 2019~~

The Infrastructure Services reportable segment reported operating income of $42 million for the three months ended September 30, 2019, which includes $6 million of Merger-related amortization of intangibles for construction backlog recorded in non-utility cost of revenues, including natural gas, and $3 million of Merger-related intangibles amortization recorded in depreciation and amortization. These results are not comparable to the prior year as this reportable segment was acquired in the Merger as discussed in Note 3 to the Interim Condensed Financial Statements.

~~Nine months ended September 30, 2019~~

The Infrastructure Services reportable segment reported operating income of $50 million for the nine months ended September 30, 2019, which includes $13 million for Merger-related severance and incentive compensation costs, $15 million of Merger-related amortization of intangibles for construction backlog recorded in non-utility cost of revenues, including natural gas, and $10 million of Merger-related intangibles amortization recorded in depreciation and amortization. These results are not comparable to the prior year as this reportable segment was acquired in the Merger as discussed in Note 3 to the Interim Condensed Financial Statements.

Midstream Investments (CenterPoint Energy)

For information regarding factors that may affect the future results of operations of the Midstream Investments reportable segment, please read “Risk Factors — Risk Factors Affecting CenterPoint Energy’s Interests in Enable Midstream Partners, LP” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

The following table provides ~~pre-tax equity~~the net income (loss) of the Midstream Investments reportable segment:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Equity in earnings from Enable, net $ 77
$ 81
$ 213
$ 208



		Three Months Ended March 31,
		2020			2019
	(in millions)
Non-utility Revenues		$	—		$	—
Taxes other than income taxes		(1		)	—
Total Expenses		(1		)	—
Operating Income		1			—
Other Income (Expense):
Interest expense and other finance charges		$	(14	)	$	(12	)
Equity in earnings (loss) from Enable, net		(1,475		)	62
Interest income		—			$	2
Income (Loss) from Continuing Operations Before Income Taxes		(1,488		)	52
Income tax expense (benefit)		(361		)	28
Net Income (Loss)		$	(1,127	)	$	24

CenterPoint Energy’s Midstream Investment reportable segment reported a net loss of $1,127 million for the three months ended March 31, 2020, compared to net income of $24 million for the three months ended March 31, 2019.

Net income decreased $1,151 million primarily as a result of the following key factors:

a $1,541 million impairment charge recorded on CenterPoint Energy’s equity investment in Enable (see Note 9 to the Interim Condensed Financial Statements for further information); and

a $6 million decrease in Equity in Earnings from Enable.

These decreases were partially offset by the following:

a $389 million increase in income tax benefit primarily resulting from the impairment charge discussed above and a lower effective tax rate in 2020; and

a $10 million decrease in the loss on dilution.

Corporate and Other (CenterPoint Energy)

The following table shows the ~~operating~~net income (loss) of CenterPoint Energy’s Corporate and ~~Other reportable segment:~~Other:


	Three Months Ended September 30,					Nine Months Ended September 30,							Three Months Ended March 31,
	2019		2018			2019			2018				2020			2019 (1)
	(in millions)											(in millions)
Revenues	$	93	$	3		$	215		$	11
Non-utility Revenues													$	82		$	42
Expenses:
Non-utility cost of revenues, including natural gas	68		—			158			—				58			37
Operation and maintenance	2		(13		)	25			(14		)		5			24
Depreciation and amortization	16		9			44			24				17			14
Taxes other than income taxes	3		2			5			6				2			2
Total	89		(2		)	232			16				82			77
Operating Income (Loss)	$	4	$	5		$	(17	)	$	(5	)
Operating Loss													—			(35		)
Other Income (Expense)
Gain (loss) on marketable securities													(144		)	83
Gain (loss) on indexed debt securities													135			(86		)
Interest expense and other finance charges													(96		)	(84		)
Interest income													48			46
Other income, net													11			10
Loss from Continuing Operations Before Income Taxes													(46		)	(66		)
Income tax benefit													(50		)	(44		)
Net Income (Loss)													$	4		$	(22	)


(1)	Includes only February 1, 2019 through March 31, 2019 results of the ESG business acquired in the Merger.

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~March 31, 2019

CenterPoint Energy’s Corporate and Other ~~reportable segment~~ reported ~~operating~~net income of $4 million for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~operating income~~a net loss of $5$22 million for the three months ended ~~September 30, 2018.~~March 31, 2019.

~~The operating~~Net income ~~decreased $1~~increased $26 million primarily due to the following key factors:

a $9$221 million increase in gains on the underlying value of indexed debt securities related to the ZENS;

a $19 million decrease in operation and maintenance expenses primarily ~~for Merger-related transaction~~due to the following:


◦	lower corporate allocations retained in continuing operations related to the Infrastructure Services Disposal Group of $11 million primarily from Merger-related severance and incentive compensation costs incurred in 2019 that did not recur in 2020;


◦	decreased benefits and services costs of $4 million;


◦	decreased software maintenance costs of $2 million; and


◦	reduced Merger-related integration costs of $2 million incurred in 2019 that did not recur in 2020;

a $19 million increase in margin primarily related to higher margin of $9 million at ESG from two large federal projects in 2020 and ~~integration costs, which was offset by $8 million in operating income associated with ESG, which was acquired in~~ the ~~Merger, including~~reduction of Merger-related amortization of intangibles for ~~operation and maintenance agreements and~~ construction backlog ~~recorded~~of $6 million in non-utility cost of revenues, including natural ~~gas of $2 million.~~gas; and

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018~~

CenterPoint Energy’s Corporate and Other reportable segment reported an operating loss of $17 million for the nine months ended September 30, 2019 compared to an operating loss of $5 million for the nine months ended September 30, 2018.

~~The operating loss increased $12 million due to~~ a ~~$20~~$6 million increase in ~~operation and maintenance expenses primarily for Merger-related transaction and integration costs, which was~~income tax benefit.

These increases in net income were partially offset ~~by:~~by the following:

a $5$227 million ~~operating income associated with ESG, which was~~increase in losses on marketable securities;

a $12 million increase in interest expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to additional debt acquired in the Merger ~~for the period~~on February 1, 2019 through September 30, 2019, including operation and maintenance expenses of $2 million for Merger-related severance and incentive compensation costs, Merger-related amortization of intangibles for operation and maintenance agreements and construction backlog recorded in non-utility cost of revenues, including natural gas of $4 million and Merger-related intangibles amortization recorded in depreciation and amortization of $1 million;2019; and

a $3 million ~~property tax refund.~~increase in depreciation and amortization from the inclusion of expense for three months in 2020 versus two months included in 2019 for businesses acquired in the Merger on February 1, 2019.

Corporate and Other (CERC)

The following table shows the ~~operating~~net income (loss) of CERC’s Corporate and ~~Other reportable segment:~~Other:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(in millions)
Revenues $ 3
$ —
$ 4
$ —
Expenses 2
1
3
—
Operating Income (Loss) $ 1
$ (1 ) $ 1
$ —



		Three Months Ended March 31,
		2020			2019
	(in millions)
Non-utility Revenues		$	3		$	1
Expenses
Operation and maintenance		5			6
Total		5			6
Operating Loss		(2		)	(5		)
Other Income (Expense):
Interest expense and other finance charges		(31		)	(31		)
Interest income		21			20
Other income (expense), net		—			(1		)
Loss from Continuing Operations Before Income Taxes		(12		)	(17		)
Income tax benefit		(9		)	(8		)
Net Loss		$	(3	)	$	(9	)

CERTAIN FACTORS AFFECTING FUTURE EARNINGS

For information on other developments, factors and trends that may have an impact on the Registrants’ future earnings, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Affecting Future Earnings” in Item 7 of Part II and “Risk Factors” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K, in Item 1A of Part II of this Form 10-Q and “Cautionary Statement Regarding Forward-Looking Information” in this Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Historical Cash Flows

The following table summarizes the net cash provided by (used in) operating, investing and financing activities:


	Nine Months Ended September 30,																		Three Months Ended March 31,
	2019									2018									2020									2019
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)																		(in millions)
Cash provided by (used in):
Operating activities	$	1,086		$	595		$	513		$	1,679		$	788		$	850		$	662		$	103		$	381		$	271		$	66		$	248
Investing activities	(7,775		)	(1,504		)	(515		)	(674		)	(663		)	(359		)	(654		)	192			(177		)	(6,539		)	(1,237		)	(250		)
Financing activities	2,708			786			(21		)	(970		)	(82		)	(502		)	(32		)	(315		)	(205		)	2,345			1,078			(11		)

Operating Activities. The following items contributed to increased (decreased) net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period of ~~2018:~~2019:


	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)									(in millions)
Changes in net income after adjusting for non-cash items	$	136		$	(217	)	$	154		$	(1,363	)	$	(26	)	$	62
Changes in working capital	(768		)	53			(311		)	212			58			67
Change in equity in earnings from Enable, net of distributions (1)	28			—			—
Changes related to discontinued operations	—			—			(176		)
Lower pension contribution	(27		)	—			—
Change in equity in earnings of unconsolidated affiliates										1,537			—			—
Change in distributions from unconsolidated affiliates (1)										(4		)	—			—
Other	38			(29		)	(4		)	9			5			4
	$	(593	)	$	(193	)	$	(337	)	$	391		$	37		$	133


(1)	This change is partially offset by the change in distributions from Enable in excess of cumulative earnings in investing activities noted in the table below.

Investing Activities. The following items contributed to (increased) decreased net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period of ~~2018:~~2019:


	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)									(in millions)
Proceeds from the sale of marketable securities in 2018	$	(398	)	$	—		$	—
2019 mergers and acquisitions, net of cash acquired (See Note 3 to the Interim Condensed Financial Statements)	(5,991		)	—			—
Mergers and acquisitions, net of cash acquired										$	5,987		$	—		$	—
Higher capital expenditures	(701		)	(66		)	(135		)	(127		)	(28		)	(30		)
Net change in notes receivable from affiliated companies	—			(772		)	27			—			1,460			106
Change in distributions from Enable in excess of cumulative earnings	(30		)	—			—			7			—			—
Changes related to discontinued operations	—			—			(47		)
Other	19			(3		)	(1		)	18			(3		)	(3		)
	$	(7,101	)	$	(841	)	$	(156	)	$	5,885		$	1,429		$	73

Financing Activities. The following items contributed to (increased) decreased net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period of ~~2018:~~2019:


	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)									(in millions)
Net changes in commercial paper outstanding	$	3,135		$	—		$	900		$	(3,520	)	$	—		$	(183	)
Decreased proceeds from issuances of preferred stock	(790		)	—			—
Net changes in long-term debt outstanding, excluding commercial paper	1,062			276			(599		)	210			(584		)	—
Net changes in long-term revolving credit facilities										915			—			—
Net changes in debt issuance costs	17			(4		)	5			8			7			—
Net changes in short-term borrowings	39			—			39
Distributions to ZENS note holders in 2018	398			—			—
Increased payment of Common Stock dividends	(73		)	—			—			(1		)	—			—
Increased payment of preferred stock dividends	(101		)	—			—
Decreased payment of preferred stock dividends										1			—			—
Net change in notes payable from affiliated companies	—			(16		)	570			—			134			—
Contribution from parent	—			590			(600		)	—			(590		)	—
Dividend to parent	—			23			167			—			(361		)	(12		)
Other	(9		)	(1		)	(1		)	10			1			1
	$	3,678		$	868		$	481		$	(2,377	)	$	(1,393	)	$	(194	)

Future Sources and Uses of Cash

The liquidity and capital requirements of the Registrants are affected primarily by results of operations, capital expenditures, debt service requirements, tax payments, working capital needs and various regulatory actions. Capital expenditures are expected to be used for investment in infrastructure. These capital expenditures are anticipated to maintain reliability and safety, increase resiliency and expand our systems through value-added projects. In addition to dividend payments on CenterPoint Energy’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock, and in addition to interest payments on debt, the Registrants’ principal anticipated cash requirements for the remaining ~~three~~nine months of ~~2019~~2020 include the following:

CenterPoint Energy Houston Electric CERC
(in millions)
Estimated capital expenditures $ 704
$ 307
$ 221
Scheduled principal payments on Securitization Bonds 69
69
—

~~For an update on CenterPoint Energy’s contractual obligations following the Merger, see Notes 12, 14 and 19 to the Interim Condensed Financial Statements.~~



	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Estimated capital expenditures	$	1,682	$	626	$	401
Scheduled principal payments on Securitization Bonds	168		168		—
Maturing Vectren term loans	600		—		—

The Registrants expect that anticipated cash needs for the remaining ~~three~~nine months of ~~2019~~2020 will be met with borrowings under their credit facilities, bank loans, proceeds from the private placement of Series C Preferred Stock and Common Stock, proceeds from the issuance of long-term debt, proceeds from the completed sale of the Infrastructure Services Disposal Group, proceeds from the anticipated sale of the Energy Services Disposal Group, anticipated cash flows from operations, with respect to CenterPoint Energy and CERC, proceeds from commercial paper and, with respect to CenterPoint Energy, distributions from Enable. Discretionary financing or refinancing may result in the issuance of equity securities of CenterPoint Energy or debt securities of the Registrants in the capital markets or the arrangement of additional credit facilities or term bank loans. Issuances of equity or debt in the capital markets, funds raised in the commercial paper markets and additional credit facilities may not, however, be available on acceptable terms.

On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to CenterPoint Energy that fall below CenterPoint Energy’s previously disclosed expected minimum quarterly distribution from Enable of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce Enable common unit distributions to CenterPoint Energy by approximately $155 million per year.

Additionally, on April 1, 2020, CenterPoint Energy provided a business update related to certain measures it expects to take in response to the current business environment to strengthen its financial position and to adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions discussed above. These measures are expected to include reducing CenterPoint Energy’s (i) quarterly common stock dividend per share from $0.2900 to $0.1500; (ii) anticipated 2020 capital spending by approximately $300 million, with CenterPoint Energy continuing to target five-year total capital investment of approximately $13 billion as previously disclosed; and (iii) anticipated operation and maintenance expenses for 2020 by a target

of approximately $40 million, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets.

To the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, the Registrants may need to consider alternative sources of funding for some of its operations and for working capital, which may increase the cost of capital and result in higher interest expense. At this time, the Registrants expect impacts on their liquidity due to COVID-19 to be temporary. Although CenterPoint Energy customarily satisfies its near-term financing needs with proceeds from commercial paper, CenterPoint Energy has utilized its revolving credit facilities as a source of funding because market disruptions caused by COVID-19 limited its access to the commercial paper markets. These uncertain economic conditions may also result in the inability of the Registrants’ customers and other counterparties to make payments to the Registrants, on a timely basis or at all, which could adversely affect the business, cash flows, liquidity, financial condition and results of operations of the Registrants. Under such circumstances, the Registrants would intend to rely on borrowings from the short-term capital markets as well as continued use of their revolving credit facilities to mitigate such effects until cash flows revert to their pre-COVID-19 levels. The net proceeds of CenterPoint Energy’s sale of the Infrastructure Services Disposal Group were used to repay a portion of outstanding CenterPoint Energy debt, including $200 million of maturing Vectren term loans.

Off-Balance Sheet Arrangements

Other than Houston Electric’s general mortgage bonds issued as collateral for tax-exempt long-term debt of CenterPoint Energy as discussed in Note 12, guarantees as discussed in Note 14(b) and (c) to the Interim Condensed Financial Statements, ~~and operating leases,~~ we have no off-balance sheet arrangements.

Regulatory Matters

COVID-19 Regulatory Matters

Governors, public utility commissions and other authorities in the states in which we operate have issued a number of different orders related to the COVID-19 pandemic. While many jurisdictions are subject to mandatory stay-at-home and similar orders, essential businesses and activities are exempted from these orders, including utility operations and maintenance. Accordingly, CenterPoint Energy’s crews will continue to provide essential service by responding to calls, completing work orders and undertaking other critical work. To protect our customers and employees, we are implementing COVID-19 safety precautions. Additionally, regulatory authorities have issued orders addressing customer non-payment and disconnection. For example, in Indiana, the IURC issued an order that, among other things, permits utilities to voluntarily suspend or waive late fees and reconnections fees and reconnect customers who have been disconnected due to non-payment, provided that such actions are taken on a non-discriminatory basis and apply to all customers. Commissions in other states have issued similar orders. In our NGD service territories and for Indiana Electric, we have temporarily suspended disconnections for non-payment and will continue to support those customers who may need payment assistance, arrangements or extensions. We will continue to monitor developments in this area and adjust our response as guidelines and circumstances may require.

On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset costs resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory. The order includes several requirements for transmission and distribution utilities (including Houston Electric):

Transmission and distribution utilities must file a tariff rider to collect funds to reimburse costs related to unpaid bills from eligible residential customers unemployed due to the impacts of COVID-19. The rider is based on $0.33 per MW hour ($0.00033 per KW hour) to be applied to all customer classes. Houston Electric filed its updated tariff implementing the rider on March 31, 2020, which was approved by the PUCT on April 2, 2020.

Transmission and distribution utilities entered into no-interest loan agreements with ERCOT to provide for an initial fund balance for reimbursement. On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a no-interest loan agreement with ERCOT for approximately $5 million.

The fund administered by each transmission and distribution utility for the COVID-19 ERP can also receive donations and grants from governmental entities, corporations, and other entities. Any funds received from other sources shall be administered and treated in the same manner by the transmission and distribution utilities as the funds in the program from the rider.

Transmission and distribution utilities may petition the PUCT for changes to the COVID-19 ERP, including the level of the rider in the event that the funds collected are not sufficient to cover reimbursements.

REPs will identify eligible customers to the relevant transmission and distribution utilities, and the transmission and distribution utilities will cease charging REPs for associated delivery charges, except securitization related charges. REPs will cease submitting disconnection for non-payment orders to transmission and distribution utilities for eligible customers.

The funds collected through the rider will be used to reimburse the following entities and costs: REPs’ energy charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice (reimbursement amounts are based on an average energy cost of $0.04 per KW hour); transmission and distribution utilities’ delivery charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice; the third-party administrator to cover its reasonable costs of administering the COVID-19 ERP eligibility process; and ERCOT for the loan to the transmission and distribution utilities.


•	REPs will submit one spreadsheet with reimbursement claims to transmission and distribution utilities beginning on April 30, 2020 and all subsequent requests that may be made on the 15^th of each month, and transmission and distribution utilities will process reimbursement payments within 14 days.

Transmission and distribution utilities will prepare reports and file them at the PUCT every 30 days showing aggregate amounts of reimbursements to the transmission and distribution utilities and REPs.

The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of the COVID-19 ERP. The transmission and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete any remaining COVID-19 ERP cost recovery and disburse all reimbursement amounts or remaining balances.

In the other states in which we operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs and savings. For example, the MPSC is allowing CenterPoint Energy and CERC to defer the following:

all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system beginning with the date of the Governor of Mississippi’s declared state of emergency; and

any costs, including any incremental bad debt expenses and all associated credit and collection costs, related to connections, reconnections, or disconnections for all customers classes. This deferral authorization includes, but is not limited to, customer-paid fees.

Further, the MPSC is also allowing CenterPoint Energy and CERC to offset these deferrals with any financial relief received from other sources at the federal or state level. Orders have also been received from the Railroad Commission, the LPSC and the APSC authorizing CenterPoint Energy and CERC to defer some or all COVID-19 related costs for future recovery.

Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately $194 million, ~~excluding~~among other requests. On January 23, 2020, Houston Electric filed a ~~rider to refund~~Stipulation and Settlement Agreement with the PUCT that provides for the following, among other things:

an overall revenue requirement increase of approximately ~~$40 million annually over three years discussed below. This rate filing is based on a rate base~~$13 million;

an ROE of ~~$6.4 billion,~~ 9.4%;

a ~~50% debt, 50% equity~~ capital structure ~~and~~ of 57.5% debt/42.5% equity;

a 10.4% ROE. Houston Electric last filed for a base rate increase on June 30, 2010, with a test year ending December 31, 2009. Houston Electric also requested a prudency determination on all capital investments made since January 1, 2010, the establishment of a rider to refund ~~over three years to its customers approximately $119 million~~ of unprotected EDIT ~~resulting from the TCJA, updated depreciation rates~~of $105 million plus carrying costs over approximately 30-36 months; and ~~approval to clarify and update various non-rate tariff provisions. Recovery~~

recovery of all ~~reasonable~~retail transmission related costs through the TCRF.

Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and ~~necessary~~DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for ~~this case and certain prior rate case proceedings were severed into~~Houston Electric no later than four years from the date of the PUCT’s final order in the proceeding. Additionally, Houston Electric will not file a ~~separate proceeding. A hearing was held June 24–28, 2019.~~

~~On September 16, 2019, the ALJs issued~~DCRF in 2020, nor will a PFD recommending a revenue increase of approximately $2.6 million based on a 55% debt, 45% equity capital structure, a 9.42% ROE, rate base reductions of approximately $350 million, operation and maintenance expense disallowances and certain “ring-fencing” measures. If the PFD were approved in its entirety, it would result, among other things, in a one-time refund obligation of capital previously recovered through Houston Electric’s TCOS and DCRF mechanisms, and a pre-tax write-off of approximately $120 million for rate base disallowance of assets recorded in CenterPoint Energy’s and Houston Electric’s Condensed Consolidated Balance Sheets as of September 30, 2019. The amount of any refunds for previously recovered capital would be determined in a separate proceeding with the PUCT. Furthermore, the PFD recommends asubsequent separate proceeding with the PUCT ~~to determine the amount, if any, of $158 million~~be instituted regarding EDIT on Houston Electric’s securitized ~~assets to be provided to customers. Parties filed exceptions and replies to exceptions in October 2019.~~

~~A summary~~assets. Furthermore, under the terms of the ~~PFD impacts are as follows, assuming~~Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy but left the ~~issues identified~~determination of whether to impose a dividend restriction up to the PUCT. The PUCT approved the Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the ~~PFD as noted in Houston Electric’s exceptions to the PFD filing with the PUCT are adjusted:~~

(in millions)
Operating income impact from Houston Electric's request $ 111
PFD proposed reductions:
ROE and equity ratio (62 )
Rate base disallowances (25 )
Operations and maintenance expenses (39 )
Weather normalization (12 )
Operating income impact from PFD $ (27 )

Total operating income change from request to PFD $ (138 )

final order. The ~~PUCT has not yet begun deliberating~~rates were implemented on the PFD, which is prepared by judges at a different state agency. A final order from the PUCT is currently expected in the fourth quarter of 2019, but motions for rehearing, if granted, could result in the order being issued inApril 23, 2020. ~~CenterPoint Energy and Houston Electric cannot predict the outcome of the proceeding.~~

CenterPoint Energy and Houston Electric ~~records~~record pre-tax expense for ~~disallowed~~(i) probable disallowances of capital investments and (ii) customer refund obligations ~~when the amounts are deemed both probable~~ and ~~estimable.~~

~~Brazos Valley Connection Project (CenterPoint Energy and Houston Electric)~~

~~Houston Electric completed construction on and energized the Brazos Valley Connection~~costs deferred in March 2018, ahead of the original June 1, 2018 energization date. The final capital costs of the project reported to the PUCT in December 2018 were $281 million, which was within the estimated range of approximately $270-$310 million in the PUCT’s original order. Houston Electric applied for interimregulatory assets when recovery of project costs incurred through July 31, 2018, which were not already included in rates in a filing with the PUCT in September 2018 and received approval for interim recovery in November 2018. Final approval by the PUCT of the project costssuch amounts is ~~expected to occur in Houston Electric’s pending base rate case discussed above.~~no longer considered probable.

Bailey to Jones Creek Project (CenterPoint Energy and Houston Electric)

In April 2017, Houston Electric submitted a proposal to ERCOT requesting its endorsement of the Freeport Area Master Plan, which included the Bailey to Jones Creek

Project. On ~~December 12, 2017,~~November 21, 2019, the PUCT issued its final approval of Houston ~~Electric received approval from ERCOT. In September 2018, Houston Electric filed a~~Electric’s certificate of convenience and necessity application, with the PUCT that included capital cost estimates for the project that ranged from approximately $482-$695 million, which were higher than the initial cost estimates. The revised project cost estimates include additional costs associated with the routing of the line to mitigate environmental and other land use impacts and structure design to address soil and coastal wind conditions. The actual capital costs of the project will dependbased on those factors as well as other factors, including land acquisition costs, construction costs and the ultimate route approved by the PUCT. On the request of the PUCT, ERCOT intervened in the proceeding and performed a re-evaluation of the cost-effectiveness of the proposed project. Based on that re-evaluation, ERCOT reaffirmed the recommended transmission option for the project. Anan unopposed settlement agreement ~~was filed on August 15, 2019,~~ under which Houston Electric would construct the project at an estimated cost of approximately $483 million. In April 2020, a federal court vacated the Army Corps of Engineers Nationwide Permit 12, which Houston Electric ~~anticipates~~intended to use for the project. Houston Electric is monitoring those proceedings and has filed its individual permit application with the Army Corps in accordance with the federal court decision. Significant delays in the processing of that application could lead to delays in completing construction. The actual capital costs of the ~~PUCT~~project will ~~issue a final decision~~depend on land acquisition costs, construction costs, minor changes to the routing of the line to mitigate environmental and other land use impacts, structure design to address soil and coastal wind conditions, the permitting issues described above, and other factors. Houston Electric has commenced pre-construction activities on the ~~certificate of convenience~~project, and ~~necessity application~~anticipates beginning construction in early 2021 and completing construction and energizing the ~~fourth quarter of 2019.~~line before the peak electric season in April 2022.

Indiana Electric Generation Project (CenterPoint Energy)

Indiana Electric must make substantial investments in its generation resources in the near term to comply with environmental regulations. On February 20, 2018, Indiana Electric filed a petition seeking authorization from the IURC to construct a new 700-850 MW natural gas combined cycle generating facility to replace the baseload capacity of its existing generation fleet at an approximate cost of $900 million, which includes the cost of a new natural gas pipeline to serve the plant.

As a part of this same proceeding, Indiana Electric also sought recovery under Indiana Senate Bill 251 of costs to be incurred for environmental investments to be made at its F.B. Culley generating plant to comply with ELG and CCR rules. The F.B. Culley investments, estimated to be approximately $95 million, began in 2019 and will allow the F.B. Culley Unit 3 generating facility to comply with environmental requirements and continue to provide generating capacity to Indiana Electric’s customers. Under Indiana Senate Bill 251, Indiana Electric sought authority to recover 80% of the approved costs, including a return, using a tracking mechanism, with the remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding.

On April 24, 2019, the IURC issued an order approving the environmental investments proposed for the F.B. Culley generating facility, along with recovery of prior pollution control investments made in 2014. The order denied the proposed gas combined cycle generating facility. Indiana Electric ~~will conduct~~is conducting a new IRP, expected to be completed in mid-2020, to identify an appropriate investment of capital in its generation fleet to satisfy the needs of its customers and comply with environmental regulations.

Indiana Electric ~~Solar Project~~A.B. Brown Ash Pond Remediation (CenterPoint Energy)

On ~~February 20, 2018,~~August 14, 2019, Indiana Electric ~~announced it was finalizing details to install an additional 50 MW of universal solar energy, consistent with its IRP, with~~filed a petition with the IURC, seeking ~~authority to recover~~approval, as a federally mandated project, for the recovery of costs associated with the ~~project~~clean closure of the A.B. Brown ash pond pursuant to Indiana Senate Bill ~~29.~~251. This project, expected to last approximately 14 years, would result in the full excavation and recycling of the ponded ash through agreements with a beneficial reuse entity, totaling approximately $160 million. Under Indiana Senate Bill 251, Indiana Electric seeks authority to recover via a tracking mechanism 80% of the approved costs, with a return on eligible capital investments needed to allow for the extraction of the ponded ash, with the remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding. On December 19, 2019 and subsequently on January 10, 2020, Indiana Electric filed a settlement agreement with the intervening parties whereby the ~~energy produced by the solar farm~~costs would be ~~set~~recovered as requested, with an additional commitment by Indiana Electric to offset the federally mandated costs by at least $25 million, representing a ~~fixed market rate over~~combination of total cash proceeds received from the ~~life of the investment~~

ash reuser and ~~recovered within~~total insurance proceeds to be received from Indiana Electric’s ~~CECA mechanism. On March 20, 2019,~~insurers under confidential settlement agreements of litigation filed against the ~~IURC approved the settlement. Indiana Electric reached an agreement with the other settling parties to amend the settlement agreement to ensure the project would not cause negative tax consequences.~~insurers. The ~~amendment must be approved by the IURC. Indiana Electric has filed the amended~~ settlement agreement with the intervening parties is pending before the IURC, ~~and a hearing is scheduled~~with an order expected in the first half of 2020. If approved, Indiana Electric would expect recovery of the approved costs to ~~be held~~commence in ~~January 2020.~~2021.

Rate Change Applications

The Registrants are routinely involved in rate change applications before state regulatory authorities. Those applications include general rate cases, where the entire cost of service of the utility is assessed and reset. In addition, Houston Electric is periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS and DCRF) and annually files to adjust its EECRF. CERC is periodically involved in proceedings to adjust its capital tracking mechanisms in Texas (GRIP), its cost of service adjustments in Arkansas, Louisiana, Mississippi and Oklahoma (FRP, RSP, RRA and PBRC, respectively), its decoupling mechanism in Minnesota, and its energy efficiency cost trackers in Arkansas, Minnesota, Mississippi and Oklahoma (EECR, CIP, EECR and EECR, respectively). CenterPoint Energy is periodically involved in proceedings to adjust its capital tracking mechanisms in Indiana (CSIA for gas and TDSIC for ~~Electric)~~electric) and Ohio (DRR), its decoupling mechanism in Indiana (SRC for gas), and its energy efficiency cost trackers in Indiana (EEFC for gas and DSMA for electric) and Ohio (EEFR).

The table below reflects significant applications pending or completed since the Registrants’ combined ~~2018~~2019 Form 10-K was filed with the SEC.

Mechanism

Annual Increase (Decrease) (1)

(in millions)

Filing

Date

Effective Date

Approval Date

Additional Information

CenterPoint Energy and Houston Electric (PUCT)

Rate Case~~(1)~~

$~~155~~13

April

2019

~~TBD~~

April

2020

~~TBD~~March 2020

See discussion above under Houston Electric Base Rate Case.

~~EECRF~~

~~May~~

~~2019~~TCOS (1)

~~March~~

~~2020~~

~~October 2019~~March 2020

~~The PUCT issued a final order in October 2019 approving recovery~~TBD

TBD

Requested an increase of ~~2020 EECRF of $35~~$204 million ~~including a $7 million performance bonus.~~to rate base.

CenterPoint Energy and CERC - Beaumont/East Texas (Railroad Commission)

Rate Case (1)

November

2019

TBD

Unanimous settlement agreement filed with the Railroad Commission in March 2020 that recommends a $4 million annual increase in current revenues, a refund for an Unprotected EDIT Rider amortized over three years of which $2.2 million is refunded in the first year and establishes a 9.65% ROE and a 56.95% equity ratio for future GRIP filings for the Beaumont/East Texas jurisdiction. The settlement calls for new rates to be effective with October 2020 usage and would be reflected starting with November 2020 bills.

CenterPoint Energy and CERC - South Texas, Houston and Texas Coast (Railroad Commission)

GRIP (1)

2018

March

~~2019~~2020

~~July~~

~~2019~~

TBD

~~June~~

~~2019~~

TBD

Based on net change in invested capital of ~~$123~~$144 million.

~~CenterPoint Energy and CERC - Houston and Texas Coast (Railroad Commission)~~

~~Administrative 104.111~~

~~n/a~~

~~August 2019~~

~~TBD~~

On August 1, 2019, and subsequent supplemental filings in August and October 2019, Houston and Texas Coast proposed a rider to refund over three years to its Houston and Texas Coast customers combined, approximately $18 million of unprotected EDIT related to the TCJA.

CenterPoint Energy and CERC - Arkansas (APSC)

FRP (1)

7(8)

April

~~2019~~2020

~~October 2019~~

~~August 2019~~

Based on ROE of 9.5% approved in the last rate case. On August 23, 2019, the APSC approved a unanimous comprehensive settlement that results in an FRP revenue increase of $7 million and includes additional non-monetary items.

~~CenterPoint Energy and CERC - Louisiana (LPSC)~~

~~RSP(1)~~

~~September 2019~~

~~December 2019~~TBD

TBD

Based on ROE of ~~9.95%~~9.5% with 50 basis point (+/-) earnings band. Revenue reduction of $8.1 million based on prior test year true-up earned return on equity of 11.75% combined with projected test year return on equity of 8.40%.

CenterPoint Energy and CERC - Minnesota (MPUC)

CIP Financial Incentive(1)

119

May

~~2019~~2020

~~October 2019~~TBD

~~September 2019~~TBD

CIP Financial Incentive based on ~~2018~~2019 activity.

~~Decoupling~~

~~n/a~~

~~September 2019~~

~~TBD~~

Represents over-recovery of $21 million recorded for and during the period July 1, 2018 through June 30, 2019, partially offset by over-refund of $2 million related to the period July 1, 2017 through June 30, 2018.

Rate Case (1)

October 2019

TBD

Reflects a proposed 10.15% ROE on a 51.39% equity ratio. Interim rates reflecting an annual increase of $53 million ~~requested to be effective~~were implemented on January 1, 2020.

CenterPoint Energy and CERC - ~~Mississippi (MPSC)~~Oklahoma (OCC)

~~RRA~~PBRC (1)

2(2)

May
2019

March

2020

TBD

Based on ROE of ~~9.26%.~~

~~CenterPoint Energy and CERC~~ 10% with 50 basis point (+/- ~~Oklahoma (OCC)~~

~~PBRC~~

~~March~~

) earnings band. Revenue credit of approximately $2 million based on 2019

~~September 2019~~

~~August 2019~~

~~Based on~~ test year adjusted earned ROE of ~~10%~~15.37%. ~~On July 26, 2019, the ALJ recommended that the OCC approve an increase of $2 million. On August 29, 2019, the OCC approved the ALJ-recommended revenue increase of $2 million.~~

~~CenterPoint Energy - Indiana South - Gas (IURC)~~

~~CSIA~~

~~October~~

~~2018~~

~~January~~

~~2019~~

~~January~~

~~2019~~

Requested an increase of $16 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes refunds associated with the TCJA, resulting in a change of $(1) million, and a change in the total (over)/under-recovery variance of $(3) million annually.

~~CSIA~~

~~April~~

~~2019~~

~~July~~

~~2019~~

~~July~~

~~2019~~

Requested an increase of $22 million to rate base, which reflects a $5 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $3 million annually.

~~CSIA~~ ~~(1)~~

~~October 2019~~

~~January 2020~~

~~TBD~~

Requested an increase of $18 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $(0.2) million annually.

Mechanism

Annual Increase (Decrease) (1)

(in millions)

Filing

Date

Effective Date

Approval Date

Additional Information

CenterPoint Energy and CERC - Mississippi (MPSC)

RRA (1)

May

2020

TBD

Based on ROE of 9.292% with 100 basis point (+/-) earnings band. Revenue increase of $2 million based on 2019 test year adjusted earned ROE of 7.45%.

CenterPoint Energy - Indiana ~~North~~South - Gas (IURC)

CSIA(1)

October
2018April 2020

January
2019

July

2020

January
2019TBD

Requested an increase of ~~$54~~$13 million to rate base, which reflects a $3$1 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in ano change ~~of $(11) million,~~to the previous credit provided, and a change in the total (over)/under-recovery variance of ~~$(19)~~$1 million annually.

CenterPoint Energy - Indiana North - Gas (IURC)

CSIA(1)

124

April
~~2019~~

July
2019 2020

July

~~2019~~ 2020

TBD

Requested an increase of ~~$58~~$35 million to rate base, which reflects a ~~$12~~$4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $14 million annually.

~~CSIA~~ ~~(1)~~

~~October 2019~~

~~January 2020~~

~~TBD~~

Requested an increase of $29 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $(7) million annually.

CenterPoint Energy - Ohio (PUCO)

~~DRR~~

~~May~~

~~2019~~

~~September~~

~~2019~~

~~August 2019~~

Requested an increase of $78 million to rate base for investments made in 2018, which reflects a $11 million annual increase in current revenues. A change in (over)/under-recovery variance of $(3) million annually is also included in rates. All pre-2018 investments are included in rate case request.

~~Rate Case~~

~~March~~

~~2018~~

~~September 2019~~

~~August 2019~~

Settlement agreement approved by PUCO Order that provides for a $23 million annual increase in current revenues. Order based upon $622 million of total rate base, a 7.48% overall rate of return, and extension of conservation and DRR programs.

TSCR (1)

~~(18)~~N/A

January

2019

TBD

Application to flow back to customers certain benefits from the TCJA. Initial impact reflects credits for 2018 of $(10) million and 2019 of ~~$(8)~~$(9) million, and 2020 of $(6) million, with mechanism to begin subsequent to new ~~base rates. Order~~approval by PUCO. The order is expected in ~~the fourth quarter~~2020.

DRR

May

2020

September

2020

TBD

Requested an increase of $67 million to rate base for investments made in 2019, ~~or early 2020.~~which reflects a $10 million annual increase in current revenues. A change in (over)/under-recovery variance of $2 million annually is also included in rates.

CenterPoint Energy - Indiana Electric (IURC)

~~TDSIC~~

~~February~~

~~2019~~

~~May~~

~~2019~~

~~May~~

~~2019~~

Requested an increase of $24 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes refunds associated with the TCJA, resulting in a change of $5 million, and a change in the total (over)/under-recovery variance of $5 million annually.

TDSIC (1)

~~August~~February

~~2019~~2020

~~November~~May

~~2019~~2020

TBD

Requested an increase of ~~$35~~$34 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $4$2 million annually.

~~ECA - MATS~~

~~February~~

~~2018~~

~~January~~

~~2019~~

~~April~~

~~2019~~

Requested an increase of $58 million to rate base, which reflects a $13 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism includes recovery of prior accounting deferrals associated with investments (depreciation, carrying costs, operating expenses).

~~CECA~~

~~February~~

~~2019~~

~~June~~

~~2019~~

~~May~~

~~2019~~

Requested an increase of $13 million to rate base related to solar pilot investments, which reflects a $2 million annual increase in current revenues. Additional solar investment to supply 50 MW of solar capacity is approved and will be included for recovery once completed in 2021.


(1)	Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates.

Tax Reform

TCJA-related 2018 tax expense refunds are currently included in the Registrants’ existing rates and are therefore reducing the Registrants’ current annual revenue. The TCJA-related 2018 tax expense refunds for Houston Electric were completed in September 2019. However, in Houston Electric’s rate case filed in April 2019, and subsequently adjusted in errata filings in May and June 2019, pursuant to the Stipulation and Settlement Agreement, Houston Electric ~~is proposing~~will return unprotected EDIT net regulatory liability balance to ~~continue returning other benefits of the TCJA~~customers, through a separate rider ~~that will return~~and its wholesale transmission tariff over approximately ~~$119~~three years. The balance of unprotected EDIT was $105 million as of December 31, 2018. In addition, Houston Electric’s TCJA-related protected EDIT balance as of December 31, 2018 is $563 million and must be returned to customers over ~~the next three years. The TCJA is also expected to continue to return benefits to customers through Houston Electric’s base rates by approximately $73 million per year.~~ARAM.

CenterPoint Energy’s electric and natural gas utilities in Indiana and Ohio, which were acquired during the Merger, currently recover corporate income tax expense in approved rates charged to customers. The IURC and the PUCO both issued orders which

initiated proceedings to investigate the impact of the TCJA on utility companies and customers within Indiana and Ohio, respectively. In addition, the IURC and PUCO have ordered each utility to establish regulatory liabilities to record all estimated impacts of tax reform starting January 1, 2018 until the date when rates are adjusted to capture these impacts. In Indiana, in response to Vectren’s pre-Merger filing for proposed changes to its rates and charges to consider the impact of the lower federal income tax rates, the IURC approved an initial reduction to current rates and charges, effective June 1, 2018, to capture the immediate impact of the lower corporate federal income tax rate. The refund of EDIT and regulatory liabilities commenced in November 2018 for Indiana electric customers and in January 2019 for Indiana natural gas customers. In Ohio, the initial rate reduction to current rates and charges became effective upon conclusion of its pending base rate case on August 28, 2019. In January 2019, an application was filed with PUCO in compliance with its October 2018 order requiring utilities to file for a request to adjust rates to reflect the impact of the TCJA, requesting authority to implement a rider to flow back to customers the tax benefits realized under the TCJA, including the refund of EDIT and regulatory liabilities. CenterPoint Energy expects this proceeding to be approved in ~~the fourth quarter of 2019 or early~~ 2020.

ELG (CenterPoint Energy)

Under the Clean Water Act, the EPA sets technology-based guidelines for water discharges from new and existing electric generation facilities. In September 2015, the EPA finalized revisions to the existing steam electric ELG setting stringent technology-based water discharge limits for the electric power industry. The EPA focused this rulemaking on wastewater generated primarily by pollution control equipment necessitated by the comprehensive air regulations, specifically setting strict water discharge limits for arsenic, mercury and selenium for scrubber waste waters. The ELG will be implemented when existing water discharge permits for the plants are renewed. In the case of Indiana Electric’s water discharge permits, in 2017 the IDEM issued final renewals for the F.B. Culley and A.B. Brown power plants. IDEM agreed that units identified for retirement by December 2023 would not be required to install new treatment technology to meet ELG, and approved a 2020 compliance date for dry bottom ash and a 2023 compliance date for flue gas desulfurization wastewater treatment standards for the remaining coal-fired unit at F.B. Culley.

On April 13, 2017, as part of the U.S. President’s Administration’s regulatory reform initiative, which is focused on the number and nature of regulations, the EPA granted petitions to reconsider the ELG rule, and indicated it would stay the current implementation deadlines in the rule during the pendency of the reconsideration. On September 13, 2017, the EPA finalized a rule postponing certain interim compliance dates by two years, but did not postpone the final compliance deadline of December 31, 2023. In April 2018, the EPA published an effluent guidelines program plan that anticipated a December 2019 rule revising the effluent limitations and pre-treatment standards for existing sources in the 2015 rule. On April 12, 2019, the U.S. Court of Appeals for the Fifth Circuit vacated and remanded portions of the ELG rule that selected impoundment as the best available technology for legacy wastewater and leachate. It is not clear what revisions to the ELG rule the EPA will implement, or what effect those revisions may have. As Indiana Electric does not currently have short-term ELG implementation deadlines in its recently renewed wastewater discharge permits, it does not anticipate immediate impacts from the EPA’s two-year extension of preliminary implementation deadlines due to the longer compliance time frames granted by IDEM and will continue to work with IDEM to evaluate further implementation plans. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR and ELG rules. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.

CPP and ACE Rule (CenterPoint Energy)

On August 3, 2015, the EPA released its CPP Rule, which required a 32% reduction in carbon emissions from 2005 levels. The final rule was published in the Federal Register on October 23, 2015, and that action was immediately followed by litigation ultimately resulting in the U.S. Supreme Court staying implementation of the rule. On August 31, 2018, the EPA published its proposed CPP replacement rule, the ACE Rule, which was finalized on July 8, 2019 and requires states to implement a program of energy efficiency improvement targets for individual coal-fired electric generating units. States have three years to develop state plans to implement the ACE rule, and CenterPoint Energy does not expect a state ACE rule to be finalized and approved by the EPA until 2024. CenterPoint Energy is currently unable to predict the effect of a state plan to implement the ACE rule but does not anticipate that such a plan would have a material effect.

Impact of Legislative Actions & Other Initiatives (CenterPoint Energy)

At this time, compliance costs and other effects associated with reductions in GHG emissions or obtaining renewable energy sources remain uncertain. While the requirements of a state ACE rule remain uncertain, Indiana Electric will continue to monitor regulatory activity regarding GHG emission standards that may affect its electric generating units.

~~FERC Revised Policy Statement~~MRT Rate Case (CenterPoint ~~Energy and CERC)~~Energy)

The regulation of midstream energy infrastructure assets has a significant impact on Enable’s business. For example, Enable’s interstate natural gas transportation and storage assets are subject to regulation by the FERC under the Natural Gas Act. In ~~March~~June 2018, the FERC announced a Revised Policy Statement stating that it would no longer allow pipelines organized as a master limited partnership to recover an income tax allowance in their cost-of-service rates. In July 2018, the FERC issued new regulations which required all FERC-regulated natural gas pipelines to make a one-time Form No. 501-G filing providing certain financial information. In October 2018, Enable Gas Transmission, LLC filed its Form No. 501-G and filed a statement that it intended to take no other action. On March 8, 2019, the FERC terminated the 501-G proceeding and required no other action. MRT ~~did not file a FERC Form No. 501-G because it had~~ filed a general Natural Gas Act rate case, and in ~~June 2018. In July~~October 2019, MRT filed a second rate case. MRT began collecting the rates proposed in the 2018 ~~the FERC issued an order accepting MRT’s proposed~~ rate ~~increases~~case, subject to refund, ~~upon a final determination of MRT’s rates~~on January 1, 2019. On November 5, 2019, as supplemented on December 13, 2019, MRT filed uncontested proposed settlements for the 2018 and ~~ordering MRT to refile its~~2019 rate case to reflect the elimination of an income tax allowance in its cost-of-service rates. On August 30, 2018, MRT submitted a supplemental filing to comply with the FERC’s order. MRT has appealed the FERC’s order to eliminate the income tax allowance in its cost-of-service rates.cases. The FERC set MRT’s re-filed rate case for hearing. The procedural schedule has been suspended to afford MRT time to file a settlement. If a settlement is not filed or all of the participants do not agree to a settlement, then the proceeding may advance to hearing.approved both settlements on March 26, 2020, and that order became final on April 25, 2020.

Other Matters

Credit Facilities

The Registrants may draw on their respective revolving credit facilities from time to time to provide funds used for general corporate and limited liability company purposes, including to backstop CenterPoint Energy’s and CERC’s commercial paper programs. The facilities may also be utilized to obtain letters of credit. For further details related to the Registrants’ revolving credit facilities, please see Note 12 to the Interim Condensed Financial Statements.

Based on the consolidated debt to capitalization covenant in the Registrants’ revolving credit facilities, the Registrants would have been permitted to utilize the full capacity of such revolving credit facilities, which aggregated approximately $5.1 billion as of ~~September 30, 2019.~~March 31, 2020. As of ~~October 25, 2019,~~May 1, 2020, the Registrants had the following revolving credit facilities and utilization of such facilities:


			Amount Utilized as of October 25, 2019										Amount Utilized as of May 1, 2020
Registrant	Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate	Termination Date	Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate	Termination Date
	(in millions)										(in millions)
CenterPoint Energy	$	3,300	$	—	$	6	$	1,412	2.14%	March 3, 2022	$	3,300	$	—	$	8	$	1,675	1.68%	March 3, 2022
CenterPoint Energy (1)	400		—		—		282		2.08%	July 14, 2022	400		—		—		147		0.68%	July 14, 2022
CenterPoint Energy (2)	200		—		—		—		—%	July 14, 2022	200		—		—		—		—%	July 14, 2022
Houston Electric	300		—		—		—		—%	March 3, 2022	300		—		—		—		—%	March 3, 2022
CERC	900		—		1		320		2.08%	March 3, 2022	900		—		1		125		0.63%	March 3, 2022
Total	$	5,100	$	—	$	7	$	2,014			$	5,100	$	—	$	9	$	1,947


(1)	The credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.


(2)	The credit facility was issued by VCC and is guaranteed by Vectren.

Borrowings under each of the revolving credit facilities are subject to customary terms and conditions. However, there is no requirement that the borrower makes representations prior to borrowing as to the absence of material adverse changes or litigation that could be expected to have a material adverse effect. Borrowings under each of the revolving credit facilities are subject to acceleration upon the occurrence of events of default that we consider customary. The revolving credit facilities also provide for customary fees, including commitment fees, administrative agent fees, fees in respect of letters of credit and other fees. In each of the revolving credit facilities, the spread to LIBOR and the commitment fees fluctuate based on the borrower’s credit rating. The borrowers are currently in compliance with the various business and financial covenants in ~~their respective~~the five revolving credit facilities.

Long-term Debt

For detailed information about the Registrants’ debt transactions in ~~2019,~~2020, see ~~Note~~Notes 12 and 20 to the Interim Condensed Financial Statements.

Securities Registered with the SEC

On January 31, 2017, the Registrants filed a joint shelf registration statement with the SEC, as amended on September 24, 2018, registering indeterminate principal amounts of Houston Electric’s general mortgage bonds, CERC Corp.’s senior debt securities and CenterPoint Energy’s senior debt securities and junior subordinated debt securities and an indeterminate number of shares of Common Stock, shares of preferred stock, depositary shares, as well as stock purchase contracts and equity units. The joint shelf registration statement ~~will expire~~expired on January 31, 2020. ~~For information related to the Registrants’ debt securities issuances to date in 2019, see Note 12 to the Interim Condensed Financial Statements.~~

Temporary Investments

As of ~~October 25, 2019,~~May 1, 2020, the Registrants had no temporary investments.

Money ~~Pools~~Pool

The Registrants participate in a money ~~pools~~pool through which they and certain of their subsidiaries can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the CenterPoint Energy money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper. The net funding requirements of the CERC money pool are expected to be met with borrowings under CERC’s revolving credit facility or the sale of CERC’s commercial paper. The money ~~pools~~pool may not provide sufficient funds to meet the Registrants’ cash needs.

The table below summarizes CenterPoint Energy money pool activity by Registrant as of ~~October 25, 2019:~~May 1, 2020:

Weighted Average Interest Rate Houston Electric CERC
(in millions)
Money pool investments 2.17% $ 789
$ —



	Weighted Average Interest Rate	Houston Electric			CERC
		(in millions)
Money pool investments (borrowings)	1.70%	$	(193	)	$	—

Impact on Liquidity of a Downgrade in Credit Ratings

The interest on borrowings under the credit facilities is based on each respective borrower’s credit ratings. On October 25, 2019, Moody’s downgraded VUHI’s and Indiana Gas’ senior unsecured debt rating to A3 from A2 and SIGECO’s senior secured debt rating to A1 from Aa3. The outlooks of VUHI, Indiana Gas and SIGECO were revised to stable from negative. As of ~~October 25, 2019,~~May 1, 2020, Moody’s, S&P and Fitch had assigned the following credit ratings to the borrowers:

Moody’s

S&P

Fitch

Registrant

Borrower/Instrument

Rating

Outlook (1)

Rating

Outlook (2)

Rating

Outlook (3)

CenterPoint Energy

CenterPoint Energy Senior Unsecured Debt

Baa2

~~Stable~~Negative

BBB

~~Stable~~Negative

BBB

~~Stable~~Negative

CenterPoint Energy

Vectren Corp. Issuer Rating

n/a

BBB+

~~Stable~~Negative

n/a

CenterPoint Energy

VUHI Senior Unsecured Debt

Stable

BBB+

~~Stable~~Negative

n/a

CenterPoint Energy

Indiana Gas Senior Unsecured Debt

A3n/a

~~Stable~~n/a

BBB+

~~Stable~~Negative

n/a

CenterPoint Energy

SIGECO Senior Secured Debt

Stable

~~Stable~~Negative

n/a

Houston Electric

Houston Electric Senior Secured Debt

A1A2

Stable

Negative

~~Stable~~

A+

~~Stable~~Negative

CERC

CERC Corp. Senior Unsecured Debt

Baa1

Positive

BBB+

~~Stable~~Negative

BBB+

Stable


(1)	A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term.


(2)	An S&P outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term.


(3)	A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.

The Registrants cannot assure that the ratings set forth above will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. The Registrants note that these credit ratings are included for informational purposes and are not recommendations to buy, sell or hold the Registrants’ securities and may be revised or withdrawn at any time by the rating agency. Each rating should be evaluated independently of any other rating. Any future reduction or withdrawal of one or more of the Registrants’ credit ratings could have a material adverse impact on the Registrants’ ability to obtain short- and long-term financing, the cost of such financings and the execution of the Registrants’ commercial strategies.

A decline in credit ratings could increase borrowing costs under the Registrants’ revolving credit facilities. If the Registrants’ credit ratings had been downgraded one notch by S&P and Moody’s from the ratings that existed as of ~~September 30, 2019,~~March 31, 2020, the impact on the borrowing costs under the five revolving credit facilities would have been immaterial. A decline in credit ratings would also increase the interest rate on long-term debt to be issued in the capital markets and could negatively impact the Registrants’ ability to complete capital market transactions and to access the commercial paper market. Additionally, a decline in credit ratings could increase cash collateral requirements and reduce earnings of CenterPoint Energy’s and CERC’s Natural Gas Distribution ~~and Energy Services~~ reportable segments.

~~CES, operating in the~~The Energy Services ~~reportable segment,~~Disposal Group provides natural gas sales and services primarily to commercial and industrial customers and electric and natural gas utilities throughout the United States. To economically hedge its exposure to natural gas prices, ~~CES~~the Energy Services Disposal Group uses derivatives with provisions standard for the industry, including those pertaining to credit thresholds. Typically, the credit threshold negotiated with each counterparty defines the amount of unsecured credit that such counterparty will extend to ~~CES.~~the Energy Services Disposal Group. To the extent that the credit exposure that a counterparty has to ~~CES~~the Energy Services Disposal Group at a particular time does not exceed that credit threshold, ~~CES~~the Energy Services Disposal Group is not obligated to provide collateral. Mark-to-market exposure in excess of the credit threshold is routinely collateralized by ~~CES.~~the Energy Services Disposal Group. Similarly, mark-to-market exposure offsetting and exceeding the credit threshold may cause the counterparty to provide collateral to ~~CES.~~the Energy Services Disposal Group. As of ~~September 30, 2019,~~March 31, 2020, the amount posted by ~~CES~~the Energy Services Disposal Group as collateral aggregated approximately ~~$69~~$72 million. Should the credit ratings of CERC Corp. (as the credit support provider for ~~CES)~~the Energy Services Disposal Group) fall below certain levels, ~~CES~~ the Energy Services Disposal Group

would be required to provide additional collateral up to the amount of its previously unsecured credit limit. CenterPoint Energy and CERC estimate that as of ~~September 30, 2019,~~March 31, 2020, unsecured credit limits extended to ~~CES~~the Energy Services Disposal Group by counterparties aggregated ~~$467~~$452 million, and none of such amount was utilized.

Pipeline tariffs and contracts typically provide that if the credit ratings of a shipper or the shipper’s guarantor drop below a threshold level, which is generally investment grade ratings from both Moody’s and S&P, cash or other collateral may be demanded from the shipper in an amount equal to the sum of three months’ charges for pipeline services plus the unrecouped cost of any lateral built for such shipper. If the credit ratings of CERC Corp. decline below the applicable threshold levels, CERC might need to provide cash or other collateral of as much as ~~$165~~$193 million as of ~~September 30, 2019.~~March 31, 2020. The amount of collateral will depend on seasonal variations in transportation levels.

ZENS and Securities Related to ZENS (CenterPoint Energy)

If CenterPoint Energy’s creditworthiness were to drop such that ZENS holders thought its liquidity was adversely affected or the market for the ZENS were to become illiquid, some ZENS holders might decide to exchange their ZENS for cash. Funds for the payment of cash upon exchange could be obtained from the sale of the shares of ZENS-Related Securities that CenterPoint Energy owns or from other sources. CenterPoint Energy owns shares of ZENS-Related Securities equal to approximately 100% of the reference shares used to calculate its obligation to the holders of the ZENS. ZENS exchanges result in a cash outflow because tax deferrals related to the ZENS and shares of ZENS-Related Securities would typically cease when ZENS are exchanged or otherwise retired and shares of ZENS-Related Securities are sold. The ultimate tax liability related to the ZENS continues to increase by the amount of the tax benefit realized each year, and there could be a significant cash outflow when the taxes are paid as a result of the retirement or exchange of the ZENS. If all ZENS had been exchanged for cash on ~~September 30, 2019,~~March 31, 2020, deferred taxes of approximately ~~$432~~$470 million would have been payable in ~~2019.~~2020. If all the ZENS-Related Securities had been sold on ~~September 30, 2019,~~March 31, 2020, capital gains taxes of approximately ~~$133~~$119 million would have been payable in ~~2019~~2020 based on ~~2019~~2020 tax rates in effect. For additional information about ZENS, see Note 11 to the Interim Condensed Financial Statements.

Cross Defaults

Under each of CenterPoint Energy’s, Houston Electric’s and CERC’s respective revolving credit facilities, as well as under CenterPoint Energy’s term loan agreement, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $125 million by the borrower or any of their respective significant subsidiaries will cause a default under such borrower’s respective credit

facility or term loan agreement. A default by CenterPoint Energy would not trigger a default under its subsidiaries’ debt instruments or revolving credit facilities.

Under each of VUHI’s and VCC’s respective revolving credit facilities and term loan agreements, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $50 million by the borrower, any of their respective subsidiaries or any of the respective guarantors of a credit facility or term loan agreement will cause a default under such borrower’s respective credit facility or term loan agreement.

Possible Acquisitions, Divestitures and Joint Ventures

From time to time, the Registrants consider the acquisition or the disposition of assets or businesses or possible joint ventures, strategic initiatives or other joint ownership arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are unpredictable. The Registrants may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to the Registrants at that time due to a variety of events, including, among others, maintenance of our credit ratings, industry conditions, general economic conditions, market conditions and market perceptions.

CenterPoint Energy previously disclosed that it may reduce its ownership in Enable over time through sales in the public equity markets, or otherwise, of the Enable common units it holds, subject to market conditions. CenterPoint Energy has no intention to reduce its ownership of Enable common units and currently plans to hold such Enable common units and to utilize any cash distributions received on such Enable common units to finance a portion of CenterPoint Energy’s capital expenditure program. CenterPoint Energy may consider or alter its plans or proposals in respect of any such plans in the future.

~~Enable Midstream Partners (CenterPoint~~On February 3, 2020, CenterPoint Energy, ~~and CERC)~~through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.

~~In September 2018, CERC completed the Internal Spin~~, after which CERC’s equity investment in Enable met the criteria for discontinued operations classification. As a result, the operations have been classified as Income from discontinued operations, net of tax, in CERC’s Condensed Statements of Consolidated Income for the periods presented. For further information, seeSee Note 93 to the Interim Condensed Financial ~~Statements.~~Statements for further information.

Enable Midstream Partners (CenterPoint Energy)

CenterPoint Energy receives quarterly cash distributions from Enable on its common units and Enable Series A Preferred Units. A reduction in the cash distributions CenterPoint Energy receives from Enable could significantly impact CenterPoint Energy’s liquidity. For additional information about cash distributions from Enable, see Notes 9 and 2120 to the Interim Condensed Financial Statements.

Hedging of Interest Expense for Future Debt Issuances

From time to time, the Registrants may enter into interest rate agreements to hedge, in part, volatility in the U.S. treasury rates by reducing variability in cash flows related to interest payments. For further information, see Note 7(a) to the Interim Condensed Financial Statements.

Weather Hedge (CenterPoint Energy and CERC)

CenterPoint Energy and CERC have historically entered into partial weather hedges for certain NGD jurisdictions and electric operations’ Texas service territory to mitigate the impact of fluctuations from normal weather. CenterPoint Energy and CERC remain exposed to some weather risk as a result of the partial hedges. For more information about weather hedges, see Note 7(a) to the Interim Condensed Financial Statements.

Collection of Receivables from REPs (CenterPoint Energy and Houston Electric)

Houston Electric’s receivables from the distribution of electricity are collected from REPs that supply the electricity Houston Electric distributes to their customers. Before conducting business, a REP must register with the PUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, structural problems in the market served by ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for Houston Electric’s services or could cause them to delay such payments. Houston Electric depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs could adversely affect Houston Electric’s cash flows. In the event of a REP’s default, Houston Electric’s tariff provides a number of remedies, including the option for Houston Electric to request that the PUCT suspend or revoke the certification of the REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider

of last resort if a REP cannot make timely payments. However, Houston Electric remains at risk for payments related to services provided prior to the shift to the replacement REP or the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations and claims might be made against Houston Electric involving payments it had received from such REP. If a REP were to file for bankruptcy, Houston Electric may not be successful in recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, PUCT regulations authorize utilities, such as Houston Electric, to defer bad debts resulting from defaults by REPs for recovery in future rate cases, subject to a review of reasonableness and necessity.

Other Factors that Could Affect Cash Requirements

In addition to the above factors, the Registrants’ liquidity and capital resources could also be negatively affected by:

reductions in the cash distributions we receive from Enable;

cash collateral requirements that could exist in connection with certain contracts, including weather hedging arrangements, and natural gas purchases, natural gas price and natural gas storage activities of CenterPoint Energy’s and CERC’s Natural Gas Distribution ~~and Energy Services~~ reportable ~~segments;~~segment;

acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased natural gas prices and concentration of natural gas suppliers (CenterPoint Energy and CERC);

increased costs related to the acquisition of natural gas (CenterPoint Energy and CERC);

increases in interest expense in connection with debt refinancings and borrowings under credit facilities or term loans;

various legislative or regulatory actions;

incremental collateral, if any, that may be required due to regulation of derivatives (CenterPoint Energy and CERC);

the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and Houston ~~Electric;~~Electric, including the negative impact on such ability related to COVID-19;

slower customer payments and increased write-offs of receivables due to higher natural gas prices, or changing economic conditions or COVID-19 (CenterPoint Energy and CERC);

the satisfaction of any obligations pursuant to guarantees;

the outcome of litigation;

contributions to pension and postretirement benefit plans;

restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and


•	various other risks identified in “Risk Factors” in Item 1A of Part I of the Registrants’ combined ~~2018~~2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.

Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money

Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions. For information about the total debt to capitalization financial covenants in the Registrants’ and certain of CenterPoint Energy’s subsidiaries’ revolving credit facilities, see Note 12 to the Interim Condensed Financial Statements.

CRITICAL ACCOUNTING POLICIES

Impairment of Long-Lived Assets, Including Identifiable Intangibles, Goodwill, Equity Method Investments, and Investments without a Readily Determinable Fair Value

The Registrants review the carrying value of long-lived assets, including identifiable intangibles, goodwill, equity method investments, and investments without a readily determinable fair value whenever events or changes in circumstances indicate that such carrying values may not be recoverable, and at least annually, goodwill is tested for impairment as required by accounting guidance for goodwill and other intangible assets. Unforeseen events, changes in market conditions, and probable regulatory disallowances, where applicable, could have a material effect on the value of long-lived assets, including intangibles, goodwill, equity method investments, and investments without a readily determinable fair value due to changes in observable or estimated market value, future cash flows, interest rate, and regulatory matters could result in an impairment charge.

In connection with its preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform ~~the annual~~interim goodwill impairment ~~test in the third quarter~~tests for each of each year and additional tests are performed if events or circumstances indicate that a potential goodwill impairment may exist. A reporting unit is an operating segment or one level below an operating segment (a component) and is the level at which goodwill is tested for impairment. CenterPoint Energy’stheir reporting units ~~approximate its applicable reportable segments with~~due to the ~~exception of ESG, which is a separate~~

~~reporting unit, but is included~~macroeconomic conditions resulting from the COVID-19 pandemic and the related decline in CenterPoint Energy’s ~~Corporate~~common stock price. CenterPoint Energy recognized goodwill impairment losses, discussed below, during the three months March 31, 2020, and ~~Other reportable segment for segment reporting purposes. CERC’s~~CERC recorded no impairments to goodwill within continuing operations during the three months ended March 31, 2020. The long-lived assets within the reporting units ~~approximate its reportable segments.~~were determined to be recoverable as of March 31, 2020.

Fair value is the amount at which ~~the~~an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenue performance measures. The fair value ~~of the asset~~ could be different using different estimates and assumptions in these valuation techniques.

~~The determination~~Fair value measurements require significant judgment and unobservable inputs, including (i) projected timing and amount of ~~fair~~future cash flows, which factor in planned growth initiatives, (ii) the regulatory environment, as applicable, and (iii) discount rates reflecting risk inherent in the current and future market prices. Determining the discount rates requires the estimation of the appropriate company specific risk premiums for those businesses based on evaluation of industry and entity-specific risks, which

includes expectations about future market or economic conditions and reflects the risk demonstrated by market participants through the value ~~requires~~of CenterPoint Energy’s common stock price as of the impairment test date. Changes in these assumptions could have a significant ~~assumptions by management which are subjective and forward-looking in nature. To assist in deriving these assumptions,~~impact on results of the impairment tests. CenterPoint Energy and CERC utilized a third-party valuation specialist ~~in both determining and testing~~to determine the key assumptions used in the ~~valuation~~estimate of fair value for each of their respective reporting units on the date of their annual goodwill impairment test and for CenterPoint Energy the fair value of each of its reporting ~~units.~~units are reconciled to its market capitalization based on the price of CenterPoint Energy and CERC based their assumptions on projected financial information that they believe are reasonable; however, actual results may differ materially from those projections. These projected cash flows factor into planned growth initiatives, andEnergy’s common stock.

Interim goodwill impairment test, excluding assets held for ~~certain reporting units, the regulatory environment.~~sale

CenterPoint Energy and CERC ~~completed their 2019 annual~~performed an interim goodwill impairment test as of ~~July 1, 2019 and determined, based on~~March 31, 2020. The fair value of each reporting unit was derived using an income approach or a weighted combination of income and market ~~approaches, that~~approaches. Based on the results of the test, CenterPoint Energy recorded a goodwill impairment loss of $185 million at its Indiana Electric Integrated reporting unit. CERC recorded no goodwill impairment charge ~~was required~~in its continuing operations for ~~any reporting unit.~~ the three months ended March 31, 2020.

The fair values of each reporting unit ~~significantly~~ exceeded the carrying value of the reporting unit, with the exception of CenterPoint Energy’s ~~Infrastructure Services and ESG~~Indiana Electric Integrated reporting ~~units. Infrastructure Services’~~unit. As of March 31, 2020, subsequent to the impairment loss recorded by CenterPoint Energy in the three months ended March 31, 2020, Indiana Electric Integrated reporting unit’s fair value ~~exceeded~~approximated its carrying ~~values by 6%~~value, and itthe reporting unit had total goodwill of ~~$355~~$936 million. ~~ESG’s fair value exceeded its carrying value by 8% and had total goodwill of $127 million. These~~The reporting ~~units are~~unit is comprised entirely of ~~recent~~businesses acquired ~~businesses, where~~in the Merger on February 1, 2019, when the carrying value of the acquired assets and liabilities were adjusted to fair value and as a result ~~carrying values approximate~~presented the greatest risk for impairment. The primary driver for the decline in fair ~~value. These~~value as of the March 31, 2020 interim goodwill impairment test date is an increase in discounts rates, or the weighted average cost of capital of market participants, on the rate regulated reporting units ~~have a greater risk of future impairment if their operations were~~due in part to ~~experience a~~the decline ~~or if market rates were~~in current macroeconomic conditions from July 1, 2019, the previous annual testing date, to ~~increase.~~March 31, 2020.

~~Additionally,~~An interim goodwill impairment test could be triggered and goodwill impairments recorded in future periods by CenterPoint Energy or CERC’s reporting units due to any of the following: CenterPoint Energy’s ~~measurement~~market capitalization falling below book value, adverse macroeconomic environment, turnover in key personnel, events affecting a reporting unit such as a contemplated disposal of all or part of a reporting unit, actual earnings results that are materially lower than expected, significant adverse changes in the operating or regulatory environment, or changes in discount rates or other key assumptions that require judgment and are forward looking in nature.

For further information, see Note 10 to the Interim Condensed Financial Statements.

Assets held for sale and discontinued operations, Infrastructure Services Disposal Group

Generally, a long-lived asset to be sold is classified as held for sale in the period ~~for~~in which management, with approval from the ~~acquisition~~Board of ~~Vectren remains open~~Directors, as ~~of September 30, 2019~~applicable, commits to a plan to sell, and a sale is expected to ~~conclude by December 31, 2019.~~be completed within one year. The Registrants record assets and liabilities held for sale, or the disposal group, at the lower of their carrying value or their estimated fair value less cost to sell. If a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill ~~assigned~~within that reporting unit is allocated to ~~these~~the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. Goodwill is not allocated to a portion of a reporting unit that does not meet the definition of a business. A disposal group that meets the held for sale criteria and also represents a strategic shift to the Registrant is also reflected as discontinued operations on the Statements of Consolidated Income, and prior periods are recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.

In February 2020, certain assets and liabilities representing the Infrastructure Services Disposal Group met the held for sale criteria and represented all of the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was considered an asset sale for tax purposes, requiring the net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the ~~testing date~~disposal group and were recognized as a deferred income tax benefit by CenterPoint Energy upon closing.

Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for transaction costs.

Because the Infrastructure Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy, it is ~~preliminary~~reflected as discontinued operations on CenterPoint Energy’s Statements of Consolidated Income, and ~~subject~~as a result, prior periods have been recast to ~~change. See~~reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

Assets held for sale and discontinued operations, Energy Services Disposal Group

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. This transaction does not include CEIP and its assets. The transaction is expected to close in the second quarter of 2020.

In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax assets of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and will be recognized as a deferred tax expense by CenterPoint Energy upon closing.

Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment loss of approximately $62 million and a loss on assets held for sale of approximately $70 million, plus an additional loss of $6 million for transaction costs. CenterPoint Energy and CERC disclosed it its 2019 Form 10-K that an anticipated loss on held for sale of $80 million was expected in the three months ended March 31, 2020. The primary driver for the increase in the actual impairment recorded by CenterPoint Energy and CERC in the three months ended March 31, 2020 compared to the amounts previously anticipated is a result of an increase in portions of the derivative assets, net of derivative liabilities, excluded from the working capital adjustment within the Equity Purchase Agreement during the three months ended March 31, 2020. Additional impairments or loss on held for sale may be recorded in future periods due to increases to the carrying value of derivative assets or decreases to derivative liabilities in those periods.

Because the Energy Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy and CERC, it is reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, and prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

For further information, see Note 3 to the ~~Registrants~~ Interim Condensed Financial ~~Statements~~Statements.

Equity Method Investments

Equity method investments are evaluated for impairment when factors indicate that a ~~discussion~~decrease in value of an investment has occurred and the carrying amount of the investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the best estimate of fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of its financial statements for the three months ended March 31, 2020, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s ~~valuation analysis~~equity investment in Enable, which includes common units, general partner interest, and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of ~~Vectren post-Merger.~~fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units.

Key assumptions in the market approach include recent market transactions of comparable companies and EBITDA to total enterprise multiples for comparable companies. Due to volatility of the quoted price of Enable’s units, a volume weighted average price was used under the market approach to best approximate fair value at the measurement date. Key assumptions in the income

approach include Enable’s forecasted cash distributions, projected cash flows of incentive distribution rights, forecasted growth rate of Enable’s cash distributions beyond 2020, and the discount rate used to determine the present value of the estimated future cash flows. A weighing of the different approaches was utilized to determine the estimated fair value of our investment in Enable. CenterPoint Energy based its assumptions on projected financial information that it believes is reasonable; however, actual results may differ materially from those projections. It is reasonably possible that the fair value of CenterPoint Energy’s investment in Enable will change in the near term due to the following: actual Enable cash distribution is materially lower than expected, significant adverse changes in Enable’s operating environment, decline in Enable’s common unit price, increase in the discount rate, and changes in other key assumptions which require judgment and/or are forward looking in nature. Further declines in the fair value of Enable could result in additional impairments.

For further information, see Note 9 to the Interim Condensed Financial Statements.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2 to the Interim Condensed Financial Statements, incorporated herein by reference, for a discussion of new accounting pronouncements that affect the Registrants.

OTHER SIGNIFICANT MATTERS

The significant uncertainties related to the COVID-19 pandemic and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries. While it is unknown how long these conditions will last and what the complete financial effect will be, the plan assets and benefit obligations of our pension and postretirement plans are expected to be negatively impacted when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the subsequent years from the historical amounts. Currently, we do not expect the event to impact the disclosed 2020 plan expenses or minimum required contributions.


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Houston Electric and CERC meet the conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and are therefore permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies. Accordingly, Houston Electric and CERC have omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures About Market Risk) of Part I of the Form 10-Q.

Interest Rate Risk (CenterPoint Energy)

As of ~~September 30, 2019,~~March 31, 2020, CenterPoint Energy had outstanding long-term debt, lease obligations and obligations under its ZENS that subject it to the risk of loss associated with movements in market interest rates.

CenterPoint Energy’s floating rate obligations aggregated ~~$3.6~~$4.2 billion and ~~$210 million~~$3.9 billion as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. If the floating interest rates were to increase by 10% from ~~September 30, 2019~~March 31, 2020 rates, CenterPoint Energy’s combined interest expense would increase by approximately $9 million annually.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating ~~$11.3~~$11.2 billion and ~~$9.0~~$11.2 billion, respectively, in principal amount and having a fair value of $~~12.4~~12.0 billion and ~~$9.2~~$12.2 billion, respectively. Because these instruments are fixed-rate, they do not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of these instruments would increase by approximately ~~$346~~$348 million if interest rates were to decline by 10% from levels at ~~September 30, 2019.~~March 31, 2020. In general, such an increase in fair value would impact earnings and cash flows only if CenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.

The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $2118 million as of ~~September 30, 2019~~March 31, 2020 was a fixed-rate obligation and, therefore, did not expose CenterPoint Energy to the risk of loss in

earnings due to changes in market interest rates. However, the fair value of the debt component would increase by approximately $32 million if interest rates were to decline by 10% from levels at ~~September 30, 2019.~~March 31, 2020. Changes in the fair value of the derivative component, a ~~$817~~$758 million recorded liability at ~~September 30, 2019,~~March 31, 2020, are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income and, therefore, it is exposed to changes in the fair value of the derivative component as a result of changes in the underlying risk-free interest rate. If the risk-free interest rate were to increase by 10% from ~~September 30, 2019~~March 31, 2020 levels, the fair value of the

derivative component liability would decrease by ~~approximately~~less than $1 million, which would be recorded as an unrealized gain in CenterPoint Energy’s Condensed Statements of Consolidated Income.

Equity Market Value Risk (CenterPoint Energy)

CenterPoint Energy is exposed to equity market value risk through its ownership of 10.2 million shares of AT&T Common and 0.9 million shares of Charter Common, which CenterPoint Energy holds to facilitate its ability to meet its obligations under the ZENS. See Note 11 to the condensed consolidated financial statements for a discussion of CenterPoint Energy’s ZENS obligation. Changes in the fair value of the ZENS-Related Securities held by CenterPoint Energy are expected to substantially offset changes in the fair value of the derivative component of the ZENS. A decrease of 10% from the ~~September 30, 2019~~March 31, 2020 aggregate market value of these shares would result in a net loss of less than $1 million, which would be recorded as an unrealized loss in CenterPoint Energy’s Condensed Statements of Consolidated Income.

Commodity Price Risk From Non-Trading Activities (CenterPoint Energy)

CenterPoint Energy uses derivative instruments as economic hedges to offset the commodity price exposure inherent in its Energy Services business. The commodity risk created by these instruments, including the offsetting impact on the market value of natural gas inventory, is described below. CenterPoint Energy measures this commodity risk using a sensitivity analysis. For purposes of this analysis, CenterPoint Energy estimates commodity price risk by applying a $0.50 change in the forward NYMEX price to its net open fixed price position (including forward fixed price physical contracts, natural gas inventory and fixed price financial contracts) at the end of each period. As of September 30, 2019, the recorded fair value of CenterPoint Energy’s non-trading energy derivatives was a net asset of $72 million (before collateral), all of which is related to the Energy Services reportable segment. A $0.50 change in the forward NYMEX price would have had a combined impact of $13 million on CenterPoint Energy’s non-trading energy derivatives net asset and the market value of natural gas inventory.

Commodity price risk is not limited to changes in forward NYMEX prices. Variation of commodity pricing between the different indices used to mark to market portions of Energy Services’ natural gas inventory (Gas Daily) and the related fair value hedge (NYMEX) can result in volatility to CenterPoint Energy’s net income. Over time, any gains or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.

CenterPoint Energy’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms. CenterPoint Energy’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years. This authority has been utilized to secure fixed price natural gas using both physical purchases and financial derivatives. As of ~~September 30, 2019,~~March 31, 2020, the recorded fair value of non-trading energy derivative liabilities was ~~$20~~$23 million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.

Although CenterPoint Energy’s regulated operations are exposed to limited commodity price risk, natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered. Constructive regulatory orders, such as those authorizing lost margin recovery, other innovative rate designs and recovery of unaccounted for natural gas and other natural gas-related expenses, also mitigate the effect natural gas costs may have on CenterPoint Energy’s financial condition. In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy.

CenterPoint Energy uses derivative instruments as economic hedges to offset the commodity price exposure inherent in the Energy Services Disposal Group. The commodity risk created by these instruments, including the offsetting impact on the market value of natural gas inventory, is described below. CenterPoint Energy measures this commodity risk using a sensitivity analysis. For purposes of this analysis, CenterPoint Energy estimates commodity price risk by applying a $0.50 change in the forward NYMEX price to its net open fixed price position (including forward fixed price physical contracts, natural gas inventory and fixed price financial contracts) at the end of each period. As of March 31, 2020, the recorded fair value of CenterPoint Energy’s non-trading energy derivatives was a net asset of $127 million (before collateral), all of which is related to the Energy Services Disposal Group and included in assets and liabilities held for sale. A $0.50 change in the forward NYMEX price would have had a combined impact of $19 million on CenterPoint Energy’s non-trading energy derivatives net asset, included in assets and liabilities held for sale, and the market value of natural gas inventory. For further information, See Note 3 to the Interim Condensed Financial Statements.

Commodity price risk is not limited to changes in forward NYMEX prices. Variation of commodity pricing between the different indices used to mark to market portions of Energy Services Disposal Group’s natural gas inventory, included in assets held for sale, (Gas Daily) and the related fair value hedge (NYMEX) can result in volatility to CenterPoint Energy’s net income. Over time, any gains or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.


Item 4.	CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Registrants carried out separate evaluations, under the supervision and with the participation of each company’s management, including the principal executive officer and principal financial officer, of the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, the principal executive officer and principal financial officer, in each case, concluded that the disclosure controls and procedures were effective as of ~~September 30, 2019~~March 31, 2020 to provide assurance that information required to be disclosed in the

reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods

specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

On the Merger Date, CenterPoint Energy completed the acquisition of Vectren. CenterPoint Energy is currently in the process of evaluating the control environment and implementing CenterPoint Energy’s internal control structure over the acquired operations. This effort is expected to continue through 2019. With the exception of the implementation of the Vectren acquisition into CenterPoint Energy’s control structure, thereThere has been no change in the Registrants’ internal controls over financial reporting that occurred during the three months ended ~~September 30, 2019~~March 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Registrants’ internal controls over financial reporting.

PART II. OTHER INFORMATION


Item 1.	LEGAL PROCEEDINGS

For a description of certain legal and regulatory proceedings, please read Note ~~14(c)~~14(d) to the Interim Condensed Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Sources and Uses of Cash” and “— Regulatory Matters,” each of which is incorporated herein by reference. See also “Business — Regulation” and “— Environmental Matters” in Item 1 and “Legal Proceedings” in Item 3 of the Registrants’ combined ~~2018~~2019 Form 10-K.


Item 1A.	RISK FACTORS

~~Other than with respect~~Please see below the new risk factors affecting the Registrants’ businesses and CenterPoint Energy’s investment in Enable, in addition to those discussed in “Risk Factors” in Item 1A of Part I of the ~~risk factor set forth~~combined 2019 Form 10-K, which could materially affect the Registrants’ financial condition or future results. Except for the updates below, ~~which pertains to CenterPoint Energy and Houston Electric,~~ there have been no material changes from the risk factors disclosed in ~~our~~the combined ~~2018~~2019 Form 10-K.

We face risks related to COVID-19 and other health epidemics and outbreaks, including economic, regulatory, legal, workforce and cyber security risks, which could adversely impact our financial condition, results of operations, cash flows and liquidity.

The ~~outcome~~recent outbreak of COVID-19 is a rapidly evolving situation that is adversely affecting current global economic activities and conditions. An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the ~~pending~~United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively affected under the current economic conditions. Furthermore, to the extent we experience disruptions in our supply chain that limit our ability to obtain materials and equipment necessary for our businesses, whether through delayed order fulfillment, limited production or unavailability due to COVID-19, we may be unable to perform our operations timely or as anticipated, which could result in service or construction delays or increased costs.

In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment and late fees are temporarily suspended, which could increase our bad debt expense. For Houston Electric, ~~rate case,~~we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. These PUCT orders provide for suspended disconnections for certain residential customers as well as for their REPs and utilities to be compensated through a temporary rider charged by utilities, including Houston Electric, applicable to all customers. Additionally, the PUCT orders allow for certain utility costs related to COVID-19 to be placed in a regulatory asset for utilities to seek recovery in the future. As adverse economic conditions continue, REPs could encounter financial difficulties, including bankruptcies, which could impair their ability to pay for Houston Electric’s services or could cause them to delay such payments. Additionally, our state and local regulatory agencies, in response to a federal mandate or otherwise, could impose restrictions on the rates we charge to provide our services, including the ~~imposition~~inability to implement approved rates, or delay actions with respect to our rate cases and filings. The COVID-19 outbreak may affect our ability to timely satisfy regulatory requirements such as recordkeeping and/or timely reporting requirements. As the EPA and many state environmental agencies have issued enforcement discretion policies for such issues, it is unclear whether the effect of any ~~“ring-fencing”~~possible noncompliance due to COVID-19 will be material.

Furthermore, in the event a substantial portion of our workforce were to be impacted by COVID-19 for an extended period of time, we may face challenges with respect to our services or operations and we may not be able to execute our capital plan as anticipated. There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, shortages of employees, facility shutdowns or business closures. We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in certain meetings,

events and conferences) to conform to government restrictions and best practices encouraged by governmental and regulatory authorities. However, the quarantine of personnel or the inability to access our facilities or customer sites could adversely affect ~~CenterPoint Energy’s~~our operations. Also, we have a limited number of highly skilled employees for some of our operations. If a large proportion of our employees in those critical positions were to contract COVID-19 at the same time, we would rely upon our business continuity plans in an effort to continue operations at our facilities, but there is no certainty that such measures will be sufficient to mitigate the adverse impact to our operations that could result from shortages of highly skilled employees.

In addition, the significant uncertainties related to the COVID-19 pandemic and ~~Houston Electric’s reputation,~~actions taken to slow its spread have had, and are expected to continue to have, an adverse impact on the economies and financial markets of many countries. The plan assets and benefit obligations of our pension and postretirement plans are expected to be impacted negatively when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the subsequent years from the historical amounts.

As many of our employees and third-party service providers work remotely in accordance with government mandates, we face heightened cyber security and privacy risks related to unauthorized system access, aggressive social engineering tactics and adversaries attacking the information technology systems, network infrastructure, technology and facilities used to conduct our businesses. We will continue to monitor developments affecting our employees, customers and operations. At this time, however, we cannot predict the extent or duration of the COVID-19 pandemic or its effects on national, state and local economies, including the impact on our ability to access capital markets, our supply chain and our workforce, nor can we estimate the potential adverse impact from COVID-19 on our financial condition, results of operations, cash flows ~~credit quality,~~and liquidity.

The demand for Enable’s services are impacted by the drilling and production decisions of others and by commodity price volatility, which could adversely affect its financial ~~condition and~~position, results of operations and its ability to make cash distributions to us. A sustained decline in energy and commodity prices may also contribute to unfavorable economic conditions in certain of our service territories, in particular Houston, Texas.

The COVID-19 pandemic has adversely affected Enable’s businesses by (i) reducing the demand for natural gas, NGLs and crude oil due to reduced global and national economic activity, leading to significantly lower prices for natural gas, NGLs and crude oil; (ii) impairing the supply chain of certain of its customers for which it provides gathering and processing services, both of which could lead to further reduction of the utilization of its systems; and (iii) reducing producer activity across its footprint which is expected to result in ~~a delay or denial~~reduced utilization of ~~the ability to earn an expected return on invested capital and fully recover costs~~its services. In addition, concerns about global economic growth, as well as uncertainty regarding the ~~degradation~~timing, pace and extent of an economic recovery in ~~credit metrics resulting~~the United States and abroad, have had a significant adverse impact on global financial markets and commodity prices. The price of, and demand for, natural gas, NGLs and crude oil declined significantly in ~~downgrades~~response to the ongoing spread and economic effects of COVID-19, including significant governmental measures being implemented to control the spread of COVID-19, including quarantines, travel restrictions and business shutdowns and efforts made by oil-producing countries to reduce production of crude oil in response to declining global demand. For example, a coalition of 23 nations led by Saudi Arabia and Russia agreed to reduce production of crude oil by 9.7 million barrels per day in May and June; however, NGL and crude oil prices have remained depressed. These events, combined with the continuing COVID-19 pandemic and uncertainty regarding the length of time it will take for the United States and the rest of the world to slow the spread of COVID-19 to the point where applicable authorities are comfortable easing current restrictions on various commercial and economic activities, contributed to a sharp drop in prices for crude oil in the first quarter of 2020 and negative crude oil prices in the second quarter of 2020. On March 31, 2020, Enable’s common unit price closed at $2.57 per common unit. In response to these industry conditions, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more ~~credit rating agencies~~

~~In Houston Electric’s pending rate case, the ALJs at the Texas State Office~~quarterly distributions to us that fall below our previously disclosed expected minimum quarterly distribution from Enable of ~~Administrative Hearings have recommended in their PFD, among other items, various rate base disallowances, a~~$0.2875 per common unit. This reduction in ~~allowed return~~Enable’s quarterly distributions per common unit is expected to reduce its common unit distributions to us by approximately $155 million per year. Enable currently cannot predict the duration or magnitude of the effects of COVID-19 on ~~equity,~~the supply and demand for, and the price of, natural gas, NGLs and crude oil or the exploration, development and production activity of the producers across its areas of operation. Sustained low commodity prices and reductions in exploration or production activities could continue to ~~operation~~adversely affect the value of our interests in Enable and ~~maintenance expenses~~Enable’s financial position, results of operations and ability to make cash distributions to us.

Additionally, the significant decline in energy and commodity prices described above, if sustained, could cause, the rate of economic, employment and/or population growth in certain of our service territories to decline. In particular, Houston, Texas has a ~~change~~higher percentage of employment tied to ~~Houston Electric’s proposed capital structure. If~~ the ~~PFD were~~energy sector relative to ~~be approved and adopted~~other regions of the country. A reduction in ~~its entirety,~~ the ~~PFD would~~rate of economic, employment and/or population growth could result in lower growth and reduced demand for and usage of electricity and natural gas in such service territories. As such, sustained low energy and commodity prices could have an ~~operating income reduction~~adverse impact on our financial condition, results of $155 million, or, assuming certain issues identified in the PFD (as noted in Houston Electric’s exceptions to the PFD filing with the PUCT) are adjusted, $138 million, from Houston Electric’s request. This equates to a $27 million operating income reduction to CenterPoint Energy’s and Houston Electric’s current rates in place. Additionally, CenterPoint Energy and Houston Electric would expect to incur a pre-tax write-off of approximately $120 million and a one-time refund obligation of capital recovered from TCOS and DCRF mechanisms. The PFD recommends a separate proceeding with the PUCT to determine the amount, if any, of $158 million EDIT on securitized assets to be provided to customers. Furthermore, the PFD recommendations, if approved and adopted by the PUCT, would result in significant reduction in CenterPoint Energy’s and Houston Electric’s funds from operations, ~~or FFO, as calculated by rating agencies, and potentially degrade CenterPoint Energy’s and Houston Electric’s credit metrics. The resulting decrease in~~ cash flows ~~from these recommendations~~ and proposals, if approved and adopted by the PUCT, would potentially result in the degradation of CenterPoint Energy’s and Houston Electric’s credit quality, which may lead to downgrades at one or more credit rating agencies. Such downgrades, in turn, could increase the cost of capital for CenterPoint Energy and Houston Electric, among other potential effects.

If the PUCT were to adopt all these recommendations, the negative implications to CenterPoint Energy’s and Houston Electric’s cash flows, credit quality and cost of capital could affect their ability to recover capital investments, meet PUCT reliability thresholds, and maintain their current high level of operational and customer service performance. Additionally, the recommendations in the PFD include certain “ring-fencing” measures to increase Houston Electric’s financial separateness from CenterPoint Energy and to purportedly mitigate the risk that Houston Electric would be harmed in the event of a bankruptcy or other adverse financial development affecting CenterPoint Energy. These recommendations included ordering Houston Electric to:

~~limit its payment of dividends to an amount not to exceed its net income (as determined in accordance with GAAP);~~

work to ensure that its credit ratings at all three major ratings agencies (S&P, Moody’s, and Fitch) remain at or above Houston Electric’s current credit ratings and, if Houston Electric’s credit rating at any one of the three major ratings agencies were to fall below BBB+ (or its equivalent) for Houston Electric’s senior secured debt, be required to suspendliquidity.

~~payment of dividends or other distributions, except for contractual tax payments, until otherwise allowed by the PUCT; and~~

~~ensure that its debt to equity ratio is at or below the debt-to-equity ratio established from time to time by the PUCT for ratemaking purposes in Houston Electric rate proceedings.~~

~~These recommended ring-fencing measures, if ordered by the PUCT, could, among other things, cause Houston Electric to:~~

exceed its authorized equity levels in its authorized capital structure by limiting or prohibiting Houston Electric’s ability to true-up its capital structure through distributions to CenterPoint Energy;

~~be prohibited from participating in the CenterPoint Energy money pool, thereby increasing Houston Electric’s cost of capital and reducing Houston Electric’s return on short term investments;~~

~~realize increased administrative expenses due to increased separateness requirements and less ability to use shared services; and~~

~~in conjunction with the ALJs’ other recommendations in their PFD, suffer downgrades at one or more credit rating agencies, thereby increasing Houston Electric’s cost of capital.~~

The recommendations in the PFD described above (including the ring-fencing measures), if ordered by the PUCT, could adversely affect CenterPoint Energy’s and Houston Electric’s reputation, cash flows, credit quality, financial condition and results of operations.


Item 6.	EXHIBITS

Exhibits filed herewith are designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing as indicated. Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about the Registrants, any other persons, any state of affairs or other matters.

Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrants have not filed as exhibits to this Form 10-Q certain long-term debt instruments, including indentures, under which the total amount of securities authorized does not exceed 10% of the total assets of the Registrants and its subsidiaries on a consolidated basis. The Registrants hereby agree to furnish a copy of any such instrument to the SEC upon request.

Exhibit

Number

Description

Report or Registration

Statement

SEC File or

Registration

Number

Exhibit

Reference

CenterPoint Energy

Houston Electric

CERC

Description

Report or Registration

Statement

SEC File or

Registration

Number

Exhibit

Reference

CenterPoint Energy

Houston Electric

CERC

2.1*

Agreement and Plan of Merger, dated as of April 21, 2018, by and among Vectren Corporation, CenterPoint Energy, Inc. and Pacer Merger Sub, Inc.

CenterPoint Energy’s Form 8-K dated April 21, 2018

1-31447

2.1

Agreement and Plan of Merger, dated as of April 21, 2018, by and among Vectren Corporation, CenterPoint Energy, Inc. and Pacer Merger Sub, Inc.

CenterPoint Energy’s Form 8-K dated April 21, 2018

1-31447

2.1

2.2*

Securities Purchase Agreement, dated as of February 3, 2020, by and among Vectren Utility Services, Inc., PowerTeam Services, LLC and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren Corporation

CenterPoint Energy’s Form 8-K dated February 3, 2020

1-31447

2.3*

Equity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Athena Energy Services Buyer, LLC

CenterPoint Energy’s Form 8-K dated February 24, 2020

1-31447

3.1

Restated Articles of Incorporation of CenterPoint Energy

CenterPoint Energy’s Form 8-K dated July 24, 2008

1-31447

3.2

Restated Articles of Incorporation of CenterPoint Energy

CenterPoint Energy’s Form 8-K dated July 24, 2008

1-31447

3.2

Restated Certificate of Formation of Houston Electric

Houston Electric’s Form 10-Q for the quarter ended June 30, 2011

1-3187

3.1

Restated Certificate of Formation of Houston Electric

Houston Electric’s Form 10-Q for the quarter ended June 30, 2011

1-3187

3.1

3.3

Certificate of Incorporation of RERC Corp.

CERC Form 10-K for the year ended December 31, 1997

1-13265

3(a)(1)

Certificate of Incorporation of RERC Corp.

CERC Form 10-K for the year ended December 31, 1997

1-13265

3(a)(1)

3.4

Certificate of Merger merging former NorAm Energy Corp. with and into HI Merger, Inc. dated August 6, 1997

CERC Form 10-K for the year ended December 31, 1997

1-13265

3(a)(2)

Certificate of Merger merging former NorAm Energy Corp. with and into HI Merger, Inc. dated August 6, 1997

CERC Form 10-K for the year ended December 31, 1997

1-13265

3(a)(2)

3.5

Certificate of Amendment changing the name to Reliant Energy Resources Corp.

CERC Form 10-K for the year ended December 31, 1998

1-13265

3(a)(3)

Certificate of Amendment changing the name to Reliant Energy Resources Corp.

CERC Form 10-K for the year ended December 31, 1998

1-13265

3(a)(3)

3.6

Certificate of Amendment changing the name to CenterPoint Energy Resources Corp.

CERC Form 10-Q for the quarter ended June 30, 2003

1-13265

3(a)(4)

Certificate of Amendment changing the name to CenterPoint Energy Resources Corp.

CERC Form 10-Q for the quarter ended June 30, 2003

1-13265

3(a)(4)

3.7

Third Amended and Restated Bylaws of CenterPoint Energy

CenterPoint Energy’s Form 8-K dated February 21, 2017

1-31447

3.1

3.8

Amended and Restated Limited Liability Company Agreement of Houston Electric

Houston Electric’s Form 10-Q for the quarter ended June 30, 2011

1-3187

3.2

3.9

Bylaws of RERC Corp.

CERC Form 10-K for the year ended December 31, 1997

1-13265

3(b)

3.10

Statement of Resolutions Deleting Shares Designated Series A Preferred Stock of CenterPoint Energy

CenterPoint Energy’s Form 10-K for the year ended December 31, 2011

1-31447

3(c)


Exhibit Number	Description	Report or Registration Statement	SEC File or Registration Number	Exhibit Reference	CenterPoint Energy	Houston Electric	CERC	Description	Report or Registration Statement	SEC File or Registration Number	Exhibit Reference	CenterPoint Energy	Houston Electric	CERC
3.7	Third Amended and Restated Bylaws of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated February 21, 2017	1-31447	3.1	x
3.8	Amended and Restated Limited Liability Company Agreement of Houston Electric	Houston Electric’s Form 10-Q for the quarter ended June 30, 2011	1-3187	3.2		x
3.9	Bylaws of RERC Corp.	CERC Form 10-K for the year ended December 31, 1997	1-13265	3(b)			x
3.10	Statement of Resolutions Deleting Shares Designated Series A Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 10-K for the year ended December 31, 2011	1-31447	3(c)	x
3.11	Statement of Resolution Establishing Series of Shares Designated Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated August 22, 2018	1-31447	3.1	x			Statement of Resolution Establishing Series of Shares Designated Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated August 22, 2018	1-31447	3.1	x
3.12	Statement of Resolution Establishing Series of Shares designated 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	3.1	x			Statement of Resolution Establishing Series of Shares designated 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	3.1	x
4.1	Form of CenterPoint Energy Stock Certificate	CenterPoint Energy’s Registration Statement on Form S-4	3-69502	4.1	x			Form of CenterPoint Energy Stock Certificate	CenterPoint Energy’s Registration Statement on Form S-4	3-69502	4.1	x
4.2	Form of Certificate representing the Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated August 22, 2018	1-31447	4.1	x			Form of Certificate representing the Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of CenterPoint Energy	CenterPoint Energy’s Form 8-K dated August 22, 2018	1-31447	4.1	x
4.3	Form of Certificate representing the 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy (included as Exhibit A to Exhibit 3.12)	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.1	x			Form of Certificate representing the 7.00% Series B Mandatory Convertible Preferred Stock of CenterPoint Energy (included as Exhibit A to Exhibit 3.12)	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.1	x
4.4	Deposit Agreement, dated as of October 1, 2018, among CenterPoint Energy and Broadridge Corporate Issuer Solutions, Inc., as Depositary, and the holders from time to time of the Depositary Receipts described therein	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.2	x			Deposit Agreement, dated as of October 1, 2018, among CenterPoint Energy and Broadridge Corporate Issuer Solutions, Inc., as Depositary, and the holders from time to time of the Depositary Receipts described therein	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.2	x
4.5	Form of Depositary Receipt for the Depositary Shares (included as Exhibit A to Exhibit 4.4)	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.3	x			Form of Depositary Receipt for the Depositary Shares (included as Exhibit A to Exhibit 4.4)	CenterPoint Energy’s Form 8-K dated September 25, 2018	1-31447	4.3	x
4.6	$1,600,000,000 Credit Agreement, dated as of March 3, 2016, among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.1	x			$1,600,000,000 Credit Agreement, dated as of March 3, 2016, among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.1	x
4.7	$300,000,000 Credit Agreement, dated as of March 3, 2016, among Houston Electric, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.2	x	x		$300,000,000 Credit Agreement, dated as of March 3, 2016, among Houston Electric, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.2	x	x
4.8	$600,000,000 Credit Agreement, dated as of March 3, 2016, among CERC Corp., as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.3	x		x	$600,000,000 Credit Agreement, dated as of March 3, 2016, among CERC Corp., as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated March 3, 2016	1-31447	4.3	x		x
4.9	First Amendment to Amended and Restated Credit Agreement, dated as of June 16, 2017, by and among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated June 16, 2017	1-31447	4.1	x			First Amendment to Amended and Restated Credit Agreement, dated as of June 16, 2017, by and among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated June 16, 2017	1-31447	4.1	x
4.10	Second Amendment to Amended and Restated Credit Agreement, dated as of May 25, 2018, by and among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated May 25, 2018	1-31447	4.1	x			Second Amendment to Amended and Restated Credit Agreement, dated as of May 25, 2018, by and among CenterPoint Energy, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated May 25, 2018	1-31447	4.1	x
4.11	First Amendment to Credit Agreement, dated as of June 16, 2017, among Houston Electric, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated June 16, 2017	1-31447	4.2	x	x		First Amendment to Credit Agreement, dated as of June 16, 2017, among Houston Electric, as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated June 16, 2017	1-31447	4.2	x	x
4.12								First Amendment to Credit Agreement, dated as of June 16, 2017, among CERC Corp., as Borrower, and the banks named therein	CenterPoint Energy’s Form 8-K dated June 16, 2017	1-31447	4.3	x		x
4.13								$400,000,000 Credit Agreement, dated as of July 14, 2017, among VUHI, as Borrower, certain Subsidiaries of VUHI, as Guarantors, and the banks named therein	Vectren’s Form 8-K dated July 17, 2017	1-15467	10.1	x
4.14								$200,000,000 Credit Agreement, dated as of July 14, 2017, among VCC, as Borrower, Vectren Corporation, as Guarantor, and the banks named therein	Vectren’s Form 8-K dated July 17, 2017	1-15467	10.2	x

Exhibit

Number

Description

Report or Registration

Statement

SEC File or

Registration

Number

Exhibit

Reference

CenterPoint Energy

Houston Electric

CERC

Description

Report or Registration

Statement

SEC File or

Registration

Number

Exhibit

Reference

CenterPoint Energy

Houston Electric

CERC

4.12

First Amendment to Credit Agreement, dated as of June 16, 2017, among CERC Corp., as Borrower, and the banks named therein

CenterPoint Energy’s Form 8-K dated June 16, 2017

1-31447

4.3

4.13

$400,000,000 Credit Agreement, dated as of July 14, 2017, among VUHI, as Borrower, certain Subsidiaries of VUHI, as Guarantors, and the banks named therein

Vectren’s Form 8-K dated July 17, 2017

1-15467

10.1

4.14

$200,000,000 Credit Agreement, dated as of July 14, 2017, among VCC, as Borrower, Vectren Corporation, as Guarantor, and the banks named therein

Vectren’s Form 8-K dated July 17, 2017

1-15467

10.2

4.15

Term Loan Agreement dated as of July 30, 2018, among VUHI, as Borrower, the Subsidiaries of Borrower identified herein as Guarantors and the banks named therein

Vectren’s Form 8-K dated July 30, 2018

1-15467

10.1

Term Loan Agreement dated as of July 30, 2018, among VUHI, as Borrower, the Subsidiaries of Borrower identified herein as Guarantors and the banks named therein

Vectren’s Form 8-K dated July 30, 2018

1-15467

10.1

4.16

Term Loan Agreement dated as of September 14, 2018, among VCC, as Borrower, Vectren as Guarantor, and the banks named therein

Vectren’s Form 8-K dated September 18, 2018

1-15467

10.1

Term Loan Agreement dated as of September 14, 2018, among VCC, as Borrower, Vectren as Guarantor, and the banks named therein

Vectren’s Form 8-K dated September 18, 2018

1-15467

10.1

4.17

First Amendment to Term Loan Agreement, dated as of June 25, 2019, among VCC, as Borrower, Vectren as Guarantor and the banks named therein

CenterPoint Energy’s Form 10-Q for the quarter ended June 30, 2019

1-31447

4.17

First Amendment to Term Loan Agreement, dated as of June 25, 2019, among VCC, as Borrower, Vectren as Guarantor and the banks named therein

CenterPoint Energy’s Form 10-Q for the quarter ended June 30, 2019

1-31447

4.17

4.18

$1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein

CenterPoint Energy’s Form 8-K dated May 15, 2019

1-31447

4.1

$1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein

CenterPoint Energy’s Form 8-K dated May 15, 2019

1-31447

4.1

4.19

Indenture, dated as of May 19, 2003, between CenterPoint Energy and JPMorgan Chase Bank, as Trustee

CenterPoint Energy’s Form 8-K dated May 19, 2003

1-31447

4.1

+4.20

Supplemental Indenture No. 11 to Exhibit 4.19, dated as of August 14, 2019, providing for the issuance of CenterPoint Energy’s 2.50% Senior Notes due 2024, 2.95% Senior Notes due 2030 and 3.70% Senior Notes due 2049

10.1

Second Amendment to the CenterPoint Energy Savings Restoration Plan, effective as of January 1, 2020

CenterPoint Energy’s Form 8-K dated December 9, 2019

1-31447

10.1

10.2

First Amendment to the Amended and Restated CenterPoint Energy Stock Plan for Outside Directors

CenterPoint Energy’s Form 10-K for the year ended December 31, 2019

1-31447

10(n)(2)

10.3

Separation and Release Agreement between CenterPoint Energy, Inc. and Scott M. Prochazka, dated March 6, 2020

CenterPoint Energy’s Form 8-K dated March 6, 2020

1-31447

10.1

10.4

Form of Award Agreement for Restricted Stock Unit Awards

CenterPoint Energy’s Form 8-K dated March 4, 2020

1-31447

10.1

10.5

Form of Award Agreement for Performance Share Units

CenterPoint Energy’s Form 8-K/A dated March 30, 2020

1-31447

10.1

10.6

Form of Award Agreement for Restricted Stock Unit Awards

CenterPoint Energy’s Form 8-K/A dated March 30, 2020

1-31447

10.2

+31.1.1

Rule 13a-14(a)/15d-14(a) Certification of Scott M. Prochazka

Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II

+31.1.2

Rule 13a-14(a)/15d-14(a) Certification of Scott M. Prochazka

Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II

+31.1.3

Rule 13a-14(a)/15d-14(a) Certification of Scott M. Prochazka

Rule 13a-14(a)/15d-14(a) Certification of John W. Somerhalder II

+31.2.1

Rule 13a-14(a)/15d-14(a) Certification of Xia Liu

Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin

+31.2.2

Rule 13a-14(a)/15d-14(a) Certification of Xia Liu

Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin

+31.2.3

Rule 13a-14(a)/15d-14(a) Certification of Xia Liu

Rule 13a-14(a)/15d-14(a) Certification of Kristie L. Colvin

+32.1.1

Section 1350 Certification of Scott M. Prochazka

Section 1350 Certification of John W. Somerhalder II

+32.1.2

Section 1350 Certification of Scott M. Prochazka

Section 1350 Certification of John W. Somerhalder II

+32.1.3

Section 1350 Certification of Scott M. Prochazka

Section 1350 Certification of John W. Somerhalder II

+32.2.1

Section 1350 Certification of Xia Liu

Section 1350 Certification of Kristie L. Colvin

+32.2.2

Section 1350 Certification of Xia Liu

Section 1350 Certification of Kristie L. Colvin

+32.2.3

Section 1350 Certification of Xia Liu

Section 1350 Certification of Kristie L. Colvin

+101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

+101.SCH

Inline XBRL Taxonomy Extension Schema Document

Exhibit

Number

Description

Report or Registration

Statement

SEC File or

Registration

Number

Exhibit

Reference

CenterPoint Energy

Houston Electric

CERC

~~+101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document~~

+101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

+101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

+101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

+101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

+104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



*	Schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	CENTERPOINT ENERGY, INC.
	CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
	CENTERPOINT ENERGY RESOURCES CORP.


By:	/s/ Kristie L. Colvin
	Kristie L. Colvin
	~~Senior~~Interim Executive Vice President and Chief ~~Accounting~~Financial Officer
	and Chief Accounting Officer

Date: ~~November~~May 7, ~~2019~~2020

101



	Weighted Average Useful Lives	Estimated Fair Value
	(in years)	(in millions)
Operation and maintenance agreements	24	$	12
Customer relationships	18	220
Construction backlog	1	28
Trade names	10	62
Total		$	322



	Three Months Ended September 30, 2019
	Houston Electric T&D (1)			Indiana Electric Integrated (1)		Natural Gas Distribution (1)			Energy Services (2)			Infrastructure Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	861		$	165	$	518		$	81		$	377		$	91	$	2,093
Derivatives income	—			—		—			664			—			—		664
Other (3)	(2		)	—		6			—			—			2		6
Eliminations	—			—		(9		)	(11		)	(1		)	—		(21		)
Total revenues	$	859		$	165	$	515		$	734		$	376		$	93	$	2,742

	Nine Months Ended September 30, 2019
	Houston Electric T&D (1)			Indiana Electric Integrated (1) (4)		Natural Gas Distribution (1) (4)			Energy Services (2)			Infrastructure Services (2) (4)			Corporate and Other (2) (4)		Total
	(in millions)
Revenue from contracts	$	2,319		$	388	$	2,581		$	341		$	849		$	210	$	6,688
Derivatives income	3			—		—			2,505			—			—		2,508
Other (3)	(9		)	—		2			—			—			5		(2		)
Eliminations	—			—		(29		)	(92		)	(2		)	—		(123		)
Total revenues	$	2,313		$	388	$	2,554		$	2,754		$	847		$	215	$	9,071



	Three Months Ended September 30, 2018
	Houston Electric T&D (1)			Indiana Electric Integrated (1)		Natural Gas Distribution (1)			Energy Services (2)			Infrastructure Services (2)		Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	904		$	—	$	398		$	82		$	—	$	1	$	1,385
Derivatives income	—			—		—			838			—		—		838
Other (3)	(7		)	—		12			—			—		2		7
Eliminations	—			—		(8		)	(10		)	—		—		(18		)
Total revenues	$	897		$	—	$	402		$	910		$	—	$	3	$	2,212

	Nine Months Ended September 30, 2018
	Houston Electric T&D (1)			Indiana Electric Integrated (1)		Natural Gas Distribution (1)			Energy Services (2)			Infrastructure Services (2)		Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	2,525		$	—	$	2,093		$	338		$	—	$	4	$	4,960
Derivatives income	(4		)	—		—			2,727			—		—		2,723
Other (3)	(19		)	—		(35		)	—			—		7		(47		)
Eliminations	—			—		(26		)	(57		)	—		—		(83		)
Total revenues	$	2,502		$	—	$	2,032		$	3,008		$	—	$	11	$	7,553



	September 30, 2019
	Management Rights (1)		Incentive Distribution Rights (2)
CenterPoint Energy (3)	50	%	40	%
OGE	50	%	60	%



	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate as of September 30, 2019		Maturity Date
			(in millions)
Houston Electric	January 2019	General mortgage bonds	$	700	4.25	%	2049
CenterPoint Energy (1)	February 2019	Variable rate term loan	25		2.88	%	2020
CenterPoint Energy	May 2019	Variable rate term loan	1,000		2.81	%	2021
CenterPoint Energy	August 2019	Unsecured senior notes	500		2.50	%	2024
CenterPoint Energy	August 2019	Unsecured senior notes	400		2.95	%	2030
CenterPoint Energy	August 2019	Unsecured senior notes	300		3.70	%	2049



	(in millions)
Long-term debt:
Senior notes due 2020 to 2045 (1)	$	637
Variable rate term loan due 2020 (2)	300
Variable rate term loan due 2020 (3)	200
First mortgage bonds due 2022 to 2055 (4)	293
Commercial paper (5)	278
Bank revolver (6)	—
Total Vectren debt	$	1,708



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018
	(in millions)
CenterPoint Energy
Houston Electric T&D	$	269	$	227		$	522		$	523
Indiana Electric Integrated	48		—			64			—
Natural Gas Distribution	27		3			241			166
Energy Services	2		(9		)	64			(20		)
Infrastructure Services	42		—			50			—
Corporate and Other	4		5			(17		)	(5		)
Total CenterPoint Energy Consolidated Operating Income	$	392	$	226		$	924		$	664
Houston Electric
Houston Electric T&D	$	269	$	227		$	519		$	527
CERC
Natural Gas Distribution	$	20	$	3		$	212		$	166
Energy Services	2		(9		)	64			(20		)
Other Operations	1		(1		)	1			—
Total CERC Consolidated Operating Income (Loss)	$	23	$	(7	)	$	277		$	146



	(in millions)
Operating income impact from Houston Electric's request	$	111
PFD proposed reductions:
ROE and equity ratio	(62		)
Rate base disallowances	(25		)
Operations and maintenance expenses	(39		)
Weather normalization	(12		)
Operating income impact from PFD	$	(27	)

Total operating income change from request to PFD	$	(138	)

Recently Adopted Accounting Standards

ASU Number and Name

Description

Date of Adoption

Financial Statement Impact
upon Adoption

ASU ~~2016-02- Leases (Topic 842) and related amendments~~

~~ASU 2016-02 provides a comprehensive new lease model that requires lessees to recognize assets and liabilities for most leases and would change certain aspects of lessor accounting.~~
~~Transition method:~~ ~~modified retrospective~~

~~January 1, 2019~~

The Registrants adopted the standard and recognized a right-of-use asset and lease liability on their statement of financial position with no material impact on their results of operations and cash flows. See Note 19 for more information.