Texas deregulated its electricity markets under a 1999 law that allowed former monopolies to recoup costs from the transition, including the lost value of power plants, environmental costs and some power purchase costs.

In its proposed order, the PUC said CenterPoint had underestimated the value of its stake in its power generation arm Texas Genco Holding Inc. (TGN.N: Quote, Profile, Research) by about $500 million, putting the unit's value at $2.9 billion.

CenterPoint agreed in July to sell its stake in Texas Genco to private equity group GC Power for $3.65 billion.

Under an alternate scenario that the PUC could use in the event of an appeal, a different method of calculating the value of Texas Genco could cut the amount CenterPoint would receive to $1.97 billion.

The PUC also indicated CenterPoint had overestimated the amount of interest it was owed by nearly $420 million.

CenterPoint, which distributes energy in the Houston area, expects to challenge the proposals when they are formally approved by the commission, which is expected in about a week.

"We will be filing a motion for a rehearing," CenterPoint spokesman Floyd LeBlanc said.

The company will, however, move to securitize the cost recovery through a bond issue, despite the likely appeal, LeBlanc said.

That bond will be paid off by a surcharge to retail companies that sell electricity in the region that is likely to add about $3 to each household bill per month in CenterPoint's region for the next 15 years, the company said. The additional charges would be passed along to the retail companies that sell electricity in the region.

Reliant Energy Inc. (RRI.N: Quote, Profile, Research) , the largest power retailer in Houston, will likely seek to pass the costs along to its customers, although that was not expected until at least February, a company spokeswoman said.

Dallas-based TXU (TXU.N: Quote, Profile, Research) settled its cost recovery case last year and AEP (AEP.N: Quote, Profile, Research) is expected to file for its settlement next year. (Additional reporting by Hilary Hylton in Austin)