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TABLE OF CONTENTS

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

FORM 10-Q

Commission file number 1-16455

Reliant Energy, Inc.
(Exact Name of Registrant as Specified in Its Charter)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ý    No o

        As of May 2, 2005, the latest practicable date for determination, Reliant Energy, Inc. had 300,914,012 shares of common stock outstanding and no shares of common stock were held as treasury stock.

TABLE OF CONTENTS

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

        When we make statements containing projections, estimates or assumptions about our revenues, income and other financial items, our plans for the future, future economic performance, transactions and dispositions and financings related thereto, we are making "forward-looking statements." Forward-looking statements relate to future events and anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "position," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" and other similar words. However, the absence of these words does not mean that the statements are not forward-looking.

        Although we believe that the expectations and the underlying assumptions reflected in our forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are not guarantees of future performance or events. These statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in the forward-looking statements. Among other things, the matters described in:

•

"Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors" in Item 7 and note 14 to our consolidated financial statements, in our Annual Report on Form 10-K for the year ended December 31, 2004 (Form 10-K) and



•

"Management's Discussion and Analysis of Financial Condition and Results of Operations" and note 10 to our interim financial statements in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 (this Form 10-Q)

could cause actual results to differ materially from those expressed or implied in our forward-looking statements.

        Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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PART I.
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RELIANT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)

See Notes to our Unaudited Consolidated Interim Financial Statements

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RELIANT ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(1)   Background and Basis of Presentation

(a) Background.

        As used in this Form 10-Q, "Reliant Energy" refers to Reliant Energy, Inc. and "we," "us" and "our" refer to Reliant Energy, Inc. and its consolidated subsidiaries, unless we specify or the context indicates otherwise. Our business operations consist primarily of two business segments. See note 12. This Form 10-Q includes our consolidated interim financial statements and notes (interim financial statements). The interim financial statements are unaudited, omit certain financial statement disclosures and should be read in conjunction with our audited consolidated financial statements and notes in our Form 10-K.

(b) Basis of Presentation.

        Estimates.    In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we 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.

        Adjustments and Reclassifications.    In September 2004, we sold plants having a net capacity of 770 megawatts (MW) (hydropower plants). In December 2004, we transferred a project-financed generation plant (Liberty) to the project's lenders. The operations of these plants are reported as discontinued operations. See note 14.

        The interim financial statements reflect all normal recurring adjustments necessary, in management's opinion, to present fairly our financial position and results of operations for the reported periods. Amounts reported for interim periods, however, may not be indicative of a full year period due to seasonal fluctuations in demand for energy and energy services, changes in energy commodity prices, timing of maintenance and other expenditures, dispositions, changes in interest expense and other factors.

        We have reclassified certain amounts reported in this Form 10-Q from prior periods to conform to the 2005 presentation of financial statements. These reclassifications had no impact on reported earnings.

        Changes in Estimates for Retail Energy Sales and Costs.    The revenues and the related energy supply costs in our retail energy segment include our estimates of customer usage after consideration of initial usage information provided by the Electric Reliability Council of Texas (ERCOT) Independent System Operator (ISO) and the electric distribution companies in the PJM Interconnection, LLC (PJM). We revise these estimates and record any changes in the period as information becomes available (collectively referred to as "market usage adjustments").

        As of March 31, 2005 and December 31, 2004, we recorded unbilled revenues of $304 million and $328 million, respectively, for retail energy sales. During the three months ended March 31, 2005 and 2004, we recognized in gross margin (revenue less fuel and cost of gas sold and purchased power) $15 million and $9 million of expense, respectively, related to market usage adjustments.

        As of March 31, 2005, the ERCOT ISO has issued true-up settlements through September 2004. As of March 31, 2005, the ERCOT ISO's settlement calculations indicate that our customers utilized electricity volumes that exceeded our estimates by approximately 140,000 megawatt hours (MWh) for 2003 and 186,000 MWh for January through September 2004. As of March 31, 2005, we have a net

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receivable of $15 million recorded for final settlement with ERCOT, consisting of a $9 million receivable related to 2003, a $3 million receivable related to 2004 and a $3 million receivable related to 2005.

        Although we believe that the estimates and assumptions utilized to recognize revenues and the related supply costs are reasonable and represent our best estimates, actual results could differ.

(2)   Stock-based Compensation Plans and Retirement Plans

(a) Stock-based Compensation Plans.

        We apply the intrinsic value method of accounting for employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25).

        The Financial Accounting Standards Board issued SFAS No. 123R, "Share-Based Payment" (SFAS No. 123R), which requires that we account for employee share-based transactions using a fair value based method. SFAS No. 123R is effective for us for all share-based transactions initiated on or after January 1, 2006. We will apply this statement using a modified version of prospective application. We will recognize compensation cost for the unvested portion of awards granted prior to the effective date, based on the grant-date fair value of those awards used in the pro forma disclosures below. We have assessed the impact that the adoption of this statement will have on our consolidated financial statements to the extent possible. The impact with respect to variable instruments is dependent on our stock price on the date of implementation.

        If employee stock-based compensation costs had been expensed based on the fair value (determined using the Black-Scholes model) method of accounting applied to all stock-based awards, our pro forma results would be:

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(b) Retirement Plans.

        The components of net benefit cost for our qualified retirement plans are:

        Pension expense associated with our non-qualified pension plan was $0 and $2 million during the three months ended March 31, 2005 and 2004, respectively. During the three months ended March 31, 2004, we recognized an accounting settlement charge of $2 million (pre-tax) related to distributions paid.

        We expect to make cash contributions of approximately $7 million during 2005. As of March 31, 2005, we had contributed $1 million.

(3)   Comprehensive Income (Loss)

        The components of total comprehensive income (loss) are:

(4)   Goodwill and Property, Plant and Equipment

        We perform our goodwill impairment test annually and evaluate goodwill and property, plant and equipment when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. We initially selected November 1 as our annual goodwill impairment testing date since we had historically completed our annual strategic planning process by the date. Since the time we selected the November 1 date, we have modified our strategic planning process and are no longer completed by Novermber 1. In addition, our year-end closing and reporting process has been truncated in order to meet the accelerated periodic reporting requirements with the Securities and Exchange Commission resulting in significant constraints on our resources at year-end and during our first fiscal quarter. Accordingly, in order to align our annual goodwill impairment test with our annual strategic planning process, to meet the accelerated reporting deadlines and to provide adequate time to complete the analysis each year, beginning in 2005, we changed the date on which we perform our annual goodwill impairment test from November 1 to April 1. The change is not intended to delay,

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accelerate or avoid an impairment charge. We believe that this accounting change is an alternative accounting principle that is preferable under the circumstances.

        January and March 2005 Goodwill Impairment Tests Related to our Wholesale Energy Reporting Unit.    In January and March 2005, we signed agreements to sell 48 MW and 30 MW of generation assets, respectively. See note 13. These sales required us to allocate a portion of the goodwill in the wholesale energy reporting unit to the assets being sold on a relative fair value basis as of January and March 2005 in order to compute the gain/loss on disposals. As of January and March 2005, we also analyzed the recoverability of goodwill in our remaining wholesale energy reporting unit and determined that no impairment had occurred.

(5)   Derivative Instruments

        For discussion of our derivative activities, see notes 2(d) and 6 to our consolidated financial statements in our Form 10-K. Below is the pre-tax income (loss) of our derivative instruments, including energy and interest rate derivatives:

(1)

No component of the derivatives' gain or loss was excluded from the assessment of effectiveness.

(2)

There were no amounts for the three months ended March 31, 2005 and 2004 recognized in our results of operations as a result of the discontinuance of cash flow hedges because it was probable that the forecasted transaction would not occur.

        As of March 31, 2005 and December 31, 2004, the maximum length of time we are hedging our exposure to the variability in future cash flows for forecasted energy transactions is eight years. As of March 31, 2005 and December 31, 2004, the maximum length of time we are hedging our exposure to the payment of variable interest rates is nine months and 12 months, respectively. As of March 31, 2005 and December 31, 2004, accumulated other comprehensive loss from derivatives, net of tax, was $122 million and $33 million, respectively. As of March 31, 2005, we expect $4 million of accumulated other comprehensive gain to be reclassified into our results of operations during the period from April 1, 2005 to March 31, 2006.

        In March 2003, we discontinued our proprietary trading business. Prior to that date, our trading activities included (a) transactions establishing open positions in the energy markets, primarily on a short-term basis and (b) energy price risk management services to customers primarily related to natural gas, electric power and other energy-related commodities. Although we have exited our proprietary trading activities, we have legacy positions, which will be closed as economically feasible or in accordance with their terms. In addition to our legacy trading activities, we have other transactions, which we record on a net basis in our results of operations that are accounted for under the mark-to-market method of accounting. Such transactions include financial hedges of certain natural gas inventory held in storage. During the three months ended March 31, 2005 and 2004, the margins associated with these transactions (our legacy positions and optimization around our storage positions) of $26 million loss and $3 million gain, respectively, are included in fuel and cost of gas sold.

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(6)   Credit Facilities, Bonds, Notes and Other Debt

        As of March 31, 2005, we were in compliance with all of our debt covenants. An overview of our outstanding debt is:

(1)

The weighted average stated interest rates are for borrowings outstanding as of March 31, 2005 or December 31, 2004.

(2)

As of December 31, 2004, the entire amount borrowed under this revolver was subject to prime rate-based rates. The London inter-bank offered rate (LIBOR) based rate would have been 4.90% as of December 31, 2004. As of March 31, 2005, the majority of the outstanding balance was subject to LIBOR-based rates.

(3)

Included in interest expense is amortization of $2 million for valuation adjustments for debt for the three months ended March 31, 2005 and 2004.

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        Amounts borrowed and available for borrowing under our revolving credit agreements as of March 31, 2005 are:

        As of March 31, 2005 and December 31, 2004, committed credit facilities, bonds and notes aggregating $675 million and $703 million, respectively, were unsecured.

        RE Retail Receivables, LLC Facility.    We have a receivables facility arrangement with financial institutions to sell an undivided interest in accounts receivable from our retail business under which, on an ongoing basis, the financial institutions can invest a maximum of $350 million for their interests in these receivables. The facility expires on September 27, 2005. We service the receivables and received a fee of 0.4% of cash collected during the three months ended March 31, 2005 and 2004, which approximates our actual service costs.

        In 2002, we formed a qualified special purpose entity (QSPE) to buy certain receivables from our retail electric subsidiaries and sell undivided interests in them to financial institutions. In September 2004, the QSPE ceased to be a qualified special purpose entity and we began consolidating its results of operations. The special purpose entity is a separate entity and its assets will be available first and foremost to satisfy the claims of its creditors. We are not ultimately liable for any failure of payment of the obligors on the receivables. We have, however, guaranteed the performance obligations of the sellers and the servicing of the receivables under the related documents.

        Servicing fee income and costs associated with the sale of receivables to the QSPE for the three months ended March 31, 2004 (in millions) are:

(1)

Beginning September 28, 2004, the discount on the receivables and other related interest items are reflected as interest expense in our consolidated statements of operations and we no longer recognize service fee income and interest income.

        In calculating the loss on sale for the three months ended March 31, 2004, an average discount rate of 7.3% was applied to projected cash collections over a six-month period.

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(7)   Stockholders' Equity

(a) Common Stock Activity.

        Our common stock activity is:

(b) Treasury Stock Issuances and Transfers.

        Changes in the number of shares of our treasury stock are:

(8)   Earnings Per Share

        Reconciliations of the amounts used in the basic and diluted loss per common share computations are:

(1)

As we incurred a loss from continuing operations for this period, diluted loss per share is calculated the same as basic loss per share.

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(1)

See note (1) above regarding diluted loss per share.

        The following potential common shares and other impacts were excluded from the calculation of diluted earnings (loss) per common share due to their anti-dilutive effect or, in the case of certain stock options, because their exercise price was greater than the average market price for the periods presented:

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(9)   Income Taxes

(a) Tax Rate Reconciliations.

        A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:

(1)

The effective tax rate differs from the federal statutory rate primarily due to providing valuation allowances against certain state tax benefits.

(b) Tax Contingencies.

        Our income tax returns for certain prior tax reporting periods are presently under audit by federal and state taxing authorities. During some of the years under audit, we were consolidated with CenterPoint Energy, Inc. for federal income tax purposes. We evaluate the need for contingent tax liabilities on a quarterly basis and any changes in estimates are recorded in our results of operations. However, there are inherent risks associated with income tax audits and we cannot predict the ultimate resolution of these matters.

(10) Contingencies

(a) Legal and Environmental Matters.

        We are involved in a number of legal, environmental and other proceedings before courts and governmental agencies. Unless otherwise disclosed, we cannot predict the outcome of these proceedings, some of which involve substantial claim amounts or potential exposure, which, in the event of an adverse judgment or decision could have a material adverse effect on our results of operations, financial condition and cash flows. For information regarding legal proceedings and environmental matters, see note 14 to our consolidated financial statements in our Form 10-K, which note, as updated below, is incorporated herein by reference and filed as an exhibit to this Form 10-Q.

Legal Matters.

Western States Electricity and Natural Gas Litigation

        Natural Gas Actions.    In March 2005, a consolidated complaint for seven new class action lawsuits was filed in California state court against us and Reliant Energy Services, Inc., one of our wholly-owned subsidiaries. The lawsuits, which include allegations similar to those asserted in the 25

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previously disclosed "natural gas" lawsuits, allege that we participated in an unlawful conspiracy to increase natural gas prices in California from 2000 to 2001 in violation of antitrust and other laws. The lawsuits seek injunctive relief, treble damages, restitution of overpayments, disgorgement of unlawful profits and legal expenses.

        In April 2005, the United States District Court of Nevada dismissed one of the 25 previously disclosed natural gas lawsuits alleging violations of federal and state antitrust laws and violations of the California unfair competition law. The allegations in this case are substantially similar to the allegations in the other pending natural gas cases that have been filed against us. The court ruled that, under the Natural Gas Act, the Federal Energy Regulatory Commission (FERC) retains statutory authority over wholesale natural gas prices and that the plaintiff's federal antitrust claims and state law claims, accordingly, were barred by the filed rate doctrine. The decision is subject to appeal.

        California Attorney General—Ancillary Services.    In April 2005, the United States Supreme Court denied a request to transfer to state court a lawsuit filed against us in March 2002 by the California Attorney General. The lawsuit, which we had removed to a federal court, asserts alleged violations of state law in the California ancillary services markets. In March 2003, a federal district court dismissed the lawsuit on the basis of federal preemption and the filed rate doctrine. The dismissal was subsequently affirmed by a federal appellate court.

Other Litigation

        Texas Commercial Energy and Utility Choice Electric.    The lawsuit filed by Texas Commercial Energy, LLC (TCE) against several ERCOT power market participants (including us and certain subsidiaries), which was dismissed in June 2004 from the Corpus Christi Federal District Court for the Southern District of Texas is on appeal and is currently scheduled to be heard in May 2005 by the United States Court of Appeals for the Fifth Circuit (Fifth Circuit).

        In April 2005, the defendants to the lawsuit (filed by Utility Choice Electric pending in the Federal District Court for the Southern District of Texas, Houston Division) filed a motion to stay this litigation pending the decision by the Fifth Circuit in the TCE litigation.

Environmental Matters.

        Regulation of Emissions of Mercury and Other Hazardous Air Pollutants.    In December 2003, the United States Environmental Protection Agency (EPA) proposed two alternative regulations to control emissions of mercury from coal-fired power plants and nickel from certain oil-fired power plants. In March 2005, the EPA adopted the cap-and-trade version of the mercury regulation. In addition, the EPA withdrew its proposed regulation to reduce emissions of nickel from oil-fired power plants. Withdrawal of the nickel reduction provision of the regulation resulted in the elimination of an estimated $35 million of capital costs associated with nickel controls at one of our power plants.

        Regulation of Emissions of Sulfur Dioxide (SO₂) and Nitrogen Oxides (NO_x).    In December 2003, the EPA proposed a regulation called the Clean Air Interstate Rule (CAIR) to reduce emissions of SO₂ and NO_x from power plants. The rule was proposed as a cap-and-trade program and had the potential to have a significant impact on our operations. In March 2005, the EPA finalized CAIR. The final rules are substantially similar to the proposed rules.

(b) California Energy Sales Refund, Credit and Interest.

        We are a party to a refund proceeding initiated by the FERC in 2001 regarding wholesale electricity prices that we charged in California from October 2, 2000 through June 20, 2001 (2000-2001 Refund Proceeding). We have recorded receivables from the California Independent System Operator (Cal ISO) and the California Power Exchange (Cal PX) relating to power sales into the markets run by

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the Cal ISO and the Cal PX related to this period. See note 14(b) to our consolidated financial statements in our Form 10-K.

        Based on the most recent refund methodology adopted by the FERC with respect to these receivables, we currently estimate our refund obligation in the 2000-2001 Refund Proceeding to be $90 million.

        The issues related to the California energy crisis are complex and involve a number of court and regulatory proceedings that are ongoing. See note 14(a) to our consolidated financial statements in our Form 10-K for discussion of western market legal matters and the related risks. While we continue to pursue the possible settlement of a number of these proceedings, the resolution of these matters remains uncertain and could range from litigating these matters to conclusion to resolving these matters through settlement, or some combination of both litigation and settlement. Depending on how these matters are ultimately resolved, including the impact of any proceedings initiated with respect to refund obligations for periods prior to October 2000, the amount of our net receivable could be materially impacted.

        We have adjusted these receivables (related to the period from October 2000 through June 2001) to account for (a) the estimated refund obligation in the 2000-2001 Refund Proceeding, (b) a discount on the receivables and (c) interest accrued on the receivables. We believe that the gross accounts receivable are fully collectible, subject to the estimated refund obligation. The adjustments are as follows:

        During the three months ended March 31, 2005 and 2004, we adjusted our estimated refund obligation, credit reserve and receivables (netted in revenues) and interest income (recorded in interest income) related to energy sales in California as follows (income (loss)):

(1)

During the three months ended March 31, 2004, we reversed the credit reserve of $21 million, which was related to PG&E due to PG&E funding its obligation into an escrow account pursuant to a bankruptcy order.

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(11) Supplemental Guarantor Information

        For the issuances of senior secured notes in July 2003 and December 2004 totaling $1.9 billion, our wholly-owned subsidiaries are either (a) full and unconditional guarantors, jointly and severally or (b) non-guarantors.

        The following condensed consolidating financial information presents supplemental information for the three months ended March 31, 2005 and 2004 and as of March 31, 2005 and December 31, 2004.

Condensed Consolidating Statements of Operations.