BAKER BOTTS L.L.P. ONE SHELL PLAZA AUSTIN
910 LOUISIANA BAKU
HOUSTON, TEXAS DALLAS
77002-4995 DUBAI
713.229.1234 HONG KONG
FAX 713.229.1522 HOUSTON
LONDON
MOSCOW
NEW YORK
RIYADH
WASHINGTON
July 8, 2005
001166.1319 Dora B. Tognarelli
713.229.1433
Securities and Exchange Commission FAX 713.229.2733
100 F Street, NE dora.tognarelli@bakerbotts.com
Washington, DC 20549
Attention: Filing Desk
Re: Memorandum in Response to Staff Comments
Ladies and Gentlemen:
On behalf of CenterPoint Energy, Inc. (the "Company"), we transmit
herewith for electronic filing via the EDGAR system under the Securities Act of
1933, as amended, a memorandum and attachments setting forth the Company's
responses to the comments of the staff of the Securities and Exchange Commission
in its comment letter dated June 30, 2005.
Please contact Gerald M. Spedale (713.229.1734), James H. Mayor
(713.229.1749) or the undersigned (713.229.1433) of the firm Baker Botts L.L.P.,
counsel to the Company, with any questions or comments you may have regarding
the enclosed. In addition, please send copies of all written correspondence with
the Company directly to Mr. Gerald M. Spedale, Baker Botts L.L.P., One Shell
Plaza, 910 Louisiana Street, Houston, Texas 77002 (fax number: 713.229.7734),
with a copy to Steven R. Loeshelle, counsel to the dealer manager, at Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019 (fax
number: 212.259.6161).
Very truly yours,
BAKER BOTTS L.L.P.
By: /s/ Dora B. Tognarelli
------------------------------------
Dora B. Tognarelli
cc: Mr. Rufus S. Scott
CenterPoint Energy, Inc.
Mr. Gerald M. Spedale
Ms. Margo S. Scholin
Mr. James H. Mayor
Baker Botts L.L.P.
Mr. Steven R. Loeshelle
Dewey Ballantine LLP
CENTERPOINT ENERGY, INC.
MEMORANDUM IN RESPONSE TO STAFF COMMENTS
Amendment No. 2 to Registration Statement on Form S-4
(Registration No. 333-123182)
Filed June 22, 2005
This memorandum sets forth the responses of CenterPoint
Energy, Inc. (the Company) to the comment of the staff (the Staff) of the
Securities and Exchange Commission (the Commission) in its comment letter dated
June 30, 2005 (the Comment Letter) relating to the Company's Registration
Statement (No. 333-123182) on Form S-4 (the Registration Statement) that was
originally filed on March 8, 2005, Amendment No. 1 to the Registration Statement
(Amendment No. 1) that was filed on May 26, 2005, Amendment No. 2 to the
Registration Statement (Amendment No. 2) that was filed on June 22, 2005,
CenterPoint Energy Houston Electric, LLC's Form 10-K for the fiscal year ended
December 31, 2004 (File No. 1-03187) and CenterPoint Energy Resources Corp.'s
Form 10-K for the fiscal year ended December 31, 2004 (File No. 1-13265). For
your convenience, we have repeated the comment of the Staff as given in the
Comment Letter, and set forth below such comment is the response of the Company.
CENTERPOINT ENERGY HOUSTON, LLC - FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004
1. Please refer to our comment 6 in our letter dated June 9, 2005. Provide
to us the calculations supporting the $226 million income recognition
related to the debt component of the true-up balance. In this regard,
your historical financial statements appear to support a lower
debt-to-equity ratio than what was actually recorded. We may have
further comment.
RESPONSE: Attached as Exhibit A are actual interest calculations by month
for total interest at a rate of 11.075% and at the debt rates of 7.59%,
7.18%, and 6.05% for 2002, 2003, and 2004, respectively. The debt rates are
derived from the Earnings Monitoring Report, which is filed annually with
the Public Utility Commission of Texas. This report reflects only the
transmission and distribution operations of CenterPoint Energy Houston
Electric, LLC ("CEHE"), excluding (i) the operations of the Transition Bond
Company, a wholly-owned subsidiary of CEHE, and (ii) for periods prior to
January 1, 2004, the effects of the True-Up Proceeding. Attached as
Exhibit B is a schedule showing the capital structure and the weighted
average cost of debt for 2002, 2003, and 2004 used in this calculation.
EXHIBIT A
CENTERPOINT ENERGY HOUSTON ELECTRIC
TOTAL EARNED INTEREST CALCULATION
DECEMBER 2004
RATE/MONTH
2002 0.008791374
Interest Rate @ 11.075% 2003 0.008791374
2004 0.008791374
--------------------------------------------------------------------------------------------------------
PRINCIPAL INTEREST
------------------------------------------------------------------------------------ Total
(P&I) * rate Order on Rehearing Principal &
Cumulative Month Adjustments Cumulative Interest
--------------------------------------------------------------------------------------------------------
DECEMBER 2001 707,270,358 0 707,270,358
JANUARY 2002 728,737,718 6,217,878 (6,217,878) 0 728,737,718
FEBRUARY 782,028,140 6,406,606 (6,080,157) 326,449 782,354,589
MARCH 836,006,506 6,877,972 (6,222,204) 982,217 836,988,723
APRIL 894,605,924 7,358,281 (6,370,299) 1,970,200 896,576,124
MAY 933,633,155 7,882,136 (6,559,019) 3,293,317 936,926,472
JUNE 998,610,172 8,236,871 (6,575,673) 4,954,516 1,003,564,688
JULY 1,047,956,770 8,822,713 (6,820,461) 6,956,768 1,054,913,538
AUGUST 1,105,474,784 9,274,140 (6,927,836) 9,303,071 1,114,777,856
SEPTEMBER 1,161,500,756 9,800,429 (7,107,049) 11,996,451 1,173,497,207
OCTOBER 1,205,933,651 10,316,653 (7,273,146) 15,039,959 1,220,973,610
NOVEMBER 1,245,487,277 10,734,036 (7,337,323) 18,436,673 1,263,923,949
DECEMBER 1,302,997,583 11,111,629 (7,358,604) 22,189,697 1,325,187,280
JANUARY 2003 1,354,966,621 11,650,217 (4,592,000) 29,247,914 1,384,214,536
FEBRUARY 1,393,156,467 12,169,148 (4,592,000) 36,825,063 1,429,981,530
MARCH 1,439,200,395 12,571,503 (4,592,000) 44,804,566 1,484,004,960
APRIL 1,481,521,765 13,046,443 (4,592,000) 53,259,009 1,534,780,773
MAY 1,522,187,245 13,492,832 (4,592,000) 62,159,841 1,584,347,086
JUNE 1,574,129,437 13,928,588 (4,592,000) 71,496,429 1,645,625,866
JULY 1,620,425,087 14,467,313 (4,592,000) 81,371,742 1,701,796,830
AUGUST 1,670,765,104 14,961,133 (4,592,000) 91,740,876 1,762,505,979
SEPTEMBER 1,724,141,178 15,494,850 (4,592,000) 102,643,725 1,826,784,903
OCTOBER 1,769,189,840 16,059,950 (4,592,000) 114,111,675 1,883,301,516
NOVEMBER 1,811,647,847 16,556,809 (4,592,000) 126,076,484 1,937,724,331
DECEMBER 1,861,498,062 17,035,260 (4,592,000) 138,519,744 2,000,017,806
JANUARY 2004 1,881,255,337 17,582,905 156,102,649 2,037,357,987
FEBRUARY 1,902,977,024 17,911,177 174,013,826 2,076,990,851
MARCH 1,921,762,810 18,259,604 192,273,430 2,114,036,240
APRIL 1,942,679,927 18,585,284 210,858,714 2,153,538,641
MAY 1,964,052,892 18,932,564 229,791,279 2,193,844,170
JUNE 1,984,087,128 19,286,905 249,078,184 2,233,165,312
JULY 2,007,379,260 19,632,592 268,710,776 2,276,090,036
AUGUST 2,031,463,869 20,009,960 288,720,736 2,320,184,604
SEPTEMBER 2,130,350,809 20,397,611 309,118,347 2,439,469,157
OCTOBER 2,151,597,550 21,446,287 330,564,634 2,482,162,183
NOVEMBER 2,169,962,414 21,821,617 352,386,251 2,522,348,665
DECEMBER 1 - 17, 2004 2,178,467,782 12,160,435 364,546,686 2,543,014,468
DECEMBER 18 - 31, 2004 2,083,833,692 10,014,476 374,561,162 2,458,394,854
CENTERPOINT ENERGY HOUSTON ELECTRIC
DEBT COMPONENT OF INTEREST CALCULATION
DECEMBER 2004
RATE/MONTH
7.59% 2002 0.006114113
Interest Rate @ 7.18% 2003 0.005796230
6.05% 2004 0.004906939
----------------------------------------------------------------------------------------------------
PRINCIPAL & INTEREST INTEREST
----------------------------------------------------------------------------------------------------
(P&I) * rate Order on Rehearing
Cumulative Month Adjustments Cumulative
----------------------------------------------------------------------------------------------------
DECEMBER 2001 707,270,358 0
JANUARY 2002 728,737,718 4,324,331 (4,099,502) 224,829
FEBRUARY 782,354,589 4,455,584 (4,008,701) 671,713
MARCH 836,988,723 4,783,404 (4,102,353) 1,352,763
APRIL 896,576,124 5,117,443 (4,199,994) 2,270,213
MAY 936,926,472 5,481,767 (4,324,419) 3,427,562
JUNE 1,003,564,688 5,728,474 (4,335,399) 4,820,637
JULY 1,054,913,538 6,135,908 (4,496,790) 6,459,755
AUGUST 1,114,777,856 6,449,860 (4,567,583) 8,342,032
SEPTEMBER 1,173,497,207 6,815,877 (4,685,740) 10,472,170
OCTOBER 1,220,973,610 7,174,894 (4,795,249) 12,851,815
NOVEMBER 1,263,923,949 7,465,170 (4,837,561) 15,479,425
DECEMBER 1,325,187,280 7,727,773 (4,851,592) 18,355,606
JANUARY 2003 1,384,214,536 7,681,090 (3,027,546) 23,009,150
FEBRUARY 1,429,981,530 8,023,226 (3,027,546) 28,004,831
MARCH 1,484,004,960 8,288,502 (3,027,546) 33,265,787
APRIL 1,534,780,773 8,601,634 (3,027,546) 38,839,875
MAY 1,584,347,086 8,895,942 (3,027,546) 44,708,272
JUNE 1,645,625,866 9,183,240 (3,027,546) 50,863,966
JULY 1,701,796,830 9,538,426 (3,027,546) 57,374,846
AUGUST 1,762,505,979 9,864,006 (3,027,546) 64,211,306
SEPTEMBER 1,826,784,903 10,215,890 (3,027,546) 71,399,651
OCTOBER 1,883,301,516 10,588,466 (3,027,546) 78,960,570
NOVEMBER 1,937,724,331 10,916,049 (3,027,546) 86,849,074
DECEMBER 2,000,017,806 11,231,496 (3,027,546) 95,053,024
JANUARY 2004 2,037,357,987 9,813,965 104,866,989
FEBRUARY 2,076,990,851 9,997,191 114,864,180
MARCH 2,114,036,240 10,191,667 125,055,847
APRIL 2,153,538,641 10,373,447 135,429,294
MAY 2,193,844,170 10,567,282 145,996,576
JUNE 2,233,165,312 10,765,059 156,761,636
JULY 2,276,090,036 10,958,006 167,719,641
AUGUST 2,320,184,604 11,168,635 178,888,276
SEPTEMBER 2,439,469,157 11,385,004 190,273,280
OCTOBER 2,482,162,183 11,970,326 202,243,606
NOVEMBER 2,522,348,665 12,179,818 214,423,424
DECEMBER 1 - 17, 2004 2,543,014,468 6,787,393 221,210,817
DECEMBER 18 - 31, 2004 2,458,394,854 5,589,618 226,800,435
-----------
Interest calculated at 11.075% rate in total 374,561,162
-----------
Equity component of interest income to be recorded over recovery period 147,760,727
===========
NOTES AND ASSUMPTIONS:
Order on Rehearing adjustments were assumed to apply to the debt component
ratably.
The Debt component is the WACD from the EMR filed annually. 2004 is estimated.
Interest follows method used in the final order docket 29526.
Interest is calculated based on the prior month's ending balance.
EXHIBIT B
CENTERPOINT ENERGY HOUSTON ELECTRIC
WEIGHTED AVERAGE COST OF CAPITAL APPROVED IN DOCKET 29526
TRUE UP BALANCE
UCOS
Weighted PUC
Capital Average Approved
Structure Cost Cost Rate
------------------------------------------------------------------------
UCOS 2002
Long-term Debt 60% 6.92% 4.15% 4.152%
Equity 40% 11.25% 4.50% 6.923%
------------------- ---------------------------------------
Total 100% 8.65% 11.075%
ACTUAL 2002 (EMR SCHEDULE V)
Long-term Debt 71.39% 10.63% 7.59%
Equity 28.61% 11.25% 3.22%
------------------- -------------------
Total 100.00% 10.81%
ACTUAL 2003 (EMR SCHEDULE V)
Long-term Debt 69.32% 10.36% 7.18%
Equity 30.68% 11.25% 3.45%
------------------- -------------------
Total 100.00% 10.63%
ESTIMATED 2004 (EMR SCHEDULE V)*
Long-term Debt 61.42% 9.85% 6.05%
Equity 38.58% 11.25% 4.34%
------------------- -------------------
Total 100.00% 10.39%
* The EMR had not been finalized at the time the calculation was made.
