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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from                      to                     

Commission file number 1-16455

RELIANT ENERGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

1000 Main Street

Houston, Texas 77002

(Address of Principal Executive Offices) (Zip Code)

(713) 497-3000

(Registrant’s Telephone Number, Including Area Code)

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 ¨

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

As of November 1, 2004, the last practicable date for determination, Reliant Energy, Inc. had 298,671,506 shares of common stock outstanding, excluding 1,132,494 shares held by the registrant as treasury stock.

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RELIANT ENERGY, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

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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,” “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. Such 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:

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 publicly 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

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 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

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.

Our business operations provide electricity and related services to retail customers (including acquiring and managing the related supply) primarily in Texas and we generate and sell electricity and other related services in wholesale energy markets in various regions of the United States. For information regarding our reportable segments, see note 15.

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 (a) our audited consolidated financial statements and notes in our Form 10-K, (b) our unaudited interim financial statements and notes in our First Quarter Form 10-Q and (c) our unaudited interim financial statements and notes in our Second Quarter Form 10-Q.

Basis of Presentation

Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) 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.

Adjustments and Reclassifications. In September 2004, we sold 770 megawatts (MW) of generation assets located in upstate New York (hydropower plants) for $874 million in cash. We have reported the operations of the hydropower plants as discontinued operations since May 2004 and, accordingly, have reclassified amounts for all periods. See notes 5 and 16 for further discussion.

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 2004 presentation of financial statements. These reclassifications had no impact on reported earnings.

We have reclassified general and administrative expenses and operation and maintenance expenses from prior year’s presentation. Other general and administrative expenses in the consolidated statements of operations include (a) corporate and administrative services (including management services, financial and accounting, cash management and treasury support, certain legal costs, information technology system support, communications, office management and human resources), (b) regulatory costs and (c) certain benefit costs.

Restructuring Costs. For the remainder of 2004 and 2005, we intend to continue to identify, evaluate and pursue opportunities to restructure our business operations in order to increase our efficiency, reduce our costs and reduce our liquidity and capital requirements. We have incurred and expect to continue to incur short-term costs in the form of severance payments, information technology systems investments, costs and write-offs related to corporate leases and other restructuring costs as part of our efforts to reduce our cost structure. During the three and nine months ended September 30, 2004, we incurred $1 million and $29 million, respectively, in severance costs, which are included in operation and maintenance, selling and marketing and other general and administrative expenses in our consolidated statements of operations. The majority of the severance costs have been paid and $1 million is accrued in our consolidated balance sheet as of September 30, 2004. In addition, during the three and nine months ended September 30, 2004, we incurred $11 million in other restructuring costs, such as lease expense

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related to vacating certain floors in our corporate headquarters. See note 5 for a discussion of write-downs of property, plant and equipment. In addition, severance costs and other restructuring costs are expected to be incurred in the remainder of 2004 and in 2005 and 2006.

FIN No. 46R. In January 2004, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN No. 46R), which modified certain criteria in determining which entities should be considered as variable interest entities. The adoption had no impact on our financial statements. The application of FIN No. 46R continues to evolve as the FASB continues to address issues submitted for consideration. We will continue to assess our application of clarified or revised guidance related to FIN No. 46R.

Changes in Estimates for Retail Energy Sales and Costs. Our revenues and the related energy supply costs are based on (a) our estimates of customer usage and (b) initial usage information provided by the Electric Reliability Council of Texas (ERCOT) Independent System Operator (ISO) and PJM Interconnection, LLC (PJM) relating to customer meter reading data provided by third parties. Upon receipt of actual or updated usage data from the ERCOT ISO and PJM, we revise the estimates and record any resulting changes in the period when better information becomes available. As of September 30, 2004 and December 31, 2003, we recorded unbilled revenues, based on our estimates, of $393 million and $290 million, respectively, for retail energy sales.

During the three months ended September 30, 2004 and 2003, we recognized in gross margin $13 million of expense and $25 million of income, respectively, and during the nine months ended September 30, 2004 and 2003, we recognized in gross margin $10 million of expense and $27 million of income, respectively, resulting from revisions to prior period estimates related to customer usage in ERCOT and PJM and supply costs and other changes in estimates (collectively referred to as “market usage adjustments”). The ERCOT ISO continues to experience problems processing volume data. During 2004, we have seen negative trends from ERCOT ISO final settlement data related to “unaccounted for energy” and supply costs compared to our estimates that we have recorded. Based on final settlement information from the ERCOT ISO and a change in methodology for estimating and recording “unaccounted for energy,” we recognized a loss of $14 million during the three months ended September 30, 2004 ($12 million gain related to 2002, $16 million loss related to 2003 and $10 million loss related to the first six months of 2004). These amounts are included in the amounts above described as “market usage adjustments.” As of September 30, 2004, the ERCOT ISO’s settlement calculations indicate that our customers utilized greater volumes of electricity than our records indicated by approximately 450,000 megawatt hours (MWh) for 2003. As of September 30, 2004, we have receivables recorded of $23 million related to 2003 and $11 million related to 2004 due to our estimated settlement volumes being less than that indicated by the ERCOT ISO’s settlement calculations. The ultimate resolution of these differences could result in additional changes in estimates of our energy supply costs for our retail operations.

EITF No. 03-11. Prior to October 1, 2003, we generally recorded revenues, fuel and cost of gas sold, and purchased power related to sale and purchase contracts designated as hedges on a gross basis in the delivery period. Since that date, we have recorded certain transactions on a net basis, including the settlement of sales and purchases of fuel and purchased power related to our non-trading energy derivative activities that were not physically delivered. The change in accounting treatment resulted in an $821 million and $1,776 million decrease in revenues and a corresponding $821 million and $1,776 million decrease in fuel and cost of gas sold and purchased power for the three and nine months ended September 30, 2004, respectively. We believe the application of Emerging Issues Task Force (EITF) Issue No. 03-11 (EITF No. 03-11) will continue to result in a significant amount of our non-trading energy derivative activities being reported on a net basis prospectively that were previously reported on a gross basis. EITF No. 03-11 has no impact on margins or net income. Reclassification of periods prior to October 1, 2003 is not required and it is not practicable for us to do so.

Prior to January 1, 2004, we recognized repair and maintenance costs for power generation assets acquired prior to December 31, 1999, under the “accrue-in-advance” method. Under the accrue-in-advance method, we estimated the costs of planned major maintenance and accrued the related expense over the maintenance cycle, which ranges from two to 12 years. Effective January 1, 2004, we began expensing these costs as incurred. Such change conforms our accounting for all major maintenance costs to a method that we believe is preferable in these circumstances. As a result of this change in accounting method, we (a) recognized a cumulative effect of an accounting change resulting in an increase in net income of $7 million, net of tax of $3 million, (or $0.02 per diluted share) for the nine months ended September 30, 2004, (b) decreased long-term liabilities by $10 million and (c) decreased deferred tax assets by $3 million.

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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).

In March 2004, the FASB issued a proposed statement that would eliminate the ability to account for share-based compensation transactions using APB No. 25 and would generally require that such transactions be accounted for using a fair value based method. The FASB tentatively has agreed that the proposed standard should be effective for awards that are granted, modified or settled in cash in interim or annual periods beginning after June 15, 2005. Early adoption is allowed. In connection with the revised proposed effective dates, the FASB has discussed a variety of transition methods that would allow (but not require) companies to account for share-based payment awards.

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 net income (loss) and per share amounts would have approximated the following pro forma results for the three and nine months ended September 30, 2004 and 2003:

Net benefit cost for our qualified retirement plans includes the following components:

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Pension expense associated with our non-qualified pension plan was $0 during each of the three months ended September 30, 2004 and 2003 and $3 million and $1 million during the nine months ended September 30, 2004 and 2003, respectively. During the nine months ended September 30, 2004, we recognized an accounting settlement charge of $2 million (pre-tax) related to distributions paid.

We expect cash contributions to our pension plans for continuing operations will be approximately $11 million during 2004. As of September 30, 2004, we had contributed $10 million.

The following table summarizes the components of total comprehensive income (loss):

We evaluate goodwill annually (in November) and goodwill and property, plant and equipment when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

July 2003 Goodwill Impairment Test Related to our Wholesale Energy Segment. In July 2003, we entered into a definitive agreement to sell our 588 MW Desert Basin plant located in Casa Grande, Arizona. The sale closed in October 2003. This sale of our Desert Basin plant required us to allocate a portion of the goodwill in the wholesale energy reporting unit to the Desert Basin plant operations on a relative fair value basis as of July 2003 in order to compute the loss on disposal. We were also required to test the recoverability of goodwill in our remaining wholesale energy reporting unit as of July 2003. As a result of the July 2003 test, we recognized an impairment of $985 million (pre-tax and after-tax) in the third quarter of 2003. This impairment was due to a decrease in the estimated fair value of our wholesale energy reporting unit. See note 17.

November 2003 Annual Goodwill Impairment Test. We performed our annual goodwill impairment tests for our wholesale energy and retail energy reporting units effective November 1, 2003 and determined that no additional impairments of goodwill had occurred since July 2003.

May 2004 Goodwill Impairment Test Related to our Wholesale Energy Segment. In May 2004, we signed an agreement to sell 770 MW of generation assets. The sale closed in September 2004. Generally accepted accounting principles required us to allocate a portion of the goodwill in the wholesale energy reporting unit to the assets being

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sold on a relative fair value basis as of May 2004 in order to compute the gain on disposal. As of May 2004, we also tested the recoverability of goodwill in our remaining wholesale energy reporting unit and determined that no impairment had occurred. The goodwill for our wholesale energy reporting unit as of September 30, 2004 is $388 million and $441 million for Reliant Energy as a whole. See note 16.

For additional information regarding the process and assumptions used in our impairment tests for 2003 and 2002, see note 6 to our consolidated financial statements in our Form 10-K. The significant assumptions used in the May 2004 test are consistent with our November 2003 annual impairment test assumptions, which were previously disclosed in our Form 10-K.

Property, Plant and Equipment. We recognized in depreciation expense related to early retirements and write-downs of certain property, plant and equipment during the three months ended September 30, 2004 and 2003, $2 million and $20 million, respectively, and during the nine months ended September 30, 2004 and 2003, $38 million and $27 million, respectively.

Potential Future Impairments of Property, Plant and Equipment. We are currently evaluating the continued use of certain information technology systems, which have a net book value of approximately $13 million as of September 30, 2004.

See note 13 for discussion of an anticipated future impairment of our net investment in a subsidiary.

Trading and derivative assets and liabilities at September 30, 2004 and December 31, 2003 include amounts for non-trading and trading activities, as follows: