[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Notices]
[Pages 51388-51392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4725]


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SECURITIES AND EXCHANGE COMMISSION

[[Release No. 35-28019]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

August 24, 2005.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by September 19, 2005, to the Secretary, Securities and 
Exchange Commission, Washington, DC 20549-0609, and serve a copy on the 
relevant applicant(s) and/or declarant(s) at the address(es) specified 
below. Proof of service (by affidavit or, in the case of an attorney at 
law, by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After September 19, 2005, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

CenterPoint Energy, Inc., et al. (70-10329)

    CenterPoint Energy, Inc. (``CenterPoint''), a registered public-
utility holding company under the Act, located at 1111 Louisiana, 
Houston, TX 77002, Utility Holding, LLC (``Utility Holding''), 
CenterPoint's direct, wholly owned subsidiary limited liability 
company, located at 200 West Ninth Street Plaza, Suite 411,Wilmington, 
DE 19801, CenterPoint Energy Houston Electric, LLC (``CEHouston 
Electric''), a wholly owned electric utility subsidiary

[[Page 51389]]

limited liability company of Utility Holding, and CenterPoint Energy 
Transition Bond Company II, LLC (``CE Issuer''), a direct, wholly owned 
subsidiary limited liability company of CEHouston Electric, both 
located at 1111 Louisiana, Houston, TX 77002 (together, 
``Applicants''), have filed an application-declaration, as amended 
(``Application''), with the Commission under sections 6(a), 7, 9, 10, 
12(b), 12(c) 12(f), 12(g) and 13(b) of the Act and rules 42, 43, 44, 
45, 54, 90 and 91.
    Applicants are requesting authority to issue certain additional 
transition bonds (``Additional Transition Bonds'') \1\ in an amount 
projected, at this time, to be approximately $2 billion \2\ and to 
engage in certain transactions related to Applicants' financing and 
recovery of costs associated with the State of Texas' electric-utility 
industry restructuring, administered by the Texas Commission.\3\ The 
proposed bonds are in addition to transition bonds issued in 2001, 
prior to CenterPoint's registration with the Commission.\4\
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    \1\ By its order dated Nov. 30, 2004, the Commission previously 
authorized CenterPoint to form and capitalize CenterPoint Energy 
Transition Bond Company II, LLC, to issue the Additional Transition 
Bonds and, in its order dated June 29, 2005, the Commission 
previously discussed the bonds' financial effect on the CenterPoint 
system's capitalization. See CenterPoint Energy, Inc., et al., 
Holding Co. Act Release No. 27919; CenterPoint Energy, Inc., et al., 
Holding Co. Act Release No. 27989 (``June 29, 2005 Omnibus Financing 
Order''), respectively.
    \2\ Applicants state that the amount of the proposed bonds is a 
projection, as it is based on an assumption that issuance will be 
prior to Dec. 31, 2006 and the total amount of Additional Transition 
Bonds is also subject to a further determination of the Texas Public 
Utility Commission (``Texas Commission'').
    \3\ The Texas Restructuring Law (``Restructuring Law'') became 
effective on Sept. 1, 1999, to permit companies to compete for 
retail electric customers, among other things. The Restructuring Law 
also required the Texas Commission to administer the requirement 
that integrated utilities separate their generating, transmission 
and distribution and retail sales functions.
    \4\ Applicants state that, in October 2001, CenterPoint Energy 
Transition Bond Company, LLC (formerly known as Reliant Energy 
Transition Bond Company, LLC) (``Transition Bond Company I''), a 
special purpose, wholly owned subsidiary of CEHouston Electric, 
issued $749 million of the Series 2001-1 Transition Bonds. 
Applicants also note that they have referred to CEHouston Electric 
as the ``T&D Utility'' in previous filings and that it may be so 
referred to in certain of the exhibits to this Application.
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I. Summary of the Request

    Applicants request authority to issue the Additional Transition 
Bonds and engage in related transactions, as generally described below:
    1. CEHouston Electric, to sell, pledge or assign transition 
property (``Transition Property''), as described below, to CE Issuer in 
exchange for proceeds from the sale of one or more series of Additional 
Transition Bonds;
    2. CE Issuer, to issue and sell Additional Transition Bonds in an 
aggregate principal amount not to exceed approximately $2 billion (as 
authorized and approved by the Texas Commission);
    3. CE Issuer, to enter into hedging transactions and arrangements 
and credit enhancement transactions to reduce certain interest rate and 
credit risks associated with the Additional Transition Bonds;
    4. CEHouston Electric, or any successor entity or another 
affiliate, to provide services to CE Issuer related to the Transition 
Property and to enter into one or more Transition Property Servicing 
Agreements, as described below;
    5. CEHouston Electric, or any successor entity or another 
affiliate, to provide administrative services to CE Issuer and to enter 
into one or more Administration Agreements, as described below;
    6. CE Issuer, to use the proceeds from the Additional Transition 
Bonds to pay the expenses of issuance and to purchase the Transition 
Property from CEHouston Electric;
    7. CEHouston Electric and Utility Holding, to pay dividends out of 
capital or unearned surplus, from the Transition Property sale proceeds 
(or some portion of the proceeds), from CEHouston Electric to Utility 
Holding and from Utility Holding to CenterPoint;
    8. CEHouston Electric, to enter into:
    (a) Indemnity provisions in the Transition Property Sale Agreement, 
indemnifying CE Issuer, the trustee and certain of their affiliates; 
and
    (b) As a service provider, to enter into indemnity provisions of 
the Transition Property Service Agreement, indemnifying CE Issuer, the 
trustee, certain affiliates of the trustee and the Texas Commission 
(for the benefit of CEHouston Electric's customers);
    9. CE Issuer, to enter into indemnity provisions in its limited 
liability company agreement, through which it may indemnify its 
managers; and
    10. CEHouston Electric, to make capital contributions to CE Issuer 
and, subject to certain limitations, receive interest and other 
investments earnings on them.

II. Background

    In addition to introducing competition to the Texas electric 
utility industry, by requiring integrated utilities to separate their 
generating, transmission and distribution and retail sales functions, 
Applicants state that the Texas Restructuring Law permits utilities to 
recover certain of certain ``stranded'' or other ``transition'' costs 
associated with transition to a competitive retail electric market in 
Texas.\5\ Applicants explain that the Restructuring Law permits 
recovery of the stranded costs, and other transition related costs, 
providing two mechanisms, either, or both, of which the Texas 
Commission may use to permit a utility to recover transition costs: (1) 
Non-bypassable ``competition transition charges'' (``CTCs'') imposed on 
retail electric customers' bills or (2) the issuance of transition 
bonds, securitizing non-bypassable ``transition charges'' imposed on 
customers, which pay for the bonds (``Transition Charges'').\6\ 
Applicants' request in this Application involves the latter 
mechanism.\7\
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    \5\ Applicants state that the Restructuring Law allows a utility 
to recover the amount by which the market value of its generating 
assets is below the regulatory book value of the assets as of the 
end of 2001. It also allows a utility to recover certain other 
transition costs by a true-up procedure (i.e., calculating the 
difference between the Texas Commission's projected market prices 
for generation during 2002 and 2003 and the actual market prices for 
generation occurring in 2002 and 2003). The statute requires these 
determinations to be made by the Texas Commission in ``true-up 
proceedings.''
    \6\ Applicants state that the Restructuring Law provides, in 
general, that retail electric customers within the utility's service 
territory as it existed on May 1, 1999, will be assessed CTCs, 
regardless of whether the retail electric customers receive service 
from the utility that historically served them or another entity. 
CTCs are similar to transition charges in the way they are imposed 
and collected, but CTCs are not securitized.
    \7\ Applicants state that, separately, in January 2005, 
CEHouston Electric filed an application with the Texas Commission 
for a CTC order, to recover the entire true-up balance (plus accrued 
interest and excess mitigation credits), and that, on July 14, 2005, 
CEHouston Electric received an order allowing it to collect 
approximately $570 million in CTC over 14 years, plus interest at an 
annual rate of 11.075% (``CTC Order''). Based on this interest 
permitted, it is expected that the amount will total to 
approximately $600 million by the end of the third quarter of 2005, 
when the CTC is expected to be implemented. Applicants state that 
the CTC Order also allows CEHouston Electric to collect 
approximately $24 million of rate case expenses over three years.
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    Applicants state that the Texas Restructuring Law requires 
transition bonds to be repaid by retail customers, over a period of no 
more than 15 years, through the imposition of the non-bypassable 
Transition Charges.\8\ Under

[[Page 51390]]

the statute, transition bonds will be secured by, and payable from, 
Transition Property, which includes the right to impose, collect and 
receive the Transition Charges.\9\ Applicants state that transition 
bonds may be issued through a special purpose entity designed to be a 
bankruptcy remote entity.\10\ The obligations on the bonds are required 
to be non-recourse to the utility and to all other entities in the 
electric utility system, other than issuer, the special purpose entity.
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    \8\ Applicants explain that the Restructuring Law authorizes the 
Texas Commission to issue financing orders approving transition 
bonds to recover certain ``qualified costs.'' Qualified costs of an 
electric utility include, among other things, the costs of issuing, 
supporting and servicing transition bonds and any costs of retiring 
and refunding existing debt and equity securities in connection with 
their issuance. The Restructuring Law permits a utility, its 
successors or a third-party assignee of a utility, to issue 
transition bonds. Under the Restructuring Law, proceeds of 
transition bonds must be used to reduce the amount of recoverable 
qualified costs through the refinancing or retirement of the 
electric utility's debt or equity, and may have a maximum maturity 
of 15 years.
    \9\ Applicants also state that the State of Texas pledged in the 
Restructuring Law that it will not take or permit any action that 
would impair the value of the transition property or, except as 
permitted in connection with the true-up adjustment authorized by 
the statute, reduce, alter or impair the transition charges until 
the principal, interest and premium, and any other charges incurred 
and contracts to be performed in connection with transition bonds, 
have been paid and performed in full. Applicants state that the 
Restructuring Law does require the Texas Commission to review and 
adjust the transition charges at least annually, within 45 days of 
the anniversary of the date of the issuance of the transition bonds 
in order to: (1) Correct any overcollections or undercollections 
during the preceding 12 months and (2) provide for recovery of 
amounts sufficient to pay timely all debt service and other amounts 
and charges associated with the transition bonds.
    \10\ See notes 1 and 8, above. The Commission previously 
authorized CenterPoint to form and capitalize CenterPoint Energy 
Transition Bond Company II, LLC, to issue the Additional Transition 
Bonds. CenterPoint Energy, Inc., et al., Holding Co. Act Release No. 
27919 (Nov. 30, 2004). As noted above, the Restructuring Law permits 
a utility, its successors or a third party assignee of a utility, to 
issue transition bonds.
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    In December 2004, the Texas Commission authorized CEHouston 
Electric \11\ to recover about $2.4 billion of stranded costs and 
interest accrued through Aug. 31, 2004 (``True-Up Order''). Applicants 
state that, on Mar. 16, 2005, the Texas Commission authorized the 
proposed Additional Transition Bonds, allowing CEHouston Electric to 
securitize approximately $1.494 billion, plus (1) the amount of excess 
mitigation credits provided by CEHouston Electric after Aug. 31, 2004, 
(2) interest on the stranded cost amount accrued after Aug. 31, 2004, 
and through the date of issuance of the transition bonds, and (3) 
certain up-front qualified costs related to the issuance of the 
Additional Transition Bonds (``Texas Financing Order'').\12\ On Nov. 
30, 2004, as noted previously, the Commission authorized Centerpoint to 
form and capitalize CE Issuer (i.e., Centerpoint Energy Transition Bond 
Company II, LLC), for the purpose of issuing the Additional Transition 
Bonds.\13\
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    \11\ Applicants explain that, on Mar. 31, 2004, CEHouston 
Electric, Texas Genco, LP and Reliant Energy Retail Services, LLC, 
applied to the Texas Commission for an order determining CEHouston 
Electric's 2004 true-up balance. Applicants state that the 
Restructuring Law requires the power generation company and the 
retail electric provider that are ``affiliated with'' the former 
integrated electric utility to be parties to the application. 
Reliant Energy Retail Services was an applicant even though, at the 
time, it no longer had any legal affiliation with CenterPoint Energy 
or its subsidiaries.
    \12\ Applicants state that this amount was also subject to 
adjustments reflecting certain deferred taxes, accrual of interest 
and payment of excess mitigation credits after Aug. 31, 2004. 
Applicants also explain that a financing order, once effective, is 
irrevocable and not subject to reduction, impairment or adjustment 
by the Texas Commission (including the transition charges authorized 
in the order), except for annual and interim true-up adjustments 
made under the Restructuring Law.
    \13\ See notes 1 and 10, above.
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III. The Proposed Transactions

A. Additional Transition Bonds

    Applicants request authority to issue the Additional Transition 
Bonds through CE Issuer, in one or more series, each made up of one or 
more classes, up to an amount, anticipated to be approximately $2 
billion (as authorized by the Texas Commission), secured by CE Issuer's 
right, title and interest in and to the Transition Property. Applicants 
also ask that they be authorized to issue the different series, with 
different interest rates (which may be at fixed or floating rates) and 
amortizations of principal and that each series have classes with 
different interest rates and amortizations of principal. Applicants 
state that, in accordance with the requirements of the Restructuring 
Law, the Additional Transition Bonds will be required to be fully 
repaid within 15 years of the date of issuance.\14\ CenterPoint 
projects that, with interest from Aug. 31, 2004 to the date of issuance 
(and assuming the Additional Transition Bonds are issued no later than 
Dec. 31, 2006), the amount of Additional Transition Bonds issued would 
be no more than $2 billion, although the total amount of Additional 
Transition Bonds issued will be determined by the Texas Commission 
before the bonds are issued.
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    \14\ Applicants expect that it will be a condition of issuance 
that each series of Additional Transition Bonds be rated Aaa by 
Moody's Investors Service, Inc., AAA by Standard and Poor's Rating 
Services, a Division of The McGraw-Hill Companies and AAA by Fitch, 
Inc. In addition, Applicants state that CEHouston Electric will 
comply with the Commission's investment grade criteria contained in 
the Commission's June 29, 2005 Omnibus Financing Order. See also 
note 1, above.
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    Applicants further request that CEHouston Electric be authorized to 
transfer its right to receive Transition Charges to CE Issuer. 
Applicants state that, once CEHouston Electric transfers its right to 
receive Transition Charges to CE Issuer, all revenues and collections 
resulting from them, and its other rights and interests received under 
the Texas Financing Order, will constitute Transition Property. 
Applicants state that the Transition Property includes the right to 
impose, collect and receive (through the transition charges payable by 
retail electric customers within CEHouston Electric's service 
territory) an amount sufficient to recover the CEHouston Electric's 
``qualified costs,'' including the right to receive transition charges 
in amounts and at times sufficient to pay principal and interest and to 
make other deposits in connection with the Additional Transition Bonds 
(authorized in the Texas Financing Order).\15\
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    \15\ See also notes 9, 10 and 13, above. Under the Texas 
Financing Order, CEHouston Electric's qualified costs include a 
portion of CEHouston Electric's 2004 true-up balance, up-front costs 
of issuing, supporting and servicing the Additional Transition Bonds 
and certain related costs of retiring and refunding CEHouston 
Electric's existing debt and equity securities.
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    Applicants also state that the Restructuring Law provides that the 
issuer of the transition bonds will have a valid and enforceable lien 
and security interest in the transition property derived from the 
transition charges and created by a Texas financing Order. Applicants 
state, as well, that the Restructuring Law also provides that an 
electric utility's (or an assignee's) transfer of transition property 
is a ``true sale'' under state law.
    Applicants state that a trustee will be appointed under the 
indenture governing the Additional Transition Bonds and that the 
trustee, and its investment authority, will be subject to certain 
constraints.\16\ The trustee will provide to the holders of record of 
the Additional Transition Bonds regular reports (containing information 
concerning, among other things, CEHouston Electric and the bonds' 
collateral) prepared by the servicer, described below.\17\
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    \16\ Deutsche Bank Trust Company Americas will be the initial 
trustee under the indenture governing the Additional Transition 
Bonds.
    \17\ As noted above, other transition bonds have been issued by 
Applicants. Applicants note with respect to the previous bonds that, 
although CEHouston Electric is the servicer of the Series 2001-1 
Transition Bonds and is expected to be the initial servicer of the 
Additional Transition Bonds, CE Issuer is a separate legal entity 
from Transition Bond Company I and the Additional Transition Bonds 
issued by CE Issuer will be payable from collateral that is separate 
from the collateral securing the Series 2001-1 Transition Bonds. 
Moreover, Applicants note that Transition Bond Company I has no 
obligations for the Additional Transition Bonds that will be issued 
by CE Issuer and, similarly, CE Issuer will have no obligations for 
the Series 2001-1 Transition Bonds.

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[[Page 51391]]

    In addition, Applicants request authority to enter into certain 
transactions for the purpose of protecting CE Issuer against certain 
credit risks that may be associated with the Additional Transition 
Bonds. Applicants explain that these transactions or instruments, which 
may include surety bonds, financial guaranty insurance policies or 
letters of credit, among other things, are intended to protect against 
losses or delays in scheduled payments on the Additional Transition 
Bonds.

B. Hedging Transactions

    Applicants request that CE Issuer be authorized to hedge its 
interest rate risk using interest rate swaps or other financial 
derivatives.\18\ Applicants state that each hedging arrangement will be 
treated for accounting purposes in accordance with U.S. generally 
accepted accounting principles and that Applicants will comply with 
Statement of Financial Accounting Standards 133 and Statement of 
Financial Accounting Standards 138 (``Accounting for Certain Derivative 
Instruments and Certain Hedging Activities'') or other standards 
applicable to accounting for derivative transactions as are adopted and 
implemented by the Financial Accounting Standards Board.
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    \18\ Applicants state that CE Issuer may enter into certain 
interest rate swaps or other transactions for the purpose of hedging 
a series or class of floating rate Additional Transition Bonds. They 
explain that interest rate swaps and other hedging arrangements may 
be used, among other things, to fix synthetically the interest on 
floating rate Additional Transition Bonds.
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C. Various Agreements

1. Transition Property Servicing Agreement
    Applicants request that CEHouston Electric be authorized to act on 
behalf of CE Issuer, as the servicer, of the Additional Transition 
Bonds. They propose that the servicer of the bonds, as the agent of CE 
Issuer, manage, service, administer and make collections related to the 
Transition Property.\19\ Applicants state that, while they anticipate 
that CEHouston Electric will be the servicer, they request that the 
trustee be authorized to appoint an unaffiliated third party as the 
servicer under certain conditions. Applicants state that the 
appointment of a third party as the servicer will not adversely affect 
Additional Transition Bonds' investment grade ratings.
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    \19\ The servicer will be responsible for, among other things, 
calculating, billing and collecting the transition charges from 
retail electric providers, submitting requests to the Texas 
Commission to adjust these charges, monitoring the collateral for 
the transition bonds and taking certain actions in the event of non-
payment by a retail electric provider.
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    Applicants also request an exemption from the ``at cost'' 
requirements in connection with the servicing fee. Applicants propose 
that the servicer be entitled to receive an aggregate annual servicing 
fee under the terms of the transition property servicing agreement. 
Applicants state that the servicing fee must be comparable to similar 
fees charged in market-based, arm's length transactions for CE Issuer 
to qualify for the status of a bankruptcy remote entity and to satisfy 
related rating agency and other legal requirements. Applicants propose 
that the fee be set at an annual level of not more than one percent of 
the initial principal amount of the Additional Transition Bonds. 
Applicants state that, although they expect the servicing fee to 
approximate the actual costs of providing the services, they cannot be 
certain that the servicing fee will meet the ``at cost'' requirements 
of section 13(b) of the Act and other applicable rules.
2. Administration Agreement
    Applicants request that CEHouston Electric be authorized to provide 
administrative services to CE Issuer. They propose that CEHouston 
Electric provide administrative services to CE Issuer under an 
administration agreement, providing ordinary clerical, bookkeeping and 
other corporate administrative services necessary and appropriate.\20\
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    \20\ These services may include, without limitation: (1) 
Maintaining CE Issuer's general accounting records; (2) preparing 
and filing required documents; (3) preparing and filing income, 
franchise or other tax returns; (4) preparing minutes of meetings of 
CE Issuer's managers; (5) maintaining executed copies of CE Issuer 
documents; (6) taking actions necessary for CE Issuer to keep in 
full effect its existence, rights and franchises as a limited 
liability company; (7) providing for the issuance and delivery of 
the Additional Transition Bonds; (8) providing for the performance 
by CE Issuer of its obligations and enforcement each of its rights 
under the indenture, the servicing agreement and the sale agreement; 
(9) providing for defense of any action, suit or proceeding; and 
(10) providing office space and ancillary services.
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    Applicants also request an exemption from the ``at cost'' 
requirements in connection with the administration fee. Applicants 
propose that the administrator be entitled to receive a fixed fee, plus 
reimbursable expenses. Applicants state that the administrative fee 
must be comparable to similar fees charged in market-based, arm's 
length transactions for CE Issuer to qualify for the status of a 
bankruptcy remote entity and to satisfy related rating agency and 
other, legal requirements. Applicants state that, although they expect 
the administrative fee to approximate the actual costs of providing the 
services, they cannot be certain that the fee will meet the ``at cost'' 
requirements of section 13(b) of the Act and other applicable rules.

D. Dividend Authority and Use of Proceeds

    Applicants request that CE Issuer be authorized to use the proceeds 
from the issuance of the Additional Transition Bonds to pay associated 
issuance expenses and to purchase the Transition Property from 
CEHouston Electric. In addition, Applicants request that CEHouston 
Electric be authorized to use proceeds received from CE Issuer to 
reduce stranded costs, through the retirement of debt or equity or 
both, or to be distributed to Utility Holding and to CenterPoint 
through either the payment of dividends or the settlement of 
intercompany payables.\21\ Applicants state that they intend to 
maintain CEHouston Electric's capital structure at the approximately 
60% debt to 40% equity target levels (exclusive of the Additional 
Transition Bonds).\22\
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    \21\ Applicants state that the specific amount of proceeds to be 
used to retire debt and/or equity will depend on CEHouston 
Electric's capital structure and market conditions. They expect that 
approximately $1.3 billion of the securitization proceeds will be 
used to repay CEHouston Electric's term loan maturing in November 
2005 (or any replacement credit facility or debt issuance if the 
proceeds have not been received by the maturity date). To the extent 
that proceeds may not be applied to repay that loan, they may be 
distributed to Utility Holding and CenterPoint, either through 
dividend payments or the settlement of intercompany payables. 
Applicants state that proceeds that are paid as a dividend by 
CEHouston Electric to Utility Holding and by Utility Holding then to 
CenterPoint may be used to reduce debt at CenterPoint and to 
otherwise improve the capital structure of the CenterPoint system. 
To the extent that proceeds received prior to the November 2005 
maturity of the term loan may not be used to repay the loan, 
Applicants state that they may be contributed back to CEHouston 
Electric when the term loan matures.
    \22\ See also June 29, 2005 Omnibus Financing Order.
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E. Indemnifications

    Applicants also request that they be authorized to enter into 
various indemnity agreements associated with the transition property 
sale agreement and transition property servicing agreement. Applicants 
explain that CEHouston Electric will be required to indemnify the Texas 
Commission (for the benefit of CEHouston Electric's customers), CE 
Issuer, the trustee and certain of their affiliates for various 
activities required in connection with the issuance and administration 
of the Additional Transition Bonds and, similarly, under the limited 
liability company agreement, CE Issuer will be

[[Page 51392]]

required to indemnify its managers in certain situations, as described 
in the Application.

F. CEHouston Electric Capitalization

    Finally, Applicants also request an exemption from the Commission's 
30% common equity ratio in order to carry out the Texas Financing 
Order, as discussed in the Commission's June 29, 2005 Omnibus Financing 
Order.\23\ Applicants state that CEHouston Electric's common equity 
ratio is projected to decrease below the Commission's standard of 30% 
during part of the period that the Additional Transition Bonds are 
outstanding, because the Additional Transition Bonds are categorized as 
debt. Applicants state, however, that inasmuch as the bonds will be (1) 
non-recourse to CEHouston Electric and (2) serviced by Transition 
Charges cash flows in accordance with the Texas Financing Order (not 
CEHouston Electric utility operation revenues), the Additional 
Transition Bonds do not represent the type of financial leverage that 
the Commission's 30% common equity standard is intended to address.
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    \23\ See note 1, above. As discussed in the June 29, 2005 
Omnibus Financing Order, CEHouston Electric may have less than the 
Commission's common equity ratio standard 30% when the 
securitization debt of the Additional Transition Bonds is included. 
Applicants anticipate, however, that its equity ratio will improve 
as the Additional Transition Bonds are paid down, although it is not 
expected to reach 30% until 2010 with securitization debt included 
in the calculation. Applicants note that, in their request for the 
June 29, 2005 Omnibus Financing Order, they asked the Commission to 
take into account the particular nature of this debt in issuing that 
order.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4725 Filed 8-29-05; 8:45 am]
BILLING CODE 8010-01-P