The State of Texas filed an administrative appeal last week against the Public Utility Commission of Texas' decision to give CenterPoint Energy the green light to issue $1.8 billion in rate reduction bonds, delaying the issue that CenterPoint was planning for the near term (see ASR 3/14/05). The appeal was filed last Wednesday in the District Court of Travis County, Texas, where the state capital of Austin is located, and could derail the deal indefinitely. Tom Kelly, spokesman for the Texas State Attorney General's office, declined to comment, saying it does not comment on pending legal matters.

"We are looking forward to having the matter resolved so that we can get the transition bonds to the market," said CenterPoint spokesman Floyd LeBlanc. LeBlanc said CenterPoint believes the Commission issued a valid financing order and plans to intervene on behalf of the Commission's decision, meaning that the company will ask the court for permission to speak and to present evidence in the case. Terry Hadley, spokesman for the PUC, declined to comment saying, "We have not had time to review [the appeal] yet."

The Commission had planned on issuing a new RFP last week, seeking a financial advisor, according to ASR sister publication The Bond Buyer. The advisor must be in place prior to selecting underwriters, and subsequently marketing the deal. Until the matter is resolved, most likely with a settlement on the size of the stranded cost deal, CenterPoint will continue recouping an 11% return on its capital, which is currently being paid by consumers, sources said.

Houston-based CenterPoint was awarded $2.3 billion dollars in "true-up" balances last August by the Commission. CenterPoint originally tried to get $3.7 billion in true-up costs securitized, but was awarded the $2.3 billion, and has since appealed that decision. In spite of the fact they are still trying to get the additional $1.4 billion, CenterPoint decided to go ahead with a bond issuance. The $1.4 billion is to be collected via a non-securitizable competition transition charge assessed to local electricity distributors, which purchase product from CenterPoint and deliver to commercial and consumer users.

The State of Texas is also appealing the August decision to give CenterPoint the $2.3 billion, on the grounds that the process used to determine the amount was erroneous, and therefore the securitization amount itself is erroneous. The State further argues that the financing order should not be allowed to stand since the original case is still under appeal.

"Until such time as the Commission's errors in [the original true-up order] have been finally adjudicated by the courts, and the correct true-up balance established, it is an error to allow the Financing Order...to be effectuated," according to the appeal document. "The court should not allow securitization to go forward until such time as the manifest errors have been corrected. Only after the correct true-up balance has been established can the Commission proceed to securitization of stranded costs, regulatory assets and other qualified costs."

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