CenterPoint Energy Inc. said its expected costs for restoration efforts following Hurricane Ike have ballooned to $650-750 million from its preliminary estimate of $350-500 million in late September (see NGI, Sept. 29).
The Houston-based power company reported the higher figure to the Securities and Exchange Commission (SEC) last Wednesday in an 8-K filing. "Total costs for the restoration effort still cannot be measured with precision, but [affiliate] CenterPoint Houston now estimates that its costs will be in the range of approximately $650 million to $750 million," the utility said. CenterPoint Houston is a wholly owned subsidiary of CenterPoint Energy.
Assuming enabling legislation is enacted by the Texas legislature during the session that begins in January 2009, CenterPoint Houston expects to obtain recovery of its storm restoration costs through the issuance of non-recourse securitization bonds. If the securitization does not become available, the utility said it would seek recovery of the costs through the traditional regulatory mechanisms.
Under a 2006 rate settlement, CenterPoint noted that it is entitled to seek an adjustment to its power rates in an emergency situation like this, even though in most instances its rates are to remain frozen until 2010.
In addition to the restoration costs, the outages and loss of load due to the storm are expected to have a negative impact on both CenterPoint Energy's and CenterPoint Houston's earnings for the third quarter and the rest of the year, according to the SEC filing. "However the exact amount of these impacts cannot be determined at this time," the company said.
CenterPoint Energy and CenterPoint Houston said they "believe that they have sufficient liquidity to finance storm restoration costs until ultimate recovery, while at the same time carrying out their current business plans." But if storm cost recovery is delayed substantially, the two affiliates "could be required to reduce funding on planned projects or to seek capital resources not currently planned," they said.
The companies each have access to a credit facility -- $1 billion for CenterPoint Energy and only $126 million for CenterPoint Houston. CenterPoint Energy Resources Corp., a natural gas subsidiary of CenterPoint Energy, has its own $950 million bank credit facility, but it cannot be accessed by CenterPoint Houston.
There may be a "minor reduction" in the available remaining balance of the three credit facilities because Lehman Brothers Bank FSB, whose parent filed for bankruptcy protection, has a 4% participation in the facilities and has not been funding its commitments, CenterPoint Energy told the SEC.
More than 90% of the utility's customers initially were without electric service when the storm struck on Sept. 13. By Oct. 1 CenterPoint had restored service to approximately 99% of its customers.
"Some restoration and repair work is expected to continue during most of the remainder [of the year], as customers rebuild homes and other facilities that were severely damaged by the storm," the company said.
At the height of the restoration efforts, CenterPoint estimated that as many as 13,000 of its own workers and contractors across the United States and Canada were working to repair interrupted power service.
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