|CenterPoint Energy Transition Bond Company, LLC, CenterPoint Energy Transition Bond Company II, LLC, CenterPoint Energy Transition Bond Company III, LLC, CenterPoint Energy Transition Bond Company IV, LLC and CenterPoint Energy Restoration Bond Company, LLC are special purpose subsidiaries of CenterPoint Energy Houston Electric, LLC (CenterPoint Energy Houston).
Under the Texas electric restructuring law that was enacted in 1999, a special purpose subsidiary of a sponsoring utility may issue transition bonds to enable the utility to recover certain stranded costs and regulatory assets. A specific charge imposed on the distribution of electricity to customers supports principal and interest payments on these transition bonds, and is authorized by the Public Utility Commission of Texas (Texas Utility Commission) under a financing order that is binding, irrevocable and non-appealable.
Under legislation enacted in 2009, an electric utility like CenterPoint Energy Houston may be authorized to form a special purpose subsidiary that issues securitization bonds, called system restoration bonds, for the purpose of recovering costs related to restoring the utility’s distribution system following major storms or other natural events. The process for authorizing and issuing such bonds and for recovering the principal and interest on them is essentially the same as the process related to transition bonds. CenterPoint Energy Restoration Bond Company, LLC was formed in 2009 and issued system restoration bonds to recover the costs associated with restoring CenterPoint Energy Houston’s distribution system following Hurricane Ike.