Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in millions, except per share amounts)
Revenues:
Utility revenues	$	1,829	$	1,661	$	6,400	$	5,797
Non-utility revenues	74		88		210		241
Total	1,903		1,749		6,610		6,038
Expenses:
Utility natural gas, fuel and purchased power	349		223		1,860		1,416
Non-utility cost of revenues, including natural gas	52		61		143		159
Operation and maintenance	670		709		2,020		2,055
Depreciation and amortization	329		353		974		987
Taxes other than income taxes	119		125		401		394

Total	1,519		1,471		5,398		5,011
Operating Income	384		278		1,212		1,027
Other Income (Expense):
Gain (loss) on equity securities	(206)		(12)		(284)		40
Gain (loss) on indexed debt securities	210		11		381		(40)
Gain on sale	—		8		303		8
Interest expense and other finance charges	(116)		(114)		(375)		(380)
Interest expense on Securitization Bonds	(3)		(5)		(11)		(16)



Other income, net	8		17		25		54
Total	(107)		(95)		39		(334)
Income from Continuing Operations Before Income Taxes	277		183		1,251		693
Income tax expense	75		33		328		63
Income from Continuing Operations	202		150		923		630
Income from Discontinued Operations (net of tax expense of $-0-, $15, $-0- and $56, respectively)	—		68		—		202
Net Income	202		218		923		832
Income allocated to preferred shareholders	13		23		37		82
Income Available to Common Shareholders	$	189	$	195	$	886	$	750

Basic earnings per common share - continuing operations	$	0.30	$	0.21	$	1.41	$	0.94
Basic earnings per common share - discontinued operations	—		0.11		—		0.35
Basic Earnings Per Common Share	0.30		0.32		1.41		1.29
Diluted earnings per common share - continuing operations	$	0.30	$	0.21	$	1.40	$	0.91
Diluted earnings per common share - discontinued operations	—		0.11		—		0.34
Diluted Earnings Per Common Share	$	0.30	$	0.32	$	1.40	$	1.25

Weighted Average Common Shares Outstanding, Basic	630		605		629		581
Weighted Average Common Shares Outstanding, Diluted	633		609		633		601

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in millions)
Net Income	$	202	$	218	$	923	$	832
Other comprehensive income:
Adjustment to pension and other postretirement plans (net of tax expense (benefit) of $(9), $1, $(5) and $2)	2		4		(20)		7

Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0-, $-0-, $-0- and $-0-)	—		1		1		1

Other comprehensive income from unconsolidated affiliates (net of tax of $-0-, $-0-, $-0- and $-0-)	—		—		—		2
Total	2		5		(19)		10
Comprehensive income	204		223		904		842
Income allocated to preferred shareholders	13		23		37		82
Comprehensive income available to common shareholders	$	191	$	200	$	867	$	760

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($110 and $92 related to VIEs, respectively)	$	114	$	230
Investment in equity securities	452		1,439

Accounts receivable ($30 and $29 related to VIEs, respectively), less allowance for credit losses of $36 and $44, respectively	773		690
Accrued unbilled revenues, less allowance for credit losses of $2 and $6, respectively	315		513

Natural gas and coal inventory	308		186
Materials and supplies	574		422
Non-trading derivative assets	29		9
Taxes receivable	—		1
Current assets held for sale	—		2,338
Regulatory assets	1,377		1,395
Prepaid expenses and other current assets ($12 and $19 related to VIEs, respectively)	141		132
Total current assets	4,083		7,355
Property, Plant and Equipment:
Property, plant and equipment	36,478		33,673
Less: accumulated depreciation and amortization	10,568		10,189
Property, plant and equipment, net	25,910		23,484
Other Assets:
Goodwill	4,294		4,294
Regulatory assets ($265 and $420 related to VIEs, respectively)	2,212		2,321

Non-trading derivative assets	6		5




Other non-current assets	214		220
Total other assets	6,726		6,840
Total Assets	$	36,719	$	37,679

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions, except par value and shares)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term borrowings	$	514	$	7
Current portion of VIE Securitization Bonds long-term debt	153		220
Indexed debt, net	8		10
Current portion of other long-term debt	1,478		308
Indexed debt securities derivative	522		903
Accounts payable	1,028		1,196

Taxes accrued	273		378
Interest accrued	118		136
Dividends accrued	113		131
Customer deposits	109		111
Non-trading derivative liabilities	—		2


Current liabilities held for sale	—		562
Other current liabilities	295		323
Total current liabilities	4,611		4,287
Other Liabilities:
Deferred income taxes, net	3,974		3,904
Non-trading derivative liabilities	—		12
Benefit obligations	578		511
Regulatory liabilities	3,295		3,153

Other non-current liabilities	835		836
Total other liabilities	8,682		8,416
Long-term Debt:
VIE Securitization Bonds, net	240		317
Other long-term debt, net	13,195		15,241
Total long-term debt, net	13,435		15,558
Commitments and Contingencies (Note 13)
Temporary Equity (Note 18)	2		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 18)	790		790
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 629,532,024 shares and 628,923,534 shares outstanding, respectively	6		6
Additional paid-in capital	8,557		8,529
Retained earnings	719		154
Accumulated other comprehensive loss	(83)		(64)
Total shareholders’ equity	9,989		9,415
Total Liabilities and Shareholders’ Equity	$	36,719	$	37,679

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
	(in millions)
Cash Flows from Operating Activities:
Net income	$	923	$	832


Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	974		987

Deferred income taxes	26		86




Gain on divestitures	(303)		(8)
Loss (gain) on equity securities	284		(40)
Loss (gain) on indexed debt securities	(381)		40

Equity in earnings of unconsolidated affiliates	—		(258)
Distributions from unconsolidated affiliates	—		116
Pension contributions	(6)		(59)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	95		231

Inventory	(224)		(104)
Taxes receivable	1		68
Accounts payable	(119)		(53)

Net regulatory assets and liabilities	148		(2,309)
Other current assets and liabilities	(199)		(25)
Other non-current assets and liabilities	34		(95)
Other operating activities, net	72		74


Net cash provided by (used in) operating activities	1,325		(517)
Cash Flows from Investing Activities:
Capital expenditures	(3,079)		(2,148)






Proceeds from sale of marketable securities	702		—
Proceeds from divestitures	2,075		22


Other investing activities, net	73		22


Net cash used in investing activities	(229)		(2,104)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	457		(27)
Payment of obligation for finance lease	(218)		—
Proceeds from (payments of) commercial paper, net	(1,620)		596
Proceeds from long-term debt	2,089		4,493
Payments of long-term debt, including make-whole premiums	(1,519)		(2,024)




Payment of debt issuance costs	(26)		(38)


Payment of dividends on Common Stock	(328)		(278)
Payment of dividends on Preferred Stock	(48)		(106)





Other financing activities, net	(7)		(6)


Net cash provided by (used in) financing activities	(1,220)		2,610
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(124)		(11)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	254		167
Cash, Cash Equivalents and Restricted Cash at End of Period	$	130	$	156

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
	(in millions of dollars and shares, except authorized shares and par value amounts)
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares
Balance, beginning of period	1	$	790	3	$	1,739	1	$	790	3	$	2,363


Conversion of Series B Preferred Stock and Series C Preferred Stock	—	—		(2)	(949)		—	—		(2)	(1,573)
Balance, end of period	1	790		1	790		1	790		1	790
Common Stock, $0.01 par value; authorized 1,000,000,000 shares
Balance, beginning of period	629	6		593	6		629	6		551	6
Issuances of Common Stock	—	—		36	—		—	—		77	—
Issuances related to benefit and investment plans	—	—		—	—		—	—		1	—
Balance, end of period	629	6		629	6		629	6		629	6
Additional Paid-in-Capital
Balance, beginning of period		8,544			7,553			8,529			6,914
Issuances of Common Stock, net of issuance costs		—			949			—			1,573
Issuances related to benefit and investment plans		13			15			28			30

Balance, end of period		8,557			8,517			8,557			8,517
Retained Earnings (Accumulated Deficit)
Balance, beginning of period		768			(343)			154			(845)
Net income		202			218			923			832
Common Stock dividends declared (see Note 18)		(227)			(202)			(334)			(297)
Preferred Stock dividends declared (see Note 18)		(24)			(41)			(24)			(58)





Balance, end of period		719			(368)			719			(368)
Accumulated Other Comprehensive Loss
Balance, beginning of period		(85)			(85)			(64)			(90)
Other comprehensive income (loss)		2			5			(19)			10
Balance, end of period		(83)			(80)			(83)			(80)
Total Shareholders’ Equity		$	9,989		$	8,865		$	9,989		$	8,865

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Revenues	$	935	$	874	$	2,562	$	2,344
Expenses:
Operation and maintenance	395		396		1,193		1,159
Depreciation and amortization	175		182		511		484
Taxes other than income taxes	65		64		196		192
Total	635		642		1,900		1,835
Operating Income	300		232		662		509
Other Income (Expense):
Interest expense and other finance charges	(50)		(46)		(148)		(138)
Interest expense on Securitization Bonds	(3)		(5)		(11)		(16)



Other income, net	5		4		13		12
Total	(48)		(47)		(146)		(142)
Income Before Income Taxes	252		185		516		367
Income tax expense	52		34		108		60
Net Income	$	200	$	151	$	408	$	307

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Net income	$	200	$	151	$	408	$	307




Comprehensive income	$	200	$	151	$	408	$	307

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($110 and $92 related to VIEs, respectively)	$	115	$	214
Accounts receivable ($30 and $29 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively	402		263
Accounts and notes receivable–affiliated companies	389		11
Accrued unbilled revenues	147		127
Materials and supplies	408		292



Prepaid expenses and other current assets ($12 and $19 related to VIEs, respectively)	31		49
Total current assets	1,492		956
Property, Plant and Equipment:
Property, plant and equipment	16,988		15,273
Less: accumulated depreciation and amortization	4,295		4,070
Property, plant and equipment, net	12,693		11,203
Other Assets:
Regulatory assets ($265 and $420 related to VIEs, respectively)	768		789

Other non-current assets	38		32
Total other assets	806		821
Total Assets	$	14,991	$	12,980

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:

Current portion of VIE Securitization Bonds long-term debt	$	153	$	220
Current portion of other long-term debt	200		300
Accounts payable	438		510
Accounts and notes payable–affiliated companies	39		568
Taxes accrued	159		193
Interest accrued	57		74

Other current liabilities	73		91
Total current liabilities	1,119		1,956
Other Liabilities:
Deferred income taxes, net	1,186		1,122
Benefit obligations	53		55
Regulatory liabilities	1,186		1,152

Other non-current liabilities	101		98
Total other liabilities	2,526		2,427
Long-term Debt:
VIE Securitization Bonds, net	240		317
Other long-term debt, net	6,035		4,658
Total long-term debt, net	6,275		4,975
Commitments and Contingencies (Note 13)
Member’s Equity:
Common stock	—		—
Additional paid-in capital	3,860		2,678
Retained earnings	1,211		944

Total member’s equity	5,071		3,622
Total Liabilities and Member’s Equity	$	14,991	$	12,980

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
	(in millions)
Cash Flows from Operating Activities:
Net income	$	408	$	307
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	511		484
Deferred income taxes	44		8


Changes in other assets and liabilities:
Accounts and notes receivable, net	(159)		(140)
Accounts receivable/payable–affiliated companies	(35)		(31)
Inventory	(116)		(49)
Accounts payable	(11)		60

Net regulatory assets and liabilities	(40)		(190)
Other current assets and liabilities	(43)		41
Other non-current assets and liabilities	(5)		13
Other operating activities, net	(9)		(6)
Net cash provided by operating activities	545		497
Cash Flows from Investing Activities:
Capital expenditures	(1,727)		(1,108)
Increase in notes receivable–affiliated companies	(360)		—


Other investing activities, net	34		4
Net cash used in investing activities	(2,053)		(1,104)
Cash Flows from Financing Activities:


Proceeds from long-term debt	1,589		1,096
Payments of long-term debt	(444)		(540)
Increase (decrease) in notes payable–affiliated companies	(512)		32
Dividend to parent	(141)		—
Contribution from parent	1,143		—

Payment of debt issuance costs	(15)		(12)
Payment of obligation for finance lease	(218)		—

Net cash provided by financing activities	1,402		576
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(106)		(31)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	233		154
Cash, Cash Equivalents and Restricted Cash at End of Period	$	127	$	123

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
	(in millions, except share amounts)


Common Stock
Balance, beginning of period	1,000	$	—	1,000	$	—	1,000	$	—	1,000	$	—
Balance, end of period	1,000	—		1,000	—		1,000	—		1,000	—
Additional Paid-in-Capital
Balance, beginning of period		3,860			2,548			2,678			2,548
Non-cash contribution from parent		—			—			38			—
Contribution from parent		—			—			1,143			—
Other		—			—			1			—
Balance, end of period		3,860			2,548			3,860			2,548
Retained Earnings
Balance, beginning of period		1,085			719			944			563
Net income		200			151			408			307
Dividend to parent		(74)			—			(141)			—
Balance, end of period		1,211			870			1,211			870
Accumulated Other Comprehensive Loss
Balance, beginning of period		—			—			—			—

Balance, end of period		—			—			—			—
Total Member’s Equity		$	5,071		$	3,418		$	5,071		$	3,418

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in millions)
Revenues:
Utility revenues	$	663	$	594	$	3,206	$	2,876
Non-utility revenues	9		15		26		49
Total	672		609		3,232		2,925
Expenses:
Utility natural gas	276		173		1,660		1,230
Non-utility cost of revenues, including natural gas	1		4		3		16
Operation and maintenance	190		223		630		709
Depreciation and amortization	113		124		333		360
Taxes other than income taxes	50		53		185		182

Total	630		577		2,811		2,497
Operating Income	42		32		421		428
Other Income (Expense):
Gain on sale	—		11		557		11
Interest expense and other finance charges	(32)		(32)		(91)		(96)


Other expense, net	—		(2)		(11)		—
Total	(32)		(23)		455		(85)
Income Before Income Taxes	10		9		876		343
Income tax expense	17		1		220		40


Net Income (Loss)	$	(7)	$	8	$	656	$	303

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in millions)
Net income (loss)	$	(7)	$	8	$	656	$	303




Comprehensive income (loss)	$	(7)	$	8	$	656	$	303

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	1	$	15
Accounts receivable, less allowance for credit losses of $32 and $40, respectively	242		336
Accrued unbilled revenues, less allowance for credit losses of $1 and $6, respectively	139		335
Accounts and notes receivable–affiliated companies	30		28
Materials and supplies	104		82
Natural gas inventory	267		151
Non-trading derivative assets	23		8
Taxes receivable	21		28

Current assets held for sale	—		2,084
Regulatory assets	1,340		1,371
Prepaid expenses and other current assets	69		48
Total current assets	2,236		4,486
Property, Plant and Equipment:
Property, plant and equipment	14,075		12,934
Less: accumulated depreciation and amortization	3,985		3,826
Property, plant and equipment, net	10,090		9,108
Other Assets:
Goodwill	1,583		1,583
Regulatory assets	856		938
Non-trading derivative assets	4		4



Other non-current assets	31		34
Total other assets	2,474		2,559
Total Assets	$	14,800	$	16,153

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term borrowings	$	514	$	7
Current portion of long-term debt	1,274		—
Accounts payable	389		503
Accounts payable–affiliated companies	68		125
Notes payable–affiliated companies	—		441
Taxes accrued	112		152
Interest accrued	41		30
Customer deposits	93		92

Current liabilities held for sale	—		562
Other current liabilities	150		151
Total current liabilities	2,641		2,063
Other Liabilities:
Deferred income taxes, net	1,262		1,019


Benefit obligations	96		100
Regulatory liabilities	1,815		1,715

Other non–current liabilities	565		571
Total other liabilities	3,738		3,405
Long-Term Debt	3,297		5,552
Commitments and Contingencies (Note 13)
Stockholder’s Equity:

Additional paid-in capital	3,565		4,106
Retained earnings	1,549		1,017
Accumulated other comprehensive income	10		10
Total stockholder’s equity	5,124		5,133
Total Liabilities and Stockholder’s Equity	$	14,800	$	16,153

See Combined Notes to Interim Condensed Financial Statements

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CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
	(in millions)
Cash Flows from Operating Activities:
Net income	$	656	$	303
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	333		360

Deferred income taxes	217		41

Gain on divestitures	(557)		(11)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	271		374
Accounts receivable/payable–affiliated companies	(59)		(4)
Inventory	(87)		(77)
Taxes receivable	—		(4)
Accounts payable	(117)		(98)



Net regulatory assets and liabilities	181		(2,153)
Other current assets and liabilities	(81)		(57)
Other non-current assets and liabilities	(5)		(42)
Other operating activities, net	1		9
Net cash provided by (used in) operating activities	753		(1,359)
Cash Flows from Investing Activities:
Capital expenditures	(1,166)		(805)
Increase in notes receivable–affiliated companies	—		(25)

Proceeds from divestiture	2,075		22
Other investing activities, net	12		(39)


Net cash provided by (used in) investing activities	921		(847)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	457		(27)

Proceeds from (payments of) commercial paper, net	(324)		338
Proceeds from long-term debt	852		1,699
Payments of long-term debt	(425)		—

Dividends to parent	(844)		—
Payment of debt issuance costs	(11)		(10)
Increase (decrease) in notes payable–affiliated companies	(1,517)		203
Contribution from parent	125		—


Other financing activities, net	(1)		(2)


Net cash provided by (used in) financing activities	(1,688)		2,201
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(14)		(5)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	15		6
Cash, Cash Equivalents and Restricted Cash at End of Period	$	1	$	1

See Combined Notes to Interim Condensed Financial Statements

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CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

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

CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of period	1,000	$	—	1,000	$	—	1,000	$	—	1,000	$	—
Balance, end of period	1,000	—		1,000	—		1,000	—		1,000	—
Additional Paid-in-Capital
Balance, beginning of period		3,565			3,965			4,106			3,966
Non-cash contribution from parent		—			—			54			—
Contribution from parent		—			—			125			—
Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses		—			—			(720)			—
Other		—			—			—			(1)
Balance, end of period		3,565			3,965			3,565			3,965
Retained Earnings
Balance, beginning of period		1,569			939			1,017			644
Net income		(7)			8			656			303
Dividend to parent		(13)			—			(124)			—
Balance, end of period		1,549			947			1,549			947
Accumulated Other Comprehensive Income
Balance, beginning of period		10			10			10			10

Balance, end of period		10			10			10			10
Total Stockholder’s Equity		$	5,124		$	4,922		$	5,124		$	4,922

See Combined Notes to Interim Condensed Financial Statements

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CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

COMBINED NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS

(1) Background and Basis of Presentation

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

Except as discussed in the penultimate paragraph in Note 11 to the Registrants’ Interim Condensed Financial Statements, no registrant has an obligation in respect of any other Registrant’s debt securities, and holders of such debt securities should not consider the financial resources or results of operations of any Registrant other than the obligor in making a decision with respect to such securities.

Included in this combined Form 10-Q are the Interim Condensed Financial Statements of CenterPoint Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Interim Condensed Financial Statements are unaudited, omit certain financial statement disclosures and should be read with the Registrants’ financial statements included in the Registrants’ combined 2021 Form 10-K. The Combined Notes to Interim Condensed 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 it 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 9 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 3.

As of September 30, 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.
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.

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As of September 30, 2022, CenterPoint Energy’s reportable segments were Electric and Natural Gas. Houston Electric and CERC each consist of a single reportable segment. For a description of CenterPoint Energy’s reportable segments, see Note 15.

As of September 30, 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.

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

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

Certain prior year amounts have been reclassified to conform to the current year reportable segment presentation described in Note 15 and to reflect the impacts of discontinued operations and the Restructuring.

(2) 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	Adoption of this standard may result in additional disclosures related to the recovery of Texas natural gas costs associated with the February 2021 Winter Storm Event through the state securitization, which is expected to be 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 standards and recently issued 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) Divestitures (CenterPoint Energy and CERC)

Divestiture of Arkansas and Oklahoma Natural Gas Businesses. 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 include 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.

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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 nine months ended September 30, 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.

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 September 30, 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 Condensed 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

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 9 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 Note 11.

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 Condensed Statements of Consolidated Income is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022 (1)		2021		2022 (1)		2021
	(in millions)
Income from Continuing Operations Before Income Taxes	$	—	$	(14)	$	9	$	48

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(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. Subject to the conditions in the Transition Services Agreement, Southern Col Midco may terminate these support services with 60 days prior written notice. In September 2022, Southern Col Midco provided notice of their intent to terminate a significant majority of all services under the Transition Services Agreement, with such termination expected to occur in November 2022.

CenterPoint Energy’s charges to Southern Col Midco for reimbursement of transition services were $10 million and $29 million during the three and nine months ended September 30, 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 $7 million as of September 30, 2022 for transition services.

Discontinued Operations (CenterPoint Energy)

Enable Merger. 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, resulting in the exchange of Enable Common Units owned by CenterPoint Energy for Energy Transfer Common Units and the exchange of Enable Series A Preferred Units owned by CenterPoint Energy for Energy Transfer Series G Preferred Units.

During the nine months ended September 30, 2022, CenterPoint Energy sold all of its remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units. See Note 10 for further information regarding Energy Transfer equity securities.

Additionally, CenterPoint Energy’s disposal of its interests in Enable represented a strategic shift that will have a major effect on CenterPoint Energy’s operations or financial results, and as such, its equity investment in Enable was classified and presented as held for sale. 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 Condensed Statements of Consolidated Income for the three and nine months ended September 30, 2021.

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


	Equity Method Investment in Enable
	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021

	(in millions)
Equity in earnings of unconsolidated affiliate, net	$	83	$	258
Income from discontinued operations before income taxes	83		258
Income tax expense	15		56
Net income from discontinued operations	$	68	$	202

CenterPoint Energy has elected not to separately disclose discontinued operations on its respective Condensed Statements of Consolidated Cash Flows. The following table summarizes CenterPoint Energy’s cash flows from discontinued operations and certain supplemental cash flow disclosures, as applicable:


	Equity Method Investment in Enable
	Nine Months Ended September 30, 2021
	(in millions)
Equity in earnings of unconsolidated affiliate - operating	$	(258)
Distributions from unconsolidated affiliate - operating	116

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Distributions Received from Enable (CenterPoint Energy):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021				2021
	Per Unit		Cash Distribution		Per Unit		Cash Distribution
	(in millions, except per unit amounts)
Enable Common Units	$	0.16525	$	39	$	0.49575	$	116
Enable Series A Preferred Units	0.54390		8		1.75620		26
Total CenterPoint Energy			$	47			$	142

Transactions with Enable (CenterPoint Energy and CERC):


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
	(in millions)
Natural gas expenses, includes transportation and storage costs	$	14	$	62

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
	(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

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Summarized unaudited consolidated income information for Enable is as follows:


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
	(in millions)
Operating revenues	$	956	$	2,713
Cost of sales, excluding depreciation and amortization	565		1,510
Depreciation and amortization	104		313

Operating income	152		482
Net income attributable to Enable Common Units	107		341


Reconciliation of Equity in Earnings, net:
CenterPoint Energy’s interest	$	58	$	183
Basis difference amortization (1)	25		75


CenterPoint Energy’s equity in earnings, net (2)	$	83	$	258

(1)Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s 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.

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

(4) Revenue Recognition and Allowance for Credit Losses

Revenues from Contracts with Customers

In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services.

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.

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

CenterPoint Energy


	Three Months Ended September 30, 2022
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,155	$	686	$	65	$	1,906

Other (1)	(9)		6		—		(3)

Total revenues	$	1,146	$	692	$	65	$	1,903

	Nine Months Ended September 30, 2022
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	3,113	$	3,358	$	182	$	6,653
Other (1)	(21)		(24)		2		(43)

Total revenues	$	3,092	$	3,334	$	184	$	6,610

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	Three Months Ended September 30, 2021
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,056	$	611	$	73	$	1,740
Other (1)	—		8		1		9

Total revenues	$	1,056	$	619	$	74	$	1,749

	Nine Months Ended September 30, 2021
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	2,822	$	2,984	$	190	$	5,996
Other (1)	1		38		3		42

Total revenues	$	2,823	$	3,022	$	193	$	6,038

(1)Primarily consists of income from ARPs and leases. Total lease income was $1 million and $2 million for the three months ended September 30, 2022 and 2021, respectively, and $5 million and $6 million for the nine months ended September 30, 2022 and 2021, respectively.

Houston Electric


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Revenue from contracts	$	949	$	880	$	2,597	$	2,358
Other (1)	(14)		(6)		(35)		(14)
Total revenues	$	935	$	874	$	2,562	$	2,344

(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three and nine months ended September 30, 2022 and 2021.

CERC


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Revenue from contracts	$	667	$	602	$	3,257	$	2,893
Other (1)	5		7		(25)		32

Total revenues	$	672	$	609	$	3,232	$	2,925

(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three and nine months ended September 30, 2022 and 2021.

Revenues from Contracts with Customers

Electric (CenterPoint Energy and Houston Electric). Houston Electric transmits and distributes electricity to customers over time, and customers consume the electricity when delivered. Indiana Electric generates, transmits and distributes electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, 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.

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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 Condensed Consolidated Balance Sheets. As of September 30, 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 Condensed Consolidated Balance Sheets. As of September 30, 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 related to ASC 606 revenues, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers, excluding balances related to assets held for sale, as of December 31, 2021 and September 30, 2022, respectively, are presented below.

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 September 30, 2022	741		315		2		51
Increase (decrease)	$	114	$	(198)	$	(13)	$	35

The amount of revenue recognized during the nine-month period ended September 30, 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 September 30, 2022	371		147		4
Increase (decrease)	$	146	$	20	$	—

The amount of revenue recognized during the nine-month period ended September 30, 2022 that was included in the opening contract liability was $3 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 September 30, 2022	261		139
Increase (decrease)	$	(58)	$	(196)

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

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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 September 30, 2022:

Corporate and Other	$	310	$	574	$	884
	$	310	$	574	$	884

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

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 recognizes losses on financial assets that fall under the scope of Topic 326. Losses on financial assets are primarily recoverable through regulatory mechanisms and do not materially impact Houston Electric's allowance for credit losses. For a discussion of regulatory deferrals related to the February 2021 Winter Storm Event, see Note 6.

(5) Employee Benefit Plans

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

Pension Benefits (CenterPoint Energy)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Service cost (1)	$	7	$	9	$	23	$	29
Interest cost (2)	20		15		52		44
Expected return on plan assets (2)	(21)		(26)		(69)		(78)

Amortization of net loss (2)	8		9		22		28
Settlement cost (benefit) (2) (3)	8		27		38		26

Net periodic cost	$	22	$	34	$	66	$	49

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

(2)Amounts presented in the table above are included in Other income, net in CenterPoint Energy’s Condensed Statements of Consolidated Income, net of regulatory deferrals.

(3)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.

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Postretirement Benefits


	Three Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Service cost (1)	$	—	$	—	$	1	$	1	$	—	$	—
Interest cost (2)	3		1		1		2		1		1
Expected return on plan assets (2)	(1)		(1)		(1)		(1)		(1)		—
Amortization of prior service credit (2)	(1)		(1)		—		(1)		(1)		—
Amortization of net loss (2)	(1)		(1)		—		—		—		—




Net periodic cost (benefit)	$	—	$	(2)	$	1	$	1	$	(1)	$	1

	Nine Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Service cost (1)	$	1	$	—	$	1	$	2	$	—	$	1
Interest cost (2)	7		3		3		6		3		2
Expected return on plan assets (2)	(3)		(3)		(1)		(3)		(3)		—
Amortization of prior service cost (credit) (2)	(2)		(3)		1		(3)		(3)		—
Amortization of net loss (2)	(3)		(2)		(1)		—		—		—




Net periodic cost (benefit)	$	—	$	(5)	$	3	$	2	$	(3)	$	3

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

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

The table below reflects the expected minimum contributions to be made to the pension and postretirement benefit plans during 2022:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Expected minimum contribution to pension plans during 2022	$	7	$	—	$	—
Expected minimum contribution to postretirement benefit plans in 2022	8		1		4

The table below reflects the contributions made to the pension and postretirement benefit plans:


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Pension plans	$	2	$	—	$	—	$	6	$	—	$	—
Postretirement benefit plans	2		—		1		6		1		3

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(6) Regulatory Matters

Equity Return

The Registrants are at times allowed by a regulator to defer an equity return as part of the recoverable carrying costs of a regulatory asset. A deferred equity return is capitalized for rate-making purposes, but it is not included in the Registrant’s regulatory assets on its Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of Consolidated Income as it is recovered in rates. The recoverable allowed equity return not yet recognized by the Registrants is as follows:


	September 30, 2022						December 31, 2021
	CenterPoint Energy (1)		Houston Electric (2)		CERC (3)		CenterPoint Energy (1)		Houston Electric (2)		CERC (3)
	(in millions)
Allowed equity return not recognized	$	185	$	83	$	52	$	199	$	100	$	51

(1)In addition to the amounts described in (2) and (3) below, represents CenterPoint Energy’s allowed equity return on post in-service carrying cost generally associated with investments at SIGECO.

(2)Represents 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 and TEEEF balances pending recovery in the next rate proceeding. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.

(3)CERC’s allowed equity return on post in-service carrying cost associated with certain distribution facilities replacements expenditures in Texas and costs associated with investments in Indiana.

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


	Three Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	14	$	12	$	1	$	12	$	11	$	—

	Nine Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	36	$	33	$	2	$	31	$	29	$	1

February 2021 Winter Storm Event

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 September 30, 2022 are probable and may be subject to customary regulatory prudence reviews in all jurisdictions that may impact the amounts ultimately recovered. CenterPoint Energy and CERC have begun recovery of natural gas costs in Louisiana, Mississippi and Minnesota, and recovery of natural gas costs in Indiana is complete. CenterPoint Energy and CERC have filed for securitization of natural gas costs in Texas, received commission approval and issuance of financing order in 2022, and expect the Texas Public Financing Authority to issue customer rate relief bonds in 2022. 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

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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 is reviewing the final order and any motion for reconsideration is due by November 8, 2022.

As of September 30, 2022, both CenterPoint Energy and CERC have recorded current regulatory assets of $1,175 million and non-current regulatory assets of $225 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 has been reflected in 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 has been reflected in held for sale at both CenterPoint Energy and CERC, associated with the February 2021 Winter Storm Event.

As of both September 30, 2022 and December 31, 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, both CenterPoint Energy and Houston Electric recorded a regulatory asset of $16 million and $15 million as of September 30, 2022 and December 31, 2021, respectively, to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.

See Note 13(d) for further information regarding litigation related to the February 2021 Winter Storm Event.

Houston Electric TEEEF

Houston Electric continues to review the effects of legislation passed in 2021 and is working with the PUCT regarding proposed rulemakings and pursuing implementation of these items where applicable. For example, pursuant to legislation passed in 2021, Houston Electric entered into two leases for TEEEF (mobile generation) which are detailed in Note 19. Houston Electric is seeking to recover 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 latest 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 contains certain provisions that allow Houston Electric to terminate the lease within a specific window effective between October 1, 2022, and March 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, could be in excess of $805 million, which includes the total payments under the short-term and long-term lease agreements, allowed return and other related costs. 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 are due November 16, 2022 and reply briefs are due December 2, 2022. The administrative law judges are expected to issue a proposal for decision in late January 2023, which will ultimately be decided by the PUCT issuance of a final order expected in March or April of 2023.

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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 September 30, 2022. Right of use 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 three or nine months ended September 30, 2022. See Note 19 for further information.

(7) Derivative Instruments

The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants utilize derivative instruments such as 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 the 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.

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.

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


	September 30, 2022		December 31, 2021
Hedging Classification	Notional Principal

	(in millions)
Economic hedge (1)	$	84	$	84

(1)Relates to interest rate derivative instruments at SIGECO. On June 13, 2022, SIGECO amended the LIBOR interest rate swaps to adjust the termination date to May 1, 2023.

Weather Normalization (CenterPoint Energy and CERC). CenterPoint Energy and CERC have 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. The Registrants do not currently enter into weather hedges.

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**(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, while the last table provides a breakdown of the related income statement impacts.

Fair Value of Derivative Instruments and Hedged Items

CenterPoint Energy


		September 30, 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	$	28	$	—	$	9	$	—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	6		—		5		—

Interest rate derivatives	Current Assets: Non-trading derivative assets	1		—		—		—
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	—		522		—		903

Total		$	35	$	522	$	14	$	917

CERC


		September 30, 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	$	23	$	—	$	8	$	—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	4		—		4		—






Total		$	27	$	—	$	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 amounts.

(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 10 for further information.

Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy)


		Three Months Ended September 30,				Nine Months Ended September 30,
	Income Statement Location	2022		2021		2022		2021
Derivatives not designated as hedging instruments:		(in millions)
Indexed debt securities derivative (1)	Gain (loss) on indexed debt securities	$	210	$	11	$	381	$	(40)

(1)The indexed debt securities derivative is recorded at fair value and changes in the fair value are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income.

(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

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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.


	September 30, 2022 (1)		December 31, 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 (2)	—		7

(1)As of September 30, 2022, all derivatives with credit risk-related contingent features were in an asset position.

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

(8) Fair Value Measurements

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

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities.

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

Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data.

The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis.

The following tables present information about the Registrants’ assets and liabilities measured at fair value on a recurring basis as of September 30, 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


	September 30, 2022						December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Equity securities	$	452	$	—	$	—	$	452	$	1,439	$	—	$	—	$	1,439
Investments, including money market funds (1)	32		—		—		32		42		—		—		42
Interest rate derivatives	—		1		—		1		—		—		—		—
Natural gas derivatives	—		34		—		34		—		14		—		14



Total assets	$	484	$	35	$	—	$	519	$	1,481	$	14	$	—	$	1,495
Liabilities
Indexed debt securities derivative	$	—	$	522	$	—	$	522	$	—	$	903	$	—	$	903
Interest rate derivatives	—		—		—		—		—		14		—		14




Total liabilities	$	—	$	522	$	—	$	522	$	—	$	917	$	—	$	917

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Houston Electric


	September 30, 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


	September 30, 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)	$	13	$	—	$	—	$	13	$	14	$	—	$	—	$	14
Natural gas derivatives	—		27		—		27		—		12		—		12
Total assets	$	13	$	27	$	—	$	40	$	14	$	12	$	—	$	26

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

Estimated Fair Value of Financial Instruments

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


	September 30, 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	$	15,066	$	6,628	$	4,571	$	16,086	$	5,495	$	5,552
Fair value	13,482		5,649		4,324		17,385		6,230		5,999

(1)Includes Securitization Bond debt.

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

Goodwill (CenterPoint Energy and CERC)

CenterPoint Energy’s goodwill by reportable segment as of both September 30, 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 September 30, 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.

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(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 3.

(3)Includes $972 million of goodwill attributable to the businesses transferred in the Restructuring. 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. Goodwill attributable to the disposed Natural Gas businesses was classified as held for sale as of December 31, 2021 and excluded from the table above.

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 the Corporate and Other reconciling category 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.

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

Other Intangibles (CenterPoint Energy)

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


	September 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
	(in millions)
Customer relationships	$	33	$	(15)	$	18	$	33	$	(12)	$	21

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

Operation and maintenance agreements (1)	12		(1)		11		12		(1)		11
Other	2		(1)		1		2		(1)		1
Total	$	63	$	(23)	$	40	$	63	$	(19)	$	44

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization	$	1	$	1	$	4	$	4

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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)
Remaining three months of 2022	$	2
2023	6
2024	5
2025	5
2026	5
2027	4

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

(a) Equity Securities

During February and March 2022, CenterPoint Energy executed 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 11 for further information.

CenterPoint Energy’s sales of equity securities during the nine months ended September 30, 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 in Gain (Loss) on Equity Securities in CenterPoint Energy’s Condensed Statements of Consolidated Income.


	Gains (Losses) on Equity Securities
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
AT&T Common	$	(57)	$	(18)	$	(94)	$	(18)
Charter Common	(144)		6		(304)		58
WBD Common	(5)		—		28		—
Energy Transfer Common Units	—		—		95		—
Energy Transfer Series G Preferred Units	—		—		(9)		—
Other	—		—		—		—
Total	$	(206)	$	(12)	$	(284)	$	40

CenterPoint Energy recorded net unrealized losses of $206 million and $370 million for the three and nine months ended September 30, 2022 and net unrealized loss of $12 million and net unrealized gain of $40 million for the three and nine months ended September 30, 2021 respectively, for equity securities held as of September 30, 2022 and 2021.

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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		Carrying Value
	September 30, 2022	December 31, 2021	September 30, 2022		December 31, 2021
			(in millions)
AT&T Common	10,212,945	10,212,945	$	157	$	251
Charter Common	872,503	872,503	265		569
WBD Common	2,470,685	—	28		—
Energy Transfer Common Units	—	50,999,768	—		420
Energy Transfer Series G Preferred Units	—	192,390	—		196
Other			2		3
Total			$	452	$	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 September 30, 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:


	September 30, 2022	December 31, 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 attributable to the ZENS is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of September 30, 2022, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $29 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.

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, 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.

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

Inventory Financing. CenterPoint Energy’s and CERC’s Natural Gas businesses have third-party 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. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had $14 million and $7 million outstanding obligations related to the AMAs as of September 30, 2022 and December 31, 2021, respectively, recorded in Short-term borrowings on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. 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. See Note 3 for further information.

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Debt Transactions. During the nine months ended September 30, 2022, in addition to CERC’s debt exchange discussed further below, 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	1,600
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 transaction expenses and fees, of approximately $500 million were used for general corporate purposes, including the repayment of CERC’s outstanding commercial paper balances.

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

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 allow the reissuance of existing debt of Indiana Gas and VEDO to CERC, to continue to amortize existing issuance expenses and discounts, and to treat 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. 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. 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.

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Debt Repayments and Redemptions. During the nine months ended September 30, 2022, the following debt instruments were repaid at maturity or redeemed prior to maturity with proceeds received from the sale of Energy Transfer units discussed further in Note 10:


Registrant	Repayment/Redemption Date	Debt Instrument	Aggregate Principal Amount		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
		Total Houston Electric	300
CenterPoint Energy (2)	January 2022	First Mortgage Bonds	5		0.82%	2022
CenterPoint Energy (3)	March 2022	Senior Notes	250		3.85%	2024
CenterPoint Energy (4)	March 2022	Senior Notes	350		4.25%	2028
		Total CenterPoint Energy	$	1,330

(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)First Mortgage Bonds issued by SIGECO.

(3)In March 2022, CenterPoint Energy provided notice of redemption, and on March 31, 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.

(4)In March 2022, CenterPoint Energy provided notice of partial redemption, and on March 31, 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.

Additionally, in October 2022, Houston Electric redeemed $200 million aggregate principal amount of its outstanding 5.60% general mortgage bonds due 2023 at a redemption price equal to 100% of the 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.

Credit Facilities.

The Registrants had the following revolving credit facilities as of September 30, 2022:


Execution Date	Registrant	Size of Facility		Draw Rate of LIBOR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of September 30, 2022 (2)	Termination Date
		(in millions)
February 4, 2021	CenterPoint Energy	$	2,400	1.625%	65.0%	(3)	59.9%	February 4, 2024


February 4, 2021	Houston Electric	300		1.375%	67.5%	(3)	52.3%	February 4, 2024
February 4, 2021	CERC	900		1.250%	65.0%		49.8%	February 4, 2024
	Total	$	3,600

(1)Based on current credit ratings.

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

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(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.

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.

The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of September 30, 2022.

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


	September 30, 2022								December 31, 2021
Registrant	Loans		Letters of Credit		Commercial Paper (1)		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper (1)		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy	$	—	$	11	$	454	3.22	%	$	—	$	11	$	1,400	0.34	%
CenterPoint Energy (2)	—		—		—		—	%	—		—		350		0.21	%

Houston Electric	—		—		—		—	%	—		—		—		—	%
CERC	—		—		575		3.38	%	—		—		899		0.26	%
Total	$	—	$	11	$	1,029			$	—	$	11	$	2,649

(1)Outstanding commercial paper generally has maturities of 60 days or less and each Registrants’ commercial paper program is backstopped by such Registrants’ long-term credit facilities. Houston Electric does not have a commercial paper program.

(2)This credit facility was entered into by VUH and was guaranteed by SIGECO, Indiana Gas and VEDO. This credit facility was terminated in connection with the Restructuring, as discussed above.

Liens. As of September 30, 2022, Houston Electric’s assets were subject to liens securing approximately $6.3 billion of general mortgage bonds, 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. As of September 30, 2022, Houston Electric could issue approximately $4.3 billion of additional general mortgage bonds on the basis of retired bonds and 70% of property additions.

Other. As of September 30, 2022, certain financial institutions agreed to issue, from time to time, up to $20 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. As of September 30, 2022, such financial institutions had issued $1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.

(12) Income Taxes

The Registrants reported the following effective tax rates:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
CenterPoint Energy - Continuing operations (1)	27	%	18	%	26	%	9	%
CenterPoint Energy - Discontinued operations	—	%	18	%	—	%	22	%
Houston Electric (2)	21	%	18	%	21	%	16	%
CERC (3)(4)	170	%	11	%	25	%	12	%

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(1)CenterPoint Energy’s higher effective tax rate on income from continuing operations for the three and nine months ended September 30, 2022 compared to the same periods ended September 30, 2021 was primarily driven by the impact of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma, and a decrease in EDIT amortization of the net regulatory EDIT liability.

(2)Houston Electric’s higher effective tax rate for the three and nine months ended September 30, 2022 compared to the same period in 2021 was primarily driven by a decrease in the amount of amortization of the net regulatory EDIT liability.

(3)CERC’s higher effective tax rate for the three months ended September 30, 2022 compared to the same period ended September 30, 2021 was primarily driven by the impact of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma, and a decrease in EDIT amortization of the net regulatory EDIT liability.

(4)CERC’s higher effective tax rate for the nine months ended September 30, 2022 compared to the same period ended September 30, 2021 was primarily driven by the impact of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma offset by an increase in EDIT amortization of the net regulatory EDIT liability and the 2021 deferred state tax benefit for the revaluation of deferred tax assets and liabilities due to both the Arkansas and Oklahoma gas assets being held for sale and Louisiana and Oklahoma tax rates changes as well as the release of the valuation allowance on certain Louisiana NOLs in the quarter ended June 30, 2021.

CenterPoint Energy reported a net uncertain tax liability, inclusive of interest and penalties, of $5 million as of September 30, 2022. The Registrants believe that it is reasonably possible that a decrease of less than $1 million in unrecognized tax benefits may occur 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 2019-2022 tax years, the Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger

2014-2019 tax years are currently under audit by the IRS.

(13) 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 Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 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 February 9, 2021, Indiana Electric entered into a BTA with a subsidiary of Capital Dynamics. Pursuant to the BTA, Capital Dynamics, with its partner Tenaska, originally planned to build a 300 MW solar array in Posey County, Indiana through a special purpose entity, Posey Solar. Upon completion of construction, currently projected to be placed in service in 2024, and subject to IURC approval, which was received on October 27, 2021, Indiana Electric will acquire Posey Solar and its solar array assets for a fixed purchase price. Due to rising cost for the project, caused in part by supply chain issues in the energy industry, the rising cost of commodities and community feedback, CenterPoint Energy, along with Capital Dynamics, announced plans in January 2022 to downsize the project to approximately 200 MW. Indiana Electric collaboratively agreed to the scope change and is currently working through contract negotiations, contingent on further IURC review and approval.

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As of September 30, 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)
Remaining three months of 2022	$	343	$	79	$	289
2023	1,046		567		923
2024	898		385		855
2025	669		63		627
2026	510		33		474
2027	442		74		406
2028 and beyond	2,135		571		2,019

(1)CenterPoint Energy’s undiscounted minimum payment obligations related to PPAs with commitments ranging from 15 to 25 years and its purchase commitments under its BTA in Posey County, Indiana 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) 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 September 30, 2022, there were 62 open surety bonds supporting future performance with an aggregate face amount of approximately $659 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 September 30, 2022, approximately 40% 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 September 30, 2022, there were 34 warranties totaling $529 million and an additional $1.3 billion in energy savings commitments not guaranteed by Vectren. 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 have operated effectively. CenterPoint Energy assessed the fair value of its obligation for such guarantees as of September 30, 2022 and no amounts were recorded on CenterPoint Energy’s Condensed 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 September 30, 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 $534 million as of September 30, 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.

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**(c)**Guarantees and Product Warranties (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. The transaction closed on June 1, 2020. 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. When CES remained wholly owned by CERC Corp., these guarantees did not represent incremental consolidated obligations, but rather, these guarantees represented guarantees of CES’s obligations to allow it to conduct business without posting other forms of assurance.

Under the terms of the Equity Purchase Agreement, Symmetry Energy Solutions Acquisition must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after the closing of the transaction. As of September 30, 2022, management believes the exposure that remained outstanding under CERC Corp. guarantees issued prior to the closing of the transaction on June 1, 2020 is immaterial.

CenterPoint Energy and CERC recorded no amounts on their respective Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 related to the performance of these guarantees.

(d) Legal, Environmental and Other Matters

Legal Matters

Litigation Related to the February 2021 Winter Storm Event. Various legal matters are still proceeding with respect to the February 2021 Winter Storm Event. As of September 30, 2022, there are approximately 190 related lawsuits, which are pending, and in approximately 130 CenterPoint Energy, Utility Holding, LLC and Houston Electric, along with numerous other entities, have been named as defendants. 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 and their compliance with NERC, ERCOT and PUCT rules and directives. CenterPoint Energy, Utility Holding, LLC, and Houston Electric, along with hundreds of other defendants (including ERCOT, power generation companies, other TDUs, natural gas producers, retail electric providers, 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 now consolidated in Texas state court in Harris County, Texas, as part of a multi-district litigation proceeding. The judge overseeing the multi-district litigation has issued an initial case management order and stayed all proceedings and discovery, including discovery related to damages. Per the case management order, the judge will first entertain dispositive motions in five representative or “bellwether” cases; the judge held hearings on them in mid-October and will likely rule on them later in 2022, which ruling will likely be appealed. Until the judge rules on those motions and any appeals of such rulings are resolved, further proceedings and discovery will likely remain stayed. 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 have conducted or are conducting 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. Such other entities include the United States Congress, FERC, NERC, Texas RE, ERCOT, Texas government entities and officials such as the Texas Governor’s office, the Texas Legislature, the PUCT, the City of Houston and other municipal and county entities in Houston Electric’s service territory. Additionally, CenterPoint Energy and CERC have responded to inquiries from several state Attorneys General.

To date, there have not been demands, quantification, disclosure or discovery of damages by any party to the litigation 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.

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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.


	September 30, 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.

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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 has applied for the extensions 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. EPA’s determination will be up for public comment for thirty days from October 19. 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.

Indiana Electric continues to refine site specific estimates of closure costs for its 10-acre Culley East pond. 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.

As of September 30, 2022, CenterPoint Energy has recorded an approximate $92 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 2021, 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

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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.

(14) 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.

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 Series B Preferred Stock and Series C Preferred Stock is computed using the if-converted method, as applicable, which assumes conversion of 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.

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The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions, except per share and share amounts)
Numerator:
Income from continuing operations	$	202	$	150	$	923	$	630
Less: Preferred stock dividend requirement (Note 18)	13		23		37		82


Income available to common shareholders from continuing operations - basic and diluted	189		127		886		548



Income available to common shareholders from discontinued operations - basic and diluted	—		68		—		202
Income available to common shareholders - basic and diluted	$	189	$	195	$	886	$	750
Denominator:
Weighted average common shares outstanding - basic	629,509,000		604,607,000		629,374,000		580,819,000
Plus: Incremental shares from assumed conversions:
Restricted stock	3,559,000		4,775,000		3,559,000		4,775,000

Series C Preferred Stock	—		—		—		15,809,000
Weighted average common shares outstanding - diluted	633,068,000		609,382,000		632,933,000		601,403,000


Anti-dilutive Incremental Shares Excluded from Denominator for Diluted Earnings Computation:

Series B Preferred Stock	—		24,179,000		—		31,962,000


Earnings Per Common Share:
Basic earnings per common share - continuing operations	$	0.30	$	0.21	$	1.41	$	0.94
Basic earnings per common share - discontinued operations	—		0.11		—		0.35
Basic Earnings Per Common Share	$	0.30	$	0.32	$	1.41	$	1.29
Diluted earnings per common share - continuing operations	$	0.30	$	0.21	$	1.40	$	0.91
Diluted earnings per common share - discontinued operations	—		0.11		—		0.34
Diluted Earnings Per Common Share	$	0.30	$	0.32	$	1.40	$	1.25

(15) 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 discontinued operations as described below. Additionally, during the nine months ended September 30, 2022, CenterPoint Energy sold certain assets previously owned by entities within Corporate and Other to businesses within the Electric and Natural Gas reportable segments. Prior year amounts were reclassified as a result of this transaction in the nine months ended September 30, 2022 and as described in the combined 2021 Form 10-K.

In 2021, CenterPoint Energy’s equity investment in Enable was classified and presented as held for sale and discontinued operations. On December 2, 2021, Enable completed the previously announced Enable Merger pursuant to the Enable Merger Agreement entered into on February 16, 2021. See Note 3 for further information.

As of September 30, 2022, reportable segments by Registrant were 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,

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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 category 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 serving 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.

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

CenterPoint Energy


	Three Months Ended September 30,
	2022			2021
	Revenues from External Customers			Net Income (Loss)		Revenues from External Customers			Net Income (Loss)
	(in millions)
Electric	$	1,146	(1)	$	234	$	1,056	(1)	$	185
Natural Gas	692			(10)		619			5
Corporate and Other	65			(22)		74			(40)
Continuing Operations	$	1,903		202		$	1,749		150
Discontinued Operations, net				—					68
Consolidated				$	202				$	218

	Nine Months Ended September 30,
	2022			2021
	Revenues from External Customers			Net Income		Revenues from External Customers			Net Income (Loss)
	(in millions)
Electric	$	3,092	(1)	$	489	$	2,823	(1)	$	385
Natural Gas	3,334			416		3,022			308
Corporate and Other	184			18		193			(63)

Continuing Operations	$	6,610		923		$	6,038		630
Discontinued Operations, net				—					202
Consolidated				$	923				$	832

(1)Houston Electric revenues from major external customers are as follows (CenterPoint Energy and Houston Electric):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Affiliates of NRG	$	327	$	285	$	797	$	672
Affiliates of Vistra Energy Corp.	153		128		372		303

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	Total Assets
	September 30, 2022		December 31, 2021
	(in millions)
Electric	$	18,524	$	16,548
Natural Gas	16,796		16,270

Corporate and Other, net of eliminations (1)	1,399		2,523

Continuing Operations	36,719		35,341
Assets Held for Sale	—		2,338
Consolidated	$	36,719	$	37,679

(1)Total assets included pension and other postemployment-related regulatory assets of $424 million and $427 million as of September 30, 2022 and December 31, 2021, respectively.

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.

(16) Supplemental Disclosure of Cash Flow Information

The table below provides supplemental disclosure of cash flow information:


	Nine Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash Payments/Receipts:
Interest, net of capitalized interest	$	376	$	188	$	67	$	427	$	172	$	96
Income tax payments (refunds), net	340		113		3		(47)		—		(11)
Non-cash transactions:
Accounts payable related to capital expenditures	333		197		145		290		208		124
ROU assets obtained in exchange for lease liabilities (1)	1		—		—		2		—		—

(1) Excludes ROU assets obtained through prepayment of the lease liabilities. See Note 19.

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


	September 30, 2022						December 31, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash and cash equivalents (1)	$	114	$	115	$	1	$	230	$	214	$	15
Restricted cash included in Prepaid expenses and other current assets	16		12		—		24		19		—

Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows	$	130	$	127	$	1	$	254	$	233	$	15

(1)Houston Electric’s Cash and cash equivalents as of September 30, 2022 and December 31, 2021 included $110 million and $92 million, respectively, of cash related to the Bond Companies.

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

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

The table below summarizes CenterPoint Energy money pool activity:


	September 30, 2022						December 31, 2021
	Houston Electric			CERC			Houston Electric			CERC
	(in millions, except interest rates)
Money pool investments (borrowings) (1)	$	360		$	—		$	(512)		$	(224)
Weighted average interest rate	3.25		%	3.25		%	0.34		%	0.34		%

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

As a result of the Restructuring, CERC acquired Indiana Gas and VEDO, which had notes payable to VUH for borrowings under the VUH money pool in the amount of $217 million and a weighted average interest rate of 0.21% as of December 31, 2021. These notes were repaid to VUH on June 30, 2022 in connection with the Restructuring.

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

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


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Corporate service charges	$	38	$	54	$	46	$	64	$	114	$	163	$	136	$	178
Net affiliate service charges (billings)	3		(3)		(4)		4		(12)		12		(6)		6

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The table below presents transactions among Houston Electric, CERC and their parent, CenterPoint Energy.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	74	$	13	$	—	$	—	$	141	$	124	$	—	$	—
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses	—		—		—		—		—		720		—		—
Cash contribution from parent	—		—		—		—		1,143		125		—		—
Net assets acquired in the Restructuring (1)	—		—		—		—		—		2,345		—		—
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		—		—

(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.

Common Control Transaction

The Restructuring has been accounted for as a common control transaction as there is no change in the control over the assets acquired and liabilities assumed. 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 following table presents the as reported and recast amounts for CERC’s Condensed Consolidated Balance Sheet.


	December 31, 2021
	As Reported		Recast
	(in millions)
Total Assets	$	11,110	$	16,153
Total Liabilities	8,109		11,020
Retained Earnings	765		1,017
Total Equity	3,001		5,133

The following table presents the as reported and recast amounts for CERC’s Condensed Statements of Consolidated Income.


	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
	As Reported		Recast		As Reported		Recast
	(in millions)
Net income (loss)	$	(1)	$	8	$	208	$	303

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(18) Equity

Dividends Declared and Paid (CenterPoint Energy)


	Dividends Declared Per Share								Dividends Paid Per Share
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021
Common Stock	$	0.360	$	0.330	$	0.530	$	0.490	$	0.180	$	0.160	$	0.520	$	0.480
Series A Preferred Stock	30.625		30.625		30.625		30.625		30.625		30.625		61.250		61.250
Series B Preferred Stock	—		17.500		—		35.000		—		17.500		—		52.500
Series C Preferred Stock (1)	—		—		—		—		—		—		—		0.160

(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 April and May 2021.

Preferred Stock (CenterPoint Energy)


	Liquidation Preference Per Share			Shares Outstanding as of				Outstanding Value as of
			September 30, 2022		December 31, 2021		September 30, 2022			December 31, 2021
	(in millions, except shares and per share amounts)
Series A Preferred Stock	$	1,000		800,000		800,000		$	790		$	790


				800,000		800,000		$	790		$	790

Income Allocated to Preferred Shareholders (CenterPoint Energy)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Series A Preferred Stock	$	13	$	12	$	37	$	37
Series B Preferred Stock	—		11		—		45



Total income allocated to preferred shareholders	$	13	$	23	$	37	$	82

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, President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. Under the terms of the retention incentive agreement, Mr. Lesar will receive equity-based awards under CenterPoint Energy’s LTIP covering a total of 1 million shares of Common Stock (Total Stock Award) to be granted in multiple annual awards. Mr. Lesar received 400 thousand restricted stock units in July 2021 that will vest in December 2022 and 400 thousand restricted stock units in February 2022 that will vest in December 2023. In February 2023, restricted stock units covering the remaining 200 thousand shares, or such lesser number of restricted stock units as may be required pursuant to the annual individual award limitations under CenterPoint Energy’s LTIP, will be awarded to Mr. Lesar and will vest in December 2023. In the event any shares under the Total Stock Award remain unawarded, in February 2024, a fully vested stock bonus award of the remaining shares will be granted. For accounting purposes, the 1 million shares under the Total Stock Award, consisting of both the awarded and unawarded equity-based awards described above, were considered granted in July 2021. In the event of death, disability, termination without cause or resignation for good reason, as defined in the retention incentive agreement, that occurs prior to the full Total Stock Award being awarded, CenterPoint Energy will pay 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 unawarded equity-based awards are redeemable for cash

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upon events that are not probable at the grant date, the equity associated with the unawarded equity-based awards will be 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:


	Three Months Ended September 30,
	2022						2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Beginning Balance	$	(85)	$	—	$	10	$	(85)	$	—	$	10
Other comprehensive income (loss) before reclassifications:
Remeasurement of pension and other postretirement plans	(10)		—		—		—		—		—


Amounts reclassified from accumulated other comprehensive income (loss):
Prior service cost (1)	—		—		—		1		—		—
Actuarial losses (1)	2		—		—		1		—		—
Settlement (2)	1		—		—		3		—		—
Reclassification of deferred loss from cash flow hedges realized in net income	—		—		—		1		—		—
Tax benefit (expense)	9		—		—		(1)		—		—
Net current period other comprehensive income (loss)	2		—		—		5		—		—
Ending Balance	$	(83)	$	—	$	10	$	(80)	$	—	$	10

	Nine Months Ended September 30,
	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	(44)		—		—		—		—		—

Other comprehensive income (loss) from unconsolidated affiliates	—		—		—		2		—		—
Amounts reclassified from accumulated other comprehensive income (loss):
Prior service cost (1)	1		—		—		1		—		—
Actuarial losses (1)	4		—		—		5		—		—
Settlement (2)	14		—		—		3		—		—
Reclassification of deferred loss from cash flow hedges realized in net income	1		—		—		1		—		—

Tax benefit (expense)	5		—		—		(2)		—		—
Net current period other comprehensive income (loss)	(19)		—		—		10		—		—
Ending Balance	$	(83)	$	—	$	10	$	(80)	$	—	$	10

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

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(19) Leases

In 2021, Houston Electric entered into a temporary short-term lease and a long-term lease, each 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. 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 $90 million and $20 million as of September 30, 2022 and December 31, 2021, respectively.

Houston Electric took delivery of an additional 32 MW and 160 MW of TEEEF under the long-term lease during the three and nine months ended September 30, 2022, respectively, and remitted cash payments under the lease of $47 million and $218 million, respectively. 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 September 30, 2022 and December 31, 2021 and relates to removal costs that will be incurred at the end of the lease term. The long-term lease agreement includes up to 505 MW of TEEEF of which 285 MW and 125 MW was delivered as of September 30, 2022 and December 31, 2021, respectively, triggering lease commencement at delivery, and has an initial term ending in 2029 for all TEEEF leases. As of September 30, 2022, Houston Electric has secured a first lien on all the generation equipment long-term leases and no amount of the payments made by Houston Electric under long-term leases were held in escrow. Expenses associated with the long-term lease, including carrying costs, are deferred to a regulatory asset and totaled $41 million and $1 million as of September 30, 2022 and December 31, 2021, respectively. The long-term lease agreement also contains a termination clause that can be exercised in the event of material adverse regulatory actions. For further discussion of the regulatory impacts, see Note 6.

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


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	2	$	—	$	—	$	2	$	—	$	1
Short-term lease cost	39		39		1		54		54		—
Variable lease cost	—		—		—		—		—		—
Total lease cost (1)	$	41	$	39	$	1	$	56	$	54	$	1

	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	4	$	—	$	1	$	6	$	—	$	3
Short-term lease cost	123		122		1		89		89		—
Variable lease cost	—		—		—		—		—		—
Total lease cost (1)	$	127	$	122	$	2	$	95	$	89	$	3

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

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The components of lease income were as follows:


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	1	$	1	$	1	$	1	$	1	$	1
Variable lease income	—		—		—		—		—		—
Total lease income	$	1	$	1	$	1	$	1	$	1	$	1

	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	4	$	1	$	2	$	4	$	1	$	2
Variable lease income	1		—		—		1		—		—
Total lease income	$	5	$	1	$	2	$	5	$	1	$	2

Supplemental balance sheet information related to leases was as follows:


	September 30, 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)	$	15		$	—		$	6		$	22		$	1		$	12
Finance ROU assets (2)	367			367			—			179			179			—
Total leased assets	$	382		$	367		$	6		$	201		$	180		$	12

Liabilities:
Current operating lease liability (3)	$	5		$	—		$	2		$	6		$	1		$	2
Non-current operating lease liability (4)	10			—			4			17			—			11
Total leased liabilities (5)	$	15		$	—		$	6		$	23		$	1		$	13

Weighted-average remaining lease term (in years) - operating leases	5			5.4			4.1			6.2			4.1			6.5
Weighted-average discount rate - operating leases	3.16		%	3.50		%	3.55		%	3.10		%	2.86		%	3.20		%
Weighted-average remaining lease term (in years) - finance leases	6.8			6.8			—			7.5			7.5			—
Weighted-average discount rate - finance leases	2.73		%	2.73		%	—			2.21		%	2.21		%	—

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

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

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

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

(5)Finance lease liabilities were not significant as of September 30, 2022 or December 31, 2021 and are reported within Other long-term debt in the Registrants’ respective Condensed Consolidated Balance Sheets when applicable.

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As of September 30, 2022, finance lease liabilities were not significant to the Registrants. As of September 30, 2022, maturities of operating lease liabilities were as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2022	$	2	$	—	$	1
2023	5		—		2
2024	4		—		2
2025	2		—		1
2026	2		—		1
2027 and beyond	2		—		—
Total lease payments	17		—		7
Less: Interest	2		—		1
Present value of lease liabilities	$	15	$	—	$	6

As of September 30, 2022, future minimum finance lease payments were not significant to the Registrants, exclusive of approximately $271 million of legally-binding undiscounted minimum lease payments for finance leases for approximately 220 MW of TEEEF leases signed but not yet commenced. As of September 30, 2022, maturities of undiscounted operating lease payments to be received are as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2022	$	1	$	—	$	1
2023	7		1		4
2024	7		1		4
2025	7		1		4
2026	7		—		4
2027	7		—		4
2028 and beyond	160		—		156
Total lease payments to be received	$	196	$	3	$	177

Other information related to leases is as follows:


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating cash flows from operating leases included in the measurement of lease liabilities	$	1	$	—	$	—	$	2	$	—	$	1
Financing cash flows from finance leases included in the measurement of lease liabilities	47		47		—		—		—		—

	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating cash flows from operating leases included in the measurement of lease liabilities	$	4	$	—	$	1	$	5	$	—	$	3
Financing cash flows from finance leases included in the measurement of lease liabilities	218		218		—		—		—		—

See Note 16 for information on ROU assets obtained in exchange for operating lease liabilities.

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