<PAGE>

                                                                    EXHIBIT 10.1

                            CENTERPOINT ENERGY, INC.
                            LONG-TERM INCENTIVE PLAN

                    NONQUALIFIED STOCK OPTION AWARD AGREEMENT

            Pursuant to this Award Agreement, CENTERPOINT ENERGY, INC. (the
"Company") hereby grants to [NAME] (the "Optionee"), an employee of the Company,
on [GRANT DATE] (the "Grant Date"), a right (the "Option") to purchase from the
Company [NUMBER] shares of Common Stock of the Company at $[OPTION STRIKE PRICE]
per share (the "Exercise Price"), pursuant to the Long-Term Incentive Plan of
CenterPoint Energy, Inc. (the "Plan"), with such number of shares and such price
per share being subject to adjustment as provided in Section 14 of the Plan, and
further subject to the following terms and conditions:

            1. RELATIONSHIP TO THE PLAN; DEFINITIONS.

            This Option is subject to all of the terms, conditions and
provisions of the Plan and administrative interpretations thereunder, if any,
which have been adopted by the Committee thereunder and are in effect on the
date hereof. Except as defined herein, capitalized terms shall have the same
meanings ascribed to them under the Plan. To the extent that any provision of
this Award Agreement conflicts with the express terms of the Plan, it is hereby
acknowledged and agreed that the terms of the Plan shall control and, if
necessary, the applicable provisions of this Award Agreement shall be hereby
deemed amended so as to carry out the purpose and intent of the Plan. References
to the Optionee herein also include the heirs or other legal representatives of
the Optionee. For purposes of this Award Agreement:

            "DISABILITY" means a physical or mental impairment of sufficient
      severity such that the Optionee is both eligible for and in receipt of
      benefits under the long-term disability provisions of the Company's
      benefit plans.

            "EMPLOYMENT" means employment with the Company or any of its
      Subsidiaries.

            "OPTION PERIOD" means the period commencing upon the Optionee's
      receipt of this Award Agreement and ending on the date on which the Option
      expires pursuant to Section 3(a).

            "OPTION SHARES" means the shares of Common Stock covered by this
      Award Agreement.

                                       1

<PAGE>

            "RETIREMENT"  means termination of Employment on or after attainment
      of age 55 and with at least five years of service with the Company.

            2. EXERCISE AND VESTING SCHEDULE.

            (a) This Option shall become exercisable in three cumulative annual
      installments, as follows:

                  (i) [NUMBER] of the Option Shares shall become exercisable on
            [DATE],

                  (ii) an additional [NUMBER] of the Option Shares shall become
            exercisable on [DATE], and

                  (iii) the remaining [NUMBER] Option Shares shall become
            exercisable on [DATE];

      provided, however, that the Optionee must be in continuous Employment
      through the date of exercisability of each installment in order for the
      Option to become exercisable with respect to additional shares of Common
      Stock on such date.

            (b) This Option shall become fully exercisable, irrespective of the
      limitations set forth in subparagraph (a) above, upon termination of
      Employment of the Optionee due to death, Disability, or Retirement,
      provided that prior to such termination the Optionee had been in
      continuous Employment.

            3. EXPIRATION OF OPTION.

            (a) Expiration of Option Period. The Option Period shall expire on
      [10TH ANNIVERSARY OF GRANT DATE].

            (b) Termination of Employment Due to Death or Disability. Upon
      termination of Employment of the Optionee due to death or Disability, the
      Option shall expire upon the earlier of one year following the date of
      termination of Employment or expiration of the Option Period.

            (c) Termination of Employment Due to Retirement. Upon termination of
      Employment of the Optionee because of Retirement, the Option shall expire
      upon the earlier of three years following the date of termination of
      Employment or expiration of the Option Period.

            (d) Termination of Employment by the Company or Due to Resignation.
      Upon termination of Employment of the Optionee by the Company or any of
      its Subsidiaries for any reason or due to voluntary

                                       2

<PAGE>

      resignation by the Optionee, the portion of the Option not exercisable
      shall expire immediately, and the portion of the Option exercisable upon
      termination shall expire upon the earlier of 90 days following the date of
      termination of Employment or the expiration of the Option Period.

            (e) Death Following Termination of Employment. Notwithstanding
      anything herein to the contrary, in the event the Optionee dies following
      termination of Employment but prior to the expiration of the Option
      pursuant to this Section 3, the portion of the Option exercisable upon the
      Optionee's death shall expire one year following the date of the
      Optionee's death or, if earlier, upon the expiration of the Option Period.

            4. CASH PAYMENT UPON A CHANGE OF CONTROL. Notwithstanding anything
herein to the contrary, upon or immediately prior to the occurrence of a Change
of Control, the Option, unless previously expired pursuant to Section 3, shall
be settled by a cash payment to the Optionee equal to the difference between (i)
the Fair Market Value per share of Common Stock on the date immediately
preceding the date on which the Change of Control occurs and (ii) the Exercise
Price of the Option, multiplied by the total number of unexercised Option
Shares, regardless of whether such Option Shares have become exercisable under
Section 2. Such cash payment shall satisfy the rights of the Optionee and the
obligations of the Company under this Award Agreement in full.

            5. EXERCISE OF OPTION. Subject to the limitations set forth herein
and in the Plan, this Option may be exercised pursuant to the procedures set
forth by the Committee. Unless otherwise permitted by the Committee, upon
exercise the Optionee shall provide to the Company or its designated
representative, cash, check or money order payable to the Company equal to the
full amount of the purchase price for any shares of Common Stock being acquired
or, at the election of the Optionee, Common Stock held by such Optionee for at
least six months equal in value to the full amount of the purchase price (or any
combination of cash, check, money order or such Common Stock). For purposes of
determining the amount, if any, of the purchase price satisfied by payment in
Common Stock, such Common Stock shall be valued at its Fair Market Value on the
date of exercise. Any Common Stock delivered in satisfaction of all or a portion
of the purchase price shall be appropriately endorsed for transfer and
assignment to the Company. The Company shall have the right to withhold
applicable taxes from compensation otherwise payable to the Optionee at the time
of exercise pursuant to Section 11 of the Plan.

            6. NOTICES. For purposes of this Award Agreement, notices to the
Company shall be deemed to have been duly given upon receipt of written notice
by the corporate secretary of the Company at 1111 Louisiana, Houston, Texas
77002, or to such other address as the Company may furnish to the Optionee.
Notice of exercise of the Option must be made to the person and in the manner
set forth by the Committee.

                                       3

<PAGE>

            Notices to the Optionee shall be deemed effectively delivered or
given upon personal, electronic, or postal delivery of written notice to the
Optionee, the place of Employment of the Optionee, the address on record for the
Optionee at the human resources department of the Company, or such other address
as the Optionee hereafter designates by written notice to the Company.

            7. SHAREHOLDER RIGHTS. The Optionee shall have no rights of a
shareholder with respect to shares of Common Stock subject to the Option unless
and until such time as the Option has been exercised and vested and ownership of
such shares of Common Stock has been transferred to the Optionee.

            8. SUCCESSORS AND ASSIGNS. This Award Agreement shall bind and inure
to the benefit of and be enforceable by the Optionee, the Company and their
respective permitted successors and assigns except as expressly prohibited
herein and in the Plan. Notwithstanding anything herein or in the Plan to the
contrary, all or a portion of the Option is transferable by Optionee to
Immediate Family Members, Immediate Family Member Trusts, and Immediate Family
Member Partnerships pursuant to Section 13 of the Plan.

            9. NO EMPLOYMENT GUARANTEED. Nothing in this Award Agreement shall
give the Optionee any rights to (or impose any obligations for) continued
Employment by the Company or any Subsidiary thereof or successor thereto, nor
shall it give such entities any rights (or impose any obligations) with respect
to continued performance of duties by the Optionee.

            10. MODIFICATION OF AGREEMENT. Any modification of this Award
Agreement shall be binding only if evidenced in writing and signed by an
authorized representative of the Company.

                                       4