If push comes to shove, CenterPoint Energy Inc. said it is ready to go all the way up to the Texas Supreme Court in challenging a Public Utilities Commission of Texas (PUCT) decision that the company will only be allowed to recover $2.3 billion of the $4.25 billion it requested in stranded costs and interest in the final adjustment or “true-up” of costs associated with the transition to retail competition.
“Although the commission’s final order is essentially in line with what we have been expecting based on their earlier deliberations, we nevertheless are extremely disappointed in the decision today,” David McClanahan, president of CenterPoint Energy, said last Wednesday. “We do not believe the commission has followed the law or its own rulings on a number of very significant issues.”
CenterPoint will review the commission’s decision carefully, “prepare our motion for a rehearing and to the extent sufficient relief is not obtained through a rehearing, appeal to Texas’ state courts, up to and including the Texas Supreme Court,” said Scott Rozzell, general counsel for CenterPoint. “In the meantime, we will attempt to work closely with the PUC staff and the intervening parties to get securitization bonds issued for the commission-authorized true-up balance while current bond market interest rates are favorable. Securitizing quickly should save customers hundreds of millions of dollars in interest costs.”
CenterPoint maintains the electrical system that delivers power to Houston-area customers, and charges a regulated delivery rate to retail electric providers. This delivery rate represents only a small part of customers’ overall electric bill.
The power company said that based on Wednesday’s decision, securitizing the full amount determined by the PUCT will increase the amount the company charges retail electric providers, which in turn increases the monthly bill for a PUCT benchmark residential customer (1,000 kWh/month) by $3 per month.
Fixed-income market analysts at CreditSights said that CenterPoint “got a sort of final order” but “there is an interest on stranded cost item of $121 million that the PUC said it still wasn’t sure about.” According to the analysts, the PUCT has netted some “credits” against CenterPoint’s original interest on stranded cost claim of $539 million, and “apparently isn’t quite sure if it has correctly calculated this number.” The analysts continue to expect CenterPoint to remain investment grade at Standard & Poor’s.
Prior to the PUCT decision, CenterPoint had estimated that regulators were only likely to allow it to recover about $2 billion. As a result, the company recorded an $894 million extraordinary loss for the third quarter. Once the PUC issues a final order, the extraordinary loss may be adjusted.
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