CenterPoint Energy Outlines Plan to Minimize May 2024 Derecho Storm Bill Impact for Electric Customers

Rhea-AI Summary

CenterPoint Energy has filed a securitization plan with the Public Utility Commission of Texas to manage approximately $450 million in emergency response costs from the May 2024 Derecho storm. The plan aims to spread costs over 15 years, resulting in an estimated $1 per month impact on customer bills while saving them over $50 million in interest charges. The Derecho caused about $5 billion in damages across Houston, requiring over 7,700 workers to restore power. The company restored service to 80% of affected customers within 72 hours, replacing 400 miles of electrical wires, 1,600 transformers, and 1,600 power poles. The final PUCT decision is expected in 2025.

Positive

• Efficient emergency response with 80% power restoration within 72 hours
• Cost-effective financing strategy saving customers $50 million in interest charges
• Minimal customer impact of approximately $1 per month through 15-year cost spreading

Negative

• Significant emergency response costs of $450 million to be passed to customers
• Additional monthly surcharge for customers starting 2025
• Extensive infrastructure damage requiring substantial replacement costs

Insights

Financial Analyst

The securitization plan for $450 million in storm-related costs represents a strategic financial move by CenterPoint Energy. The 15-year spread and lower interest financing method will save customers $50 million while maintaining the company's cash flow. The $1 monthly customer impact is minimal, suggesting revenue risk and strong regulatory relationship management.

The company's efficient emergency response and cost recovery strategy demonstrates solid operational and financial planning. By following established industry practices and securing regulatory approval through the PUCT, CNP is likely to maintain stable returns. The securitization approach, previously successful after Hurricane Ike, provides predictable cost recovery while protecting the balance sheet from immediate strain.

Utility Infrastructure Expert

The scale of infrastructure damage and rapid restoration metrics are impressive - 80% customer restoration within 72 hours despite massive system damage requiring 400+ miles of wire replacement and 1,600+ transformers. The mobilization of 7,700 workers across eight states showcases robust emergency response capabilities and strong utility partnerships.

The $450 million cost, while significant, represents efficient crisis management given the $5 billion total regional storm damage. The deployment of emergency generation units to critical facilities and establishment of multiple staging sites indicates sophisticated disaster response protocols that help maintain service reliability and customer satisfaction.

• Company plans to spread emergency Derecho response costs of approximately $450 million across 15 years; Customer bill impact expected to be about $1 per month
• Financial method expected to save customers more than $50 million in interest charges
• Derecho storm caused more than an estimated $5 billion in damages across the Greater Houston area unrelated to CenterPoint infrastructure

HOUSTON, Nov. 8, 2024 /PRNewswire/ -- As part of its commitment to keeping customer bills more affordable, CenterPoint Energy today filed the first phase of a securitization plan (a lower cost way of financing recovery costs over a longer time period time) with the Public Utility Commission of Texas (PUCT) that would minimize the customer impact of the major May 2024 Derecho and late May storms, that resulted in approximately $450 million in repair, equipment and emergency response costs outside of CenterPoint's normal annual rates as set by the PUCT. Using this method of financing is expected to save customers more than $50 million in interest charges over the 15-year period. 

The May 16^th Derecho caused more than an estimated $5 billion in damages across the Greater Houston area not related to CenterPoint's infrastructure.  As reported by numerous media outlets, the Derecho was a "once-in-a-generation wind event" and included wind gusts over 100 miles per hour and multiple tornadoes across the region, shattering thousands of downtown office windows, destroying homes and businesses, knocking down thousands of power poles, and impacting hundreds of miles of power lines and other critical electric equipment across the Greater Houston area.  

The fast-moving storm required CenterPoint to activate its emergency operation plan and mobilize over 7,700 employees, contractors, and mutual aid partners to assess damage, repair downed equipment, and restore power.  

"The Derecho that struck the Houston region in the spring was an unprecedented and extreme weather event that caused billions in damage to our communities and a significant portion of our electrical infrastructure. This proposed cost recovery plan reflects our commitment to minimize the impact on our customers' electric bills while addressing the significant costs related to mobilizing thousands of frontline workers to repair and rebuild the damaged portions of the energy system and restore power for our customers as safely and as quickly as possible," said Jason Ryan, CenterPoint Energy's Executive Vice President, Regulatory Services and Government Affairs.  

Scope of CenterPoint Emergency Response
In response to the Derecho, CenterPoint mobilized thousands of frontline crews and critical resources and coordinated with government, community and utility partners to address the significant damage to the electrical system. As a result, CenterPoint restored power to more than 80 percent of impacted customers within 72 hours. The scope of the company's emergency response included: 

• Mobilizing over 7,700 frontline electrical workers, contractors and mutual aid resources from eight states to assess system damage and repair equipment; 
• Replacing more than 400 miles of primary electrical wires, more than1,600 transformers, and approximately 1,600 power poles on its distribution system; 
• Deploying 13 emergency generation units to provide temporary power to critical facilities including hospitals, cooling centers, first responder sites, schools and senior centers; 
• Establishing nine multi-city staging sites to efficiently deploy crews and equipment for customer restoration efforts to impacted areas of Greater Houston;  
• Restoring power to approximately 340,000 impacted customers within the first 24 hours; 550,000 within 48 hours; and 750,000 within 72 hours; and 
• Restoring 98 percent of all CenterPoint customers within five days of the Derecho. 

CenterPoint Commitment to Customer Affordability: Securitizing for Lower Cost Impact
CenterPoint's plan follows the standard electric sector industry practice used in Texas and across all Gulf Coast states for financing and recovering costs after extreme weather and other one-time events.  The company plans to spread the costs over a period of up to 15 years to help minimize the impact on customers using securitization, which is a less expensive method to finance those costs. Securitization has been used 10 times for large named storm-related events in the previous 25 years in Texas. It was also used by CenterPoint for the benefit of customers following Hurricane Ike in 2008. 

By securitizing the cost recovery following major storms, hurricanes or other one-time events, CenterPoint is able spread cost impacts over several years and at a lower cost when compared to traditional financing, which results in a significantly lower monthly impact to customers. CenterPoint's filing will include costs associated with its emergency response for the May storm events, which includes the mobilization of frontline workers, repair and replacement of critical equipment, crew supplies, fuel and other materials.  

Today's filing does not include any costs associated with CenterPoint's 2024 Hurricane Beryl response. 

Estimated Monthly Customer Bill Impact
CenterPoint's filing seeks stakeholder and PUCT review of approximately $450 million of storm and emergency response-related costs.  The next phase of the recovery plan will propose to collect those costs over up to 15 years to minimize the impact on customers and is expected to initially result in an average residential customer surcharge of just over $1 per month starting in the second half of 2025, and then dropping below a $1 per month in the second half of 2026. Both today's filing and the next phase will undergo a thorough, open and transparent review process at the PUCT with a final decision expected in 2025.  

About CenterPoint Energy
As the only investor-owned electric and gas utility based in Texas, CenterPoint Energy, Inc. (NYSE: CNP) is an energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations that serve more than 7 million metered customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas. With approximately 9,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, visit CenterPointEnergy.com.

Forward-looking Statements
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "target," "will" or other similar words are intended to identify forward-looking statements. These forward-looking statements including statements regarding securitization, customer bill impacts and timing of approvals, are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding future events that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release. Important factors that could cause actual results to differ materially from those indicated by the provided forward-looking information include risks and uncertainties relating to: (1) the impact of pandemics, including the COVID-19 pandemic; (2) financial market conditions; (3) general economic conditions; (4) the timing and impact of future regulatory and legislative decisions; and (5) other factors, risks and uncertainties discussed in CenterPoint Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and CenterPoint's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024 and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.

For more information, contact
Communications
Media.Relations@CenterPointEnergy.com

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SOURCE CenterPoint Energy

FAQ

How much will the May 2024 Derecho storm recovery cost CenterPoint Energy (CNP)?

CenterPoint Energy's emergency response and recovery costs for the May 2024 Derecho storm amount to approximately $450 million.

How much will CenterPoint Energy (CNP) customers pay monthly for the Derecho storm recovery?

Customers will pay approximately $1 per month starting in the second half of 2025, with costs decreasing below $1 per month in the second half of 2026.

When will the PUCT make a final decision on CenterPoint Energy's (CNP) storm recovery plan?

The Public Utility Commission of Texas is expected to make a final decision on the recovery plan in 2025.

How much will CenterPoint Energy's (CNP) securitization plan save customers?

The securitization plan is expected to save customers more than $50 million in interest charges over the 15-year period.