CenterPoint Energy (CNP) Q3 2017 Earnings Conference Call Transcript

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CenterPoint Energy (NYSE: CNP)
Q3 2017 Earnings Conference Call
Nov. 3, 2017 11:00 a.m. ET

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Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to CenterPoint Energy's Q3 2017 earnings conference call with senior management. During the company's prepared remarks all participants will be on a listen-only mode. There will be a question and answer session after management's remarks. To ask a question, press star 1 on your telephone keypad. To withdraw enjoy your question, press the pound key. I'll now turn the call over to David Mordy, Director of Investor Relations. Mr. Mordy, you may begin, sir.

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David Mordy -- Director, Investor Relations

Thank you, and good morning everyone. Welcome to our Q3 2017 earnings conference call. Scott Prochazka, President and CEO and Bill Rogers, Executive Vice President and CFO will discuss our Q3 2017 results and provide highlights on other key areas. Also with us, this morning are Tracy Bridge, Executive Vice President and President of our Electric Division, Scott Doyle, Senior Vice President of Natural Gas Distribution and Joe Vortherms, Senior Vice President of Energy Services.

Tracy, Scott, and Joe will be available during the Q&A portion of our call.

In conjunction with our call, we will be using slides which can be found under the 'Investors' section of our website CenterPointEnergy.com. For a reconciliation of non-GAAP measures used in providing earnings guidance in today's call, please refer to our earnings news release and our slides. They've been posted on our website as our Form 10Q.

Please note that we may announce material information using SEC filings, news releases, public conference calls, webcasts and posts to the 'Investor' section of our website. In the future, we will continue to use these channels to communicate important information and encourage you to review the information on our website.

Today, management will discuss certain topics containing projections and forward-looking information that are based on management's beliefs, assumptions and information currently available to management. These forward-looking statements are subject to risks or uncertainties. Actual results could differ materially based upon factors including weather variations, regulatory actions, economic conditions and growth, commodity prices, changes in our service territories and other risk factors noted in our SEC filings.

We will also discuss our guidance for 2017. The guidance range considers utility operations performance to date and certain significant variables that may impact earnings such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rate and financing activities. In providing this guidance the company uses a non-GAAP measure of adjusted diluted earnings per share that does not include other potential impacts such as changes in accounting standards or unusual items, earnings or losses from change in the value of the zero-premium exchangeable subordinated notes or Zen securities and the related stocks or the timing effects of mark to market accounting in the company's energy services business. The guidance range also considers such factors that have Enable most recent public forecast and effective tax rates.

Before Scott begins, I would like to mention that this call is being recorded. Information on how to access the replay can be found on our website.

I'd now like to turn the call over to Scott.

Scott Prochazka -- Chief Executive Officer and President

Thank you, David, and good morning, ladies and gentleman. Thank you for joining us today and thank you for your interest in CenterPoint Energy. We mentioned earlier in the year we were thrilled to be hosting the Super Bowl in Houston this year and Minneapolis next year. Little did we know the Astros would chime in with the World Series win between the two.

We're proud of the team and the city and proud to serve Houston.

I will begin on slide 4. This morning we reported Q3 2017 net income of 169 million dollars or 39 cents per diluted share compared with net income of a 179 million dollars or 41 cents per diluted share in the same quarter of last year. On a guidance basis, Q3 2017 adjusted earnings were a 167 million dollars or 38 cents per diluted share compared with adjusted earnings of 177 million dollars or 41 cents per diluted share in the same quarter of last year. Increases resulted from rate relief and customer growth.

These benefits were more than offset by a return to more normal weather, lower equity return, higher depreciation and amortization expense and lower right of way revenue.

While these offsets translated into a lower Q3 earnings versus 2016, they are in line with our plan and we are on track to achieve at or near the high end of our guidance range for 2017. Our businesses have performed well so far this year and we anticipate a strong finish in the Q4.

Turning to slide 5, as you all know, on Friday, August 25, hurricane Harvey made landfall in Texas. In the Houston region, Harvey brought nearly a year's worth of rainfall over a four-day period, over 50 inches of rain in some areas. I would like to thank our employees, many of whom experienced flooding in their homes and/or lost vehicles to high water but remain focused on the needs of our customers in the days and weeks that followed. Their preparation and dedication were crucial to our ability to respond so quickly to our impacted natural gas and electric customers.

CenterPoint natural gas technicians from Arkansas, Louisiana, Oklahoma and adjacent Texas offices assisted their fellow colleagues along the Texas coast. I'd like to thank more than 1500 electric contractors and mutual assistance crews from seven states who helped in our electric recovery efforts. We are also proud to offer assistance. After restoring power here, some of our CenterPoint Electric crews traveled to Florida and for nearly two weeks assisted two utilities in their recovery efforts following Hurricane Irma.

Grid investments made over the last decade produced significant benefits during and after the storm. Distribution automation including devices such as intelligent grid switches allowed us to quickly isolate problems, enabling faster restoration. Smart meters efficiently executed remote orders as well as provided outage information to keep customers informed with specific relevant information. Drones helped us assess damage, efficiently direct crews to accessible work locations and accelerate restoration.

These benefits were realized through years of planning, designing, implementing and ultimately utilizing these grid modernization investments. I would also like to thank the first responders, the cities we serve, community partners and the thousands of volunteers who continue to support the affected communities.

Next, I will cover business highlights starting with Houston Electric on slide 6. Electric transmission and distribution core operating income in the Q3 of 2017 was 229 million dollars compared to 234 million dollars in the same quarter last year. We are down slightly due in large part to weather and reduced equity return in this quarter compared to the Q3 of last year. We continue to see strong growth in our electric service territory.

We added more than 46,000 metered customers since the Q3 of 2016, reflecting 2% customer growth. We believe this level of growth will continue throughout this year and a five-year period.

I'm also pleased to announce that we are ahead of schedule on the construction of the Brazos Valley connection project which includes a 60-mile transmission line. We expect to complete and energize the project in the Q1 of 2018. Rate relief reflecting 42 million dollars of annual increase from the distribution cost recovery factor or DCRF settlement for investments made during 2016 went into effect in September. Additionally, we recently filed for 39 million dollars in transmission cost of service or T-Cost rate recovery.

We anticipate Houston Electric will make another DCRF filing reflecting 2017 investments and April of next year as well as an additional T-Cost filing after the completion of the Brazos Valley Connection Project. For a complete overview of Houston Electric's year-to-date regulatory developments, please see slide 22.

Turning now to slide 7. We continue to believe capital requirements to support this business will remain robust. Capital needs for growth, reliability and [Inaudible] investment are likely to create an upward shift to our current five-year capital plan. Earlier this year we proposed a Freeport Texas Transmission Project totaling 250 million dollars in capital.

This project is incremental to our current planned capital expenditures. It is also indicative of continued growth occurring throughout the industrial sector.

The greater Houston partnership is forecasting that Houston's gross metro product will outpace the national GDP over the next 20 years by 4 percentage points. In addition to industrial growth, residential customer growth is expected to continue at 2%. We are in the process of refining our capital requirements and will provide an updated capital plan in our 2017 Form 10K.

Turning to slide eight. Natural gas distribution reported operating income of 19 million dollars compared to 22 million dollars in the same quarter last year. The slight decline was primarily due to timing associated with rate stabilization. We experienced solid customer growth of approximately 1% in this business with the addition of nearly 38,000 customers since the Q3 of 2016 to benefit from annual recovery mechanisms across most of our service territories.

In Minnesota, interim rates went into effect on October 1st following a rate filing made in that jurisdiction in August. In Arkansas, our first formula rate plan or FRP filing was approved and new rates went into affect there on October 2nd. For a complete listing of regulatory filings in our gas distribution business, please see slides 23 and 24.

Similar to our electric business, we anticipate an upward shift in capital investment for gas distribution for our upcoming five-year plan. These investments will help keep pace with industry norms and regulatory requirements. Safety and system integrity will continue to drive capital spending. Similar to our electric business, an updated gas distribution five-year capital plan will be provided in our 2017 Form 10K.

Turning to slide 9. Energy services operating income was 5 million dollars in the Q3 of 2017 compared to 7 million dollars in the same quarter of last year, excluding a mark to market gain of 2 million dollars and a loss of 2 million dollars respectively. Operating income for the quarter included 2 million dollars of expenses related to the acquisition and integration of Atmos Energy Marketing or AEM. As anticipated, the AEM acquisition has been modestly accretive year to date and we see volume growth opportunities in this segment.

Turning to midstream investments, Enable performed well this quarter. Slide 10 shows some of the highlights from their Q3 earnings call on November 1st. Midstream Investments contributed 10 cents per diluted share in the Q3 of 2017 compared to 10 cents per diluted share in the same period last year. Q3 marked the partnership's highest quarter for natural gas gathering volumes, crude oil gathering volumes, and interstate transportation average deliveries.

Enabled continues to see a strong level of activity on their system with 40 rigs drilling wells dedicated to their gathering and processing systems. We continue to believe Enable is well positioned for success.

Turning to slide 11. Given our performance to date and our views for the balance of the year, we anticipate achieving at or near the high end of our guidance range for 2017. We also continue to expect year-over-year earnings growth for 2018 to be at the upper end of our 4% to 6% range. The status of our midstream investment ownership review is covered on slide 12.

We are at late stage discussions regarding our interest in Enable. We will not comment on the status of those activities, nor can we represent that we will reach an agreement. Should our discussions not come to fruition, then we will look for opportunities to constructively sell units in the public market as conditions allow. Proceeds from unit sales will serve as a source of capital for growing core energy delivery business.

Let me conclude by reiterating that we remain focused on meeting the energy delivery needs of our growing customer base through prudent investment and timely recovery. We are performing well year to date and expect a strong finish to the year. I will now turn the call over to Bill.

Bill Rogers -- Chief Financial Officer and Executive Vice President

Thank you, Scott. I will start with a review of the financial impact of Hurricane Harvey on slide 14. As noted, Harvey was a balance sheet event, not an income statement event for our company. Our current estimate that the restoration effort for Houston Electric will cost between 110 and 120 million dollars.

We expect a third of that amount will likely be covered through claims under our property insurance programs. Remaining costs will be recovered either through capital mechanisms or through regulatory assets and our next general rate case proceeding. We're estimating we will have 25 to 30 million dollars of restoration cost for gas distribution. We anticipate that the majority of those costs will be recovered by claims under our property insurance programs.

Next, I will provide a quarter to quarter operating income walk for our Electric EMB and natural gas distribution segments followed by EPS drivers for utility operations and then our consolidated business on a guidance basis. I will begin with Houston Electric on slide 15. Rate relief and continued 2% customer growth translated into a 12-million-dollar and 9-million-dollar favorable variance respectively for the quarter. This revenue growth was more than offset by return to more normal weather, lower equity return and lower right of way revenue.

Usage declined on a quarter to quarter basis resulting in a 12-million-dollar negative variance. Equity return was lower by 9 million and miscellaneous revenue, primarily right of way, was lower by 7 million dollars. Core operating income is shown on the chart to provide a better view of the growth excluding the change in equity return. On that basis, Houston Electric's core operating income increased from 212 to 216 million dollars, a 4-million-dollar improvement on a period-to-period basis despite reductions due to weather.

Turning to slide 16. Natural gas distribution operating income for Q3 was 19 million dollars compared to 22 million dollars for the same period last year. The business benefited from 5 million dollars of rate relief and 2 million dollars from customer growth. Usage was down 4 million dollars due primarily to the timing of revenue recognition associated with the use of decoupling normalization adjustments.

The net increase in revenues in gas distribution were more than offset by 6-million-dollar increases in depreciation, amortization and other taxes.

Excluding mark to market adjustments, operating income for our energy services business declined from 7 million dollars in Q3 of 2016 to 5 million dollars for Q3 of 2017. Higher operating costs were primarily result of 2 million dollars of expenses related to the acquisition and integration of Atmos Energy Marketing.

Our quarter-to-quarter utility operations guidance basis, EPS walk, begins on slide 17. The decline in the EPS and utility operations from 31 cents in 2016 to 28 cents in 2017 is a result of previously discussed lower operating income, a decrease in equity return and a collection of other items which include income taxes and other income. Our consolidated guidance EPS comparison is on slide 18. Earnings declined from 41 cents in Q3 2016 to 38 cents in Q3 2017 as a result of the decrease in EPS contributions from utility operations.

We anticipate strong performance for the remainder of 2017 with customer growth, rate relief, energy services and our midstream segment all contributing to year-on-year growth.

Turning to slide 19. We continue to expect 1.5 billion in capital investment in 2017. Our financial strength is evidenced by recent positive rating agency action. In September Fitch upgraded [Inaudible] secured notes to a rating of A+.

In addition, both Fitch and Standard & Poor's revised their outlook to positive for CNP and CERC. We value a strong balance sheet and we're pleased to see the upgrade.

As previously discussed, we are not forecasting a need for equity in either 2017 or 2018. With respect to our effective income tax rate, although the Q3 increased to 37%, we continue to anticipate a full year 2017 tax rate of 36%. On slide 20 we summarize year to date performance. In short, we have 7 cents of improvement from utility operations and 7 cents of improvement from midstream investments versus this time last year.

This strong year to date performance sets us up well to achieve our full year 2017 financial objectives. As Scott commented earlier, we anticipate we will be at or near the high end of our $1.25 to $1.33 guidance range for 2017.

Finally, we recognize that our federal legislators are hard at work at tax reform and yesterday provided their reconciliation bill under the Tax Cuts and Jobs Act. Although, it's premature to take a view on eventual tax reform if at all, we have provided a review of CenterPoint's tax position in the appendix materials in the 'Investor' slides that accompany this call.

I will now turn the call back over to David.

David Mordy -- Director, Investor Relations

Thank you, Bill. We will now open the call to questions. In the interest of time, I will ask you to limit yourself to one question and a follow-up.

Questions and Answers:

Operator

At this time we will begin taking questions. If you wish to ask a question, please press star 1 on your Touchtone keypad now. to withdraw your question, press the pound key. The company requests that when asking their question, callers pick up their telephone handsets. Thank you. The first question will come from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Josephine Wilson -- Bank of America -- Analyst

Hi, this is Josephine taking your question today. I was wondering if ... I know that you guys are a cash taxpayer. If you could maybe talk a little bit about how you're thinking about absorbing some of this tax appetite. Are there any strategies that you guys are considering?

Scott Prochazka -- Chief Executive Officer and President

Bill, can you take this?

Bill Rogers -- Chief Financial Officer and Executive Vice President

Certainly. You are correct in that we are a cash taxpayer at CenterPoint and like other companies, we do look for opportunities to accelerated deductions and defer revenue recognition.

Josephine Wilson -- Bank of America -- Analyst

Are there any strategies that you've thought about beyond of course the tax reform, maybe like looking at tax equity?

Bill Rogers -- Chief Financial Officer and Executive Vice President

I don't think we would comment on this time with respect to strategies that we have and we will certainly continue to take a look at proposals as a tax reform in Congress.

Josephine Wilson -- Bank of America -- Analyst

Okay, of course. Thank you, Bill.

Operator

The next question will come from Greg Gordon with Evercore ISI. Please go ahead.

Greg Gordon -- Evercore ISI -- Analyst

Thanks. Good morning, guys.

Scott Prochazka -- Chief Executive Officer and President

Good morning, Greg.

Greg Gordon -- Evercore ISI -- Analyst

So, just a follow-up on that question then I've got one follow-up. I understand you have a negative basis on Enable such that if you were to sell it, you'd have a large tax hit to manage but from an ongoing basis, my understanding is, and please correct me if I'm wrong, that your actual effective cash tax rate now on an ongoing basis is quite low. Isn't it around 5%? And if so, how do you see that trending through the rest of the decade?

Scott Prochazka -- Chief Executive Officer and President

Bill, take this as well.

Bill Rogers -- Chief Financial Officer and Executive Vice President

Sure. Greg, you're correct in that last year, 2016, our cash tax was mid-single digits at 5%. This year it's approaching closer to 20%.

Greg Gordon -- Evercore ISI -- Analyst

Gotcha. And can you give us any sense of our weather you'd be willing to forecast what that would look like prospectively or no?

Scott Prochazka -- Chief Executive Officer and President

I think over the longer course of time it will approach our accrual rate which today is 36%.

Greg Gordon -- Evercore ISI -- Analyst

Great, thanks. Follow-up question. When it comes to the earnings growth targets that you lay out, the guidance range, what is the convention you use for the underlying assumption with regard to enable contribution? Are you still assuming that for purposes of articulating that range that enables a flat contributor prospectively?

Bill Rogers -- Chief Financial Officer and Executive Vice President

Greg, if you're asking about the 2017, the answer to that is yes. We just take their contributions or their projections and roll that into our numbers.

Greg Gordon -- Evercore ISI -- Analyst

Right, but when you give a wealthier longer-term earnings guidance aspiration...

Scott Prochazka -- Chief Executive Officer and President

So, what we've done is we've given a view as to what we believe 2018 would look like and we incorporate what Enable has articulated in terms of their views of 2018 relative to 2017 which they provided a couple of days ago.

Greg Gordon -- Evercore ISI -- Analyst

Okay. So, they're public pronouncements.

Scott Prochazka -- Chief Executive Officer and President

Yeah, they've given some indication of income for a net income range for 2018.

Greg Gordon -- Evercore ISI -- Analyst

Okay. No, I just wanted to be clear that it wasn't internal forecast that was the public forecast.

Scott Prochazka -- Chief Executive Officer and President

Yeah, we'll use their forecast for 2018.

Greg Gordon -- Evercore ISI -- Analyst

Thank you very much. have a great day.

Scott Prochazka -- Chief Executive Officer and President

Yup.

Operator

The next question will come from Neel Mitra with Tudor Pickering

Neel Mitra -- Tudor Pickering -- Analyst

Hi, good morning.

Scott Prochazka -- Chief Executive Officer and President

Good morning, Neel.

Neel Mitra -- Tudor Pickering -- Analyst

First question was in regards to what you project your earned ROE and at Houston Electric is it going to be this year? Just with the moving parts with maybe moving some of the O&M to regulatory asset given Hurricane Harvey and whether you'd be eligible to file the DCRF this year.

Scott Prochazka -- Chief Executive Officer and President

Neel, since, as Bill indicated, the financial effects of the storm are primarily balance sheet driven, we anticipate that we will be able to file the DCRF or said another way that our yearend return will be below our allowed return of 10.

Neel Mitra -- Tudor Pickering -- Analyst

Okay, great. And then second question. Now that you have Atmos and you have a lot more throughput through the competitive businesses, how do you see that kind of going forward relative to the qualitative commentary that you've given around your growth rate going forward?

Scott Prochazka -- Chief Executive Officer and President

So, we see this as a great complement to our utility business. We see this business growing as our other core businesses are growing. Today, it's kind of mid-single digits in terms of percent earnings contribution to our overall mix. We saw that staying in about the same place.

In other words, we see this business growing as our utilities are growing.

Neel Mitra -- Tudor Pickering -- Analyst

Okay, and how do you view incremental acquisitions going forward? Is it a business that you want to have as a higher portion of your overall mix or is it a business [Inaudible]28:50] that's want to grow organically at this point with the segments that you've already acquired or have under your hood.

Scott Prochazka -- Chief Executive Officer and President

We're very pleased with the additions we made. It certainly created for some nice critical mass for this business. We've got some work to do to fully absorb and integrate this but we don't comment on M&A but we look for opportunities that are value creating to grow each of our businesses.

Neel Mitra -- Tudor Pickering -- Analyst

Great. Can I ask just one last quick question? Would it be fair to say that you won't comment on the Enable process unless there's something definitive going forward or is there going to be another kind of deadline or milestone we should look for to get a progress report?

Scott Prochazka -- Chief Executive Officer and President

No, this has been admittedly a long process. So, we think, as we come to the end of this, we will communicate the outcome irrespective of what it is.

Neel Mitra -- Tudor Pickering -- Analyst

Okay, great. Thank you.

Scott Prochazka -- Chief Executive Officer and President

Yup.

Operator

The next question will come from Abe Azar with Deutsche Bank.

Abe Azar -- Deutsche Bank -- Analyst

Thank you. Good morning.

Scott Prochazka -- Chief Executive Officer and President

Good morning, Abe.

Abe Azar -- Deutsche Bank -- Analyst

If you do a transaction on Enable, you continue to believe it will be for another stock that you'll sell over time and not cash?

Bill Rogers -- Chief Financial Officer and Executive Vice President

Well, think the best way to answer that is for a cash transaction to work, it would have to be at a price that will allow us to accomplish all of our objectives. So, I think we said on an earlier call, the most likely outcome would be something that is not a cash transaction, a cash sale transaction.

Abe Azar -- Deutsche Bank -- Analyst

Okay. So, no change to that.

Bill Rogers -- Chief Financial Officer and Executive Vice President

No.

Abe Azar -- Deutsche Bank -- Analyst

And then if you did not reach a transaction we noticed a slight change in your language on the slide from you're going to pursue opportunities to sell Enable in the public market on the Q2 slides and now a little bit more [Inaudible] evaluate the sale of the units. Is there anything to read into that or is that just some ...

Scott Prochazka -- Chief Executive Officer and President

No, there's nothing to read into that. We're trying to communicate the same messages we did last quarter.

Abe Azar -- Deutsche Bank -- Analyst

Okay. And then for the Minnesota rate case, do you book revenues as you receive them for the internal rate increase or is there a reserve against that?

Scott Prochazka -- Chief Executive Officer and President

We do book revenues as we receive them starting when the [Inaudible] effect on October 1st.

Abe Azar -- Deutsche Bank -- Analyst

Thank you.

Scott Prochazka -- Chief Executive Officer and President

Yup.

Operator

The next question is from Ali Agha with SunTrust.

Scott Prochazka -- Chief Executive Officer and President

Thank you. Good morning.

Scott Prochazka -- Chief Executive Officer and President

Good morning, Ali.

Ali Agha -- SunTrust -- Analyst

Good morning. Scott and Bill, I wanted to just be clear, the 2018 sort of in negative range, the high end of the 406. Does that assume that Enable stays [Inaudible] like no transaction, just looking at the business as it is right now?

Scott Prochazka -- Chief Executive Officer and President

Yes, that is correct.

Ali Agha -- SunTrust -- Analyst

Okay. Just to be clear on that because a few weeks ago you guys had put some slides out that had basically indicated that based on known and measurable [Inaudible] already out there, utility earnings would be up by 10 cents year over year. So, mathematically that would imply that you could likely exceed the 4% to 6%. Is that still the case assuming that there's no change to Enable?

Bill Rogers -- Chief Financial Officer and Executive Vice President

Ali, good morning. It's Bill. I think you're referring to some slides we put out in September at an investor conference where, as you put it, we had some [Inaudible][3236] measurable events which included growth in our electric business, rate relief in our electric business as approved and as filed, flat for the gas business and then increases in energy services as well as equity return. And I think you're right to say that that did not include any additional rate relief.

Nor did it incorporate the earnings forecast that Enable's put out Wednesday of this week, all of which to say is those are the items that give us comfort to saying we will be at the higher end of that 4% to 6% percent guidance.

Ali Agha -- SunTrust -- Analyst

Okay. And also just to clarify, so if there is a transaction for Enable either sale of stock or you start to sell down the units on your own. In the very sort of near-term as that happens, how should we think about the earnings impact from that because the earnings would go away from Enable but the proceeds coming in will take awhile to be reinvested. So, from a timing perspective at least it should be assumed that if there is a transaction, there is some at least short-term downward impact to the earnings power?

Scott Prochazka -- Chief Executive Officer and President

Ali, I'll start with this. Bill may want to add a little color to it. I think the way I would think about this is our objective, as we said early on, was if we did anything, it would be in the context of keeping our investors whole or achieving our financial objectives. So, our objective would be through whatever we do, we would still continue to target our growth objectives as we laid them out for you.

Ali Agha -- SunTrust -- Analyst

And also the dividend as well.

Scott Prochazka -- Chief Executive Officer and President

That is the target, yes.

Ali Agha -- SunTrust -- Analyst

Okay, thank you.

Scott Prochazka -- Chief Executive Officer and President

Yup.

Operator

The next question will come from Shahriar Pourreza with the Guggenheim Partners.

Shahriar Pourreza -- Guggenheim -- Analyst

Good morning, guys.

Scott Prochazka -- Chief Executive Officer and President

Morning, Shahriar.

Shahriar Pourreza -- Guggenheim -- Analyst

Most of my questions were answered at this point but just on the capital program that you discussed today and appreciate we have to wait for the K to come out in order to get it but on the electric side, the higher capex potential, is that predominantly the Freeport project or do you envision sort of the reliability and resiliency stuff you discussed this morning to be incremental to that?

Bill Rogers -- Chief Financial Officer and Executive Vice President

So, Freeport is clearly a large component of that. We hope to get support from [Inaudible] by the end of the year and assuming that happens, then we will enter the process of the PUC early next year but in addition to that, we are thinking about other opportunities associated with growth needs in the area and reliability and hardening investments as well in the area.

Shahriar Pourreza -- Guggenheim -- Analyst

Got it. You guys had never had trouble growing, right? So, when you sort of think about the higher capital program on the [Inaudible] side, do you envision sort of maintaining that top end of that 4% to 6% beyond 2018 with what you know now?

Scott Prochazka -- Chief Executive Officer and President

We haven't given any indications beyond 2018 at this point but we are preparing to share more of our views in the outer years at our yearend call. So, we're developing that thinking. Certainly, the need for capital spending help support a good growth rate but we will be better prepared to communicate what we think that looks like out into the future at our yearend call.

Shahriar Pourreza -- Guggenheim -- Analyst

Got it. And just lastly on Enable, obviously, OG&E still has their proposal out there. They responded on, I think, August 14th. So, whatever outcome in this process, just remind us the offer that you accept has to exceed what OG&E is sort of out there with and what's the deadline for you to respond?

David Mordy -- Director, Investor Relations

Right. Shahriar, it's Bill. You're right. OG&E has a right of first offer opportunity and they exercised that right in August, as you said. If we accept another offer, that has to be completed within 180 days and that offer does have to be higher by 105% or greater than OG&E's offer.

Shahriar Pourreza -- Guggenheim -- Analyst

Okay, got it. 180 days puts you somewhere around January 11th?

Bill Rogers -- Chief Financial Officer and Executive Vice President

I think that's fair.

Shahriar Pourreza -- Guggenheim -- Analyst

Okay, good. Have a good morning, guys. Thanks again.

Bill Rogers -- Chief Financial Officer and Executive Vice President

Thank you.

Scott Prochazka -- Chief Executive Officer and President

Thank you.

Operator

Please remember if you wish to ask a question to press star 1 on your telephone keypad now. Thank you for corporation. The next question will come from Charles Fishman with Morningstar.

Charles Fishman -- Morningstar -- Analyst

Good morning. Just two quick ones. In addition to the capex, you'll provide your projection of rate base for electric [Inaudible] as well as natural gas with the Q4 call?

Scott Prochazka -- Chief Executive Officer and President

Charles, we've done some of that in the past. We haven't put together our projections yet but we'll contemplate providing disclosure on that as well as what we think our capital spending is.

Charles Fishman -- Morningstar -- Analyst

Okay. And then second real quick question. You had 7 million less right away revenue. Bill, do you have a year to date total on it, what we're down to, as that goes lower?

Bill Rogers -- Chief Financial Officer and Executive Vice President

I think where we're looking here real quick to see if we have that number available for you.

Charles Fishman -- Morningstar -- Analyst

If not, I'll get the DEI from you.

Bill Rogers -- Chief Financial Officer and Executive Vice President

We owe you an answer.

Charles Fishman -- Morningstar -- Analyst

Okay, that'll work. We'll see you next week.

Bill Rogers -- Chief Financial Officer and Executive Vice President

Okay.

Operator

The next question will come from Steve Fleishman with Wolfe Research.

Steve Fleishman -- Wolfe Research -- Analyst

Hi. Good morning.

Scott Prochazka -- Chief Executive Officer and President

Good morning, Steve.

Steve Fleishman -- Wolfe Research -- Analyst

So, just on Enable, in the scenario where you do not have a transaction port, is there any consideration to not kind of looking to monetize it in the market because, I'm sure you're aware, it's kind of bit of an overwhelming overhang on Enable stock to have that out there. So, I'm just kind of curious is there still some openness to thinking about that.

Scott Prochazka -- Chief Executive Officer and President

Steve, I'll back to what our initial objective was and that was to reduce our exposure to commodity variability by our investment in midstream. So, we would still continue to look for opportunities to reduce our exposure in that space. That said, I mean, you bring up very valid points about the market conditions and, as we've said, in the past as we considered the sale of units, we had to be extremely mindful of what is actually going on in respect to the markets.

Steve Fleishman -- Wolfe Research -- Analyst

Okay. And then my other question, I guess, in terms of the capital plan updates that you're going to give early next year, is there any way that you could maybe give some sense of how much higher they might go? Is this like 50% higher, is this just a little higher or any sense of scale?

Scott Prochazka -- Chief Executive Officer and President

Well, it's not going to go 50% higher, I can tell you that. It's not that kind of adjustment but I'd say it's not insignificant. I mean, we've mentioned this because the opportunities we're looking at are significant enough to disclose and mention but we just don't have the plan yet finalized. So, I'd characterize it as meaningful but not a doubling of our current capital plan.

Steve Fleishman -- Wolfe Research -- Analyst

Okay, thank you very much.

Operator

Our final question will come from Michael Lapides with Goldman Sachs.

Michael Lapides -- Goldman Sachs -- Analyst

Yeah. Hey, guys. Actually, couple of questions. First a follow-up on the capital plan following up to Steve.

Do you see the change being on a percentage basis higher on the electric side or the gas side?

Scott Prochazka -- Chief Executive Officer and President

Michael, we're actually looking at changes to both of the businesses. So, I don't know what the percentage numbers would be like but I would say they're meaningful for both segments.

Michael Lapides -- Goldman Sachs -- Analyst

And because you gave out a multiyear capex plan, is it more ratable throughout or is it more backend loaded when you're thinking about it, meaning kind of lumpier and more in the last two years than maybe in the first couple of years?

Bill Rogers -- Chief Financial Officer and Executive Vice President

Michael, I would say that both gas and electric are biased to go higher by similar amount. Admittedly, gas is smaller percentage of the total capital program. The gas business are more programs as we think about pipe replacement. So, that's a more localized capital investment.

The electric business and our visibility of that tends to be frontend loaded and to the extent that we have large transmission projects such as Brazos Valley or Freeport, we have visibility in that. So, they get biased on the frontend of the electric business because we can see the growth in the Houston Metropolitan area.

Michael Lapides -- Goldman Sachs -- Analyst

And do you worry about like in Houston you all have been very good about earning, authorized earning close to authorized, if needed the DCRF but are you worried that incremental capital and staying out of rate cases will eventually push on to returns to a level that's kind of beneath what you've been able to generate for the large couple of years there?

Scott Prochazka -- Chief Executive Officer and President

Well, certainly our mechanisms help us minimize regulatory lag but you're correct to say with higher capital on the margin, that regulatory lag increases. It's not something that we worry about at this point in time. I think it's very manageable.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Okay, guys, thank you very much. Much appreciated.

Scott Prochazka -- Chief Executive Officer and President

Thank you, Mike.

David Mordy -- Director, Investor Relations

I believe Michael's is the final question. Thank you, everyone, for your interest in CenterPoint Energy. We will now conclude our Q3 2017 earnings call. Have a great day.

Operator

This concludes CenterPoint Energy's Q3 2017 earnings conference call. Thank you for your participation. You may now disconnect.

Duration: 49 minutes

Call Participants:

David Mordy -- Director, Investor Relations

Scott Prochazka -- Chief Executive Officer and Chairman

Bill Rogers -- Chief Financial Officer and Executive Vice President

Josephine Wilson -- Bank of America -- Analyst

Greg Gordon -- Evercore ISI -- Analyst

Neel Mitra -- Tudor Pickering -- Analyst

Abe Azar -- Deutsche Bank -- Analyst

Ali Agha -- SunTrust -- Analyst

Shahriar Pourreza -- Guggenheim -- Analyst

Charles Fishman -- Morningstar -- Analyst

Steve Fleishman -- Wolfe Research -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

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