Item 1. FINANCIAL STATEMENTS

272K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in millions, except per share amounts)
Revenues:
Utility revenues	$	1,789	$	1,862	$	4,506	$	4,571
Non-utility revenues	86		82		148		136
Total	1,875		1,944		4,654		4,707
Expenses:
Utility natural gas, fuel and purchased power	280		413		1,358		1,511
Non-utility cost of revenues, including natural gas	57		56		97		91
Operation and maintenance	679		662		1,342		1,350
Depreciation and amortization	349		327		668		645
Taxes other than income taxes	130		135		268		282

Total	1,495		1,593		3,733		3,879
Operating Income	380		351		921		828
Other Income (Expense):
Gain (loss) on equity securities	(31)		(61)		7		(78)
Gain (loss) on indexed debt securities	34		65		(5)		171
Gain (loss) on sale	(12)		—		(12)		303
Interest expense and other finance charges	(165)		(106)		(313)		(259)
Interest expense on Securitization Bonds	(2)		(4)		(4)		(8)




Other income (expense), net	13		(1)		26		17
Total	(163)		(107)		(301)		146
Income Before Income Taxes	217		244		620		974
Income tax expense	99		54		177		253


Net Income	118		190		443		721
Income allocated to preferred shareholders	12		11		24		24
Income Available to Common Shareholders	$	106	$	179	$	419	$	697



Basic Earnings Per Common Share	0.17		0.28		0.66		1.11


Diluted Earnings Per Common Share	$	0.17	$	0.28	$	0.66	$	1.10

Weighted Average Common Shares Outstanding, Basic	631		629		631		629
Weighted Average Common Shares Outstanding, Diluted	633		632		633		631

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in millions)
Net Income	$	118	$	190	$	443	$	721
Other comprehensive income (loss):
Adjustment to pension and other postretirement plans (net of tax expense (benefit) of $-0-, $4, $-0- and $4)	—		(23)		(1)		(22)

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


Total	—		(23)		(1)		(21)
Comprehensive income	118		167		442		700
Income allocated to preferred shareholders	12		11		24		24
Comprehensive income available to common shareholders	$	106	$	156	$	418	$	676

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2023		December 31, 2022
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($63 and $75 related to VIEs, respectively)	$	214	$	74
Investment in equity securities	517		510

Accounts receivable ($25 and $22 related to VIEs, respectively), less allowance for credit losses of $41 and $38, respectively	638		889
Accrued unbilled revenues, less allowance for credit losses of $1 and $4, respectively	289		764

Natural gas and coal inventory	79		241
Materials and supplies	650		635
Non-trading derivative assets	1		10
Taxes receivable	18		20

Regulatory assets	241		1,385
Prepaid expenses and other current assets ($14 and $13 related to VIEs, respectively)	155		171
Total current assets	2,802		4,699
Property, Plant and Equipment:
Property, plant and equipment	38,774		37,728
Less: accumulated depreciation and amortization	10,320		10,585
Property, plant and equipment, net	28,454		27,143
Other Assets:
Goodwill	4,160		4,294
Regulatory assets ($497 and $229 related to VIEs, respectively)	2,495		2,193

Non-trading derivative assets	—		2




Other non-current assets	186		215
Total other assets	6,841		6,704
Total Assets	$	38,097	$	38,546

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)

(Unaudited)


	June 30, 2023		December 31, 2022
	(in millions, except par value and shares)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term borrowings	$	2	$	511
Current portion of VIE Securitization Bonds long-term debt	170		156
Indexed debt, net	6		7
Current portion of other long-term debt	756		1,346
Indexed debt securities derivative	583		578
Accounts payable	832		1,352

Taxes accrued	176		298
Interest accrued	203		159
Dividends accrued	—		144
Customer deposits	109		110




Other current liabilities	347		452
Total current liabilities	3,184		5,113
Other Liabilities:
Deferred income taxes, net	4,036		3,986

Benefit obligations	555		547
Regulatory liabilities	3,091		3,245

Other non-current liabilities	833		774
Total other liabilities	8,515		8,552
Long-term Debt:
VIE Securitization Bonds, net	408		161
Other long-term debt, net	15,624		14,675
Total long-term debt, net	16,032		14,836
Commitments and Contingencies (Note 13)
Temporary Equity (Note 18)	—		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, 631,073,571 shares and 629,535,631 shares outstanding, respectively	6		6
Additional paid-in capital	8,570		8,568
Retained earnings	1,032		709
Accumulated other comprehensive loss	(32)		(31)
Total shareholders’ equity	10,366		10,042
Total Liabilities and Shareholders’ Equity	$	38,097	$	38,546

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2023		2022
	(in millions)
Cash Flows from Operating Activities:
Net income	$	443	$	721


Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	668		645

Deferred income taxes	22		23




Loss (gain) on divestitures	12		(303)
Loss (gain) on equity securities	(7)		78
Loss (gain) on indexed debt securities	5		(171)



Pension contributions	(4)		(4)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	647		64

Inventory	142		15
Taxes receivable	2		(2)
Accounts payable	(403)		(132)

Net regulatory assets and liabilities	1,022		113

Other current assets and liabilities	(120)		(164)
Other non-current assets and liabilities	48		30
Other operating activities, net	5		65


Net cash provided by operating activities	2,482		978
Cash Flows from Investing Activities:
Capital expenditures	(2,259)		(1,880)






Proceeds from sale of marketable securities	—		702
Proceeds from divestitures, net of cash divested	145		2,075


Other investing activities, net	(40)		45


Net cash provided by (used in) investing activities	(2,154)		942
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net	(14)		(43)
Payment of obligation for finance lease	—		(171)
Payments of commercial paper, net	(920)		(1,226)
Proceeds from long-term debt and term loans	3,675		1,292
Payments of long-term debt and term loans, including make-whole premiums	(2,613)		(1,187)




Payment of debt issuance costs	(28)		(17)


Payment of dividends on Common Stock	(240)		(214)
Payment of dividends on Preferred Stock	(24)		(24)





Other financing activities, net	(23)		(7)


Net cash used in financing activities	(187)		(1,597)
Net Increase in Cash, Cash Equivalents and Restricted Cash	141		323
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	91		254
Cash, Cash Equivalents and Restricted Cash at End of Period	$	232	$	577

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	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	1	$	790	1	$	790	1	$	790



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	631	6		629	6		630	6		629	6

Issuances related to benefit and investment plans	—	—		—	—		1	—		—	—
Balance, end of period	631	6		629	6		631	6		629	6
Additional Paid-in-Capital
Balance, beginning of period		8,558			8,532			8,568			8,529

Issuances related to benefit and investment plans		12			12			2			15

Balance, end of period		8,570			8,544			8,570			8,544
Retained Earnings
Balance, beginning of period		1,034			685			709			154
Net income		118			190			443			721
Common Stock dividends declared (see Note 18)		(120)			(107)			(120)			(107)






Balance, end of period		1,032			768			1,032			768
Accumulated Other Comprehensive Loss
Balance, beginning of period		(32)			(62)			(31)			(64)
Other comprehensive loss		—			(23)			(1)			(21)
Balance, end of period		(32)			(85)			(32)			(85)
Total Shareholders’ Equity		$	10,366		$	10,023		$	10,366		$	10,023

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Revenues	$	909	$	881	$	1,701	$	1,627
Expenses:
Operation and maintenance	401		403		781		798
Depreciation and amortization	186		174		345		336
Taxes other than income taxes	67		68		131		131
Total	654		645		1,257		1,265
Operating Income	255		236		444		362
Other Income (Expense):
Interest expense and other finance charges	(63)		(50)		(116)		(98)
Interest expense on Securitization Bonds	(2)		(4)		(4)		(8)



Other income, net	10		4		17		8
Total	(55)		(50)		(103)		(98)
Income Before Income Taxes	200		186		341		264
Income tax expense	42		39		75		56
Net Income	$	158	$	147	$	266	$	208

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Net income	$	158	$	147	$	266	$	208




Comprehensive income	$	158	$	147	$	266	$	208

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)


	June 30, 2023		December 31, 2022
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($62 and $75 related to VIEs, respectively)	$	62	$	75
Accounts receivable ($25 and $22 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively	333		311
Accounts and notes receivable–affiliated companies	14		21
Accrued unbilled revenues	136		142
Materials and supplies	479		471



Prepaid expenses and other current assets ($12 and $13 related to VIEs, respectively)	37		41
Total current assets	1,061		1,061
Property, Plant and Equipment:
Property, plant and equipment	18,658		17,753
Less: accumulated depreciation and amortization	4,383		4,292
Property, plant and equipment, net	14,275		13,461
Other Assets:
Regulatory assets ($160 and $229 related to VIEs, respectively)	828		778

Other non-current assets	50		39
Total other assets	878		817
Total Assets	$	16,214	$	15,339

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)


	June 30, 2023		December 31, 2022
	(in millions)
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:

Current portion of VIE Securitization Bonds long-term debt	$	159	$	156

Accounts payable	391		413
Accounts and notes payable–affiliated companies	192		755
Taxes accrued	115		150
Interest accrued	101		83

Other current liabilities	87		88
Total current liabilities	1,045		1,645
Other Liabilities:
Deferred income taxes, net	1,290		1,229
Benefit obligations	38		38
Regulatory liabilities	953		1,155

Other non-current liabilities	125		77
Total other liabilities	2,406		2,499
Long-term Debt:
VIE Securitization Bonds, net	81		161
Other long-term debt, net	6,928		6,036
Total long-term debt, net	7,009		6,197
Commitments and Contingencies (Note 13)
Member’s Equity:
Common stock	—		—
Additional paid-in capital	4,510		3,860
Retained earnings	1,244		1,138

Total member’s equity	5,754		4,998
Total Liabilities and Member’s Equity	$	16,214	$	15,339

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)


	Six Months Ended June 30,
	2023		2022
	(in millions)
Cash Flows from Operating Activities:
Net income	$	266	$	208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	345		336
Deferred income taxes	53		36


Changes in other assets and liabilities:
Accounts and notes receivable, net	(16)		(119)
Accounts receivable/payable–affiliated companies	(24)		(24)
Inventory	(8)		(45)
Accounts payable	(18)		(7)

Net regulatory assets and liabilities	(192)		(112)
Other current assets and liabilities	(21)		(83)
Other non-current assets and liabilities	39		2
Other operating activities, net	(9)		(4)
Net cash provided by operating activities	415		188
Cash Flows from Investing Activities:
Capital expenditures	(1,185)		(1,140)
Increase in notes receivable–affiliated companies	—		(272)


Other investing activities, net	(13)		21
Net cash used in investing activities	(1,198)		(1,391)
Cash Flows from Financing Activities:


Proceeds from long-term debt	898		792
Payments of long-term debt	(77)		(112)
Decrease in notes payable–affiliated companies	(532)		(512)
Dividend to parent	(160)		(67)
Contribution from parent	650		1,143

Payment of debt issuance costs	(9)		(8)
Payment of obligation for finance lease	—		(171)
Other financing activities, net	(1)		1
Net cash provided by financing activities	769		1,066
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(14)		(137)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	88		233
Cash, Cash Equivalents and Restricted Cash at End of Period	$	74	$	96

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	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		4,510			3,354			3,860			2,678
Non-cash contribution from parent		—			—			—			38
Contribution from parent		—			506			650			1,143
Other		—			—			—			1
Balance, end of period		4,510			3,860			4,510			3,860
Retained Earnings
Balance, beginning of period		1,195			968			1,138			944
Net income		158			147			266			208
Dividend to parent		(109)			(30)			(160)			(67)
Balance, end of period		1,244			1,085			1,244			1,085




Total Member’s Equity		$	5,754		$	4,945		$	5,754		$	4,945

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in millions)
Revenues:
Utility revenues	$	733	$	788	$	2,440	$	2,543
Non-utility revenues	12		8		22		17
Total	745		796		2,462		2,560
Expenses:
Utility natural gas	260		351		1,258		1,384
Non-utility cost of revenues, including natural gas	—		1		1		2
Operation and maintenance	211		202		429		440
Depreciation and amortization	122		113		240		220
Taxes other than income taxes	59		60		128		135

Total	652		727		2,056		2,181
Operating Income	93		69		406		379
Other Income (Expense):
Gain on sale	—		—		—		557
Interest expense and other finance charges	(45)		(30)		(87)		(59)



Other income (expense), net	5		(11)		6		(11)
Total	(40)		(41)		(81)		487
Income Before Income Taxes	53		28		325		866
Income tax expense	10		1		70		203


Net Income	$	43	$	27	$	255	$	663

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in millions)
Net income	$	43	$	27	$	255	$	663

Adjustment to pension and other postretirement plans (net of tax of $-0-, $-0- ,$-0- and $-0-)	—		—		(1)		—

Other comprehensive loss	—		—		(1)		—
Comprehensive income	$	43	$	27	$	254	$	663

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)


	June 30, 2023		December 31, 2022
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	1	$	—
Accounts receivable, less allowance for credit losses of $37 and $34, respectively	257		463
Accrued unbilled revenues, less allowance for credit losses of $1 and $4, respectively	117		573
Accounts receivable–affiliated companies	19		52
Notes receivable–affiliated companies	417		—
Materials and supplies	101		98
Natural gas inventory	29		195
Non-trading derivative assets	1		7
Taxes receivable	—		12


Regulatory assets	211		1,336
Prepaid expenses and other current assets	41		78
Total current assets	1,194		2,814
Property, Plant and Equipment:
Property, plant and equipment	15,102		14,379
Less: accumulated depreciation and amortization	4,092		3,973
Property, plant and equipment, net	11,010		10,406
Other Assets:
Goodwill	1,583		1,583
Regulatory assets	806		844
Non-trading derivative assets	—		2



Other non-current assets	53		55
Total other assets	2,442		2,484
Total Assets	$	14,646	$	15,704

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)


	June 30, 2023		December 31, 2022
	(in millions)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term borrowings	$	2	$	511
Current portion of long-term debt	57		1,331
Accounts payable	312		690
Accounts payable–affiliated companies	133		190

Taxes accrued	87		140
Interest accrued	71		50
Customer deposits	94		94


Other current liabilities	181		200
Total current liabilities	937		3,206
Other Liabilities:
Deferred income taxes, net	1,302		1,262


Benefit obligations	76		76
Regulatory liabilities	1,828		1,801

Other non–current liabilities	512		501
Total other liabilities	3,718		3,640
Long-Term Debt	4,185		3,495
Commitments and Contingencies (Note 13)
Stockholder’s Equity:
Common stock	—		—
Additional paid-in capital	4,229		3,729
Retained earnings	1,562		1,618
Accumulated other comprehensive income	15		16
Total stockholder’s equity	5,806		5,363
Total Liabilities and Stockholder’s Equity	$	14,646	$	15,704

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 CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2023		2022
	(in millions)
Cash Flows from Operating Activities:
Net income	$	255	$	663
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	240		220

Deferred income taxes	22		201

Gain on divestitures	—		(557)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	644		203
Accounts receivable/payable–affiliated companies	(24)		(40)
Inventory	168		60

Accounts payable	(372)		(110)



Net regulatory assets and liabilities	1,198		136

Other current assets and liabilities	10		(7)
Other non-current assets and liabilities	7		(3)
Other operating activities, net	(1)		1
Net cash provided by operating activities	2,147		767
Cash Flows from Investing Activities:
Capital expenditures	(807)		(688)
Increase in notes receivable–affiliated companies	(417)		—

Proceeds from divestiture	—		2,075
Other investing activities, net	(9)		7


Net cash provided by (used in) investing activities	(1,233)		1,394
Cash Flows from Financing Activities:
Decrease in short-term borrowings, net	(14)		(43)

Payments of commercial paper, net	(805)		(325)
Proceeds from long-term debt and term loan	2,006		852
Payments of long-term debt and term loan	(2,275)		(425)

Dividends to parent	(311)		(831)
Payment of debt issuance costs	(13)		(8)

Decrease in notes payable–affiliated companies	—		(1,517)
Contribution from parent	500		125


Other financing activities, net	(1)		(1)


Net cash used in financing activities	(913)		(2,173)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	1		(12)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	—		15
Cash, Cash Equivalents and Restricted Cash at End of Period	$	1	$	3

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 CHANGES IN EQUITY

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	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		3,729			3,440			3,729			4,106
Non-cash contribution from parent		—			—			—			54
Contribution from parent		500			125			500			125
Contribution to parent for sale of Arkansas and Oklahoma Natural Gas businesses		—			—			—			(720)

Balance, end of period		4,229			3,565			4,229			3,565
Retained Earnings
Balance, beginning of period		1,626			1,614			1,618			1,017
Net income		43			27			255			663
Dividend to parent		(107)			(72)			(311)			(111)
Balance, end of period		1,562			1,569			1,562			1,569
Accumulated Other Comprehensive Income
Balance, beginning of period		15			10			16			10
Other comprehensive loss		—			—			(1)			—
Balance, end of period		15			10			15			10
Total Stockholder’s Equity		$	5,806		$	5,144		$	5,806		$	5,144

See Combined Notes to Interim Condensed Financial Statements

Table of Contents

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 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 2022 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. On June 30, 2023, CenterPoint Energy completed the sale of its indirect subsidiary, Energy Systems Group, to an unaffiliated third party. For additional information, see Note 3. 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. SIGECO was not acquired by CERC and remains a subsidiary of VUH. On January 10, 2022, CERC Corp. completed the sale of its Arkansas and Oklahoma Natural Gas businesses. For additional information, see Note 3.

As of June 30, 2023, 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; and
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.

As of June 30, 2023, CenterPoint Energy’s reportable segments were Electric, Natural Gas and Corporate and Other. 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 June 30, 2023, 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. Additionally, CenterPoint Energy, through SIGECO, has a consolidated VIE consisting of the Securitization Subsidiary, a wholly-owned, bankruptcy-remote, special purpose entity that facilitated the securitization financing of qualified costs in the second quarter of 2023 associated with the planned retirement of SIGECO’s A.B. Brown coal generation facilities. CenterPoint Energy, through SIGECO, has a controlling financial interest in the Securitization Subsidiary and is the VIE’s primary beneficiary. For further information, see Note 6. Creditors of CenterPoint Energy, Houston Electric and SIGECO have no recourse to any assets or revenues of the Bond Companies or the Securitization Subsidiary, as applicable. The bonds issued by these VIEs are payable only from and secured

Table of Contents

by transition, system restoration or securitization property, as applicable, and the bondholders have no recourse to the general credit of CenterPoint Energy, Houston Electric or SIGECO.

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.

(2) New Accounting Pronouncements

Management believes that 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 Energy Systems Group. On May 21, 2023, CenterPoint Energy, through its subsidiary Vectren Energy Services, entered into an Equity Purchase Agreement to sell all of the outstanding limited liability company interests of Energy Systems Group to ESG Holdings Group, for a purchase price of $157 million, subject to customary adjustments set forth in the Equity Purchase Agreement, including adjustments based on Energy Systems Group’s net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. The transaction closed on June 30, 2023, and CenterPoint Energy received $154 million in cash, subject to finalization of the purchase price adjustment. Additionally, as of June 30, 2023, CenterPoint Energy had a payable to ESG Holdings Group for working capital and other adjustments set forth in the Equity Purchase Agreement.

During the three months ended June 30, 2023, certain assets and liabilities of Energy Systems Group met the held for sale criteria. The divestiture of Energy Systems Group reflects CenterPoint Energy’s continued strategic focus on its core utility businesses. The historical annual revenues, net income and total assets of Energy Systems Groups did not have a sufficient effect, quantitatively or qualitatively, on CenterPoint Energy’s financial results to be considered a strategic shift. Therefore, the income and expenses associated with Energy Systems Group were not reflected as discontinued operations on CenterPoint Energy’s Condensed Statements of Consolidated Income. For disposal groups that are classified as held for sale but that do not meet the criteria for discontinued operations reporting, the assets and liabilities of the disposal group are required to be separately presented on the face of the balance sheet only in the initial period in which it is classified as held for sale. Therefore, CenterPoint Energy’s Condensed Consolidated Balance Sheet as of December 31, 2022 was not recast to reflect Energy Systems Group’s assets and liabilities as held for sale. Depreciation and amortization of long-lived assets ceases at the end of the quarter in which the held for sale criteria is met. Additionally, as a result of the completion of the sale of Energy Systems Group in June 2023, there were no assets or liabilities classified as held for sale as of June 30, 2023. For a discussion of guarantees and product warranties related to Energy Systems Group prior to the sale, see Note 13(b).

CenterPoint Energy recognized a loss on sale of approximately $12 million, including $3 million of transaction costs, during the three and six months ended June 30, 2023, in connection with the closing of the sale of Energy Systems Group. Additionally, CenterPoint Energy recognized a current tax expense of $33 million during the three and six months ended June 30, 2023, as a result of the cash taxes payable upon the closing of the sale.

The pre-tax income (loss) for Energy Systems Group, excluding interest and corporate allocations, included in CenterPoint Energy’s Condensed Statements of Consolidated Income is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Income (Loss) from Continuing Operations Before Income Taxes	$	2	$	2	$	(4)	$	(4)

Divestiture of Arkansas and Oklahoma Natural Gas Businesses. On April 29, 2021, CenterPoint Energy, through its

Table of Contents

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

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

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

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

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 June 30, 2022		Six Months Ended June 30, 2022 (1)
	(in millions)
Income from Continuing Operations Before Income Taxes	$	—	$	9

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

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

CenterPoint Energy’s charges to Southern Col Midco for reimbursement of transition services were $-0- and less than $1 million during the three and six months ended June 30, 2023 and were $10 million and $19 million during the three and six months ended June 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 $-0- as of June 30, 2023 and $1 million as of December 31, 2022, for transition services.

(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

Table of Contents

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 June 30, 2023
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,040	$	759	$	73	$	1,872

Other (1)	(3)		5		1		3

Total revenues	$	1,037	$	764	$	74	$	1,875

	Six Months Ended June 30, 2023
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,998	$	2,511	$	124	$	4,633
Other (1)	(9)		28		2		21

Total revenues	$	1,989	$	2,539	$	126	$	4,654


	Three Months Ended June 30, 2022
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,060	$	827	$	72	$	1,959
Other (1)	(7)		(9)		1		(15)

Total revenues	$	1,053	$	818	$	73	$	1,944

	Six Months Ended June 30, 2022
	Electric		Natural Gas		Corporate and Other		Total
	(in millions)
Revenue from contracts	$	1,958	$	2,672	$	117	$	4,747
Other (1)	(12)		(30)		2		(40)

Total revenues	$	1,946	$	2,642	$	119	$	4,707

(1)Primarily consists of income from ARPs and leases. Total lease income was $2 million and $3 million for the three months ended June 30, 2023 and 2022, respectively, and $4 million and $4 million for the six months ended June 30, 2023 and 2022, respectively.

Houston Electric


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Revenue from contracts	$	918	$	892	$	1,721	$	1,648
Other (1)	(9)		(11)		(20)		(21)
Total revenues	$	909	$	881	$	1,701	$	1,627

(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three and six months ended June 30, 2023 and 2022.

Table of Contents

CERC


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Revenue from contracts	$	737	$	805	$	2,437	$	2,590
Other (1)	8		(9)		25		(30)

Total revenues	$	745	$	796	$	2,462	$	2,560

(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three and six months ended June 30, 2023 and 2022.

Revenues from Contracts with Customers

Electric (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time, and customers consume the electricity when delivered. Indiana Electric generates, 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.

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 and contract liabilities are included in Accounts payable and Other current liabilities in their Condensed Consolidated Balance Sheets. CenterPoint Energy’s contract assets and contract liabilities primarily related to Energy Systems Group contracts where revenue was recognized using the input method prior to the sale of Energy Systems Group that was completed on June 30, 2023.

The opening and closing balances of accounts receivable, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers are as follows:

CenterPoint Energy


	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Assets			Contract Liabilities
	(in millions)
Opening balance as of December 31, 2022	$	858	$	764	$	4		$	45
Closing balance as of June 30, 2023	608		289		—			6
Decrease	$	(250)	$	(475)	$	(4)	(1)	$	(39)	(1)

(1)Decrease primarily related to the completed sale of Energy Systems Group on June 30, 2023.

The amount of revenue recognized during the three-month period ended June 30, 2023 that was included in the opening contract liability was $2 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.

Table of Contents

Houston Electric


	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2022	$	271	$	142	$	2
Closing balance as of June 30, 2023	306		136		6
Increase (decrease)	$	35	$	(6)	$	4

The amount of revenue recognized during the three-month period ended June 30, 2023 that was included in the opening contract liability was $1 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.

CERC


	Accounts Receivable		Other Accrued Unbilled Revenues
	(in millions)
Opening balance as of December 31, 2022	$	478	$	573
Closing balance as of June 30, 2023	267		117
Decrease	$	(211)	$	(456)

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

Remaining Performance Obligations (CenterPoint Energy). Following the completed sale of Energy Systems Group on June 30, 2023, CenterPoint Energy had no remaining performance obligations.

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 had no material changes in its methodology to recognize losses on financial assets that fall under the scope of Topic 326, primarily due to the nature of its customers and regulatory environment. For a discussion of regulatory deferrals, including those related to COVID-19, see Note 6.

Table of Contents

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Service cost (1)	$	6	$	8	$	13	$	16
Interest cost (2)	19		17		38		32
Expected return on plan assets (2)	(19)		(23)		(38)		(48)

Amortization of net loss (2)	7		7		14		14
Settlement cost (2) (3)	—		30		—		30

Net periodic cost	$	13	$	39	$	27	$	44

(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, 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.

Postretirement Benefits


	Three Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Service cost (1)	$	1	$	—	$	—	$	—	$	—	$	—
Interest cost (2)	3		2		1		2		1		1
Expected return on plan assets (2)	(2)		(1)		—		(1)		(1)		—
Amortization of prior service credit (2)	(1)		(2)		—		—		(1)		1
Amortization of net loss (2)	(2)		(1)		—		(1)		—		(1)




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

	Six Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Service cost (1)	$	1	$	—	$	—	$	1	$	—	$	—
Interest cost (2)	6		3		2		4		2		2
Expected return on plan assets (2)	(3)		(2)		—		(2)		(2)		—
Amortization of prior service cost (credit) (2)	(1)		(3)		1		(1)		(2)		1
Amortization of net loss (2)	(4)		(2)		(1)		(2)		(1)		(1)




Net periodic cost (benefit)	$	(1)	$	(4)	$	2	$	—	$	(3)	$	2

(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.

Table of Contents

The table below reflects the expected minimum contributions to be made to the pension and postretirement benefit plans during 2023:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Expected minimum contribution to pension plans during 2023	$	7	$	—	$	—
Expected minimum contribution to postretirement benefit plans in 2023	8		1		4

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


	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Pension plans	$	2	$	—	$	—	$	4	$	—	$	—
Postretirement benefit plans	2		—		1		4		—		2

(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:


	June 30, 2023						December 31, 2022
	CenterPoint Energy (1)		Houston Electric (2)		CERC (3)		CenterPoint Energy (1)		Houston Electric (2)		CERC (3)
	(in millions)
Allowed equity return not recognized	$	210	$	91	$	63	$	188	$	82	$	54

(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, including investments at SIGECO and securitized qualified costs associated with the planned retirements of Indiana Electric’s A.B. Brown coal-fired generation facilities.

(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, TEEEF and LLTF 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.

Table of Contents

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


	Three Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	10	$	9	$	—	$	12	$	12	$	1

	Six Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Allowed equity return recognized	$	18	$	16	$	1	$	22	$	21	$	1

February 2021 Winter Storm Event

In February 2021, certain of the Registrants’ jurisdictions experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures, which impacted their businesses. The February 2021 Winter Storm Event impacted wholesale prices of CenterPoint Energy’s and CERC’s natural gas purchases and their ability to serve customers in their Natural Gas service territories, including due to the reduction in available natural gas capacity and impacts to CenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of weather on their systems and their ability to transport natural gas, among other things. The overall natural gas market, including the markets from which CenterPoint Energy and CERC sourced a significant portion of their natural gas for their operations, experienced significant impacts caused by the February 2021 Winter Storm Event, resulting in extraordinary increases in the cost of natural gas purchased by CenterPoint Energy and CERC of approximately $2 billion. CenterPoint Energy and CERC have completed recovery of natural gas costs in Mississippi, Indiana and Texas discussed further below, and continue to recover the natural gas cost in Louisiana and Minnesota. As of June 30, 2023, CenterPoint Energy and CERC have each recorded current regulatory assets of $104 million and non-current regulatory assets of $140 million associated with the February 2021 Winter Storm Event. As of December 31, 2022, CenterPoint Energy and CERC have each recorded current regulatory assets of $1,175 million and non-current regulatory assets of $202 million associated with the February 2021 Winter Storm Event.

In Minnesota, the MPUC issued its written order on October 19, 2022 disallowing CERC’s recovery of approximately $36 million of the $409 million incurred, and CERC’s regulatory asset balance was reduced to reflect the disallowance. CERC filed a petition for reconsideration on November 8, 2022 and a written order denying the petition for reconsideration was issued on January 6, 2023.

CenterPoint Energy and CERC have approximately $75 million of the total $2 billion of natural gas costs incurred during the February 2021 Winter Storm Event remaining under prudence review. Recovery of natural gas costs within the regulatory assets as of June 30, 2023 are probable and only natural gas costs in Louisiana are still subject to customary regulatory prudence reviews, which may impact the amount ultimately recovered in Louisiana.

As of both June 30, 2023 and December 31, 2022, as authorized by the PUCT, both 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 $17 million and $16 million as of both June 30, 2023 and December 31, 2022, to defer operations and maintenance costs associated with the February 2021 Winter Storm Event.

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

Texas Public Securitization. The Texas Natural Gas Securitization Finance Corporation issued customer rate relief bonds in March 2023, and on March 23, 2023, CenterPoint Energy and CERC, collectively, received approximately $1.1 billion in cash proceeds from the state’s customer rate relief bonds. The proceeds from the state’s customer rate relief bonds included carrying costs incurred through August 2022. Incremental carrying costs incurred after August 2022 until the date the proceeds were received are recorded in a separate regulatory asset to be included for recovery in a subsequent rate proceeding. As CenterPoint

Table of Contents

Energy and CERC have no future financial obligations for the repayment of the state’s customer rate relief bonds, the customer rate relief bonds are not recorded on CenterPoint Energy’s or CERC’s balance sheets. The $1.1 billion in cash proceeds from the customer rate relief bonds is considered to be a government grant. The state’s customer rate relief bonds are backed in part by customer rate relief property, including customer rate relief charges, which are non-bypassable uniform monthly volumetric charges to be paid by all existing and future customers as a component of each regulated utility’s gas cost or in another manner that the Railroad Commission determines reasonable, separate from their base rate. CERC only acts as a collection agent, whose duties include management, servicing and administration of a portion of the customer rate relief property which is associated with the customer rate relief charge imposed on customers of CERC under the guidance and direction from the Railroad Commission. The Texas Natural Gas Securitization Finance Corporation, and not CenterPoint Energy or CERC, is the owner of the customer rate relief property. The assets of the Texas Natural Gas Securitization Finance Corporation are not available to pay creditors of CenterPoint Energy, CERC, or their affiliates. While the customer rate relief charges will be included by CERC in their monthly billings, the billing amount is established by the Railroad Commission. CERC will remit all customer rate relief charges to the financing entity set up by the Railroad Commission. Therefore, the collection and servicing of customer rate relief charges have no impact on the respective Condensed Statements of Consolidated Income of CenterPoint Energy or CERC.

As U.S. generally accepted accounting principles have no specific accounting guidance for government grants or assistance, the cash proceeds from the state’s customer rate relief bonds were accounted for as a government grant by analogy to the grant model under IAS 20—Accounting for Government Grants and Disclosures of Government Assistance. CenterPoint Energy and CERC reflect the proceeds from the grant as a deduction to natural gas costs and recognized the $1.1 billion of cash proceeds from the state’s customer rate relief bonds within Utility natural gas expense on their respective Condensed Statements of Consolidated Income in the six months ended June 30, 2023, net of the recognition of natural gas cost related to relieving CenterPoint Energy and CERC’s regulatory assets related to the February 2021 Winter Storm Event in the same period.

Indiana Electric Securitization of Planned Generation Retirements (CenterPoint Energy)

On January 4, 2023, the IURC issued an order in accordance with Indiana Senate Enrolled Act 386 authorizing the issuance of up to $350 million in securitization bonds to securitize qualified costs associated with the planned retirements of Indiana Electric’s A.B. Brown coal-fired generation facilities. Accordingly, CenterPoint Energy determined that the retirement of property, plant and equipment became probable upon the issuance of the order. No loss on abandonment was recognized in connection with issuance of the order as there was no disallowance of all or part of the cost of the abandoned property, plant and equipment. In the first quarter of 2023, upon receipt of the order, CenterPoint Energy reclassified property, plant and equipment to be recovered through securitization to a regulatory asset and such amounts continued to earn a full return until recovered through securitization.

On March 24, 2023, SIGECO and the Securitization Subsidiary filed a registration statement on Form SF-1, amended on May 16, 2023, under the Securities Act of 1933, as amended, with the SEC registering the public offering and sale of approximately $341 million aggregate principal amount of the SIGECO Securitization Bonds. The registration statement became effective on June 12, 2023. The Securitization Subsidiary issued $341 million aggregate principal amount of the SIGECO Securitization Bonds on June 29, 2023. See Note 11 for further details of the issuance. The Securitization Subsidiary used the net proceeds from the issuance to purchase the securitization property from SIGECO. No gain or loss was recognized.

The SIGECO Securitization Bonds are secured by the securitization property, which includes the right to recover, through non-bypassable securitization charges payable by SIGECO’s retail electric customers, the qualified costs of SIGECO authorized by the IURC order. SIGECO has no payment obligations with respect to the SIGECO Securitization Bonds except to remit collections of securitization charges as set forth in a servicing agreement between SIGECO and the Securitization Subsidiary. The non-bypassable securitization charges are subject to a true-up mechanism.

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 initially sought recovery of deferred costs and the applicable return as of December 31, 2021 under these lease agreements of approximately $200 million in its DCRF application filed with the PUCT on April 5, 2022, and subsequently amended on July 1, 2022, to show mobile generation in a separate Rider TEEEF. The annual revenue increase requested for these lease agreements was approximately $57 million. A final order was issued on April 5, 2023 approving a reduced revenue requirement of $39 million that results in full recovery of costs requested but lengthens the amortization period for the short-

Table of Contents

term lease to be collected over 82.5 months. On April 28, 2023, and May 1, 2023, certain intervenors filed motions for rehearing of the PUCT’s April 5, 2023 order. On May 25, 2023, the PUCT issued its order on rehearing which clarified some of the findings, but did not change the approval of TEEEF cost recovery. On June 19, 2023, certain intervenors filed motions for rehearing of the PUCT’s May 25, 2023 Order on Rehearing; the PUCT voted to add the motions for rehearing to the August 3, 2023 open meeting agenda for consideration of the merits. The ultimate outcome of these proceedings cannot be predicted at this time.

On April 5, 2023, Houston Electric made its second TEEEF filing requesting recovery of TEEEF related costs incurred through December 31, 2022. Houston Electric is requesting a new annual revenue requirement of approximately $188 million using 78 months to amortize the related deferred costs for proposed rates beginning September 2023, a net increase in TEEEF revenues of approximately $149 million. On June 7, 2023, intervenors jointly requested a hearing, and on June 14, 2023, the PUCT staff indicated that it does not oppose a hearing in this docket. On June 21, 2023 Houston Electric made a filing that a hearing is not necessary given the PUCT’s decision in the TEEEF docket filed in 2022 and indicated that if the PUCT does refer this case to the State Office of Administrative Hearings, any preliminary order issued by the PUCT should be limited. On July 18, 2023 the PUCT referred the case to the State Office of Administrative Hearings and, on July 20, 2023, the PUCT issued a preliminary order identifying the issues to be addressed. The ultimate outcome of these proceedings cannot be predicted at this time.

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 debt returns, and determined that such regulatory assets remain probable of recovery as of June 30, 2023. 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 has not recorded any impairments on its right of use assets in the year ended December 31, 2022 or the six months ended June 30, 2023. See Note 19 for further information.

COVID-19 Regulatory Matters

Regulatory commissions in Indiana Electric’s and CenterPoint Energy’s and CERC’s Natural Gas service territories have either (1) issued orders to record a regulatory asset for incremental bad debt expenses related to COVID-19, including costs associated with the suspension of disconnections and payment plans, or (2) provided authority to recover bad debt expense through an existing tracking mechanism. CenterPoint Energy and CERC have recorded estimated incremental uncollectible receivables to the associated regulatory asset of $18 million and $17 million, respectively, as of both June 30, 2023 and December 31, 2022. CenterPoint Energy and CERC both have $7 million remaining to recover through rates and other sources as of June 30, 2023, and $11 million and $10 million, respectively, remaining to recover through rates and other sources as of December 31, 2022, respectively.

(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 they respectively own, enter into certain derivative instruments to mitigate the effects of commodity price movements. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges.

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

Table of Contents

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


	June 30, 2023		December 31, 2022
Hedging Classification	Notional Principal
	CenterPoint Energy		CenterPoint Energy
	(in millions)
Economic hedge (1)	$	—	$	84
Cash flow hedge (2)	75		—

(1)Relates to interest rate derivative instruments at SIGECO that terminated on May 1, 2023.

(2)Relates to an interest rate derivative instrument at CenterPoint Energy with a termination date of August 29, 2023. The interest rate swap contract was designated as a cash flow hedge of a forecasted transaction. CenterPoint Energy records all changes in the fair value of cash flow hedges in accumulated other comprehensive income (loss) until the underlying hedged transaction occurs, when it reclassifies that amount into earnings. The effect of cash flow hedge accounting in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2023, was immaterial.

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.

**(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


		June 30, 2023				December 31, 2022
	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	$	1	$	—	$	9	$	—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	—		—		2		—

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



Indexed debt securities derivative (2)	Current Liabilities	—		583		—		578

Total		$	1	$	583	$	12	$	578

CERC


		June 30, 2023				December 31, 2022
	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	$	1	$	—	$	7	$	—
Natural gas derivatives (1)	Other Assets: Non-trading derivative assets	—		—		2		—






Total		$	1	$	—	$	9	$	—

Table of Contents

(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 June 30,				Six Months Ended June 30,
	Income Statement Location	2023		2022		2023		2022
Derivatives not designated as hedging instruments:		(in millions)
Indexed debt securities derivative (1)	Gain (loss) on indexed debt securities	$	34	$	65	$	(5)	$	171

(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 CenterPoint Energy’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment. As of June 30, 2023 and December 31, 2022, all derivatives with credit risk-related contingent features were in an asset 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.

Table of Contents

The following tables present information about the Registrants’ assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.

CenterPoint Energy


	June 30, 2023						December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Equity securities	$	517	$	—	$	—	$	517	$	510	$	—	$	—	$	510
Investments, including money market funds (1)	31		—		—		31		32		—		—		32
Interest rate derivatives	—		—		—		—		—		1		—		1
Natural gas derivatives	—		1		—		1		—		11		—		11



Total assets	$	548	$	1	$	—	$	549	$	542	$	12	$	—	$	554
Liabilities
Indexed debt securities derivative	$	—	$	583	$	—	$	583	$	—	$	578	$	—	$	578





Total liabilities	$	—	$	583	$	—	$	583	$	—	$	578	$	—	$	578

Houston Electric


	June 30, 2023						December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Investments, including money market funds (1)	$	15	$	—	$	—	$	15	$	17	$	—	$	—	$	17

Total assets	$	15	$	—	$	—	$	15	$	17	$	—	$	—	$	17

CERC


	June 30, 2023						December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)

Investments, including money market funds (1)	$	14	$	—	$	—	$	14	$	14	$	—	$	—	$	14
Natural gas derivatives	—		1		—		1		—		9		—		9
Total assets	$	14	$	1	$	—	$	15	$	14	$	9	$	—	$	23

(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.


	June 30, 2023						December 31, 2022
	CenterPoint Energy (1)		Houston Electric (1)		CERC		CenterPoint Energy (1)		Houston Electric (1)		CERC
Long-term debt, including current maturities	(in millions)


Carrying amount	$	16,958	$	7,168	$	4,242	$	16,338	$	6,353	$	4,826
Fair value	15,694		6,340		4,086		14,990		5,504		4,637

(1)Includes Securitization Bonds, as applicable.

Table of Contents

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

Goodwill (CenterPoint Energy and CERC)

CenterPoint Energy’s goodwill by reportable segment is as follows:


	December 31, 2022		Disposals			June 30, 2023
	(in millions)
Electric (1)	$	936	$	—		$	936
Natural Gas	2,920		—			2,920
Corporate and Other	438		134		(2)	304

Total	$	4,294	$	134		$	4,160

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

(2)Represents goodwill attributable to the sale of Energy Systems Group. For further information, see Note 3.

CERC’s goodwill as of both June 30, 2023 and December 31, 2022 is as follows:



	(in millions)
Goodwill	$	1,583

When a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. As described further in Note 3, certain assets and liabilities of Energy Systems Group, including goodwill of $134 million at CenterPoint Energy, were disposed of upon consummation of the sale of Energy Systems Group in the second quarter of 2023. The disposal of goodwill attributable to Energy Systems Group was reflected in the loss on sale of $12 million during the three and six months ended June 30, 2023.

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. The intangible assets and associated amortization expense are primarily related to Energy Systems Group prior to the completion of the sale in June 2023 as indicated below. See Note 3 for further information.


	June 30, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
	(in millions)
Customer relationships (1)	$	—	$	—	$	—	$	33	$	(16)	$	17

Trade names (1)	—		—		—		16		(6)		10

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

(1)Related to Energy Systems Group prior to the completion of the sale in June 2023. Amortization ceased at June 30, 2023, the end of the quarter in which the held for sale criteria was met. See Note 3 for further information.

(2)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. Amortization ceased at June 30, 2023, the end of the quarter in which the held for sale criteria was met. See Note 3 for further information.

Table of Contents


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization	$	2	$	2	$	3	$	3

CenterPoint Energy estimates that amortization expense of intangible assets with finite lives for the next five years will not be significant.

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

(a) Equity Securities

During the six months ended June 30, 2022, CenterPoint Energy completed the execution of its previously announced plan to exit the midstream sector by selling the remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units it held.

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
AT&T Common	$	(34)	$	(27)	$	(25)	$	(37)
Charter Common	9		(67)		25		(160)
WBD Common	(6)		33		8		33
Energy Transfer Common Units	—		—		—		95
Energy Transfer Series G Preferred Units	—		—		—		(9)
Other	—		—		(1)		—
Total	$	(31)	$	(61)	$	7	$	(78)

CenterPoint Energy recorded net unrealized gains (losses) of $(31) million and $7 million for the three and six months ended June 30, 2023 and net unrealized losses of $61 million and $164 million for the three and six months ended June 30, 2022 respectively, for equity securities held as of June 30, 2023 and 2022.

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
	June 30, 2023	December 31, 2022	June 30, 2023		December 31, 2022
			(in millions)
AT&T Common	10,212,945	10,212,945	$	163	$	188
Charter Common	872,503	872,503	321		296
WBD Common	2,470,685	2,470,685	31		23


Other			2		3
Total			$	517	$	510

(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 June 30, 2023. 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.

Table of Contents

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


	June 30, 2023	December 31, 2022
	(in shares)
AT&T Common	0.7185	0.7185
Charter Common	0.061382	0.061382
WBD Common	0.173817	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 June 30, 2023, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $22 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.

(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. Certain of these transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had $2 million and $11 million outstanding obligations related to the AMAs as of June 30, 2023 and December 31, 2022, respectively, recorded in Short-term borrowings on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets.

Debt Transactions. During the six months ended June 30, 2023, the following debt instruments were issued or incurred:


Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
	(in millions)



Houston Electric	March 2023	General Mortgage Bonds (1)	$	600	4.95%	2033
Houston Electric	March 2023	General Mortgage Bonds (1)	300		5.30%	2053
		Total Houston Electric	900
CERC	February 2023	Term Loan (2)	500		SOFR (3) + 0.85%	2024
CERC	February 2023	Senior Notes (4)	600		5.25%	2028
CERC	February 2023	Senior Notes (4)	600		5.40%	2033
CERC	May 2023	Senior Notes (5)	300		5.25%	2028
		Total CERC	2,000
CenterPoint Energy (6)	March 2023	First Mortgage Bonds (7)	100		4.98%	2028
CenterPoint Energy (6)	March 2023	First Mortgage Bonds (7)	80		5.04%	2033
CenterPoint Energy	March 2023	Term Loan (8)	250		SOFR (3) + 1.50%	2023
CenterPoint Energy (9)	June 2023	Securitization Bonds (10)	341		5.026% - 5.172%	2038-2043
		Total CenterPoint Energy	$	3,671

(1)Total proceeds from Houston Electric’s March 2023 issuances of general mortgage bonds, net of transaction expenses and fees, were approximately $890 million. Approximately $593 million of such proceeds were used for general limited liability company purposes, including capital expenditures, working capital and the repayment of all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool, and approximately $296 million of such proceeds will be disbursed or allocated to finance or refinance, in part or in full, new or existing projects that meet stated criteria.

(2)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.

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

Table of Contents

(4)Total proceeds from CERC’s February 2023 issuances of senior notes, net of transaction expenses and fees, of approximately $1.2 billion were used for general corporate purposes, including the repayment of (i) all or a portion of CERC’s outstanding 0.700% senior notes due 2023, (ii) all or a portion of CERC’s outstanding floating rate senior notes due 2023 and (iii) a portion of CERC’s outstanding commercial paper balances.

(5)Total proceeds, net of issuance premiums, transaction expenses and fees, of approximately $308 million, which includes approximately $3 million of accrued interest, were used for general corporate purposes, including repayment of all or a portion of CERC’s outstanding $500 million term loan due February 2024.

(6)Issued by SIGECO.

(7)Total proceeds from SIGECO’s March 2023 issuances of first mortgage bonds, net of transaction expenses and fees, of approximately $179 million were used for general corporate purposes, including repaying short-term debt and refunding long-term debt at maturity or otherwise.

(8)Total proceeds, net of transaction expenses and fees, of approximately $250 million were used for general corporate purposes, including the repayment of CenterPoint Energy’s outstanding commercial paper balances. The full outstanding amount of the term loan, including accrued and unpaid interest, was repaid in March 2023 and, following the repayment, the term loan agreement was terminated.

(9)Issued by the Securitization Subsidiary. Scheduled final payment dates are November 15, 2036 and May 15, 2041. The SIGECO Securitization Bonds will be repaid over time through a securitization charge imposed on retail electric customers in SIGECO’s service territory. See Notes 1 and 6 for further details.

(10)Total proceeds from the Securitization Subsidiary’s June 2023 issuance of SIGECO Securitization Bonds, net of transaction expenses and fees, of approximately $337 million were used to pay SIGECO the purchase price of the securitization property. SIGECO will use the net proceeds from the sale of the securitization property (after payment of upfront financing costs) to reimburse or pay for qualified costs approved by the IURC related to the planned retirement of its A.B. Brown 1 and 2 coal-powered generation units.

In April 2023, SIGECO executed a remarketing agreement, subject to standard conditions precedent, to remarket five series of tax-exempt debt issued by the Indiana Finance Authority, and secured by SIGECO first mortgage bonds, of approximately $148 million, comprised of: (i) $107 million aggregate principal amount of Environmental Improvement Refunding Revenue Bonds, Series 2013, originally issued by the Indiana Finance Authority on April 26, 2013, and (ii) $41 million aggregate principal amount of Environmental Improvement Refunding Revenue Bonds, Series 2014, originally issued by the Indiana Finance Authority on September 24, 2014, which closed on May 1, 2023. SIGECO expects to remarket an additional $38 million of tax-exempt debt at then market rates due to mandatory purchase or mandatory tender for purchase provisions by the end of 2023.

Debt Repayments and Redemptions. During the six months ended June 30, 2023, the following debt instruments were repaid at maturity or redeemed prior to maturity with proceeds received from the Texas securitization discussed further in Note 6 or through the issuance of new debt:


Registrant	Repayment/Redemption Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
			(in millions)
CERC	March 2023	Term Loan (3)	$	500	SOFR (2) + 0.70%	2023
CERC	March 2023	Senior Notes	700		0.70%	2023
CERC	March 2023	Floating Rate Senior Notes	575		Three-month LIBOR plus 0.5%	2023
CERC	May 2023	Term Loan (4)	500		SOFR (2) + 0.85%	2024
		Total CERC	2,275


CenterPoint Energy (1)	January 2023	First Mortgage Bonds	11		4.00%	2044
CenterPoint Energy	March 2023	Term Loan (3)	250		SOFR (2) + 1.50%	2023
		Total CenterPoint Energy	$	2,536

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

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

(3) The full outstanding amount of the term loan, including accrued and unpaid interest, was repaid in March 2023 and, following the repayment, the term loan agreement was terminated.

Table of Contents

(4) The full outstanding amount of the term loan, including accrued and unpaid interest, was repaid in May 2023 and, following the repayment, the term loan agreement was terminated.

Credit Facilities. The Registrants had the following revolving credit facilities as of June 30, 2023:


Execution Date	Registrant	Size of Facility		Draw Rate of SOFR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of June 30, 2023 (2)	Termination Date
		(in millions)
December 6, 2022	CenterPoint Energy	$	2,400	1.500%	65.0%	(3)	60.8%	December 6, 2027
December 6, 2022	CenterPoint Energy (4)	250		1.125%	65.0%		47.1%	December 6, 2027

December 6, 2022	Houston Electric	300		1.250%	67.5%	(3)	52.6%	December 6, 2027
December 6, 2022	CERC	1,050		1.125%	65.0%		42.2%	December 6, 2027
	Total	$	4,000

(1)Based on current credit ratings.

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

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

(4)This credit facility was issued by SIGECO.

The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of June 30, 2023.

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


	June 30, 2023								December 31, 2022
Registrant	Loans		Letters of Credit		Commercial Paper (2)		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper (2)		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy	$	—	$	11	$	1,655	5.46	%	$	—	$	11	$	1,770	4.71	%
CenterPoint Energy (1)	—		—		—		—	%	—		—		—		—	%
Houston Electric	—		—		—		—	%	—		—		—		—	%
CERC	—		1		—		—	%	—		—		805		4.67	%
Total	$	—	$	12	$	1,655			$	—	$	11	$	2,575

(1)This credit facility was issued by SIGECO.

(2)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. Neither Houston Electric nor SIGECO has a commercial paper program.

Liens. As of June 30, 2023, Houston Electric’s assets were subject to liens securing approximately $7.1 billion of general mortgage bonds outstanding under the General Mortgage, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. The general mortgage bonds that are held in trust to secure pollution control bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. Houston Electric could issue approximately $4.7 billion of additional general mortgage bonds on the basis of retired bonds and 70% of property additions as of June 30, 2023. No first

Table of Contents

mortgage bonds are outstanding under the M&DOT, and Houston Electric is contractually obligated to not issue any additional first mortgage bonds under the M&DOT and is undertaking actions to release the lien of the M&DOT and terminate the M&DOT.

As of June 30, 2023, SIGECO had approximately $457 million aggregate principal amount of first mortgage bonds outstanding. Generally, all of SIGECO’s real and tangible property is subject to the lien of SIGECO’s mortgage indenture which was amended and restated effective as of January 1, 2023. As of June 30, 2023, SIGECO was permitted to issue additional bonds under its mortgage indenture up to 70% of then currently unfunded property additions and approximately $1.3 billion of additional first mortgage bonds could be issued on this basis.

Other. As of June 30, 2023, certain financial institutions agreed to issue, from time to time, up to $5 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. As of June 30, 2023, such financial institutions had issued less than $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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
CenterPoint Energy (1)	46	%	22	%	29	%	26	%

Houston Electric (2)	21	%	21	%	22	%	21	%
CERC (3) (4)	20	%	4	%	22	%	23	%

(1)CenterPoint Energy’s higher effective tax rate for the three and six months ended June 30, 2023 compared to the same periods ended June 30, 2022 was primarily due to tax impacts of the sale of Energy Systems Group which is partially offset by the absence of the non-deductible goodwill associated with the sale of the Natural Gas businesses in Arkansas and Oklahoma in 2022.

(2)Houston Electric’s higher effective tax rate for the six months ended June 30, 2023 compared to the same period in 2022 was primarily driven by an increase in state income taxes.

(3)CERC’s higher effective tax rate for the three months ended June 30, 2023 compared to the same period ended June 30, 2022 was primarily driven by the increase in income from continuing operations in 2023 while favorable permanent tax adjustments and EDIT amortization remained consistent.

(4)CERC’s lower effective tax rate for the six months ended June 30, 2023 compared to the same period ended June 30, 2022 was primarily driven by decreased amortization of the EDIT regulatory liability.

CenterPoint Energy reported a net uncertain tax liability, inclusive of interest and penalties, of $29 million as of June 30, 2023. The Registrants believe that it is reasonably possible that there will be no change in unrecognized tax benefits, including penalties and interest, in the next 12 months as a result of a lapse of statutes on older exposures, a tax settlement, and/or a resolution of open audits.

Tax Audits and Settlements. Tax years through 2018 have been audited and settled with the IRS for CenterPoint Energy. For the 2019-2022 tax years, the Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2014-2019 tax years have been audited and settled with the IRS.

(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 June 30, 2023 and December 31, 2022. 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.

Table of Contents

On February 1, 2023, Indiana Electric entered into an amended and restated BTA to purchase the 191 MW Posey Solar project for a fixed purchase price over the anticipated 35-year life. On February 7, 2023, Indiana Electric filed a CPCN with the IURC to approve the amended BTA. With the passage of the IRA, Indiana Electric can now pursue PTCs for solar projects. Indiana Electric has filed an updated CPCN with a request that project costs, net of PTCs, be recovered in rate base, through base rates or the CECA mechanism, depending on which provides more timely recovery. The Posey Solar project is expected to be placed in service in 2025.

On January 11, 2023, the IURC issued an order approving the settlement agreement granting Indiana Electric a CPCN to purchase and acquire the 130 MW Pike County solar project through a BTA and approved the estimated cost. The IURC also designated the project as a clean energy project as well as approved the proposed levelized rate and associated ratemaking and accounting treatment. The project is expected to be placed in service by 2025.

As of June 30, 2023, other than discussed below, undiscounted minimum purchase obligations are approximately:


	CenterPoint Energy						CERC
	Natural Gas Supply		Electric Supply (1)		Other (2)		Natural Gas Supply
	(in millions)
Remaining six months of 2023	$	322	$	87	$	111	$	318
2024	671		161		191		666
2025	572		703		56		569
2026	487		103		39		483
2027	412		105		—		408
2028	368		68		—		364
2029 and beyond	1,707		718		392		1,682

(1)CenterPoint Energy’s undiscounted minimum payment obligations related to PPAs with commitments ranging from 15 years to 25 years and its purchase commitments under its BTA in Posey County, Indiana and its BTA in Pike County, Indiana are included above.

(2)The 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)

On May 21, 2023, CenterPoint Energy, through Vectren Energy Services, entered into the Equity Purchase Agreement to sell Energy Systems Group. The sale closed on June 30, 2023. See Note 3 for further information.

In the normal course of business prior to the consummation of the transaction on June 30, 2023, CenterPoint Energy, primarily through Vectren, issued parent company level guarantees supporting Energy Systems Group’s obligations. When Energy Systems Group was wholly owned by CenterPoint Energy, these guarantees did not represent incremental consolidated obligations, but rather, these guarantees represented guarantees of Energy Systems Group’s obligations to allow it to conduct business without posting other forms of assurance. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $519 million as of June 30, 2023. 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, were issued prior to the sale of Energy Systems Group in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects.

Under the terms of the Equity Purchase Agreement, ESG Holdings Group must generally use reasonable best efforts to replace existing CenterPoint Energy guarantees with credit support provided by a party other than CenterPoint Energy as of and after the closing of the transaction. The Equity Purchase Agreement also requires certain protections to be provided for any damages incurred by CenterPoint Energy in relation to these guarantees not released by closing. No additional guarantees were provided by CenterPoint Energy in favor of Energy Systems Group subsequent to the closing of the sale on June 30, 2023.

Table of Contents

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. CenterPoint Energy believes that, from Energy Systems Group’s inception in 1994 to the closing of the sale of Energy Systems Group on June 30, 2023, Energy Systems Group had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operated effectively. CenterPoint Energy recorded no amounts on its Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 related to its obligation under the outstanding guarantees.

**(c)**Legal, Environmental and Other Matters

Legal Matters

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

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

Substantially all of the litigation is or will be consolidated in Texas state court in Harris County, Texas, as part of an MDL proceeding, with one case currently pending in justice court in Harris County. The judge overseeing the MDL issued an initial case management order and stayed all proceedings and discovery. Per the case management order, the judge entertained dispositive motions in five representative or “bellwether” cases and, in late January 2023, issued rulings on them. The judge ruled that ERCOT has sovereign immunity as a governmental entity and dismissed the suits against it. In a recent opinion in an unrelated matter, the Texas Supreme Court held that ERCOT is entitled to sovereign immunity. This ruling will apply to claims against ERCOT in the MDL. The MDL judge also dismissed all claims against the natural gas defendants (which lists of natural gas defendants incorrectly included Utility Holding, LLC), and the REP defendants and some causes of action against the other defendants. As to the TDU and generator defendants, the MDL judge dismissed some causes of action but denied the motions to dismiss claims for negligence, gross negligence, and nuisance, which denial the TDU defendants and generator defendants are asking the court of appeals to overturn. The court of appeals has granted the request for oral argument in the TDU mandamus proceeding and is expected to hear oral argument in the third quarter of 2023. The MDL judge has allowed plaintiffs to file amended petitions and is going to entertain a second round of initial motions in the five bellweather cases, but otherwise the cases remain stayed as the MDL judge addresses additional preliminary issues.

Following the initial rulings and around the two-year anniversary of the February 2021 Winter Storm Event, there were voluminous amendments, non-suits and re-filings of pending lawsuits, and the filing of new lawsuits, and there continue to be amendments. As such, the pleadings are still being settled and the precise number of cases and claims against particular defendants and in total is still being determined. As of June 30, 2023, there are approximately 225 pending lawsuits that are in or will be added to the MDL proceeding related to the February 2021 Winter Storm Event, and CenterPoint Energy and Houston Electric, along with numerous other entities, have been named as defendants in approximately 155 of those lawsuits. A putative class action on behalf of everyone who received electric power via the ERCOT grid and sustained a power outage between February 10, 2021 and February 28, 2021 is also pending against CenterPoint Energy, Houston Electric, and numerous other defendants. Additionally, Utility Holding, LLC is currently named as a defendant in approximately six lawsuits in which CenterPoint Energy and/or Houston Electric are also named as defendants. CenterPoint Energy expects that the claims against Utility Holding, LLC will ultimately be dismissed in light of the judge’s initial rulings. CenterPoint Energy, Utility Holding, LLC, and Houston Electric intend to vigorously defend themselves against the claims raised.

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

In February 2023, twelve lawsuits were filed in state district court in Harris County and Tom Green County, Texas, against dozens of gas market participants in Texas, including natural gas producers, processors, pipelines, marketers, sellers, traders, gas utilities, and financial institutions. Plaintiffs named CERC as one such defendant, along with “CenterPoint Energy Services, Inc.,” incorrectly identifying it as CERC’s parent company (CenterPoint Energy previously divested CES). One lawsuit filed in Harris County is a putative class action on behalf of two classes of electric and natural gas customers (those who experienced a

Table of Contents

loss of electricity and/or natural gas, and those who were charged securitization-related surcharges on a utility bill or were otherwise charged higher rates for electricity and/or gas during the February 2021 Winter Storm Event), potentially including millions of class members. Two other lawsuits (one filed in Harris County and one in Tom Green County) are brought by an entity that purports to be an assignee of claims by tens of thousands of persons and entities that have assigned claims to the plaintiff. These, and nine other similar lawsuits filed in Harris County, generally allege that the defendants engaged in gas market manipulation and price gouging, including by intentionally withholding, suppressing, or diverting supplies of natural gas in connection with the February 2021 Winter Storm Event, Winter Storm Elliott, and other severe weather conditions, and through financial market manipulation. Plaintiffs allege that this manipulation impacted gas supply and prices as well as the market, supply, and price of electricity in Texas and caused blackouts and other damage. Plaintiffs assert claims for tortious interference with existing contract, private nuisance, and unjust enrichment, and allege a broad array of injuries and damages, including personal injury, property damage, and harm from certain costs being securitized and passed on to ratepayers. The lawsuits do not specify the amount of damages sought, but seek broad categories of actual, compensatory, statutory, consequential economic, and punitive damages; restitution and disgorgement; pre- and post-judgment interest; costs and attorneys’ fees; and other relief. As of June 30, 2023, most of the lawsuits have not been served, but the three cases in which defendants were served were tagged for transfer to the existing MDL proceeding referenced above. The plaintiffs in those three cases filed motions to remand the lawsuits back to their original trial courts and out of the MDL. On June 28, 2023, the judge overseeing the MDL heard oral arguments on the motions to remand, but did not state when she would render her ruling. Regardless of whether the cases remain within the MDL, CERC intends to vigorously defend itself against the claims raised, including by raising jurisdictional challenges to the plaintiffs’ claims.

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

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.

Table of Contents

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.


	June 30, 2023
	CenterPoint Energy		CERC
	(in millions, except years)
Amount accrued for remediation	$	17	$	15
Minimum estimated remediation costs	12		11
Maximum estimated remediation costs	51		44
Minimum years of remediation	5		5
Maximum years of remediation	50		50

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

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

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

CCR Rule (CenterPoint Energy). In April 2015, the EPA finalized its CCR Rule, which regulates ash as non-hazardous material under the RCRA. The final rule allows beneficial reuse of ash, and the majority of the ash generated by Indiana Electric’s generating plants will continue to be reused. In July 2018, the EPA released its final CCR Rule Phase I Reconsideration which extended the deadline to October 31, 2020 for ceasing placement of ash in ponds that exceed groundwater protections standards or that fail to meet location restrictions. In August 2019, the EPA proposed additional “Part A” amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. Further “Part B” amendments, which related to alternate liners for CCR surface impoundments and the surface impoundment closure process, were published in March 2020. The Part A amendments were finalized in August 2020 and extended the deadline to cease placement of ash in ponds to April 11, 2021, discussed further below. The Part A amendments do not restrict Indiana Electric’s current beneficial reuse of its fly ash. CenterPoint Energy evaluated the Part B amendments to determine potential impacts and determined that the Part B amendments did not have an impact on its current plans.

Indiana Electric has three ash ponds, two at the F.B. Culley facility (Culley East and Culley West) and one at the A.B. Brown facility. Under the existing CCR Rule, Indiana Electric is required to perform integrity assessments, including ground water monitoring, at its F.B. Culley and A.B. Brown generating stations. The ground water studies are necessary to determine the remaining service life of the ponds and whether a pond must be retrofitted with liners or closed in place. Indiana Electric’s Warrick generating unit is not included in the scope of the CCR Rule as this unit has historically been part of a larger generating station that predominantly serves an adjacent industrial facility. Preliminary groundwater monitoring indicates potential groundwater impacts very close to Indiana Electric’s ash impoundments, and further analysis is ongoing. The CCR Rule required companies to complete location restriction determinations by October 18, 2018. Indiana Electric completed its evaluation and determined that one F.B. Culley pond (Culley East) and the A.B. Brown pond fail the aquifer placement location restriction. As a result of this failure, Indiana Electric was required to cease disposal of new ash in the ponds and commence closure of the ponds by April 11, 2021, unless approved for an extension. CenterPoint Energy filed timely extension requests available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through October 15, 2023. The EPA is still reviewing industry extension requests, including CenterPoint Energy’s extension request for the Culley East pond; however, the Culley East pond was taken out of service on May 1, 2023, so there is no longer a need for an extension at Culley. 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

Table of Contents

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. Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already completed closure activities. On August 14, 2019, Indiana Electric filed its petition with the IURC for recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs associated with the excavation and recycling of ponded ash. This petition was subsequently approved by the IURC on May 13, 2020. On October 28, 2020, the IURC approved Indiana Electric’s ECA proceeding, which included the initiation of recovery of the federally mandated project costs.

In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. The proceeds of these settlements will offset costs that have been and will be incurred to close the ponds. On November 1, 2022, Indiana Electric filed for a CPCN to recover federally mandated costs associated with closure of the Culley East Pond, its third and final ash pond. Indiana Electric is also seeking accounting and ratemaking relief for the project, and on June 8, 2023, Indiana Electric filed a revised CPCN for recovery of the federally mandated ash pond costs. The project costs are estimated to be approximately $50 million, inclusive of overheads.

On March 18, 2023, the EPA proposed amendments to the CCR rule that would, if finalized, apply closure requirements for inactive surface impoundments located at inactive facilities (legacy CCR surface impoundments) and CCR management units located at regulated CCR facilities. CenterPoint Energy is currently reviewing this proposal.

As of June 30, 2023, CenterPoint Energy has recorded an approximate $109 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the settlements in the aforementioned insurance proceeding. In addition to these AROs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.

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

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

Other Proceedings

The Registrants are involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business. From time to time, the Registrants are also defendants in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry. Some of these proceedings involve substantial amounts. The Registrants regularly analyze current information and, as necessary, provide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. The Registrants do not expect the disposition of these matters to have a material adverse effect on the Registrants’ financial condition, results of operations or cash flows.

(14) Earnings Per Share (CenterPoint Energy)

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

Table of Contents

Diluted earnings per common share reflects the dilutive effect of potential common shares from share-based awards. The dilutive effect of restricted stock is computed using the treasury stock method, as applicable, which includes the incremental shares that would be hypothetically vested in excess of the number of shares assumed to be hypothetically repurchased with the assumed proceeds.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions, except per share and share amounts)
Numerator:
Income from continuing operations	$	118	$	190	$	443	$	721
Less: Preferred stock dividend requirement (Note 18)	12		11		24		24







Income available to common shareholders - basic and diluted	$	106	$	179	$	419	$	697
Denominator:
Weighted average common shares outstanding - basic	631,057,000		629,475,000		630,685,000		629,306,000
Plus: Incremental shares from assumed conversions:
Restricted stock	1,948,000		2,188,000		2,345,000		2,188,000


Weighted average common shares outstanding - diluted	633,005,000		631,663,000		633,030,000		631,494,000







Earnings Per Common Share:


Basic Earnings Per Common Share	$	0.17	$	0.28	$	0.66	$	1.11


Diluted Earnings Per Common Share	$	0.17	$	0.28	$	0.66	$	1.10

(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.

As of June 30, 2023, 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, 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 through June 30, 2023, the date of the sale of Energy Systems Group, and 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

Table of Contents

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:

CenterPoint Energy


	Three Months Ended June 30,
	2023			2022
	Revenues from External Customers			Net Income (Loss)		Revenues from External Customers			Net Income (Loss)
	(in millions)
Electric	$	1,037	(1)	$	180	$	1,053	(1)	$	173
Natural Gas	764			35		818			28
Corporate and Other	74			(97)		73			(11)
Consolidated	$	1,875		$	118	$	1,944		$	190



	Six Months Ended June 30,
	2023			2022
	Revenues from External Customers			Net Income (Loss)		Revenues from External Customers			Net Income
	(in millions)
Electric	$	1,989	(1)	$	303	$	1,946	(1)	$	255
Natural Gas	2,539			269		2,642			426
Corporate and Other	126			(129)		119			40

Consolidated	$	4,654		$	443	$	4,707		$	721

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Affiliates of NRG	$	229	$	245	$	456	$	470
Affiliates of Vistra Energy Corp.	112		114		226		219


	Total Assets
	June 30, 2023		December 31, 2022
	(in millions)
Electric	$	20,302	$	19,024
Natural Gas	16,745		18,043

Corporate and Other, net of eliminations (1)	1,050		1,479

Consolidated	$	38,097	$	38,546

(1)Total assets included pension and other postemployment-related regulatory assets of $385 million and $405 million as of June 30, 2023 and December 31, 2022, 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.

Table of Contents

(16) Supplemental Disclosure of Cash Flow Information

The table below provides supplemental disclosure of cash flow information:


	Six Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash Payments/Receipts:
Interest, net of capitalized interest	$	317	$	128	$	82	$	219	$	96	$	41
Income tax payments, net	154		1		34		267		130		5
Non-cash transactions:
Accounts payable related to capital expenditures	297		164		133		352		221		147
ROU assets obtained in exchange for lease liabilities (1)	3		1		—		1		—		—

(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:


	June 30, 2023						December 31, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash and cash equivalents (1)	$	214	$	62	$	1	$	74	$	75	$	—
Restricted cash included in Prepaid expenses and other current assets	18		12		—		17		13		—

Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows	$	232	$	74	$	1	$	91	$	88	$	—

(1)Cash and cash equivalents related to VIEs as of June 30, 2023 and December 31, 2022 included $63 million and $75 million, respectively, at CenterPoint Energy and $62 million and $75 million, respectively, at Houston Electric.

(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:


	June 30, 2023						December 31, 2022
	Houston Electric			CERC			Houston Electric			CERC
	(in millions, except interest rates)
Money pool investments (borrowings) (1)	$	(110)		$	417		$	(642)		$	—
Weighted average interest rate	5.50		%	5.50		%	4.75		%	4.75		%

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

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

Table of Contents

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 June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Corporate service charges	$	40	$	56	$	37	$	51	$	75	$	106	$	76	$	109
Net affiliate service charges (billings)	(3)		3		(9)		9		(6)		6		(15)		15

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


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	109	$	107	$	30	$	72	$	160	$	311	$	67	$	111
Cash dividend paid to parent related to the sale of the Arkansas and Oklahoma Natural Gas businesses	—		—		—		—		—		—		—		720
Cash contribution from parent	—		500		506		125		650		500		1,143		125
Net assets acquired in the Restructuring	—		—		—		2,345		—		—		—		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	—		—		13		13		—		—		65		61
Property, plant and equipment from parent (1)	—		—		13		13		—		—		103		115

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

(18) Equity

Dividends Declared and Paid (CenterPoint Energy)


	Dividends Declared Per Share								Dividends Paid Per Share
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Common Stock	$	0.190	$	0.170	$	0.190	$	0.170	$	0.190	$	0.170	$	0.380	$	0.340
Series A Preferred Stock	—		—		—		—		—		—		30.625		30.625

Preferred Stock (CenterPoint Energy)


	Liquidation Preference Per Share			Shares Outstanding as of				Outstanding Value as of
			June 30, 2023		December 31, 2022		June 30, 2023			December 31, 2022
	(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

Table of Contents

Income Allocated to Preferred Shareholders (CenterPoint Energy)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Series A Preferred Stock	$	12	$	11	$	24	$	24




Total income allocated to preferred shareholders	$	12	$	11	$	24	$	24

Temporary Equity (CenterPoint Energy)

On the approval and recommendation of the Compensation Committee and approval of the Board (acting solely through its independent directors), CenterPoint Energy entered into a retention incentive agreement with David J. Lesar, then President and Chief Executive Officer of CenterPoint Energy, dated July 20, 2021. Pursuant to the retention incentive agreement, Mr. Lesar received equity-based awards under CenterPoint Energy’s LTIP covering a total of 1 million shares of Common Stock (Total Stock Award) which were granted in multiple annual awards. Mr. Lesar received 400 thousand restricted stock units in July 2021 that vested in December 2022 and 400 thousand restricted stock units and 200 thousand restricted stock units in February 2022 and February 2023, respectively, that will vest in December 2023. For accounting purposes, the 1 million shares under the Total Stock Award, consisting of the equity-based awards described above, were considered granted in July 2021. In the event that death, disability, termination without cause or resignation for good reason, as defined in the retention incentive agreement, had occurred prior to the full Total Stock Award being awarded, CenterPoint Energy would have paid a lump sum cash payment equal to the value of the unawarded equity-based awards, based on the closing trading price of Common Stock on the date of the event’s occurrence. Because the equity-based awards would have been redeemable for cash prior to being awarded upon events that were not probable at the grant date, the equity associated with any unawarded equity-based awards were classified as Temporary Equity as of December 31, 2022 on CenterPoint Energy’s Condensed Consolidated Balance Sheets. As of June 30, 2023, all restricted stock units have been awarded to Mr. Lesar and no amounts are reflected in Temporary Equity on CenterPoint Energy’s Condensed Consolidated Balance Sheets.

Table of Contents

Accumulated Other Comprehensive Income (Loss)

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


	Three Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Beginning Balance	$	(32)	$	—	$	15	$	(62)	$	—	$	10
Other comprehensive income (loss) before reclassifications:
Remeasurement of pension and other postretirement plans	—		—		—		(34)		—		—


Amounts reclassified from accumulated other comprehensive income (loss):
Prior service cost (1)	—		—		—		1		—		—
Actuarial losses (1)	—		—		—		1		—		—
Settlement (2)	—		—		—		13		—		—

Tax benefit (expense)	—		—		—		(4)		—		—
Net current period other comprehensive income (loss)	—		—		—		(23)		—		—
Ending Balance	$	(32)	$	—	$	15	$	(85)	$	—	$	10

	Six Months Ended June 30,
	2023						2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Beginning Balance	$	(31)	$	—	$	16	$	(64)	$	—	$	10
Other comprehensive income (loss) before reclassifications:
Remeasurement of pension and other postretirement plans	—		—		—		(34)		—		—


Amounts reclassified from accumulated other comprehensive income (loss):
Prior service cost (1)	(1)		—		(1)		1		—		—
Actuarial losses (1)	—		—		—		2		—		—
Settlement (2)	—		—		—		13		—		—
Reclassification of deferred loss from cash flow hedges realized in net income	—		—		—		1		—		—

Tax benefit (expense)	—		—		—		(4)		—		—
Net current period other comprehensive income (loss)	(1)		—		(1)		(21)		—		—
Ending Balance	$	(32)	$	—	$	15	$	(85)	$	—	$	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.

(19) Leases

In 2021, Houston Electric entered into a temporary short-term lease and long-term leases for mobile generation. The short-term lease agreement allowed Houston Electric to take delivery of TEEEF assets on a short-term basis with an initial term ending on September 30, 2022 and extended until December 31, 2022. As of December 31, 2022, the short-term lease agreement has expired and all mobile generation assets are leased under the long-term lease agreement. Per Houston Electric’s short-term lease accounting policy election, a ROU asset and lease liability are not reflected on Houston Electric’s Condensed Consolidated Balance Sheets. Expenses associated with the short-term lease, including carrying costs, are deferred to a regulatory asset and totaled, net of amounts recovered in rates, $104 million and $103 million as of June 30, 2023 and December 31, 2022, respectively.

The long-term lease agreement includes up to 505 MW of TEEEF, all of which was delivered as of December 31, 2022, triggering lease commencement at delivery, with an initial term ending in 2029 for all TEEEF leases. These assets were

Table of Contents

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 June 30, 2023 and December 31, 2022 and relates to removal costs that will be incurred at the end of the lease term. As of June 30, 2023, Houston Electric has secured a first lien on the assets leased under the prepayment agreement, except for assets with lease payments totaling $113 million. The $113 million prepayment is being held in an escrow account, not controlled by Houston Electric, and the funds will be released when a first lien can be secured for Houston Electric. Expenses associated with the long-term lease, including depreciation expense on the right of use asset and carrying costs, are deferred to a regulatory asset and totaled, net of amounts recovered in rates, $106 million and $60 million as of June 30, 2023 and December 31, 2022, respectively. The long-term lease agreement contains a termination clause that can be exercised in the event of material adverse regulatory actions. If the right to terminate is elected, subject to the satisfaction of certain conditions, 75% of Houston Electric’s prepaid lease costs that is attributable to the period from the effective date of termination to the end of the lease term would be refunded. In December 2022, the long-term lease agreement was amended to include a disallowance reimbursement clause that can be exercised in the event that any regulatory proceeding or settlement agreement results in a disallowance of Houston Electric’s recovery of deferred costs under either the long-term lease agreement, short-term lease agreement or any other quantifiable adverse financial impact to Houston Electric. If the disallowance reimbursement clause is exercised, 85% of such disallowance up to $53 million would be paid to Houston Electric. Any disallowance greater than $53 million would remain subject to the 75% limit set forth in the termination clause. For further discussion of the regulatory impacts, see Note 6.

Houston Electric will also incur variable costs throughout the lease term for the operation and maintenance of the generators. Lease costs, including variable and ROU asset amortization costs, are deferred to Regulatory assets as incurred as a recoverable cost under the 2021 Texas legislation. See Note 6 for further information regarding recovery of these deferred costs.

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 June 30, 2023						Three Months Ended June 30, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	1	$	—	$	1	$	2	$	—	$	—
Short-term lease cost	13		14		—		37		37		—

Total lease cost (1)	$	14	$	14	$	1	$	39	$	37	$	—

	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	3	$	1	$	1	$	2	$	—	$	1
Short-term lease cost	13		13		—		84		83		—

Total lease cost (1)	$	16	$	14	$	1	$	86	$	83	$	1

(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.

Table of Contents

Lease income was as follows:


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	1	$	—	$	1	$	1	$	—	$	1
Variable lease income	—		—		—		1		—		—
Total lease income	$	1	$	—	$	1	$	2	$	—	$	1

	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	3	$	—	$	2	$	3	$	—	$	1
Variable lease income	1		—		—		1		—		—
Total lease income	$	4	$	—	$	2	$	4	$	—	$	1

Supplemental balance sheet information related to leases was as follows:


	June 30, 2023									December 31, 2022
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions, except lease term and discount rate)
Assets:
Operating ROU assets (1)	$	16		$	7		$	5		$	19		$	6		$	5
Finance ROU assets (2)	574			574			—			621			621			—
Total leased assets	$	590		$	581		$	5		$	640		$	627		$	5

Liabilities:
Current operating lease liability (3)	$	4		$	1		$	2		$	5		$	1		$	2
Non-current operating lease liability (4)	12			5			3			14			5			4
Total leased liabilities (5)	$	16		$	6		$	5		$	19		$	6		$	6

Weighted-average remaining lease term (in years) - operating leases	5.0			4.4			3.5			4.3			4.8			3.9
Weighted-average discount rate - operating leases	4.10		%	4.09		%	3.59		%	3.80		%	4.01		%	3.58		%
Weighted-average remaining lease term (in years) - finance leases	6.0			6.0			—			6.5			6.5			—
Weighted-average discount rate - finance leases	3.60		%	3.60		%	—			3.60		%	3.60		%	—

(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 June 30, 2023 or December 31, 2022 and are reported within Other long-term debt in the Registrants’ respective Condensed Consolidated Balance Sheets when applicable.

Table of Contents

As of June 30, 2023, finance lease liabilities were not significant to the Registrants. As of June 30, 2023, maturities of operating lease liabilities were as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2023	$	3	$	—	$	1
2024	4		2		2
2025	3		2		1
2026	3		2		1
2027	2		1		—
2028	2		—		—
2029 and beyond	1		—		—
Total lease payments	18		7		5
Less: Interest	2		1		—
Present value of lease liabilities	$	16	$	6	$	5

As of June 30, 2023, future minimum finance lease payments were not significant to the Registrants. As of June 30, 2023, maturities of undiscounted operating lease payments to be received are as follows:


	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Remainder of 2023	$	3	$	—	$	2
2024	6		1		5
2025	8		1		5
2026	8		—		5
2027	8		—		5
2028	7		—		5
2029 and beyond	176		—		170
Total lease payments to be received	$	216	$	2	$	197

Other information related to leases is as follows:


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	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	$	1	$	1	$	1	$	—	$	—


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	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	$	3	$	1	$	1	$	3	$	—	$	1
Financing cash flows from finance leases included in the measurement of lease liabilities	—		—		—		171		171		—

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

Table of Contents

(20) Subsequent Events (CenterPoint Energy)

On July 19, 2023, CenterPoint Energy’s Board of Directors declared the following cash dividends to shareholders of record as of the close of business on the applicable record dates.


Equity Instrument	Declaration Date	Record Date	Payment Date	Per Share
Common Stock	July 19, 2023	August 17, 2023	September 14, 2023	$	0.1900
Series A Preferred Stock	July 19, 2023	August 15, 2023	September 1, 2023	$	30.6250

Table of Contents

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES