The director of financial analysis for the Public Utility Commission of Texas (PUCT) recommended last week that $1.95 billion be trimmed from a $4.43 billion request by a CenterPoint Energy Inc. to recover the costs of stranded power plants, environmental controls and transition.

CenterPoint subsidiaries CenterPoint Energy Houston Electric LLC, Texas Genco LP and Reliant Energy Retail Services LLC filed a final “true-up” application in late March (see Power Market Today, April 1). Beginning this year, electric utilities may recover their stranded costs, also known as “true-up” balances, primarily through low-interest bonds, under the 1999 Texas Electric Choice Law. Repayment is through charges paid by retail electric providers for electric delivery services.

PUCT’s Darryl Tietjen, who submitted a 100-page staff report to the commission, recommended several reductions in CenterPoint’s request. Among other things, he recommended that $180 million of interest, which was part of CenterPoint’s excess mitigation credits, be denied. He also recommended a disallowance of $305,235 be made to Genco’s stranded cost request. Regarding CenterPoint’s $1.356 billion request for the capacity auction true-up, he recommended that CenterPoint be allowed to recover $664.5 million.

He also recommended denying CenterPoint’s request for $631 million in interest costs “because it is calculated in violation of the commission’s rules.” The interest costs, already denied by PUCT, are being appealed by CenterPoint at the Supreme Court of Texas.

A final decision on CenterPoint’s application is expected by Aug. 30. All of the CenterPoint filings (Case 29526-2) may be found on PUCT’s Interchange web site at https://puc.state.tx.us.

Following the staff report, Standard & Poor’s Ratings Services (S&P) noted that CenterPoint’s ratings would be unaffected. S&P stated previously that it expects $5 billion of total deleveraging by CenterPoint once it sells its 81% Genco interest. “In and of itself, the staff recommendation is not a meaningful credit event,” said S&P. It expects “there to be more clarity on this issue by summer’s end, as the Texas Genco sale process plays out and the PUCT ultimately makes its decision on the true-up filing.”

In related news, CenterPoint announced that it has filed a universal shelf registration statement (Form S-3) with the Securities and Exchange Commission (SEC) to sell up to $1 billion of its securities, which may include common stock, preferred stock and senior debt securities. Once the registration statement is declared effective by the SEC, the registration statement will allow the company to sell any of the securities covered by the registration statement in one or more offerings in the future. CenterPoint did not announce when the securities would be sold.

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