Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Houston Electric and CERC meet the conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and are therefore permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies. Accordingly, Houston Electric and CERC have omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures About Market Risk) of Part I of the Form 10-Q.

Information regarding the Registrants’ quantitative and qualitative disclosures about market risk are disclosed in Part II, Item 7A of our combined 2024 Form 10-K. Except as described below, there have been no material changes in those disclosures.

Interest Rate Risk (CenterPoint Energy)

As of March 31, 2025, the Registrants had outstanding long-term debt and lease obligations and CenterPoint Energy had obligations under its ZENS that subject them to the risk of loss associated with movements in market interest rates. The Registrants seek to manage interest rate exposure by monitoring the effects of changes in market interest rates and using a combination of fixed and variable rate debt. Additionally, interest rate swaps are used to mitigate interest rate exposure when deemed appropriate.

CenterPoint Energy’s floating rate obligations aggregated $2.1 billion and $1.5 billion as of March 31, 2025 and December 31, 2024, respectively. If the floating interest rates were to increase by 100 basis points from March 31, 2025 rates, CenterPoint Energy’s combined interest expense would increase by approximately $21 million annually.

As of March 31, 2025 and December 31, 2024, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating $20.3 billion and $19.7 billion, respectively, in principal amount and having a fair value of $19.2 billion and $18.4 billion, respectively. Because these instruments are fixed-rate, they do not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of these instruments would increase by approximately $792 million if interest rates were to decline by 10% from levels at March 31, 2025. In general, such an increase in fair value would impact earnings and cash flows only if CenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.

Table of Contents

The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $2 million as of March 31, 2025 was a fixed-rate obligation and, therefore, did not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of the debt component would increase by less than $1 million if interest rates were to decline by 10% from levels at March 31, 2025. Changes in the fair value of the derivative component, a $698 million recorded liability at March 31, 2025, are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income and, therefore, it is exposed to changes in the fair value of the derivative component as a result of changes in the underlying risk-free interest rate. If the risk-free interest rate were to increase by 10% from March 31, 2025 levels, the fair value of the derivative component liability would decrease by $1 million, which would be recorded as a gain on indexed debt securities in CenterPoint Energy’s Condensed Statements of Consolidated Income.