CENTERPOINT ENERGY TRANSITION BOND CO LLC - 10-Q Quarterly Report

Back to GetFilings.com

================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 333-91093

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

(Exact name of registrant as specified in its charter)

Delaware 76-0624152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1111 Louisiana, Suite 4667
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)

(713) 207-8272
(Registrant's telephone number,
including area code)

RELIANT ENERGY TRANSITION BOND COMPANY LLC
(Former name, former address and
former fiscal year, if changed
since last report)

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED
DISCLOSURE FORMAT.

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].

As of November 9, 2002, all outstanding membership interests in CenterPoint
Energy Transition Bond Company, LLC were held by CenterPoint Energy Houston
Electric, LLC.

================================================================================

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.................................................................1

Statements of Income
Three and Nine Months Ended September 30, 2002 (unaudited)...........................1

Balance Sheets
December 31, 2001 and September 30, 2002 (unaudited).................................2

Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2002 (unaudited)............................3

Notes to Unaudited Financial Statements..................................................4

Item 2. Management's Narrative Analysis of Results of Operations of CenterPoint Energy
Transition Bond Company, LLC.............................................................8

Item 4. Controls and Procedures..............................................................9

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K....................................................10

i

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

From time to time we make statements concerning our expectations, beliefs,
plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements that are not historical facts. These
statements are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those expressed or implied by these statements. In some cases, you can
identify our forward-looking statements by the words "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "should," "will," "forecast," "goal," "objective," "projection," or
other similar words.

We have based our forward-looking statements on our management's beliefs
and assumptions based on information available to our management at the time the
statements are made. We caution you that assumptions, beliefs, expectations,
intentions and projections about future events may and often do vary materially
from actual results. Therefore, we cannot assure you that actual results will
not differ materially from those expressed or implied by our forward-looking
statements.

The following list identifies some of the factors that could cause actual
results to differ from those expressed or implied by our forward-looking
statements:

o state and federal legislative and regulatory actions or developments,
including deregulation, re-regulation and restructuring of the electric
utility industry, changes in or application of laws or regulations
applicable to other aspects of our business;

o non-payment of transition charges due to financial distress of CenterPoint
Energy Houston Electric, LLC's (CenterPoint Houston) customers;

o the accuracy of the servicer's estimates of market demand and prices for
energy;

o the accuracy of the servicer's estimates of industrial, commercial and
residential growth in CenterPoint Houston's service territory;

o changes in market demand and demographic patterns;

o weather variations and other natural phenomena affecting retail electric
customer energy usage;

o the operating performance of CenterPoint Houston's facilities and
third-party suppliers of electric energy in CenterPoint Houston's service
territory;

o the accuracy of the servicer's estimates of the payment patterns of retail
electric customers, including the rate of delinquencies and any collections
curves;

o legal and administrative proceedings and settlements;

o changes in tax laws;

o any lack of effectiveness of our disclosure controls and procedures;

o significant changes in critical accounting policies material to us;

o acts of terrorism or war, including any direct or indirect effect on our
business resulting from terrorist attacks such as occurred on September 11,
2001 or any similar incidents or responses to those incidents;

o the reliability of the systems, procedures and other infrastructure
necessary to operate the retail electric business in CenterPoint Houston's
service territory, including the systems owned and operated by the
independent system operator in the Electric Reliability Council of Texas,
Inc.;

ii

o political, legal, regulatory and economic conditions and developments in
the United States; and

o other factors we discuss in this Form 10-Q and our other SEC filings.

You should not place undue reliance on forward-looking statements. Each
forward-looking statement speaks only as of the date of the particular
statement, and we undertake no obligation to publicly update or revise any
forward-looking statements.

iii

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

STATEMENTS OF INCOME
(UNAUDITED)

See Notes to the Company's Interim Financial Statements

1

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

BALANCE SHEETS
(UNAUDITED)

See Notes to the Company's Interim Financial Statements

2

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

STATEMENTS OF CASH FLOWS
(UNAUDITED)

See Notes to the Company's Interim Financial Statements

3

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1) BACKGROUND AND BASIS OF PRESENTATION

Effective August 31, 2002, Reliant Energy, Incorporated (Reliant Energy)
consummated a restructuring transaction in which it, among other things, (1)
conveyed its Texas electric generation assets to an affiliated company, Texas
Genco Holdings, Inc. (Texas Genco), (2) became an indirect, wholly owned
subsidiary of a new utility holding company, CenterPoint Energy, Inc.
(CenterPoint Energy), (3) was converted into a Texas limited liability company
named CenterPoint Energy Houston Electric, LLC (CenterPoint Houston), and (4)
distributed the capital stock of its operating subsidiaries to CenterPoint
Energy. As part of the restructuring, each share of Reliant Energy common stock
was converted into one share of CenterPoint Energy common stock. In connection
with the restructuring, Reliant Energy Transition Bond Company LLC was renamed
CenterPoint Energy Transition Bond Company, LLC (the Company).

The interim financial statements of CenterPoint Energy Transition Bond
Company, LLC are unaudited, omit certain financial statement disclosures and
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 2001 and Quarterly Reports on Form 10-Q for the
three months and six months ended March 31, 2002 and June 30, 2002,
respectively.

The Company is a special purpose Delaware limited liability company whose
sole member is CenterPoint Houston.

The Company was organized on November 10, 1999 under the laws of the State
of Delaware for the sole purposes of acquiring and holding the Transition
Property from Reliant Energy, issuing one or more series of Transition Bonds
secured by the Transition Property, and performing any activity incidental
thereto. The Transition Property includes the irrevocable right to impose,
collect and receive, through the transition charges payable by retail electric
customers within Reliant Energy's certificated service area as it existed on May
1, 1999, an amount sufficient to recover the qualified costs of Reliant Energy
authorized in the financing order (Financing Order) issued by the Public Utility
Commission of Texas (Texas Utility Commission), 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 Transition Bonds. All
revenues and collections resulting from Transition Charges are part of the
Transition Property. The Company had no operations until October 24, 2001.

The Company is restricted by its organizational documents from engaging in
any activity not directly related to the specific purposes for which the Company
was created. The Company is a separate and distinct legal entity from
CenterPoint Houston, and the Company's organizational documents require it to
operate in a manner to avoid consolidation with the bankruptcy estate of
CenterPoint Houston in the event CenterPoint Houston were to become subject to
such a proceeding. CenterPoint Houston is not the owner of the Transition
Property described herein, and the assets of the Company are not available to
pay creditors of CenterPoint Houston or any of its affiliates.

(2) SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The Company's interim financial statements reflect all
normal recurring adjustments that are, in the opinion of management, necessary
to present fairly the financial position for the respective periods.

REGULATION AND REGULATORY ASSETS AND LIABILITIES. The Company's business
meets the criteria of Statement of Financial Accounting Standards ("SFAS") No.
71 (SFAS No. 71), "Accounting for the Effects of Certain Types of Regulation."
This accounting standard recognizes the cost based rate making process which may
result in differences in the application of generally accepted accounting
principles between regulated and non-regulated

4

businesses. The Company's purpose is to purchase the Transition Property, issue
one or more series of Transition Bonds secured by the Transition Property and
perform any activity incidental thereto. The Transition Charges are designed to
provide the necessary revenues to make payments on the Transition Bonds.
Continued applicability of SFAS No. 71 requires that rates be designed to
recover specific costs of providing regulated services and products, and that it
be reasonable to assume that the Transition Charges are set at levels that will
recover an entity's costs and can be charged to and collected from customers.
The Company believes it satisfies such requirements and applies the provisions
of SFAS No. 71 to its business.

CASH AND CASH EQUIVALENTS/RESTRICTED FUNDS. For purposes of the Balance
Sheet and Statement of Cash Flows, the Company considers investments purchased
with a maturity of three months or less to be the equivalent of cash. The
trustee under the indenture pursuant to which the Transition Bonds were issued
(the Trustee) has established, as provided in the indenture, the following
subaccounts for the Transition Bonds:

The General Subaccount is comprised of collections of Transition
Charges and interest earned from short-term investments. These amounts
accumulate in the General Subaccount until they are transferred from the
General Subaccount on each Transition Bond payment date.

The Reserve Subaccount is maintained for the purpose of holding any
Transition Charges and investment earnings (other than investment earnings
on amounts in the Capital Subaccount) not otherwise used on the payment
dates of the Transition Bonds for payment of principal, interest, fees or
expenses, or for funding the Capital Subaccount or the
Overcollateralization Subaccount. As of September 30, 2002, the Reserve
Subaccount had a zero balance.

The indenture also provides for an Overcollateralization Subaccount.
The target funding level of this subaccount is approximately $3.7 million
(0.5% of the initial principal amount of the Transition Bonds), and funding
is expected to occur ratably over the life of the Transition Bonds. The
Trustee may draw from this subaccount if the General Subaccount and Reserve
Subaccount are not sufficient on any payment date to make scheduled
payments on the Transition Bonds and payments of certain fees and expenses.
As of September 30, 2002, the Overcollateralization Subaccount had a zero
balance. Expected funding on that date was $312,040.

An amount equal to approximately $3.7 million (0.5% of the initial
principal amount of the Transition Bonds) was deposited into the Capital
Subaccount under the indenture on the date of issuance of the Transition
Bonds. This amount was contributed by CenterPoint Houston to the Company.
If amounts available in the General, Reserve and Overcollateralization
Subaccounts are not sufficient on any payment date to make scheduled
payments on the Transition Bonds and payments of certain fees and expenses,
the Trustee will draw on amounts in the Capital Subaccount. Any remaining
amounts collateralizing the Transition Bonds will be released to the
Company upon final payment of the Transition Bonds. Approximately $2.9
million was drawn from the Capital Subaccount in connection with the March
15, 2002 interest payment on the Transition Bonds, And approximately $1.5
million of such drawing was replenished in connection with the September
15, 2002 interest payment. As of September 30, 2002, the Capital Subaccount
had a balance of $2,313,674.

CUSTOMER DEPOSITS. The Trustee holds cash deposits, affiliate guarantees,
surety bonds and letters of credit provided by retail electric providers. Retail
electric providers are required to meet creditworthiness criteria established by
the Texas Utility Commission with respect to transition charges. Each retail
electric provider must (1) have a long-term, unsecured credit rating of not less
than "BBB-" and "Baa3" (or the equivalent) from Standard & Poor's Ratings
Services (S&P) and Moody's Investors Service, Inc. (Moody's), respectively, or
(2) provide (a) a cash deposit of two months' maximum expected transition charge
collections, (b) an affiliate guarantee, surety bond or letter of credit
providing for payment of such amount of transition charge collections in the
event that the retail electric provider defaults in its payment obligations, or
(c) a combination of any of the foregoing. The provider of any affiliate
guarantee, surety bond or letter of credit must have and maintain long-term
unsecured credit ratings of not less than "BBB-" and "Baa3" (or the equivalent)
from S&P and Moody's, respectively. As of September 30, 2002, retail electric
providers had satisfied the creditworthiness criteria through cash deposits,
letters of credit and surety bonds aggregating approximately $1 million, $10
million and $39,000, respectively. Affiliate guarantees aggregated
approximately $1 million as of September 30, 2002.

5

DEBT ISSUANCE COSTS. The costs associated with the issuance of the
Transition Bonds are capitalized and are being amortized over the life of the
Transition Bonds utilizing the effective interest method.

REVENUE. Beginning on October 25, 2001 and pursuant to the Financing Order,
Reliant Energy (now CenterPoint Houston), as Servicer of the Transition
Property, implemented the non-bypassable Transition Charge on behalf of the
Company. The Company records revenue for Transition Charges under the accrual
method. These revenues are generally recognized upon delivery of services by
CenterPoint Houston to consumers.

AMORTIZATION. The Transition Property was recorded at acquired cost and is
being amortized over 12 years, the life of the Transition Bonds, based on
estimated revenue from Transition Charges, interest accruals and other expenses.
The Financing Order authorizing the imposition of the Transition Charges and the
issuance of the Transition Bonds, limits the terms of the Transition Bonds to no
greater than 15 years. In accordance with SFAS No. 71, amortization is adjusted
for over/under collection of Transition Charges. At September 30, 2002,
Transition Property included regulatory adjustments of $18,201,349 to defer
amortization costs until periods in which Transition Charge revenue is recorded.

INCOME TAXES. The Company is organized as a single member limited liability
company and will not be subject to United States federal income tax as an entity
separate from CenterPoint Energy. In addition, the Company has received a ruling
from the Comptroller of Public Accounts of the State of Texas to the effect that
(i) the Company's receipt of the Transition Property, (ii) the Company's receipt
of the Transition Charges, and (iii) the Company's short-term earnings from
investment of the Transition Charges will be excluded from taxable capital and
taxable earned surplus for purposes of the Texas franchise tax. Accordingly,
there is no provision for income taxes.

(3) LONG-TERM DEBT

Interest payments on the Transition Bonds are due semi-annually, began
March 15, 2002 and are paid from funds deposited daily with the Trustee for the
Transition Bonds by CenterPoint Houston as Servicer of the Transition Property.

The source of repayment for the Transition Bonds is the Transition Charges.
The Servicer collects this non-bypassable charge from retail electric providers
who, in turn, collect it from retail consumers of electricity in CenterPoint
Houston's service territory. The Servicer deposits Transition Charge collections
into a General Subaccount maintained by the Trustee under the Indenture. Amounts
remitted to the Trustee from January 1, 2002 through September 30, 2002 included
$47,672,184 of Transition Charges and $12,167 of interest.

(4) SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS

Under a sale agreement between the Company and Reliant Energy dated October
24, 2001, Reliant Energy sold the Transition Property to the Company. Pursuant
to a servicing agreement entered into between the Company and Reliant Energy
concurrently with the issuance of the Transition Bonds, Reliant Energy (now
CenterPoint Houston) is the Servicer of the Transition Property. As the
Servicer, CenterPoint Houston manages and administers the Transition Property
and collects the Transition Charges on behalf of the Company. The Company pays a
fixed annual servicing fee to CenterPoint Houston for these services. Pursuant
to an administration agreement entered into between the Company and CenterPoint
Houston, CenterPoint Houston also provides administrative services to the
Company. The Company pays CenterPoint Houston a fixed fee for performing these
services, plus all reimbursable expenses. The Company recorded administrative
fees of $25,000 and $75,000 for the three and nine months ended September 30,
2002, respectively, related to the administration agreement. The Company
recorded servicing fees of $89,658 and $249,206 for the three and nine months
ended September 30, 2002, respectively, related to the servicing agreement.

Subsidiaries of Reliant Resources, Inc. (Reliant Resources), a former
affiliate of the Company, collect the majority of the Transition Charges from
retail electric customers. Reliant Resources continues to be in compliance with
the creditworthiness criteria for retail electric providers as set forth in the
Financing Order. At September 30, 2002, subsidiaries of Reliant Resources had
letters of credit aggregating approximately $10 million on deposit with the
Trustee. The Servicer is expected to direct the Trustee to seek recourse against
such letters of credit or alternate

6

form of credit support as a remedy for any payment default. On September 30,
2002, CenterPoint Energy distributed its remaining ownership interest in Reliant
Resources to CenterPoint Energy's shareholders.

(5) SUBSEQUENT EVENTS

CenterPoint Houston filed on August 2, 2002 with the Texas Utility
Commission, in Docket No. 26402, the Transition Charges to become effective
November 1, 2002. CenterPoint Houston is required to true-up Transition Charges
annually on November 1 in compliance with the Financing Order adopted in
Application of Reliant Energy, Incorporated for Financing Order to Securitize
Regulatory Assets and Other Qualified Costs, Docket No. 21665. The adjusted
Transition Charges are expected to permit the collection of $60,048,285 during
the year ending October 31, 2003. This amount includes an expected shortfall of
$1,284,92l in the collection of Transition Charges during the year ended October
31, 2002. The $1,284,921 shortfall is 2.7% of the expected collections of
$48,345,803 for the year ended October 31, 2002. The Financing Order provides
that the Texas Utility Commission will issue a final order in a true-up filing
by the date stated in the filing (November 1, 2002) but that the Servicer will
be permitted to implement its proposed changes to the Transition Charges if the
Texas Utility Commission cannot issue an order by that date. Any modifications
subsequently ordered by the Texas Utility Commission will be made by the
Servicer in the next true-up filing. The Texas Utility Commission referred this
docket to the State Office of Hearings (SOAH Docket NO. 473-03-0277) on
September 24, 2002 to conduct a hearing and issue a proposal for decision. A
pre-hearing conference was conducted on October 28, 2002, by a SOAH
Administrative Law Judge. A procedural schedule was established with a
settlement conference set for November 14, 2002. If a settlement is not reached,
testimony is to be filed December 16, 2002 with a hearing on unsettled issues
scheduled for February 25, 2003. CenterPoint Houston implemented the new rates
on November 1, 2002.

7

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS OF CENTERPOINT
ENERGY TRANSITION BOND COMPANY, LLC

The following is an analysis of the Company's consolidated results of
operations in an abbreviated format pursuant to Instruction H(1)(a) and (b) of
Form 10-Q. This analysis should be read in combination with the Interim
Financial Statements included in Item 1 of this Form 10-Q. The Company meets the
conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and is
therefore permitted to use the reduced disclosure format for wholly owned
subsidiaries of reporting companies. Accordingly, the Company has omitted from
this report the information called for by Item 3 (Quantitative and Qualitative
Disclosures About Market Risk) of Part I and the following Part II items of Form
10-Q: Item 2 (Changes in Securities and Use of Proceeds), Item 3 (Defaults Upon
Senior Securities) and Item 4 (Submission of Matters to a Vote of Security
Holders).

The Company is a Delaware limited liability company established in November
1999 for limited purposes. On October 24, 2001 the Company issued Transition
Bonds and used the net proceeds to purchase the Transition Property from Reliant
Energy, Incorporated. Because the Company is restricted by its organizational
documents from engaging in activities not directly related to the specific
purposes for which the Company was created, income statement effects were
limited primarily to income generated from the Transition Charges, interest
expense on the Transition Bonds, amortization of the Transition Property, debt
issuance expenses and the discount on the Transition Bonds, Transition Property
servicing and administration fees and incidental investment interest income.

For the three months ended September 30, 2002, revenue from Transition
Charges was $25,184,109 and investment income was $104,664. Interest expense of
$9,608,635 relates to interest on the Transition Bonds and amortization expense
of $428,497 relates to amortization of debt issuance expenses and the discount
on the Transition Bonds. Amortization of the Transition Property includes
regulatory adjustments of $397,675 for the three months ended September 30, 2002
to defer amortization costs until periods in which Transition Charge revenue is
recorded. The Company recorded administrative expenses of $270,212, including
bad debt expense of $86,731 and servicing fees of $89,658 for the three months
ended September 30, 2002.

For the nine months ended September 30, 2002, revenue from Transition
Charges was $58,488,383 and investment income was $172,497. Interest expense of
$28,855,406 relates to interest on the Transition Bonds and amortization expense
of $1,291,637 relates to amortization of debt issuance expenses and the discount
on the Transition Bonds. Amortization of the Transition Property includes
regulatory adjustments of $18,201,349 for the nine months ended September 30,
2002 to defer amortization costs until periods in which Transition Charge
revenue is recorded. The Company recorded administrative expenses of $577,874,
including bad debt expense of $181,244 and servicing fees of $249,206 for the
nine months ended September 30, 2002.

The Company expects to use collections of Transition Charges to make
scheduled principal and interest payments on the Transition Bonds. Transition
Charges, together with interest earned on collected Transition Charges, are
expected to offset (1) interest expense on the Transition Bonds, (2)
amortization of the Transition Property, debt issuance expenses and the discount
on the Transition Bonds and (3) the fees charged by CenterPoint Houston for
servicing the Transition Property and providing administrative services to the
Company. From the October 2001 issuance date of the Transition Bonds to the
September 15, 2002 interest payment date, the aggregate amount of collected
Transition Charges and interest thereon was $46,463,518, and the aggregate
amount expected to have been collected was $47,900,737. The difference was paid
by drawing approximately $1.4 million from the Capital Subaccount. As a result
of the shortfall in collections and interest, the Overcollateralization
Subaccount has not been funded, and therefore falls short of its target funding
level by $312,040 as of September 30, 2002.

The Transition Charges are expected to be reviewed and adjusted at least
annually by the Public Utility Commission of Texas (Texas Utility Commission) to
correct any overcollections or undercollections during the preceding 12 months
and to provide for the expected recovery of amounts sufficient to timely provide
all payment of debt service and other required amounts and charges in connection
with the Transition Bonds.

CenterPoint Houston filed on August 2, 2002 with the Texas Utility
Commission, in Docket No. 26402, the Transition Charges to become effective
November 1, 2002. CenterPoint Houston is required to true-up Transition Charges
annually on November 1 in compliance with the Financing Order issued by the
Texas Utility Commission in

8

Application of Reliant Energy, Incorporated for Financing Order to Securitize
Regulatory Assets and Other Qualified Costs, Docket No. 21665. The adjusted
Transition Charges are expected to permit the collection of $60,048,285 during
the year ending October 31, 2003. This amount includes an expected shortfall of
$1,284,92l in the collection of Transition Charges during the year ended October
31, 2002. The $1,284,921 shortfall is 2.7% of the expected collections of
$48,345,803 for the year ended October 31, 2002. The Financing Order provides
that the Texas Utility Commission will issue a final order in a true-up filing
by the date stated in the filing (November 1, 2002) but that the Servicer will
be permitted to implement its proposed changes to the Transition Changes if the
Texas Utility Commission cannot issue an order by that date. Any modifications
subsequently ordered by the Texas Utility Commission will be made by the
Servicer in the next true-up filing. The Texas Utility Commission referred this
docket to the State Office of Hearings (SOAH Docket NO. 473-03-0277) on
September 24, 2002 to conduct a hearing and issue a proposal for decision. A
pre-hearing conference was conducted on October 28, 2002, by a SOAH
Administrative Law Judge. A procedural schedule was established with a
settlement conference set for November 14, 2002. If a settlement is not reached,
testimony is to be filed December 16, 2002 with a hearing on unsettled issues
scheduled for February 25, 2003. CenterPoint Houston implemented the new rates
on November 1, 2002.

Holders of Transition Bonds may experience payment delays or incur losses
if the Company's assets are not sufficient to pay interest or the scheduled
principal of the Transition Bonds. Funds for payments are dependent upon the
Transition Property and the right to collect the Transition Charges over a
period limited by Texas law to 15 years.

In addition, collections are dependent on the amount of electricity
consumed within CenterPoint Houston's service territory.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our principal executive officer and our principal financial officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based
on that evaluation, the principal executive officer and the principal financial
officer concluded that our disclosure controls and procedures are effective in
timely alerting them to material information relating to us (including our
consolidated subsidiaries) required to be included in our periodic SEC filings.
Subsequent to the date of their evaluation, there were no significant changes in
our internal controls or in other factors that could significantly affect the
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

9

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

None.

(b) Reports on Form 8-K.

On August 14, 2002, we filed a Current Report on Form 8-K dated
August 14, 2002, furnishing certifications of our financial
statements by our principal executive officer and principal financial
officer related to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002.

10

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CENTERPOINT ENERGY TRANSITION BOND COMPANY, LLC

By: /s/ James S. Brian
-------------------------------------------
James S. Brian
Senior Vice President and
Chief Accounting Officer

Date: November 14, 2002

11

CERTIFICATIONS

I, Gary L. Whitlock, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CenterPoint
Energy Transition Bond Company, LLC;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: November 14, 2002

By: /s/ Gary L. Whitlock
---------------------------------------------
Gary L. Whitlock
President and Principal Executive Officer

12

I, Marc Kilbride, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CenterPoint
Energy Transition Bond Company, LLC;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: November 14, 2002

By: /s/ Marc Kilbride
-------------------------------------------------------------
Marc Kilbride
Vice President, Treasurer and Principal Financial Officer

13