Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

CenterPoint Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CenterPoint Energy, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impact of Rate Regulation on the Financial Statements — Refer to Notes 2, 4 and 7 to the financial statements

Critical Audit Matter Description

The Company is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of electric and gas transmission and distribution companies in those jurisdictions. Management has determined its regulated operations meet the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. The impacts of accounting for the economics of rate regulation are pervasive to the financial statements and disclosures.

The Company’s rates are subject to regulatory rate-setting processes by the Commissions. Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on, and recovery of, the Company’s investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The Commissions’ regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the Commissions in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it

expects to recover costs from customers through regulated rates, there is a risk that the Commissions will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

We identified rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about affected account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory actions on the financial statements. Management’s judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of capital investments made by the Company and (3) refunds to customers. Given that certain of management’s accounting judgments are based on assumptions about the outcome of decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of decisions by the Commissions included the following, among others:

We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred and deferred as regulatory assets, and (2) refunds or future reductions in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
We read relevant regulatory orders issued by the Commissions for the Company and other public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.
For regulatory matters in process, we inspected the Company’s filings with the Commissions and the filings with the Commissions by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
We evaluated management’s assertion that no indicators of impairment were identified in connection with the Company's property, plant, and equipment. We inspected the capital projects budget and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life. We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management’s assertion regarding probability of a disallowance of long-lived assets.
We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects and inquired of management to assess whether capitalized costs are probable of disallowance.
We obtained an analysis from management and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 17, 2023

We have served as the Company’s auditor since 1932.

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions, except per share amounts)
Revenues:
Utility revenues	$	9,018	$	8,042	$	7,049
Non-utility revenues	303		310		369
Total	9,321		8,352		7,418
Expenses:
Utility natural gas, fuel and purchased power	2,887		2,127		1,488
Non-utility cost of revenues, including natural gas	204		208		257
Operation and maintenance	2,833		2,810		2,744
Depreciation and amortization	1,288		1,316		1,189
Taxes other than income taxes	543		528		516
Goodwill impairment	—		—		185
Total	7,755		6,989		6,379
Operating Income	1,566		1,363		1,039
Other Income (Expense):
Gain (loss) on equity securities	(227)		(172)		49
Gain (loss) on indexed debt securities	325		50		(60)
Gain on sale	303		8		—
Interest expense and other finance charges	(511)		(508)		(501)
Interest expense on Securitization Bonds	(13)		(21)		(28)



Other income (expense), net	(26)		58		64
Total	(149)		(585)		(476)
Income from Continuing Operations Before Income Taxes	1,417		778		563
Income tax expense	360		110		80
Income from Continuing Operations	1,057		668		483
Income (Loss) from Discontinued Operations (net of tax expense (benefit) of $-0-, $201, and $(333), respectively)	—		818		(1,256)
Net Income (Loss)	1,057		1,486		(773)
Income allocated to preferred shareholders	49		95		176

Income (Loss) Available to Common Shareholders	$	1,008	$	1,391	$	(949)

Basic earnings per common share - continuing operations	$	1.60	$	0.97	$	0.58
Basic earnings (loss) per common share - discontinued operations	—		1.38		(2.37)
Basic Earnings (Loss) Per Common Share	$	1.60	$	2.35	$	(1.79)
Diluted earnings per common share - continuing operations	$	1.59	$	0.94	$	0.58
Diluted earnings (loss) per common share - discontinued operations	—		1.34		(2.37)
Diluted Earnings (Loss) Per Common Share	$	1.59	$	2.28	$	(1.79)

Weighted Average Common Shares Outstanding, Basic	629		593		531
Weighted Average Common Shares Outstanding, Diluted	632		610		531

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Net Income (Loss)	$	1,057	$	1,486	$	(773)
Other comprehensive income (loss):
Adjustment to pension and other postemployment plans (net of tax expense of $2, $7 and $-0-, respectively)	32		21		(5)

Reclassification of deferred loss from cash flow hedges realized in net income (net of tax expense of $-0-, $-0- and $-0-, respectively)	1		2		—
Reclassification of net deferred losses from cash flow hedges (net of tax expense of $-0-, $-0-, and $4, respectively)	—		—		15
Other comprehensive income (loss) from unconsolidated affiliates (net of tax of $-0-, $-0-, and $-0-, respectively)	—		3		(2)
Total	33		26		8
Comprehensive income (loss)	1,090		1,512		$	(765)
Income allocated to preferred shareholders	49		95		176
Comprehensive income (loss) available to common shareholders	$	1,041	$	1,417	$	(941)

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($75 and $92 related to VIEs, respectively)	$	74	$	230
Investment in equity securities	510		1,439

Accounts receivable ($22 and $29 related to VIEs, respectively), less allowance for credit losses of $38 and $44, respectively	889		690
Accrued unbilled revenues, less allowance for credit losses of $4 and $6, respectively	764		513

Natural gas and coal inventory	241		186
Materials and supplies	635		422
Non-trading derivative assets	10		9
Taxes receivable	20		1
Current assets held for sale	—		2,338
Regulatory assets	1,385		1,395
Prepaid expense and other current assets ($13 and $19 related to VIEs, respectively)	171		132
Total current assets	4,699		7,355
Property, Plant and Equipment, net	27,143		23,484
Other Assets:
Goodwill	4,294		4,294
Regulatory assets ($229 and $420 related to VIEs, respectively)	2,193		2,321

Non-trading derivative assets	2		5




Other non-current assets	215		220
Total other assets	6,704		6,840
Total Assets	$	38,546	$	37,679

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS, cont.


	December 31, 2022		December 31, 2021
	(in millions, except par value and shares)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term borrowings	$	511	$	7
Current portion of VIE Securitization Bonds long-term debt	156		220
Indexed debt, net	7		10
Current portion of other long-term debt	1,346		308
Indexed debt securities derivative	578		903
Accounts payable	1,352		1,196

Taxes accrued	298		378
Interest accrued	159		136
Dividends accrued	144		131
Customer deposits	110		111
Non-trading derivative liabilities	—		2

Current liabilities held for sale	—		562
Other	452		323
Total current liabilities	5,113		4,287
Other Liabilities:
Deferred income taxes, net	3,986		3,904
Non-trading derivative liabilities	—		12
Benefit obligations	547		511
Regulatory liabilities	3,245		3,153

Other	774		836
Total other liabilities	8,552		8,416
Long-term Debt, net:
VIE Securitization Bonds, net	161		317
Other long-term debt, net	14,675		15,241
Total long-term debt, net	14,836		15,558
Commitments and Contingencies (Note 15)
Temporary Equity (Note 12)	3		3
Shareholders’ Equity:
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 800,000 shares and 800,000 shares outstanding, respectively, $800 and $800 liquidation preference, respectively (Note 12)	790		790
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 629,535,631 shares and 628,923,534 shares outstanding, respectively	6		6
Additional paid-in capital	8,568		8,529
Retained earnings	709		154
Accumulated other comprehensive loss	(31)		(64)
Total shareholders’ equity	10,042		9,415
Total Liabilities and Shareholders’ Equity	$	38,546	$	37,679

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Cash Flows from Operating Activities:
Net income (loss)	$	1,057	$	1,486	$	(773)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,288		1,316		1,189



Deferred income taxes	20		213		(429)
Goodwill impairment and loss from reclassification to held for sale	—		—		175
Goodwill impairment	—		—		185

Gain on divestitures	(303)		(681)		—

Loss (gain) on equity securities	227		172		(49)
Loss (gain) on indexed debt securities	(325)		(50)		60

Equity in (earnings) losses of unconsolidated affiliates	—		(339)		1,428
Distributions from unconsolidated affiliates	—		155		113
Pension contributions	(35)		(61)		(86)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	(461)		(98)		90

Inventory	(259)		(140)		9
Taxes receivable	(19)		81		24
Accounts payable	203		175		2

Net regulatory assets and liabilities	234		(2,295)		(107)
Other current assets and liabilities	(5)		56		104
Other non-current assets and liabilities	109		(53)		25
Other operating activities, net	79		85		35
Net cash provided by operating activities	1,810		22		1,995
Cash Flows from Investing Activities:
Capital expenditures	(4,419)		(3,164)		(2,596)


Transaction costs related to Enable Merger (Note 4)	—		(49)		—
Cash received related to Enable Merger	—		5		—
Distributions from unconsolidated affiliates in excess of cumulative earnings	—		—		80



Proceeds from sale of equity securities, net of transaction costs	702		1,320		—
Proceeds from divestitures (Note 4)	2,075		22		1,215


Other investing activities, net	14		15		36
Net cash used in investing activities	(1,628)		(1,851)		(1,265)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	452		(27)		—
Payment of obligation for finance lease	(485)		(179)		—
Borrowings from revolving credit facilities	—		—		1,050
Repayments of revolving credit facilities	—		—		(1,050)
Proceeds from (payments of) commercial paper, net	(74)		1,132		(761)
Proceeds from long-term debt	2,089		4,493		799
Payments of long-term debt, including make-whole premiums	(1,795)		(2,968)		(1,724)


Payment of debt issuance costs	(36)		(38)		(8)

Payment of dividends on Common Stock	(440)		(385)		(392)
Payment of dividends on Preferred Stock	(49)		(107)		(137)
Proceeds from issuance of Common Stock, net	—		—		672
Proceeds from issuance of Series C Preferred stock, net	—		—		723

Other financing activities, net	(7)		(5)		(6)
Net cash provided by (used in) financing activities	(345)		1,916		(834)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(163)		87		(104)
Cash, Cash Equivalents and Restricted Cash at Beginning of Year	254		167		271
Cash, Cash Equivalents and Restricted Cash at End of Year	$	91	$	254	$	167

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY


	2022			2021			2020
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions of dollars and shares, except authorized shares and per share amounts)
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares
Balance, beginning of year	1	$	790	3	$	2,363	2	$	1,740


Issuances of Series C Preferred Stock, net of issuance costs	—	—		—	—		1	723
Conversion of Series B Preferred Stock and Series C Preferred Stock	—	—		(2)	(1,573)		—	(100)
Balance, end of year	1	790		1	790		3	2,363
Common Stock, $0.01 par value; authorized 1,000,000,000 shares
Balance, beginning of year	629	6		551	6		502	5
Issuances related to benefit and investment plans	1	—		1	—		1	—
Issuances of Common Stock	—	—		77	—		48	1
Balance, end of year	630	6		629	6		551	6
Additional Paid-in-Capital
Balance, beginning of year		8,529			6,914			6,080
Issuances related to benefit and investment plans		39			41			30
Issuances of Common Stock, net of issuance costs		—			1			672
Conversion of Series B Preferred Stock and Series C Preferred Stock		—			1,573			100
Recognition of beneficial conversion feature		—			—			32
Balance, end of year		8,568			8,529			6,914
Retained Earnings (Accumulated Deficit)
Balance, beginning of year		154			(845)			632
Net income (loss)		1,057			1,486			(773)
Common Stock dividends declared (see Note 12)		(453)			(404)			(480)
Series A Preferred Stock dividends declared (see Note 12)		(49)			(49)			(73)
Series B Preferred Stock dividends declared (see Note 12)		—			(34)			(85)
Series C Preferred Stock dividends declared (see Note 12)		—			—			(27)
Amortization of beneficial conversion feature		—			—			(32)
Adoption of ASU 2016-13		—			—			(7)



Balance, end of year		709			154			(845)
Accumulated Other Comprehensive Loss
Balance, beginning of year		(64)			(90)			(98)
Other comprehensive income		33			26			8

Balance, end of year		(31)			(64)			(90)
Total Shareholders’ Equity		$	10,042		$	9,415		$	8,348

See Combined Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member of

CenterPoint Energy Houston Electric, LLC

Opinion on the Financial Statements

We have audited the accompanying balance sheets of CenterPoint Energy Houston Electric, LLC and subsidiaries (an indirect wholly-owned subsidiary of CenterPoint Energy, Inc.) (the "Company") as of December 31, 2022 and 2021, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Impact of Rate Regulation on the Financial Statements — Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company is subject to rate regulation by the Public Utility Commission of Texas (“PUCT”), which has jurisdiction with respect to the rates of electric transmission and distribution companies in Texas. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. The impacts of accounting for the economics of rate regulation are pervasive to the financial statements and disclosures.

The Company’s rates are subject to regulatory rate-setting processes by the PUCT. Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on, and recovery of, the Company’s investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The PUCT’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the PUCT in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it expects to recover costs

from customers through regulated rates, there is a risk that the PUCT will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

We identified rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about affected account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory actions on the financial statements. Management’s judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of capital investments made by the Company, and (3) refunds to customers. Given that certain of management’s accounting judgments are based on assumptions about the outcome of decisions by the PUCT, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of decisions by the PUCT included the following, among others:

We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred and deferred as regulatory assets, and (2) refunds or future reductions in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
We read relevant regulatory orders issued by the PUCT for the Company and other public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the PUCT’s treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.
For regulatory matters in process, we inspected the Company’s filings with the PUCT and the filings with the PUCT by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
We evaluated management’s assertion that no indicators of impairment were identified in connection with the Company's property, plant, and equipment. We inspected the capital projects budget and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life. We inspected minutes of the board of directors and regulatory orders and other filings with the PUCT to identify any evidence that may contradict management’s assertion regarding probability of a disallowance of long-lived assets.
We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects and inquired of management to assess whether capitalized costs are probable of disallowance.
We obtained an analysis from management and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 17, 2023

We have served as the Company’s auditor since 1932.

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Revenues	$	3,412	$	3,134	$	2,911

Expenses:
Operation and maintenance	1,650		1,597		1,523
Depreciation and amortization	670		642		560
Taxes other than income taxes	261		251		252
Total	2,581		2,490		2,335
Operating Income	831		644		576

Other Income (Expense):
Interest expense and other finance charges	(202)		(183)		(171)
Interest expense on Securitization Bonds	(13)		(21)		(28)


Other income, net	19		17		10
Total	(196)		(187)		(189)
Income Before Income Taxes	635		457		387
Income tax expense	125		76		53
Net Income	$	510	$	381	$	334

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Net income	$	510	$	381	$	334
Other comprehensive income:

Reclassification of net deferred losses from cash flow hedges (net of tax expense of $-0-, $-0-, and $4, respectively)	—		—		15
Other comprehensive income	—		—		15
Comprehensive income	$	510	$	381	$	349

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS



	December 31, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($75 and $92 related to VIEs, respectively)	$	75	$	214
Accounts and notes receivable, net ($22 and $29 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively	311		263
Accounts and notes receivable—affiliated companies	21		11
Accrued unbilled revenues	142		127
Materials and supplies	471		292



Prepaid expenses and other current assets ($13 and $19 related to VIEs, respectively)	41		49
Total current assets	1,061		956
Property, Plant and Equipment, net	13,461		11,203
Other Assets:
Regulatory assets ($229 and $420 related to VIEs, respectively)	778		789

Other non-current assets	39		32
Total other assets	817		821
Total Assets	$	15,339	$	12,980

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

LIABILITIES AND MEMBER’S EQUITY


	December 31, 2022		December 31, 2021
	(in millions)
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of VIE Securitization Bonds long-term debt	$	156	$	220
Current portion of other long-term debt	—		300
Accounts payable	413		510
Accounts and notes payable—affiliated companies	755		568
Taxes accrued	150		193
Interest accrued	83		74

Other current liabilities	88		91
Total current liabilities	1,645		1,956
Other Liabilities:
Deferred income taxes, net	1,229		1,122
Benefit obligations	38		55
Regulatory liabilities	1,155		1,152

Other non-current liabilities	77		98
Total other liabilities	2,499		2,427
Long-Term Debt, net:
VIE Securitization Bonds, net	161		317
Other long-term debt, net	6,036		4,658
Total long-term debt, net	6,197		4,975
Commitments and Contingencies (Note 15)
Member’s Equity:
Common stock	—		—
Additional paid-in capital	3,860		2,678
Retained earnings	1,138		944

Total member’s equity	4,998		3,622
Total Liabilities and Member’s Equity	$	15,339	$	12,980

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CASH FLOWS


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Cash Flows from Operating Activities:
Net income	$	510	$	381	$	334
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	670		642		560
Deferred income taxes	86		32		(42)
Changes in other assets and liabilities:
Accounts and notes receivable, net	(63)		(17)		(26)
Accounts receivable/payable–affiliated companies	47		(36)		47
Inventory	(179)		(97)		(48)
Accounts payable	(7)		66		28

Net regulatory assets and liabilities	(41)		(237)		(11)
Other current assets and liabilities	(20)		39		55
Other non-current assets and liabilities	(25)		6		4
Other operating activities, net	(12)		(9)		(2)
Net cash provided by operating activities	966		770		899
Cash Flows from Investing Activities:
Capital expenditures	(2,436)		(1,619)		(1,058)
Decrease in notes receivable–affiliated companies	—		—		481


Other investing activities, net	1		2		13
Net cash used in investing activities	(2,435)		(1,617)		(564)
Cash Flows from Financing Activities:

Proceeds from long-term debt	1,589		1,096		299
Payments of long-term debt	(720)		(613)		(231)

Dividend to parent	(316)		—		(551)
Increase in notes payable–affiliated companies	130		504		8

Payment of debt issuance costs	(17)		(12)		(3)
Contribution from parent	1,143		130		62
Payment of obligation for finance lease	(485)		(179)		—

Net cash provided by (used in) financing activities	1,324		926		(416)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(145)		79		(81)
Cash, Cash Equivalents and Restricted Cash at Beginning of the Year	233		154		235
Cash, Cash Equivalents and Restricted Cash at End of the Year	$	88	$	233	$	154

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY


	2022			2021			2020
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions, except share amounts)


Common Stock
Balance, beginning of year	1,000	$	—	1,000	$	—	1,000	$	—
Balance, end of year	1,000	—		1,000	—		1,000	—
Additional Paid-in-Capital
Balance, beginning of year		2,678			2,548			2,486
Non-cash contribution from parent		38			—			—
Contribution from parent		1,143			130			62
Other		1			—			—
Balance, end of year		3,860			2,678			2,548
Retained Earnings
Balance, beginning of year		944			563			780
Net income		510			381			334
Dividend to parent		(316)			—			(551)
Balance, end of year		1,138			944			563
Accumulated Other Comprehensive Loss
Balance, beginning of year		—			—			(15)
Other comprehensive income		—			—			15
Balance, end of year		—			—			—
Total Member’s Equity		$	4,998		$	3,622		$	3,111

See Combined Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholder of

CenterPoint Energy Resources Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CenterPoint Energy Resources Corp. and subsidiaries (an indirect wholly-owned subsidiary of CenterPoint Energy, Inc.) (the "Company") as of December 31, 2022 and 2021, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Critical Audit Matter

Impact of Rate Regulation on the Financial Statements — Refer to Notes 2, 4 and 7 to the financial statements

Critical Audit Matter Description

The Company is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of gas transmission and distribution companies in those jurisdictions. Management has determined its regulated operations meet the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. The impacts of accounting for the economics of rate regulation are pervasive to the financial statements and disclosures.

recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of decisions by the Commissions included the following, among others:

We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred and deferred as regulatory assets, and (2) refunds or future reductions in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.
We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
We read relevant regulatory orders issued by the Commissions for the Company and other public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.
For regulatory matters in process, we inspected the Company’s filings with the Commissions and the filings with the Commissions by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
We evaluated management’s assertion that no indicators of impairment were identified in connection with the Company's property, plant, and equipment. We inspected the capital projects budget and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life. We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management’s assertion regarding probability of a disallowance of long-lived assets.
We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects and inquired of management to assess whether capitalized costs are probable of disallowance.
We obtained an analysis from management and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 17, 2023

We have served as the Company’s auditor since 1997.

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Revenues:
Utility revenues	$	4,764	$	4,143	$	3,479
Non-utility revenues	36		57		52
Total	4,800		4,200		3,531

Expenses:
Utility natural gas	2,607		1,885		1,313
Non-utility cost of revenue, including natural gas	4		17		17
Operation and maintenance	886		973		997
Depreciation and amortization	448		483		441
Taxes other than income taxes	257		249		234

Total	4,202		3,607		3,002
Operating Income	598		593		529

Other Income (Expense):
Gain on sale	557		11		—
Interest expense and other finance charges	(130)		(134)		(143)


Other, net	(64)		(4)		(4)
Total	363		(127)		(147)
Income From Continuing Operations Before Income Taxes	961		466		382
Income tax expense (benefit)	236		76		117
Income From Continuing Operations	725		390		265
Loss from Discontinued Operations (net of tax benefit of $—, $—, and $(2), respectively)	—		—		(66)
Net Income	$	725	$	390	$	199

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Net income	$	725	$	390	$	199
Other comprehensive income:
Adjustment to other postemployment plans (net of tax expense of $4, $1 and $1, respectively)	6		—		—

Other comprehensive income	6		—		—
Comprehensive income	$	731	$	390	$	199

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS


	December 31, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	15
Accounts receivable, less allowance for credit losses of $34 and $40, respectively	463		336
Accrued unbilled revenue, less allowance for credit losses of $4 and $6, respectively	573		335
Accounts and notes receivable — affiliated companies	52		28
Material and supplies	98		82
Natural gas inventory	195		151
Non-trading derivative assets	7		8
Taxes receivable	12		28

Current assets held for sale	—		2,084
Regulatory assets	1,336		1,371
Prepaid expenses and other current assets	78		48
Total current assets	2,814		4,486
Property, Plant and Equipment, Net	10,406		9,108
Other Assets:
Goodwill	1,583		1,583
Regulatory assets	844		938
Non-trading derivative assets	2		4



Other non-current assets	55		34
Total other assets	2,484		2,559
Total Assets	$	15,704	$	16,153

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS, cont.


	December 31, 2022		December 31, 2021
	(in millions)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term borrowings	$	511	$	7
Current portion of long-term debt	1,331		—
Accounts payable	690		503
Accounts and notes payable–affiliated companies	190		566

Taxes accrued	140		143
Interest accrued	50		30
Customer deposits	94		92

Current liabilities held for sale	—		562
Other current liabilities	200		151
Total current liabilities	3,206		2,054

Other Liabilities:
Deferred income taxes, net	1,262		1,028


Benefit obligations	76		100
Regulatory liabilities	1,801		1,715

Other non-current liabilities	501		571
Total other liabilities	3,640		3,414

Long-Term Debt, net	3,495		5,552

Commitments and Contingencies (Note 15)

Stockholder’s Equity:
Common stock	—		—
Additional paid-in capital	3,729		4,106
Retained earnings	1,618		1,017
Accumulated other comprehensive income	16		10
Total stockholder’s equity	5,363		5,133

Total Liabilities and Stockholder’s Equity	$	15,704	$	16,153

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CASH FLOWS


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Cash Flows from Operating Activities:
Net income	$	725	$	390	$	199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	448		483		441


Deferred income taxes	178		101		113
Goodwill impairment and loss from reclassification to held for sale	—		—		93
Gain on divestitures	(557)		(11)		—
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	(376)		(68)		104
Accounts receivable/payable–affiliated companies	41		27		—
Inventory	(50)		(62)		64
Taxes receivable	—		(28)		—
Accounts payable	190		95		(40)



Net regulatory assets and liabilities	244		(2,095)		(78)
Other current assets and liabilities	13		(39)		33
Other non-current assets and liabilities	(2)		(31)		56
Other operating activities, net	2		19		5
Net cash provided by (used in) operating activities	856		(1,219)		990
Cash Flows from Investing Activities:
Capital expenditures	(1,661)		(1,324)		(1,146)


Increase in notes receivable–affiliated companies	—		—		(9)
Proceeds from divestitures (Note 4)	2,075		22		365

Other investing activities, net	(8)		15		20
Net cash provided by (used in) investing activities	406		(1,287)		(770)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	452		(27)		—

Proceeds from (payments of) commercial paper, net	(94)		552		(30)
Proceeds from long-term debt	927		1,699		500
Payments of long-term debt, including make-whole premiums	(475)		(311)		(593)
Payment of debt issuance costs	(14)		(10)		(4)
Dividends to parent	(844)		(17)		(128)

Contribution from parent	289		140		337
Capital distribution to parent associated with the sale of CES	—		—		(286)
Increase (decrease) in notes payable–affiliated companies	(1,517)		490		(18)
Other financing activities, net	(1)		(1)		(1)
Net cash provided by (used in) financing activities	(1,277)		2,515		(223)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(15)		9		(3)
Cash, Cash Equivalents and Restricted Cash at Beginning of Year	15		6		9
Cash, Cash Equivalents and Restricted Cash at End of Year	$	—	$	15	$	6

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY


	2022			2021			2020
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of year	1,000	$	—	1,000	$	—	1,000	$	—
Balance, end of year	1,000	—		1,000	—		1,000	—
Additional Paid-in-Capital
Balance, beginning of year		4,106			3,966			3,915
Non-cash contribution from parent		54			—			—
Contribution from parent		289			140			337
Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses		(720)			—			—
Capital distribution to parent associated with the sale of CES		—			—			(286)


Balance, end of year		3,729			4,106			3,966
Retained Earnings
Balance, beginning of year		1,017			644			578
Net income		725			390			199
Dividend to parent		(124)			(17)			(128)
Adoption of ASU 2016-13		—			—			(5)

Balance, end of year		1,618			1,017			644
Accumulated Other Comprehensive Income
Balance, beginning of year		10			10			10
Other comprehensive income		6			—			—

Balance, end of year		16			10			10
Total Stockholder’s Equity		$	5,363		$	5,133		$	4,620

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Background

General. This combined Form 10-K 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 Note 13 to the Registrants’ 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-K are the Financial Statements of CenterPoint Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Combined Notes to the Consolidated Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated.

Background. CenterPoint Energy, Inc. is a public utility holding company. CenterPoint Energy completed the Restructuring on June 30, 2022, whereby the equity interests in Indiana Gas and VEDO, both subsidiaries CenterPoint Energy acquired in its acquisition of Vectren on February 1, 2019, were transferred from VUH to CERC Corp. As a result, Indiana Gas and VEDO became wholly owned subsidiaries of CERC Corp., to better align CenterPoint Energy’s organizational structure with management and financial reporting and to fund future capital investments more efficiently. The Restructuring was a non-cash common control acquisition by CERC. As a result, CERC acquired these businesses at CenterPoint Energy’s historical basis in these entities and prior year amounts were recast to reflect the Restructuring as if it occurred at the earliest period presented for which CenterPoint Energy had common control. The Restructuring did not impact CenterPoint Energy’s carrying basis in any entity, its allocation of goodwill to its reporting units, or its segment presentation. Neither CenterPoint Energy nor CERC recognized any gains or losses in connection with the Restructuring. SIGECO was not acquired by CERC and remains a subsidiary of VUH. See Note 6 for a discussion of the goodwill recorded at CERC as a result of this transaction. IURC and PUCO approvals necessary for the Restructuring were received in December 2021 (IURC) and January 2022 (PUCO).

On January 10, 2022, CERC Corp. completed the sale of its Arkansas and Oklahoma Natural Gas businesses. For additional information regarding discontinued operations and divestitures, see Note 4.

As of December 31, 2022, CenterPoint Energy’s operating subsidiaries 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
CERC Corp. (i) directly owns and operates natural gas distribution systems in Louisiana, Minnesota, Mississippi and Texas, (ii) indirectly, through Indiana Gas and VEDO, owns and operates natural gas distribution systems in Indiana and Ohio, respectively, and (iii) owns and operates permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP.
SIGECO provides energy delivery services to electric and natural gas customers located in and 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
Energy Systems Group provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.

For a description of CenterPoint Energy’s reportable segments, see Note 17. Houston Electric and CERC each consist of a single reportable segment.

(2) Summary of Significant Accounting Policies

**(a)**Use of Estimates

The preparation of 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.

**(b)**Principles of Consolidation

The accounts of the Registrants and their wholly-owned and majority-owned and controlled subsidiaries are included in the consolidated financial statements. All intercompany transactions and balances are eliminated in consolidation, except as described below.

As of December 31, 2022, 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.

**(c)**Equity Method and Investments without a Readily Determinable Fair Value (CenterPoint Energy)

CenterPoint Energy uses the equity method for investments in entities when it exercises significant influence, does not have control and is not considered the primary beneficiary, if applicable. Generally, equity investments in limited partnerships with interest greater than approximately 3-5% is accounted for under the equity method.

Under the equity method, CenterPoint Energy adjusts its investments each period for contributions made, distributions received, respective shares of comprehensive income and amortization of basis differences, as appropriate. CenterPoint Energy evaluates its equity method investments for impairment when events or changes in circumstances indicate there is a loss in value of the investment that is other than a temporary decline.

CenterPoint Energy considers distributions received from equity method investments which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in its Statements of Consolidated Cash Flows. CenterPoint Energy considers distributions received from equity method investments in excess of cumulative equity in earnings subsequent to the date of investment to be a return of investment and classifies these distributions as investing activities in its Statements of Consolidated Cash Flows.

Investments without a readily determinable fair value will be measured at cost, less impairment, plus or minus observable prices changes of an identical or similar investment of the same issuer.

**(d)**Revenues

The Registrants record revenue for electricity delivery and natural gas sales and services under the accrual method and these revenues are recognized upon delivery to customers. Electricity deliveries not billed by month-end are accrued based on actual AMS/AMI data, supply volumes, estimated line loss and applicable tariff rates. Natural gas sales not billed by month-end are accrued based upon estimated purchased gas volumes, estimated lost and unaccounted for gas and currently effective tariff rates. For further discussion, see Note 5.

(e) MISO Transactions

Indiana Electric is a member of the MISO. MISO-related purchase and sale transactions are recorded using settlement information provided by the MISO. These purchase 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 Statements of Consolidated Income in Utility natural gas, fuel and purchased power, and net sales within that interval are recorded on CenterPoint Energy’s 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 probable and the resettlement amount can be estimated. Revenues associated with resettlements are recognized when the amount is determinable and collectability is reasonably assured.

(f) Guarantees

CenterPoint Energy recognizes guarantee obligations at fair value. CenterPoint Energy discloses parent company guarantees of a subsidiary’s obligation when that guarantee results in the exposure of a material obligation of the parent company even if the probability of fulfilling such obligation is considered remote. See Note 15(c) and (d).

(g) Long-lived Assets, Goodwill and Intangibles

The Registrants record property, plant and equipment at historical cost and expense repair and maintenance costs as incurred.

The Registrants periodically evaluate long-lived assets, including property, plant and equipment, and specifically identifiable intangibles subject to amortization, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. For rate regulated businesses, recoverability of long-lived assets is assessed by determining if a capital disallowance from a regulator is probable through monitoring the outcome of rate cases and other proceedings. For non-rate regulated businesses, recoverability is assessed based on an estimate of undiscounted cash flows attributable to the assets compared to the carrying value of the assets. No long-lived asset or intangible asset impairments were recorded in 2022, 2021 or 2020.

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. CenterPoint Energy and CERC recognize a goodwill impairment by the amount a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill within that reporting unit. CenterPoint Energy includes deferred tax assets and liabilities within its reporting unit’s carrying value for the purposes of annual and interim impairment tests, regardless of whether the estimated fair value reflects the disposition of such assets and liabilities. For further information about the goodwill impairment tests, see Note 6.

(h) Assets Held for Sale and Discontinued Operations

Generally, a long-lived asset to be sold is classified as held for sale in the period in which management, with approval from the Board of Directors, as applicable, commits to a plan to sell and a sale is expected to be completed within one year. The Registrants record assets and liabilities held for sale at the lower of their carrying value or their estimated fair value less cost to sell. If the disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to 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.

(i) Regulatory Assets and Liabilities

The Registrants apply the guidance for accounting for regulated operations within the Electric reportable segment and the Natural Gas reportable segment. The Registrants’ rate-regulated subsidiaries may collect revenues subject to refund pending final determination in rate proceedings. In connection with such revenues, estimated rate refund liabilities are recorded which reflect management’s current judgment of the ultimate outcomes of the proceedings.

The Registrants’ rate-regulated businesses recognize removal costs as a component of depreciation expense in accordance with regulatory treatment. In addition, a portion of the amount of removal costs collected from customers that relate to AROs has been reflected as an asset retirement liability in accordance with accounting guidance for AROs.

For further detail on the Registrants’ regulatory assets and liabilities, see Note 7.

(j) Depreciation and Amortization Expense

The Registrants compute depreciation and amortization using the straight-line method based on economic lives or regulatory-mandated recovery periods. Amortization expense includes amortization of certain regulatory assets and other intangibles.

(k) Capitalization and Deferral of Interest, including AFUDC

The Registrants capitalize interest and AFUDC as a component of projects under construction and amortize it over the assets’ estimated useful lives once the assets are placed in service. Additionally, the Registrants defer interest costs into a regulatory asset when amounts are probable of recovery. Deferred debt interest is amortized over the recovery period for rate-making purposes. AFUDC represents the composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction for subsidiaries that apply the guidance for accounting for regulated operations. Although AFUDC increases both utility plant and earnings, it is realized in cash when the assets are included in rates. The table below includes interest capitalized or deferred during the periods.


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Interest and AFUDC debt (1) (2)	$	44	$	14	$	22	$	34	$	13	$	16	$	27	$	8	$	13
AFUDC equity (3)	37		24		5		28		20		5		25		14		3
Other deferred debt interest (4)	33		12		21		10		1		9		3		—		3

(1)Included in Interest and other finance charges on CenterPoint Energy’s Statements of Consolidated Income, inclusive of $18 million, $16 million and $13 million of debt post in-service carrying costs on property, plant and equipment, primarily in Indiana, deferred into a regulatory asset in the years ended December 31, 2022, 2021 and 2020, respectively.

(2)Included in Interest and other finance charges on CERC’s Statements of Consolidated Income, inclusive of $15 million, $13 million and $10 million of debt post in-service carrying costs on property, plant and equipment, primarily in Indiana, deferred into a regulatory asset in the years ended December 31, 2022, 2021 and 2020, respectively.

(3)Included in Other Income (Expense) on the Registrants’ respective Statements of Consolidated Income.

(4)Represents the amount of deferred debt interest on certain regulatory assets that are authorized to earn a return, such as gas costs, storm restoration costs, and TEEEF (including returns on both regulatory and lease assets).

(l) Income Taxes

Houston Electric and CERC are included in CenterPoint Energy’s U.S. federal consolidated income tax return. Houston Electric and CERC report their income tax provision on a separate entity basis pursuant to a tax sharing policy with CenterPoint Energy. Current federal and certain state income taxes are payable to or receivable from CenterPoint Energy.

The Registrants use the asset and liability method of accounting for deferred income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established against deferred tax assets for which management believes realization is not considered to be more likely than not. The Registrants recognize interest and penalties as a component of income tax expense (benefit), as applicable, in their respective Statements of Consolidated Income. CenterPoint Energy reports the income tax provision associated with its interest in Enable in discontinued operations, net of tax in its Statements of Consolidated Income. For further information, see Note 4.

To the extent certain EDIT of the Registrants’ rate-regulated subsidiaries may be recoverable or payable through future rates, regulatory assets and liabilities have been recorded, respectively. See Note 14 for further discussion.

The Registrants use the portfolio approach to recognize income tax effects on other comprehensive income from accumulated other comprehensive income.

Investment tax credits are deferred and amortized to income over the approximate lives of the related property.

(m) Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount and do not bear interest. Management reviews historical write-offs, current available information, and reasonable and supportable forecasts to estimate and establish allowance for credit losses. Account balances are charged off against the allowance when management determines it is probable the receivable will

not be recovered. See Note 7 for further information about regulatory deferrals of bad debt expense, including those related to COVID-19 and the February 2021 Winter Storm Event.

(n) Inventory

The Registrants’ inventory consists principally of materials and supplies, and for CERC, natural gas, and for CenterPoint Energy, coal inventory. Materials and supplies are valued at the lower of average cost or market. Materials and supplies are recorded to inventory when purchased and subsequently charged to expense or capitalized to plant when installed. Certain natural gas in storage at CenterPoint Energy’s and CERC’s utilities are recorded using the LIFO method. CenterPoint Energy’s and CERC’s balances in inventory that were valued using LIFO method were as follows:


	Year Ended December 31,
	2022 (1)		2021		2022 (1)		2021
	CenterPoint Energy				CERC
	(in millions)
LIFO inventory	$	101	$	101	$	82	$	79

(1)Based on the average cost of gas purchased during December 2022, both CenterPoint Energy’s and CERC’s cost of replacing inventories carried at LIFO cost was more than the carrying value at December 31, 2022 by $101 million.

(o) 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, from time to time, 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. Such derivatives are recognized in the Registrants’ Consolidated Balance Sheets at their fair value unless the Registrant elects the normal purchase and sales exemption for qualified physical transactions. A derivative may be designated as a normal purchase or normal sale if the intent is to physically receive or deliver the product for use or sale in the normal course of business. CenterPoint Energy elected to record changes in the fair value of amounts excluded from the assessment of effectiveness immediately in its Statements of Consolidated Income, and such amounts will be captured in a regulatory asset or regulatory liability if they are recoverable or refundable to customers.

(p) Investments in Equity Securities (CenterPoint Energy)

CenterPoint Energy reports equity securities at estimated fair value in the Consolidated Balance Sheets, and any gains and losses, net of any transaction costs, are recorded as Gain (Loss) on Equity Securities in the Statements of Consolidated Income.

(q) Environmental Costs

The Registrants expense or capitalize environmental expenditures, as appropriate, depending on their future economic benefit. The Registrants expense amounts that relate to an existing condition caused by past operations that do not have future economic benefit. The Registrants record undiscounted liabilities related to these future costs when environmental assessments and/or remediation activities are probable and the costs can be reasonably estimated.

(r) Cash and Cash Equivalents and Restricted Cash

For purposes of reporting cash flows, the Registrants consider cash equivalents to be short-term, highly-liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents held by the Bond Companies (VIEs) solely to support servicing the Securitization Bonds as of December 31, 2022 and 2021 are reflected on CenterPoint Energy’s and Houston Electric’s Consolidated Balance Sheets.

In connection with the issuance of Securitization Bonds, CenterPoint Energy and Houston Electric were required to establish restricted cash accounts to collateralize the bonds that were issued in these financing transactions. These restricted cash accounts are not available for withdrawal until the maturity of the bonds and are not included in cash and cash equivalents. For more information on restricted cash see Note 18.

(s) Preferred Stock and Dividends

Preferred stock is evaluated to determine balance sheet classification, and all conversion and redemption features are evaluated for bifurcation treatment. Proceeds received net of issuance costs are recognized on the settlement date. Cash dividends become a liability once declared. Income available to common stockholders is computed by deducting from net income the dividends accumulated and earned during the period on cumulative preferred stock.

(t) Purchase Accounting

The Registrants evaluate acquisitions to determine when a set of acquired activities and assets represent a business. When control of a business is obtained, the Registrants apply the acquisition method of accounting and record the assets acquired, liabilities assumed and any non-controlling interest obtained based on fair value at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the net assets acquired is recorded as goodwill. The results of operations of the acquired business are included in the Registrants’ respective Statements of Consolidated Income beginning on the date of the acquisition.

(u) New Accounting Pronouncements

The following table provides an overview of certain recently adopted accounting pronouncements applicable to all the Registrants.


Recently Adopted Accounting Standards
ASU Number and Name	Description	Date of Adoption	Financial Statement Impact upon Adoption
ASU 2021-10: Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance	This standard requires additional disclosure requirements when a business receives government assistance and uses a grant or contribution accounting model by analogy to other accounting guidance such as the grant model under International Accounting Standards (IAS) 20 Accounting for Government Grants and Disclosures of Government Assistance and GAAP ASC 958-605 Not for Profit. Transition method: Prospective or retrospective	January 1, 2022	The prospective adoption of this standard resulted in additional annual disclosures related to the recovery of Texas natural gas costs associated with the February 2021 Winter Storm Event through the state securitization, which is accounted for as a government grant by analogy to IAS 20. The adoption of this standard did not have a material impact on the Registrants’ financial position, results of operations or cash flows.

Management believes that other recently adopted and recently 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) Property, Plant and Equipment

(a) Property, Plant and Equipment

Property, plant and equipment includes the following:


		December 31, 2022						December 31, 2021
	Weighted Average Useful Lives	Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net		Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net
	(in years)	(in millions)
CenterPoint Energy
Electric transmission and distribution	36	$	19,154	$	5,317	$	13,837	$	17,156	$	4,658	$	12,498
Electric generation (1)	26	2,120		813		1,307		1,807		1,179		628
Natural gas distribution	32	15,097		4,135		10,962		13,578		3,981		9,597


Finance ROU asset mobile generation	6.5	662		41		621		179		—		179
Other property	23	695		279		416		953		371		582
Total		$	37,728	$	10,585	$	27,143	$	33,673	$	10,189	$	23,484


		December 31, 2022						December 31, 2021
	Weighted Average Useful Lives	Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net		Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net
	(in years)	(in millions)
Houston Electric
Electric transmission and distribution	38	$	14,791	$	3,556	$	11,235	$	13,321	$	3,502	$	9,819

Finance ROU asset mobile generation	6.5	662		41		621		179		—		179
Other property	20	2,300		695		1,605		1,773		568		1,205
Total		$	17,753	$	4,292	$	13,461	$	15,273	$	4,070	$	11,203
CERC
Natural gas distribution	32	$	14,316	$	3,946	$	10,370	$	12,885	$	3,800	$	9,085

Other property	17	63		27		36		49		26		23
Total		$	14,379	$	3,973	$	10,406	$	12,934	$	3,826	$	9,108

(1)SIGECO and AGC own a 300 MW unit at the Warrick Power Plant (Warrick Unit 4) as tenants in common. SIGECO’s share of the cost of this unit as of December 31, 2022, is $198 million with accumulated depreciation totaling $162 million. AGC and SIGECO share equally in the cost of operation and output of the unit. SIGECO’s share of operating costs is included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income.

(b) Depreciation and Amortization

The following table presents depreciation and amortization expense for 2022, 2021 and 2020:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Depreciation	$	1,013	$	434	$	420	$	1,024	$	391	$	466	$	961	$	368	$	426
Amortization of securitized regulatory assets	191		191		—		213		213		—		155		155		—
Other amortization	84		45		28		79		38		17		73		37		15
Total	$	1,288	$	670	$	448	$	1,316	$	642	$	483	$	1,189	$	560	$	441

(c) AROs

The Registrants recorded AROs associated with the removal of asbestos and asbestos-containing material in its buildings, including substation building structures. CenterPoint Energy recorded AROs relating to the closure of the ash ponds at A.B. Brown and F.B. Culley. CenterPoint Energy and Houston Electric also recorded AROs relating to treated wood poles for electric distribution, distribution transformers containing PCB (also known as Polychlorinated Biphenyl), and underground fuel storage tanks. CenterPoint Energy and CERC also recorded AROs relating to gas pipelines abandoned in place. The estimates of future liabilities were developed using historical information, and where available, quoted prices from outside contractors.

A reconciliation of the changes in the ARO liability recorded in Other non-current liabilities on each of the Registrants’ respective Consolidated Balance Sheets is as follows:


	December 31, 2022						December 31, 2021
	CenterPoint Energy (1)		Houston Electric		CERC (1)		CenterPoint Energy (1)		Houston Electric		CERC (1)
	(in millions)
Beginning balance	$	659	$	42	$	479	$	664	$	43	$	514

Accretion expense (2)	20		1		15		19		1		13
Revisions in estimates (3)	(69)		(7)		(74)		(24)		(2)		(48)
Ending balance	$	610	$	36	$	420	$	659	$	42	$	479

(1)Excludes ARO activity of Arkansas and Oklahoma Natural Gas businesses that were sold in January 2022 and are reflected as held for sale as of December 31, 2021. For further information, see Note 4.

(2)Reflected in Regulatory assets on each of the Registrants’ respective Consolidated Balance Sheets.

(3)In 2022, the Registrants reflected a decrease in their respective ARO liability, which is primarily attributable to increases in the long-term interest rates used for discounting in the ARO calculation.

(4) Held for Sale and Divestitures (CenterPoint Energy and CERC)

Divestiture of Arkansas and Oklahoma Natural Gas Businesses (CenterPoint Energy and CERC). On April 29, 2021, CenterPoint Energy, through its subsidiary CERC Corp., entered into an Asset Purchase Agreement to sell its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion in cash, including recovery of approximately $425 million in natural gas costs, including storm-related incremental natural gas costs associated with the February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The assets included approximately 17,000 miles of main pipeline in Arkansas, Oklahoma and certain portions of Bowie County, Texas serving more than half a million customers. The transaction closed on January 10, 2022.

The sale was considered an asset sale for tax purposes, requiring net deferred tax liabilities to be excluded from held for sale balances. The deferred taxes associated with the businesses were recognized as a deferred income tax benefit by CenterPoint Energy and CERC upon closing of the sale in 2022.

Although the Arkansas and Oklahoma Natural Gas businesses met the held for sale criteria as of December 31, 2021, their disposals did not represent a strategic shift to CenterPoint Energy and CERC, as both retained significant operations in, and continued to invest in, their natural gas businesses. Therefore, the income and expenses associated with the disposed businesses were not reflected as discontinued operations on CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable. Since the depreciation on the Arkansas and Oklahoma Natural Gas assets continued to be reflected in revenues through customer rates until the closing of the transaction and will be reflected in the carryover basis of the rate-regulated assets, CenterPoint Energy and CERC continued to record depreciation on those assets through the closing of the transaction. The Registrants record assets and liabilities held for sale at the lower of their carrying value or their estimated fair value less cost to sell.

CenterPoint Energy and CERC recognized gains of $303 million and $557 million, respectively, net of transaction costs of $59 million, in connection with the closing of the disposition of the Arkansas and Oklahoma Natural Gas businesses during the year ended December 31, 2022. CenterPoint Energy and CERC collected a receivable of $15 million in May 2022 for full and final settlement of the working capital adjustment under the Asset Purchase Agreement.

Neither CenterPoint Energy nor CERC recognized any gains or losses on the measurement of assets held for sale during the year ended December 31, 2021. See Note 6 for further information about the allocation of goodwill to the businesses to be disposed.

As a result of the completion of the sale of the Arkansas and Oklahoma Natural Gas businesses, there were no assets or liabilities classified as held for sale as of December 31, 2022. The assets and liabilities of the Arkansas and Oklahoma Natural Gas businesses classified as held for sale in CenterPoint Energy’s and CERC’s Consolidated Balance Sheets, as applicable, as of December 31, 2021 included the following:


	December 31, 2021
	CenterPoint Energy		CERC
	(in millions)
Receivables, net	$	46	$	46
Accrued unbilled revenues	48		48
Natural gas inventory	46		46
Materials and supplies	9		9
Property, plant and equipment, net	1,314		1,314
Goodwill (1)	398		144
Regulatory assets	471		471
Other	6		6
Total current assets held for sale	$	2,338	$	2,084


	December 31, 2021
	CenterPoint Energy		CERC
	(in millions)
Short term borrowings (2)	$	36	$	36
Accounts payable	40		40
Taxes accrued	7		7

Customer deposits	12		12
Regulatory liabilities	365		365
Other	102		102
Total current liabilities held for sale	$	562	$	562

(1)See Note 6 for further information about the allocation of goodwill to the disposed businesses.

(2)Represents third-party AMAs associated with utility distribution service in Arkansas and Oklahoma. These transactions are accounted for as an inventory financing. For further information, see Notes 13 and 15.

The pre-tax income for the Arkansas and Oklahoma Natural Gas businesses, excluding interest and corporate allocations, included in CenterPoint Energy’s and CERC’s Statements of Consolidated Income is as follows:


	Year Ended December 31,
	2022 (1)		2021		2020
	(in millions)
Income from Continuing Operations Before Income Taxes	$	9	$	78	$	73

(1)Reflects January 1, 2022 to January 9, 2022 results only due to of the sale of the Arkansas and Oklahoma Natural Gas businesses.

Effective on the date of the closing of the disposition of the Arkansas and Oklahoma Natural Gas businesses, a subsidiary of CenterPoint Energy entered into the Transition Services Agreement, whereby that subsidiary agreed to provide certain transition services such as accounting, customer operations, procurement, and technology functions for a term of up to twelve months. In November 2022, a significant majority of all services under the Transition Services Agreement were terminated, and on January 10, 2023, all remaining services were terminated.

CenterPoint Energy’s charges to Southern Col Midco for reimbursement of transition services was $40 million during the year ended December 31, 2022. Actual transitional services costs incurred are recorded net of amounts charged to Southern Col Midco. CenterPoint Energy had accounts receivable from Southern Col Midco of $1 million as of December 31, 2022 for transition services.

Divestiture of MES (CenterPoint Energy and CERC). CenterPoint Energy, through its subsidiary CERC Corp., completed the sale of MES on August 31, 2021 to Last Mile Energy. Prior to the transaction, MES provided temporary delivery of LNG and CNG throughout the contiguous 48 states and MES was reflected in CenterPoint Energy’s Natural Gas reportable segment and CERC’s single reportable segment, as applicable.

The MES disposal did not represent a strategic shift to CenterPoint Energy and CERC, as both retained significant operations in, and continued to invest in, their natural gas businesses. Therefore, the income and expenses associated with MES are not reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, as applicable. CenterPoint Energy and CERC recognized a pre-tax gain on the sale of $8 million and $11 million, respectively, during year ended December 31, 2021. See Note 6 for further information about the allocation of goodwill to the MES disposal.

Discontinued Operations (CenterPoint Energy and CERC)

CenterPoint Energy’s and CERC’s discontinued operations reflect the disposals of interests in Enable, Infrastructure Services and Energy Services, as applicable. CenterPoint Energy’s disposal of its interests in Enable, discussed further below, represented a strategic shift that will have a major effect on CenterPoint Energy’s operations or financial results, and as such, the equity in earnings of unconsolidated affiliates, net of tax, associated with CenterPoint Energy’s equity investment in Enable was reflected as discontinued operations on CenterPoint Energy’s Statements of Consolidated Income. The Infrastructure Services and Energy Services Disposal Groups disposals, discussed further below, also represent a strategic shift to CenterPoint

Energy and CERC, as applicable, and as such, the earnings and expenses directly associated with these dispositions, including operating results of the businesses through the date of sale, are reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, as applicable. As a result, prior periods have also been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

A summary of discontinued operations presented in CenterPoint Energy’s Statements of Consolidated Income is as follows:


	Year Ended December 31, 2021
	Equity Method Investment in Enable
	(in millions)
Equity in earnings of unconsolidated affiliate, net	$	1,019
Income from discontinued operations before income taxes	1,019
Income tax expense	201
Net income from discontinued operations	$	818


	Year Ended December 31, 2020
	Equity Method Investment in Enable		Infrastructure Services Disposal Group		Energy Services Disposal Group		Total
	(in millions)
Revenues	$	—	$	250	$	1,167	$	1,417
Expenses:
Non-utility cost of revenues	—		50		1,108		1,158
Operation and maintenance	—		184		34		218

Taxes other than income taxes	—		1		3		4

Total	—		235		1,145		1,380
Operating income	—		15		22		37
Equity in losses of unconsolidated affiliate, net (1)	(1,428)		—		—		(1,428)
Income (loss) from discontinued operations before income taxes	(1,428)		15		22		(1,391)
Loss on classification to held for sale, net (2)	—		(102)		(96)		(198)
Income tax expense (benefit)	(354)		24		(3)		(333)
Net loss from discontinued operations	$	(1,074)	$	(111)	$	(71)	$	(1,256)

(1)CenterPoint Energy recognized a loss of $1,428 million from its investment in Enable for the year ended December 31, 2020. This loss included an impairment charge on CenterPoint Energy’s investment in Enable of $1,541 million and CenterPoint Energy’s interest in Enable’s $225 million impairment on an equity method investment.

(2)Loss from classification to held for sale is inclusive of goodwill impairments, gains and losses recognized upon sale, and for CenterPoint Energy, its costs to sell.

A summary of the Energy Services Disposal Group presented as discontinued operations in CERC’s Statements of Consolidated Income, as applicable, is as follows:


	Year Ended December 31, 2020
	CERC
	(in millions)
Revenues	$	1,167
Expenses:
Non-utility cost of revenues	1,108
Operation and maintenance	34

Taxes other than income taxes	3

Total	1,145

Income from Discontinued Operations before income taxes	22
Loss on classification to held for sale, net (1)	(90)
Income tax expense (benefit)	(2)
Net income (loss) from Discontinued Operations	$	(66)

(1)Loss from classification to held for sale is inclusive of goodwill impairment, gains and losses recognized upon sale, 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. Except as discussed in Note 2, 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 as applicable:


	Year Ended December 31, 2021
	CenterPoint Energy
	Equity Method Investment in Enable
	(in millions)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on Enable Merger	$	(681)
Equity in earnings of unconsolidated affiliate	(339)
Distributions from unconsolidated affiliate	155
Cash flows from investing activities:
Transaction costs related to the Enable Merger	(49)
Cash received related to Enable Merger	5


	Year Ended December 31, 2020
	CenterPoint Energy
	Equity Method Investment in Enable		Infrastructure Services Disposal Group		Energy Services Disposal Group
	(in millions)
Cash flows from operating activities:


Adjustments to reconcile net income to net cash provided by operating activities:
Write-down of natural gas inventory	$	—	$	—	$	3
Equity in losses of unconsolidated affiliate	1,428		—		—
Distributions from unconsolidated affiliate	113		—		—
Cash flows from investing activities:
Capital expenditures	—		18		3
Distributions from unconsolidated affiliate in excess of cumulative earnings	80		—		—


	Year Ended December 31, 2020
	CERC
	Energy Services Disposal Group
	(in millions)
Cash flows from operating activities:

Write-down of natural gas inventory	$	3
Cash flows from investing activities:
Capital expenditures	3

Disposal of Investment in Enable (CenterPoint Energy). On December 2, 2021, Enable, completed the previously announced Enable Merger pursuant to the Enable Merger Agreement entered into on February 16, 2021. At the closing of the Enable Merger on December 2, 2021, Energy Transfer acquired 100% of Enable’s outstanding common and preferred units, and, as a result, Enable Common Units owned by CenterPoint Energy were exchanged for Energy Transfer Common Units and Enable Series A Preferred Units owned by CenterPoint Energy were exchanged for Energy Transfer Series G Preferred Units.

During the year ended December 31, 2022, CenterPoint Energy sold all of its remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units. See Note 11 for further information regarding Energy Transfer equity securities.

CenterPoint Energy evaluates its equity method investments, when not reflected as held for sale, 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. 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 the price of Enable Common Units 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 Enable 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 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 during the year ended December 31, 2020, reducing the carrying value of the investment to its estimated fair value of $848 million as of March 31, 2020.

Distributions Received from Enable (CenterPoint Energy):


	Year Ended December 31,
	2021				2020
	Per Unit		Cash Distribution		Per Unit		Cash Distribution
	(in millions, except per unit amounts)
Enable Common Units	$	0.6610	$	155	$	0.8263	$	193
Enable Series A Preferred Units (1)	2.2965		34		2.5000		36
Total			$	189			$	229

(1)As of December 31, 2020, the Enable Series A Preferred Units annual distribution rate was 10%. On February 18, 2021, five years after the issue date, the Enable Series A Preferred Units annual distribution rate changed to a percentage of the Stated Series A Liquidation Preference per Enable Series A Preferred Unit equal to the sum of (a) Three-Month LIBOR, as calculated on each applicable date of determination, and (b) 8.5%.

Transactions with Enable (CenterPoint Energy and CERC):

The transactions with Enable through December 2, 2021 in the following tables exclude transactions with the Energy Services Disposal Group.


	CenterPoint Energy and CERC
	Year Ended December 31,
	2021		2020
	(in millions)
Natural gas expenses, including transportation and storage costs (1)	$	85	$	86

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

Summarized Financial Information for Enable (CenterPoint Energy)

As a result of the closing of the Enable Merger in 2021, there were no assets classified as held for sale as of December 31, 2021. Summarized consolidated balance sheet information for Enable on the closing of the Enable Merger is as follows:


	December 2, 2021 (1)
	(in millions)
Current assets	$	594
Non-current assets	11,227
Current liabilities	1,254
Non-current liabilities	3,281
Non-controlling interest	26
Preferred equity	362
Accumulated other comprehensive loss	(1)
Enable partners’ equity	6,899

Reconciliation of Investment in Enable:
CenterPoint Energy’s ownership interest in Enable partners’ equity	$	3,701
CenterPoint Energy’s basis difference	(2,732)

CenterPoint Energy’s equity method investment in Enable	$	969

(1) Reflects balances as of the closing of the Enable Merger on December 2, 2021.

Summarized consolidated income (loss) information for Enable is as follows:


	Year Ended December 31,
	2021 (1)		2020
	(in millions)
Operating revenues	$	3,466	$	2,463
Cost of sales, excluding depreciation and amortization	1,959		965
Depreciation and amortization	382		420
Goodwill impairment	—		28
Operating income	634		465
Net income attributable to Enable Common Units	461		52
Reconciliation of Equity in Earnings (Losses), net before income taxes:
CenterPoint Energy’s interest	$	248	$	28
Basis difference amortization (2)	92		87
Loss on dilution, net of proportional basis difference recognition	(1)		(2)
Impairment of CenterPoint Energy’s equity method investment in Enable	—		(1,541)
Gain on Enable Merger	680		—
CenterPoint Energy’s equity in earnings (losses), net before income taxes (3)	$	1,019	$	(1,428)

(1)Reflects January 1, 2021 to December 2, 2021 results only due to the closing of the Enable Merger.

(2)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 was being amortized through the year 2048 and ceased upon closing of the Enable Merger.

(3)Reported as discontinued operations on CenterPoint Energy’s Statements of Consolidated Income.

Divestiture of Infrastructure Services (CenterPoint Energy). On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group to PowerTeam Services. Subject to the terms and conditions of the Securities Purchase Agreement, PowerTeam Services agreed to purchase all of the outstanding equity interests of VISCO for approximately $850 million, subject to customary adjustments set forth in the Securities Purchase Agreement, including adjustments based on VISCO’s net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. The transaction closed on April 9, 2020 for $850 million in cash, subject to the working capital adjustment. Additionally, as of December 31, 2020, CenterPoint Energy had a receivable from PowerTeam Services for working capital and other adjustments set forth in the Security Purchase Agreement. CenterPoint Energy collected a receivable of $4 million from PowerTeam Services in January 2021 for full and final settlement of the working capital adjustment under the Securities Purchase Agreement.

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 was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units. The sale was considered an asset sale for tax purposes, requiring net deferred tax liabilities of approximately $129 million as of April 9, 2020, the date the transaction closed, to be recognized as a deferred income tax benefit by CenterPoint Energy. Additionally, CenterPoint Energy recognized a current tax expense of $158 million during the year ended December 31, 2020, as a result of the cash taxes payable upon sale.

Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy’s financial statements as of March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for cost to sell, during the year ended December 31, 2020. CenterPoint Energy used the contractual sales price adjusted for estimated working capital and other contractual purchase price adjustments to determine fair value, which are Level 2 inputs. Using this market approach, the fair value of the Infrastructure Services Disposal Group as of March 31, 2020, was determined to be approximately $864 million. The same methodology was applied to estimate the fair value of the Infrastructure Services Disposal Group on the closing date and through the settlement of the net working capital adjustment. CenterPoint Energy recognized a net pre-tax loss of $6 million in connection with the closing of the disposition of the Infrastructure Services Disposal Group during the year ended December 31, 2020, respectively.

In the Securities Purchase Agreement, CenterPoint Energy agreed to a mechanism to reimburse PowerTeam Services subsequent to closing of the sale for certain amounts of specifically identified change orders that may have been ultimately rejected by one of VISCO’s customers as part of on-going audits. CenterPoint Energy’s maximum contractual exposure under the Securities Purchase Agreement, in addition to the amount reflected in the working capital adjustment, for these change orders was $21 million. This matter was resolved in 2022 with no amounts reimbursed by CenterPoint Energy.

Divestiture of Energy Services (CenterPoint Energy and CERC). On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group to Symmetry Energy Solutions Acquisition. This transaction did not include CEIP and its assets or MES. Symmetry Energy Solutions Acquisition agreed to purchase all of the outstanding equity interests of the Energy Services Disposal Group for approximately $400 million, subject to customary adjustments set forth in the Equity Purchase Agreement, and inclusive of an estimate of the cash adjustment for the Energy Services Disposal Group’s net working capital at closing, indebtedness and transaction expenses. The transaction closed on June 1, 2020 for approximately $286 million in cash, subject to the working capital adjustment. CenterPoint Energy collected a receivable of $79 million from Symmetry Energy Solutions Acquisition in October 2020 for full and final settlement of the working capital adjustment under the Equity Purchase Agreement.

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 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. The sale was considered an asset sale for tax purposes, requiring the net deferred tax liability of approximately $4 million as of June 1, 2020, the date the transaction closed, to be recognized as a deferred tax benefit by CenterPoint Energy and CERC upon closing. Additionally, CenterPoint Energy and CERC recognized current tax expense of $4 million during the year ended December 31, 2020, respectively, as a result of the cash taxes payable upon sale.

Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy’s and CERC’s respective financial statements as of March 31, 2020, CenterPoint Energy and CERC recorded a goodwill impairment of approximately $62 million during the year ended December 31, 2020. CenterPoint Energy and CERC used the contractual sales price adjusted for estimated working capital and other contractual purchase price adjustments to determine fair value, which are Level 2 inputs. Using this market approach, the fair value of the Energy Services Disposal Group as of March 31, 2020, was determined to be approximately $402 million. The same methodology was applied to estimate the fair value of the Energy Services Disposal Group on the closing date and through the settlement of the net working capital adjustment. Additionally, CenterPoint Energy recognized a loss on assets held for sale of approximately $31 million, plus an additional loss $6 million for cost to sell, recorded only at CenterPoint Energy during the year ended December 31, 2020. CenterPoint Energy and CERC recognized a gain on sale of $3 million during the year ended December 31, 2020.

Other Sale Related Matters of Infrastructure Services and Energy Services (CenterPoint Energy and CERC). CES provided natural gas supply to CenterPoint Energy’s and CERC’s Natural Gas 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 transportation provider for these customers as long as these customers retain a relationship with the divested CES business.

Transactions between CES and CenterPoint Energy’s and CERC’s Natural Gas that were previously eliminated in consolidation have been reflected in continuing operations until the closing of the sale of the Energy Services Disposal Group. Revenues and expenses included in continuing operations were as follows:


	Year Ended December 31, 2020 (1)
	CenterPoint Energy		CERC
	(in millions)
Transportation revenue	$	34	$	34
Natural gas expense	48		47

(1)Represents charges for the period January 1, 2020 until the closing of the sale of the Energy Services Disposal Group.

In the normal course of business prior to June 1, 2020, the Energy Services Disposal Group through CES traded natural gas under supply contracts and entered into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities prior to the closing of the sale of the Energy Services Disposal Group on June 1, 2020, CERC Corp. issued guarantees to certain of CES’s counterparties to guarantee the payment of CES’s obligations.

CenterPoint Energy’s and CERC’s Natural Gas businesses had AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group that expired in March 2021. See Note 15 for further information.

The Infrastructure Services Disposal Group provided pipeline construction and repair services to CenterPoint Energy’s and CERC’s Natural Gas. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by Natural Gas utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the Natural Gas utility. Amounts charged for these services that are not capitalized are included primarily in Operation and maintenance expenses.

Fees incurred by CenterPoint Energy’s and CERC’s Natural Gas reportable segment for pipeline construction and repair services are as follows:


	Year Ended December 31, 2020 (1)
	CenterPoint Energy		CERC
	(in millions)
Pipeline construction and repair services capitalized	$	34	$	—
Pipeline construction and repair service charges in operations and maintenance expense	1		1

(1)Represents charges for the period January 1, 2020 until the closing of the sale of the Infrastructure Services Disposal Group.

(5) Revenue Recognition

In accordance with ASC 606, 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 following tables disaggregate revenues by reportable segment and major source and exclude operating revenues from the Energy Services and Infrastructure Services Disposal Groups, which are reflected as discontinued operations prior to the date of closing of each transaction. See Note 4 for further information.

CenterPoint Energy


	Year Ended December 31, 2022
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	4,095	$	4,969	$	263	$	9,327
Other (1)	13		(23)		4		(6)
Total revenues	$	4,108	$	4,946	$	267	$	9,321

	Year Ended December 31, 2021
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	3,726	$	4,281	$	249	$	8,256
Other (1)	37		55		4		96
Total revenues	$	3,763	$	4,336	$	253	$	8,352


	Year Ended December 31, 2020
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	3,451	$	3,586	$	313	$	7,350
Other (1)	19		45		4		68
Total revenues	$	3,470	$	3,631	$	317	$	7,418

(1)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. Total lease income was $7 million, $7 million and $6 million for each of the years ended December 31, 2022, 2021 and 2020, respectively.

Houston Electric


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Revenue from contracts	$	3,417	$	3,117	$	2,896
Other (1)	(5)		17		15
Total revenues	$	3,412	$	3,134	$	2,911

(1)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. Lease income was not significant for the years ended December 31, 2022, 2021, and 2020.

CERC


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Revenue from contracts	$	4,816	$	4,148	$	3,480
Other (1)	(16)		52		51
Total revenues	$	4,800	$	4,200	$	3,531

(1)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. Lease income was $3 million, $3 million and less than $2 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Revenues from Contracts with Customers

Electric (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. 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, such as the PUCT and the IURC, 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 provided by Houston Electric is recognized upon completion of service based on the tariff rates set by 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 the regulator. Payments are received on a monthly basis. Indiana Electric customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.

Natural Gas (CenterPoint Energy and CERC). CenterPoint Energy and CERC distribute and transport natural gas 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.

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 Consolidated Balance Sheets. As of December 31, 2022, CenterPoint Energy’s contract assets primarily relate to Energy Systems Group contracts where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Consolidated Balance Sheets. On an aggregate basis as of December 31, 2022, CenterPoint Energy’s contract liabilities primarily relate to Energy Systems Group 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 are as follows:

CenterPoint Energy


	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Assets		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2021	$	627	$	513	$	15	$	16
Closing balance as of December 31, 2022	858		764		4		45
Increase (decrease)	$	231	$	251	$	(11)	$	29

The amount of revenue recognized in the year ended December 31, 2022 that was included in the opening contract liability was $15 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, 2021	$	225	$	127	$	4
Closing balance as of December 31, 2022	271		142		2
Increase (decrease)	$	46	$	15	$	(2)

The amount of revenue recognized in the year ended December 31, 2022 that was included in the opening contract liability was $4 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, 2021	$	319	$	335
Closing balance as of December 31, 2022	478		573
Increase	$	159	$	238

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 energy performance and sustainable infrastructure services contracts of Energy Systems Group, which are included in Corporate and Other.


	Rolling 12 Months		Thereafter		Total
	(in millions)
Revenue expected to be recognized on contracts in place as of December 31, 2022:
Corporate and Other	$	288	$	562	$	850
	$	288	$	562	$	850

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.

Allowance for Credit Losses and Bad Debt Expense

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. For a discussion of regulatory deferrals, including those related to COVID-19, see Note 7.

The table below summarizes the Registrants’ bad debt expense amounts for 2022, 2021 and 2020, net of regulatory deferrals, including those related to COVID-19:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Bad debt expense	$	20	$	—	$	17	$	12	$	—	$	10	$	24	$	—	$	21
Bad debt expense deferred as regulatory asset	$	—	$	—	$	—	$	16	$	8	$	8	$	17	$	—	$	16

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

CenterPoint Energy’s goodwill by reportable segment as of both December 31, 2022 and December 31, 2021 is as follows:


	(in millions)

Electric (1)	$	936
Natural Gas (2)	2,920
Corporate and Other	438
Total	$	4,294

CERC’s goodwill has been recast to reflect the Restructuring and as of both December 31, 2022 and December 31, 2021 is as follows:



	(in millions)
Goodwill (2) (3)	$	1,583

(1)Amount presented is net of the accumulated goodwill impairment charge of $185 million recorded in 2020.

(2)Excludes $398 million and $144 million, respectively, of goodwill attributable to the Arkansas and Oklahoma Natural Gas businesses which was reflected on CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets in Current assets held for sale as of December 31, 2021 and disposed following the completion of the sale in January 2022. For further information, see Note 4.

(3)Includes $972 million of goodwill attributable to the businesses transferred in the Restructuring as of both December 31, 2022 and December 31, 2021. See below for a discussion of the goodwill valuation determination.

When the net assets or equity interest transferred in a common-control transaction constitute a business, goodwill is included with the net assets transferred at the parent company’s historical basis. CenterPoint Energy applied a relative fair value methodology to determine the amount of goodwill to allocate to CERC from its natural gas reporting unit as part of the Restructuring.

When a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. As a result, goodwill attributable to the Natural Gas businesses to be disposed is classified as held for sale as of December 31, 2021, and excluded from the table above. Goodwill attributable to MES was reflected in the gain on sale during the year ended December 31, 2021. See Note 4 for goodwill impairments included within discontinued operations.

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 Energy Systems Group, which is a separate reporting unit but included in Corporate and Other at CenterPoint Energy. 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 recorded as an impairment charge, not to exceed the carrying amount of goodwill. See Note 2(g) for further discussion.

CenterPoint Energy and CERC performed the annual goodwill impairment tests in the third quarter of each of 2022 and 2021 and determined that no goodwill impairment charge was required for any reporting unit as a result of those tests.

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. The interim impairment test resulted in a non-cash goodwill impairment charge in the amount of $185 million for a reporting unit, Indiana Electric, within the Electric reportable segment. The fair value analysis resulted in an implied fair value of goodwill of $936 million for this reporting unit as of March 31, 2020, and as a result, the non-cash impairment charge was recorded in the year ended December 31, 2020. CenterPoint Energy estimated the fair value of the Indiana Electric 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 timing of future capital

expenditures and the 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.

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


	December 31, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
	(in millions)
Customer relationships	$	33	$	(16)	$	17	$	33	$	(12)	$	21

Trade names	16		(6)		10		16		(5)		11

Operation and maintenance agreements (1)	12		(2)		10		12		(1)		11
Other	2		(1)		1		2		(1)		1
Total	$	63	$	(25)	$	38	$	63	$	(19)	$	44

(1)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 Statements of Consolidated Income.


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization (1)	$	6	$	6	$	6
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas (2)	1		1		2

(1)Assets held for sale are not amortized. The table reflects amortization on continuing operations. For further information on discontinued operations, see Note 4.

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


	Amortization Expense
	(in millions)
2023	$	6
2024	5
2025	5
2026	5
2027	4

(7) Regulatory Matters

The following is a list of regulatory assets and liabilities, excluding amounts related to the Arkansas and Oklahoma Natural Gas businesses classified as held for sale as of December 31, 2021, reflected on the Registrants’ respective Consolidated Balance Sheets as of December 31, 2022 and 2021. For information about regulatory assets and liabilities in held for sale, see Note 4.


	December 31, 2022
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Regulatory Assets:
Future amounts recoverable from ratepayers related to:
Benefit obligations (1)	$	392	$	—	$	5
Asset retirement obligations & other	237		64		155
Net deferred income taxes	83		34		40
Total future amounts recoverable from ratepayers	712		98		200
Amounts deferred for future recovery related to:
Extraordinary gas costs	1,073		—		1,073
Cost recovery riders	133		—		57
Hurricane and February 2021 Winter Storm Event restoration costs	129		113		16

Other regulatory assets	129		46		67
Gas recovery costs	108		—		108
Decoupling	3		—		3
COVID-19 incremental costs	13		8		5
TEEEF costs	182		182		—
Unrecognized equity return (2)	(54)		(27)		(5)
Total amounts deferred for future recovery	1,716		322		1,324
Amounts currently recovered in customer rates related to:
Authorized trackers and cost deferrals	499		25		369
Securitized regulatory assets	229		229		—
Unamortized loss on reacquired debt and hedging	88		64		12
Gas recovery costs	79		—		30
Extraordinary gas costs	294		—		294
Regulatory assets related to TCJA	47		47		—
Hurricane Harvey restoration costs	30		30		—
Benefit obligations	18		18		—
Unrecognized equity return (3)	(134)		(55)		(49)

Total amounts recovered in customer rates (4)	1,150		358		656
Total Regulatory Assets	$	3,578	$	778	$	2,180
Total Current Regulatory Assets (5)	$	1,385	$	—	$	1,336
Total Non-Current Regulatory Assets	$	2,193	$	778	$	844

Regulatory Liabilities:
Regulatory liabilities related to TCJA	$	1,436	$	716	$	536
Estimated removal costs	1,338		158		1,097
Other regulatory liabilities	496		281		193
Total Regulatory Liabilities	$	3,270	$	1,155	$	1,826
Total Current Regulatory Liabilities (6)	$	25	$	—	$	25
Total Non-Current Regulatory Liabilities	$	3,245	$	1,155	$	1,801


	December 31, 2021
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Regulatory Assets:
Future amounts recoverable from ratepayers related to:
Benefit obligations (1)	$	412	$	—	$	5
Asset retirement obligations & other	240		45		171
Net deferred income taxes	41		29		5
Total future amounts recoverable from ratepayers	693		74		181
Amounts deferred for future recovery related to:
Extraordinary gas costs	1,528		—		1,517
Cost recovery riders	124		—		51
Hurricane and February 2021 Winter Storm Event restoration costs	105		105		—

Other regulatory assets	94		57		37
Gas recovery costs	29		—		29
Decoupling	25		—		25
COVID-19 incremental costs	23		8		15
TEEEF costs	21		21		—
Unrecognized equity return	(28)		(3)		(4)
Total amounts deferred for future recovery	1,921		188		1,670
Amounts currently recovered in customer rates related to:
Authorized trackers and cost deferrals	504		24		363
Securitized regulatory assets	420		420		—
Unamortized loss on reacquired debt and hedging	92		67		11
Gas recovery costs	72		—		59
Extraordinary gas costs	66		—		66
Regulatory assets related to TCJA	48		46		2
Hurricane Harvey restoration costs	43		43		—
Benefit obligations	28		24		4
Unrecognized equity return (3)	(171)		(97)		(47)

Total amounts recovered in customer rates	1,102		527		458
Total Regulatory Assets	$	3,716	$	789	$	2,309
Total Current Regulatory Assets (5)	$	1,395	$	—	$	1,371
Total Non-Current Regulatory Assets	$	2,321	$	789	$	938

Regulatory Liabilities:
Regulatory liabilities related to TCJA	$	1,389	$	738	$	573
Estimated removal costs	1,304		229		994
Other regulatory liabilities	481		205		149
Total Regulatory Liabilities	$	3,174	$	1,172	$	1,716
Total Current Regulatory Liabilities (6)	$	21	$	20	$	1
Total Non-Current Regulatory Liabilities	$	3,153	$	1,152	$	1,715

(1)Pension and postretirement-related regulatory assets balances are measured annually, and the ending amortization period may change based on the actuarial valuation.

(2)Represents the following: (a) CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with investments in Indiana; (b) Houston Electric’s allowed equity return on TEEEF costs and storm restoration costs; and (c) CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas.

(3)Represents the following: (a) CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with investments in Indiana; (b) Houston Electric’s allowed equity return on its true-up balance of stranded costs, other changes and related interest resulting from the formerly integrated electric utilities prior to Texas deregulation to be recovered in rates through 2024 and certain storm restoration balances; and (c) CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas.

(4)Of the $1.2 billion, $358 million and $656 million currently being recovered in customer rates related to CenterPoint Energy, Houston Electric and CERC, respectively, $390 million, $294 million and $96 million is earning a return, respectively. The weighted average recovery period of regulatory assets currently being recovered in base rates, not earning a return, which totals $531 million, $64 million and $424 million for CenterPoint Energy, Houston Electric and CERC, respectively, is 11 years, 28 years and 7 years, respectively. Regulatory assets not earning a return with perpetual or undeterminable lives have been excluded from the weighted average recovery period calculation.

(5)Current regulatory assets for both CenterPoint Energy and CERC include extraordinary gas costs of $1,175 million as of December 31, 2022 and $1,256 million and $1,245 million, respectively, as of December 31, 2021.

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

The table below reflects the amount of allowed equity return recognized by each Registrant in its Statements of Consolidated Income:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	45	$	42	$	2	$	40	$	37	$	2	$	31	$	31	$	—

Indiana Electric Securitization of Planned Generation Retirements (CenterPoint Energy)

The State of Indiana has enacted legislation, Senate Bill 386, that would enable CenterPoint Energy to request approval from the IURC to securitize the remaining book value and removal costs associated with certain generating facilities not more than twenty-four months before the unit is retired. The Governor of Indiana signed the legislation on April 19, 2021. On May 10, 2022, CenterPoint Energy (Indiana Electric) filed an application with the IURC to securitize qualified costs associated with its planned retirements of coal generation facilities. Total qualified costs are estimated at $359 million, of which $350 million would be financed and $9 million are estimated total ongoing costs. A hearing was held before the IURC on September 7, 2022 and a final order was received on January 4, 2023 authorizing the issuance of up to $350 million in securitization bonds. As a result of this order, CenterPoint Energy will reclassify property, plant and equipment to be recovered through securitization to a regulatory asset during the first quarter of 2023.

February 2021 Winter Storm Event

In February 2021, certain of the Registrants’ jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted their businesses. In Texas, the February 2021 Winter Storm Event caused an electricity generation shortage that was severely disruptive to Houston Electric’s service territory and the wholesale generation market. While demand for electricity reached extraordinary levels due to the extreme cold, the supply of electricity significantly decreased in part because of the inability of certain power generation facilities to supply electric power to the grid. Houston Electric does not own or operate any electric generation facilities other than TEEEF. Houston Electric transmits and distributes to customers of REPs electric power that the REPs obtain from power generation facilities owned by third parties. ERCOT serves as the independent system operator and regional reliability coordinator for member electric power systems in most of Texas. To comply with ERCOT’s orders, Houston Electric implemented controlled outages across its service territory, resulting in a substantial number of businesses and residents being without power, many for extended periods of time, in compliance with ERCOT’s directives as an emergency procedure to avoid prolonged large-scale state-wide blackouts and long-term damage to the electric system in Texas. In anticipation of this weather event, Houston Electric implemented its emergency operations plan’s processes and procedures necessary to respond to such events, including establishing an incident command center and calling for mutual assistance from other utilities where needed, among other measures. Throughout the February 2021 Winter Storm Event, Houston Electric remained in contact with its regulators and stakeholders, including federal, state and local officials, as well as the PUCT and ERCOT.

The February 2021 Winter Storm Event also impacted wholesale prices of CenterPoint Energy’s and CERC’s natural gas purchases and their ability to serve customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations,

experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the price of natural gas purchased by CenterPoint Energy and CERC.

On February 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility to record in a regulatory asset the extraordinary expenses associated with the February 2021 Winter Storm Event, including, but not limited to, natural gas cost and other costs related to the procurement and transportation of natural gas supply, subject to recovery in future regulatory proceedings. The Texas governor signed legislation in June 2021 that authorizes the Railroad Commission to use securitization financing and the issuance of customer rate relief bonds for recovery of extraordinary natural gas costs incurred by natural gas utilities as a result of the February 2021 Winter Storm Event. On November 12, 2021, the RRC issued a Regulatory Asset Determination Order which authorized CERC to include $1.1 billion in a regulatory asset which should be included for recovery through customer rate relief bond financing. In addition, CenterPoint Energy’s and CERC’s Natural Gas utilities in jurisdictions outside of Texas deferred under-recovered natural gas cost as regulatory assets under existing recovery mechanisms and are seeking recovery of the increased cost of natural gas. As of December 31, 2022, both CenterPoint Energy and CERC have recorded current regulatory assets of $1,175 million and non-current regulatory assets of $202 million associated with the February 2021 Winter Storm Event. As of December 31, 2021, CenterPoint Energy and CERC have recorded current regulatory assets of $1,410 million and $1,399 million, respectively, of which $154 million related to Arkansas and Oklahoma are reflected as held for sale at both CenterPoint Energy and CERC, and non-current regulatory assets of $583 million and $583 million respectively, of which $244 million related to Arkansas and Oklahoma are reflected as held for sale at both CenterPoint Energy and CERC, associated with the February 2021 Winter Storm Event. See Note 4 for further information.

Amounts for the under recovery of natural gas costs associated with the February 2021 Winter Storm Event are reflected in current and non-current regulatory assets on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. Recovery of natural gas costs within the regulatory assets as of December 31, 2022 is probable and may be subject to customary regulatory prudence reviews in all jurisdictions that may impact the amounts ultimately recovered. CenterPoint Energy and CERC has approximately $75 million of the total $2 billion of natural gas costs incurred during the February 2021 Winter Storm Event remaining under prudence review. CenterPoint Energy and CERC have begun recovery of natural gas costs in Louisiana and Minnesota, and recovery of natural gas costs in Indiana and Mississippi is complete. CenterPoint Energy and CERC have filed for securitization of natural gas costs in Texas, received commission approval and issuance of a financing order in 2022, and expect the Texas Public Financing Authority to issue customer rate relief bonds in first half of 2023. As part of the closing of the sale of CenterPoint Energy’s and CERC’s Natural Gas businesses in Arkansas and Oklahoma, CERC received as part of the purchase price $398 million for unrecovered natural gas costs associated with the February 2021 Winter Storm Event. In Minnesota, testimonies were filed in CERC’s high gas cost prudency review case by intervenors proposing significant disallowances for all natural gas utilities and for CERC, ranging from $45 million to $409 million. The natural gas costs in Minnesota were incurred in accordance with the plan on file with the MPUC and CenterPoint Energy believes the costs were prudently incurred and are eligible for recovery. In May 2022, the administrative law judges reviewing the gas prudency case concluded that CERC acted prudently in connection with the February 2021 Winter Storm Event and recommended no disallowance of CERC’s jurisdictional gas costs incurred during the event. The commissioners of the MPUC heard oral arguments on the administrative law judges’ report and held deliberations in August 2022. At the deliberations, the MPUC generally found that CERC acted prudently, but it determined that CERC could have done more to offset costs with natural gas storage, peak shaving resources (LNG and propane-air) and curtailment of service to interruptible commercial/industrial customers. As a result, the MPUC disallowed recovery of approximately $36 million of the $409 million originally requested and CERC’s regulatory asset balance as of September 30, 2022 was reduced to reflect the disallowance. Other natural gas utilities in Minnesota received disallowances related to similar topics in a similar proportion to their gas costs. Further, the MPUC required all regulated natural gas utilities to make a filing explaining how they can improve or modify their practices to protect ratepayers from extraordinary natural gas price spikes in the future. CERC made its compliance filing on September 15, 2022. On October 19, 2022, the MPUC issued its written order. CERC filed a petition for reconsideration on November 8, 2022 and a written order denying the petition for reconsideration was issued on January 6, 2023.

As of both December 31, 2022 and 2021, as authorized by the PUCT, CenterPoint Energy and Houston Electric recorded a regulatory asset of $8 million for bad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of collateral. Additionally, as of December 31, 2022 and 2021, CenterPoint Energy and Houston Electric recorded a regulatory asset of $16 million and $15 million, respectively, to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.

See Note 15(d) for further information regarding litigation related to the February 2021 Winter Storm Event.

Houston Electric TEEEF

Pursuant to legislation passed in 2021, Houston Electric entered into two leases for TEEEF (mobile generation) which are detailed in Note 20. Houston Electric sought initial recovery of the lease costs for the TEEEF and the operational costs for transportation, mobilization and demobilization, labor and materials for interconnections, fuel for commissioning, testing and operation, purchase and lease of auxiliary equipment, and labor and materials for operations in its 2022 DCRF application. Houston Electric filed its DCRF application with the PUCT on April 5, 2022, and subsequently amended such filing on July 1, 2022 to show mobile generation in a separate Rider TEEEF, seeking recovery of deferred costs and the applicable return as of December 31, 2021 under these lease agreements of approximately $200 million. The annual revenue increase requested for these lease agreements is approximately $57 million. Intervenors in the proceeding filed testimony on September 16, 2022 challenging the acquisition and deployment of TEEEF and have recommended disallowances based on the overall contractual obligations. Houston Electric’s rebuttal testimony was filed on October 5, 2022 responding to intervenor positions, including estimating a financial loss impact ranging from $335 million to $354 million if the PUCT disallows recovery of TEEEF costs and the termination clause under the long-term lease is exercised. The termination clause in the long-term lease agreement, as amended, contains certain provisions that allow Houston Electric to terminate the lease within a specific window effective between October 1, 2022, and December 31, 2023 based upon a material adverse regulatory action. Houston Electric’s exposure to loss in the event of a full disallowance of TEEEF related investments, and assuming Houston Electric is unable to exercise the termination clause prior to its expiration, includes the lease costs deferred as a regulatory asset and finance ROU assets further discussed in Note 20, in addition to the allowed return and other related costs incurred through the date of disallowance. On October 13, 2022, the PUCT staff filed a statement of position recommending a longer amortization period for the short-term lease, deferral of associated rate case expenses to the next base rate proceeding and exclusion of the retail transmission rate class from allocation of TEEEF costs. Houston Electric indicated to the PUCT staff that it did not oppose their recommendations. The PUCT staff also reserved the right to take positions on additional issues after consideration of the evidence admitted into the record at the hearing. A hearing was held on October 18 through 20, 2022. Briefs were filed on November 16, 2022 and reply briefs were filed on December 2, 2022. On January 27, 2023, the administrative law judges issued a proposal for decision recommending that the leasing of the TEEEF was not prudent or reasonable and necessary and that the PUCT deny recovery of all of the TEEEF costs. The PUCT is expected to consider the proposal for decision on March 9, 2023.

Houston Electric defers costs associated with the short-term and long-term leases that are probable of recovery and would otherwise be charged to expense in a regulatory asset, including allowed returns, and determined that such regulatory assets remain probable of recovery as of December 31, 2022. ROU finance lease assets, such as assets acquired under the long-term leases, are evaluated for impairment under the long-lived asset impairment model by assessing if a capital disallowance from a regulator is probable through monitoring the outcome of rate cases and other proceedings. Houston Electric continues to monitor the on-going proceedings and did not record any impairments on its right of use assets in the year ended December 31, 2022 or 2021. See Note 20 for further information.

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, including orders addressing customer non-payment and disconnection. Although the disconnect moratoriums have expired in the Registrants’ service territories, CenterPoint Energy continues to support those customers who may need payment assistance, arrangements or extensions.

On March 26, 2020, 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.

Commissions in all of Indiana Electric’s and CenterPoint Energy’s and CERC’s Natural Gas service territories have either (1) issued orders to record a regulatory asset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of disconnections and payment plans or (2) provided authority to recover bad debt expense through an existing tracking mechanism. Both CenterPoint Energy and CERC have recorded estimated incremental uncollectible receivables to the associated regulatory asset of $17 million as of December 31, 2022, and $29 million and $28 million, respectively, as of December 31, 2021.

In some of the states in which the Registrants operate, public utility commissions have authorized utilities to employ deferred accounting authority for certain COVID-19 related costs which ensure the safety and health of customers, employees, and contractors, that would not have been incurred in the normal course of business. CERC’s Natural Gas service territory in Minnesota will include any offsetting savings in the deferral. Other jurisdictions where the Registrants operate may require

them to offset the deferral with savings as well. The Mississippi RRA, approved by final order dated August 2, 2022, included the unamortized balance of the regulatory asset as of December 31, 2021 in rate base per Docket No. 2018-AD-141 Order Authorizing Utility Response and Accounting for COVID-19. The Minnesota general rate case filing, approved by written order on September 23, 2022, included a request to recover the COVID-19 regulatory asset balance as of June 30, 2021 over a two-year amortization period. The Louisiana RSP’s requested recovery of COVID-19 regulatory assets over a one-year period concurrent with RSP implementation.

(8) Stock-Based Incentive Compensation Plans and Employee Benefit Plans

(a) Stock-Based Incentive Compensation Plans (CenterPoint Energy)

CenterPoint Energy has LTIPs that provide for the issuance of stock-based incentives, including stock options, performance awards, restricted stock unit awards and restricted and unrestricted stock awards to officers, employees and non-employee directors. Approximately 30 million shares of Common Stock are authorized under these plans for awards. CenterPoint Energy issues new shares of its Common Stock to satisfy stock-based payments related to LTIPs. Equity awards are granted to employees without cost to the participants.

Compensation costs for the performance and stock unit awards granted under LTIPs are measured using fair value and expected achievement levels on the grant date. For performance awards with operational goals, the achievement levels are revised as goals are evaluated. The fair value of awards granted to employees is based on the closing stock price of CenterPoint Energy’s Common Stock on the grant date. The compensation expense is recorded on a straight-line basis over the vesting period. Forfeitures are estimated on the date of grant based on historical averages and estimates are updated periodically throughout the vesting period.

The performance awards granted in 2022, 2021 and 2020 are distributed based upon the achievement of certain objectives over a three-year performance cycle. The stock unit awards granted in 2020 are service based, and the stock unit awards granted in 2022 and 2021 are service based, subject to the achievement of a performance goal. The stock unit awards generally vest at the end of a three-year period, provided, however, that stock unit awards granted to non-employee directors vested immediately upon grant. Upon vesting, shares under the performance and stock unit awards are issued to the participants along with the value of dividend equivalents earned over the performance cycle or vesting period.

The following table summarizes CenterPoint Energy’s expenses related to LTIPs for 2022, 2021 and 2020:


	Year Ended December 31,
	2022		2021		2020
	(in millions)
LTIP compensation expense (1)	$	51	$	48	$	38
Income tax benefit recognized	12		11		9
Actual tax benefit realized for tax deductions	6		4		5

(1)Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income and shown prior to any amounts capitalized.

The following tables summarize CenterPoint Energy’s LTIP activity for 2022


	Year Ended December 31, 2022
	Shares (Thousands)	Weighted-Average Grant Date Fair Value		Remaining Average Contractual Life (Years)	Aggregate Intrinsic Value (2) (Millions)
Performance Awards (1)
Outstanding and nonvested as of December 31, 2021	4,663	$	24.48
Granted	1,781	28.12
Forfeited or canceled	(856)	29.92
Vested and released to participants	(431)	31.20
Outstanding and nonvested as of December 31, 2022	5,157	$	24.26	1.0	$	106

Stock Unit Awards
Outstanding and nonvested as of December 31, 2021	2,367	$	24.75
Granted	441	28.44
Forfeited or canceled	(60)	24.98
Vested and released to participants	(452)	28.35
Outstanding and nonvested as of December 31, 2022	2,296	$	25.03	0.9	$	69

(1)Reflects maximum performance achievement.

(2)Reflects the impact of current expectations of achievement and stock price.

The weighted average grant date fair values per unit of awards granted were as follows for 2022, 2021 and 2020:


	Year Ended December 31,
	2022		2021		2020
	(in millions, except for per unit amounts)
Performance Awards
Weighted-average grant date fair value per unit of awards granted	$	28.12	$	21.89	$	23.82
Total intrinsic value of awards received by participants	13		7		9
Vested grant date fair value	13		8		9

Stock Unit Awards
Weighted-average grant date fair value per unit of awards granted	$	28.44	$	24.20	$	21.53
Total intrinsic value of awards received by participants	14		11		12
Vested grant date fair value	13		11		12

As of December 31, 2022, there was $50 million of total unrecognized compensation cost related to nonvested performance and stock unit awards which is expected to be recognized over a weighted-average period of 1.6 years.

(b) Pension Benefits (CenterPoint Energy)

CenterPoint Energy maintains a non-contributory qualified defined benefit pension plan covering eligible employees, with benefits determined using a cash balance formula. In addition to the non-contributory qualified defined benefit pension plan, CenterPoint Energy maintains unfunded non-qualified benefit restoration plans which allow participants to receive the benefits to which they would have been entitled under CenterPoint Energy’s non-contributory qualified pension plan except for federally mandated limits on qualified plan benefits or on the level of compensation on which qualified plan benefits may be calculated.

As a result of the Merger, CenterPoint Energy now also maintains three additional qualified defined benefit pension plans, two of which are closed to new participants and one of which is completely frozen, and a non-qualified supplemental retirement plan. The defined benefit pension plans cover eligible full-time regular employees and retirees of Vectren and are primarily non-contributory.

In December 2022, the CenterPoint Energy pension plan completed an annuity lift-out, a transaction that provided for the purchase of an irrevocable group annuity contract to fund pension plan annuities of retirees from previously divested

businesses, as part of a de-risking strategy. This annuity lift-out reduced the plan’s pension obligation by $138 million and plan assets by $136 million which were transferred to an insurance company. The $138 million transferred benefit obligation represented 9.4% of CenterPoint Energy’s total benefit obligation as of its last remeasurement prior to the transaction. As a result of this transaction: CenterPoint Energy incurred a settlement charge of $47 million; CenterPoint Energy was relieved of all responsibility for these pension obligations’ and an insurance company is now required to pay and administer the retirement benefits owed to 1,119 retirees and beneficiaries, with no changes to the amount, timing or form of retirement benefit payments.

CenterPoint Energy’s net periodic cost includes the following components relating to pension, including the non-qualified benefit plans:


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Service cost (1)	$	29	$	39	$	43
Interest cost (2)	73		59		75
Expected return on plan assets (2)	(87)		(103)		(112)

Amortization of net loss (2)	31		36		41
Settlement cost (2) (3)	126		38		2

Net periodic cost	$	172	$	69	$	49

(1)Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income, net of regulatory deferrals and amounts capitalized.

(2)Amounts presented in the table above are included in Other, net in CenterPoint Energy’s 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. In 2022, 2021 and 2020, CenterPoint Energy recognized non-cash settlement cost due to lump sum settlement payments. The transfer of assets related to the 2022 Annuity Lift-Out is considered a lump sum settlement payment.

CenterPoint Energy used the following assumptions to determine net periodic cost relating to pension benefits:


	Year Ended December 31,
	2022		2021		2020
Discount rate	2.80	%	2.45	%	3.20	%
Expected return on plan assets	5.00		5.00		5.75
Rate of increase in compensation levels	4.95		5.05		4.95

In determining net periodic benefit cost, CenterPoint Energy uses fair value, as of the beginning of the year, as its basis for determining expected return on plan assets.

The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in the Consolidated Balance Sheets as well as the key assumptions of CenterPoint Energy’s pension plans. The measurement dates for plan assets and obligations were December 31, 2022 and 2021.


	December 31,
	2022			2021
	(in millions, except for actuarial assumptions)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	2,298		$	2,507

Service cost	29			38
Interest cost	73			59

Benefits paid (4)	(509)			(285)
Actuarial (gain) loss (1)	(338)			(22)


Plan amendment	—			1



Benefit obligation, end of year	1,553			2,298
Change in Plan Assets
Fair value of plan assets, beginning of year	2,072			2,135

Employer contributions	35			61

Benefits paid (4)	(509)			(285)

Actual investment return	(386)			161

Fair value of plan assets, end of year	1,212			2,072
Funded status, end of year	$	(341)		$	(226)

Amounts Recognized in Balance Sheets
Non-current assets	$	—		$	6
Current liabilities-other	(7)			(7)
Other liabilities-benefit obligations	(334)			(225)
Net liability, end of year	$	(341)		$	(226)
Actuarial Assumptions
Discount rate (2)	5.15		%	2.80		%
Expected return on plan assets (3)	6.50			5.00
Rate of increase in compensation levels	4.99			4.95
Interest crediting rate	3.00			2.25

(1)Significant sources of gain for 2022 include the increase in discount rate from 2.80% to 5.15%, partially offset by significant sources of loss that include expected return on assets exceeding actual return on plan assets during 2022.

(2)The discount rate assumption was determined by matching the projected cash flows of CenterPoint Energy’s plans against a hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from one-half to 99 years.

(3)The expected rate of return assumption was developed using the targeted asset allocation of CenterPoint Energy’s plans and the expected return for each asset class.

(4)Benefits paid for 2022 includes $136 million related to the 2022 Annuity Lift-Out.

The following table displays pension benefits related to CenterPoint Energy’s pension plans that have accumulated benefit obligations in excess of plan assets:


	December 31,
	2022				2021
	Pension (Qualified)		Pension (Non-qualified)		Pension (Qualified)		Pension (Non-qualified)
	(in millions)
Accumulated benefit obligation	$	1,497	$	51	$	2,216	$	62
Projected benefit obligation	1,502		51		2,237		62
Fair value of plan assets	1,212		—		2,072		—

The accumulated benefit obligation for all defined benefit pension plans on CenterPoint Energy’s Consolidated Balance Sheets was $1,548 million and $2,278 million as of December 31, 2022 and 2021, respectively.

(c) Postretirement Benefits

CenterPoint Energy provides certain healthcare and life insurance benefits for eligible retired employees on both a contributory and non-contributory basis. The Registrants’ employees (other than employees of Vectren and its subsidiaries) who were hired before January 1, 2018 and who have met certain age and service requirements at retirement, as defined in the plans, are eligible to participate in these benefit plans, provided, however, that life insurance benefits are available only for eligible retired employees who retired before January 1, 2022. Employees hired on or after January 1, 2018 are not eligible for these benefits, except that such employees represented by IBEW Local Union 66 are eligible to participate in certain of the benefits, subject to the applicable age and service requirements. With respect to retiree medical and prescription drug benefits, and, effective January 1, 2021, dental and vision benefits, employees represented by the IBEW Local Union 66 who retire on or after January 1, 2017, and their dependents, receive any such benefits exclusively through the NECA/IBEW Family Medical Care Plan pursuant to the terms of the applicable collective bargaining agreement. Houston Electric and CERC are required to fund a portion of their obligations in accordance with rate orders. All other obligations are funded on a pay-as-you-go basis.

CenterPoint Energy, through Vectren, also maintains a postretirement benefit plan that 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.

Postretirement benefits are accrued over the active service period of employees. The net postretirement benefit cost includes the following components:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Service cost (1)	$	2	$	—	$	1	$	2	$	—	$	1	$	2	$	—	$	1
Interest cost (2)	9		4		3		9		4		3		11		5		4
Expected return on plan assets (2)	(5)		(4)		(1)		(4)		(3)		(1)		(5)		(4)		(1)
Amortization of prior service cost (credit) (2)	(3)		(4)		2		(4)		(5)		1		(4)		(5)		1
Amortization of net loss (2)	(4)		(2)		(1)		—		—		—		—		—		—

Net postretirement benefit cost (credit)	$	(1)	$	(6)	$	4	$	3	$	(4)	$	4	$	4	$	(4)	$	5

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

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

The following assumptions were used to determine net periodic cost relating to postretirement benefits:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
Discount rate	2.85	%	2.85	%	2.85	%	2.50	%	2.50	%	2.50	%	3.25	%	3.25	%	3.25	%
Expected return on plan assets	3.22		3.32		2.86		3.20		3.30		2.85		3.95		4.05		3.35

The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in consolidated balance sheets and the key assumptions of the postretirement plans. The measurement dates for plan assets and benefit obligations were December 31, 2022 and 2021.


	December 31,
	2022									2021
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions, except for actuarial assumptions)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	336		$	148		$	118		$	366		$	168		$	122
Service cost	2			—			1			2			—			1
Interest cost	9			4			3			9			4			3
Participant contributions	6			2			3			7			2			3
Benefits paid	(20)			(7)			(8)			(21)			(9)			(8)
Early Retiree Reinsurance Program	—			—			—			20			—			11
Plan amendment	3			—			2			—			5			—
Actuarial (gain) loss (1)	(73)			(32)			(27)			(47)			(22)			(14)

Benefit obligation, end of year	263			115			92			336			148			118
Change in Plan Assets
Fair value of plan assets, beginning of year	132			104			29			134			106			28

Employer contributions	8			1			4			7			1			4
Participant contributions	6			2			3			7			2			3
Benefits paid	(20)			(7)			(8)			(21)			(9)			(8)
Actual investment return	(17)			(16)			(3)			5			4			2

Fair value of plan assets, end of year	109			84			25			132			104			29
Funded status, end of year	$	(154)		$	(31)		$	(67)		$	(204)		$	(44)		$	(89)
Amounts Recognized in Balance Sheets
Current liabilities — other	$	(7)		$	—		$	(4)		$	(7)		$	—		$	(4)
Other liabilities — benefit obligations	(147)			(31)			(64)			(197)			(44)			(85)
Net liability, end of year	$	(154)		$	(31)		$	(68)		$	(204)		$	(44)		$	(89)

Actuarial Assumptions
Discount rate (2)	5.15		%	5.15		%	5.15		%	2.85		%	2.85		%	2.85		%
Expected return on plan assets (3)	3.66			3.75			3.35			3.22			3.32			2.86
Medical cost trend rate assumed for the next year - Pre-65	6.50			6.50			6.50			6.00			6.00			6.00
Medical/prescription drug cost trend rate assumed for the next year - Post-65	23.66			23.66			23.66			18.71			18.71			18.71
Prescription drug cost trend rate assumed for the next year - Pre-65	8.00			8.00			8.00			8.00			8.00			8.00
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.50			4.50			4.50			4.50			4.50			4.50
Year that the cost trend rates reach the ultimate trend rate - Pre-65	2032			2032			2032			2029			2029			2029
Year that the cost trend rates reach the ultimate trend rate - Post-65	2032			2032			2032			2030			2030			2030

(1)Significant sources of gain for 2022 include updated life insurance rates and the increase in discount rate from 2.85% to 5.15%, offset by significant sources of loss including an increase in crediting rate and updated claims.

(2)The discount rate assumption was determined by matching the projected cash flows of the plans against a hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from one-half to 99 years.

(3)The expected rate of return assumption was developed using the targeted asset allocation of the plans and the expected return for each asset class.

(d) Accumulated Other Comprehensive Income (Loss) (CenterPoint Energy and CERC)

CenterPoint Energy recognizes the funded status of its pension and other postretirement plans on its Consolidated Balance Sheets. To the extent this obligation exceeds amounts previously recognized in the Statements of Consolidated Income, CenterPoint Energy records a regulatory asset for that portion related to its rate regulated utilities. To the extent that excess liability does not relate to a rate regulated utility, the offset is recorded as a reduction to equity in accumulated other comprehensive income.

Amounts recognized in accumulated other comprehensive loss (gain) consist of the following:


	December 31,
	2022						2021
	Pension Benefits		Postretirement Benefits				Pension Benefits		Postretirement Benefits
	CenterPoint Energy		CenterPoint Energy		CERC		CenterPoint Energy		CenterPoint Energy		CERC
	(in millions)
Unrecognized actuarial loss (gain)	$	70	$	(36)	$	(28)	$	99	$	(23)	$	(18)
Unrecognized prior service cost	—		13		11		—		13		12

Net amount recognized in accumulated other comprehensive loss (gain)	$	70	$	(23)	$	(17)	$	99	$	(10)	$	(6)

The changes in plan assets and benefit obligations recognized in other comprehensive income during 2022 are as follows:


	Pension Benefits		Postretirement Benefits
	CenterPoint Energy		CenterPoint Energy		CERC
	(in millions)
Net loss (gain)	$	45	$	(13)	$	(16)
Amortization of net loss	(7)		(1)		(1)
Amortization of prior service cost	—		1		1
Settlement	(67)		—		—

Total recognized in comprehensive income	$	(29)	$	(13)	$	(16)
Total recognized in net periodic costs and Other comprehensive income	$	142	$	(19)	$	(15)

(e) Pension Plan Assets (CenterPoint Energy)

In managing the investments associated with the benefit plans, CenterPoint Energy’s objective is to achieve and maintain a fully funded plan. This objective is expected to be achieved through an investment strategy that manages liquidity requirements while maintaining a long-term horizon in making investment decisions and efficient and effective management of plan assets.

As part of the investment strategy discussed above, CenterPoint Energy maintained the following weighted average allocation targets for its pension plans as of December 31, 2022:


	Minimum		Maximum
U.S. equity	17	%	27	%
International equity	9	%	19	%
Real estate	2	%	11	%
Fixed income	54	%	64	%
Cash	—	%	2	%

The following tables set forth by level, within the fair value hierarchy (see Note 10), CenterPoint Energy’s pension plan assets at fair value as of December 31, 2022 and 2021:


	Fair Value Measurements as of December 31,
	2022								2021
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Cash	$	7	$	—	$	—	$	7	$	26	$	—	$	—	$	26
Corporate bonds:
Investment grade or above	—		467		—		467		—		833		—		833
Equity securities:

U.S. companies	29		—		—		29		89		—		—		89
Cash received as collateral from securities lending	47		—		—		47		80		—		—		80

U.S. treasuries and government agencies	163		—		—		163		285		—		—		285
Mortgage backed securities	—		6		—		6		—		7		—		7
Asset backed securities	—		2		—		2		—		3		—		3
Municipal bonds	—		24		—		24		—		40		—		40
Mutual funds (2)	—		—		—		—		—		—		—		—
International government bonds	—		10		—		10		—		20		—		20

Obligation to return cash received as collateral from securities lending	(47)		—		—		(47)		(80)		—		—		(80)
Total investments at fair value	$	199	$	509	$	—	$	708	$	400	$	903	$	—	$	1,303
Investments measured by net asset value per share or its equivalent (1) (2)							504								769
Total Investments							$	1,212							$	2,072

(1)Represents investments in pooled investment funds and common collective trust funds.

(2)The amounts invested in pooled investment funds were allocated to real estate. The amounts invested common collective trust funds were allocated as follows:


	As of December 31,
	2022		2021
	Common Collective Trust Funds		Common Collective Trust Funds
International equities	40	%	41	%
U.S. equities	56	%	58	%

Fixed income	4	%	1	%

Level 2 investments, which do not have a quoted price in active market, are valued using the market data provided by independent pricing services or major market makers, to arrive at a price a dealer would pay for the security.

The pension plans utilized both exchange traded and over-the-counter financial instruments such as futures, interest rate options and swaps that were marked to market daily with the gains/losses settled in the cash accounts. The pension plans did not include any holdings of CenterPoint Energy Common Stock as of December 31, 2022 or 2021.

(f) Postretirement Plan Assets

In managing the investments associated with the postretirement plans, the Registrants’ primary objective is to preserve and improve the funded status of the plan, while minimizing volatility. This objective is expected to be achieved through an investment strategy that manages liquidity requirements while maintaining a long-term horizon in making investment decisions and efficient and effective management of plan assets.

As part of the investment strategy discussed above, the Registrants maintained the following weighted average allocation targets for the postretirement plans as of December 31, 2022:


	CenterPoint Energy				Houston Electric				CERC
	Minimum		Maximum		Minimum		Maximum		Minimum		Maximum
U.S. equities	13	%	23	%	13	%	23	%	15	%	25	%
International equities	3	%	13	%	3	%	13	%	2	%	12	%
Fixed income	69	%	79	%	69	%	79	%	68	%	78	%
Cash	—	%	2	%	—	%	2	%	—	%	2	%

The following table presents mutual funds by level, within the fair value hierarchy, the Registrants’ postretirement plan assets at fair value as of December 31, 2022 and 2021:


	Fair Value Measurements as of December 31,
	2022								2021
	Mutual Funds
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
CenterPoint Energy	$	109	$	—	$	—	$	109	$	133	$	—	$	—	$	133
Houston Electric	84		—		—		84		105		—		—		105
CERC	25		—		—		25		28		—		—		28

The amounts invested in mutual funds were allocated as follows:


	As of December 31,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
Fixed income	74	%	74	%	74	%	72	%	73	%	71	%
U.S. equities	18	%	17	%	20	%	20	%	19	%	22	%
International equities	8	%	8	%	6	%	8	%	8	%	7	%

(g) Benefit Plan Contributions

The Registrants made the following contributions in 2022 and are required to make the following minimum contributions in 2023 to the indicated benefit plans below:


	Contributions in 2022						Expected Minimum Contributions in 2023
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Qualified pension plans	$	27	$	—	$	—	$	—	$	—	$	—
Non-qualified pension plans	8		—		—		7		—		—
Postretirement benefit plans	8		1		4		8		1		4

The following benefit payments are expected to be paid by the pension and postretirement benefit plans:


	Pension Benefits		Postretirement Benefits
	CenterPoint Energy		CenterPoint Energy		Houston Electric		CERC
	(in millions)
2023	$	134	$	15	$	6	$	6
2024	138		17		7		6
2025	137		18		8		6
2026	134		19		9		7
2027	134		20		9		7
2028-2032	608		106		49		35

(h) Savings Plan

CenterPoint Energy maintains the CenterPoint Energy Savings Plan, a tax-qualified employee savings plan that includes a cash or deferred arrangement under Section 401(k) of the Code, and an employee stock ownership plan under Section 4975(e)(7) of the Code. Under the plan, participating employees may make pre-tax or Roth contributions and, if eligible, after-tax contributions up to certain federally mandated limits. Participating Registrants provide matching contributions and, as of January 1, 2020, for certain eligible employees, nonelective contributions up to certain limits. CenterPoint Energy, through the Merger, also acquired additional defined contribution retirement savings plans sponsored by Vectren and its subsidiaries that are qualified under sections 401(a) and 401(k) of the Code, one of which merged into the CenterPoint Energy Savings Plan as of January 1, 2020 and one of which merged into the CenterPoint Energy Savings Plan as of January 1, 2022. As of January 1, 2022, the CenterPoint Energy Savings Plan is the only remaining qualified defined contribution retirement savings plan maintained by CenterPoint Energy.

The CenterPoint Energy Savings Plan has significant holdings of Common Stock. As of December 31, 2022, 7,335,725 shares of Common Stock were held by the savings plan, which represented approximately 9% of its investments. Given the concentration of the investments in Common Stock, the savings plan and its participants have market risk related to this investment. The savings plan limits the percentage of future contributions that can be invested in Common Stock to 25% and prohibits transfers of account balances where the transfer would result in more than 25% of a participant’s total account balance invested in Common Stock.

CenterPoint Energy allocates the savings plan benefit expense to Houston Electric and CERC related to their respective employees. The following table summarizes the Registrants’ savings plan benefit expense for 2022, 2021 and 2020:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Savings plan benefit expenses (1)	$	72	$	23	$	22	$	58	$	20	$	23	$	58	$	18	$	25

(1)Amounts presented in the table above are included in Operation and maintenance expense in the Registrants’ respective Statements of Consolidated Income and shown prior to any amounts capitalized.

(i) Other Benefits Plans

The Registrants participate in CenterPoint Energy’s plans that provide postemployment benefits for certain former or inactive employees, their beneficiaries and covered dependents, after employment but before retirement (primarily healthcare and life insurance benefits for participants in the long-term disability plan).

CenterPoint Energy maintains non-qualified deferred compensation plans that provide benefits payable to eligible directors, officers and select employees or their designated beneficiaries at specified future dates or upon termination, retirement or death. Benefit payments are made from the general assets of the participating Registrants or, in the case of certain plans, from a rabbi trust that is a grantor trust and remains subject to the claims of general creditors under applicable state and federal law.

Expenses related to other benefit plans were recorded as follows:


	Year Ended December 31,
	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Postemployment benefits	$	4	$	1	$	1	$	3	$	1	$	2	$	1	$	1	$	—
Deferred compensation plans	1		—		—		3		—		—		4		1		—

Amounts related to other benefit plans were included in Benefit Obligations in the Registrants’ accompanying Consolidated Balance Sheets as follows:


	December 31, 2022						December 31, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Postemployment benefits	$	9	$	3	$	4	$	8	$	3	$	5
Deferred compensation plans	28		4		1		40		6		4
Split-dollar life insurance arrangements	22		1		—		29		1		—

(j) Change in Control Agreements and Other Employee Matters

CenterPoint Energy has a change in control plan, which was amended and restated on May 1, 2017. The plan generally provides, to the extent applicable, in the case of a change in control of CenterPoint Energy and covered termination of employment, for severance benefits of up to three times annual base salary plus bonus, and other benefits. Certain CenterPoint Energy officers are participants under the plan.

Certain key employees of a subsidiary of Vectren have employment agreements that provide payments and other benefits upon a covered termination of employment.

As of December 31, 2022, the Registrants’ employees were covered by collective bargaining agreements as follows:


		Percentage of Employees Covered
	Agreement Expiration	CenterPoint Energy		Houston Electric		CERC
IBEW Local 66	May 2023	16	%	54	%	—	%
OPEIU Local 12	December 2025	2	%	—	%	2	%
Gas Workers Union Local 340	April 2025	5	%	—	%	13	%
IBEW Locals 1393 and USW Locals 12213 & 7441	December 2023	3	%	—	%	8	%
IBEW Locals 949	December 2025	3	%	—	%	8	%
USW Locals 13-227	June 2027	6	%	—	%	14	%
USW Locals 13-1	July 2027	—	%	—	%	1	%
IBEW Local 702	June 2025	3	%	—	%	—	%
Teamsters Local 135/215	September 2024	—	%	—	%	—	%
UWUA Local 175	October 2024	1	%	—	%	4	%
Total		39	%	54	%	50	%

The collective bargaining agreements with IBEW 1393, USW 12213, USW 7441 related to Natural Gas employees are scheduled to expire in December 2023 and the collective bargaining agreement with IBEW 66 related to Houston Electric employees is scheduled to expire in May 2023; negotiations of these agreements are expected to be completed before the respective expirations.

Board of Directors Actions. On July 22, 2021, CenterPoint Energy announced the decision of the independent directors of the Board to implement a new independent Board leadership and governance structure and appointed a new independent chair

of the Board. To implement this new governance structure, the independent directors of the Board eliminated the Executive Chairman position that was formerly held by Milton Carroll.

On the approval and recommendation of the Compensation Committee and approval of the Board (acting solely through its independent directors), CenterPoint Energy entered into a separation agreement between CenterPoint Energy and Mr. Carroll, dated July 21, 2021. Under the terms of the separation agreement, Mr. Carroll exited the positions of Executive Chairman on July 21, 2021 and Board member on September 30, 2021. Under the terms of the separation agreement, Mr. Carroll received a lump sum cash payment of $28 million and his separation was treated as an “enhanced retirement” for purposes of his outstanding 2019, 2020 and 2021 equity award agreements.

On the approval and recommendation of the Compensation Committee and approval of the Board (acting solely through its independent directors), CenterPoint Energy has entered into a retention incentive agreement with David J. Lesar, President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. For information about the classification of this award, see Note 12.

(9) 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.

(a) Non-Trading Activities

Commodity Derivative Instruments (CenterPoint Energy and CERC). CenterPoint Energy and CERC, through their Indiana utilities, enter into certain derivative instruments to mitigate the effects of commodity price movements. 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 12.

The table below summarizes CenterPoint Energy’s outstanding interest rate hedging activity:


	December 31, 2022		December 31, 2021
Hedging Classification	Notional Principal
	(in millions)
Economic hedge (1)	$	84		$	84

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

Weather Hedges (CenterPoint Energy and CERC). As of December 31, 2022, CenterPoint Energy and CERC had weather normalization or other rate mechanisms that largely mitigate the impact of weather on Natural Gas in Indiana, Louisiana, Mississippi, Minnesota and Ohio, as applicable. CenterPoint Energy’s and CERC’s Natural Gas 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 Natural Gas 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 Natural Gas’ results in Texas and on CenterPoint Energy’s electric operations’ results in its Texas and Indiana service territories. Houston Electric and Indiana Electric do not enter into weather hedges. CenterPoint Energy and CERC did not enter into any weather hedges during the year ended December 31, 2022.

(b) Derivative Fair Values and Income Statement Impacts (CenterPoint Energy and CERC)

The following tables present information about derivative instruments and hedging activities. The first table provides a balance sheet overview of Derivative Assets and Liabilities as of December 31, 2022 and 2021, while the last table provides a breakdown of the related income statement impacts for the years ending December 31, 2022, 2021 and 2020.

Fair Value of Derivative Instruments and Hedged Items (CenterPoint Energy and CERC)

CenterPoint Energy


		December 31, 2022				December 31, 2021
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
		(in millions)






Derivatives not designated as hedging instruments:
Natural gas derivatives (1)	Current Assets: Non-trading derivative assets	$	9	$	—	$	9	$	—
Interest rate derivatives	Current Assets: Non-trading derivative assets	1		—		—		—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	2		—		5		—

Interest rate derivatives	Current Liabilities: Non-trading derivative liabilities	—		—		—		2

Interest rate derivatives	Other Liabilities: Non-trading derivative liabilities	—		—		—		12
Indexed debt securities derivative (2)	Current Liabilities	—		578		—		903
	Total	$	12	$	578	$	14	$	917

CERC


		December 31, 2022				December 31, 2021
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value




Derivatives not designated as hedging instruments:		(in millions)
Natural gas derivatives (1)	Current Assets: Non-trading derivative assets	$	7	$	—	$	8	$	—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	2		—		4		—






Total		$	9	$	—	$	12	$	—

(1)Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. However, the mark-to-market fair value of each natural gas contract is in an asset position with no offsetting amount.

(2)Derivative component of the ZENS obligation that represents the ZENS holder’s option to receive the appreciated value of the reference shares at maturity. See Note 11 for further information.

Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy)


		Year Ended December 31,
	Income Statement Location	2022		2021		2020
		(in millions)
Effects of derivatives not designated as hedging instruments on the income statement:
Indexed debt securities derivative	Gain (loss) on indexed debt securities	$	325	$	50	$	(60)

Total CenterPoint Energy		$	325	$	50	$	(60)

(c) Credit Risk Contingent Features (CenterPoint Energy)

Certain of CenterPoint Energy’s derivative instruments contain provisions that require CenterPoint Energy’s debt to maintain an investment grade credit rating on its long-term unsecured unsubordinated debt from S&P and Moody’s. If CenterPoint Energy’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment.


	As of December 31,
	2022		2021
	(in millions)
Aggregate fair value of derivatives with credit-risk-related contingent features in a liability position	$	—	$	14
Fair value of collateral already posted	—		7
Additional collateral required to be posted if credit risk contingent features triggered (1)	—		7

(1)The maximum collateral required if further escalating collateral is triggered would equal the net liability position.

(10) Fair Value Measurements

Assets and liabilities that are recorded at fair value in the Registrants’ 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, and inputs other than quoted prices that are observable for the asset or liability. 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.

The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis and recognize transfers between levels 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 December 31, 2022 and December 31, 2021, and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.

CenterPoint Energy


	December 31, 2022						December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Equity securities	$	510	$	—	$	—	$	510	$	1,439	$	—	$	—	$	1,439
Investments, including money market funds (1)	32		—		—		32		42		—		—		42
Interest rate derivatives	—		1		—		1		—		—		—		—
Natural gas derivatives	—		11		—		11		—		14		—		14


Total assets	$	542	$	12	$	—	$	554	$	1,481	$	14	$	—	$	1,495

Liabilities
Indexed debt securities derivative	$	—	$	578	$	—	$	578	$	—	$	903	$	—	$	903
Interest rate derivatives	—		—		—		—		—		14		—		14



Total liabilities	$	—	$	578	$	—	$	578	$	—	$	917	$	—	$	917

Houston Electric


	December 31, 2022						December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Investments, including money market funds (1)	$	17	$	—	$	—	$	17	$	27	$	—	$	—	$	27

Total assets	$	17	$	—	$	—	$	17	$	27	$	—	$	—	$	27

CERC


	December 31, 2022						December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)

Investments, including money market funds (1)	$	14	$	—	$	—	$	14	$	14	$	—	$	—	$	14
Natural gas derivatives	—		9		—		9		—		12		—		12


Total assets	$	14	$	9	$	—	$	23	$	14	$	12	$	—	$	26

(1)Amounts are included in Prepaid and Other Current Assets in the respective Consolidated Balance Sheets.

During 2022 and 2021, CenterPoint Energy did not have any assets or liabilities designated as Level 3.

Items Measured at Fair Value on a Nonrecurring Basis

For a discussion of the valuation of the Arkansas and Oklahoma Natural Gas businesses in 2021, CenterPoint Energy’s investment in Enable and the Infrastructure Services and Energy Services Disposal Groups in 2020, see Note 4.

For a discussion of goodwill impairment charges, see Note 6.

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 equity securities, including ZENS related derivative liabilities, 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’ Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.


	December 31, 2022						December 31, 2021
	CenterPoint Energy (1)		Houston Electric (1)		CERC		CenterPoint Energy (1)		Houston Electric (1)		CERC
Long-term debt, including current maturities	(in millions)


Carrying amount	$	16,338	$	6,353	$	4,826	$	16,086	$	5,495	$	5,552
Fair value	14,990		5,504		4,637		17,385		6,230		5,999

(1)Includes Securitization Bond debt.

(11) Equity Securities and Indexed Debt Securities (ZENS) (CenterPoint Energy)

(a) Equity Securities

During February and March 2022, CenterPoint Energy completed the execution of its previously announced plan to exit the midstream sector by selling the remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units it held as discussed below. CenterPoint Energy used the proceeds from these sales to redeem outstanding debt and pay incurred expenses associated with the early redemptions. See Note 13 for further information.

CenterPoint Energy’s sales of equity securities during the year ended December 31, 2022 are as follows:


Equity Security/Date Sold	Units Sold	Proceeds (1)
		(in millions)
Energy Transfer Common Units
February and March 2022	50,999,768	$	515
Energy Transfer Series G Preferred Units
March 2022	192,390	$	187

(1)Proceeds are net of transaction costs.

Gains and losses on equity securities, net of transaction costs, are recorded as Gain (Loss) on Equity Securities in CenterPoint Energy’s Statements of Consolidated Income.


	Gains (Losses) on Equity Securities
	Year Ended December 31,
	2022		2021		2020
			(in millions)
AT&T Common	$	(63)	$	(43)	$	(105)
Charter Common	(273)		(8)		154
WBD Common	23		—		—
Energy Transfer Common Units	95		(124)		—
Energy Transfer Series G Preferred Units	(9)		2		—
Other	—		1		—
	$	(227)	$	(172)	$	49

CenterPoint Energy recorded unrealized gains (losses) of $(313) million, $(52) million, and $49 million for the years ended December 31, 2022, 2021, and 2020, respectively, for equity securities held as of December 31, 2022, 2021, and 2020.

CenterPoint Energy and its subsidiaries hold shares of certain securities detailed in the table below, which are classified as trading securities. Shares of AT&T Common, Charter Common and WBD Common are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS.


	Shares Held at December 31,		Carrying Value at December 31,
	2022	2021	2022		2021
			(in millions)
AT&T Common	10,212,945	10,212,945	188		$	251
Charter Common	872,503	872,503	296		569
WBD Common	2,470,685	—	23		—
Energy Transfer Common Units	—	50,999,768	—		420
Energy Transfer Series G Preferred Units	—	192,390	—		196
Other			3		3
			$	510	$	1,439

(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 December 31, 2022. 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:


	December 31,
	2022	2021
	(in shares)
AT&T Common	0.7185	0.7185
Charter Common	0.061382	0.061382
WBD Common	0.173817	—

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 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 reference shares is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of December 31, 2022, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $26 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the reference shares attributable to the ZENS. As of December 31, 2022, the market value of such shares was approximately $507 million, which would provide an exchange amount of $582 for each $1,000 original principal amount of ZENS. At maturity of the ZENS in 2029, CenterPoint Energy will be obligated to pay in cash the higher of the contingent principal amount of the ZENS or an amount based on the then-current market value of the reference shares, which will include any additional publicly-traded securities distributed with respect to the current reference shares prior to maturity.

The ZENS obligation is bifurcated into a debt component and a derivative component (the holder’s option to receive the appreciated value of the reference shares at maturity). The bifurcated debt component accretes through interest charges annually up to the contingent principal amount of the ZENS in 2029. Such accretion will be reduced by annual cash interest payments, as described above. The derivative component is recorded at fair value and changes in the fair value of the derivative component are recorded in CenterPoint Energy’s Statements of Consolidated Income. 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.

The following table sets forth summarized financial information regarding CenterPoint Energy’s investment in ZENS-Related Securities and each component of CenterPoint Energy’s ZENS obligation.


	ZENS-Related Securities		Debt Component of ZENS		Derivative Component of ZENS
	(in millions)
Balance as of December 31, 2019	$	822	$	19	$	893
Accretion of debt component of ZENS	—		17		—
2% interest paid	—		(16)		—

Distribution to ZENS holders	—		(5)		—

Loss on indexed debt securities	—		—		60
Gain on ZENS-Related Securities	49		—		—
Balance as of December 31, 2020	871		15		953
Accretion of debt component of ZENS	—		17		—
2% interest paid	—		(17)		—

Distribution to ZENS holders	—		(5)		—

Gain on indexed debt securities	—		—		(50)
Loss on ZENS-Related Securities	(51)		—		—
Balance as of December 31, 2021	820		10		903

Accretion of debt component of ZENS	—		17		—
2% interest paid	—		(17)		—

Distribution to ZENS holders	—		(3)		—

Gain on indexed debt securities	—		—		(325)
Loss on ZENS-Related Securities	(313)		—		—
Balance as of December 31, 2022	$	507	$	7	$	578

On May 17, 2021, AT&T announced that it had entered into a definitive agreement with Discovery, Inc. to combine their media assets into a new publicly traded company to be called Warner Bros. Discovery. The transaction closed on April 8, 2022. Pursuant to the definitive agreement, AT&T shareholders received 0.241917 shares of WBD Common for each share of AT&T Common owned, representing 71% of the new company. Upon the closing of the transaction, reference shares attributable to ZENS now consist of 0.7185 shares of AT&T Common, 0.061382 shares of Charter Common and 0.173817 shares of WBD Common.

(12) Equity (CenterPoint Energy)

Dividends Declared and Paid (CenterPoint Energy)

CenterPoint Energy declared and paid dividends on its Common Stock during 2022, 2021 and 2020 as presented in the table below:


	Dividends Declared Per Share						Dividends Paid Per Share
	2022		2021		2020 (2)		2022		2021		2020 (2)
Common Stock	$	0.7200	$	0.6600	$	0.9000	$	0.7000	$	0.6500	$	0.7400
Series A Preferred Stock	61.2500		61.2500		91.8750		61.2500		61.2500		61.2500
Series B Preferred Stock	—		35.0000		87.5000		—		52.5000		70.0000
Series C Preferred Stock (1)	—		—		0.6100		—		0.1600		0.4500

(1)The Series C Preferred Stock was 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. The per share amount reflects the dividend per share of Common Stock as if the Series C Preferred Stock were converted into Common Stock. All of the outstanding Series C Preferred Stock was converted to Common Stock during 2021 as described below.

(2)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.

Preferred Stock (CenterPoint Energy)


	Liquidation Preference Per Share			Shares Outstanding as of December 31,						Outstanding Value as of December 31,
			2022		2021		2020		2022			2021			2020
	(in millions, except shares and per share amount)
Series A Preferred Stock	$	1,000		800,000		800,000		800,000		$	790		$	790		$	790
Series B Preferred Stock	1,000			—		—		977,400		—			—			950
Series C Preferred Stock	1,000			—		—		625,000		—			—			623
				800,000		800,000		2,402,400		$	790		$	790		$	2,363

Dividend Requirement on Preferred Stock


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Series A Preferred Stock	$	49	$	49	$	49
Series B Preferred Stock	—		46		68
Series C Preferred Stock	—		—		27
Preferred dividend requirement	49		95		144
Amortization of beneficial conversion feature	—		—		32
Total income allocated to preferred shareholders	$	49	$	95	$	176

Series A Preferred Stock

On August 22, 2018, CenterPoint Energy completed the issuance of 800,000 shares of its Series A Preferred Stock, at a price of $1,000 per share, resulting in net proceeds of $790 million after issuance costs. The aggregate liquidation value of the Series A Preferred Stock is $800 million with a per share liquidation value of $1,000.

CenterPoint Energy used the net proceeds from the Series A Preferred Stock offering to fund a portion of the Merger and to pay related fees and expenses.

Dividends. The Series A Preferred Stock accrue cumulative dividends, calculated as a percentage of the stated amount per share, at a fixed annual rate of 6.125% per annum to, but excluding, September 1, 2023, and at an annual rate of three-month LIBOR plus a spread of 3.270% thereafter to be paid in cash if, when and as declared. If declared, prior to September 1, 2023, dividends are payable semi-annually in arrears on each March 1 and September 1, beginning on March 1, 2019, and, for the period commencing on September 1, 2023, dividends are payable quarterly in arrears each March 1, June 1, September 1 and December 1, beginning on December 1, 2023. Cumulative dividends earned during the applicable periods are presented on CenterPoint Energy’s Statements of Consolidated Income as Preferred stock dividend requirement.

Optional Redemption. On or after September 1, 2023, CenterPoint Energy may, at its option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $1,000 per share, plus any accumulated and unpaid dividends thereon to, but excluding, the redemption date.

At any time within 120 days after the conclusion of any review or appeal process instituted by CenterPoint Energy, if any, following the occurrence of a ratings event, CenterPoint Energy may, at its option, redeem the Series A Preferred Stock in whole, but not in part, at a redemption price in cash per share equal to $1,020 (102% of the liquidation value of $1,000) plus an amount equal to all accumulated and unpaid dividends thereon to, but excluding, the redemption date, whether or not declared.

Ranking. The Series A Preferred Stock, with respect to anticipated dividends and distributions upon CenterPoint Energy’s liquidation or dissolution, or winding-up of CenterPoint Energy’s affairs, ranks or will rank:

senior to Common Stock and to each other class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is expressly made subordinated to the Series A Preferred Stock;
on a parity with any class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is not expressly made senior or subordinated to the Series A Preferred Stock;
junior to any class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is expressly made senior to the Series A Preferred Stock;
junior to all existing and future indebtedness (including indebtedness outstanding under CenterPoint Energy’s credit facilities, senior notes and commercial paper) and other liabilities with respect to assets available to satisfy claims against CenterPoint Energy; and
structurally subordinated to any existing and future indebtedness and other liabilities of CenterPoint Energy’s subsidiaries and capital stock of CenterPoint Energy’s subsidiaries held by third parties.

Voting Rights. Holders of the Series A Preferred Stock generally will not have voting rights. Whenever dividends on shares of Series A Preferred Stock have not been declared and paid for the equivalent of three or more semi-annual or six or more quarterly dividend periods (including, for the avoidance of doubt, the dividend period beginning on, and including, the original issue date and ending on, but excluding, March 1, 2019), whether or not consecutive, the holders of such shares of Series A Preferred Stock, voting together as a single class with holders of any and all other series of voting preferred stock (as defined in the Statement of Resolution for the Series A Preferred Stock) then outstanding, will be entitled at CenterPoint Energy’s next annual or special meeting of shareholders to vote for the election of a total of two additional members of CenterPoint Energy’s Board of Directors, subject to certain limitations. This right will terminate if and when all accumulated dividends have been paid in full and, upon such termination, the term of office of each director so elected will terminate at such time and the number of directors on CenterPoint Energy’s Board of Directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.

Series B Preferred Stock

On October 1, 2018, CenterPoint Energy completed the issuance of 19,550,000 depositary shares, each representing a 1/20th interest in a share of its Series B Preferred Stock, at a price of $50 per depositary share, resulting in net proceeds of $950 million after issuance costs. The aggregate liquidation value of Series B Preferred Stock is $978 million with a per share liquidation value of $1,000. The amount issued included 2,550,000 depositary shares issued pursuant to the exercise in full of the option granted to the underwriters to purchase additional depositary shares.

Dividends. Dividends on the Series B Preferred Stock were payable on a cumulative basis when, as and if declared at an annual rate of 7.00% on the liquidation value of $1,000 per share. CenterPoint Energy paid declared dividends in cash or, subject to certain limitations, in shares of Common Stock, or in any combination of cash and shares of Common Stock on March 1, June 1, September 1 and December 1 of each year, commencing on December 1, 2018 and ending on, and including, September 1, 2021. Cumulative dividends earned during the applicable periods were presented on CenterPoint Energy’s Statements of Consolidated Income as Preferred stock dividend requirement.

Mandatory Conversion. Each remaining outstanding share of the Series B Preferred Stock was converted on the mandatory conversion date, September 1, 2021, into 36.7677 shares of Common Stock. The conversion rate was determined based on a preceding 20-day volume-weighted-average-price of Common Stock.

Conversion of Series B Preferred Stock. During 2021, 977,400 shares of Series B Preferred Stock were converted into 35,921,441 shares of Common Stock. As of December 31, 2021, all shares of Series B Preferred Stock had been converted into shares of Common Stock.

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 net proceeds of $724 million after issuance costs.

The Series C Preferred Stock was 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.

Each remaining outstanding share of the Series C Preferred Stock was converted on May 7, 2021 into the number of Common Stock equal to the quotient of $1,000 divided by the prevailing conversion price, which was $15.31.

Conversion of Series C Preferred Stock. During 2021, 625,000 shares of Series C Preferred Stock were converted into 40,822,990 shares of Common Stock. As of December 31, 2021, all shares of Series C Preferred Stock had been converted into shares of Common Stock.

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 net proceeds of $673 million after issuance costs. On June 1, 2020, CenterPoint Energy filed a shelf registration statement with the SEC registering these 41,977,612 shares of Common Stock.

Temporary Equity (CenterPoint Energy)

On the approval and recommendation of the Compensation Committee and approval of the Board (acting solely through its independent directors), CenterPoint Energy entered into a retention incentive agreement with David J. Lesar, then President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. Pursuant to the retention incentive agreement, Mr. Lesar received equity-based awards under CenterPoint Energy’s LTIP covering a total of 1 million shares of Common Stock (Total Stock Award), which were granted in multiple annual awards. Mr. Lesar received 400 thousand restricted stock units in July 2021 that vested in December 2022 and 400 thousand restricted stock units and 200 thousand restricted stock units in February 2022 and February 2023, respectively, that will vest in December 2023. For accounting purposes, the 1 million shares under the Total Stock Award, consisting of the equity-based awards described above, were considered granted in July 2021. In the event that death, disability, termination without cause or resignation for good reason, as defined in the retention incentive agreement, had occurred prior to the full Total Stock Award being awarded, CenterPoint Energy would have paid a lump sum cash payment equal to the value of the unawarded equity-based awards, based on the closing trading price of Common Stock on the date of the event’s occurrence. Because the equity-based awards would have been redeemable for cash prior to being awarded upon events that were not probable at the grant date, the equity associated with any unawarded equity-based awards are classified as Temporary Equity on CenterPoint Energy’s Condensed Consolidated Balance Sheets.

Accumulated Other Comprehensive Income (Loss)

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


	Year Ended December 31,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Beginning Balance	$	(64)	$	—	$	10	$	(90)	$	—	$	10
Other comprehensive income (loss) before reclassifications:
Remeasurement of pension and other postretirement plans	(40)		—		10		16		—		—


Other comprehensive income (loss) from unconsolidated affiliates	—		—		—		3		—		—
Amounts reclassified from accumulated other comprehensive loss:
Prior service cost (1)	(1)		—		(1)		1		—		1
Actuarial losses (1)	8		—		1		7		—		—
Settlement (2)	67		—		—		4		—		—
Reclassification of deferred loss from cash flow hedges realized in net income	1		—		—		2		—		—

Tax benefit (expense)	(2)		—		(4)		(7)		—		(1)
Net current period other comprehensive income (loss)	33		—		6		26		—		—

Ending Balance	$	(31)	$	—	$	16	$	(64)	$	—	$	10

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

(2)Amounts presented represent a one-time, non-cash settlement cost (benefit), prior to regulatory deferrals, which are 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. Amounts presented in the table above are included in Other income (expense), net in CenterPoint Energy’s Statements of Consolidated Income, net of regulatory deferrals.

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


	December 31, 2022				December 31, 2021
	Long-Term		Current (1)		Long-Term		Current (1)
	(in millions)
CenterPoint Energy:
ZENS due 2029 (2)	$	—	$	7	$	—	$	10
CenterPoint Energy senior notes 1.45% to 4.61% due 2024 to 2049	3,050		—		3,650		—
CenterPoint Energy pollution control bonds 5.125% due 2028 (3)	68		—		68		—
CenterPoint Energy commercial paper (4) (5)	1,770		—		1,400		—
VUH senior notes (see Debt Exchange below)	—		—		377		—
VUH commercial paper (4) (5)	—		—		350		—


SIGECO first mortgage bonds 0.875% to 6.72% due 2024 to 2055 (6)	277		11		288		5
Other debt	—		4		4		3
Unamortized debt issuance costs	(15)		—		(23)		—
Unamortized discount and premium, net	(6)		—		(7)		—
Houston Electric debt (see details below)	6,197		156		4,975		520
CERC third party debt (see details below)	3,495		1,842		4,476		7

Total CenterPoint Energy debt	$	14,836	$	2,020	$	15,558	$	545





Houston Electric:

General mortgage bonds 2.35% to 6.95% due 2026 to 2052 (8)	$	6,112	$	—	$	4,712	$	300
Other	1		—		—		—
Restoration Bond Company:
System restoration bonds 4.243% due 2022	—		—		—		70




Bond Company IV:
Transition bonds 3.028% due 2024	161		156		317		150
Unamortized debt issuance costs	(50)		—		(36)		—
Unamortized discount and premium, net	(27)		—		(18)		—
Total Houston Electric debt	$	6,197	$	156	$	4,975	$	520





CERC (7):
Short-term borrowings:
Inventory financing (9)	$	—	$	11	$	—	$	7
Term loan	—		500		—		—
Total CERC short-term borrowings	—		511		—		7
Long-term debt:
Senior notes 0.70% to 6.625% due 2023 to 2047	$	2,620	$	1,331	$	3,500	$	—
Indiana Gas senior notes 6.34% to 7.08% due 2025 to 2029	96		—		96		—
Commercial paper (4) (5)	805		—		899		—
Unamortized debt issuance costs	(22)		—		(15)		—
Unamortized discount and premium, net	(4)		—		(4)		—
Total CERC third-party long-term debt	3,495		1,331		4,476		—
Indiana Gas and VEDO notes payable to CenterPoint Energy	—		—		1,076		—
Total CERC debt	$	3,495	$	1,842	$	5,552	$	7

(1)Includes amounts due or exchangeable within one year of the date noted.

(2)CenterPoint Energy’s ZENS obligation is bifurcated into a debt component and an embedded derivative component. For additional information regarding ZENS, see Note 11(b). As ZENS are exchangeable for cash at any time at the option of the holders, these notes are classified as a current portion of long-term debt.

(3)These pollution control bonds were secured by general mortgage bonds of Houston Electric as of December 31, 2022 and 2021 and are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations.

(4)Classified as long-term debt because the termination date of the facility that backstops the commercial paper is more than one year from the date noted.

(5)Commercial paper issued by CenterPoint Energy and CERC Corp. has maturities up to 60 days and 30 days, respectively, and are backstopped by the respective issuer’s long-term revolving credit facility. The VUH credit facility was terminated in connection with the Restructuring, as discussed below, and VUH no longer issues commercial paper.

(6)The first mortgage bonds issued by SIGECO subject SIGECO’s properties to a lien under the related mortgage indenture as further discussed below.

(7)Issued by CERC Corp.

(8)The general mortgage bonds issued by Houston Electric subject Houston Electric’s properties to a lien under the General Mortgage as further discussed below.

(9)Represents AMA transactions accounted for as an inventory financing. Outstanding obligations related to third-party AMAs associated with utility distribution service in Arkansas and Oklahoma of $36 million as of December 31, 2021 are reflected in current liabilities held for sale on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. For further information about AMAs, see Notes 4 and 15.

Debt Transactions

Debt Issuances. During 2022, the following debt instruments were issued or incurred:


Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
		(in millions)
Houston Electric	February 2022	General Mortgage Bonds (1)	$	300	3.00%	2032
Houston Electric	February 2022	General Mortgage Bonds (1)	500		3.60%	2052
Houston Electric	September 2022	General Mortgage Bonds (2)	500		4.45%	2032
Houston Electric	September 2022	General Mortgage Bonds (2)	300		4.85%	2052
		Total Houston Electric (1)	1,600
CERC	June 2022	Senior Notes (3)	500		4.40%	2032
CERC	August 2022	Term Loan (4)	500		SOFR (5) + 0.70%	2023
		Total CERC	1,000
		Total CenterPoint Energy	$	2,600

(1)Total proceeds, net of discounts and issuance expenses and fees, of approximately $784 million were used for general limited liability company purposes, including capital expenditures and the repayment of all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool.

(2)Total proceeds, net of discounts and issuance expenses and fees, of approximately $789 million were used for general limited liability company purposes, including capital expenditures, the repayment of all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool and the redemption of outstanding general mortgage bonds discussed below.

(3)Total proceeds, net of discounts and issuance expenses and fees, of approximately $495 million were used for general corporate purposes, including the issuance by CERC Corp.’s current subsidiaries, Indiana Gas and VEDO, of intercompany notes to CERC Corp. in June 2022; these subsidiaries used the funds to repay intercompany debt owed to VUH in connection with the Restructuring in June 2022.

(4)Total proceeds, net of discounts and issuance expenses and fees, of approximately $500 million were used for general corporate purposes, including the repayment of CERC’s outstanding commercial paper balances. The term loan is reflected in short-term borrowings on CenterPoint Energy’s and CERC’s Consolidated Balance Sheets.

(5)As defined in the term loan agreement, which includes an adjustment of 0.10% per annum.

On February 16, 2023, CERC Corp. entered into a $500 million term loan agreement. Borrowings under the term loan agreement bear interest at CERC Corp.’s option, at a rate equal to either (i) Term SOFR (as defined in the term loan agreement), which includes an adjustment of 0.10% per annum plus a margin of 0.85% or (ii) the alternate base rate (as defined in the term loan agreement). CERC Corp. borrowed the full $500 million at closing and intends to use the proceeds thereof for general corporate purposes, including the repayment of a portion of its outstanding commercial paper. The maturity date for the borrowings under the term loan agreement is February 15, 2024.

Debt Exchange. As a part of the Restructuring, on May 27, 2022, CERC Corp. and VUH completed an exchange with holders of VUH PPNs whereby CERC Corp. issued new senior notes with an aggregate principal amount of $302 million to such holders in exchange for all of their outstanding VUH PPNs with an aggregate principal amount of $302 million. The new CERC Corp. senior notes have the same principal amount, interest rate, and payment and maturity dates as the VUH PPNs for which they were exchanged. As a result of the exchange, CERC Corp. became the creditor for the PPNs originally issued by VUH, and CERC Corp. received $302 million of cash from VUH on June 30, 2022 in full repayment of the VUH PPNs. Orders received from the IURC and PUCO allowed for the reissuance of existing debt of Indiana Gas and VEDO to CERC, the continued amortization of existing issuance expenses and discounts, and the treatment of any potential exchange fees as discounts to be amortized over the life of the debt.

On September 6, 2022, CERC Corp. and VUH announced that CERC Corp. had commenced an offer to eligible holders to exchange any and all outstanding 6.10% senior notes due 2035 issued by Vectren Utility Holdings, Inc. (predecessor of VUH) for (1) up to $75 million aggregate principal amount of new senior notes issued by CERC Corp. and (2) cash. On October 5, 2022, in connection with the settlement of the exchange offer, CERC Corp. issued $75 million aggregate principal amount of 6.10% senior notes due 2035 in exchange for all outstanding VUH senior notes. The new CERC Corp. senior notes issued in the exchange offer have the same interest rate and payment and maturity dates as the VUH notes for which they were exchanged.

Debt Repayments and Redemptions. During 2022, the following debt instruments were repaid at maturity or redeemed, excluding scheduled principal payments of $220 million on the Securitization bonds:


Registrant	Repayment/Redemption Date	Debt Instrument	Aggregate Principal		Interest Rate	Maturity Date
			(in millions)
CERC (1)	January 2022	Floating Rate Senior Notes	$	425	Three-month LIBOR plus 0.5%	2023
		Total CERC	425
Houston Electric	August 2022	General Mortgage Bonds	300		2.25%	2022
Houston Electric (2)	October 2022	General Mortgage Bonds	200		5.60%	2023
		Total Houston Electric	500
CenterPoint Energy (3)	January 2022	First Mortgage Bonds	5		0.82%	2022
CenterPoint Energy (4)	March 2022	Senior Notes	250		3.85%	2024
CenterPoint Energy (5)	March 2022	Senior Notes	350		4.25%	2028
		Total CenterPoint Energy	$	1,530

(1)In January 2022, CERC provided notice of partial redemption, and on January 31, 2022, CERC redeemed a portion ($425 million) of the outstanding $1 billion aggregate principal amount of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest on the principal amount being redeemed.

(2)In September 2022, Houston Electric provided notice of redemption, and on October 17, 2022, Houston Electric redeemed $200 million aggregate principal amount, plus accrued and unpaid interest of approximately $3 million and an applicable make-whole premium of approximately $2 million, for a total redemption price of $205 million.

(3)First Mortgage Bonds issued by SIGECO.

(4)In March 2022, CenterPoint Energy provided notice of redemption, and on March 30, 2022, CenterPoint Energy redeemed all of the remaining outstanding senior notes of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $2 million, the write off of issuance costs of $1 million and an applicable make-whole premium of approximately $7 million for a total redemption price of $260 million.

(5)In March 2022, CenterPoint Energy provided notice of partial redemption, and on March 30, 2022, CenterPoint Energy redeemed a portion ($350 million) of the outstanding $500 million aggregate principal amount of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $6 million, the write off of issuance costs of $3 million and an applicable make-whole premium of approximately $34 million for a total redemption price of $393 million.

CenterPoint Energy and CERC recorded losses on early extinguishment of debt, including make-whole premiums and recognition of deferred debt related costs, in Interest expense and other finance charges on their respective Statements of Consolidated Income, of $47 million and $-0-, respectively, during the year ended December 31, 2022, and $53 million and $11 million, respectively for the year ended December 31, 2021, and $2 million for both for the year ended December 31, 2020. Houston Electric recorded a loss on early extinguishment of debt of $2 million during the year ended December 31, 2022, which was recorded as a regulatory asset.

On December 16, 2022, SIGECO provided notice of redemption and on January 17, 2023, SIGECO redeemed $11 million aggregate principal amount of SIGECO’s outstanding first mortgage bonds due 2044 at a redemption price equal to 100% of the principal amount of the first mortgage bonds to be redeemed plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date.

Securitization Bonds. As of December 31, 2022, CenterPoint Energy and Houston Electric had special purpose subsidiaries consisting of the Bond Companies, which they consolidate. The consolidated special purpose subsidiaries are wholly-owned, bankruptcy remote entities that were formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of transition bonds or system restoration bonds and activities incidental thereto. These Securitization Bonds are payable only through the imposition and collection of “transition” or “system restoration” charges, as defined in the Texas Public Utility Regulatory Act, which are irrevocable, non-bypassable charges to provide recovery of authorized qualified costs. On August 15, 2022, Restoration Bond Company repaid in full its last outstanding system restoration bonds. CenterPoint Energy and Houston Electric have no payment obligations in respect of the Securitization Bonds other than to remit the applicable transition or system restoration charges they collect as set forth in

servicing agreements among Houston Electric, the Bond Companies and other parties. Each special purpose entity is the sole owner of the right to impose, collect and receive the applicable transition or system restoration charges securing the bonds issued by that entity. Creditors of CenterPoint Energy or Houston Electric have no recourse to any assets or revenues of the Bond Companies (including the transition charges), and the holders of Securitization Bonds have no recourse to the assets or revenues of CenterPoint Energy or Houston Electric.

Credit Facilities. On June 30, 2022, in connection with the Restructuring, VUH repaid in full all outstanding indebtedness and terminated all remaining commitments and other obligations under its $400 million amended and restated credit agreement dated as of February 4, 2021. VUH did not incur any penalties in connection with the early termination.

On December 6, 2022, CenterPoint Energy, Inc. and its wholly owned subsidiaries, Houston Electric and CERC, replaced their existing revolving credit facilities with three revolving credit facilities totaling $3.75 billion in aggregate commitments. In addition, SIGECO entered into a new revolving credit facility totaling an additional $250 million in aggregate commitments. The aggregate amount of commitments among the four credit facilities total $4.0 billion.

The Registrants had the following revolving credit facilities as of December 31, 2022:


Execution Date	Registrant	Size of Facility		Draw Rate of SOFR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of December 31, 2022 (2)	Termination Date
		(in millions)
December 6, 2022	CenterPoint Energy	$	2,400	1.500%	65%	(3)	61.8%	December 6, 2027
December 6, 2022	CenterPoint Energy (4)	250		1.125%	65%		45.2%	December 6, 2027
December 6, 2022	Houston Electric	300		1.250%	67.5%	(3)	54.4%	December 6, 2027
December 6, 2022	CERC	1,050		1.125%	65%		49.9%	December 6, 2027
	Total	$	4,000

(1)Based on credit ratings as of December 31, 2022.

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

(3)For CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase 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 SIGECO.

The Registrants, as well as the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of December 31, 2022.

As of December 31, 2022 and 2021, the Registrants had the following revolving credit facilities and utilization of such facilities:


	December 31, 2022										December 31, 2021
Registrant	Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy (1)	$	2,400	$	—	$	11	$	1,770	4.71	%	$	2,400	$	—	$	11	$	1,400	0.34	%
CenterPoint Energy (2)	—		—		—		—		—	%	400		—		—		350		0.21	%
Houston Electric	300		—		—		—		—	%	300		—		—		—		—	%
CERC	1,050		—		—		805		4.67	%	900		—		—		899		0.26	%
SIGECO	250		—		—		—		—	%	—		—		—		—		—	%
Total	$	4,000	$	—	$	11	$	2,575			$	4,000	$	—	$	11	$	2,649

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

(2)This credit facility was issued by VUH and was terminated in connection with the Restructuring, as discussed above.

Maturities. As of December 31, 2022, maturities of long-term debt through 2027, excluding the ZENS obligation and unamortized discounts, premiums and issuance costs, were as follows:


	CenterPoint Energy (1)		Houston Electric (1)		CERC		Securitization Bonds
	(in millions)
2023	$	1,999	$	156	$	1,832	$	156
2024	1,384		161		—		161
2025	51		—		10		—
2026	860		300		60		—
2027	2,901		300		831		—

(1)These maturities include Securitization Bonds principal repayments on scheduled payment dates.

Liens. As of December 31, 2022, Houston Electric’s assets were subject to liens securing approximately $6.2 billion of general mortgage bonds outstanding under the General Mortgage, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. The general mortgage bonds that are held in trust to secure pollution control bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. Houston Electric could issue approximately $4.9 billion of additional general mortgage bonds on the basis of retired bonds and 70% of property additions as of December 31, 2022. No first mortgage bonds are outstanding under the M&DOT, and Houston Electric is contractually obligated to not issue any additional first mortgage bonds under the M&DOT and is undertaking actions to release the lien of the M&DOT and terminate the M&DOT.

As of December 31, 2022, SIGECO had approximately $288 million aggregate principal amount of first mortgage bonds outstanding. Generally, all of SIGECO’s real and tangible property is subject to the lien of SIGECO’s mortgage indenture. As of December 31, 2022, SIGECO was permitted to issue additional bonds under its mortgage indenture up to 60% of then currently unfunded property additions and approximately $1.4 billion of additional first mortgage bonds could be issued on this basis. The mortgage indenture was amended and restated effective as of January 1, 2023 which, among other things, permits SIGECO to issue additional bonds up to 70% of currently unfunded property additions.

Other. As of December 31, 2022, certain financial institutions agreed to issue, from time to time, up to $20 million of letters of credit on behalf of certain of Vectren’s subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on February 1, 2024. As of December 31, 2022, such financial institutions had issued less than $1 million of letters of credit on behalf of these subsidiaries.

Houston Electric and CERC participate in a money pool through which they can borrow or invest on a short-term basis. For additional information, see Note 19.

(14) Income Taxes

The components of the Registrant’s income tax expense (benefit) were as follows:


	Year Ended December 31,
	2022		2021		2020
	(in millions)
CenterPoint Energy - Continuing Operations
Current income tax expense (benefit):
Federal	$	294	$	—	$	(36)
State	46		(28)		32
Total current expense (benefit)	340		(28)		(4)
Deferred income tax expense (benefit):
Federal	16		78		63
State	4		60		21
Total deferred expense	20		138		84
Total income tax expense	$	360	$	110	$	80

CenterPoint Energy - Discontinued Operations
Current income tax expense:
Federal	$	—	$	91	$	152
State	—		35		28
Total current expense	—		126		180
Deferred income tax expense (benefit):
Federal	—		127		(422)
State	—		(52)		(91)
Total deferred expense (benefit)	—		75		(513)
Total income tax expense (benefit)	$	—	$	201	$	(333)
Houston Electric
Current income tax expense:
Federal	$	23	$	22	$	76
State	16		22		19
Total current expense	39		44		95
Deferred income tax expense (benefit):
Federal	86		31		(42)
State	—		1		—
Total deferred expense (benefit)	86		32		(42)
Total income tax expense	$	125	$	76	$	53

CERC - Continuing Operations
Current income tax expense (benefit):
Federal	$	30	$	—	$	—
State	28		(25)		2
Total current expense (benefit)	58		(25)		2
Deferred income tax expense (benefit):
Federal	164		67		42
State	14		34		73
Total deferred expense (benefit)	178		101		115
Total income tax expense (benefit)	$	236	$	76	$	117


	Year Ended December 31,
	2022		2021		2020
	(in millions)
CERC - Discontinued Operations
Current income tax expense:
Federal	$	—	$	—	$	—
State	—		—		—
Total current expense	—		—		—
Deferred income tax expense (benefit):
Federal	—		—		—
State	—		—		(2)
Total deferred expense (benefit)	—		—		(2)
Total income tax expense (benefit)	$	—	$	—	$	(2)

A reconciliation of income tax expense (benefit) using the federal statutory income tax rate to the actual income tax expense and resulting effective income tax rate is as follows:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
CenterPoint Energy - Continuing Operations (1) (2) (3)
Income before income taxes	$	1,417		$	778		$	563
Federal statutory income tax rate	21		%	21		%	21		%
Expected federal income tax expense	298			163			118
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	46			63			40
State valuation allowance, net of federal income tax	—			(15)			1
State law change, net of federal income tax	—			(23)			—

Excess deferred income tax amortization	(51)			(75)			(76)
Goodwill impairment	84			—			39
Net operating loss carryback	—			—			(37)
Other, net	(17)			(3)			(5)
Total	62			(53)			(38)
Total income tax expense	$	360		$	110		$	80
Effective tax rate	25		%	14		%	14		%
CenterPoint Energy - Discontinued Operations (4)(5)
Income (loss) before income taxes	$	—		$	1,019		$	(1,589)
Federal statutory income tax rate	—		%	21		%	21		%
Expected federal income tax expense (benefit)	—			214			(334)
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	—			14			(60)

State law change, net of federal income tax	—			(27)			—
Goodwill impairment	—			—			25
Tax impact of sale of Energy Services and Infrastructure Services Disposal Groups	—			—			30
Other, net	—			—			6



Total	—			(13)			1
Total income tax expense (benefit)	$	—		$	201		$	(333)
Effective tax rate	—		%	20		%	21		%


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Houston Electric (6) (7) (8)
Income before income taxes	$	635		$	457		$	387
Federal statutory income tax rate	21		%	21		%	21		%
Expected federal income tax expense	133			96			81
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	13			18			15


Excess deferred income tax amortization	(18)			(41)			(42)
Other, net	(3)			3			(1)
Total	(8)			(20)			(28)
Total income tax expense	$	125		$	76		$	53
Effective tax rate	20		%	17		%	14		%
CERC - Continuing Operations (9) (10) (11)
Income before income taxes	$	961		$	466		$	382
Federal statutory income tax rate	21		%	21		%	21		%
Expected federal income tax expense	202			98			80
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	35			31			59
State law change, net of federal income tax	—			(9)			—
State valuation allowance, net of federal income tax	—			(15)			1


Excess deferred income tax amortization	(28)			(30)			(29)

Goodwill Impairment	30			—			—
Other, net	(3)			1			6
Total	34			(22)			37
Total income tax expense (benefit)	$	236		$	76		$	117
Effective tax rate	25		%	16		%	31		%
CERC - Discontinued Operations (12)
Income (loss) before income taxes	$	—		$	—		$	(68)
Federal statutory income tax rate	—		%	—		%	21		%
Expected federal income tax expense (benefit)	—			—			(14)
Increase in tax expense resulting from:
State income tax expense, net of federal income tax	—			—			(2)


Goodwill impairment	—			—			10


Other, net	—			—			4
Total	—			—			12
Total income tax expense (benefit)	$	—		$	—		$	(2)
Effective tax rate	—		%	—		%	3		%

(1)Recognized a $51 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, and a $84 million expense for the goodwill impairment on the Arkansas and Oklahoma Natural Gas business sale.

(2)Recognized a $75 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, a $23 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions, and a $15 million benefit for the impact of a change in the NOL carryforward period in Louisiana from 20 years to an indefinite period allowing for the release of the valuation allowance on certain Louisiana NOLs.

(3)Recognized a $76 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, a $39 million deferred tax expense for the non-deductible portion of the goodwill impairment on SIGECO, and a $37 million benefit for the NOL carryback claim allowed by the CARES Act.

(4)Recognized a $27 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions.

(5)Recognized a $25 million deferred tax expense for the non-deductible portion of the goodwill impairment on both the Energy Services and Infrastructure Services Disposal Groups. Also, recognized a $30 million net tax expense on both

the sale of the Energy Services and Infrastructure Services Disposal Groups.

(6)Recognized a $18 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions.

(7)Recognized a $41 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions.

(8)Recognized a $42 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions.

(9)Recognized a $28 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, and a $30 million expense for the goodwill impairment on the Arkansas and Oklahoma Natural Gas business sale.

(10)Recognized a $9 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions, a $30 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, and a $15 million benefit for the impact of a change in the NOL carryforward period in Louisiana from 20 years to an indefinite period allowing for the release of the valuation allowance on certain Louisiana NOLs.

(11)Recognized a $29 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulatory in certain jurisdictions.

(12)Recognized a $10 million deferred tax expense for the non-deductible portion of the goodwill impairment on the Energy Services Disposal Group.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:


	December 31,
	2022		2021
	(in millions)
CenterPoint Energy
Deferred tax assets:
Benefits and compensation	$	121	$	120
Regulatory liabilities	378		396
Loss and credit carryforwards	84		76
Asset retirement obligations	95		130
Indexed debt securities derivative	—		36
Investment in unconsolidated affiliates	—		1
Other	49		50
Valuation allowance	(10)		(11)
Total deferred tax assets	717		798
Deferred tax liabilities:
Property, plant and equipment	3,228		2,912

Regulatory assets	601		741
Investment in ZENS and equity securities related to ZENS	722		693
Investment in equity securities	—		195
Other	152		161
Total deferred tax liabilities	4,703		4,702
Net deferred tax liabilities	$	3,986	$	3,904


	December 31,
	2022		2021
	(in millions)
Houston Electric
Deferred tax assets:
Regulatory liabilities	$	184	$	175
Benefits and compensation	10		13

Asset retirement obligations	6		9
Other	13		10
Total deferred tax assets	213		207
Deferred tax liabilities:
Property, plant and equipment	1,330		1,215
Regulatory assets	112		114

Total deferred tax liabilities	1,442		1,329
Net deferred tax liabilities	$	1,229	$	1,122

CERC
Deferred tax assets:
Benefits and compensation	$	9	$	17
Regulatory liabilities	151		181
Loss and credit carryforwards	466		585
Asset retirement obligations	86		118
Other	25		30

Total deferred tax assets	737		931
Deferred tax liabilities:
Property, plant and equipment	1,427		1,264
Regulatory assets	381		536
Other	191		159
Total deferred tax liabilities	1,999		1,959
Net deferred tax liabilities	$	1,262	$	1,028

Tax Attribute Carryforwards and Valuation Allowance. CenterPoint Energy has no federal NOL carryforwards and no federal charitable contribution carryforwards as of December 31, 2022. As of December 31, 2022, CenterPoint Energy had $1.1 billion of state NOL carryforwards that expire between 2023 and 2042, and $17 million of state tax credits that do not expire. CenterPoint Energy reported a valuation allowance of $10 million because it is more likely than not that the benefit from certain state NOL carryforwards will not be realized.

CERC has $1.8 billion of federal NOL carryforwards which have an indefinite carryforward period. CERC has $827 million of gross state NOL carryforwards which expire between 2023 and 2042 and $17 million of state tax credits which do not expire.

A reconciliation of CenterPoint Energy’s beginning and ending balance of unrecognized tax benefits, excluding interest and penalties, for 2022 and 2021 are as follows:


	Year Ended December 31,
	2022		2021
	(in millions)
Balance, beginning of year	$	3	$	7



Increases related to tax positions of prior years	26		—
Decreases related to tax positions of prior years	(3)		(4)


Balance, end of year	$	26	$	3

CenterPoint Energy’s net unrecognized tax benefits, including penalties and interest, were $28 million as of December 31, 2022 and are included in other non-current liabilities in the Consolidated Financial Statements. Included in the balance of uncertain tax positions as of December 31, 2022 are $26 million of tax benefits that, if recognized, would affect the effective

tax rate. The Registrants recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. The above table does not include $2 million of accrued penalties and interest as of December 31, 2022. The Registrants believe that it is reasonably possible that there will be no change in unrecognized tax benefits, including penalties and interest, in the next 12 months as a result of a lapse of statutes on older exposures, a tax settlement, and/or a resolution of open audits.

Tax Audits and Settlements. Tax years through 2018 have been audited and settled with the IRS for CenterPoint Energy. For the 2019-2021 tax years, the Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2014-2019 tax years have been audited and settled with the IRS.

(15) 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 reportable segment and CenterPoint Energy’s Electric reportable segment. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the registrant and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. 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 Consolidated Balance Sheets as of December 31, 2022 and 2021. 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.

On October 27, 2021, the IURC issued an order approving the CPCN, authorizing Indiana Electric to purchase the Posey solar project through a BTA to acquire its solar array assets for a fixed purchase price and approved recovery of costs via a levelized rate over the anticipated 35-year life. Due to community feedback and rising project costs caused by inflation and supply chain issues affecting the energy industry, Indiana Electric, along with Arevon, the developer, announced plans in January 2022 to downsize the Posey solar project to 191 MW. Indiana Electric collaboratively agreed to the scope change, and on February 1, 2023, Indiana Electric entered into an amended and restated BTA that is contingent on further IURC review and approval. On February 7, 2023, Indiana Electric filed a CPCN with the IURC to approve the amended BTA. With the passage of the IRA, Indiana Electric can now pursue PTCs for solar projects. Indiana Electric will request that project costs, net of PTCs, be recovered in rate base rather than a levelized rate, through base rates or the CECA mechanism, depending on which provides more timely recovery. The Posey solar project is expected to be placed in service in 2025.

On July 5, 2022, Indiana Electric entered into a BTA to acquire a 130 MW solar array in Pike County, Indiana through a special purpose entity for a capped purchase price. A CPCN for the project was filed with the IURC on July 29, 2022. On September 21, 2022, an agreement in principle was reached resolving all the issues between Indiana Electric and OUCC. The Stipulation and Settlement agreement was filed on October 6, 2022 and a settlement hearing was held on November 1, 2022. On January 11, 2023, the IURC issued an order approving the settlement agreement granting Indiana Electric to purchase and acquire the Pike County solar project through a BTA and approved the estimated cost. The IURC also designated the project as a clean energy project under Ind. Code Ch. 8-1-8.8, approved the proposed levelized rate and associated ratemaking and accounting treatment. The project is expected to be placed in service by 2025.

As of December 31, 2022, other than discussed below, undiscounted minimum purchase obligations are approximately:


	CenterPoint Energy				CERC
	Natural Gas and Coal Supply		Other (1)		Natural Gas Supply
	(in millions)
2023	$	1,014	$	151	$	894
2024	887		208		827
2025	648		681		599
2026	488		45		445
2027	421		86		377
2028 and beyond	2,070		453		1,954

(1)CenterPoint Energy’s undiscounted minimum payment obligations related to PPAs with commitments ranging from 15 to 25 years and its purchase commitment under its BTA in Posey County, Indiana at the original contracted amount, prior to any renegotiation, and its BTA in Pike County, Indiana, are included above. The remaining undiscounted payment obligations relate primarily to technology hardware and software agreements.

Excluded from the table above are estimates for cash outlays from other PPAs through Indiana Electric 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.

(b) AMAs (CenterPoint Energy and CERC)

CenterPoint Energy’s and CERC’s Natural Gas businesses continue to utilize AMAs associated with their utility distribution service in Indiana, Louisiana, Minnesota, Mississippi and Texas. The AMAs have varying terms, the longest of which expires in 2027. Pursuant to the provisions of the agreements, CenterPoint Energy’s and CERC’s Natural Gas either sells natural gas to the asset manager and agrees to repurchase an equivalent amount of natural gas throughout the year at the same cost, or simply purchases its full natural gas requirements at each delivery point from the asset manager. Generally, AMAs are contracts between CenterPoint Energy’s and CERC’s Natural Gas and an asset manager that are intended to transfer the working capital obligation and maximize the utilization of the assets. In these agreements, CenterPoint Energy’s and CERC’s Natural Gas agrees to release transportation and storage capacity to other parties to manage natural gas storage, supply and delivery arrangements for CenterPoint Energy’s and CERC’s Natural Gas and to use the released capacity for other purposes when it is not needed for CenterPoint Energy’s and CERC’s Natural Gas. CenterPoint Energy’s and CERC’s Natural Gas may receive compensation from the asset manager through payments made over the life of the AMAs. CenterPoint Energy’s and CERC’s Natural Gas has an obligation to purchase their winter storage requirements that have been released to the asset manager under these AMAs. For amounts outstanding under these AMAs and AMAs with the Energy Services Disposal Group, see Notes 4 and 13.

(c) Guarantees and Product Warranties (CenterPoint Energy)

In the normal course of business, Energy Systems Group 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 Energy Systems Group’s role as a general contractor in the performance contracting industry, as of December 31, 2022, there were 66 open surety bonds supporting future performance with an aggregate face amount of approximately $646 million. Energy Systems Group’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 December 31, 2022, approximately 37% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to Energy Systems Group. In addition to these performance obligations, Energy Systems Group also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. As of December 31, 2022, there were 34 warranties totaling $521 million and an additional $1.4 billion in energy savings commitments not guaranteed by Vectren Corp. Since Energy Systems Group’s inception in 1994, CenterPoint Energy believes Energy Systems Group 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 December 31, 2022 and no amounts were recorded on CenterPoint Energy’s Consolidated Balance Sheets.

CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of Energy Systems Group. 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 December 31, 2022, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting Energy Systems Group’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $527 million as of December 31, 2022. 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.

(d) Legal, Environmental and Other Matters

Legal Matters

Litigation Related to the February 2021 Winter Storm Event. Various legal proceedings are still pending and new legal matters are being filed against numerous entities with respect to the February 2021 Winter Storm Event, including against CenterPoint Energy, Utility Holding, LLC, Houston Electric, and CERC. Like other Texas energy companies and TDUs, CenterPoint Energy and Houston Electric have become involved in certain investigations, litigation and other regulatory and legal proceedings regarding their efforts to restore power during the storm and their compliance with NERC, ERCOT and PUCT rules and directives. Additionally, like other natural gas market participants, CERC has recently been named in litigation alleging gas market manipulation.

CenterPoint Energy, Utility Holding, LLC, and Houston Electric, along with hundreds of other defendants (including ERCOT, power generation companies, other TDUs, natural gas producers, REPs, and other entities) have received, and may continue to receive, claims and lawsuits filed by plaintiffs alleging wrongful death, personal injury, property damage and other injuries and damages.

The litigation is consolidated in Texas state court in Harris County, Texas, as part of a multi-district litigation proceeding. The judge overseeing the multi-district litigation issued an initial case management order and stayed all proceedings and discovery. Per the case management order, the judge entertained dispositive motions in five representative or “bellwether” cases and, in late January 2023, issued rulings on them. The judge ruled that ERCOT has sovereign immunity as a governmental entity and dismissed the suits against it. The judge also dismissed all claims against the natural gas defendants (which incorrectly included Utility Holding, LLC), and the REP defendants and some causes of action against the other defendants. As to the TDU and generator defendants, the judge dismissed some causes of action but denied the motions to dismiss claims for negligence, gross negligence, and nuisance, which denial the TDU defendants and generator defendants are asking the court of appeals to overturn. The judge allowed plaintiffs to file amended petitions, but otherwise the cases remain stayed for now as the judge addresses additional preliminary issues.

Following the initial rulings and around the two-year anniversary of the February 2021 Winter Storm Event, there have been voluminous amendments, non-suits, re-filings, and new filings of lawsuits, such that the pleadings are still being settled and the precise number of cases and claims against particular defendants and in total is still being determined. As of February 15, 2023, there are approximately 250 pending lawsuits that are in or will be added to the multi-district litigation proceeding related to the February 2021 Winter Storm Event, and CenterPoint Energy and Houston Electric, along with numerous other entities, have been named as defendants in approximately 160 of those. One of the newly filed lawsuits is a putative class action on behalf of everyone who received electric power via the ERCOT grid and sustained a power outage between February 10, 2021 and February 28, 2021. Additionally, Utility Holding, LLC has been named as a defendant in approximately 20 lawsuits, but those claims are being dismissed in light of the judge’s rulings. CenterPoint Energy, Utility Holding, LLC, and Houston Electric intend to vigorously defend themselves against the claims raised.

CenterPoint Energy and Houston Electric have also responded to inquiries from the Texas Attorney General and the Galveston County District Attorney’s Office, and various other regulatory and governmental entities also conducted inquiries, investigations and other reviews of the February 2021 Winter Storm Event and the efforts made by various entities to prepare for, and respond to, the event, including the electric generation shortfall issues.

In February 2023, several lawsuits were filed in state district court in Harris County and Tom Green County, Texas, against dozens of gas market participants in Texas, including natural gas producers, processors, pipelines, marketers, sellers, traders, gas utilities, and financial institutions. Plaintiffs named CERC as one such defendant, along with “CenterPoint Energy Services, Inc.,” incorrectly identifying it as CERC’s parent company (CenterPoint Energy previously divested CES). One lawsuit is a putative class action on behalf of two classes of electric and natural gas customers (those who experienced a loss of electricity and/or natural gas, and those who were charged securitization-related surcharges on a utility bill or were otherwise charged higher rates for electricity and/or gas during the February 2021 Winter Storm Event), potentially including millions of class members. The other lawsuits are brought by an entity that purports to be an assignee of claims by tens of thousands of persons and entities that have assigned claims to the plaintiff. Together, the lawsuits allege that the defendants engaged in gas market manipulation and price gouging, including by intentionally withholding, suppressing, or diverting supplies of natural gas in connection with the February 2021 Winter Storm Event, Winter Storm Elliott, and other severe weather conditions, and through financial market manipulation. Plaintiffs allege that this manipulation impacted gas supply and prices as well as the market, supply, and price of electricity in Texas and caused blackouts and other damage. Plaintiffs assert claims for tortious interference with existing contract, private nuisance, and unjust enrichment, and allege a broad array of injuries and damages, including personal injury, property damage, and harm from certain costs being securitized and passed on to ratepayers. The lawsuits do

not specify the amount of damages sought, but seek broad categories of actual, compensatory, statutory, consequential economic, and punitive damages; restitution and disgorgement; pre- and post-judgment interest; costs and attorneys’ fees; and other relief. CERC intends to vigorously defend itself against the claims raised.

To date, there have not been demands, quantification, disclosure or discovery of damages by any party to any of the above legal matters that are sufficient to enable CenterPoint Energy and its subsidiaries to estimate exposure. Given that, as well as the preliminary nature of the proceedings, the numerosity of parties and complexity of issues involved, and the uncertainties of litigation, CenterPoint Energy and its subsidiaries are unable to predict the outcome or consequences of any of the foregoing matters or to estimate a range of potential losses. CenterPoint Energy and its subsidiaries have general and excess liability insurance policies that provide coverage for third party bodily injury and property damage claims. Given the nature of certain of the recent allegations, however, it is possible that the insurers for third party bodily injury and property damage claims could dispute coverage for other types of damage that may be alleged by plaintiffs. CenterPoint Energy and its subsidiaries intend to continue to pursue any and all available insurance coverage for all of the litigation related to the February 2021 Winter Storm Event.

Environmental Matters

MGP Sites. CenterPoint Energy, CERC and their predecessors, including predecessors of Vectren, 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 obligations for all costs which are probable and estimable, including amounts they are presently 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 and CERC). 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 and CERC 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 5 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.


	December 31, 2022
	CenterPoint Energy		CERC
	(in millions, except years)
Amount accrued for remediation	$	16	$	14
Minimum estimated remediation costs	12		11
Maximum estimated remediation costs	51		44
Minimum years of remediation	5		5
Maximum years of remediation	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. In August 2019, the EPA proposed additional “Part A” amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. Further “Part B” amendments, which related to alternate liners for CCR surface impoundments and the surface impoundment closure process, were published in March 2020. The Part A amendments were finalized in August 2020 and extended the deadline to cease placement of ash in ponds to April 11, 2021, discussed further below. The Part A amendments do not restrict Indiana Electric’s current beneficial reuse of its fly ash. CenterPoint Energy evaluated the Part B amendments to determine potential impacts and determined that the Part B amendments did not have an impact on its current plans.

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. 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. Preliminary groundwater monitoring 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 was required to cease disposal of new ash in the ponds and commence closure of the ponds by April 11, 2021, unless approved for an extension. CenterPoint Energy filed timely extension requests available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through October 15, 2023. The EPA is still reviewing industry extension requests, including CenterPoint Energy’s extension request for the Culley East pond. Companies can continue to operate ponds pending completion of the EPA’s evaluation of the requests for extension. If the EPA denies a full extension request, that denial may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or may adversely impact Indiana Electric’s future operations. Failure to comply with a cease waste receipt could also result in an enforcement proceeding, resulting in the imposition of fines and penalties. On October 5, 2022, EPA issued a proposed conditional approval of the Part A extension request for the A.B. Brown pond. 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 completed closure activities. 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 ponded ash. This petition was subsequently approved by the IURC on May 13, 2020. On October 28, 2020, the IURC approved Indiana Electric’s ECA proceeding, which included the initiation of recovery of the federally mandated project 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. On November 1, 2022, Indiana Electric filed for a CPCN to recover federally mandated costs associated with closure of the Culley East Pond, its third and final ash pond. Indiana Electric is also seeking accounting and ratemaking relief for the project. The project costs are estimated to be approximately $50 million, inclusive of overheads.

OUCC and intervenor testimony is due February 10, 2023 and Indiana Electric’s rebuttal testimony is due on February 24, 2023. A hearing is currently scheduled for March 14, 2023.

As of December 31, 2022, CenterPoint Energy has recorded an approximate $104 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 settlements in the aforementioned insurance proceeding. In addition to these AROs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.

Clean Water Act Permitting of Groundwater Discharges. In April 2020, the U.S. Supreme Court issued an opinion providing that indirect discharges via groundwater or other non-point sources are subject to permitting and liability under the Clean Water Act when they are the functional equivalent of a direct discharge. The Registrants are evaluating the extent to which this decision will affect Clean Water Act permitting requirements and/or liability for their operations.

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.

(16) Earnings Per Share (CenterPoint Energy)

The Series C Preferred Stock issued in May 2020 were considered participating securities since these shares participated in dividends on Common Stock on a pari passu, pro rata, as-converted basis. As a result, beginning June 30, 2020, earnings per share on Common Stock was computed using the two-class method required for participating securities during the periods the Series C Preferred Stock was outstanding. As of May 7, 2021, all of the remaining outstanding Series C Preferred Stock were converted into shares of Common Stock and earnings per share on Common Stock and, as such, the two-class method was no longer applicable beginning June 30, 2021.

The two-class method uses an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available only to common shareholders. Under the two-class method, income (loss) available to common shareholders from continuing operations is derived by subtracting the following from income (loss) from continuing operations:

preferred share dividend requirement;
deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the Series C Preferred Stock; and
an allocation of undistributed earnings to preferred shareholders of participating securities (Series C Preferred Stock) based on the securities’ right to receive dividends.

Undistributed earnings are calculated by subtracting dividends declared on Common Stock, the preferred share dividend requirement and deemed dividends for the amortization of the beneficial conversion feature from net income. Net losses are not allocated to the Series C Preferred Stock as it does not have a contractual obligation to share in the losses of CenterPoint Energy.

The Series C Preferred Stock included conversion features at a price that were below the fair value of the Common Stock on the commitment date. This beneficial conversion feature, which was approximately $32 million, represents the difference between the fair value per share of the Common Stock as of the commitment date and the conversion price, multiplied by the number of common shares issuable upon conversion. The beneficial conversion feature was recognized as a discount to Series C Preferred Stock and was amortized as a deemed dividend over the period from the issue date to the first allowable conversion date, which was November 6, 2020.

Basic earnings per common share is computed by dividing income available to common shareholders from continuing operations by the basic weighted average number of common shares outstanding during the period. Participating securities are excluded from basic weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing income available to common shareholders from continuing operations by the weighted average number of common shares outstanding, including all potentially dilutive common shares, if the effect of such common shares is dilutive.

Diluted earnings per share reflects the dilutive effect of potential common shares from share-based awards and convertible preferred shares. The dilutive effect of the restricted stock, Series B Preferred Stock and Series C Preferred Stock is computed using the if-converted method, which assumes conversion of the restricted stock, Series B Preferred Stock and Series C Preferred Stock at the beginning of the period, giving income recognition for the add-back of the preferred share dividends, amortization of beneficial conversion feature, and undistributed earnings allocated to preferred shareholders. The dilutive effect of restricted stock is computed using the treasury stock method, as applicable, which includes the incremental shares that would be hypothetically vested in excess of the number of shares assumed to be hypothetically repurchased with the assumed proceeds.

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.


	For the Year Ended December 31,
	2022		2021		2020
	(in millions, except per share and share amounts)
Numerator:
Income from continuing operations	$	1,057	$	668	$	483
Less: Preferred stock dividend requirement (Note 12)	49		95		144
Less: Amortization of beneficial conversion feature (Note 12)	—		—		32

Income available to common shareholders from continuing operations - basic and diluted	1,008		573		307
Income (loss) available to common shareholders from discontinued operations - basic and diluted	—		818		(1,256)
Income (loss) available to common shareholders - basic and diluted	$	1,008	$	1,391	$	(949)
Denominator:
Weighted average common shares outstanding - basic	629,415,000		592,933,000		531,031,000
Plus: Incremental shares from assumed conversions:
Restricted stock	2,931,000		5,181,000		—

Series C Preferred Stock (3)	—		11,824,000		—
Weighted average common shares outstanding - diluted	632,346,000		609,938,000		531,031,000

Anti-dilutive Incremental Shares Excluded from Denominator for Diluted Earnings (Loss) Computation:
Restricted stock	—		—		3,690,000
Series B Preferred Stock (2)	—		23,906,000		35,922,000
Series C Preferred Stock (3)	—		—		23,807,000


	For the Year Ended December 31,
	2022		2021		2020
	(in millions, except per share and share amounts)
Earnings (loss) per common share:
Basic earnings per common share - continuing operations	$	1.60	$	0.97	$	0.58
Basic earnings (loss) per common share - discontinued operations	—		1.38		(2.37)
Basic Earnings (Loss) Per Common Share	$	1.60	$	2.35	$	(1.79)
Diluted earnings per common share - continuing operations	$	1.59	$	0.94	$	0.58
Diluted earnings (loss) per common share - discontinued operations	—		1.34		(2.37)
Diluted Earnings (Loss) Per Common Share	$	1.59	$	2.28	$	(1.79)

(1)There were no undistributed earnings to be allocated to participating securities for the years ended December 31, 2021 and 2020.

(2)As of December 31, 2021, all of the outstanding Series B Preferred Stock has been converted into Common Stock. For further information, see Note 12.

(3)As of December 31, 2021, all of the outstanding Series C Preferred Stock has been converted into Common Stock. For further information, see Note 12.

(17) Reportable Segments

The Registrants’ determination of reportable segments considers the strategic operating units under which its CODM manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. Each Registrant’s CODM views net income as the measure of profit or loss for the reportable segments. Certain prior year amounts have been reclassified for assets held for sale, discontinued operations, or the Restructuring as described below. Additionally, in 2022 CenterPoint Energy sold certain assets previously owned by entities within Corporate and Other to businesses within the Electric and Natural Gas reportable segments, and prior year amounts were reclassified.

As of December 31, 2022, reportable segments by Registrant are as follows:

CenterPoint Energy

CenterPoint Energy’s Electric reportable segment consisted of electric transmission and distribution services in the Texas gulf coast area in the ERCOT region and electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations in the MISO region.
CenterPoint Energy’s Natural Gas reportable segment consists of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas; and (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP.
CenterPoint Energy’s Corporate and Other reportable segment consists of energy performance contracting and sustainable infrastructure services through Energy Systems Group and other corporate operations which support all of the business operations of CenterPoint Energy.

Houston Electric

Houston Electric’s single reportable segment consisted of electric transmission services to transmission service customers in the ERCOT region and distribution services to REPs in the Texas gulf coast area.

CERC

CERC’s single reportable segment following the Restructuring consisted of (i) intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas; and (ii) permanent pipeline connections through interconnects with various interstate and intrastate pipeline companies through CEIP.

Expenditures for long-lived assets include property, plant and equipment. Intersegment sales are eliminated in consolidation, except as described in Note 4.

Financial data for reportable segments is as follows, including Discontinued Operations for reconciliation purposes:

CenterPoint Energy


	Revenues from External Customers		Depreciation and Amortization		Interest Income (1)		Interest Expense		Income Tax Expense (Benefit)		Net Income (Loss)
	(in millions)
For the year ended December 31, 2022:
Electric	$	4,108	$	793	$	4	$	(235)	$	147	$	603
Natural Gas	4,946		466		2		(137)		243		492

Corporate and Other	267		29		59		(214)		(30)		(38)
Eliminations	—		—		(62)		62		—		—
Continuing Operations	$	9,321	$	1,288	$	3	$	(524)	$	360	1,057
Discontinued Operations, net											—
Consolidated											$	1,057

For the year ended December 31, 2021:
Electric	$	3,763	$	775	$	—	$	(226)	$	95	$	475
Natural Gas	4,336		527		1		(141)		80		403

Corporate and Other	253		14		118		(278)		(65)		(210)
Eliminations	—		—		(116)		116		—		—
Continuing Operations	$	8,352	$	1,316	$	3	$	(529)	$	110	668
Discontinued Operations, net											818
Consolidated											$	1,486
For the year ended December 31, 2020:
Electric	$	3,470	$	684	$	3	$	(220)	$	72	$	230

Natural Gas	3,631		491		8		(153)		125		278

Corporate and Other	317		14		104		(267)		(117)		(25)
Eliminations	—		—		(111)		111		—		—
Continuing Operations	$	7,418	$	1,189	$	4	$	(529)	$	80	483
Discontinued Operations, net											(1,256)
Consolidated											$	(773)

(1) Interest income from Securitization Bonds of less than $1 million, $1 million and $1 million for the years ended December 31, 2022, 2021 and 2020, respectively, is included in Other income, net on CenterPoint Energy’s and Houston Electric’s respective Statements of Consolidated Income.


	Total Assets				Expenditures for Long-lived Assets
	December 31,				December 31,
	2022		2021		2022		2021		2020
	(in millions)
Electric	$	19,024	$	16,548	$	2,611	$	2,008	$	1,281
Natural Gas	18,043		16,270		1,697		1,178		1,139

Corporate and Other, net of eliminations (1)	1,479		2,523		107		42		95
Continuing Operations	38,546		35,341		4,415		3,228		2,515
Assets Held for Sale/Discontinued Operations	—		2,338		3		171		21
Consolidated	$	38,546	$	37,679	$	4,418	$	3,399	$	2,536

(1)Total assets included pension and other postemployment-related regulatory assets of $405 million and $427 million as of December 31, 2022 and 2021, respectively.

Assets Held for Sale and Discontinued Operations (CenterPoint Energy and CERC)

For further information regarding CenterPoint Energy’s and CERC’s assets held for sale, discontinued operations and disposals, see Note 4.

Houston Electric

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

included.

CERC

CERC consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been included.

Major Customers (CenterPoint Energy and Houston Electric)

Houston Electric’s revenues from major external customers are as follows:


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Affiliates of NRG	$	1,046	$	905	$	749
Affiliates of Vistra Energy Corp.	489		410		404

Revenues by Products and Services


	Year Ended December 31,
	2022						2021						2020
Revenues by Products and Services:	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC (1)		CenterPoint Energy		Houston Electric		CERC (1)
	(in millions)
Electric delivery	$	3,438	$	3,412	$	—	$	3,158	$	3,134	$	—	$	2,941	$	2,911	$	—
Retail electric sales	630		—		—		559		—		—		515		—		—
Wholesale electric sales	40		—		—		46		—		—		14		—		—
Retail gas sales	4,759		—		4,613		4,157		—		4,021		3,462		—		3,362
Gas transportation and processing	12		—		12		12		—		12		15		—		15
Energy products and services	442		—		175		420		—		167		471		—		154
Total	$	9,321	$	3,412	$	4,800	$	8,352	$	3,134	$	4,200	$	7,418	$	2,911	$	3,531

(1)Includes revenues of Indiana Gas and VEDO to reflect the recast from the Restructuring.

(18) 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. The table below provides supplemental disclosure of cash flow information and does not exclude the Infrastructure Services and Energy Services Disposal Groups prior to the closing of the respective transactions.

The tables below provide supplemental disclosure of cash flow information:


	2022						2021						2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash Payments/Receipts:
Interest, net of capitalized interest	$	480	$	223	$	104	$	489	$	208	$	130	$	471	$	201	$	143
Income tax payments (refunds), net	421		142		37		(46)		20		(7)		143		65		(5)
Non-cash transactions:
Accounts payable related to capital expenditures	335		168		139		370		261		128		153		102		66
Fair Value of Energy Transfer Common Units received for Enable Merger	—		—		—		1,672		—		—		—		—		—
Fair Value of Energy Transfer Series G Preferred Units received for Enable Merger	—		—		—		385		—		—		—		—		—
ROU assets obtained in exchange for lease liabilities	7		6		—		2		—		—		15		1		5
Beneficial conversion feature	—		—		—		—		—		—		32		—		—
Amortization of beneficial conversion feature	—		—		—		—		—		—		(32)		—		—

The table below provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the amount reported in the Statements of Consolidated Cash Flows:


	December 31, 2022						December 31, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash and cash equivalents (1)	$	74	$	75	$	—	$	230	$	214	$	15
Restricted cash included in Prepaid expenses and other current assets	17		13		—		24		19		—

Total cash, cash equivalents and restricted cash shown in Statements of Consolidated Cash Flows	$	91	$	88	$	—	$	254	$	233	$	15

(1)Houston Electric’s Cash and cash equivalents as of December 31, 2022 and 2021 included $75 million and $92 million, respectively, of cash related to the Bond Companies.

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

Houston Electric and CERC participate in a 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 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 money pool activity:


	December 31, 2022						December 31, 2021
	Houston Electric			CERC			Houston Electric			CERC
	(in millions, except interest rates)
Money pool investments (borrowings) (1)	$	(642)		$	—		$	(512)		$	(224)
Weighted average interest rate	4.75		%	4.75		%	0.34		%	0.34		%

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

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


	Year Ended December 31,
	2022				2021				2020
	Houston Electric		CERC		Houston Electric		CERC (1)		Houston Electric		CERC (1)
	(in millions)
Interest income (expense), net (2)	$	—	$	(18)	$	—	$	(38)	$	—	$	(35)

(1)Includes affiliate-related net interest expense of Indiana Gas and VEDO to reflect the Restructuring.

(2)Interest income is included in Other, net and interest expense is included in Interest and other finance charges on Houston Electric’s and CERC’s respective 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 are included primarily in Operation and maintenance expenses:


	Year Ended December 31,
	2022				2021				2020
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Corporate service charges	$	167	$	237	$	189	$	257	$	197	$	232
Net affiliate service charges (billings)	15		(15)		(7)		7		(16)		16

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


	Year Ended December 31,
	2022				2021				2020
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	316	$	124	$	—	$	—	$	551	$	128
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses	—		720		—		—		—		—
Cash contribution from parent	1,143		289		130		140		62		337
Net assets acquired in the Restructuring (1)	—		2,345		—		—		—		—
Capital distribution to parent associated with the sale of CES	—		—		—		—		—		286
Non-cash capital contribution from parent in payment for property, plant and equipment below	38		54		—		—		—		—
Cash paid to parent for property, plant and equipment below	65		61		—		—		—		—
Property, plant and equipment from parent (2)	103		115		—		—		36		23

(1)The Restructuring was a common control transaction that required the recasting of financial information to the earliest period presented. Therefore, the net asset transfer is not reflected during the current period on CERC’s Condensed Statements of Consolidated Changes in Equity.

(2)Property, plant and equipment purchased from CenterPoint Energy at its net carrying value on the date of purchase.

(20) 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 income and expense for operating leases and ROU amortization for finance leases are recognized on a straight-line basis over the lease term.

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 and mobile generators. 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. Sublease income is 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 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’ operating lease agreements are primarily equipment and real property leases, including land and office facility leases. CenterPoint Energy and Houston Electric also have finance lease agreements for mobile generators. The Registrants’ lease terms may include options to extend or terminate a lease when it is reasonably certain that those options will be exercised. The Registrants have elected an accounting policy that exempts leases with terms of one year or less from the recognition requirements of ASC 842.

In 2021, Houston Electric entered into a temporary short-term lease and long-term leases for mobile generation. The short-term lease agreement allows Houston Electric to take delivery of TEEEF assets on a short-term basis with an initial term ending on September 30, 2022 and extended until December 31, 2022. As of December 31, 2022, the short-term lease agreement has

expired and all mobile generation assets are leased under the long-term lease agreement. Per Houston Electric’s short-term lease accounting policy election, a ROU asset and lease liability are not reflected on Houston Electric’s Condensed Consolidated Balance Sheets. Expenses associated with the short-term lease, including carrying costs, are deferred to a regulatory asset and totaled $103 million and $20 million as of December 31, 2022 and 2021, respectively.

The long-term lease agreement includes up to 505 MW of TEEEF of which 380 MW and 125 MW was delivered as of December 31, 2022 and 2021, respectively, triggering lease commencement at delivery, and has an initial term ending in 2029 for all TEEEF leases. The total cash payments under the long-term lease totaled $664 million, with $179 million paid in 2021 and the remaining $485 million paid in 2022. These assets were previously available under the short-term lease agreement. Houston Electric derecognized the finance lease liability when the extinguishment criteria in Topic 405 - Liabilities was achieved. Per the terms of the agreement, lease payments are due and made in full by Houston Electric upon taking possession of the asset, relieving substantially all of the associated finance lease liability at that time. The remaining finance lease liability associated with the commenced long-term TEEEF agreement was not significant as of December 31, 2022 and 2021 and relates to removal costs that will be incurred at the end of the lease term. As of December 31, 2022, Houston Electric has secured a first lien on the assets leased under the prepayment agreement, except for assets with lease payments totaling $113 million. The $113 million prepayment is being held in an escrow account, not controlled by Houston Electric, and the funds will be released when a first lien can be secured by Houston Electric. Expenses associated with the long-term lease, including depreciation expense on the right of use asset and carrying costs, are deferred to a regulatory asset and totaled $60 million and $1 million as of December 31, 2022 and 2021, respectively. The long-term lease agreement contains a termination clause that can be exercised in the event of material adverse regulatory actions. If the right to terminate is elected, subject to the satisfaction of certain conditions, 75% of Houston Electric’s prepaid lease costs that is attributable to the period from the effective date of termination to the end of the lease term would be refunded. In December 2022, the long-term lease agreement was amended to include a disallowance reimbursement clause that can be exercised in the event that any regulatory proceeding or settlement agreement results in a disallowance of Houston Electric’s recovery of deferred costs under either the long-term lease agreement, short-term lease agreement or any other quantifiable adverse financial impact to Houston Electric. If the disallowance reimbursement clause is exercised, 85% of such disallowance up to $53 million would be paid to Houston Electric. Any disallowance greater than $53 million would remain subject to the 75% limit set forth in the termination clause. For further discussion of the regulatory impacts, see Note 7.

Houston Electric will also incur variable costs throughout the lease term for the operation and maintenance of the generators. Lease costs, including variable and ROU asset amortization costs, are deferred to Regulatory assets as incurred as a recoverable cost under the 2021 Texas legislation. See Note 7 for further information regarding recovery of these deferred costs.

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


	Year Ended December 31, 2022						Year Ended December 31, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	6	$	1	$	2	$	8	$	1	$	4
Short-term lease cost	167		166		1		119		118		—

Total lease cost (1)	$	173	$	167	$	3	$	127	$	119	$	4

(1) CenterPoint Energy and Houston Electric defer finance lease costs for TEEEF to Regulatory assets for recovery rather than to Depreciation and Amortization in the Statements of Consolidated Income.

The components of lease income were as follows:


	Year Ended December 31, 2022						Year Ended December 31, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	5	$	1	$	3	$	6	$	1	$	3
Variable lease income	2		—		—		1		—		—
Total lease income	$	7	$	1	$	3	$	7	$	1	$	3

Supplemental balance sheet information related to leases was as follows:


	December 31, 2022									December 31, 2021
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions, except lease term and discount rate)
Assets:
Operating ROU assets (1)	$	19		$	6		$	5		$	22		$	1		$	12
Finance ROU assets (2)	621			621			—			179			179			—
Total leased assets	$	640		$	627		$	5		$	201		$	180		$	12

Liabilities:
Current operating lease liability (3)	$	5		$	1		$	2		$	6		$	1		$	2
Non-current operating lease liability (4)	14			5			4			17			—			11
Total leased liabilities (5)	$	19		$	6		$	6		$	23		$	1		$	13

Weighted-average remaining lease term (in years) - operating leases	4.3			4.8			3.9			6.2			4.1			6.5
Weighted-average discount rate - operating leases	3.80		%	4.01		%	3.58		%	3.10		%	2.86		%	3.20		%
Weighted-average remaining lease term (in years) - finance leases	6.5			6.5			—			7.5			7.5			—
Weighted-average discount rate - finance leases	3.60		%	3.60		%	—			2.21		%	2.21		%	—

(1)Reported within Other assets in the Registrants’ respective Consolidated Balance Sheets.

(2)Reported within Property, Plant and Equipment in the Registrants’ respective Consolidated Balance Sheets. Finance lease assets are recorded net of accumulated amortization.

(3)Reported within Current other liabilities in the Registrants’ respective Consolidated Balance Sheets.

(4)Reported within Other liabilities in the Registrants’ respective Consolidated Balance Sheets.

(5)Finance lease liabilities were not material as of December 31, 2022 or 2021 and are reported within Other long-term debt in the Registrants’ respective Consolidated Balance Sheets when applicable.

As of December 31, 2022, finance lease liabilities were not significant to the Registrants. As of December 31, 2022, maturities of operating lease liabilities were as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
2023	$	5	$	1	$	2
2024	5		2		1
2025	4		2		1
2026	4		1		2
2027	2		1		—
2028 and beyond	1		—		—
Total lease payments	21		7		6
Less: Interest	2		1		—
Present value of lease liabilities	$	19	$	6	$	6

As of December 31, 2022, future minimum finance lease payments were not significant to the Registrants. As of December 31, 2022, maturities of undiscounted operating lease payments to be received are as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
2023	$	7	$	1	$	4
2024	7		1		4
2025	7		1		4
2026	7		—		4
2027	7		—		4
2028 and beyond	159		—		156
Total lease payments to be received	$	194	$	3	$	176

Other information related to leases is as follows:


	Year Ended December 31, 2022
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating cash flows from operating leases included in the measurement of lease liabilities	$	6	$	1	$	2
Financing cash flows from finance leases included in the measurement of lease liabilities	485		485		—

See Note 18 for information on ROU assets obtained in exchange for operating lease liabilities.

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