Washington, D.C. 20549
1-2198 | | DTE Electric Company (a Michigan corporation)
One Energy Plaza
Detroit, Michigan 48226-1279
313-235-4000
| | | | | | | | | | Michigan | | 38-0478650 | | (State or other jurisdiction of incorporation or organization) | | (I.R.S Employer Identification No.) |
Registrants address of principal executive offices: One Energy Plaza, Detroit, Michigan 48226-1279 Registrants telephone number, including area code: (313) 235-4000 Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | | | | | | | | | Registrant | | Title of Each Class | | Trading Symbol(s) | | Name of Exchange on which Registered | DTE Energy Company
(DTE Energy) | | Common stock, without par value | | DTE | | New York Stock Exchange | | | | | | Registrant | | Title of Each Class | | Name of Exchange on which Registered | DTE Energy Company (DTE Energy) | | Common stock, without par value | | New York Stock Exchange | | | | | | DTE Energy | | 2012 Series C 5.25% Junior Subordinated Debentures due 2062 | | New York Stock Exchange | | | | | | DTE Energy | | 2016 Series B 5.375% Junior Subordinated Debentures due 2076 | | DTJ | | New York Stock Exchange | | | | | | | | | DTE Energy | | 2016 Series F 6.00% Junior Subordinated Debentures due 2076 | | DTY | | New York Stock Exchange | | | | | | | | | DTE Energy | | 2017 Series E 5.25% Junior Subordinated Debentures due 2077 | | DTW | | New York Stock Exchange | | | | | | | | | DTE Energy | | 2019 6.25% Corporate Units | | DTP | | New York Stock Exchange | | | | | | | | | DTE Energy | | 2020 Series G 4.375% Junior Subordinated Debentures due 2080 | | DTB | | New York Stock Exchange | | | | | | | | DTE Energy | | 6.50% Corporate Units | | New York Stock Exchange | | | | | | DTE Electric Company (DTE
(DTE Electric) | | None | | | | None |
Securities registered pursuant to Section 12(g) of the Act: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | None | | DTE Electric | None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yesx | ☒ | Noo | ☐ | | DTE Electric | Yesx | ☒ | Noo | ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yeso | ☐ | Nox | ☒ | | DTE Electric | Yeso | ☐ | Nox | ☒ |
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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yesx | ☒ | Noo | ☐ | | DTE Electric | Yesx | ☒ | Noo | ☐ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yesx | ☒ | Noo | ☐ | | DTE Electric | Yesx | ☒ | Noo | ☐ |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | | | DTE Energy | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | | ☒ | ☐ | ☐ | ☐ | ☐ | | | | | | | DTE EnergyElectric | Large accelerated filerx | Accelerated filero | Non-accelerated filero | Smaller reporting companyo | Emerging growth companyo | | ☐ | ☐ | (Do not check if a smaller reporting company)☒ | ☐ | | | | | | | | DTE Electric | Large accelerated filer o
| Accelerated filer o
| Non-accelerated filer x
| Smaller reporting company o
| Emerging growth company o
| | | | (Do not check if a smaller reporting company) | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yes | ☒ | No | ☐ | | DTE Electric | Yes | ☐ | No | ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | Yeso | ☐ | Nox | ☒ | | DTE Electric | Yeso | ☐ | Nox | ☒ |
On June 30, 2017,2020, the aggregate market value of DTE Energy's voting and non voting common equity held by non-affiliates was approximately $18.7$20.5 billion (based on the New York Stock Exchange closing price on such date). Number of shares of Common Stock outstanding at January 31, 2018: | | | | | | | | | | | | | | | | Registrant | | Description | | Shares | | DTE Energy | | Common Stock, without par value | | 179,385,962193,773,687 |
| | | | | | | DTE Electric | | Common Stock, $10 par value, directly-ownedindirectly-owned by DTE Energy | | 138,632,324138,362,324 |
|
DOCUMENTS INCORPORATED BY REFERENCE Certain information in DTE Energy's definitive Proxy Statement for its 20182021 Annual Meeting of Common Shareholders to be held May 3, 2018,20, 2021, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the registrant’s fiscal year covered by this report on Form 10-K, is incorporated herein by reference to Part III (Items 10, 11, 12, 13, and 14) of this Form 10-K. This combined Form 10-K is filed separately by two registrants: DTE Energy and DTE Electric. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. DTE Electric makes no representation as to information relating exclusively to DTE Energy. DTE Electric, aan indirect wholly-owned subsidiary of DTE Energy, meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format specified in General Instruction I(2) of Form 10-K.
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| | | | | | | | | AFUDCACE | | Affordable Clean Energy | | | | | AFUDC | | Allowance for Funds Used During Construction | | | | | AGS | | Appalachia Gathering System is a midstream natural gas asset located in Pennsylvania and West Virginia.Virginia and is part of the Gas Storage and Pipelines segment. DTE Energy purchased 100% of AGS in October 2016 | | | | | AMT | | Alternative Minimum Tax | | | | | AMV | | Applicable Market Value | | | | | ASU | | Accounting Standards Update issued by the FASB | | | | | Blue Union | | Blue Union gathering system is a midstream natural gas asset located in the Haynesville shale formation of Louisiana. DTE Energy purchased 100% of Blue Union in December 2019 and this asset is part of DTE Energy's Gas Storage and Pipelines segment.segment | | | | AMVCAD | Applicable Market Value | Canadian Dollar (C$) | | | | ANPRCARB | Advanced Noticed of Proposed Rulemaking | California Air Resources Board that administers California's Low Carbon Fuel Standard | | | | AROCARES Act | Asset Retirement Obligation | Coronavirus Aid, Relief, and Economic Security Act | | | | ASUCCR | Accounting Standards Update issued by the FASB | | | CCR | Coal Combustion Residuals | | | | | CFTC | | U.S. Commodity Futures Trading Commission | | | | CONCOVID-19 | Certificate | Coronavirus disease of Necessity2019 | | | | | DOE | | U.S. Department of Energy | | | | | DTE Electric | | DTE Electric Company (a direct(an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | | | | | DTE Energy | | DTE Energy Company, directly or indirectly the parent of DTE Electric, DTE Gas, and numerous non-utility subsidiaries | | | | | DTE Gas | | DTE Gas Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | | | | EGUDTE Midstream | | DTE Energy's natural gas pipeline, storage, and gathering non-utility, which comprises the Gas Storage and Pipelines segment and certain DTE Energy holding company activity currently included in the Corporate and Other segment | | | | | DTE Sustainable Generation | | DTE Sustainable Generation Holdings, LLC (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | | | | | EGLE | | Michigan Department of Environment, Great Lakes, and Energy, formerly known as Michigan Department of Environmental Quality | | | | | EGU | | Electric Generating Unit | | | | | ELG | | Effluent Limitations Guidelines | | | | | EPA | | U.S. Environmental Protection Agency | | | | Equity Unitsunits | | DTE Energy's 2016 Equity Units2019 equity units issued in October 2016,November 2019, which were used to finance the October 1, 2016 Gas Storage and Pipelines acquisition.acquisition on December 4, 2019 | | | | FASBEWR | | Energy Waste Reduction program, which includes a mechanism authorized by the MPSC allowing DTE Electric and DTE Gas to recover through rates certain costs relating to energy waste reduction | | | | | FASB | | Financial Accounting Standards Board | | | | | FERC | | Federal Energy Regulatory Commission | | | | FOVFGD | | Flue Gas Desulfurization | | | | | FOV | | Finding of Violation | | | |
| | | | | | | | | | FTRs | | Financial Transmission Rights are financial instruments that entitle the holder to receive payments related to costs incurred for congestion on the transmission grid.grid | | | | | GCR | | A Gas Cost Recovery mechanism authorized by the MPSC that allows DTE Gas to recover through rates its natural gas costs.costs | | | | | GHGs | | Greenhouse gases | | | | IRMIRS | Infrastructure Recovery Mechanism | | | IRS | Internal Revenue Service | | | | | ISO | | Independent System Operator | | | | LIBORLEAP | | Louisiana Energy Access Project gathering pipeline is a midstream natural gas asset located in the Haynesville shale formation of Louisiana. DTE Energy purchased 100% of LEAP in December 2019 and this asset is part of DTE Energy's Gas Storage and Pipelines segment | | | | | LIBOR | | London Inter-Bank Offered Rates | | | | | LLC | | DTE Energy Corporate Services, LLC, a subsidiary of DTE Energy | | | | MDEQLNG | Michigan Department of Environmental Quality | Liquefied Natural Gas | | | | | MGP | | Manufactured Gas Plant | | | | | MISO | | Midcontinent Independent System Operator, Inc. | | | | | MPSC | | Michigan Public Service Commission | | | MTM | Mark-to-market |
| | | | | NAVMTM | | Mark-to-market | | | | | NAV | | Net Asset Value | | | | | NEIL | | Nuclear Electric Insurance Limited | | | | | NEXUS | | NEXUS Gas Transmission, LLC, a joint venture in which DTE Energy owns a 50% partnership interest.interest | | | | | Non-utility | | An entity that is not a public utility. Its conditions of service, prices of goods and services, and other operating related matters are not directly regulated by the MPSC.MPSC | | | | | NOV | | Notice of Violation | | | | NOxX | | Nitrogen Oxides | | | | NRCNPDES | | National Pollutant Discharge Elimination System | | | | | NRC | | U.S. Nuclear Regulatory Commission | | | | PLDPG&E | | Pacific Gas and Electric Corporation | | | | | PLD | | City of Detroit's Public Lighting Department | | | | | Production tax credits | | Tax credits as authorized under Sections 45K and 45 of the Internal Revenue Code that are designed to stimulate investment in and development of alternate fuel sources. The amount of a production tax credit can vary each year as determined by the IRS.IRS | | | | | PSCR | | A Power Supply Cost Recovery mechanism authorized by the MPSC that allows DTE Electric to recover through rates its fuel, fuel-related, and purchased power costs.costs | | | | | RDM | | A Revenue Decoupling Mechanism authorized by the MPSC that is designed to minimize the impact on revenues of changes in average customer usage.usage | | | | REFREC | | Renewable Energy Credit | | | | | REF | | Reduced Emissions Fuel | | | | | Registrants | | DTE Energy and DTE Electric | | | | | Retail access | | Michigan legislation provided customers the option of access to alternative suppliers for electricity and natural gas.gas | | | |
| | | | | | | | | RSNRPS | | Renewable Portfolio Standard program, which includes a mechanism authorized by the MPSC allowing DTE Electric to recover through rates its renewable energy costs | | | | | RSN | | Remarketable Senior Notes | | | | | RTO | | Regional Transmission Organization | | | | | SEC | | Securities and Exchange Commission | | | | SecuritizationSGG | DTE Electric financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, The Detroit Edison Securitization Funding LLC. | | | SGG | Stonewall Gas Gathering is a midstream natural gas asset located in West Virginia. DTE Energy purchased 55% of SGG in October 2016 and this assetan additional 30% in May 2019, bringing its ownership to 85%. SGG is part of DTE Energy's Gas Storage and Pipelines segment.segment | | | | ShenangoSIP | Shenango Incorporated is a coke battery plant located in Pittsburgh, PA, that was closed in January 2016 and is included in the Power and Industrial Projects segment. | State Implementation Plan | | | | SO2 | | Sulfur Dioxide | | | | | TCJA | | Tax Cuts and Jobs Act of 2017, which reduced the corporate Federal income tax rate from 35% to 21% | | | | TRIATCJA rate reduction | | Reduction in DTE Gas revenue related to Calculation C of the TCJA. DTE Gas' Calculation C case was approved by the MPSC in August 2019 to address all remaining issues relative to the TCJA, which is primarily the remeasurement of deferred taxes and how the amounts deferred as Regulatory liabilities flow to ratepayers | | | | | Topic 606 | | FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as amended | | | | | Topic 842 | | FASB issued ASU No, 2016-02, Leases, as amended | | | | | TRIA | | Terrorism Risk Insurance Program Reauthorization Act of 2015 | | | | | TRM | | A Transitional Reconciliation Mechanism authorized by the MPSC that allows DTE Electric to recover through rates the deferred net incremental revenue requirement associated with the transition of PLD customers to DTE Electric's distribution system.system | | | | VEBAUSD | | United States Dollar ($) | | | | | VEBA | | Voluntary Employees Beneficiary Association | | | | | VIE | | Variable Interest Entity |
| | | | | | | | | | Units of Measurement | | | | | | Bcf | | Billion cubic feet of natural gas | | | | BTU | | | | | | | BTU | | British thermal unit, heat value (energy content) of fuel | | | | kWh | | | | | | | kWh | | Kilowatthour of electricity | | | | | | | | | | | MDth/d | | Million dekatherms per day | | | | | MMBtu | | One million BTU | | | | MW | | | | | | | MW | | Megawatt of electricity | | | | | MWh | Megawatthour | Megawatt-hour of electricity |
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FILING FORMAT This combined Form 10-K is separately filed by DTE Energy and DTE Electric. Information in this combined Form 10-K relating to each individual Registrant is filed by such Registrant on its own behalf. DTE Electric makes no representation regarding information relating to any other companies affiliated with DTE Energy other than its own subsidiaries. Neither DTE Energy, nor any of DTE Energy’s other subsidiaries (other than DTE Electric), has any obligation in respect of DTE Electric's debt securities, and holders of such debt securities should not consider the financial resources or results of operations of DTE Energy nor any of DTE Energy’s other subsidiaries (other than DTE Electric and its own subsidiaries (in relevant circumstances)) in making a decision with respect to DTE Electric's debt securities. Similarly, none of DTE Electric nor any other subsidiary of DTE Energy has any obligation inwith respect ofto debt securities of DTE Energy. This combined Form 10-K should be read in its entirety. No one section of this combined Form 10-K deals with all aspects of the subject matter of this combined Form 10-K.
FORWARD-LOOKING STATEMENTS Certain information presented herein includes “forward-looking statements”"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, and businesses of the Registrants. Words such as “anticipate,” “believe,” “expect,” “may,” “could,” “projected,” “aspiration,” “plans,”"anticipate," "believe," "expect," "may," "could," "projected," "aspiration," "plans," and “goals”"goals" signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to numerous assumptions, risks, and uncertainties that may cause actual future results to be materially different from those contemplated, projected, estimated, or budgeted. Many factors may impact forward-looking statements of the Registrants including, but not limited to, the following: •DTE Energy’s intent to spin-off DTE Midstream and DTE Energy’s preliminary strategic, operational and financial considerations related thereto. The statements with respect to the separation transaction are preliminary in nature and subject to change as additional information becomes available. The separation transaction will be subject to the satisfaction of a number of conditions, including the final approval of DTE Energy’s Board of Directors, and there is no assurance that such separation transaction will in fact occur; •Risks related to the spin-off of DTE Midstream, including that the process of exploring the transaction and potentially completing the transaction could disrupt or adversely affect the consolidated or separate businesses, results of operations and financial condition, that the transaction may not achieve some or all of any anticipated benefits with respect to either business, and that the transaction may not be completed in accordance with DTE Energy’s expected plans or anticipated timelines, or at all; •the duration and impact of the COVID-19 pandemic on the Registrants and customers; •impact of regulation by the EPA, EGLE, the FERC, the MPSC, the NRC, and for DTE Energy, the CFTC and CARB, as well as other applicable governmental proceedings and regulations, including any associated impact on rate structures; •the amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals, or new legislation, including legislative amendments and retail access programs; •economic conditions and population changes in the Registrants' geographic area resulting in changes in demand, customer conservation, and thefts of electricity and, for DTE Energy, natural gas; •the operational failure of electric or gas distribution systems or infrastructure; •impact of volatility of prices in the oil and gas markets on DTE Energy's gas storage and pipelines operations and volatility in the short-term natural gas storage markets impacting third-party storage revenues related to DTE Energy; •impact of volatility in prices in the international steel markets on DTE Energy's power and industrial projects operations; •the risk of a major safety incident;
•environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements; •the cost of protecting assets against, or damage due to, cyber crimeincidents and terrorism; •health, safety, financial, environmental, and regulatory risks associated with ownership and operation of nuclear facilities; volatility in the short-term natural gas storage markets impacting third-party storage revenues related to DTE Energy;
impact of volatility of prices in the oil and gas markets on DTE Energy's gas storage and pipelines operations;
impact of volatility in prices in the international steel markets on DTE Energy's power and industrial projects operations;
•volatility in commodity markets, deviations in weather, and related risks impacting the results of DTE Energy's energy trading operations; •changes in the cost and availability of coal and other raw materials, purchased power, and natural gas; •advances in technology that produce power, store power, or reduce power consumption; •changes in the financial condition of DTE Energy's significant customers and strategic partners; •the potential for losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions;
•access to capital markets and the results of other financing efforts which can be affected by credit agency ratings; •instability in capital markets which could impact availability of short and long-term financing; •the timing and extent of changes in interest rates; •the level of borrowings; •the potential for increased costs or delays in completion of significant capital projects; •changes in, and application of, federal, state, and local tax laws and their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings, and audits; •the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers; •unplanned outages; •employee relations and the impact of collective bargaining agreements; the risk of a major safety incident at an electric distribution or generation facility and, for DTE Energy, a gas storage, transmission, or distribution facility;
•the availability, cost, coverage, and terms of insurance and stability of insurance providers; •cost reduction efforts and the maximization of plant and distribution system performance; •the effects of competition; •changes in and application of accounting standards and financial reporting regulations; •changes in federal or state laws and their interpretation with respect to regulation, energy policy, and other business issues; •contract disputes, binding arbitration, litigation, and related appeals; and •the risks discussed in the Registrants' public filings with the Securities and Exchange Commission. New factors emerge from time to time. The Registrants cannot predict what factors may arise or how such factors may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak only as of the date on which such statements are made. The Registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.
Part I Items 1. and 2. Business and Properties General In 1995, DTE Energy incorporated in the State of Michigan. DTE Energy's utility operations consist primarily of DTE Electric and DTE Gas. DTE Energy also has three other segments that are engaged in a variety of energy-related businesses. DTE Electric is a Michigan corporation organized in 1903 and is aan indirect wholly-owned subsidiary of DTE Energy. DTE Electric is a public utility engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million customers in southeastern Michigan. DTE Gas is a Michigan corporation organized in 1898 and is aan indirect wholly-owned subsidiary of DTE Energy. DTE Gas is a public utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million customers throughout Michigan and the sale of storage and transportation capacity. DTE Energy's other businesses are involved in 1) natural gas pipelines, gathering, transportation, and storage; 2) power and industrial projects; and 3) energy marketing and trading operations. DTE Electric and DTE Gas are regulated by the MPSC. Certain activities of DTE Electric and DTE Gas, as well as various other aspects of businesses under DTE Energy are regulated by the FERC. In addition, the Registrants are regulated by other federal and state regulatory agencies including the NRC, the EPA, the MDEQ,EGLE, and for DTE Energy, the CFTC.CFTC and CARB. The Registrants' annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and all amendments to such reports are available free of charge through the Investors - Reports andInvestor Relations SEC Filings page of DTE Energy's website: www.dteenergy.com, as soon as reasonably practicable after they are filed with or furnished to the SEC. The DTE Energy Code of Ethics and Standards of Behavior, Board of Directors’ Mission and Guidelines, Board Committee Charters, and Categorical Standards for Director Independence are also posted on the DTE Energy website. The information on DTE Energy’s website is not part of this report or any other report that DTE Energy files with, or furnishes to, the SEC. Additionally, the public may read and copy any materials the Registrants file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Corporate Structure DTE Energy sets strategic goals, allocates resources, and evaluates performance based on the following structure. For financial information by segment for the last three years, see Note 2223 to the Consolidated Financial Statements in Item 8 of this Report, "Segment and Related Information." Electric •The Electric segment consists principally of DTE Electric, which is engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million residential, commercial, and industrial customers in southeastern Michigan. Gas •The Gas segment consists principally of DTE Gas, which is engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers throughout Michigan and the sale of storage and transportation capacity.
Non-utility Operations •Gas Storage and Pipelines consists of natural gas pipeline, gathering, transportation, and storage businesses. •Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and pipeline-quality gas from renewable energy projects. •Energy Trading consists of energy marketing and trading operations.
Corporate and Other •Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments.certain investments, including funds supporting regional development and economic growth. Refer to Management’s Discussion and Analysis in Item 7 of this Report for an in-depth analysis of each segment’s financial results. A description of each business unit follows. ELECTRIC Description DTE Energy's Electric segment consists principally of DTE Electric, an electric utility engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million customers in southeastern Michigan. DTE Electric is regulated by numerous federal and state governmental agencies, including, but not limited to, the MPSC, the FERC, the NRC, the EPA, and the MDEQ.EGLE. Electricity is generated from fossil-fuel plants, a hydroelectric pumped storage plant, a nuclear plant, wind and other renewable assets and is supplemented with purchased power. The electricity is sold, or distributed through the retail access program, to three major classes of customers: residential, commercial, and industrial, throughout southeastern Michigan. Operating Revenues by Service
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Residential | $ | 2,310 |
| | $ | 2,477 |
| | $ | 2,186 |
| | Commercial | 1,758 |
| | 1,754 |
| | 1,701 |
| | Industrial | 667 |
| | 654 |
| | 645 |
| Other(a) | 313 |
| | 290 |
| | 281 |
| | Subtotal | 5,048 |
| | 5,175 |
| | 4,813 |
| Interconnection sales(b) | 54 |
| | 50 |
| | 88 |
| | Electric segment Operating Revenues | $ | 5,102 |
| | $ | 5,225 |
| | $ | 4,901 |
|
| | (a) | Includes revenue associated with the under or over recoveries of tracking mechanisms and for 2015 deferred gain amortization of the previously reversed RDM liability. |
| | (b) | Represents power that is not distributed by DTE Electric. |
Weather, economic factors, competition, energy efficiencywaste reduction initiatives, and electricity prices affect sales levels to customers. DTE Electric's peak load and highest total system sales generally occur during the third quarter of the year, driven by air conditioning and other cooling-related demands. DTE Electric's operations are not dependent upon a limited number of customers, and the loss of any one or a few customers would not have a material adverse effect on the results of DTE Electric. The Electric segment also consists of non-utility operations relating to renewable energy projects at DTE Sustainable Generation. These projects have been acquired in support of DTE Energy's renewable energy goals. For a summary of Electric segment operating revenues by service, see Note 5 to the Consolidated Financial Statements in Item 8 of the Report, "Revenue." Fuel Supply and Purchased Power DTE Electric's power is generated from a variety of fuels and is supplemented with purchased power. DTE Electric expects to have an adequate supply of fuel and purchased power to meet its obligation to serve customers. DTE Electric's generating capability is heavily dependent upon the availability of coal. Coal is purchased from various sources in different geographic areas under agreements that vary in both pricing and terms. DTE Electric expects to obtain the majority of its coal requirements through long-term contracts, with the balance to be obtained through short-term agreements and spot purchases. DTE Electric has long-term and short-term contracts for the purchase of approximately 26.714 million tons of low-sulfur western coal and approximately 14 million tons of Appalachian coal to be delivered from 20182021 to 2021.2023. All of these contracts have pricing schedules. DTE Electric has purchase commitments for approximately 94%77% of the expected coal requirements for 2018 under contract. Given the geographic diversity of supply, DTE Electric believes it can meet its expected generation requirements.2021. DTE Electric leases a fleet of rail cars and has the expected western and eastern coal rail requirements under contract through 2021. Contracts covering expectedmulti-year contracts. The Company's 2021 rail transportation is covered under long-term agreements. The Company expects to cover all of its 2021 vessel transportation requirements for delivery of purchased coal to electric generating facilities are under contract through 2019.existing and new agreements. Given the geographic diversity of supply, DTE Electric believes it can meet its expected generation requirements.
DTE Electric participates in the energy market through MISO. DTE Electric offers its generation in the market on a day-ahead and real-time basis and bids for power in the market to serve its load. DTE Electric is a net purchaser of power that supplements its generation capability to meet customer demand during peak cycles or during major plant outages.
Properties DTE Electric owns generating facilities that are located in the State of Michigan. Substantially all of DTE Electric's property is subject to the lien of a mortgage. Generating facilities owned and in service as of December 31, 20172020 for the electric segment are shown in the following table: | | | | | Location by Michigan County | | Net Generation Capacity(a) | | Location by
Michigan
County | | Net Generation Capacity(a) | | Facility | | Year in Service | | (MW) | Facility | | Year in Service | | (MW) | | Fossil-fueled Steam-Electric | | | Fossil-fueled Steam-Electric | | | | | | | Belle River(b) | | St. Clair | | 1984 and 1985 | | 1,034 |
| Belle River(b) | | St. Clair | | 1984 and 1985 | | 1,034 | | | Greenwood | | St. Clair | | 1979 | | 785 |
| Greenwood | | St. Clair | | 1979 | | 785 | | Monroe(c) | | Monroe | | 1971, 1973, and 1974 | | 3,066 |
| Monroe(c) | | Monroe | | 1971, 1973, and 1974 | | 3,066 | | | River Rouge | | Wayne | | 1958 | | 272 |
| River Rouge | | Wayne | | 1958 | | 58 | | | St. Clair | | St. Clair | | 1953, 1954, 1961, and 1969 | | 1,216 |
| St. Clair | | St. Clair | | 1953, 1954, 1961, and 1969 | | 1,065 | | | Trenton Channel | | Wayne | | 1968 | | 520 |
| Trenton Channel | | Wayne | | 1968 | | 495 | | | Dearborn | | Dearborn | | Wayne | | 2019 | | 35 | | | | | 6,893 |
| | 6,538 | | | Natural gas and Oil-fueled Peaking Units | | Various | | 1966-1971, 1981, 1999, 2002, and 2003 | | 2,033 |
| Natural gas and Oil-fueled Peaking Units | | Various | | 1966-1971, 1981, 1999, 2002, and 2003 | | 1,998 | | | Nuclear-fueled Steam-Electric Fermi 2 | | Monroe | | 1988 | | 1,141 |
| Nuclear-fueled Steam-Electric Fermi 2 | | Monroe | | 1988 | | 1,141 | | Hydroelectric Pumped Storage Ludington(d) | | Mason | | 1973 | | 1,019 |
| Hydroelectric Pumped Storage Ludington(d) | | Mason | | 1973 | | 1,088 | | Renewables(e) | | | Renewables(e) | | | Wind | | | | | Brookfield Wind Park | | Huron | | 2014 | | 75 |
| | | Echo Wind Park | | Huron | | 2014 | | 112 |
| | | Gratiot Wind Park | | Gratiot | | 2011 and 2012 | | 102 |
| | | Pinnebog Wind Park | | Huron | | 2016 | | 51 |
| | | Thumb Wind Project | | Huron and Sanilac | | 2012 | | 110 |
| | | | | 450 |
| | | Wind Utility | | Wind Utility | | Various | | 2011-2020 | | 781 | | | Wind Non-Utility | | Wind Non-Utility | | Various | | 2019-2020 | | 108 | | | Solar | | | Solar | | Various | | 2010-2019 | | 65 | | | Utility-Owned SolarCurrents | | Various | | 2010-2016 | | 16 |
| | | Utility Scale Solar | | Various | | 2017 | | 50 |
| | | | | 66 |
| | 954 | | | | | 11,602 |
| | 11,719 | |
| | (a) | Represents summer net rating for all units with the exception of renewable facilities. The summer net rating is based on operating experience, the physical condition of units, environmental control limitations, and customer requirements for steam, which would otherwise be used for electric generation. Wind and solar facilities reflect name plate capacity. |
| | (b) | The Belle River capability represents DTE Electric’s entitlement to 81% of the capacity and energy of the plant. See Note 7 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." |
| | (c) | The Monroe generating plant provided 40% of DTE Electric’s total 2017 power plant generation. |
| | (d) | Represents DTE Electric’s 49% interest in Ludington with a total capability of 2,080 MW. See Note 7 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." |
| | (e) | In addition to the owned renewable facilities described above, DTE Electric has long-term contracts for 489 MW of renewable power generated from wind, solar, and biomass facilities. |
(a)Represents summer net rating for all units with the exception of renewable facilities. The summer net rating is based on operating experience, the physical condition of units, environmental control limitations, and customer requirements for steam, which would otherwise be used for electric generation. Wind and solar facilities reflect name plate capacity measured in alternating current. (b)Represents DTE Electric's 81% interest in Belle River with a total capability of 1,270 MW. See Note 8 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." (c)The Monroe generating plant provided 49% of DTE Electric’s total 2020 power plant generation. (d)Represents DTE Electric’s 49% interest in Ludington with a total capability of 2,220 MW. See Note 8 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." (e)In addition to the owned renewable facilities described above, DTE Electric has long-term contracts for 481 MW of renewable power generated from wind, solar, and biomass facilities. Of the 481 MW, currently 52 MW relate to power purchase agreements with DTE Sustainable Generation. See "Capital Investments" in Management's Discussion and Analysis in Item 7 of this Report for information regarding plant retirements and future capital expenditures.
DTE Electric owns and operates 692698 distribution substations with a capacity of approximately 36,357,00037,350,000 kilovolt-amperes (kVA) and approximately 440,500445,800 line transformers with a capacity of approximately 31,777,00032,438,000 kVA. Circuit miles of electric distribution lines owned and in service as of December 31, 20172020 are shown in the following table: | | | | | Circuit Miles | | Circuit Miles | | Operating Voltage-Kilovolts (kV) | | Overhead | | Underground | Operating Voltage-Kilovolts (kV) | | Overhead | | Underground | | 4.8 kV to 13.2 kV | | 28,479 |
| | 15,122 |
| 4.8 kV to 13.2 kV | | 28,549 | | | 15,540 | | | 24 kV | | 182 |
| | 689 |
| 24 kV | | 181 | | | 682 | | | 40 kV | | 2,301 |
| | 378 |
| 40 kV | | 2,303 | | | 382 | | | 120 kV | | 61 |
| | 8 |
| 120 kV | | 61 | | | 8 | | | | | 31,023 |
| | 16,197 |
| | 31,094 | | | 16,612 | |
There are numerous interconnections that allow the interchange of electricity between DTE Electric and electricity providers external to the DTE Electric service area. These interconnections are generally owned and operated by ITC Transmission, an unrelated company, and connect to neighboring energy companies. Regulation DTE Electric is subject to the regulatory jurisdiction of various agencies, including, but not limited to, the MPSC, the FERC, and the NRC. The MPSC issues orders pertaining to rates, recovery of certain costs, including the costs of generating facilities and regulatory assets, conditions of service, accounting, and operating-related matters. DTE Electric's MPSC-approved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on investments. The FERC regulates DTE Electric with respect to financing authorization, and wholesale electric activities.market activities, certain affiliate transactions, the acquisition and disposition of certain generation and other facilities, and, in conjunction with the NERC, compliance with mandatory reliability standards. The NRC has regulatory jurisdiction over all phases of the operation, construction, licensing, and decommissioning of DTE Electric's nuclear plant operations. DTE Electric is subject to the requirements of other regulatory agencies with respect to safety, the environment, and health. See Notes 8, 9, 12,10, 13, 19, and 1820 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," "Fair Value," and "Commitments and Contingencies.Contingencies," and " Nuclear Operations." Energy Assistance Programs Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to DTE Electric’s ability to control its uncollectible accounts receivable and collections expenses. DTE Electric’s uncollectible accounts receivable expense is directly affected by the level of government-funded assistance that qualifying customers receive. DTE Electric works continuously with the State of Michigan and others to determine whether the share of funding allocated to customers is representative of the number of low-income individuals in the service territory. DTE Electric also partners with federal, state, and local officials to attempt to increase the share of low-income funding allocated to customers. Strategy and Competition DTE Electric's electrical generation operations seek to provide the energy needs of customers in a cost effective manner.manner and support DTE Energy's goal to reduce carbon emissions. With potential capacity constraints in the MISO region, there will be increased dependency on DTE Electric's generation to provide reliable service and price stability for customers. ThisTo meet the generation needs and carbon reduction goals, continuing investments will requirebe made in renewable resources, a large investment in DTE Electric's aging coal fleet, proposed natural gas fueled combined cycle generation facility, and renewables.DTE Electric's primary coal generation fleet and nuclear generating plant. DTE Electric's distribution operations focus is on distributing energy in a safe, cost effective, and reliable manner to customers. DTE Electric seeks to increase operational efficiencies to increase customer satisfaction at an affordable rate.
The electric retail access program in Michigan gives electric customers the option of retail access to alternative electric suppliers, subject to limits. Customers with retail access to alternative electric suppliers represented approximately 10% of retail sales in 2017, 2016, and 2015 and consisted primarily of industrial and commercial customers. MPSC rate orders and 2008 energyEnergy legislation enacted by the State of Michigan havein 2008 and 2016 has placed a 10% cap on the total retail access related migration, mitigatingaccess. This cap mitigates some of the unfavorable effects of electric retail access on DTE Electric's financial performance and full service customer rates. Energy legislation passed in 2016 retained the 10% retail access cap with some revisions. DTE Electric expects that customersCustomers with retail access to alternative electric suppliers will representconsist primarily of industrial and commercial customers and represented approximately 8.5%, 10%, and 10% of retail sales in 2018.2020, 2019, and 2018, respectively. The decrease in retail access sales in 2020 was primarily due to a large customer shutting down operations. DTE Electric expects incremental customers to move into the retail access program and for sales to return to approximately 10% in 2021. Competition in the regulated electric distribution business is primarily from the on-site generation of industrial customers and from distributed generation applications by industrial and commercial customers. DTE Electric does not expect significant competition for distribution to any group of customers in the near term. Revenues from year to year will vary due to weather conditions, economic factors, regulatory events, and other risk factors as discussed in the “Risk Factors”"Risk Factors" in Item 1A. of this Report. GAS Description DTE Energy's Gas segment consists principally of DTE Gas, a natural gas utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers throughout Michigan, and the sale of storage and transportation capacity. Operating Revenues by Service
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Gas sales | $ | 1,002 |
| | $ | 970 |
| | $ | 1,019 |
| | End-user transportation | 206 |
| | 189 |
| | 191 |
| | Intermediate transportation | 49 |
| | 50 |
| | 59 |
| | Other | 131 |
| | 115 |
| | 107 |
| | Gas segment Operating Revenues | $ | 1,388 |
| | $ | 1,324 |
| | $ | 1,376 |
|
Gas sales — Includes the sale and delivery of natural gas primarily to residential and small-volume commercial and industrial customers.
End-user transportation — Gas delivery service provided primarily to large-volume commercial and industrial customers. Additionally, the service is provided to residential customers and small-volume commercial and industrial customers who have elected to participate in the gas retail access program. End-user transportation customers purchase natural gas directly from marketers, producers, or brokers and utilize DTE Gas' pipeline network to transport the gas to their facilities or homes.
Intermediate transportation — Gas delivery service is provided to producers, brokers, and other gas companies that own the natural gas, but are not the ultimate consumers. Intermediate transportation customers use DTE Gas' high-pressure transportation system to transport the natural gas to storage fields, pipeline interconnections, or other locations.
Other — Includes revenues from natural gas storage, appliance maintenance, facility development, and other energy-related services.
DTE Gas' natural gas sales, end-user transportation, and intermediate transportation volumes, revenues, and Net Income, are impacted by weather. Given the seasonal nature of the business, revenues and Net Income are concentrated in the first and fourth quarters of the calendar year. By the end of the first quarter, the heating season is largely over, and DTE Gas typically realizes substantially reduced revenues and earnings in the second quarter, and losses in the third quarter. The impacts of changes in annual average customer usage are minimized by the RDM. DTE Gas operations are not dependent upon a limited number of customers, and the loss of any one or a few customers would not have a material adverse effect on the results of DTE Gas.
For a summary of Gas segment operating revenues by service, see Note 5 to the Consolidated Financial Statements in Item 8 of the Report, "Revenue."
Natural Gas Supply DTE Gas' gas distribution system has a planned maximum daily send-out capacity of 2.42.6 Bcf, with approximately 65%66% of the volume coming from underground storage for 2017.2020. Peak-use requirements are met through utilization of storage facilities, pipeline transportation capacity, and purchased gas supplies. Because of the geographic diversity of supply and its pipeline transportation and storage capacity, DTE Gas is able to reliably meet supply requirements. DTE Gas believes natural gas supply and pipeline capacity will be sufficiently available to meet market demands in the foreseeable future. DTE Gas purchases natural gas supplies in the open market by contracting with producers and marketers and maintains a diversified portfolio of natural gas supply contracts. Supplier, producing region, quantity, and available transportation diversify DTE Gas' natural gas supply base. Natural gas supply is obtained from various sources in different geographic areas (Gulf(Appalachian, Gulf Coast, Mid-Continent, Canada, and Michigan) under agreements that vary in both pricing and terms. Gas supply pricing is generally tied to the New York Mercantile Exchange and published price indices to approximate current market prices combined with MPSC-approved fixed price supplies with varying terms and volumes through 2020.2023.
DTE Gas is directly connected to interstate pipelines, providing access to most of the major natural gas supply producing regions in the Appalachian, Gulf Coast, Mid-Continent, and Canadian regions. The primary long-term transportation supply contracts at December 31, 20172020 are listed below. In addition, DTE Gas has contracted for 75 MDth/d of capacity on the NEXUS Pipeline, for a term of 15-years beginning with the anticipated third quarter 2018 in-service date. | | | | | | Availability
(MDth/d) | | Contract
Expiration | | | Availability (MDth/d) | | Contract Expiration | | | Viking Gas Transmission Company | | Viking Gas Transmission Company | 21 | | 2022 | | Vector Pipeline L.P. (an affiliate) | | Vector Pipeline L.P. (an affiliate) | 20 | | 2022 | | Great Lakes Gas Transmission L.P. | 30 | | 2022 | Great Lakes Gas Transmission L.P. | 30 | | 2023 | | Viking Gas Transmission Company | 21 | | 2022 | | | Vector Pipeline L.P. | 20 | | 2022 | | | ANR Pipeline Company | 204 | | 2028 | ANR Pipeline Company | 129 | | 2028 | | Panhandle Eastern Pipeline Company | 125 | | 2029 | Panhandle Eastern Pipeline Company | 125 | | 2029 | | NEXUS Pipeline (an affiliate) | | NEXUS Pipeline (an affiliate) | 75 | | 2033 |
Properties DTE Gas owns distribution, storage, and transportation properties that are located in the State of Michigan. The distribution system includes approximately 19,50020,000 miles of distribution mains, approximately 1,216,0001,308,000 service pipelines, and approximately 1,262,0001,305,000 active meters, andmeters. DTE Gas also owns approximately 2,000 miles of transmission pipelines that deliver natural gas to the distribution districts and interconnect DTE Gas storage fields with the sources of supply and the market areas. DTE Gas owns storage properties relating to four underground natural gas storage fields with an aggregate working gas storage capacity of approximately 139 Bcf. These facilities are important in providing reliable and cost-effective service to DTE Gas customers. In addition, DTE Gas sells storage services to third parties. Most of DTE Gas' distribution and transportation property is located on property owned by others and used by DTE Gas through easements, permits, or licenses. Substantially all of DTE Gas' property is subject to the lien of a mortgage. DTE Gas leases a portion of its pipeline system to the Vector Pipeline Partnership (an affiliate) through a capitalfinance lease arrangement. See Note 1718 to the Consolidated Financial Statements in Item 8 of the Report, "Capital and Operating Leases."Leases." Regulation DTE Gas is subject to the regulatory jurisdiction of the MPSC, which issues orders pertaining to rates, recovery of certain costs, including the costs of regulatory assets, conditions of service, accounting, and operating-related matters. DTE Gas' MPSC-approved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on investments. DTE Gas operates natural gas storage and transportation facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and transportation services pursuant to a MPSC-approved tariff. DTE Gas also provides interstate storage and transportation services in accordance with an Operating Statement on file with the FERC. The FERC's jurisdiction is limited and extends to the rates, non-discriminatory requirements, and the terms and conditions applicable to storage and transportation provided by DTE Gas in interstate markets. FERC granted DTE Gas authority to provide storage and related services in interstate commerce at market-based rates. DTE Gas provides transportation services in interstate commerce at cost-based rates approved by the MPSC and filed with the FERC.
DTE Gas is subject to the requirements of other regulatory agencies with respect to safety, the environment, and health. See Notes 910 and 1819 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters" and "Commitments and Contingencies." Energy Assistance Program Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to DTE Gas' ability to control its uncollectible accounts receivable and collections expenses. DTE Gas' uncollectible accounts receivable expense is directly affected by the level of government-funded assistance its qualifying customers receive. DTE Gas works continuously with the State of Michigan and others to determine whether the share of funding allocated to customers is representative of the number of low-income individuals in the gas service territory. DTE Gas also partners with federal, state, and local officials to attempt to increase the share of low-income funding allocated to DTE Gas customers.
Strategy and Competition DTE Gas' strategy is to ensure the safe, reliable, and cost effective delivery of natural gas service within its franchised markets in Michigan. In addition, DTE Gas is promoting the extension of its distribution system to underserved markets and the increased use of natural gas furnaces, water heaters, and appliances within its current customer base. DTE Gas continues to focus on the reduction of operating costs and the delivery of energy efficiencywaste reduction products and services to its customers, making natural gas service the preferred fuel and even more affordable for its customers. Competition in the gas business primarily involves other natural gas transportation providers, as well as providers of alternative fuels and energy sources. The primary focus of competition for end-user transportation is cost and reliability. Some large commercial and industrial customers have the ability to switch to alternative fuel sources such as coal, electricity, oil, and steam. If these customers were to choose an alternative fuel source, they would not have a need for DTE Gas' end-user transportation service. DTE Gas competes against alternative fuel sources by providing competitive pricing and reliable service, supported by its storage capacity. Having an extensive transportation pipeline system has enabled marketing of DTE Gas' storage and transportation services to gas producers, marketers, distribution companies, end-user customers, and other pipeline companies. The business operates in a central geographic location with connections to major Midwestern interstate pipelines that extend throughout the Midwest, eastern United States, and eastern Canada. DTE Gas' storage capacity is used to store natural gas for delivery to its customers and is also sold to third parties under a variety of arrangements. Prices for storage arrangements for shorter periods are generally higher, but more volatile, than for longer periods. Prices are influenced primarily by market conditions, weather, and natural gas pricing. GAS STORAGE AND PIPELINES Description Gas Storage and Pipelines owns, operates, and develops an integrated portfolio of natural gas interstate pipelines, intrastate pipelines, storage fields,systems, gathering lateral andpipelines, gathering pipeline systems, treatment plants, and compression and surface facilities,facilities. Gas Storage and has ownershipPipelines owns and operates both wholly owned pipeline and gathering assets, as well as interests in interstate pipelines servingjoint venture pipeline assets including the Millennium Pipeline, Vector Pipeline, and NEXUS Pipeline, many of which have connectivity to the wholly owned assets. Gas Storage and Pipelines provides multiple, integrated natural gas services to customers with core assets that strategically connect key demand centers in the Gulf Coast, Midwest, Ontario, and Northeast markets. The pipelinemarkets to the premium production areas of the Marcellus/Utica and storageHaynesville dry natural gas formations in the Appalachian and Gulf Coast Basins. These assets are primarily supported by long-term, fixed-price revenue contracts.
Properties Gas Storage and Pipelines holds the following properties: | | | | | | | | | | | | | | | | | | | | | | Property Classification | | % Owned | | Description | | Location | | Pipelines and Other | | | | | | | | Birdsboro Pipeline | | 100% | | 14-mile pipeline delivering gas supply to the Birdsboro Power Plant | | PA | | Bluestone Pipeline | | 100% | | 65-mile pipeline delivering Marcellus Shale gas to Millennium Pipeline and Tennessee Pipeline | | PA and NY | | LEAP | | 100% | | 155-mile pipeline stretching from the Haynesville Shale area to the Gulf Coast providing access to petrochemical and refining facilities, power plants, and LNG export facilities | | LA | | Generation Pipeline | | 50% | | 25-mile pipeline regulated as gas utility by the Public Utilities Commission of Ohio | | OH | | Millennium Pipeline | | 26% | | 263-mile pipeline serving markets in the Northeast | | NY | | NEXUS Pipeline | | 50% | | 256-mile pipeline to transport Utica and Marcellus Shale gas to Ohio, Michigan, and Ontario market centers | | OH and MI | | Stonewall Gas Gathering | | 85% | | 68-mile pipeline connecting Appalachia Gathering System to Columbia Pipeline | | WV | | Vector Pipeline | | 40% | | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | | IL, IN, MI, and Ontario | | Washington 10 Storage | | 100% | | 94 Bcf of storage capacity | | MI | | | | | | | | Property ClassificationGathering | | % Owned | | Description | | Location | Pipelines | | | | | | | Appalachia Gathering System(a) | | 100% | | 114-mile135-mile pipeline delivering Marcellus Shale gas to Texas Eastern Pipeline and Stonewall Gas Gathering system | | PA and WV | Stonewall Gas Gathering(a)
Blue Union | | 55%100% | | 68-mile pipeline connecting Appalachia Gathering System343-mile gathering system delivering Haynesville Shale gas production to Columbia Pipelinemarkets in Gulf Coast Region | | WVLA and TX | Bluestone PipelineMichigan Gathering | | 100% | | 59-mile336-mile pipeline delivering Marcellus Shale gas to Millennium Pipeline and Tennessee Pipelinesystem in northern Michigan | | PA and NYMI | Susquehanna gathering systemGathering | | 100% | | Gathering system197-mile pipeline delivering Southwestern Energy's Marcellus Shale gas production to Bluestone Pipeline | | PA | Vector PipelineTioga Gas Gathering | | 40%100% | | 348-mile3-mile pipeline connecting Chicago, Michigan, and Ontario market centers | | IL, IN, MI, and Ontario | Millennium Pipeline | | 26% | | 251-mile pipeline serving markets in the Northeast | | NY | Michigan gathering systems | | 100% | | Gathersdelivering production gas in northern Michiganto Dominion Transmission interconnect | | MI | Storage | | | | | | | Washington 10 | | 100% | | 75 Bcf of storage capacity | | MI | Washington 28 | | 50% | | 16 Bcf of storage capacity | | MIPA |
| | (a) | In October 2016, DTE Energy closed on an acquisition of midstream natural gas assets that are part of the Gas Storage and Pipelines segment. See Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities," for additional information. |
The assets of these businesses are well integrated with other DTE Energy operations. Pursuant to an operating agreement, DTE Gas provides physical operations, maintenance, and technical support for the Washington 10 and 28 storage facilitiesfacility and for the Michigan gathering systems. In addition, DTE Energy owns a 50% interest in the NEXUS Pipeline, a 255-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers. A FERC application was filed in the fourth quarter of 2015 and was approved in August 2017. Construction has commenced with an anticipated third quarter 2018 in-service date.
In May 2017, DTE Energy filed a FERC application for approval of the Birdsboro Pipeline, a 14-mile lateral to serve a new power plant in Pennsylvania. DTE Energy is targeting a 2018 in-service date.
Regulation Gas Storage and Pipelines operates natural gas storage facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and related services pursuant to an MPSC-approved tariff. Gas Storage and Pipelines also provides interstate services in accordance with an Operating Statement on file with the FERC. Vector, Millennium, Birdsboro, and MillenniumNEXUS Pipelines provide interstate transportation services in accordance with their FERC-approved tariffs. In addition, NEXUS and Vector isare subject to applicable laws, rules, and regulations in Canada. NEXUS Pipeline, when operational, will also provide interstate transportation services in accordance with their FERC-approved tariffs. Gas Storage and Pipelines' gathering and pipeline assets are subject to the rules and regulations of the MPSC, Pennsylvania Public Utility Commission, the West Virginia Public Service Commission, and the New York Public Service Commission.various state utility commissions. Strategy and Competition Gas Storage and Pipelines expects to continue its steady growth plan by expanding existing assets acquiring and/orand developing new assets that are typically supported with long-term customer commitments. The focus will be on opportunitiescommitments, particularly in the following regions:
Midwest to Northeast regionRegion Gas Storage and Pipelines is focused on opportunities to supply natural gas to meet growing demand and displace less attractive supply from certain regions in North America. Much of the growth in midstream services demand for natural gas is expected to occur in the eastern Canada and the northeast U.S. regions. Gas Storage and Pipelines believes that the Vector, Millennium, and NEXUS Pipelines are well positionedwell-positioned to provide access routes and low-cost expansion options to these markets due to growth in production from the Marcellus/Utica Shales in Pennsylvania and West Virginia. Gas Storage and Pipelines has agreements with key Marcellus shale producers that support its Bluestone Pipeline, Susquehanna gathering, Tioga gathering, AGS, and SGG businesses. Gas Storage and Pipelines is evaluating new pipeline and storage investment opportunities that could include additional pipeline and gathering expansions, laterals, compression, and other Marcellus/Utica shale midstream development or partnering opportunities.
Gulf Coast Region
In December 2019, Gas Storage and Pipelines completed the acquisition of the Blue Union gathering system and LEAP gathering pipeline in the Haynesville shale formation of Louisiana which provide access to growing Gulf Coast markets. The assets serve multiple markets, including Louisiana, the nation's third largest natural gas consumer, and the Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. Through this acquisition, Gas Storage and Pipeline invested in strategically situated assets that are supported by long-term contracts. Strong credit provisions are also incorporated into the contract with the system's largest customer.
Gas Storage and Pipelines has competition from other pipelines and storage providers. Operations are dependent upon key customers in the Haynesville shale formation in the Gulf Coast and in the Marcellus/Utica shale formation in the Northeast for a limited numbersignificant portion of customers, and therevenues. The loss of, or reduction in volumes from, any one or a fewof these key customers could result in a decline in demand for services and have a material adverse effect on the results of Gas Storage and Pipelines. DTE Midstream Spin-off On October 27, 2020, DTE Energy announced that its Board of Directors has authorized management to pursue a plan to spin-off the DTE Midstream business. The spin-off would establish DTE Midstream as an independent, natural gas midstream company with increased flexibility and opportunities. The separation is expected to be completed by mid-year 2021, subject to final approval by DTE Energy's Board of Directors and satisfaction of other conditions. For additional information, refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions.” POWER AND INDUSTRIAL PROJECTS Description Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and gas from renewable energy projects. This business segment provides services using project assets usually located on or near the customers' premises in the steel, automotive, pulp and paper, airport, chemical, and other industries as follows: Industrial Energy Services •Steel and Petroleum Coke — Power and Industrial Projects produces metallurgical coke from a coke battery with a capacity of 1.0 million tons per year and has an investment in a second coke battery with a capacity of 1.2 million tons per year. Power and Industrial Projects also provides pulverized coal and petroleum coke to the steel, pulp and paper, and other industries. •On-Site Energy — Power and Industrial Projects provides power generation, steam production, chilled water production, wastewater treatment, and compressed air supply to industrial customers. Power and Industrial Projects also provides utility-type services using project assets usually located on or near the customers' premises in the automotive, airport, chemical, and other industries.
Renewable Energy •Wholesale Power and Renewables — Power and Industrial Projects holds ownership interests in, and operates, five renewable generating plants with a capacity of 217139 MWs. The electric output is sold under long-term power purchase agreements. Landfill•Renewable Gas Recovery — Power and Industrial Projects has ownership interests in, and operates, twenty-two landfill gas recovery sites in eightnine different states. The sites recover methane from landfills and convertsagricultural businesses and convert the gas to generate electricity, replace fossil fuels in industrial and manufacturing operations, or refine to pipeline-quality gas, which can then be used as vehicle fuel.
Reduced Emissions Fuel •Reduced Emissions Fuel — Power and Industrial Projects has constructed and placed in service REF facilities at eleventen sites, including facilities located at eightseven third-party owned coal-fired power plants. DTE Energy has sold membership interests in fourseven of the facilities and entered into lease arrangements in threetwo of the facilities. DTE Energy will continue to optimize these facilities by seeking investors or entering into lease arrangements for facilities operating at DTE Electric and other utility sites. In addition, DTE Energy has entered into an agreement to operate an REF facility owned by an outside party located at a third-party owned coal-fired power plant. The facilities blend a proprietary additive with coal used in coal-fired power plants, resulting in reduced emissions of nitrogen oxide and mercury. Qualifying facilities are eligible to generate tax credits for ten years upon achieving certain criteria. The value of a tax credit is adjusted annually by an inflation factor published by the IRS. The value of the tax credit is reduced if the reference price of coal exceeds certain thresholds. The economic benefit of the REF facilities is dependent upon the generation of production tax credits.
Properties and Other The following are significant properties operated by Power and Industrial Projects: | | | | | | | | | | | | | | | | Business Areas | | Location | | Service Type | | Industrial Energy Services | | | | | | Steel and Petroleum Coke | | | | | | Pulverized Coal Operations | | MI | | Pulverized Coal | | Coke Production | | MI | | Metallurgical Coke Supply | | Other Investment in Coke Production and Petroleum Coke | | IN and MS | | Metallurgical Coke Supply and Pulverized Petroleum Coke | | On-Site Energy | | | | | | Automotive | | IN, MI, NY, and OH | | Electric Distribution, Chilled Water, Waste Water,Wastewater, Steam, Cooling Tower Water, Reverse Osmosis Water, Compressed Air, Mist, and Dust Collectors | | Airports | | MI and PA | | Electricity and Hot and Chilled Water | | Chemical Manufacturing | | KY and OH | | Electricity, Steam, Natural Gas, Compressed Air, and Wastewater | | Consumer Manufacturing | | OH | | Electricity, Steam, Wastewater, and Sewer | | Business Park | | PA | | Electricity | | Hospital and University | | CA and IL | | Electricity, Steam, and Chilled Water | Renewable EnergyCasino and Gaming | | NJ | | Electricity, Steam, and Chilled Water | Pulp and PaperRenewable Energy | | AL | | Electric Generation and Steam | | Renewables | | CA and MN | | Electric Generation | LandfillRenewable Gas Recovery | | AZ, CA, MI, NC, NY, OH, TX, UT, and UTWI | | Electric Generation and Renewable Natural Gas | | Reduced Emissions Fuel | | MI, OH, OK, IL, PA, TX, and WI | | REF Supply |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Production Tax Credits Generated (Allocated to DTE Energy) | | | | | | | REF | $ | 55 | | | $ | 72 | | | $ | 178 | | | Renewables | 9 | | | 8 | | | 7 | | | Renewable Gas Recovery | 2 | | | 3 | | | 3 | | | | | | | | | $ | 66 | | | $ | 83 | | | $ | 188 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Production Tax Credits Generated (Allocated to DTE Energy) | | | | | | | REF | $ | 144 |
| | $ | 103 |
| | $ | 77 |
| | Renewables | 6 |
| | 8 |
| | 11 |
| | Landfill Gas Recovery | 3 |
| | 3 |
| | 3 |
| | | $ | 153 |
| | $ | 114 |
| | $ | 91 |
|
Regulation Certain electric generating facilities within Power and Industrial Projects have market-based rate authority from the FERC to sell power. The facilities are subject to FERC reporting requirements and market behavior rules. Certain projects of Power and Industrial Projects are also subject to the applicable laws, rules, and regulations related to the EPA, U.S. Department of Homeland Security, DOE, CARB, and various state utility commissions. Strategy and Competition Power and Industrial Projects will continue leveraging its energy-related operating experience and project management capability to develop and grow its steel, on-site energy, and renewable energy businesses, and optimize the REF businesses.businesses until the phase-out at the end of 2021. Power and Industrial Projects will also continue to pursue opportunities to provide asset management and operations services to third parties. There are limited competitors for Power and Industrial Projects' existing disparate businesses who provide similar products and services. Power and Industrial Projects' operations are dependent upon a limited number of customers, and the loss of any one or a few customers could have a material adverse effect on the results of Power and Industrial Projects. Power and Industrial Projects anticipates building around its core strengths in the markets where it operates. In determining the markets in which to compete, Power and Industrial Projects examines closely the regulatory and competitive environment, new and pending legislation, the number of competitors, and its ability to achieve sustainable margins. Power and Industrial Projects plans to maximize the effectiveness of its related businesses as it expands.
Power and Industrial Projects intends to focus on the following areas for growth: •Providing operatingenergy and utility-type services to owners of on-sitecommercial and industrial power plants;customers •Acquiring and developing landfill gas recovery facilities, renewable energy projects and other energy projects which may qualify for tax credits;projects. Obtaining investors in the REF projects.
ENERGY TRADING Description Energy Trading focuses on physical and financial power, natural gas and gasenvironmental marketing and trading, structured transactions, enhancement of returns from its asset portfolio, and optimization of contracted natural gas pipeline transportation and storage positions. Energy Trading also provides natural gas, power, environmental and related services which may include the management of associated storage and transportation contracts on the customers’ behalf and the supply or purchase of renewable energy creditsenvironmental attributes to various customers. Energy Trading's customer base is predominantly utilities, local distribution companies, pipelines, producers and generators, and other marketing and trading companies. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy. Energy Trading enters into derivative financial instruments as part of its marketing and hedging activities. These financial instruments are generally accounted for under the MTM method, which results in the recognition in earnings of unrealized gains and losses from changes in the fair value of the derivatives. Energy Trading utilizes forwards, futures, swaps, and option contracts to mitigate risk associated with marketing and trading activity, as well as for proprietary trading within defined risk guidelines. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy. Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments, and physical power and natural gas contracts, and certain environmental contracts are deemed derivatives; whereas, natural gas and environmental inventory, contracts for pipeline transportation, renewable energy credits,storage assets, and storage assetssome environmental contracts are not derivatives. As a result, this segment will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. The business’ strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards, swaps, and options. This results in gains and losses that are recognized in different interim and annual accounting periods. Regulation Energy Trading has market-based rate authority from the FERC to sell power and blanket authority from the FERC to sell natural gas at market prices. Energy Trading is subject to FERC reporting requirements and market behavior rules. Energy Trading is also subject to the applicable laws, rules, and regulations related to the CFTC, U.S. Department of Homeland Security, and DOE. In addition, Energy Trading is subject to applicable laws, rules, and regulations in Canada.
Strategy and Competition DTE Energy's strategy for the Energy Trading business is to deliver value-added services to DTE Energy customers. DTE Energy seeks to manage this business in a manner complementary to the growth of DTE Energy's other business segments. Energy Trading focuses on physical marketing and the optimization of its portfolio of energy assets. The segment competes with electric and gas marketers, financial institutions, traders, utilities, and other energy providers. The Energy Trading business is dependent upon the availability of capital and an investment grade credit rating. DTE Energy believes it has ample available capital capacity to support Energy Trading activities. DTE Energy monitors its use of capital closely to ensure that its commitments do not exceed capacity. A material credit restriction would negatively impact Energy Trading's financial performance. Competitors with greater access to capital, or at a lower cost, may have a competitive advantage. DTE Energy has risk management and credit processes to monitor and mitigate risk. CORPORATE AND OTHER Description Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments.
certain investments, including funds supporting regional development and economic growth.
ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulation and expect to continue recovering environmental costs related to utility operations through rates charged to customers. The following table summarizes DTE Energy's, including DTE Electric's, estimated significant future environmental expenditures based upon current regulations. Pending or future reconsiderationsreconsideration of current regulations may impact the estimated expenditures summarized in the table below. The amounts reported in the table do not include any expenditures related to the EPA Clean Power Plan as discussed below. Actual costs to comply could vary substantially. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. | | | | | | | | | | | | | | | | | | | | | | | | | DTE Electric | | DTE Gas | | Non-utility | | Total | | (In millions) | | | | | | | | | | Water | $ | 54 | | | $ | — | | | $ | — | | | $ | 54 | | | Contaminated and other sites | 9 | | | 15 | | | — | | | 24 | | | Coal combustion residuals and effluent limitations guidelines | 601 | | | — | | | — | | | 601 | | | Estimated total future expenditures through 2025 | $ | 664 | | | $ | 15 | | | $ | — | | | $ | 679 | | | Estimated 2021 expenditures | $ | 204 | | | $ | 9 | | | $ | — | | | $ | 213 | | | Estimated 2022 expenditures | $ | 143 | | | $ | 4 | | | $ | — | | | $ | 147 | |
| | | | | | | | | | | | | | | | | | | DTE Electric | | DTE Gas | | Non-utility | | Total | | | (In millions) | | Water | $ | 35 |
| | $ | — |
| | $ | — |
| | $ | 35 |
| | Contaminated and other sites | 5 |
| | 35 |
| | — |
| | 40 |
| | Coal combustion residuals and effluent limitations guidelines | 295 |
| | — |
| | — |
| | 295 |
| | Estimated total future expenditures through 2024 | $ | 335 |
| | $ | 35 |
| | $ | — |
| | $ | 370 |
| | Estimated 2018 expenditures | $ | 10 |
| | $ | 30 |
| | $ | — |
| | $ | 40 |
| | Estimated 2019 expenditures | $ | 65 |
| | $ | — |
| | $ | — |
| | $ | 65 |
|
Water — The EPA finalized regulations on cooling water intake in August 2014. DTE Electric is conducting studiesFor additional information regarding environmental matters, refer to determine the best technology for reducing the environmental impacts of the cooling water intake structures at each of its facilities. DTE Electric may be required to install technologies to reduce the impacts of the cooling water intakes.
ContaminatedNotes 9, 10, and Other Sites — Prior to the construction of major interstate natural gas pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke, or oil. The facilities, which produced gas, have been designated as MGP sites. DTE Gas owns, or previously owned, 14 such former MGP sites. DTE Electric owns, or previously owned, three former MGP sites. DTE Energy anticipates the cost amortization methodology approved by the MPSC for DTE Gas, which allows DTE Gas to amortize the MGP costs over a ten-year period beginning with the year subsequent to the year the MGP costs were incurred, will prevent environmental costs from having a material adverse effect on DTE Energy's operations. DTE Electric believes the likelihood of a material change to the accrued amount is remote based on current knowledge of the conditions at each site.
The Registrants are also in the process of cleaning up other sites where contamination is present as a result of historical and ongoing utility operations. These other sites include an engineered ash storage facility, electric distribution substations, gas pipelines, electric generating power plants, and underground and aboveground storage tank locations. Cleanup activities associated with these sites will be conducted over the next several years. Any significant change in assumptions, such as remediation techniques, nature and extent of contamination, and regulatory requirements, could impact the estimate of remedial action costs for these sites and affect the Registrants' financial position and cash flows and the rates charged to their customers.
Coal Combustion Residuals and Effluent Limitations Guidelines — In April 2015, the EPA published a final rule for the disposal of coal combustion residuals, commonly known as coal ash. The rule became effective in October 2015. The rule is based on the continued listing of coal ash as a non-hazardous waste and relies on various self-implementation design and performance standards. DTE Electric owns and operates 3 permitted engineered coal ash storage facilities to dispose of coal ash from coal-fired power plants and operates a number of smaller impoundments at its power plants. At certain facilities, the rule requires the installation of monitoring wells, compliance with groundwater standards, and the closure of basins at the end of the useful life of the associated power plant. At other facilities, the rule requires ash laden waters be moved from earthen basins to steel and concrete tanks.
In November 2015, the EPA finalized effluent limitations guidelines for the steam electric power generating industry which may require additional controls to be installed between 2018 and 2023. The initial costs to comply with this rule are under development and estimates are included in the Coal Combustion Residual and Effluent Limitations Guidelines amount in the above table.
On April 12, 2017, the EPA granted a petition for reconsideration of the ELG Rule. The EPA also signed an administrative stay of the ELG Rule’s compliance deadlines for fly ash transport water, bottom ash transport water, and flue gas desulfurization (FGD) wastewater, among others. On June 6, 2017, the EPA published in the Federal Register a proposed rule to postpone certain applicable deadlines within the ELG rule. The final rule was published on September 18, 2017, which extended the earliest compliance deadlines for the FGD wastewater and bottom ash transport until November 1, 2020 in order for the EPA to propose and finalize a new ruling. The ELG compliance requirements, final deadlines, and compliance costs will not be known until the EPA completes its reconsideration of the ELG Rule.
Air — DTE Electric is subject to the EPA ozone and fine particulate transport, and acid rain regulations that limit power plant emissions of sulfur dioxide and nitrogen oxides. The EPA and the State of Michigan have also issued emission reduction regulations relating to ozone, fine particulate, regional haze, mercury, and other air pollution. These rules have led to emission controls on fossil-fueled power plants to reduce nitrogen oxides, sulfur dioxide, mercury, and other emissions. These rulemakings could require additional controls for sulfur dioxide, nitrogen oxides, and other hazardous air pollutants over the next few years. DTE Electric does not anticipate additional capital expenditures to comply with air pollution requirements through 2024, pending the results of future rulemakings.
The EPA has implemented regulatory actions under the Clean Air Act to address emissions of GHGs from the utility sector and other sectors of the economy. Among these actions, the EPA has finalized performance standards for emissions of carbon dioxide from new and existing EGUs. The carbon standards for new sources are not expected to have a material impact on DTE Electric, since DTE Electric has no plans to build new coal-fired generation and any potential new gas generation will be able to comply with the standards. In February 2016, the U.S. Supreme Court granted petitioners' requests for a stay of the carbon rules for existing EGUs (also known as the EPA Clean Power Plan) pending final review by the courts. The Clean Power Plan has no legal effect while the stay is in place. In October 2017, the EPA issued a proposal to repeal the Clean Power Plan, and a notice that it is intending to issue an ANPR that may create a replacement rule for the Clean Power Plan. It is not possible to determine the potential impact of the EPA's repeal, and potential replacement of the Clean Power Plan on existing sources at this time.
Pending or future legislation or other regulatory actions could have a material impact on DTE Electric's operations and financial position and the rates charged to its customers. Impacts include expenditures for environmental equipment beyond what is currently planned, financing costs related to additional capital expenditures, the purchase of emission credits from market sources, higher costs of purchased power, and the retirement of facilities where control equipment is not economical. DTE Electric would seek to recover these incremental costs through increased rates charged to its utility customers, as authorized by the MPSC.
See Management’s Discussion and Analysis in Item 7 of this Report and Notes 8, 9, and 1819 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," and "Commitments and Contingencies."
EMPLOYEESHUMAN CAPITAL MANAGEMENT
DTE Energy and its subsidiaries had approximately 10,20010,600 employees as of December 31, 2017,2020, of which approximately 5,0005,200 were represented by unions. DTE Electric had approximately 4,7004,800 employees as of December 31, 2017,2020, of which approximately 2,7002,800 were represented by unions. ThereThis workforce is comprised almost entirely of full-time employees. DTE Energy and utilities across the country are managing the turnover of our workforce due to a significant number of retirements expected in the next ten years - a period that will be impacted by major transformation of our business through technology investments, regulatory changes to our electric generation portfolio, and upgrades to our distribution infrastructure. Amidst this challenge, DTE is working to build a culture of highly engaged employees with skills and expertise in science, technology, engineering, math, analytics, and skilled trades, which are in high demand and critical to our industry. To attract and retain the best talent, DTE Energy promotes the engagement of its employees through diversity, equity, and inclusion, health and safety, and compensation and benefits.
Diversity, Equity, and Inclusion (DEI) DTE is committed to building a diverse, empowered, and engaged team that delivers safe, reliable service and energy to our customers. A diverse workforce and inclusive culture contributes to DTE's success and sustainability by driving innovation and creating trusted relationships with employees, customers, suppliers, and community partners. By tapping into the talent, unique perspectives, and cultural and life experiences of every employee, DTE can ensure its continued success. DTE measures DEI performance in several bargaining unitsways: •Diversity of candidates, hires, high potential talent, and leadership promotions •Workforce representation of women, minorities, veterans, and employees with disabilities •Employee engagement, including specific elements that measure a culture of inclusion •Number of DEI related communications •Supplier diversity spend •Rankings and scores from DEI benchmarking surveys •Formal training programs, including unconscious bias training for employees and leaders •Salary analysis of women and minorities compared to non-minorities Health and Safety The health and safety of people is DTE Energy's top priority - for employees, contractors, customers, and everyone in the community DTE Energy serves. DTE Energy's safety culture is maintained and strengthened with the help of multiple safety committees spanning all levels of the company. Members include union representatives, DTE Energy executives, office workers, and field employees. All workplace injuries and incidents that could have caused an injury are documented and thoroughly reviewed for potential preventive measures. Employees know they are responsible for their own safety and the safety of everyone around them. DTE Energy also administers regular safety training. Hazardous work is identified and categorized according to risk and training is provided to mitigate risk of any serious injuries. DTE Energy monitors its safety performance by reviewing the rate of safety incidents, as defined by the Office of Safety and Health Administration (OSHA), and the rate of Days Away, Restricted, or Transferred (DART). DTE Energy is also committed to providing employees with the resources they need to lead healthier lifestyles, including an on-site clinic and fitness center. DTE Energy offers a Healthy Living Program to complete both an annual physical with biometric screenings and a Health Risk Assessment to avoid a medical premium surcharge, and offers participation in health education on disease management programs. COVID-19 Response During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and the other service territories throughout the United States in which DTE Energy operates. DTE Energy took quick action to ensure the safety and well-being of its employees. DTE Energy has successfully implemented work from home for over half of its employees and implemented extensive new safety procedures to ensure plant and employee safety, including the use of personal protective equipment, contact tracing, and cleaning of facilities. At the onset of the pandemic, DTE Energy temporarily paused all non-critical business activities. For the essential workers most critical to our continued operations, DTE Energy sequestered certain employees to protect their health and to ensure safe and reliable gas and electric service for DTE Energy subsidiaries' represented employees. The majority of representedcustomers. To further support employees for bothduring the pandemic, DTE Energy enhanced communications around its employee assistance programs, established an occupational health call center, and provided clinical case management for cases related to COVID-19.
DTE ElectricEnergy continues to actively monitor risks related to COVID-19 and proper application of our safety protocol. DTE Energy is also committed to providing consistent, transparent communication to employees around safe practices, quarantine and testing protocols, vaccine availability, and timing of safely returning to office work. Compensation and Benefits DTE Energy is committed to offering compensation that is competitive, market driven, and internally equitable. Approximately half of DTE Energy's employees are under contractsrepresented by labor unions through which pay is uniformly determined through collectively bargained agreements regardless of an employee's gender or ethnicity. For non-represented employees, DTE Energy's human resources professionals establish pay ranges for each job classification and work with hiring leaders to make competitive offers within the range to candidates based on objective factors like years of experience and strength of skills relevant to the job. Annually, DTE Energy conducts a review of compensation practices as part of its affirmative action program and makes adjustments as needed to ensure that expirepay is fair and equitable. DTE Energy provides competitive, customizable benefits for all regular full-time and regular part-time employees. Innovative compensation and benefits initiatives at DTE Energy include: •A 401(k) plan/Employee Stock Ownership Plan that is available to all regular full-time and regular part-time employees, including automatic enrollment of new hires, automatic annual escalation of employee 401(k) contributions up to 10% of pay, and 401(k) matching contributions •Competitive health and welfare benefits •Child bonding/parental leave of absence •Additional vacation days available for employee purchase •Competitive incentive plans, which are offered to all non-represented employees to create alignment of corporate and individual goals •Tuition reimbursement Incentive Plans DTE Energy has two primary types of incentives that reward individuals for performance. The incentives are designed to tie compensation to performance and encourage individuals to align their interests with those of the shareholders and customers of the Company. •Annual incentive plans allow DTE Energy to reward individuals with annual cash bonuses for performance against pre-established objectives based on work performed in the prior year. Objectives are aligned with our core priorities and include metrics for employee engagement and safety, customer satisfaction, utility operating excellence, and financial metrics such as earnings per share and cash flows. •Long-term incentive plans allow DTE Energy to grant individuals long-term equity incentives to encourage continued employment with DTE Energy, to accomplish pre-defined long-term performance objectives, and to create shareholder alignment. Metrics include total shareholder return relative to industry peers and balance sheet health. For additional information on the metrics above, please see the "Annual and Long-term Incentives" section of DTE Energy's Proxy Statement. Additionally, refer to DTE Energy’s 2020 Environmental, Social, Governance and 2021.Sustainability report for further information on metrics tracked for DEI, health and safety, and other components of DTE Energy’s human capital management. The report is available through the Investor Relations page of DTE Energy’s website (www.dteenergy.com), and shall not be deemed incorporated by reference into this Form 10-K.
Item 1A. Risk Factors There are various risks associated with the operations of the Registrants' utility businesses and DTE Energy's non-utility businesses. To provide a framework to understand the operating environment of the Registrants, below is a brief explanation of the more significant risks associated with their businesses. Although the Registrants have tried to identify and discuss key risk factors, others could emerge in the future. Each of the following risks could affect performance.
Regulatory, Legislative, and Legal Risks
The Registrants are subject to rate regulation. Electric and gas rates for the utilities are set by the MPSC and the FERC and cannot be changed without regulatory authorization. The Registrants may be negatively impacted by new regulations or interpretations by the MPSC, the FERC, or other regulatory bodies. The Registrants' ability to recover costs may be impacted by the time lag between the incurrence of costs and the recovery of the costs in customers' rates. Regulators also may decide to disallow recovery of certain costs in customers' rates if they determine that those costs do not meet the standards for recovery under current governing laws and regulations. Regulators may also disagree with the Registrants' rate calculations under the various mechanisms that are intended to mitigate the risk to their utilities related to certain aspects of the business. If the Registrants cannot agree with regulators on an appropriate reconciliation of those mechanisms, it may impact the Registrants' ability to recover certain costs through customer rates. Regulators may also decide to eliminate these mechanisms in future rate cases, which may make it more difficult for the Registrants to recover their costs in the rates charged to customers. The Registrants cannot predict what rates the MPSC will authorize in future rate cases. New legislation, regulations, or interpretations could change how the business operates, impact the Registrants' ability to recover costs through rates or the timing of such recovery, or require the Registrants to incur additional expenses. Changes to Michigan's electric retail access program could negatively impact the Registrants' financial performance. The State of Michigan currently experiences a hybrid market, where the MPSC continues to regulate electric rates for DTE Electric customers, while alternative electric suppliers charge market-based rates. MPSC rate orders, and energy legislation enacted by the State of Michigan, have placed a 10% cap on the total potential retail access migration. However, even with the legislated 10% cap on participation, there continues to be legislative and financial risk associated with the electric retail access program. Electric retail access migration is sensitive to market price and full service electric price changes. The Registrants are required under current regulation to provide full service to retail access customers that choose to return, potentially resulting in the need for additional generating capacity. Environmental laws and liability may be costly. The Registrants are subject to, and affected by, numerous environmental regulations. These regulations govern air emissions, water quality, wastewater discharge, and disposal of solid and hazardous waste. Compliance with these regulations can significantly increase capital spending, operating expenses, and plant down times, and can negatively affect the affordability of the rates charged to customers. Uncertainty around future environmental regulations creates difficulty planning long-term capital projects in the Registrants' generation fleet and, for DTE Energy's gas distribution businesses. These laws and regulations require the Registrants to seek a variety of environmental licenses, permits, inspections, and other regulatory approvals. The Registrants could be required to install expensive pollution control measures or limit or cease activities, including the retirement of certain generating plants, based on these regulations. Additionally, the Registrants may become a responsible party for environmental cleanup at sites identified by a regulatory body. The Registrants cannot predict with certainty the amount and timing of future expenditures related to environmental matters because of the difficulty of estimating cleanup costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on potentially responsible parties. The Registrants may also incur liabilities as a result of potential future requirements to address climate change issues. Proposals for voluntary initiatives and mandatory controls are being discussed both in the United States and worldwide to reduce GHGs such as carbon dioxide, a by-product of burning fossil fuels. If increased regulations of GHG emissions are implemented, the operations of DTE Electric's fossil-fueled generation assets may be significantly impacted. Since there can be no assurances that environmental costs may be recovered through the regulatory process, the Registrants' financial performance may be negatively impacted as a result of environmental matters. For DTE Energy, future environmental regulation of natural gas extraction techniques, including hydraulic fracturing, being discussed both at the United States federal level and by some states may affect the profitability of natural gas extraction businesses which could affect demand for, and profitability of, DTE Energy's gas transportation businesses.
The Renewable Portfolio Standard and energy waste reduction may affect the Registrants' business and federal and state fuel standards may affect DTE Energy's non-utility businessesinvestments. The Registrants are subject to existing Michigan, and potential future, federal legislation and regulation requiring them to secure sources of renewable energy. The Registrants have complied with the existing federal and state legislation, but do not know what requirements may not performbe added by federal or state legislation in the future. In addition, the Registrants expect to its expectations. comply with new Michigan legislation increasing the percentage of power required to be provided by renewable energy sources. The Registrants cannot predict the financial impact or costs associated with complying with potential future legislation and regulations. Compliance with these requirements can significantly increase capital expenditures and operating expenses and can negatively affect the affordability of the rates charged to customers. In addition, the Registrants are also required by Michigan legislation to implement energy waste reduction measures and provide energy waste reduction customer awareness and education programs. These requirements necessitate expenditures, and implementation of these programs creates the risk of reducing the Registrants' revenues as customers decrease their energy usage. The Registrants cannot predict how these programs will impact their business and future operating results. DTE Energy's non-utility renewable natural gas investments are also dependent on the federal Renewable Fuel Standard and California's Low Carbon Fuel Standard. Changes to these standards may affect DTE Energy's business and result in lower earnings. DTE Energy's ability to utilize production tax credits may be limited. To reduce U.S. dependence on imported oil, the Internal Revenue Code provides production tax credits as an incentive for taxpayers to produce fuels and electricity from alternative sources. The Registrants generated production tax credits from renewable energy generation and DTE Energy relies on non-utility operations for an increasing portion of earnings. If DTE Energy's currentgenerated production tax credits from renewable gas recovery, reduced emission fuel, and contemplated non-utility investments do not perform at expected levels, DTE Energy could experience diminished earnings and a corresponding decline in shareholder value. DTE Energy relies on cash flows from subsidiaries. DTE Energy is a holding company. Cash flows from the utility and non-utility subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, its ability to pay interest and dividends would be restricted.
Threats of cyber crime, physical security, and terrorism could affect the Registrants' business. The Registrants may be threatened by issues such as cyber crime, physical security, or terrorism that may disrupt the Registrants' operations, and could harm the Registrants' operating results.
Cyber crime, which includes the use of malware, computer viruses, and other means for disruption or unauthorized access against companies, including the Registrants, has increased in frequency, scope, and potential impact in recent years. The Registrants' industry requires the continued operation of sophisticated information technology systems and network infrastructure. Despite implementation of security measures, all of the Registrants' technology systems are vulnerable to disability or failures due to cyber crime, physical security threats, acts of war or terrorism, and other causes.gas production operations. If the Registrants' information technology systemsproduction tax credits were disallowed in whole or in part as a result of an IRS audit or changes in tax law, there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact the Registrants' earnings and cash flows.
Operational Risks The Registrants' electric distribution system and DTE Energy's gas distribution system are subject to fail and they were unable to recover in a timely way, the Registrants may be unable to fulfill critical business functions,risks from their operation, which could reduce revenues, increase expenses, and have a material adverse effect on their business, financial position, and results of operations. The Registrants' electric distribution and DTE Energy’s gas distribution systems are subject to many operational risks. These operational systems and infrastructure have been in service for many years. Equipment, even when maintained in accordance with good utility practices, is subject to operational failure, including events that are beyond the Registrants' business, operating results, and financial condition. In addition, the Registrants' generation plants and electrical distribution facilities, and DTE Energy's gas pipeline and storage facilities, in particular, may be targets of physical security threats or terrorist activities that could disrupt the Registrants' ability to produce or distribute some portion of their products. The Registrants have increased security as a result of past events and may be required by regulators or by the future threat environment to make investments in security that the Registrants cannot currently predict.
Failure to maintain the security of personally identifiable information could adversely affect the Registrants. In connection with the Registrants' businesses, they collect and retain personally identifiable information of their customers, shareholders, and employees. Customers, shareholders, and employees expect that the Registrants will adequately protect their personal information. The regulatory environment surrounding information security and privacy is increasingly demanding. A significant theft, loss, or fraudulent use of customer, shareholder, employee, or Registrant data by cybercrime or otherwise, could adversely impact the Registrants' reputation,control, and could result inrequire significant costs, fines,operation and litigation.
Operation of a nuclear facility subjects the Registrants to risk. Ownership of an operating nuclear generating plant subjects the Registrants to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, changes in federal nuclear regulation, increasedmaintenance expense or capital expenditures to meet industry requirements, and operational factors that can significantly impactoperate efficiently. Because the performance and costRegistrants’ distribution systems are interconnected with those of operating a nuclear facility compared to other generation options. Whilethird parties, the Registrants maintain insurance for various nuclear-related risks, there can be no assurances that such insurance will be sufficient to cover the Registrants' costs in the event of an accident or business interruption at the nuclear generating plant, which may affect the Registrants' financial performance. In addition, while the Registrants have a nuclear decommissioning trust fund to finance the decommissioningoperation of the nuclear generating plant, there canRegistrants’ systems could be no assurances that such fund will be sufficient to fund the cost of decommissioning. A decline in market value of assets held in decommissioning trust funds due to poor investment performanceadversely affected by unexpected or other factors may increase the funding requirements for these obligations. Any increase in funding requirements may have a material impactuncontrollable events occurring on the Registrants’ liquidity, financial position, or resultssystems of operations.such third parties.
Construction and capital improvements to the Registrants' power facilities, DTE Energy's distribution systems and its Gas Storage and Pipelines business subject them to risk. The Registrants are managing ongoing, and planning future, significant construction and capital improvement projects at DTE Electric'sthe Registrants' multiple power generation and distribution facilities, at DTE Energy's gas distribution system, and at DTE Energy's Gas Storage and Pipelines business. Many factors that could cause delays or increased prices for these complex projects are beyond the Registrants' control, including the cost of materials and labor, subcontractor performance, timing and issuance of necessary permits or approvals (including required certificates from regulatory agencies), construction disputes, impediments to acquiring rights-of-way or land rights on a timely basis and on acceptable terms, cost overruns, and weather conditions. Failure to complete these projects on schedule and on budget for any reason could adversely affect the Registrants' financial performance, operations, or expected investment returns at the affected facilities, businesses and development projects.
Operation of a nuclear facility subjects the Registrants to risk. Ownership of an operating nuclear generating plant subjects the Registrants to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, changes in federal nuclear regulation, increased capital expenditures to meet industry requirements, and operational factors that can significantly impact the performance and cost of operating a nuclear facility compared to other generation options. Insurance maintained by the Registrants for various nuclear-related risks may not be sufficient to cover the Registrants' costs in the event of an accident or business interruption at the nuclear generating plant, which may affect the Registrants' financial performance. In addition, the Registrants' nuclear decommissioning trust fund, to finance the decommissioning of the nuclear generating plant, may not be sufficient to fund the cost of decommissioning. A decline in market value of assets held in decommissioning trust funds due to poor investment performance or other factors may increase the funding requirements for these obligations. Any increase in funding requirements may have a material impact on the Registrants’ liquidity, financial position, or results of operations.
The supply and/or price of energy commodities and/or related services may impact the Registrants' financial results. The Registrants are dependent on coal for much of their electrical generating capacity.capacity as well as uranium for their nuclear operations. DTE Energy's access to natural gas supplies is critical to ensure reliability of service for utility gas customers. DTE Energy's non-utility businesses are also dependent upon supplies and prices of energy commodities and services. Price fluctuations, fuel supply disruptions, and changes in transportation costs, could have a negative impact on the amounts DTE Electric charges utility customers for electricity and DTE Gas charges utility customers for gas, and on the profitability of DTE Energy's non-utility businesses. The Registrants haveRegistrants' hedging strategies and regulatory recovery mechanisms in placemay be insufficient to mitigate some of the negative fluctuations in commodity supply prices inat their utility and, foror DTE Energy,Energy's non-utility businesses, but there can be no assurances thatand the Registrants' financial performance will notmay therefore be negatively impacted by price fluctuations. The price of energy also impacts the market for DTE Energy's non-utility businesses, particularly those that compete with utilities and alternative electric suppliers.suppliers as well as midstream services that depend on the demand for natural gas. The supply and/or price of other industrial raw and finished inputs and/or related services may impact the Registrants' financial results. The Registrants are dependent on supplies of certain commodities, such as copper and limestone, among others, and industrial materials, and services in order to maintain day-to-day operations and maintenance of their facilities. Price fluctuations, or supply interruptions for these commodities and other items, could have a negative impact on the amounts charged to customers for the Registrants' utility products and, for DTE Energy, on the profitability of the non-utility businesses. Emerging technologiesWeather significantly affects operations. At both utilities, deviations from normal hot and cold weather conditions affect the Registrants' earnings and cash flows. Mild temperatures can result in decreased utilization of the Registrants' assets, lowering income and cash flows. At DTE Electric, ice storms, tornadoes, or high winds can damage the electric distribution system infrastructure and power generation facilities and require it to perform emergency repairs and incur material unplanned expenses. The expenses of storm restoration efforts may not be fully recoverable through the regulatory process. DTE Gas can experience higher than anticipated expenses from emergency repairs on its gas distribution infrastructure required as a result of weather-related issues.
Unplanned power plant outages may be costly. Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. As a result of unforeseen maintenance, the Registrants may be required to make spot market purchases of electricity that exceed the costs of generation. The Registrants' financial performance may be negatively affected if unable to recover such increased costs. A work interruption may adversely affect the Registrants. There are several bargaining units for DTE Energy's approximately 5,200 and DTE Electric's approximately 2,800 represented employees. The majority of represented employees are under contracts that expire in 2021 and 2022. A union choosing to strike would have a material adverse effectan impact on the Registrants' businesses. The Registrants. Advances in technology that produce power or reduce power consumption include cost-effective renewable energy technologies, distributed generation, energy efficiency technologies, and energy storage devices. Such developments may impact are unable to predict the price of energy, may affect energy deliveries as customer-owned generation becomes more cost-effective, may require further improvements to our distribution systems to address changing load demands, and could make portions of our electric system power supply and/or distribution facilities obsolete prior to the end ofeffect a work stoppage would have on their useful lives. Such technologies could also result in further declines in commodity prices or demand for delivered energy. Each of these factors could materially affect the Registrants’ resultscosts of operations cash flows, orand financial position.performance. Financial, Economic, and Market Risks DTE Energy's non-utility businesses may not perform to its expectations. DTE Energy relies on non-utility operations for a significant portion of earnings. If DTE Energy's current and contemplated non-utility investments do not perform at expected levels, DTE Energy could experience diminished earnings and a corresponding decline in shareholder value.
Adverse changes in the Registrants' credit ratings may negatively affect them. Regional and national economic conditions, increased scrutiny of the energy industry and regulatory changes, as well as changes in the Registrants' economic performance, could result in credit agencies reexamining their credit ratings. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in the Registrants' credit ratings below investment grade could restrict or discontinue their ability to access capital markets and could result in an increase in their borrowing costs, a reduced level of capital expenditures, and could impact future earnings and cash flows. In addition, a reduction in the Registrants' credit ratings may require them to post collateral related to various physical or financially settled contracts for the purchase of energy-related commodities, products, and services, which could impact their liquidity. Poor investment performance of pension and other postretirement benefit plan assets and other factors impacting benefit plan costs could unfavorably impact the Registrants' liquidity and results of operations. The Registrants' costs of providing non-contributory defined benefit pension plans and other postretirement benefit plans are dependent upon a number of factors, such as the rates of return on plan assets, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation, and the Registrants' required or voluntary contributions made to the plans. The performance of the debt and equity markets affects the value of assets that are held in trust to satisfy future obligations under the Registrants' plans. The Registrants have significant benefit obligations and hold significant assets in trust to satisfy these obligations. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below the Registrants' projected return rates. A decline in the market value of the pension and other postretirement benefit plan assets will increase the funding requirementsneeds under the pension and other postretirement benefit plans if the actual asset returns do not recover these declines in the foreseeable future. Additionally, the pension and other postretirement benefit plan liabilities are sensitive to changes in interest rates. AsIf interest rates decrease, the liabilities increase, resulting in increasing benefit expense and funding requirements.needs. Also, if future increases in pension and other postretirement benefit costs as a result of reduced plan assets are not recoverable from the Registrants' utility customers, the results of operations and financial position of the Registrants could be negatively affected. Without sustained growth in the plan investments over time to increase the value of plan assets, the Registrants could be required to fund these plans with significant amounts of cash. Such cash funding obligations could have a material impact on the Registrants' cash flows, financial position, or results of operations.
The Registrants' ability to access capital markets is important. The Registrants' ability to access capital markets is important to operate their businesses and to fund capital investments. Turmoil in credit markets may constrain the Registrants' ability, as well as the ability of their subsidiaries, to issue new debt, including commercial paper, and refinance existing debt at reasonable interest rates. In addition, the level of borrowing by other energy companies and the market as a whole could limit the Registrants' access to capital markets. The Registrants' long-term revolving credit facilities do not expire until 2022,2024, but the Registrants regularly access capital markets to refinance existing debt or fund new projects at the Registrants' utilities and DTE Energy's non-utility businesses, and the Registrants cannot predict the pricing or demand for those future transactions. Emerging technologies may have a material adverse effect on the Registrants. Advances in technology that produce power or reduce power consumption include cost-effective renewable energy technologies, distributed generation, energy waste reduction technologies, and energy storage devices. Such developments may impact the price of energy, may affect energy deliveries as customer-owned generation becomes more cost-effective, may require further improvements to our distribution systems to address changing load demands, and could make portions of our electric system power supply and/or distribution facilities obsolete prior to the end of their useful lives. Such technologies could also result in further declines in commodity prices or demand for delivered energy. Each of these factors could materially affect the Registrants’ results of operations, cash flows, or financial position. DTE Energy's participation in energy trading markets subjects it to risk. Events in the energy trading industry have increased the level of scrutiny on the energy trading business and the energy industry as a whole. In certain situations, DTE Energy may be required to post collateral to support trading operations, which could be substantial. If access to liquidity to support trading activities is curtailed, DTE Energy could experience decreased earnings potential and cash flows. Energy trading activities take place in volatile markets and expose DTE Energy to risks related to commodity price movements, deviations in weather, and other related risks. DTE Energy's trading business routinely has speculative trading positions in the market, within strict policy guidelines DTE Energy sets, resulting from the management of DTE Energy's business portfolio. To the extent speculative trading positions exist, fluctuating commodity prices can improve or diminish DTE Energy's financial results and financial position. DTE Energy manages its exposure by establishing and enforcing strict risk limits and risk management procedures. During periods of extreme volatility, these risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities. DTE Energy's ability to utilize production tax credits may be limited. To reduce U.S. dependence on imported oil, the Internal Revenue Code provides production tax credits as an incentive for taxpayers to produce fuels and electricity from alternative sources. DTE Energy generated production tax credits from coke production, landfill gas recovery, reduced emission fuel, renewable energy generation, and gas production operations. If DTE Energy's production tax credits were disallowed in whole or in part as a result of an IRS audit or changes in tax law there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact DTE Energy's earnings and cash flows.
Weather significantly affects operations. At both utilities, deviations from normal hot and cold weather conditions affect the Registrants' earnings and cash flows. Mild temperatures can result in decreased utilization of the Registrants' assets, lowering income and cash flows. At DTE Electric, ice storms, tornadoes, or high winds can damage the electric distribution system infrastructure and power generation facilities and require it to perform emergency repairs and incur material unplanned expenses. The expenses of storm restoration efforts may not be fully recoverable through the regulatory process. DTE Gas can experience higher than anticipated expenses from emergency repairs on its gas distribution infrastructure required as a result of weather related issues.
Unplanned power plant outages may be costly. Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. As a result of unforeseen maintenance, the Registrants may be required to make spot market purchases of electricity that exceed the costs of generation. The Registrants' financial performance may be negatively affected if unable to recover such increased costs.
Renewable portfolio standards and energy efficiency programs may affect the Registrants' business. The Registrants are subject to existing Michigan, and potential future, federal legislation and regulation requiring them to secure sources of renewable energy. The Registrants have complied with the existing federal and state legislation, but do not know what requirements may be added by federal or state legislation in the future. In addition, the Registrants expect to comply with new Michigan legislation increasing the percentage of power required to be provided by renewable energy sources. The Registrants cannot predict the financial impact or costs associated with complying with potential future legislation and regulations. Compliance with these requirements can significantly increase capital expenditures and operating expenses and can negatively affect the affordability of the rates charged to customers.
The Registrants are also required by Michigan legislation to implement energy efficiency measures and provide energy efficiency customer awareness and education programs. These requirements necessitate expenditures, and implementation of these programs creates the risk of reducing the Registrants' revenues as customers decrease their energy usage. The Registrants cannot predict how these programs will impact their business and future operating results.
Regional, national, and international economic conditions can have an unfavorable impact on the Registrants. The Registrants' utility and DTE Energy's non-utility businesses follow the economic cycles of the customers they serve and credit risk of counterparties they do business with. Should the financial conditions of some of DTE Energy's significant customers deteriorate as a result of regional, national or international economic conditions, reduced volumes of electricity and gas, and demand for energy services DTE Energy supplies, collections of accounts receivable, reductions in federal and state energy assistance funding, and potentially higher levels of lost gas or stolen gas and electricity could result in decreased earnings and cash flows. If DTE Energy's goodwill or other intangible assets become impaired, it may be required to record a charge to earnings. DTE Energy annually reviews the carrying value of goodwill associated with acquisitions it has made for impairment. Goodwill and other intangible assets are also reviewed on a quarterly basis whenever events or circumstances indicate that the carrying value of these assets may not be recoverable. Factors that may be considered for purposes of this analysis include a decline in stock price and market capitalization, slower industry growth rates, or material changes with customers or contracts that could negatively impact future cash flows. DTE Energy cannot predict the timing, strength, or duration of such changes or any subsequent recovery. If the carrying value of any goodwill or other intangible assets are determined to be not recoverable, DTE Energy may take a non-cash impairment charge, which could materially impact DTE Energy's results of operations and financial position. The Registrants may not be fully covered by insurance. The Registrants have a comprehensive insurance program in place to provide coverage for various types of risks, including catastrophic damage as a result of severe weather or other natural disasters, war, terrorism, cyber incidents, or a combination of other significant unforeseen events that could impact the Registrants' operations. Economic losses might not be covered in full by insurance, or the Registrants' insurers may be unable to meet contractual obligations. Safety and Security Risks The Registrants' businesses have safety risks. The Registrants' electric distribution system, power plants, renewable energy equipment, and other facilities, and DTE Energy's gas distribution system, gas infrastructure, and other facilities, could be involved in incidents that result in injury, death, or property loss to employees, customers, third parties, or the public. Although the Registrants have insurance coverage for many potential incidents, depending upon the nature and severity of any incident, they could experience financial loss, damage to their reputation, and negative consequences from regulatory agencies or other public authorities. Threats of cyber incidents, physical security, and terrorism could affect the Registrants' business. Issues may threaten the Registrants such as cyber incidents, physical security, or terrorism that may disrupt the Registrants' operations, and could harm the Registrants' operating results. Information security risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication and frequency of cyberattacks, and data security breaches. The Registrants' industry requires the continued operation of sophisticated information and control technology systems and network infrastructure. All of the Registrants' technology systems are vulnerable to disability or failures due to cyber incidents, physical security threats, acts of war or terrorism, and other causes, as well as loss of operational control of the Registrants' electric generation and distribution assets and, DTE Energy's gas distribution assets. If the Registrants' information technology systems were to fail and they were unable to recover in a timely way, the Registrants may be unable to fulfill critical business functions, which could have a material adverse effect on the Registrants' business, operating results, and financial condition. Suppliers, vendors, contractors, and information technology providers have access to systems that support the Registrants’ operations and maintain customer and employee data. A breach of these third-party systems could adversely affect the business as if it was a breach of our own system. Also, because the Registrants’ generation and distribution systems are part of an interconnected system, a disruption caused by a cyber incident at another utility, electric generator, system operator, or commodity supplier could also adversely affect the Registrants’ businesses, operating results, and financial condition. In addition, the Registrants' generation plants and electrical distribution facilities, and DTE Energy's gas pipeline and storage facilities in particular, may be targets of physical security threats or terrorist activities that could disrupt the Registrants' ability to produce or distribute some portion of their products. The Registrants have increased security as a result of past events and may be required by regulators or by the future threat environment to make investments in security that the Registrants cannot currently predict.
Failure to maintain the security of personally identifiable information could adversely affect the Registrants. In connection with the Registrants' businesses, they collect and retain personally identifiable information of their customers, shareholders, and employees. Customers, shareholders, and employees expect that the Registrants will adequately protect their personal information. The regulatory environment surrounding information security and privacy is increasingly demanding. A significant theft, loss, or fraudulent use of customer, shareholder, employee, or Registrant data by cybercrime or otherwise, could adversely impact the Registrants' reputation, and could result in significant costs, fines, and litigation. General and Other Risks The COVID-19 pandemic and resulting impact on business and economic conditions could negatively affect the Registrants' businesses and operations. The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets. The continued spread of COVID-19 and efforts to contain the virus, such as quarantines, closures, or reduced operations of businesses, governmental agencies and other institutions, have caused a recession, resulting in disruptions in various public, commercial, and industrial activities and have caused employee absences which interfered with certain operation and maintenance of the Registrants' facilities. Travel bans and restrictions, quarantines, and shelter in place orders could also cause us to experience operational delays, delay the delivery of critical infrastructure and other supplies we source globally, or delay the connection of electric or gas service to new customers, and have reduced the use of electricity and gas by certain customers in the commercial and industrial segments. Certain of our businesses have experienced lower sales volumes, and any of the foregoing circumstances could further adversely affect customer demand or revenues, impact the ability of the Registrants' suppliers, vendors or contractors to perform, or cause other unpredictable events, which could adversely affect the Registrants' businesses, results of operations or financial condition. The continued spread of COVID-19 has also led to disruption and volatility in the financial markets, which could increase the Registrants' costs to fund capital requirements and impact the operating results of our energy trading operations. To the extent that the Registrants' access to the capital markets is adversely affected by COVID-19, the Registrants may need to consider alternative sources of funding for our operations and for working capital, any of which could increase the Registrants' cost of capital. The extent to which COVID-19 may impact the Registrants' liquidity, financial condition, and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the severity of COVID-19 and related variants, vaccine distribution and other actions taken to contain it or treat its impact, and the extent to which normal economic and operating conditions can resume, among others. Our business continuity plans and insurance coverage may be insufficient to mitigate these adverse impacts to our business. In addition, the Registrants’ may be required to suspend shut offs for certain customers which may adversely impact the Registrants’ collections process and have a negative impact on our results of operations, financial condition, and liquidity.
Failure to attract and retain key executive officers and other skilled professional and technical employees could have an adverse effect on the Registrants’ operations. The Registrants' businesses are dependent on their ability to attract and retain skilled employees. Competition for skilled employees in some areas is high, and the inability to attract and retain these employees could adversely affect the Registrants' business and future operating results. In addition, the Registrants have an aging utility workforce, and the failure of a successful transfer of knowledge and expertise could negatively impact their operations. A work interruptionDTE Energy relies on cash flows from subsidiaries. DTE Energy is a holding company. Cash flows from the utility and non-utility subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, its ability to pay interest and dividends would be restricted.
The proposed spin-off of DTE Midstream (the "Proposed Spin-off") may adversely affectnot be completed on the Registrants. Therecurrently contemplated timeline or terms, or at all, and may not achieve the intended benefits. The Proposed Spin-off, if completed, may also present additional risk to DTE Energy. The Proposed Spin-off is subject to conditions, including, without limitation, final DTE Energy Board of Directors approval. Unanticipated developments or changes in market conditions may delay the Proposed Spin-off, and the Proposed Spin-off may not occur on the currently contemplated timeline or at all. DTE Energy cannot predict with certainty when the benefits expected from the Proposed Spin-off will occur or the extent to which they will be achieved, if at all. Furthermore, there are several bargaining units for DTE Energy's approximately 5,000various uncertainties and DTE Electric's approximately 2,700 represented employees. The majorityrisks relating to the process of represented employees are under contractsthe Proposed Spin-off that expire in 2020 and 2021. A union choosing to strike wouldcould have ana negative impact on the Registrants' businesses. The Registrants are unable to predict the effect a work stoppage would have on their costsour financial condition, results of operations, and cash flows, including disruption of our operations and impairment of our relationship with regulators, key personnel, customers, and vendors. If the Proposed Spin-off is successfully completed, DTE Energy will face new and unique risks, including having fewer assets, reduced financial performance. Ifresources and less diversification of revenue sources, which may adversely impact DTE Energy's goodwill becomes impaired, itfinancial condition, results of operations, and cash flows. In addition, the changes in our operational and financial profile may not meet some or all of our shareholders' investment strategies, which could cause investors to sell their DTE Energy shares and otherwise decrease demand for shares of DTE Energy common stock. Excess selling will cause the relative market price of DTE Energy common stock to decrease, and the market price of DTE Energy common stock may be subject to greater volatility following the completion of the Proposed Spin-off.
While DTE Energy does not expect its credit ratings from Standard & Poor's Rating Service, Moody's Investor Service, and Fitch Ratings Inc. to drop below investment grade as a result of completing the Proposed Spin-off, there is no assurance that we will continue to maintain such investment grade credit ratings in the future. If a rating agency were to downgrade our rating below investment grade, our borrowing costs would increase and our funding sources could decrease. In addition, a failure by us to maintain an investment grade rating could affect our business relationships with suppliers and operating partners. The distribution of shares of the new midstream company ("DT Midstream") to DTE Energy shareholders in the Proposed Spin-off is expected to qualify as tax-free under Section 355 of the U.S. Internal Revenue Code. However, if the IRS determined on audit that the distribution is taxable, both DTE Energy and our shareholders could incur significant U.S. federal income tax liabilities. Following the Proposed Spin-off, the management and directors each of DTE Energy and DT Midstream may own common stock in both companies and Robert Skaggs, Jr., who will be a member of DT Midstream's Board, also serves on DTE Energy's Board and may be required to record a chargerecuse himself from deliberations relating to earnings. arrangements between DTE Energy annually reviewsand DT Midstream in the carrying valuefuture. This ownership and directorship overlap could create, or appear to create, potential conflicts of goodwill associated with acquisitions it has madeinterest when the management and directors of one company face decisions that could have different implications for impairment. Factorsthemselves and the other company. Potential conflicts of interest may also arise out of any commercial arrangements that may be considered for purposes of this analysis include any change in circumstances indicating that the carrying value of DTE Energy goodwilland DT Midstream may not be recoverable, such as a decline in stock price and market capitalization, future cash flows, and slower growth ratesenter into in the industry. DTE Energy cannot predict the timing, strength, or duration of any economic slowdown or subsequent recovery, worldwide or in the economy or markets in which it operates; however, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable, DTE Energy may take a non-cash impairment charge, which could potentially materially impact DTE Energy's results of operations and financial position.future. The Registrants' businesses have safety risks. The Registrants' electric distribution system, power plants, renewable energy equipment, and other facilities, and DTE Energy's gas distribution system, gas infrastructure, and other facilities, could be involved in incidents that result in injury, death, or property loss to employees, customers, or the public. Although the Registrants have insurance coverage for many potential incidents, depending upon the nature and severity of any incident, they could experience financial loss, damage to their reputation, and negative consequences from regulatory agencies or other public authorities.
The Registrants may not be fully covered by insurance. The Registrants have a comprehensive insurance program in place to provide coverage for various types of risks, including catastrophic damage as a result of severe weather or other natural disasters, war, terrorism, or a combination of other significant unforeseen events that could impact the Registrants' operations. Economic losses might not be covered in full by insurance, or the Registrants' insurers may be unable to meet contractual obligations.
Item 1B. Unresolved Staff Comments None.
Item 3. Legal Proceedings The Yolo-Solano Air Quality Management District issued nine notices of violation alleging that Woodland Biomass Power, LLC, which operates a renewable wood-fired power generation facility, failed a 2016 source test that was to demonstrate compliance with the facility’s PM-10 lb/hr daily emission permit limit, violated NOx annual emission permit limits in 2013 and 2015 and related record keeping and reporting violations, failed a 2017 source test that was to demonstrate compliance with the facility’s NOx lb/hr emission permit limit, and a fugitive dust violation that occurred in 2017. On January 5, 2018, Woodland Biomass Power, LLC paid a final settlement of $525,000 to resolve all the notice of violation issues.
An FOV was issued by the EPA to DTE Electric in 2017 alleging violations related to exceedances of the mercury emission limits for the Monroe Power Plant. DTE Electric is currently working with the EPA to address the alleged violations. At this time, DTE Electric cannot predict the impact of the final settlement.
For more information on legal proceedings and matters related to the Registrants, see Notes 910 and 1819 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters" and "Commitments and Contingencies," respectively.
For environmental proceedings in which the government is a party, the Registrants have included disclosures if any sanctions of $1 million or greater are expected.
Item 4. Mine Safety Disclosures Not applicable.
Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities DTE Energy common stock is listed under the ticker symbol "DTE" on the New York Stock Exchange, which is the principal market for such stock. The following table indicates the reported high and low sales prices of DTE Energy common stock on the Composite Tape of the New York Stock Exchange and dividends declared per share for each quarterly period during the past two years: | | | | | | | | | | | | | | | | | | | | | | | | | Dividends
Declared per Share | | Year | | Quarter | | High | | Low | | | 2017 | | | | | | | | | | | | First | | $ | 102.96 |
| | $ | 96.56 |
| | $ | 0.8250 |
| | | | Second | | $ | 111.35 |
| | $ | 100.97 |
| | $ | 0.8250 |
| | | | Third | | $ | 113.71 |
| | $ | 104.19 |
| | $ | 0.8250 |
| | | | Fourth | | $ | 116.74 |
| | $ | 106.21 |
| | $ | 0.8825 |
| | 2016 | | | | | | | | | | | | First | | $ | 91.00 |
| | $ | 78.01 |
| | $ | 0.7300 |
| | | | Second | | $ | 99.13 |
| | $ | 84.77 |
| | $ | 0.7300 |
| | | | Third | | $ | 100.45 |
| | $ | 90.61 |
| | $ | 0.7700 |
| | | | Fourth | | $ | 99.92 |
| | $ | 89.66 |
| | $ | 0.8250 |
|
At December 31, 2017,2020, there were 179,386,967193,770,617 shares of DTE Energy common stock outstanding. These shares were held by a total of 53,43747,485 shareholders of record. DTE Energy paid cash dividends on common stock of $592 million in 2017, $531 million in 2016, and $501 million in 2015. The amount of future dividends will depend on DTE Energy's earnings, cash flows, financial condition, and other factors that are periodically reviewed by the DTE Energy Board of Directors. Although there can be no assurances, DTE Energy anticipates paying dividends for the foreseeable future.
All of the 138,632,234138,632,324 issued and outstanding shares of DTE Electric common stock, par value $10 per share, are ownedindirectly-owned by DTE Energy, and constitute 100% of the voting securities of DTE Electric. Therefore, no market exists for DTE Electric's common stock. DTE Electric paid cash dividends on common stock of $432 million in 2017, $420 million in 2016, and $395 million in 2015.
For information on DTE Energy dividend restrictions, see Note 1617 to the Consolidated Financial Statements in Item 8 of this Report, "Short-Term Credit Arrangements and Borrowings." All of DTE Energy's equity compensation plans that provide for the annual awarding of stock-based compensation have been approved by shareholders. For additional detail, see Note 2122 to the Consolidated Financial Statements in Item 8 of this Report, "Stock-Based Compensation." See the following table for information as of December 31, 2017:2020: | | | | | | | | | | | | | Number of Securities to be Issued Upon Exercise of Outstanding Options | | Weighted-Average Exercise Price of Outstanding Options | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | Plans approved by shareholders | 105,994 |
| | $ | 42.95 |
| | 1,437,769 |
|
| | | | | | | | | | | | | | | | | | | Number of Securities to be Issued Upon Exercise of Outstanding Options | | Weighted-Average Exercise Price of Outstanding Options | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | Plans approved by shareholders | — | | | $ | — | | | 1,393,916 | |
UNREGISTERED SALES OF DTE ENERGY EQUITY SECURITIES AND USE OF PROCEEDS Purchases of DTE Energy Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about DTE Energy's purchases of equity securities that are registered by DTE Energy pursuant to Section 12 of the Exchange Act of 1934 for the quarter ended December 31, 2017:2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of Shares Purchased(a) | | Average Price
Paid per Share(a) | | Number of Shares Purchased as Part of Publicly Announced
Plans or Programs | | Average Price Paid per Share | | Maximum Dollar
Value that May
Yet Be Purchased Under the Plans or Programs | | 10/01/2020 — 10/31/2020 | 11,165 | | | $ | 130.43 | | | — | | | — | | | — | | | 11/01/2020 — 11/30/2020 | 791 | | | $ | 120.57 | | | — | | | — | | | — | | | 12/01/2020 — 12/31/2020 | 686 | | | $ | 125.02 | | | — | | | — | | | — | | | Total | 12,642 | | | | | — | | | | | |
(a)Represents shares of DTE Energy common stock withheld to satisfy income tax obligations upon the vesting of restricted stock based on the price in effect at the grant date.
| | | | | | | | | | | | | | | | | | | Number of Shares Purchased(a) | | Average Price
Paid per Share(a) | | Number of Shares Purchased as Part of Publicly Announced
Plans or Programs | | Average Price Paid per Share | | Maximum Dollar
Value that May
Yet Be Purchased Under the Plans or Programs | | 10/01/2017 — 10/31/2017 | 3,269 |
| | $ | 99.19 |
| | — |
| | — |
| | — |
| | 11/01/2017 — 11/30/2017 | — |
| | $ | — |
| | — |
| | — |
| | — |
| | 12/01/2017 — 12/31/2017 | 1,300 |
| | $ | 89.46 |
| | — |
| | — |
| | — |
| | Total | 4,569 |
| | |
| | — |
| | |
| | |
|
| | (a) | Represents shares of DTE Energy common stock withheld to satisfy income tax obligations upon the vesting of restricted stock based on the price in effect at the grant date. |
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN Total Return to DTE Energy Shareholders (Includes reinvestment of dividends) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Return Percentage
Year Ended December 31, | | Company/Index | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 26.93 | | | 14.59 | | | 4.19 | | | 21.36 | | | (2.90) | | | S&P 500 Index | | 11.95 | | | 21.82 | | | (4.39) | | | 31.48 | | | 18.39 | | | S&P 500 Multi-Utilities Index | | 18.56 | | | 12.09 | | | 1.77 | | | 24.36 | | | (5.87) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Indexed Returns
Year Ended December 31, | | | Base Period | | | | | | | | | | | | Company/Index | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 100.00 | | | 126.93 | | | 145.44 | | | 151.54 | | | 183.91 | | | 178.57 | | | S&P 500 Index | | 100.00 | | | 111.95 | | | 136.38 | | | 130.39 | | | 171.44 | | | 202.96 | | | S&P 500 Multi-Utilities Index | | 100.00 | | | 118.56 | | | 132.89 | | | 135.24 | | | 168.18 | | | 158.31 | |
| | | | | | | | | | | | | | | | | | | | Annual Return Percentage
Year Ended December 31, | | Company/Index | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | DTE Energy Company | | 14.89 |
| | 34.61 |
| | (3.77 | ) | | 26.93 |
| | 14.59 |
| | S&P 500 Index | | 32.39 |
| | 13.69 |
| | 1.38 |
| | 11.95 |
| | 21.82 |
| | S&P 500 Multi-Utilities Index | | 17.88 |
| | 28.94 |
| | (1.73 | ) | | 18.56 |
| | 12.09 |
|
| | | | | | | | | | | | | | | | | | | | | | | Indexed Returns
Year Ended December 31, | | | | Base Period | | | | | | | | | | | | Company/Index | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | DTE Energy Company | | 100 |
| | 114.89 |
| | 154.65 |
| | 148.82 |
| | 188.89 |
| | 216.45 |
| | S&P 500 Index | | 100 |
| | 132.39 |
| | 150.51 |
| | 152.59 |
| | 170.83 |
| | 208.11 |
| | S&P 500 Multi-Utilities Index | | 100 |
| | 117.88 |
| | 151.99 |
| | 149.36 |
| | 177.08 |
| | 198.49 |
|
Item 6. Selected Financial Data The following selected financial data of DTE Energy should be read in conjunction with the accompanying Management’s Discussion and Analysis in Item 7 of this Report and Combined Notes to Consolidated Financial Statements in Item 8 of this Report. This information has been omitted for DTE Electric per General Instruction I (2) (a) of Form 10-K for wholly-owned subsidiaries (reduced disclosure format). | | | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | | (In millions, except per share amounts) | | (In millions, except per share amounts) | | Operating Revenues | $ | 12,607 |
| | $ | 10,630 |
| | $ | 10,337 |
| | $ | 12,301 |
| | $ | 9,661 |
| Operating Revenues | $ | 12,177 | | | $ | 12,669 | | | $ | 14,212 | | | $ | 12,607 | | | $ | 10,630 | | | Net Income Attributable to DTE Energy Company(a) | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
| | $ | 905 |
| | $ | 661 |
| Net Income Attributable to DTE Energy Company(a) | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | $ | 1,134 | | | $ | 868 | | | | Diluted Earnings Per Common Share | $ | 6.32 |
| | $ | 4.83 |
| | $ | 4.05 |
| | $ | 5.10 |
| | $ | 3.76 |
| Diluted Earnings Per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | | | $ | 6.32 | | | $ | 4.83 | | | Financial Information | | | | | | | | | | Financial Information | | | Dividends declared per share of common stock | $ | 3.36 |
| | $ | 3.06 |
| | $ | 2.84 |
| | $ | 2.69 |
| | $ | 2.59 |
| Dividends declared per share of common stock | $ | 4.12 | | | $ | 3.85 | | | $ | 3.60 | | | $ | 3.36 | | | $ | 3.06 | | Total Assets(b) | $ | 33,767 |
| | $ | 32,041 |
| | $ | 28,662 |
| | $ | 27,827 |
| | $ | 25,864 |
| Total Assets(b) | $ | 45,496 | | | $ | 42,268 | | | $ | 36,288 | | | $ | 33,767 | | | $ | 32,041 | | Long-Term Debt(b)(c) | $ | 12,185 |
| | $ | 11,269 |
| | $ | 8,760 |
| | $ | 8,271 |
| | $ | 7,143 |
| | Shareholders’ equity(b) | $ | 9,512 |
| | $ | 9,011 |
| | $ | 8,772 |
| | $ | 8,327 |
| | $ | 7,921 |
| | Long-Term Debt(c) | | Long-Term Debt(c) | $ | 19,001 | | | $ | 15,935 | | | $ | 12,134 | | | $ | 12,185 | | | $ | 11,269 | | | Total DTE Energy Company Equity | | Total DTE Energy Company Equity | $ | 12,425 | | | $ | 11,672 | | | $ | 10,237 | | | $ | 9,512 | | | $ | 9,011 | |
| | (a) | The 2017 results include a $105 million net income tax benefit related to the enactment of the TCJA. |
| | (b) | In October 2016, DTE Energy closed on an acquisition of midstream natural gas assets that are part of the Gas Storage and Pipelines segment. See Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities," for additional information. |
| | (c) | Long-Term Debt includes Capital lease obligations and excludes debt due within one year. |
(a)The 2017 results include a $105 million net income tax benefit related to the enactment of the TCJA.
(b)The 2019 increase includes $2.8 billion of Blue Union and LEAP assets acquired in December 2019. Refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions,” for additional information. (c)Long-Term Debt includes Finance lease obligations and excludes debt due within one year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following combined discussion is separately filed by DTE Energy and DTE Electric. However, DTE Electric does not make any representations as to information related solely to DTE Energy or the subsidiaries of DTE Energy other than itself.
EXECUTIVE OVERVIEW DTE Energy is a diversified energy company with 20172020 Operating Revenues of approximately $12.6$12.2 billion and Total Assets of approximately $33.8$45.5 billion. DTE Energy is the parent company of DTE Electric and DTE Gas, regulated electric and natural gas utilities engaged primarily in the business of providing electricity and natural gas sales, distribution, and storage services throughout Michigan. DTE Energy also operates three energy-related non-utility segments with operations throughout the United States. The following table summarizes DTE Energy's financial results: | | | | Years Ended December 31, | | Years Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions, except per share amounts) | | (In millions, except per share amounts) | | Net Income Attributable to DTE Energy Company | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
| Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | Diluted Earnings per Common Share | $ | 6.32 |
| | $ | 4.83 |
| | $ | 4.05 |
| Diluted Earnings per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | |
The increase in 20172020 Net Income Attributable to DTE Energy Company iswas primarily due to higher earnings in the Electric, Gas Storage and Pipelines, Energy Trading, and PowerCorporate and Industrial ProjectsOther segments, partially offset by lower earnings in the Corporate and OtherEnergy Trading segment. The 2017 increase is also due to $105 million of net income tax benefit related to the enactment of the TCJA. The increase in 20162019 Net Income Attributable to DTE Energy Company is primarilywas due to higher earnings in the Electric, Gas, Energy Trading, and Corporate and Other segments, partially offset by lower earnings in the Gas Storage and Pipelines and Power and Industrial Projects segments.
COVID-19 Pandemic During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and other service territories throughout the United States in which the Registrants operate. DTE Energy took certain safety precautions including directing employees to work remotely whenever possible and pausing all non-critical business activities. The spread of COVID-19 and efforts to contain the virus resulted in closures and reduced operations of businesses, governmental agencies, and other institutions. Beginning in May 2020, DTE Energy resumed business activities that had been temporarily suspended. Local businesses and other institutions also resumed operations as new cases of COVID-19 began to decline and government restrictions were reduced. Impacts from the COVID-19 pandemic have included a reduction in sales volumes from commercial and industrial customers and an increase in sales volumes from residential customers within the Electric segment. COVID-19 has also impacted the Power and Industrial Projects segment, contributing to lower production in the REF business and lower demand in the Steel business. Operation and maintenance expense has been impacted by COVID-19, primarily in the Electric segment, due to higher costs for personal protective equipment and other health and safety-related costs, including shift premiums and related expenses associated with the sequestration of certain employees critical to continued operations. The Registrants implemented certain cost savings initiatives to offset some of these impacts, to the extent they did not affect safety or reliability of service. To date, impacts from the COVID-19 pandemic have not had a material effect on the Registrants' uncollectible expense or capital spend. In addition, the CARES Act was signed into law in March 2020 to assist individuals and employers with the impacts of the COVID-19 pandemic. This legislation resulted in various tax impacts to the Registrants. Refer to Note 11 to the Consolidated Financial Statements in Item 8 of this Report, "Income Taxes," for additional information. Please see detailed explanations of segment performance in the following "Results of Operations" section.section below, including impacts from the COVID-19 pandemic where applicable. Also refer to the "Capital Resources and Liquidity" section for information on the impact of COVID-19 on the Registrants' liquidity and cost of capital. STRATEGY DTE Energy's strategy is to achieve long-term earnings growth, a strong balance sheet, and an attractive dividend yield. DTE Energy's utilities are investing capital to improve customer reliability through investments in base infrastructure and new generation, and to comply with environmental requirements. DTE Energy expects that planned significant capital investments will result in earnings growth. DTE Energy is focused on executing plans to achieve operational excellence and customer satisfaction with a focus on customer affordability. DTE Energy operates in a constructive regulatory environment and has solid relationships with its regulators. In May 2017, DTE Energy announced its planis committed to reduce carbon emissions. This goal will be attained by cuttingthe carbon emissions 30%of its electric utility operations by the early 2020s, 45%32% by 2023, 50% by 2030, 75%and 80% by 2040 from 2005 carbon emissions levels. DTE Energy is also committed to a net zero carbon emissions goal by 2050 for its electric utility, gas utility, and more than 80% by 2050.DTE Midstream operations. To achieve thisthe reduction goals in the near term, DTE Energy will transition away from coal-powered sources and incorporate more renewable energy, energy efficiency,waste reduction projects, demand response, and highly-efficient natural gas fueled power plants.generation. DTE Energy has already begun the transition in the way it produces power through the continued retirement of its aging coal-fired plants. Refer to the "Capital Investments" section below for further discussion.
DTE Energy has significant investments in non-utility businesses. DTE Energy employs disciplined investment criteria when assessing growth opportunities that leverage its assets, skills, and expertise, and provides diversity in earnings and geography. Specifically, DTE Energy invests in targeted energy markets with attractive competitive dynamics where meaningful scale is in alignment with its risk profile. DTE Energy expects growth opportunities in the Gas Storage and Pipelines and Power and Industrial Projects segments. These opportunities would be limited to Power and Industrial Projects if DTE Energy completes the planned spin-off of the DTE Midstream business and shifts its strategy to a predominantly pure-play utility, as discussed in the "Outlook" section below.
A key priority for DTE Energy is to maintain a strong balance sheet which facilitates access to capital markets and reasonably priced short-term and long-term financing. Near-term growth will be funded through internally generated cash flows and the issuance of debt and equity. DTE Energy has an enterprise risk management program that, among other things, is designed to monitor and manage exposure to earnings and cash flow volatility related to commodity price changes, interest rates, and counterparty credit risk. CAPITAL INVESTMENTS DTE Energy's utility businesses require significant capital investments to maintain and improve the electric generation and electric and natural gas distribution infrastructure and to comply with environmental regulations and renewable energy requirements.
DTE Electric's capital investments over the 2018-20222021-2025 period are estimated at $10.4$14 billion, comprised of $4.1$5 billion for capital replacements and other projects, $4.3$7 billion for distribution infrastructure, and $2.0$2 billion for newrenewable generation. DTE Electric has retired fourfive coal-fired generation units at the Trenton Channel, River Rouge, and StSt. Clair facilities and has announced plans to retire its remaining thirteentwelve coal-fired generating units. Seven of theseRiver Rouge's final unit will retire in 2021 and five additional coal-fired generating units at Trenton Channel and St. Clair will be retired through 2023 at the Trenton Channel, River Rouge, and St. Clair facilities.in 2022. The remaining coal-fired generating units at the Belle River and Monroe facilities are expected to be retired by 2040. The retired facilities will be replaced with renewables, energy efficiency,waste reduction, demand response, and natural gas fueled generation. In September 2016, DTE Electric received an order from the MPSC in its amended Renewable Energy Plan approving two 150 megawatt wind projects expected to be constructed and in service between 2018 and 2020, and 25 megawatts of company-owned solar projects which will be constructed and in service between 2019 and 2020. DTE Electric constructed and placed in service 50 megawatts of solar generation in 2017. DTE Electric plans to build a natural gas fueled combined cycle generation facility to provide approximately 1,100 megawatts of energy beginning in 2022. In the third quarter of 2017, DTE Electric filed a CON with the MPSC seeking approval for the planned build of this natural gas plant. On January 31, 2018, DTE Electric filed its five-year distribution operations investment and maintenance plan to improve system reliability with the MPSC. DTE Electric plans to seek regulatory approval for capital expenditures consistent with prior ratemaking treatment. DTE Gas' capital investments over the 2018-20222021-2025 period are estimated at $2.1$3 billion, comprised of $950 million$1.4 billion for base infrastructure $1.1and $1.6 billion for gas main renewal, meter move out, and pipeline integrity programs,programs. DTE Electric and $10 million for expenditures related to the NEXUS Pipeline. DTE Gas plansplan to seek regulatory approval in general rate case filings for base infrastructure capital expenditures consistent with prior ratemaking treatment. DTE Energy's non-utility businesses' capital investments are primarily for expansion, growth, and ongoing maintenance. Gas Storage and Pipelines' capital investments over the 2018-20222021-2025 period are estimated at $2.8$1.2 billion to $3.4$1.7 billion for gathering and pipeline investments and expansions, including the NEXUS Pipeline.expansions. Power and Industrial Projects' capital investments over the 2018-20222021-2025 period are estimated at $800 million$1 billion to $1.2$1.4 billion for investments in cogenerationindustrial energy services and on-siterenewable energy projects. ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulation.regulations. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. Actual costs to comply could vary substantially. The Registrants expect to continue recovering environmental costs related to utility operations through rates charged to customers, as authorized by the MPSC. DTE Electric is subject to the EPA ozone and fine particulate transport and acid rain regulations that limit power plant emissions of SO2 and NOx. The EPA and the State of Michigan have also issued emission reduction regulations relating to ozone, fine particulate, regional haze, mercury, and other air pollution. These rules have led to controls on fossil-fueled power plants to reduce NOx, SO2, mercury and other emissions. Additional rulemakings are expected over the next few years which could require additional controls for SO2, NOx, and other hazardous air pollutants. To comply with existing requirements, DTE Electric spent approximately $2.4 billion through 2017. DTE Electric does not anticipate additional capital expenditures through 2024.
The EPA has implemented regulatory actions under the Clean Air Act to address emissions of GHGs from the utility sector and other sectors of the economy. Among these actions, the EPA finalized performance standards for emissions of carbon dioxide from new and existing EGUs. The carbon standards for new sources are not expected to have a material impact on DTE Electric since DTE Electric has no plans to build new coal-fired generation, and any potential new gas generation will be able to comply with the applicable standards. In February 2016, the U.S. Supreme Court granted petitioners' requests for a stay of the carbon rules for existing EGUs (also known as the EPA Clean Power Plan) pending final review by the courts. The Clean Power Plan has no legal effect while the stay is in place. On March 28, 2017, a presidential executive order was issued on "Promoting Energy Independence and Economic Growth." The order instructs the EPA to review, and if appropriate, suspend, revise or rescind the Clean Power Plan rule. Additionally, federal agencies have been directed to conduct a review of all existing regulations that potentially burden the development and use of domestically produced energy resources. Following the issuance of this order, the federal government requested the U.S. Court of Appeals for the D.C. Circuit to hold all legal challenges in abeyance until the review of these regulations is completed. On October 10, 2017, the EPA proposed to rescind the Clean Power Plan and announced its intent to issue an ANPR seeking input as to whether it should replace the rule and, if so, what form it should take. It is not possible to determine the potential impact of the EPA's repeal and possible replacement of the Clean Power Plan on existing sources at this time.
Pending or future legislation or other regulatory actions could have a material impact on DTE Electric's operations and financial position and the rates charged to its customers. Impacts include expenditures for environmental equipment beyond what is currently planned, financing costs related to additional capital expenditures, the purchase of emission credits from market sources, higher costs of purchased power, and the retirement of facilities where control equipment is not economical. DTE Electric would seek to recover these incremental costs through increased rates charged to its utility customers, as authorized by the MPSC.
Increased costs for energy produced from traditional coal-based sources due to recent, pending, and future regulatory initiatives, could also increase the economic viability of energy produced from renewable, natural gas fueled generation, and/or nuclear sources, energy efficiency initiatives, and the potential development of market-based trading of carbon instruments which could provide new business opportunities for DTE Energy's utility and non-utility segments. At the present time, it is not possible to quantify the financial impacts of these climate related regulatory initiatives on the Registrants or their customers.
See Items 1. and 2. Business and Properties and Note 1819 to the Consolidated Financial Statements in Item 8 of this Report, "Commitments and Contingencies," for further discussion of Environmental Matters.
OUTLOOKGAS STORAGE AND PIPELINES
Description Gas Storage and Pipelines owns, operates, and develops an integrated portfolio of natural gas interstate pipelines, intrastate pipelines, storage systems, gathering lateral pipelines, gathering systems, treatment plants, and compression and surface facilities. Gas Storage and Pipelines owns and operates both wholly owned pipeline and gathering assets, as well as interests in joint venture pipeline assets including the Millennium Pipeline, Vector Pipeline, and NEXUS Pipeline, many of which have connectivity to the wholly owned assets. Gas Storage and Pipelines provides multiple, integrated natural gas services to customers with core assets that strategically connect key demand centers in the Gulf Coast, Midwest, Ontario, and Northeast markets to the premium production areas of the Marcellus/Utica and Haynesville dry natural gas formations in the Appalachian and Gulf Coast Basins. These assets are primarily supported by long-term, fixed-price revenue contracts.
Properties Gas Storage and Pipelines holds the following properties: | | | | | | | | | | | | | | | | | | | | | | Property Classification | | % Owned | | Description | | Location | | Pipelines and Other | | | | | | | | Birdsboro Pipeline | | 100% | | 14-mile pipeline delivering gas supply to the Birdsboro Power Plant | | PA | | Bluestone Pipeline | | 100% | | 65-mile pipeline delivering Marcellus Shale gas to Millennium Pipeline and Tennessee Pipeline | | PA and NY | | LEAP | | 100% | | 155-mile pipeline stretching from the Haynesville Shale area to the Gulf Coast providing access to petrochemical and refining facilities, power plants, and LNG export facilities | | LA | | Generation Pipeline | | 50% | | 25-mile pipeline regulated as gas utility by the Public Utilities Commission of Ohio | | OH | | Millennium Pipeline | | 26% | | 263-mile pipeline serving markets in the Northeast | | NY | | NEXUS Pipeline | | 50% | | 256-mile pipeline to transport Utica and Marcellus Shale gas to Ohio, Michigan, and Ontario market centers | | OH and MI | | Stonewall Gas Gathering | | 85% | | 68-mile pipeline connecting Appalachia Gathering System to Columbia Pipeline | | WV | | Vector Pipeline | | 40% | | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | | IL, IN, MI, and Ontario | | Washington 10 Storage | | 100% | | 94 Bcf of storage capacity | | MI | | | | | | | | | Gathering | | | | | | | | Appalachia Gathering System | | 100% | | 135-mile pipeline delivering Marcellus Shale gas to Texas Eastern Pipeline and Stonewall Gas Gathering system | | PA and WV | | Blue Union | | 100% | | 343-mile gathering system delivering Haynesville Shale gas production to markets in Gulf Coast Region | | LA and TX | | Michigan Gathering | | 100% | | 336-mile pipeline system in northern Michigan | | MI | | Susquehanna Gathering | | 100% | | 197-mile pipeline delivering Southwestern Energy's Marcellus Shale gas production to Bluestone Pipeline | | PA | | Tioga Gas Gathering | | 100% | | 3-mile pipeline delivering production gas to Dominion Transmission interconnect | | PA |
The next few years will be a periodassets of rapid changethese businesses are well integrated with other DTE Energy operations. Pursuant to an operating agreement, DTE Gas provides physical operations, maintenance, and technical support for DTE Energythe Washington 10 storage facility and for the energy industry.Michigan gathering systems. Regulation Gas Storage and Pipelines operates natural gas storage facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and related services pursuant to an MPSC-approved tariff. Gas Storage and Pipelines also provides interstate services in accordance with an Operating Statement on file with the FERC. Vector, Millennium, Birdsboro, and NEXUS Pipelines provide interstate transportation services in accordance with their FERC-approved tariffs. In addition, NEXUS and Vector are subject to applicable laws, rules, and regulations in Canada. Gas Storage and Pipelines' gathering and pipeline assets are subject to the rules and regulations of various state utility commissions. Strategy and Competition Gas Storage and Pipelines expects to continue its steady growth plan by expanding existing assets and developing new assets that are typically supported with long-term customer commitments, particularly in the following regions:
Midwest to Northeast Region Gas Storage and Pipelines is focused on opportunities to supply natural gas to meet growing demand and displace less attractive supply from certain regions in North America. Much of the growth in midstream services demand for natural gas is expected to occur in the eastern Canada and the northeast U.S. regions. Gas Storage and Pipelines believes that the Vector, Millennium, and NEXUS Pipelines are well-positioned to provide access routes and low-cost expansion options to these markets due to growth in production from the Marcellus/Utica Shales in Pennsylvania and West Virginia. Gas Storage and Pipelines has agreements with key producers that support its Bluestone Pipeline, Susquehanna gathering, Tioga gathering, AGS, and SGG businesses. Gas Storage and Pipelines is evaluating new pipeline and storage investment opportunities that could include additional pipeline and gathering expansions, laterals, compression, and other Marcellus/Utica shale midstream development or partnering opportunities. Gulf Coast Region In December 2019, Gas Storage and Pipelines completed the acquisition of the Blue Union gathering system and LEAP gathering pipeline in the Haynesville shale formation of Louisiana which provide access to growing Gulf Coast markets. The assets serve multiple markets, including Louisiana, the nation's third largest natural gas consumer, and the Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. Through this acquisition, Gas Storage and Pipeline invested in strategically situated assets that are supported by long-term contracts. Strong credit provisions are also incorporated into the contract with the system's largest customer. Gas Storage and Pipelines has competition from other pipelines and storage providers. Operations are dependent upon key customers in the Haynesville shale formation in the Gulf Coast and in the Marcellus/Utica shale formation in the Northeast for a significant portion of revenues. The loss of, or reduction in volumes from, any of these key customers could result in a decline in demand for services and have a material adverse effect on the results of Gas Storage and Pipelines. DTE Midstream Spin-off On October 27, 2020, DTE Energy announced that its Board of Directors has authorized management to pursue a plan to spin-off the DTE Midstream business. The spin-off would establish DTE Midstream as an independent, natural gas midstream company with increased flexibility and opportunities. The separation is expected to be completed by mid-year 2021, subject to final approval by DTE Energy's strong utility base, combinedBoard of Directors and satisfaction of other conditions. For additional information, refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions.” POWER AND INDUSTRIAL PROJECTS Description Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and gas from renewable energy projects. This business segment provides services using project assets usually located on or near the customers' premises in the steel, automotive, pulp and paper, airport, chemical, and other industries as follows: Industrial Energy Services •Steel and Petroleum Coke — Power and Industrial Projects produces metallurgical coke from a coke battery with its integrated non-utilitya capacity of 1.0 million tons per year and has an investment in a second coke battery with a capacity of 1.2 million tons per year. Power and Industrial Projects also provides pulverized coal and petroleum coke to the steel, pulp and paper, and other industries. •On-Site Energy — Power and Industrial Projects provides power generation, steam production, chilled water production, wastewater treatment, and compressed air supply to industrial customers. Power and Industrial Projects also provides utility-type services using project assets usually located on or near the customers' premises in the automotive, airport, chemical, and other industries.
Renewable Energy •Wholesale Power and Renewables — Power and Industrial Projects holds ownership interests in, and operates, five renewable generating plants with a capacity of 139 MWs. The electric output is sold under long-term power purchase agreements. •Renewable Gas Recovery — Power and Industrial Projects has ownership interests in, and operates, twenty-two gas recovery sites in nine different states. The sites recover methane from landfills and agricultural businesses and convert the gas to generate electricity, replace fossil fuels in industrial and manufacturing operations, position it well for long-term growth.or refine to pipeline-quality gas, which can then be used as vehicle fuel. Looking forward,Reduced Emissions Fuel
•Reduced Emissions Fuel — Power and Industrial Projects has constructed and placed in service REF facilities at ten sites, including facilities located at seven third-party owned coal-fired power plants. DTE Energy has sold membership interests in seven of the facilities and entered into lease arrangements in two of the facilities. The facilities blend a proprietary additive with coal used in coal-fired power plants, resulting in reduced emissions of nitrogen oxide and mercury. Qualifying facilities are eligible to generate tax credits for ten years upon achieving certain criteria. The value of a tax credit is adjusted annually by an inflation factor published by the IRS. The value of the tax credit is reduced if the reference price of coal exceeds certain thresholds. The economic benefit of the REF facilities is dependent upon the generation of production tax credits. Properties and Other The following are significant properties operated by Power and Industrial Projects: | | | | | | | | | | | | | | | | Business Areas | | Location | | Service Type | | Industrial Energy Services | | | | | | Steel and Petroleum Coke | | | | | | Pulverized Coal Operations | | MI | | Pulverized Coal | | Coke Production | | MI | | Metallurgical Coke Supply | | Other Investment in Coke Production and Petroleum Coke | | IN and MS | | Metallurgical Coke Supply and Pulverized Petroleum Coke | | On-Site Energy | | | | | | Automotive | | IN, MI, NY, and OH | | Electric Distribution, Chilled Water, Wastewater, Steam, Cooling Tower Water, Reverse Osmosis Water, Compressed Air, Mist, and Dust Collectors | | Airports | | MI and PA | | Electricity and Hot and Chilled Water | | Chemical Manufacturing | | KY and OH | | Electricity, Steam, Natural Gas, Compressed Air, and Wastewater | | Consumer Manufacturing | | OH | | Electricity, Steam, Wastewater, and Sewer | | Business Park | | PA | | Electricity | | Hospital and University | | CA and IL | | Electricity, Steam, and Chilled Water | | Casino and Gaming | | NJ | | Electricity, Steam, and Chilled Water | | Renewable Energy | | | | | | Renewables | | CA and MN | | Electric Generation | | Renewable Gas Recovery | | AZ, CA, MI, NC, NY, OH, TX, UT, and WI | | Electric Generation and Renewable Natural Gas | | Reduced Emissions Fuel | | MI, OH, IL, TX, and WI | | REF Supply |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Production Tax Credits Generated (Allocated to DTE Energy) | | | | | | | REF | $ | 55 | | | $ | 72 | | | $ | 178 | | | Renewables | 9 | | | 8 | | | 7 | | | Renewable Gas Recovery | 2 | | | 3 | | | 3 | | | | | | | | | $ | 66 | | | $ | 83 | | | $ | 188 | |
Regulation Certain electric generating facilities within Power and Industrial Projects have market-based rate authority from the FERC to sell power. The facilities are subject to FERC reporting requirements and market behavior rules. Certain projects of Power and Industrial Projects are also subject to the applicable laws, rules, and regulations related to the EPA, U.S. Department of Homeland Security, DOE, CARB, and various state utility commissions. Strategy and Competition Power and Industrial Projects will focus on several areas that are expectedcontinue leveraging its energy-related operating experience and project management capability to improve future performance: electricdevelop and gas customer satisfaction;
electric distribution system reliability;
new electric generation;
gas distribution system renewal;
rate competitivenessgrow its steel, on-site energy, and affordability;
regulatory stabilityrenewable energy businesses, and investment recovery foroptimize the electricREF businesses until the phase-out at the end of 2021. Power and gas utilities;
employee safety and engagement;
cost structure optimization across all business segments;
cash, capital, and liquidity to maintain or improve financial strength; and
investments that integrate assets and leverage skills and expertise.
DTE EnergyIndustrial Projects will also continue to pursue opportunities to growprovide asset management and operations services to third parties. There are limited competitors for Power and Industrial Projects' existing disparate businesses who provide similar products and services. Power and Industrial Projects' operations are dependent upon a limited number of customers, and the loss of any one or a few customers could have a material adverse effect on the results of Power and Industrial Projects.
Power and Industrial Projects anticipates building around its core strengths in the markets where it operates. In determining the markets in which to compete, Power and Industrial Projects examines closely the regulatory and competitive environment, new and pending legislation, the number of competitors, and its ability to achieve sustainable margins. Power and Industrial Projects plans to maximize the effectiveness of its related businesses as it expands. Power and Industrial Projects intends to focus on the following areas for growth: •Providing energy and utility-type services to commercial and industrial customers •Acquiring and developing renewable energy projects and other energy projects. ENERGY TRADING Description Energy Trading focuses on physical and financial power, natural gas and environmental marketing and trading, structured transactions, enhancement of returns from its asset portfolio, and optimization of contracted natural gas pipeline transportation and storage positions. Energy Trading also provides natural gas, power, environmental and related services which may include the management of associated storage and transportation contracts on the customers’ behalf and the supply or purchase of environmental attributes to various customers. Energy Trading's customer base is predominantly utilities, local distribution companies, pipelines, producers and generators, and other marketing and trading companies. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy. Energy Trading enters into derivative financial instruments as part of its marketing and hedging activities. These financial instruments are generally accounted for under the MTM method, which results in the recognition in earnings of unrealized gains and losses from changes in the fair value of the derivatives. Energy Trading utilizes forwards, futures, swaps, and option contracts to mitigate risk associated with marketing and trading activity, as well as for proprietary trading within defined risk guidelines. Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments, physical power and natural gas contracts, and certain environmental contracts are deemed derivatives; whereas, natural gas and environmental inventory, contracts for pipeline transportation, storage assets, and some environmental contracts are not derivatives. As a result, this segment will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. The business’ strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards, swaps, and options. This results in gains and losses that are recognized in different interim and annual accounting periods. Regulation Energy Trading has market-based rate authority from the FERC to sell power and blanket authority from the FERC to sell natural gas at market prices. Energy Trading is subject to FERC reporting requirements and market behavior rules. Energy Trading is also subject to the applicable laws, rules, and regulations related to the CFTC, U.S. Department of Homeland Security, and DOE. In addition, Energy Trading is subject to applicable laws, rules, and regulations in Canada.
Strategy and Competition DTE Energy's strategy for the Energy Trading business is to deliver value-added services to DTE Energy customers. DTE Energy seeks to manage this business in a disciplined manner complementary to the growth of DTE Energy's other business segments. Energy Trading focuses on physical marketing and the optimization of its portfolio of energy assets. The segment competes with electric and gas marketers, financial institutions, traders, utilities, and other energy providers. The Energy Trading business is dependent upon the availability of capital and an investment grade credit rating. DTE Energy believes it has ample available capital capacity to support Energy Trading activities. DTE Energy monitors its use of capital closely to ensure that its commitments do not exceed capacity. A material credit restriction would negatively impact Energy Trading's financial performance. Competitors with greater access to capital, or at a lower cost, may have a competitive advantage. DTE Energy has risk management and credit processes to monitor and mitigate risk. CORPORATE AND OTHER Description Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds certain investments, including funds supporting regional development and economic growth. ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulation and expect to continue recovering environmental costs related to utility operations through rates charged to customers. The following table summarizes DTE Energy's, including DTE Electric's, estimated significant future environmental expenditures based upon current regulations. Pending or future reconsideration of current regulations may impact the estimated expenditures summarized in the table below. Actual costs to comply could vary substantially. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. | | | | | | | | | | | | | | | | | | | | | | | | | DTE Electric | | DTE Gas | | Non-utility | | Total | | (In millions) | | | | | | | | | | Water | $ | 54 | | | $ | — | | | $ | — | | | $ | 54 | | | Contaminated and other sites | 9 | | | 15 | | | — | | | 24 | | | Coal combustion residuals and effluent limitations guidelines | 601 | | | — | | | — | | | 601 | | | Estimated total future expenditures through 2025 | $ | 664 | | | $ | 15 | | | $ | — | | | $ | 679 | | | Estimated 2021 expenditures | $ | 204 | | | $ | 9 | | | $ | — | | | $ | 213 | | | Estimated 2022 expenditures | $ | 143 | | | $ | 4 | | | $ | — | | | $ | 147 | |
For additional information regarding environmental matters, refer to Notes 9, 10, and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," and "Commitments and Contingencies." HUMAN CAPITAL MANAGEMENT DTE Energy and its subsidiaries had approximately 10,600 employees as of December 31, 2020, of which approximately 5,200 were represented by unions. DTE Electric had approximately 4,800 employees as of December 31, 2020, of which approximately 2,800 were represented by unions. This workforce is comprised almost entirely of full-time employees. DTE Energy and utilities across the country are managing the turnover of our workforce due to a significant number of retirements expected in the next ten years - a period that will be impacted by major transformation of our business through technology investments, regulatory changes to our electric generation portfolio, and upgrades to our distribution infrastructure. Amidst this challenge, DTE is working to build a culture of highly engaged employees with skills and expertise in science, technology, engineering, math, analytics, and skilled trades, which are in high demand and critical to our industry. To attract and retain the best talent, DTE Energy promotes the engagement of its employees through diversity, equity, and inclusion, health and safety, and compensation and benefits.
Diversity, Equity, and Inclusion (DEI) DTE is committed to building a diverse, empowered, and engaged team that delivers safe, reliable service and energy to our customers. A diverse workforce and inclusive culture contributes to DTE's success and sustainability by driving innovation and creating trusted relationships with employees, customers, suppliers, and community partners. By tapping into the talent, unique perspectives, and cultural and life experiences of every employee, DTE can ensure its continued success. DTE measures DEI performance in several ways: •Diversity of candidates, hires, high potential talent, and leadership promotions •Workforce representation of women, minorities, veterans, and employees with disabilities •Employee engagement, including specific elements that measure a culture of inclusion •Number of DEI related communications •Supplier diversity spend •Rankings and scores from DEI benchmarking surveys •Formal training programs, including unconscious bias training for employees and leaders •Salary analysis of women and minorities compared to non-minorities Health and Safety The health and safety of people is DTE Energy's top priority - for employees, contractors, customers, and everyone in the community DTE Energy serves. DTE Energy's safety culture is maintained and strengthened with the help of multiple safety committees spanning all levels of the company. Members include union representatives, DTE Energy executives, office workers, and field employees. All workplace injuries and incidents that could have caused an injury are documented and thoroughly reviewed for potential preventive measures. Employees know they are responsible for their own safety and the safety of everyone around them. DTE Energy also administers regular safety training. Hazardous work is identified and categorized according to risk and training is provided to mitigate risk of any serious injuries. DTE Energy monitors its safety performance by reviewing the rate of safety incidents, as defined by the Office of Safety and Health Administration (OSHA), and the rate of Days Away, Restricted, or Transferred (DART). DTE Energy is also committed to providing employees with the resources they need to lead healthier lifestyles, including an on-site clinic and fitness center. DTE Energy offers a Healthy Living Program to complete both an annual physical with biometric screenings and a Health Risk Assessment to avoid a medical premium surcharge, and offers participation in health education on disease management programs. COVID-19 Response During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and the other service territories throughout the United States in which DTE Energy operates. DTE Energy took quick action to ensure the safety and well-being of its employees. DTE Energy has successfully implemented work from home for over half of its employees and implemented extensive new safety procedures to ensure plant and employee safety, including the use of personal protective equipment, contact tracing, and cleaning of facilities. At the onset of the pandemic, DTE Energy temporarily paused all non-critical business activities. For the essential workers most critical to our continued operations, DTE Energy sequestered certain employees to protect their health and to ensure safe and reliable gas and electric service for DTE Energy customers. To further support employees during the pandemic, DTE Energy enhanced communications around its employee assistance programs, established an occupational health call center, and provided clinical case management for cases related to COVID-19.
DTE Energy continues to actively monitor risks related to COVID-19 and proper application of our safety protocol. DTE Energy is also committed to providing consistent, transparent communication to employees around safe practices, quarantine and testing protocols, vaccine availability, and timing of safely returning to office work. Compensation and Benefits DTE Energy is committed to offering compensation that is competitive, market driven, and internally equitable. Approximately half of DTE Energy's employees are represented by labor unions through which pay is uniformly determined through collectively bargained agreements regardless of an employee's gender or ethnicity. For non-represented employees, DTE Energy's human resources professionals establish pay ranges for each job classification and work with hiring leaders to make competitive offers within the range to candidates based on objective factors like years of experience and strength of skills relevant to the job. Annually, DTE Energy conducts a review of compensation practices as part of its affirmative action program and makes adjustments as needed to ensure that pay is fair and equitable. DTE Energy provides competitive, customizable benefits for all regular full-time and regular part-time employees. Innovative compensation and benefits initiatives at DTE Energy include: •A 401(k) plan/Employee Stock Ownership Plan that is available to all regular full-time and regular part-time employees, including automatic enrollment of new hires, automatic annual escalation of employee 401(k) contributions up to 10% of pay, and 401(k) matching contributions •Competitive health and welfare benefits •Child bonding/parental leave of absence •Additional vacation days available for employee purchase •Competitive incentive plans, which are offered to all non-represented employees to create alignment of corporate and individual goals •Tuition reimbursement Incentive Plans DTE Energy has two primary types of incentives that reward individuals for performance. The incentives are designed to tie compensation to performance and encourage individuals to align their interests with those of the shareholders and customers of the Company. •Annual incentive plans allow DTE Energy to reward individuals with annual cash bonuses for performance against pre-established objectives based on work performed in the prior year. Objectives are aligned with our core priorities and include metrics for employee engagement and safety, customer satisfaction, utility operating excellence, and financial metrics such as earnings per share and cash flows. •Long-term incentive plans allow DTE Energy to grant individuals long-term equity incentives to encourage continued employment with DTE Energy, to accomplish pre-defined long-term performance objectives, and to create shareholder alignment. Metrics include total shareholder return relative to industry peers and balance sheet health. For additional information on the metrics above, please see the "Annual and Long-term Incentives" section of DTE Energy's Proxy Statement. Additionally, refer to DTE Energy’s 2020 Environmental, Social, Governance and Sustainability report for further information on metrics tracked for DEI, health and safety, and other components of DTE Energy’s human capital management. The report is available through the Investor Relations page of DTE Energy’s website (www.dteenergy.com), and shall not be deemed incorporated by reference into this Form 10-K.
Item 1A. Risk Factors There are various risks associated with the operations of the Registrants' utility businesses and DTE Energy's non-utility businesses. To provide a framework to understand the operating environment of the Registrants, below is a brief explanation of the more significant risks associated with their businesses. Although the Registrants have tried to identify and discuss key risk factors, others could emerge in the future. Each of the following risks could affect performance. Regulatory, Legislative, and Legal Risks The Registrants are subject to rate regulation. Electric and gas rates for the utilities are set by the MPSC and the FERC and cannot be changed without regulatory authorization. The Registrants may be negatively impacted by new regulations or interpretations by the MPSC, the FERC, or other regulatory bodies. The Registrants' ability to recover costs may be impacted by the time lag between the incurrence of costs and the recovery of the costs in customers' rates. Regulators also may decide to disallow recovery of certain costs in customers' rates if they determine that those costs do not meet the standards for recovery under current governing laws and regulations. Regulators may also disagree with the Registrants' rate calculations under the various mechanisms that are intended to mitigate the risk to their utilities related to certain aspects of the business. If the Registrants cannot agree with regulators on an appropriate reconciliation of those mechanisms, it may impact the Registrants' ability to recover certain costs through customer rates. Regulators may also decide to eliminate these mechanisms in future rate cases, which may make it more difficult for the Registrants to recover their costs in the rates charged to customers. The Registrants cannot predict what rates the MPSC will authorize in future rate cases. New legislation, regulations, or interpretations could change how the business operates, impact the Registrants' ability to recover costs through rates or the timing of such recovery, or require the Registrants to incur additional expenses. Changes to Michigan's electric retail access program could negatively impact the Registrants' financial performance. The State of Michigan currently experiences a hybrid market, where the MPSC continues to regulate electric rates for DTE Electric customers, while alternative electric suppliers charge market-based rates. MPSC rate orders, and energy legislation enacted by the State of Michigan, have placed a 10% cap on the total potential retail access migration. However, even with the legislated 10% cap on participation, there continues to be legislative and financial risk associated with the electric retail access program. Electric retail access migration is sensitive to market price and full service electric price changes. The Registrants are required under current regulation to provide full service to retail access customers that choose to return, potentially resulting in the need for additional generating capacity. Environmental laws and liability may be costly. The Registrants are subject to, and affected by, numerous environmental regulations. These regulations govern air emissions, water quality, wastewater discharge, and disposal of solid and hazardous waste. Compliance with these regulations can significantly increase capital spending, operating expenses, and plant down times, and can negatively affect the affordability of the rates charged to customers. Uncertainty around future environmental regulations creates difficulty planning long-term capital projects in the Registrants' generation fleet and, for DTE Energy's gas distribution businesses. These laws and regulations require the Registrants to seek a variety of environmental licenses, permits, inspections, and other regulatory approvals. The Registrants could be required to install expensive pollution control measures or limit or cease activities, including the retirement of certain generating plants, based on these regulations. Additionally, the Registrants may become a responsible party for environmental cleanup at sites identified by a regulatory body. The Registrants cannot predict with certainty the amount and timing of future expenditures related to environmental matters because of the difficulty of estimating cleanup costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on potentially responsible parties. The Registrants may also incur liabilities as a result of potential future requirements to address climate change issues. Proposals for voluntary initiatives and mandatory controls are being discussed both in the United States and worldwide to reduce GHGs such as carbon dioxide, a by-product of burning fossil fuels. If increased regulations of GHG emissions are implemented, the operations of DTE Electric's fossil-fueled generation assets may be significantly impacted. Since there can be no assurances that environmental costs may be recovered through the regulatory process, the Registrants' financial performance may be negatively impacted as a result of environmental matters. For DTE Energy, future environmental regulation of natural gas extraction techniques, including hydraulic fracturing, being discussed both at the United States federal level and by some states may affect the profitability of natural gas extraction businesses which could affect demand for, and profitability of, DTE Energy's gas transportation businesses.
The Renewable Portfolio Standard and energy waste reduction may affect the Registrants' business and federal and state fuel standards may affect DTE Energy's non-utility investments. The Registrants are subject to existing Michigan, and potential future, federal legislation and regulation requiring them to secure sources of renewable energy. The Registrants have complied with the existing federal and state legislation, but do not know what requirements may be added by federal or state legislation in the future. In addition, the Registrants expect to comply with new Michigan legislation increasing the percentage of power required to be provided by renewable energy sources. The Registrants cannot predict the financial impact or costs associated with complying with potential future legislation and regulations. Compliance with these requirements can significantly increase capital expenditures and operating expenses and can negatively affect the affordability of the rates charged to customers. In addition, the Registrants are also required by Michigan legislation to implement energy waste reduction measures and provide energy waste reduction customer awareness and education programs. These requirements necessitate expenditures, and implementation of these programs creates the risk of reducing the Registrants' revenues as customers decrease their energy usage. The Registrants cannot predict how these programs will impact their business and future operating results. DTE Energy's non-utility renewable natural gas investments are also dependent on the federal Renewable Fuel Standard and California's Low Carbon Fuel Standard. Changes to these standards may affect DTE Energy's business and result in lower earnings. DTE Energy's ability to utilize production tax credits may be limited. To reduce U.S. dependence on imported oil, the Internal Revenue Code provides production tax credits as an incentive for taxpayers to produce fuels and electricity from alternative sources. The Registrants generated production tax credits from renewable energy generation and DTE Energy generated production tax credits from renewable gas recovery, reduced emission fuel, and gas production operations. If the Registrants' production tax credits were disallowed in whole or in part as a result of an IRS audit or changes in tax law, there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact the Registrants' earnings and cash flows. Operational Risks The Registrants' electric distribution system and DTE Energy's gas distribution system are subject to risks from their operation, which could reduce revenues, increase expenses, and have a material adverse effect on their business, financial position, and results of operations. The Registrants' electric distribution and DTE Energy’s gas distribution systems are subject to many operational risks. These operational systems and infrastructure have been in service for many years. Equipment, even when maintained in accordance with good utility practices, is subject to operational failure, including events that are beyond the Registrants' control, and could require significant operation and maintenance expense or capital expenditures to operate efficiently. Because the Registrants’ distribution systems are interconnected with those of third parties, the operation of the Registrants’ systems could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties. Construction and capital improvements to the Registrants' power facilities, DTE Energy's distribution systems and its Gas Storage and Pipelines business subject them to risk. The Registrants are managing ongoing, and planning future, significant construction and capital improvement projects at the Registrants' multiple power generation and distribution facilities, at DTE Energy's gas distribution system, and at DTE Energy's Gas Storage and Pipelines business. Many factors that could cause delays or increased prices for these complex projects are beyond the Registrants' control, including the cost of materials and labor, subcontractor performance, timing and issuance of necessary permits or approvals (including required certificates from regulatory agencies), construction disputes, impediments to acquiring rights-of-way or land rights on a timely basis and on acceptable terms, cost overruns, and weather conditions. Failure to complete these projects on schedule and on budget for any reason could adversely affect the Registrants' financial performance, operations, or expected investment returns at the affected facilities, businesses and development projects.
Operation of a nuclear facility subjects the Registrants to risk. Ownership of an operating nuclear generating plant subjects the Registrants to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, changes in federal nuclear regulation, increased capital expenditures to meet industry requirements, and operational factors that can significantly impact the performance and cost of operating a nuclear facility compared to other generation options. Insurance maintained by the Registrants for various nuclear-related risks may not be sufficient to cover the Registrants' costs in the event of an accident or business interruption at the nuclear generating plant, which may affect the Registrants' financial performance. In addition, the Registrants' nuclear decommissioning trust fund, to finance the decommissioning of the nuclear generating plant, may not be sufficient to fund the cost of decommissioning. A decline in market value of assets held in decommissioning trust funds due to poor investment performance or other factors may increase the funding requirements for these obligations. Any increase in funding requirements may have a material impact on the Registrants’ liquidity, financial position, or results of operations. The supply and/or price of energy commodities and/or related services may impact the Registrants' financial results. The Registrants are dependent on coal for much of their electrical generating capacity as well as uranium for their nuclear operations. DTE Energy's access to natural gas supplies is critical to ensure reliability of service for utility gas customers. DTE Energy's non-utility businesses are also dependent upon supplies and prices of energy commodities and services. Price fluctuations, fuel supply disruptions, and changes in transportation costs, could have a negative impact on the amounts DTE Electric charges utility customers for electricity and DTE Gas charges utility customers for gas, and on the profitability of DTE Energy's non-utility businesses. The Registrants' hedging strategies and regulatory recovery mechanisms may be insufficient to mitigate the negative fluctuations in commodity supply prices at their utility or DTE Energy's non-utility businesses, and the Registrants' financial performance may therefore be negatively impacted by price fluctuations. The price of energy also impacts the market for DTE Energy's non-utility businesses, particularly those that compete with utilities and alternative electric suppliers as well as midstream services that depend on the demand for natural gas. The supply and/or price of other industrial raw and finished inputs and/or related services may impact the Registrants' financial results. The Registrants are dependent on supplies of certain commodities, such as copper and limestone, among others, and industrial materials, and services in order to maintain day-to-day operations and maintenance of their facilities. Price fluctuations, or supply interruptions for these commodities and other items, could have a negative impact on the amounts charged to customers for the Registrants' utility products and, for DTE Energy, on the profitability of the non-utility businesses. Weather significantly affects operations. At both utilities, deviations from normal hot and cold weather conditions affect the Registrants' earnings and cash flows. Mild temperatures can result in decreased utilization of the Registrants' assets, lowering income and cash flows. At DTE Electric, ice storms, tornadoes, or high winds can damage the electric distribution system infrastructure and power generation facilities and require it to perform emergency repairs and incur material unplanned expenses. The expenses of storm restoration efforts may not be fully recoverable through the regulatory process. DTE Gas can experience higher than anticipated expenses from emergency repairs on its gas distribution infrastructure required as a result of weather-related issues. Unplanned power plant outages may be costly. Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. As a result of unforeseen maintenance, the Registrants may be required to make spot market purchases of electricity that exceed the costs of generation. The Registrants' financial performance may be negatively affected if unable to recover such increased costs. A work interruption may adversely affect the Registrants. There are several bargaining units for DTE Energy's approximately 5,200 and DTE Electric's approximately 2,800 represented employees. The majority of represented employees are under contracts that expire in 2021 and 2022. A union choosing to strike would have an impact on the Registrants' businesses. The Registrants are unable to predict the effect a work stoppage would have on their costs of operations and financial performance. Financial, Economic, and Market Risks DTE Energy's non-utility businesses may not perform to its expectations. DTE Energy relies on non-utility operations for a significant portion of earnings. If DTE Energy's current and contemplated non-utility investments do not perform at expected levels, DTE Energy could experience diminished earnings and a corresponding decline in shareholder value.
Adverse changes in the Registrants' credit ratings may negatively affect them. Regional and national economic conditions, increased scrutiny of the energy industry and regulatory changes, as well as changes in the Registrants' economic performance, could result in credit agencies reexamining their credit ratings. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in the Registrants' credit ratings below investment grade could restrict or discontinue their ability to access capital markets and could result in an increase in their borrowing costs, a reduced level of capital expenditures, and could impact future earnings and cash flows. In addition, a reduction in the Registrants' credit ratings may require them to post collateral related to various physical or financially settled contracts for the purchase of energy-related commodities, products, and services, which could impact their liquidity. Poor investment performance of pension and other postretirement benefit plan assets and other factors impacting benefit plan costs could unfavorably impact the Registrants' liquidity and results of operations. The Registrants' costs of providing non-contributory defined benefit pension plans and other postretirement benefit plans are dependent upon a number of factors, such as the rates of return on plan assets, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation, and the Registrants' required or voluntary contributions made to the plans. The performance of the debt and equity markets affects the value of assets that are held in trust to satisfy future obligations under the Registrants' plans. The Registrants have significant benefit obligations and hold significant assets in trust to satisfy these obligations. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below the Registrants' projected return rates. A decline in the market value of the pension and other postretirement benefit plan assets will increase the funding needs under the pension and other postretirement benefit plans if the actual asset returns do not recover these declines in the foreseeable future. Additionally, the pension and other postretirement benefit plan liabilities are sensitive to changes in interest rates. If interest rates decrease, the liabilities increase, resulting in increasing benefit expense and funding needs. Also, if future increases in pension and other postretirement benefit costs as a result of reduced plan assets are not recoverable from the Registrants' utility customers, the results of operations and financial position of the Registrants could be negatively affected. Without sustained growth in the plan investments over time to increase the value of plan assets, the Registrants could be required to fund these plans with significant amounts of cash. Such cash funding obligations could have a material impact on the Registrants' cash flows, financial position, or results of operations. The Registrants' ability to access capital markets is important. The Registrants' ability to access capital markets is important to operate their businesses and to fund capital investments. Turmoil in credit markets may constrain the Registrants' ability, as well as the ability of their subsidiaries, to issue new debt, including commercial paper, and refinance existing debt at reasonable interest rates. In addition, the level of borrowing by other energy companies and the market as a whole could limit the Registrants' access to capital markets. The Registrants' long-term revolving credit facilities do not expire until 2024, but the Registrants regularly access capital markets to refinance existing debt or fund new projects at the Registrants' utilities and DTE Energy's non-utility businesses, and the Registrants cannot predict the pricing or demand for those future transactions. Emerging technologies may have a material adverse effect on the Registrants. Advances in technology that produce power or reduce power consumption include cost-effective renewable energy technologies, distributed generation, energy waste reduction technologies, and energy storage devices. Such developments may impact the price of energy, may affect energy deliveries as customer-owned generation becomes more cost-effective, may require further improvements to our distribution systems to address changing load demands, and could make portions of our electric system power supply and/or distribution facilities obsolete prior to the end of their useful lives. Such technologies could also result in further declines in commodity prices or demand for delivered energy. Each of these factors could materially affect the Registrants’ results of operations, cash flows, or financial position. DTE Energy's participation in energy trading markets subjects it to risk. Events in the energy trading industry have increased the level of scrutiny on the energy trading business and the energy industry as a whole. In certain situations, DTE Energy may be required to post collateral to support trading operations, which could be substantial. If access to liquidity to support trading activities is curtailed, DTE Energy could experience decreased earnings potential and cash flows. Energy trading activities take place in volatile markets and expose DTE Energy to risks related to commodity price movements, deviations in weather, and other related risks. DTE Energy's trading business routinely has speculative trading positions in the market, within strict policy guidelines DTE Energy sets, resulting from the management of DTE Energy's business portfolio. To the extent speculative trading positions exist, fluctuating commodity prices can improve or diminish DTE Energy's financial results and financial position. DTE Energy manages its exposure by establishing and enforcing strict risk limits and risk management procedures. During periods of extreme volatility, these risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities.
Regional, national, and international economic conditions can have an unfavorable impact on the Registrants. The Registrants' utility and DTE Energy's non-utility businesses follow the economic cycles of the customers they serve and credit risk of counterparties they do business with. Should the financial conditions of some of DTE Energy's significant customers deteriorate as a result of regional, national or international economic conditions, reduced volumes of electricity and gas, and demand for energy services DTE Energy supplies, collections of accounts receivable, reductions in federal and state energy assistance funding, and potentially higher levels of lost gas or stolen gas and electricity could result in decreased earnings and cash flows. If DTE Energy's goodwill or other intangible assets become impaired, it may be required to record a charge to earnings. DTE Energy annually reviews the carrying value of goodwill associated with acquisitions it has made for impairment. Goodwill and other intangible assets are also reviewed on a quarterly basis whenever events or circumstances indicate that the carrying value of these assets may not be recoverable. Factors that may be considered for purposes of this analysis include a decline in stock price and market capitalization, slower industry growth rates, or material changes with customers or contracts that could negatively impact future cash flows. DTE Energy cannot predict the timing, strength, or duration of such changes or any subsequent recovery. If the carrying value of any goodwill or other intangible assets are determined to be not recoverable, DTE Energy may take a non-cash impairment charge, which could materially impact DTE Energy's results of operations and financial position. The Registrants may not be fully covered by insurance. The Registrants have a comprehensive insurance program in place to provide coverage for various types of risks, including catastrophic damage as a result of severe weather or other natural disasters, war, terrorism, cyber incidents, or a combination of other significant unforeseen events that could impact the Registrants' operations. Economic losses might not be covered in full by insurance, or the Registrants' insurers may be unable to meet contractual obligations. Safety and Security Risks The Registrants' businesses have safety risks. The Registrants' electric distribution system, power plants, renewable energy equipment, and other facilities, and DTE Energy's gas distribution system, gas infrastructure, and other facilities, could be involved in incidents that result in injury, death, or property loss to employees, customers, third parties, or the public. Although the Registrants have insurance coverage for many potential incidents, depending upon the nature and severity of any incident, they could experience financial loss, damage to their reputation, and negative consequences from regulatory agencies or other public authorities. Threats of cyber incidents, physical security, and terrorism could affect the Registrants' business. Issues may threaten the Registrants such as cyber incidents, physical security, or terrorism that may disrupt the Registrants' operations, and could harm the Registrants' operating results. Information security risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication and frequency of cyberattacks, and data security breaches. The Registrants' industry requires the continued operation of sophisticated information and control technology systems and network infrastructure. All of the Registrants' technology systems are vulnerable to disability or failures due to cyber incidents, physical security threats, acts of war or terrorism, and other causes, as well as loss of operational control of the Registrants' electric generation and distribution assets and, DTE Energy's gas distribution assets. If the Registrants' information technology systems were to fail and they were unable to recover in a timely way, the Registrants may be unable to fulfill critical business functions, which could have a material adverse effect on the Registrants' business, operating results, and financial condition. Suppliers, vendors, contractors, and information technology providers have access to systems that support the Registrants’ operations and maintain customer and employee data. A breach of these third-party systems could adversely affect the business as if it was a breach of our own system. Also, because the Registrants’ generation and distribution systems are part of an interconnected system, a disruption caused by a cyber incident at another utility, electric generator, system operator, or commodity supplier could also adversely affect the Registrants’ businesses, operating results, and financial condition. In addition, the Registrants' generation plants and electrical distribution facilities, and DTE Energy's gas pipeline and storage facilities in particular, may be targets of physical security threats or terrorist activities that could disrupt the Registrants' ability to produce or distribute some portion of their products. The Registrants have increased security as a result of past events and may be required by regulators or by the future threat environment to make investments in security that the Registrants cannot currently predict.
Failure to maintain the security of personally identifiable information could adversely affect the Registrants. In connection with the Registrants' businesses, they collect and retain personally identifiable information of their customers, shareholders, and employees. Customers, shareholders, and employees expect that the Registrants will adequately protect their personal information. The regulatory environment surrounding information security and privacy is increasingly demanding. A significant theft, loss, or fraudulent use of customer, shareholder, employee, or Registrant data by cybercrime or otherwise, could adversely impact the Registrants' reputation, and could result in significant costs, fines, and litigation. General and Other Risks The COVID-19 pandemic and resulting impact on business and economic conditions could negatively affect the Registrants' businesses and operations. The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets. The continued spread of COVID-19 and efforts to contain the virus, such as quarantines, closures, or reduced operations of businesses, governmental agencies and other institutions, have caused a recession, resulting in disruptions in various public, commercial, and industrial activities and have caused employee absences which interfered with certain operation and maintenance of the Registrants' facilities. Travel bans and restrictions, quarantines, and shelter in place orders could also cause us to experience operational delays, delay the delivery of critical infrastructure and other supplies we source globally, or delay the connection of electric or gas service to new customers, and have reduced the use of electricity and gas by certain customers in the commercial and industrial segments. Certain of our businesses have experienced lower sales volumes, and any of the foregoing circumstances could further adversely affect customer demand or revenues, impact the ability of the Registrants' suppliers, vendors or contractors to perform, or cause other unpredictable events, which could adversely affect the Registrants' businesses, results of operations or financial condition. The continued spread of COVID-19 has also led to disruption and volatility in the financial markets, which could increase the Registrants' costs to fund capital requirements and impact the operating results of our energy trading operations. To the extent that the Registrants' access to the capital markets is adversely affected by COVID-19, the Registrants may need to consider alternative sources of funding for our operations and for working capital, any of which could increase the Registrants' cost of capital. The extent to which COVID-19 may impact the Registrants' liquidity, financial condition, and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the severity of COVID-19 and related variants, vaccine distribution and other actions taken to contain it or treat its impact, and the extent to which normal economic and operating conditions can secure opportunitiesresume, among others. Our business continuity plans and insurance coverage may be insufficient to mitigate these adverse impacts to our business. In addition, the Registrants’ may be required to suspend shut offs for certain customers which may adversely impact the Registrants’ collections process and have a negative impact on our results of operations, financial condition, and liquidity.
Failure to attract and retain key executive officers and other skilled professional and technical employees could have an adverse effect on the Registrants’ operations. The Registrants' businesses are dependent on their ability to attract and retain skilled employees. Competition for skilled employees in some areas is high, and the inability to attract and retain these employees could adversely affect the Registrants' business and future operating results. In addition, the Registrants have an aging utility workforce, and the failure of a successful transfer of knowledge and expertise could negatively impact their operations. DTE Energy relies on cash flows from subsidiaries. DTE Energy is a holding company. Cash flows from the utility and non-utility subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, its ability to pay interest and dividends would be restricted.
The proposed spin-off of DTE Midstream (the "Proposed Spin-off") may not be completed on the currently contemplated timeline or terms, or at all, and may not achieve the intended benefits. The Proposed Spin-off, if completed, may also present additional risk to DTE Energy. The Proposed Spin-off is subject to conditions, including, without limitation, final DTE Energy Board of Directors approval. Unanticipated developments or changes in market conditions may delay the Proposed Spin-off, and the Proposed Spin-off may not occur on the currently contemplated timeline or at all. DTE Energy cannot predict with certainty when the benefits expected from the Proposed Spin-off will occur or the extent to which they will be achieved, if at all. Furthermore, there are various uncertainties and risks relating to the process of the Proposed Spin-off that could have a negative impact on our financial condition, results of operations, and cash flows, including disruption of our operations and impairment of our relationship with regulators, key personnel, customers, and vendors. If the Proposed Spin-off is successfully completed, DTE Energy will face new and unique risks, including having fewer assets, reduced financial resources and less diversification of revenue sources, which may adversely impact DTE Energy's financial condition, results of operations, and cash flows. In addition, the changes in our operational and financial profile may not meet some or all of our shareholders' investment strategies, which could cause investors to sell their DTE Energy shares and otherwise decrease demand for shares of DTE Energy common stock. Excess selling will cause the relative market price of DTE Energy common stock to decrease, and the market price of DTE Energy common stock may be subject to greater volatility following the completion of the Proposed Spin-off. While DTE Energy does not expect its strategic,credit ratings from Standard & Poor's Rating Service, Moody's Investor Service, and Fitch Ratings Inc. to drop below investment grade as a result of completing the Proposed Spin-off, there is no assurance that we will continue to maintain such investment grade credit ratings in the future. If a rating agency were to downgrade our rating below investment grade, our borrowing costs would increase and our funding sources could decrease. In addition, a failure by us to maintain an investment grade rating could affect our business relationships with suppliers and operating partners. The distribution of shares of the new midstream company ("DT Midstream") to DTE Energy shareholders in the Proposed Spin-off is expected to qualify as tax-free under Section 355 of the U.S. Internal Revenue Code. However, if the IRS determined on audit that the distribution is taxable, both DTE Energy and our shareholders could incur significant U.S. federal income tax liabilities. Following the Proposed Spin-off, the management and directors each of DTE Energy and DT Midstream may own common stock in both companies and Robert Skaggs, Jr., who will be a member of DT Midstream's Board, also serves on DTE Energy's Board and may be required to recuse himself from deliberations relating to arrangements between DTE Energy and DT Midstream in the future. This ownership and directorship overlap could create, or appear to create, potential conflicts of interest when the management and directors of one company face decisions that could have different implications for themselves and the other company. Potential conflicts of interest may also arise out of any commercial arrangements that DTE Energy and DT Midstream may enter into in the future.
Item 1B. Unresolved Staff Comments None.
Item 3. Legal Proceedings For more information on legal proceedings and matters related to the Registrants, see Notes 10 and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters" and "Commitments and Contingencies," respectively. For environmental proceedings in which the government is a party, the Registrants have included disclosures if any sanctions of $1 million or greater are expected.
Item 4. Mine Safety Disclosures Not applicable.
Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities DTE Energy common stock is listed under the ticker symbol "DTE" on the New York Stock Exchange, which is the principal market for such stock. At December 31, 2020, there were 193,770,617 shares of DTE Energy common stock outstanding. These shares were held by a total of 47,485 shareholders of record. All of the 138,632,324 issued and outstanding shares of DTE Electric common stock, par value $10 per share, are indirectly-owned by DTE Energy, and constitute 100% of the voting securities of DTE Electric. Therefore, no market exists for DTE Electric's common stock. For information on DTE Energy dividend restrictions, see Note 17 to the Consolidated Financial Statements in Item 8 of this Report, "Short-Term Credit Arrangements and Borrowings." All of DTE Energy's equity compensation plans that provide for the annual awarding of stock-based compensation have been approved by shareholders. For additional detail, see Note 22 to the Consolidated Financial Statements in Item 8 of this Report, "Stock-Based Compensation." See the following table for information as of December 31, 2020: | | | | | | | | | | | | | | | | | | | Number of Securities to be Issued Upon Exercise of Outstanding Options | | Weighted-Average Exercise Price of Outstanding Options | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | Plans approved by shareholders | — | | | $ | — | | | 1,393,916 | |
UNREGISTERED SALES OF DTE ENERGY EQUITY SECURITIES AND USE OF PROCEEDS Purchases of DTE Energy Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about DTE Energy's purchases of equity securities that are registered by DTE Energy pursuant to Section 12 of the Exchange Act of 1934 for the quarter ended December 31, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of Shares Purchased(a) | | Average Price
Paid per Share(a) | | Number of Shares Purchased as Part of Publicly Announced
Plans or Programs | | Average Price Paid per Share | | Maximum Dollar
Value that May
Yet Be Purchased Under the Plans or Programs | | 10/01/2020 — 10/31/2020 | 11,165 | | | $ | 130.43 | | | — | | | — | | | — | | | 11/01/2020 — 11/30/2020 | 791 | | | $ | 120.57 | | | — | | | — | | | — | | | 12/01/2020 — 12/31/2020 | 686 | | | $ | 125.02 | | | — | | | — | | | — | | | Total | 12,642 | | | | | — | | | | | |
(a)Represents shares of DTE Energy common stock withheld to satisfy income tax obligations upon the vesting of restricted stock based on the price in effect at the grant date.
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN Total Return to DTE Energy Shareholders (Includes reinvestment of dividends) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Return Percentage
Year Ended December 31, | | Company/Index | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 26.93 | | | 14.59 | | | 4.19 | | | 21.36 | | | (2.90) | | | S&P 500 Index | | 11.95 | | | 21.82 | | | (4.39) | | | 31.48 | | | 18.39 | | | S&P 500 Multi-Utilities Index | | 18.56 | | | 12.09 | | | 1.77 | | | 24.36 | | | (5.87) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Indexed Returns
Year Ended December 31, | | | Base Period | | | | | | | | | | | | Company/Index | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 100.00 | | | 126.93 | | | 145.44 | | | 151.54 | | | 183.91 | | | 178.57 | | | S&P 500 Index | | 100.00 | | | 111.95 | | | 136.38 | | | 130.39 | | | 171.44 | | | 202.96 | | | S&P 500 Multi-Utilities Index | | 100.00 | | | 118.56 | | | 132.89 | | | 135.24 | | | 168.18 | | | 158.31 | |
Item 6. Selected Financial Data The following selected financial data of DTE Energy should be read in conjunction with the accompanying Management’s Discussion and risk criteria.Analysis in Item 7 of this Report and Combined Notes to Consolidated Financial Statements in Item 8 of this Report. This information has been omitted for DTE Electric per General Instruction I (2) (a) of Form 10-K for wholly-owned subsidiaries (reduced disclosure format). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | (In millions, except per share amounts) | | Operating Revenues | $ | 12,177 | | | $ | 12,669 | | | $ | 14,212 | | | $ | 12,607 | | | $ | 10,630 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net Income Attributable to DTE Energy Company(a) | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | $ | 1,134 | | | $ | 868 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted Earnings Per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | | | $ | 6.32 | | | $ | 4.83 | | | Financial Information | | | | | | | | | | | Dividends declared per share of common stock | $ | 4.12 | | | $ | 3.85 | | | $ | 3.60 | | | $ | 3.36 | | | $ | 3.06 | | Total Assets(b) | $ | 45,496 | | | $ | 42,268 | | | $ | 36,288 | | | $ | 33,767 | | | $ | 32,041 | | Long-Term Debt(c) | $ | 19,001 | | | $ | 15,935 | | | $ | 12,134 | | | $ | 12,185 | | | $ | 11,269 | | | Total DTE Energy Company Equity | $ | 12,425 | | | $ | 11,672 | | | $ | 10,237 | | | $ | 9,512 | | | $ | 9,011 | |
(a)The 2017 results include a $105 million net income tax benefit related to the enactment of the TCJA. (b)The 2019 increase includes $2.8 billion of Blue Union and LEAP assets acquired in December 2019. Refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions,” for additional information. RESULTS OF OPERATIONS(c)Long-Term Debt includes Finance lease obligations and excludes debt due within one year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes financial information prepared in accordance with GAAP, as well as the non-GAAP financial measures, Utility Margin and Non-utility Margin, discussed below, which The following combined discussion is separately filed by DTE Energy usesand DTE Electric. However, DTE Electric does not make any representations as measuresto information related solely to DTE Energy or the subsidiaries of its operational performance. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.DTE Energy other than itself. EXECUTIVE OVERVIEW DTE Energy uses Utility Margin and Non-utility Margin, non-GAAP financial measures, to assess its performance by reportable segment.
Utility Margin includes electric and gasis a diversified energy company with 2020 Operating Revenues net of Fuel, purchased power,approximately $12.2 billion and gas expenses. The utilities’ fuel, purchased power,Total Assets of approximately $45.5 billion. DTE Energy is the parent company of DTE Electric and DTE Gas, regulated electric and natural gas supply are passed through to customers,utilities engaged primarily in the business of providing electricity and therefore, result in changes to the utilities’ revenues that are comparable to changes in such expenses. As such,natural gas sales, distribution, and storage services throughout Michigan. DTE Energy believes Utility Margin provides a meaningful basis for evaluatingalso operates three energy-related non-utility segments with operations throughout the utilities’ operations across periods, as it excludes the revenue effect of fluctuations in these expenses.United States.
The Non-utility Margin relatesfollowing table summarizes DTE Energy's financial results: | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | | (In millions, except per share amounts) | | Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | Diluted Earnings per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | |
The increase in 2020 Net Income Attributable to ourDTE Energy Company was primarily due to higher earnings in the Electric, Gas Storage and Pipelines, and Corporate and Other segments, partially offset by lower earnings in the Energy Trading segment. The increase in 2019 Net Income Attributable to DTE Energy Company was due to higher earnings in the Electric, Gas, Energy Trading, and Corporate and Other segments, partially offset by lower earnings in the Gas Storage and Pipelines and Power and Industrial Projects segments.
COVID-19 Pandemic During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and other service territories throughout the United States in which the Registrants operate. DTE Energy Trading segments. Fortook certain safety precautions including directing employees to work remotely whenever possible and pausing all non-critical business activities. The spread of COVID-19 and efforts to contain the virus resulted in closures and reduced operations of businesses, governmental agencies, and other institutions. Beginning in May 2020, DTE Energy resumed business activities that had been temporarily suspended. Local businesses and other institutions also resumed operations as new cases of COVID-19 began to decline and government restrictions were reduced. Impacts from the COVID-19 pandemic have included a reduction in sales volumes from commercial and industrial customers and an increase in sales volumes from residential customers within the Electric segment. COVID-19 has also impacted the Power and Industrial Projects segment, Non-utility Margincontributing to lower production in the REF business and lower demand in the Steel business. Operation and maintenance expense has been impacted by COVID-19, primarily includes Operating Revenues net of Fuel, purchased power,in the Electric segment, due to higher costs for personal protective equipment and gas expenses. Operating Revenues include sales of refined coal to third partiesother health and the affiliated Electric utility, metallurgical cokesafety-related costs, including shift premiums and related by-products, petroleum coke, renewable natural gas, and electricity, as well as rental income and revenues from utility-type consulting, management, and operational services. Forexpenses associated with the Energy Trading segment, Non-utility Margin includes revenue and realized and unrealized gains and losses from physical and financial power and gas marketing, optimization, and trading activities, netsequestration of Purchased power and gas relatedcertain employees critical to these activities. DTE Energy evaluates its operating performancecontinued operations. The Registrants implemented certain cost savings initiatives to offset some of these non-utility businesses usingimpacts, to the measureextent they did not affect safety or reliability of Operating Revenues net of Fuel, purchased power,service. To date, impacts from the COVID-19 pandemic have not had a material effect on the Registrants' uncollectible expense or capital spend. In addition, the CARES Act was signed into law in March 2020 to assist individuals and gas expenses. Utility Margin and Non-utility Margin are not measures calculated in accordanceemployers with GAAP and should be viewed as a supplement to and not a substitute for the results of operations presented in accordance with GAAP. Utility Margin and Non-utility Margin do not intend to represent operating income, the most comparable GAAP measure, as an indicator of operating performance and are not necessarily comparable to similarly titled measures reported by other companies.
The following sections provide a detailed discussionimpacts of the operating performance and future outlook of DTE Energy's segments. Segment information, described below, includes intercompany revenues and expenses, and other income and deductions that are eliminatedCOVID-19 pandemic. This legislation resulted in various tax impacts to the Registrants. Refer to Note 11 to the Consolidated Financial Statements.
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Net Income (Loss) Attributable to DTE Energy by Segment: | | | | | | | Electric | $ | 606 |
| | $ | 622 |
| | $ | 542 |
| | Gas | 146 |
| | 138 |
| | 132 |
| | Gas Storage and Pipelines | 275 |
| | 119 |
| | 107 |
| | Power and Industrial Projects | 138 |
| | 95 |
| | 16 |
| | Energy Trading | 72 |
| | (45 | ) | | (22 | ) | | Corporate and Other | (103 | ) | | (61 | ) | | (48 | ) | | Net Income Attributable to DTE Energy Company | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
|
ELECTRIC
The Results of Operations discussion for DTE Electric is presented in a reduced disclosure format in accordance with General Instruction I (2) (a) of Form 10-K for wholly-owned subsidiaries.
The Electric segment consists principally of DTE Electric. Electric results are discussed below:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Operating Revenues — Utility operations | $ | 5,102 |
| | $ | 5,225 |
| | $ | 4,901 |
| | Fuel and purchased power — utility | 1,454 |
| | 1,532 |
| | 1,573 |
| | Utility Margin | 3,648 |
| | 3,693 |
| | 3,328 |
| | Operation and maintenance | 1,428 |
| | 1,455 |
| | 1,344 |
| | Depreciation and amortization | 753 |
| | 750 |
| | 637 |
| | Taxes other than income | 302 |
| | 284 |
| | 277 |
| | Operating Income | 1,165 |
| | 1,204 |
| | 1,070 |
| | Other (Income) and Deductions | 238 |
| | 229 |
| | 238 |
| | Income Tax Expense | 321 |
| | 353 |
| | 290 |
| | Net Income Attributable to DTE Energy Company | $ | 606 |
| | $ | 622 |
| | $ | 542 |
|
See DTE Electric's Consolidated Statements of Operations in Item 8 of this Report, "Income Taxes," for a complete viewadditional information.
Please see detailed explanations of its results.
Utility Margin decreased $45 million in 2017 and increased $365 million in 2016. Revenues associated with certain mechanisms and surcharges are offset by related expenses elsewheresegment performance in the Registrants' Consolidated Statements"Results of Operations.
The following table details changes in various Utility Margin components relativeOperations" section below, including impacts from the COVID-19 pandemic where applicable. Also refer to the comparable prior period:"Capital Resources and Liquidity" section for information on the impact of COVID-19 on the Registrants' liquidity and cost of capital.
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Implementation of new rates | $ | 124 |
| | $ | 198 |
| | PSCR disallowance in 2017 and 2015, respectively | (13 | ) | | 19 |
| | Base sales | (26 | ) | | 20 |
| | Weather | (109 | ) | | 96 |
| | Securitization bond and tax surcharge | — |
| | 40 |
| | Renewable energy program | — |
| | 12 |
| | Amortization of refundable revenue decoupling/deferred gain in 2015 | — |
| | (63 | ) | | Regulatory mechanisms and other | (21 | ) | | 43 |
| | Increase (decrease) in Utility Margin | $ | (45 | ) | | $ | 365 |
|
| | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In thousands of MWh) | | DTE Electric Sales | | | | | | | Residential | 14,885 |
| | 15,875 |
| | 15,001 |
| | Commercial | 17,283 |
| | 17,521 |
| | 17,192 |
| | Industrial | 9,897 |
| | 10,004 |
| | 9,690 |
| | Other | 258 |
| | 264 |
| | 291 |
| | | 42,323 |
| | 43,664 |
| | 42,174 |
| Interconnection sales(a) | 2,623 |
| | 2,334 |
| | 4,108 |
| | Total DTE Electric Sales | 44,946 |
| | 45,998 |
| | 46,282 |
| | | | | | | | | DTE Electric Deliveries | | | | | | | Retail and wholesale | 42,323 |
| | 43,664 |
| | 42,174 |
| Electric retail access, including self generators(b) | 4,820 |
| | 4,936 |
| | 4,899 |
| | Total DTE Electric Sales and Deliveries | 47,143 |
| | 48,600 |
| | 47,073 |
|
| | (a) | Represents power that is not distributed by DTE Electric. |
| | (b) | Represents deliveries for self generators that have purchased power from alternative energy suppliers to supplement their power requirements. |
DTE Electric sales decreased for residential, commercial, and industrial primarily dueEnergy's strategy is to favorable weather in 2016. Operation and maintenance expense decreased $27 million in 2017 and increased $111 million in 2016. The decrease in 2017 was primarily due to decreased power plant generation expenses of $66 million, partially offset by increased storm restoration expenses of $27 million, and increased line clearance expenses of $10 million. The decrease in power plant generation expenses includes an increase of $6 million of costs related to the 2016 fire atachieve long-term earnings growth, a generation facility, offset by $21 million of insurance proceeds received in 2017. The increase in 2016 was primarily due to increased power plant generation expenses of $55 million related to outages, increased distribution operations expenses of $13 million, and $47 million of expenses related to the deferral of negative other postretirement costs pursuant to the order in DTE Electric's base rate case, received in December 2015. The increase in the power plant generation expenses included $19 million of costs related to a fire at a generation facility which were partially reimbursed by insurance proceeds in 2017.
Depreciation and amortization expense increased $3 million in 2017 and increased $113 million in 2016. In 2017, the increase was due to $45 million of increased expense from an increased depreciable base, partially offset by a decrease of $29 million associated with the TRM, and a decrease of $13 million in amortization of regulatory assets. In 2016, $38 million of the increase was due to a higher depreciable base, $42 million was primarily due to the end of Securitization amortization in 2015,strong balance sheet, and an additional $42 million was associatedattractive dividend yield.
DTE Energy's utilities are investing capital to improve customer reliability through investments in base infrastructure and new generation, and to comply with the TRM, offset by a $9 million decrease in nuclear decommissioning amortization.
Other (Income) and Deductions increased $9 million in 2017 and decreased $9 million in 2016. The increase in 2017 was primarily due to higher interest expense of $10 million, lower interest income of $8 million related to a sales and use tax settlement received in 2016, and a $7 million contribution to theenvironmental requirements. DTE Energy Foundation, partially offset by $12 million of higher investment earnings and a $3 million decrease in Low Income Self-Sufficiency Plan (LSP) contributions to not-for-profit organizations in 2016. The decrease in 2016 was primarily due to $13 million of higher investment earnings, $8 million of interest income related to a sales and use tax settlement, offset by $3 million of LSP contributions to not-for-profit organizations, $2 million AFUDC equity, and $6 million higher interest expense.
Outlook— DTE Electric will continue to move forward in its efforts to achieve operational excellence, sustain strong cash flows, and earn its authorized return on equity. DTE Electric expects that planned significant capital investments will result in earnings growth. DTE Electric expects to continue its efforts to improve productivity and decrease costs while improving customer satisfaction with consideration of customer rate affordability. Looking forward, additional factors may impact earnings such as weather, the outcome of regulatory proceedings, benefit plan design changes, investment returns and changes in discount rate assumptions in benefitEnergy is focused on executing plans and health care costs, impact of 2016 Michigan energy legislation, uncertainty of legislative or regulatory actions regarding climate change, and effects of energy efficiency programs.
DTE Electric filed a rate case with the MPSC on April 19, 2017 requesting an increase in base rates of $231 million based on a projected twelve-month period ending October 31, 2018. The requested increase in base rates is primarily due to an increase in net plant resulting from infrastructure investments, environmental compliance, and reliability improvement projects. The rate filing also includes projected changes in sales, operation and maintenance expenses, and working capital. The rate filing also requests an increase in return on equity from 10.1% to 10.5%. On September 8, 2017, DTE Electric filed an application with the MPSC for a $125 million self-implemented base rate increase effective November 1, 2017. A final MPSC order in this case is expected by April 2018.
On January 19, 2018, DTE Electric filed information with the MPSC regarding the potential change in revenue requirements due to the TCJA effective January 1, 2018, and outlined our recommended method to flow the current and deferred tax benefits of those impacts to ratepayers.
GAS
The Gas segment consists principally of DTE Gas. Gas results are discussed below:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Operating Revenues — Utility operations | $ | 1,388 |
| | $ | 1,324 |
| | $ | 1,376 |
| | Cost of gas — utility | 443 |
| | 454 |
| | 526 |
| | Utility Margin | 945 |
| | 870 |
| | 850 |
| | Operation and maintenance | 451 |
| | 411 |
| | 430 |
| | Depreciation and amortization | 123 |
| | 106 |
| | 104 |
| | Taxes other than income | 65 |
| | 64 |
| | 62 |
| | Asset (gains) losses and impairments, net | — |
| | 4 |
| | — |
| | Operating Income | 306 |
| | 285 |
| | 254 |
| | Other (Income) and Deductions | 82 |
| | 70 |
| | 50 |
| | Income Tax Expense | 78 |
| | 77 |
| | 72 |
| | Net Income Attributable to DTE Energy Company | $ | 146 |
| | $ | 138 |
| | $ | 132 |
|
Utility Margin increased $75 million in 2017 and increased $20 million in 2016. Revenues associated with certain surcharges are offset by related expenses elsewhere in DTE Energy's Consolidated Statements of Operations.
The following table details changes in various Utility Margin components relative to the comparable prior period:
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Implementation of new rates | $ | 80 |
| | $ | 23 |
| | Revenue decoupling mechanism | 4 |
| | (7 | ) | | Home protection program | 3 |
| | 4 |
| | Midstream storage and transportation revenues | (5 | ) | | (2 | ) | | Weather | (6 | ) | | (22 | ) | | Infrastructure recovery mechanism | — |
| | 12 |
| | Other | (1 | ) | | 12 |
| | Increase in Utility Margin | $ | 75 |
| | $ | 20 |
|
| | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In Bcf) | | Gas Markets | | | | | | | Gas sales | 119 |
| | 116 |
| | 122 |
| | End-user transportation | 165 |
| | 182 |
| | 169 |
| | | 284 |
| | 298 |
| | 291 |
| | Intermediate transportation | 260 |
| | 214 |
| | 289 |
| | Total Gas sales | 544 |
| | 512 |
| | 580 |
|
Operation and maintenance expense increased $40 million in 2017 and decreased $19 million in 2016. The increase in 2017 was primarily due to increased employee benefits expenses of $30 million, increased corporate expenses of $3 million, and increased gas operations expenses of $3 million. The decrease in 2016 was primarily due to decreased uncollectible expenses of $14 million and decreased transmission expenses of $8 million. The decreased uncollectible expenses and transmission expenses in 2016 were primarily the result of weather-related impacts of warmer weather in 2016. Additionally, DTE Gas took actions to reduce costs to partially offset the negative impacts to revenue and utility margin resulting from the warmer weather in 2016.
Depreciation and amortization expense increased $17 million in 2017 and increased $2 million in 2016. The increase in 2017 was primarily due to increased expense from an increased depreciable base and higher depreciation rates.
Other (Income) and Deductions increased $12 million in 2017 and increased $20 million in 2016. The increase in 2017 was primarily due to increased contributions to the DTE Energy Foundation and other not-for-profit organizations of $7 million and higher interest expense of $5 million. The increase in 2016 was primarily due to contributions to the DTE Energy Foundation and other not-for-profit organizations.
Outlook — DTE Gas will continue to move forward in its efforts to achieve operational excellence sustainand customer satisfaction with a focus on customer affordability. DTE Energy operates in a constructive regulatory environment and has solid relationships with its regulators.
DTE Energy is committed to reduce the carbon emissions of its electric utility operations by 32% by 2023, 50% by 2030, and 80% by 2040 from 2005 carbon emissions levels. DTE Energy is also committed to a net zero carbon emissions goal by 2050 for its electric utility, gas utility, and DTE Midstream operations. To achieve the reduction goals in the near term, DTE Energy will transition away from coal-powered sources and incorporate more renewable energy, energy waste reduction projects, demand response, and natural gas fueled generation. DTE Energy has already begun the transition in the way it produces power through the continued retirement of its aging coal-fired plants. Refer to the "Capital Investments" section below for further discussion. DTE Energy has significant investments in non-utility businesses. DTE Energy employs disciplined investment criteria when assessing growth opportunities that leverage its assets, skills, and expertise, and provides diversity in earnings and geography. Specifically, DTE Energy invests in targeted energy markets with attractive competitive dynamics where meaningful scale is in alignment with its risk profile. DTE Energy expects growth opportunities in the Gas Storage and Pipelines and Power and Industrial Projects segments. These opportunities would be limited to Power and Industrial Projects if DTE Energy completes the planned spin-off of the DTE Midstream business and shifts its strategy to a predominantly pure-play utility, as discussed in the "Outlook" section below.
A key priority for DTE Energy is to maintain a strong balance sheet which facilitates access to capital markets and reasonably priced short-term and long-term financing. Near-term growth will be funded through internally generated cash flows and earn its authorized return onthe issuance of debt and equity. DTE Gas expectsEnergy has an enterprise risk management program that, plannedamong other things, is designed to monitor and manage exposure to earnings and cash flow volatility related to commodity price changes, interest rates, and counterparty credit risk. CAPITAL INVESTMENTS DTE Energy's utility businesses require significant infrastructure capital investments to maintain and improve the electric generation and electric and natural gas distribution infrastructure and to comply with environmental regulations and renewable energy requirements. DTE Electric's capital investments over the 2021-2025 period are estimated at $14 billion, comprised of $5 billion for capital replacements and other projects, $7 billion for distribution infrastructure, and $2 billion for renewable generation. DTE Electric has retired five coal-fired generation units at the Trenton Channel, River Rouge, and St. Clair facilities and has announced plans to retire its remaining twelve coal-fired generating units. River Rouge's final unit will resultretire in earnings growth. Looking forward,2021 and five additional factors may impact earnings such as weather,coal-fired generating units at Trenton Channel and St. Clair will be retired in 2022. The remaining coal-fired generating units at the outcomeBelle River and Monroe facilities are expected to be retired by 2040. The retired facilities will be replaced with renewables, energy waste reduction, demand response, and natural gas fueled generation. DTE Gas' capital investments over the 2021-2025 period are estimated at $3 billion, comprised of regulatory proceedings, benefit plan design changes,$1.4 billion for base infrastructure and investment returns$1.6 billion for gas main renewal, meter move out, and changes in discount rate assumptions in benefit planspipeline integrity programs. DTE Electric and health care costs. DTE Gas expectsplan to seek regulatory approval for capital expenditures consistent with ratemaking treatment. DTE Energy's non-utility businesses' capital investments are primarily for expansion, growth, and ongoing maintenance. Gas Storage and Pipelines' capital investments over the 2021-2025 period are estimated at $1.2 billion to $1.7 billion for gathering and pipeline investments and expansions. Power and Industrial Projects' capital investments over the 2021-2025 period are estimated at $1 billion to $1.4 billion for industrial energy services and renewable energy projects. ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulations. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. Actual costs to comply could vary substantially. The Registrants expect to continue its effortsrecovering environmental costs related to improve productivityutility operations through rates charged to customers, as authorized by the MPSC. See Items 1. and decrease costs while improving customer satisfaction with consideration of customer rate affordability. DTE Gas filed a rate case with the MPSC on November 22, 2017 requesting an increase in base rates of $85.1 million based on a projected twelve-month period ending September 30, 2019. The requested increase in base rates is primarily due to an increase in net plant. The rate filing also includes projected changes in sales, operations, maintenance expenses,2. Business and working capital. The rate filing also requests an increase in return on equity from 10.1% to 10.5%. A final MPSC order in this case is expected by September 2018.
On JanuaryProperties and Note 19 2018, DTE Gas filed information with the MPSC regarding the potential change in revenue requirements due to the TCJA effective January 1, 2018,Consolidated Financial Statements in Item 8 of this Report, "Commitments and outlined our recommended method to flow the current and deferred tax benefitsContingencies," for further discussion of those impacts to ratepayers.Environmental Matters.
GAS STORAGE AND PIPELINES The Description
Gas Storage and Pipelines segment consistsowns, operates, and develops an integrated portfolio of natural gas interstate pipelines, intrastate pipelines, storage systems, gathering lateral pipelines, gathering systems, treatment plants, and compression and surface facilities. Gas Storage and Pipelines owns and operates both wholly owned pipeline and gathering assets, as well as interests in joint venture pipeline assets including the Millennium Pipeline, Vector Pipeline, and NEXUS Pipeline, many of which have connectivity to the wholly owned assets. Gas Storage and Pipelines provides multiple, integrated natural gas services to customers with core assets that strategically connect key demand centers in the Gulf Coast, Midwest, Ontario, and Northeast markets to the premium production areas of the non-utilityMarcellus/Utica and Haynesville dry natural gas pipelinesformations in the Appalachian and Gulf Coast Basins. These assets are primarily supported by long-term, fixed-price revenue contracts.
Properties Gas Storage and Pipelines holds the following properties: | | | | | | | | | | | | | | | | | | | | | | Property Classification | | % Owned | | Description | | Location | | Pipelines and Other | | | | | | | | Birdsboro Pipeline | | 100% | | 14-mile pipeline delivering gas supply to the Birdsboro Power Plant | | PA | | Bluestone Pipeline | | 100% | | 65-mile pipeline delivering Marcellus Shale gas to Millennium Pipeline and Tennessee Pipeline | | PA and NY | | LEAP | | 100% | | 155-mile pipeline stretching from the Haynesville Shale area to the Gulf Coast providing access to petrochemical and refining facilities, power plants, and LNG export facilities | | LA | | Generation Pipeline | | 50% | | 25-mile pipeline regulated as gas utility by the Public Utilities Commission of Ohio | | OH | | Millennium Pipeline | | 26% | | 263-mile pipeline serving markets in the Northeast | | NY | | NEXUS Pipeline | | 50% | | 256-mile pipeline to transport Utica and Marcellus Shale gas to Ohio, Michigan, and Ontario market centers | | OH and MI | | Stonewall Gas Gathering | | 85% | | 68-mile pipeline connecting Appalachia Gathering System to Columbia Pipeline | | WV | | Vector Pipeline | | 40% | | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | | IL, IN, MI, and Ontario | | Washington 10 Storage | | 100% | | 94 Bcf of storage capacity | | MI | | | | | | | | | Gathering | | | | | | | | Appalachia Gathering System | | 100% | | 135-mile pipeline delivering Marcellus Shale gas to Texas Eastern Pipeline and Stonewall Gas Gathering system | | PA and WV | | Blue Union | | 100% | | 343-mile gathering system delivering Haynesville Shale gas production to markets in Gulf Coast Region | | LA and TX | | Michigan Gathering | | 100% | | 336-mile pipeline system in northern Michigan | | MI | | Susquehanna Gathering | | 100% | | 197-mile pipeline delivering Southwestern Energy's Marcellus Shale gas production to Bluestone Pipeline | | PA | | Tioga Gas Gathering | | 100% | | 3-mile pipeline delivering production gas to Dominion Transmission interconnect | | PA |
The assets of these businesses are well integrated with other DTE Energy operations. Pursuant to an operating agreement, DTE Gas provides physical operations, maintenance, and technical support for the Washington 10 storage facility and for the Michigan gathering systems. Regulation Gas Storage and Pipelines operates natural gas storage facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and related services pursuant to an MPSC-approved tariff. Gas Storage and Pipelines also provides interstate services in accordance with an Operating Statement on file with the FERC. Vector, Millennium, Birdsboro, and NEXUS Pipelines provide interstate transportation services in accordance with their FERC-approved tariffs. In addition, NEXUS and Vector are subject to applicable laws, rules, and regulations in Canada. Gas Storage and Pipelines' gathering and pipeline assets are subject to the rules and regulations of various state utility commissions. Strategy and Competition Gas Storage and Pipelines expects to continue its steady growth plan by expanding existing assets and developing new assets that are typically supported with long-term customer commitments, particularly in the following regions:
Midwest to Northeast Region Gas Storage and Pipelines is focused on opportunities to supply natural gas to meet growing demand and displace less attractive supply from certain regions in North America. Much of the growth in midstream services demand for natural gas is expected to occur in the eastern Canada and the northeast U.S. regions. Gas Storage and Pipelines believes that the Vector, Millennium, and NEXUS Pipelines are well-positioned to provide access routes and low-cost expansion options to these markets due to growth in production from the Marcellus/Utica Shales in Pennsylvania and West Virginia. Gas Storage and Pipelines has agreements with key producers that support its Bluestone Pipeline, Susquehanna gathering, Tioga gathering, AGS, and SGG businesses. Gas Storage and Pipelines results are discussed below:is evaluating new pipeline and storage investment opportunities that could include additional pipeline and gathering expansions, laterals, compression, and other Marcellus/Utica shale midstream development or partnering opportunities. | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Operating Revenues — Non-utility operations | $ | 453 |
| | $ | 302 |
| | $ | 243 |
| | Cost of gas — Non-utility | 30 |
| | 6 |
| | — |
| | Operation and maintenance | 83 |
| | 81 |
| | 58 |
| | Depreciation and amortization | 76 |
| | 45 |
| | 30 |
| | Taxes other than income | 8 |
| | 4 |
| | 5 |
| | Asset (gains) losses and impairments, net | 2 |
| | — |
| | — |
| | Operating Income | 254 |
| | 166 |
| | 150 |
| | Other (Income) and Deductions | (18 | ) | | (31 | ) | | (29 | ) | | Income Tax Expense (Benefit) | (30 | ) | | 71 |
| | 70 |
| | Net Income | 302 |
| | 126 |
| | 109 |
| | Less: Net Income Attributable to Noncontrolling Interests | 27 |
| | 7 |
| | 2 |
| | Net Income Attributable to DTE Energy Company | $ | 275 |
| | $ | 119 |
| | $ | 107 |
|
Operating Revenues — Non-utility operations increased $151 million in 2017In December 2019, Gas Storage and increased $59 million in 2016. The increase in both periods was primarily due toPipelines completed the acquisition of AGSthe Blue Union gathering system and SGGLEAP gathering pipeline in October 2016the Haynesville shale formation of Louisiana which provide access to growing Gulf Coast markets. The assets serve multiple markets, including Louisiana, the nation's third largest natural gas consumer, and increasedthe Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. Through this acquisition, Gas Storage and Pipeline invested in strategically situated assets that are supported by long-term contracts. Strong credit provisions are also incorporated into the contract with the system's largest customer.
Gas Storage and Pipelines has competition from other pipelines and storage providers. Operations are dependent upon key customers in the Haynesville shale formation in the Gulf Coast and in the Marcellus/Utica shale formation in the Northeast for a significant portion of revenues. The loss of, or reduction in volumes from, any of these key customers could result in a decline in demand for services and have a material adverse effect on the Bluestone Pipelineresults of Gas Storage and Susquehanna gathering systems.Pipelines. CostDTE Midstream Spin-off
On October 27, 2020, DTE Energy announced that its Board of gas — Non-utility increased $24 million in 2017 and increased $6 million in 2016. The increase in both periods was primarily driven by the physical purchase of gas from AGS customers for resaleDirectors has authorized management to optimize available transportation capacity. Operation and maintenance expense increased $2 million in 2017 and increased $23 million in 2016. The 2016 increase was primarily duepursue a plan to the transaction costs related to the acquisition of AGS and SGG in 2016 and increased activity on the Susquehanna gathering system.
Depreciation and amortization expense increased $31 million in 2017 and increased $15 million in 2016. The 2017 increase was primarily due to the acquisition of AGS and SGG in October 2016. The 2016 increase was due primarily to the acquisition of AGS and SGG and additional Bluestone and Susquehanna expansion projects placed in service.
Other (Income) and Deductions decreased $13 million in 2017 and increased $2 million in 2016. The 2017 decrease was primarily due to a $16 million net loss on extinguishment of debt within the storage business, and contributions tospin-off the DTE Energy FoundationMidstream business. The spin-off would establish DTE Midstream as an independent, natural gas midstream company with increased flexibility and opportunities. The separation is expected to be completed by mid-year 2021, subject to final approval by DTE Energy's Board of Directors and satisfaction of other not-for-profit organizations, partially offset by increased earnings from pipeline investments. The 2016 increase was primarily dueconditions. For additional information, refer to increased earnings from pipeline investments, partially offset by increased interest expense as a result of the acquisition of AGS and SGG in 2016.
Income Tax Expense (Benefit) decreased $101 million in 2017 from the expense of $71 million in 2016 and increased $1 million in 2016. The 2017 decrease was primarily due to the $115 million remeasurement of deferred tax assets and liabilities to reflect the reduction in the corporate tax rate from the enactment of the TCJA in December 2017. This was partially offset by increased tax expense on higher earnings in 2017.
Net Income Attributable to Noncontrolling Interests increased $20 million in 2017 and increased $5 million in 2016. The increase in both periods was primarily due to the acquisition of SGG in October 2016.
See Note 4 to the Consolidated Financial Statements in Item 8 of this Report, "Acquisitions“Acquisitions and Exit Activities" for discussion of the acquisition of AGS and SGG in October 2016.
Outlook — The Bluestone Pipeline and Susquehanna gathering system are being expanded with additional compression facilities and gathering lines as needed to accommodate shipper demand. DTE Energy believes its long-term agreement with Southwestern Energy Production Company and the quality of the natural gas reserves in the Marcellus region soundly positions Bluestone Pipeline and Susquehanna gathering system for future growth.
Progress continues on development activities on the NEXUS Pipeline, a transportation path to transport Appalachian Basin shale gas, including Utica and Marcellus shale gas, directly to consuming markets in northern Ohio, southeastern Michigan, and Dawn Ontario. DTE Energy owns a 50% partnership interest in the NEXUS Pipeline. The FERC application was approved on August 25, 2017 and construction commenced in October 2017. DTE Energy anticipates a third quarter 2018 in-service date for the NEXUS Pipeline.
The October 2016 acquisition of AGS and SGG provides a platform for midstream growth and access to further investment opportunities in the Appalachian basin, an additional connection to the NEXUS Pipeline which should drive incremental volumes on the NEXUS Pipeline, and a new set of producer relationships that may lead to more partnering opportunities.
In May 2017, DTE Energy filed a FERC application for approval of the Birdsboro Pipeline, a 14-mile lateral to serve a new power plant in Pennsylvania. DTE Energy is targeting a 2018 in-service date.
Gas Storage and Pipelines expects to maintain its steady growth by developing an asset portfolio with multiple growth platforms through investment in new projects and expansions. Gas Storage and Pipelines will continue to look for additional investment opportunities and other storage and pipeline projects at favorable prices.Dispositions.”
POWER AND INDUSTRIAL PROJECTS The Description
Power and Industrial Projects segment is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and gas from renewable energy projects. This business segment provides services using project assets usually located on or near the customers' premises in the steel, automotive, pulp and paper, airport, chemical, and other industries as follows: Industrial Energy Services •Steel and Petroleum Coke — Power and Industrial Projects results are discussed below: | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Operating Revenues — Non-utility operations | $ | 2,089 |
| | $ | 1,906 |
| | $ | 2,224 |
| | Fuel, purchased power, and gas — non-utility | 1,813 |
| | 1,640 |
| | 1,837 |
| | Non-utility Margin | 276 |
| | 266 |
| | 387 |
| | Operation and maintenance | 343 |
| | 320 |
| | 379 |
| | Depreciation and amortization | 72 |
| | 72 |
| | 78 |
| | Taxes other than income | 11 |
| | 13 |
| | 15 |
| | Asset (gains) losses and impairments, net | 20 |
| | (1 | ) | | 106 |
| | Operating Loss | (170 | ) | | (138 | ) | | (191 | ) | | Other (Income) and Deductions | (64 | ) | | (52 | ) | | (58 | ) | | Income Taxes | | | | | | | Benefit | (42 | ) | | (26 | ) | | (49 | ) | | Production Tax Credits | (153 | ) | | (114 | ) | | (91 | ) | | | (195 | ) | | (140 | ) | | (140 | ) | | Net Income | 89 |
| | 54 |
| | 7 |
| | Less: Net Loss Attributable to Noncontrolling Interests | (49 | ) | | (41 | ) | | (9 | ) | | Net Income Attributable to DTE Energy Company | $ | 138 |
| | $ | 95 |
| | $ | 16 |
|
Operating Revenues — Non-utility operations increased $183produces metallurgical coke from a coke battery with a capacity of 1.0 million tons per year and has an investment in 2017a second coke battery with a capacity of 1.2 million tons per year. Power and decreased $318 million in 2016. The changes are dueIndustrial Projects also provides pulverized coal and petroleum coke to the following:steel, pulp and paper, and other industries.
| | | | | | | 2017 | | | (In millions) | | Higher demand due to improved conditions in the steel business | $ | 107 |
| | Higher production driven by new projects, offset by lower coal prices in the REF business | 102 |
| | Lower production and one-time recovery in 2016, offset by an acquisition in the renewables business | (9 | ) | | Lower sales primarily associated with expired contracts in the on-site business | (17 | ) | | | $ | 183 |
| | | | | | 2016 | | | (In millions) | | Closure of the Shenango coke battery and lower demand in the steel business | $ | (264 | ) | | Termination of a lease agreement in the REF business | (40 | ) | | Contract termination at a renewable power project facility, offset by a one-time revenue recovery | (9 | ) | | Other | (5 | ) | | | $ | (318 | ) |
Non-utility Margin increased $10 million in 2017•On-Site Energy — Power and decreased $121 million in 2016. The changes are dueIndustrial Projects provides power generation, steam production, chilled water production, wastewater treatment, and compressed air supply to industrial customers. Power and Industrial Projects also provides utility-type services using project assets usually located on or near the following:
| | | | | | | 2017 | | | (In millions) | | Higher demand due to improved conditions in the steel business | $ | 42 |
| | Lower production and one-time recovery in 2016 in the renewables business | (11 | ) | | Lower sales primarily associated with expired contracts in the on-site business | (15 | ) | | Other | (6 | ) | | | $ | 10 |
| | | | | | 2016 | | | (In millions) | | Closure of the Shenango coke battery and lower demand in the steel business | $ | (114 | ) | | Termination of a lease agreement in the REF business | (12 | ) | | Lower fuel costs in a renewable power project business | 5 |
| | | $ | (121 | ) |
Operation and maintenance expense increased $23 million in 2017 and decreased $59 million in 2016. The 2017 increase was primarily due to an increase in maintenance spending driven by improved conditionscustomers' premises in the steel business of $16 million, higher maintenance and a new acquisition in the renewables business of $7 million, and an increase associated with new projects in the REF business of $5 million, offset by lower spending as a result of the closure of the Shenango coke battery in 2015 of $6 million. The 2016 decrease was primarily due to lower spending as a result of the closure of the Shenango coke battery in 2015 of $68 million, cost control due to lower demand in the steel business, and lower spending primarily due to the closure of a renewable power project of $4 million, partially offset by an increase associated with new projects in the REF business of $14 million.
Asset (gains) losses and impairments, net decreased by $21 million in 2017 from the net gain of $1 million in 2016 and decreased by $107 million in 2016 from the net loss of $106 million in 2015. The 2017 decrease was primarily due to an impairment in the REF business of $14 million and an impairment of a petroleum coke project of $6 million. The 2016 decrease was primarily due to a loss associated with the closure of the Shenango coke battery in 2015.
Other (Income) and Deductions increased $12 million in 2017 and decreased $6 million in 2016. The 2017 increase was primarily due to increased equity earnings in the renewable business of $9 million and insurance settlements in the renewable and REF businesses of $6 million, offset by increased contributions to the DTE Energy Foundation of $6 million. The 2016 decrease was primarily due to the reduction of refined coal produced at REF sites with investors of $9 million and lower equity earnings primarily from a renewable power project of $8 million, offset by higher contributions to the DTE Energy Foundationautomotive, airport, chemical, and other not-for-profit organizationsindustries.
Renewable Energy •Wholesale Power and Renewables — Power and Industrial Projects holds ownership interests in, 2015and operates, five renewable generating plants with a capacity of $11 million.139 MWs. The electric output is sold under long-term power purchase agreements. Income Taxes•Renewable Gas Recovery — Benefit increased by $16 millionPower and Industrial Projects has ownership interests in, 2017 and decreased by $23 millionoperates, twenty-two gas recovery sites in 2016.nine different states. The 2017 increase was primarily duesites recover methane from landfills and agricultural businesses and convert the gas to the remeasurement of deferred tax assetsgenerate electricity, replace fossil fuels in industrial and liabilitiesmanufacturing operations, or refine to reflect the reduction in the corporate tax rate from the enactment of the TCJA in December 2017 of $21 million, an increase due to higher pretax loss of $7 million, and a decrease due to a worthless stock deduction associated with the Shenango closure in 2016 of $10 million. The decrease in 2016 was primarily driven by a lower pretax loss of $33 million, offset by a $10 million worthless stock deduction due to the Shenango closure.pipeline-quality gas, which can then be used as vehicle fuel.
Income TaxesReduced Emissions Fuel
•Reduced Emissions Fuel — Production Tax Credits increased by $39 million in 2017 and increased $23 million in 2016. The increase in both periods was primarily due to new projects in the REF business. Net Loss Attributable to Noncontrolling Interests increased by $8 million in 2017 and increased by $32 million in 2016. The 2017 increase is primarily due to a change in the ownership percentage in one of the REF projects of $8 million. The 2016 increase consists of $27 million due to new lease arrangements and $5 million due to existing lease arrangements with investors at various REF facilities.
Outlook — Power and Industrial Projects has constructed and placed in service REF facilities at eleventen sites, including facilities located at eightseven third-party owned coal-fired power plants. DTE Energy has sold membership interests in fourseven of the facilities and entered into lease arrangements in threetwo of the facilities. DTE Energy will continueThe facilities blend a proprietary additive with coal used in coal-fired power plants, resulting in reduced emissions of nitrogen oxide and mercury. Qualifying facilities are eligible to optimize thesegenerate tax credits for ten years upon achieving certain criteria. The value of a tax credit is adjusted annually by an inflation factor published by the IRS. The value of the tax credit is reduced if the reference price of coal exceeds certain thresholds. The economic benefit of the REF facilities is dependent upon the generation of production tax credits.
Properties and Other The following are significant properties operated by seeking investors or entering into lease arrangements forPower and Industrial Projects: | | | | | | | | | | | | | | | | Business Areas | | Location | | Service Type | | Industrial Energy Services | | | | | | Steel and Petroleum Coke | | | | | | Pulverized Coal Operations | | MI | | Pulverized Coal | | Coke Production | | MI | | Metallurgical Coke Supply | | Other Investment in Coke Production and Petroleum Coke | | IN and MS | | Metallurgical Coke Supply and Pulverized Petroleum Coke | | On-Site Energy | | | | | | Automotive | | IN, MI, NY, and OH | | Electric Distribution, Chilled Water, Wastewater, Steam, Cooling Tower Water, Reverse Osmosis Water, Compressed Air, Mist, and Dust Collectors | | Airports | | MI and PA | | Electricity and Hot and Chilled Water | | Chemical Manufacturing | | KY and OH | | Electricity, Steam, Natural Gas, Compressed Air, and Wastewater | | Consumer Manufacturing | | OH | | Electricity, Steam, Wastewater, and Sewer | | Business Park | | PA | | Electricity | | Hospital and University | | CA and IL | | Electricity, Steam, and Chilled Water | | Casino and Gaming | | NJ | | Electricity, Steam, and Chilled Water | | Renewable Energy | | | | | | Renewables | | CA and MN | | Electric Generation | | Renewable Gas Recovery | | AZ, CA, MI, NC, NY, OH, TX, UT, and WI | | Electric Generation and Renewable Natural Gas | | Reduced Emissions Fuel | | MI, OH, IL, TX, and WI | | REF Supply |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Production Tax Credits Generated (Allocated to DTE Energy) | | | | | | | REF | $ | 55 | | | $ | 72 | | | $ | 178 | | | Renewables | 9 | | | 8 | | | 7 | | | Renewable Gas Recovery | 2 | | | 3 | | | 3 | | | | | | | | | $ | 66 | | | $ | 83 | | | $ | 188 | |
Regulation Certain electric generating facilities operating at DTE Electricwithin Power and otherIndustrial Projects have market-based rate authority from the FERC to sell power. The facilities are subject to FERC reporting requirements and market behavior rules. Certain projects of Power and Industrial Projects are also subject to the applicable laws, rules, and regulations related to the EPA, U.S. Department of Homeland Security, DOE, CARB, and various state utility sites.commissions. Strategy and Competition Power and Industrial Projects will continue to leverageleveraging its extensive energy-related operating experience and project management capability to develop additionaland grow its steel, on-site energy, and renewable energy businesses, and optimize the REF businesses until the phase-out at the end of 2021. Power and Industrial Projects will also continue to pursue opportunities to provide asset management and operations services to third parties. There are limited competitors for Power and Industrial Projects' existing disparate businesses who provide similar products and services. Power and Industrial Projects' operations are dependent upon a limited number of customers, and the loss of any one or a few customers could have a material adverse effect on the results of Power and Industrial Projects. Power and Industrial Projects anticipates building around its core strengths in the markets where it operates. In determining the markets in which to compete, Power and Industrial Projects examines closely the regulatory and competitive environment, new and pending legislation, the number of competitors, and its ability to achieve sustainable margins. Power and Industrial Projects plans to maximize the effectiveness of its related businesses as it expands. Power and Industrial Projects intends to focus on the following areas for growth: •Providing energy and utility-type services to commercial and industrial customers •Acquiring and developing renewable energy projects to serveand other energy intensive industrial customers.projects. ENERGY TRADING Description Energy Trading focuses on physical and financial power, and natural gas and environmental marketing and trading, structured transactions, enhancement of returns from its asset portfolio, and optimization of contracted natural gas pipeline transportation and storage positions. Energy Trading also provides natural gas, power, environmental and related services which may include the management of associated storage and transportation contracts on the customers’ behalf and the supply or purchase of environmental attributes to various customers. Energy Trading's customer base is predominantly utilities, local distribution companies, pipelines, producers and generators, and other marketing and trading companies. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy. Energy Trading enters into derivative financial instruments as part of its marketing and hedging activities. These financial instruments are generally accounted for under the MTM method, which results in the recognition in earnings of unrealized gains and losses from changes in the fair value of the derivatives. Energy Trading utilizes forwards, futures, swaps, and option contracts to mitigate risk associated with marketing and trading activity, as well as for proprietary trading within defined risk guidelines. Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments, physical power and natural gas contracts, and certain environmental contracts are deemed derivatives; whereas, natural gas and environmental inventory, contracts for pipeline transportation, storage assets, and some environmental contracts are not derivatives. As a result, this segment will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. The business’ strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards, swaps, and options. This results in gains and losses that are recognized in different interim and annual accounting periods. Regulation Energy Trading has market-based rate authority from the FERC to sell power and blanket authority from the FERC to sell natural gas at market prices. Energy Trading is subject to FERC reporting requirements and market behavior rules. Energy Trading is also subject to the applicable laws, rules, and regulations related to the CFTC, U.S. Department of Homeland Security, and DOE. In addition, Energy Trading is subject to applicable laws, rules, and regulations in Canada.
Strategy and Competition DTE Energy's strategy for the Energy Trading business is to deliver value-added services to DTE Energy customers. DTE Energy seeks to manage this business in a manner complementary to the growth of DTE Energy's other business segments. Energy Trading focuses on physical marketing and the optimization of its portfolio of energy assets. The segment competes with electric and gas marketers, financial institutions, traders, utilities, and other energy providers. The Energy Trading business is dependent upon the availability of capital and an investment grade credit rating. DTE Energy believes it has ample available capital capacity to support Energy Trading activities. DTE Energy monitors its use of capital closely to ensure that its commitments do not exceed capacity. A material credit restriction would negatively impact Energy Trading's financial performance. Competitors with greater access to capital, or at a lower cost, may have a competitive advantage. DTE Energy has risk management and credit processes to monitor and mitigate risk. CORPORATE AND OTHER Description Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds certain investments, including funds supporting regional development and economic growth. ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulation and expect to continue recovering environmental costs related to utility operations through rates charged to customers. The following table summarizes DTE Energy's, including DTE Electric's, estimated significant future environmental expenditures based upon current regulations. Pending or future reconsideration of current regulations may impact the estimated expenditures summarized in the table below. Actual costs to comply could vary substantially. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. | | | | | | | | | | | | | | | | | | | | | | | | | DTE Electric | | DTE Gas | | Non-utility | | Total | | (In millions) | | | | | | | | | | Water | $ | 54 | | | $ | — | | | $ | — | | | $ | 54 | | | Contaminated and other sites | 9 | | | 15 | | | — | | | 24 | | | Coal combustion residuals and effluent limitations guidelines | 601 | | | — | | | — | | | 601 | | | Estimated total future expenditures through 2025 | $ | 664 | | | $ | 15 | | | $ | — | | | $ | 679 | | | Estimated 2021 expenditures | $ | 204 | | | $ | 9 | | | $ | — | | | $ | 213 | | | Estimated 2022 expenditures | $ | 143 | | | $ | 4 | | | $ | — | | | $ | 147 | |
For additional information regarding environmental matters, refer to Notes 9, 10, and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," and "Commitments and Contingencies." HUMAN CAPITAL MANAGEMENT DTE Energy and its subsidiaries had approximately 10,600 employees as of December 31, 2020, of which approximately 5,200 were represented by unions. DTE Electric had approximately 4,800 employees as of December 31, 2020, of which approximately 2,800 were represented by unions. This workforce is comprised almost entirely of full-time employees. DTE Energy and utilities across the country are managing the turnover of our workforce due to a significant number of retirements expected in the next ten years - a period that will be impacted by major transformation of our business through technology investments, regulatory changes to our electric generation portfolio, and upgrades to our distribution infrastructure. Amidst this challenge, DTE is working to build a culture of highly engaged employees with skills and expertise in science, technology, engineering, math, analytics, and skilled trades, which are in high demand and critical to our industry. To attract and retain the best talent, DTE Energy promotes the engagement of its employees through diversity, equity, and inclusion, health and safety, and compensation and benefits.
Diversity, Equity, and Inclusion (DEI) DTE is committed to building a diverse, empowered, and engaged team that delivers safe, reliable service and energy to our customers. A diverse workforce and inclusive culture contributes to DTE's success and sustainability by driving innovation and creating trusted relationships with employees, customers, suppliers, and community partners. By tapping into the talent, unique perspectives, and cultural and life experiences of every employee, DTE can ensure its continued success. DTE measures DEI performance in several ways: •Diversity of candidates, hires, high potential talent, and leadership promotions •Workforce representation of women, minorities, veterans, and employees with disabilities •Employee engagement, including specific elements that measure a culture of inclusion •Number of DEI related communications •Supplier diversity spend •Rankings and scores from DEI benchmarking surveys •Formal training programs, including unconscious bias training for employees and leaders •Salary analysis of women and minorities compared to non-minorities Health and Safety The health and safety of people is DTE Energy's top priority - for employees, contractors, customers, and everyone in the community DTE Energy serves. DTE Energy's safety culture is maintained and strengthened with the help of multiple safety committees spanning all levels of the company. Members include union representatives, DTE Energy executives, office workers, and field employees. All workplace injuries and incidents that could have caused an injury are documented and thoroughly reviewed for potential preventive measures. Employees know they are responsible for their own safety and the safety of everyone around them. DTE Energy also administers regular safety training. Hazardous work is identified and categorized according to risk and training is provided to mitigate risk of any serious injuries. DTE Energy monitors its safety performance by reviewing the rate of safety incidents, as defined by the Office of Safety and Health Administration (OSHA), and the rate of Days Away, Restricted, or Transferred (DART). DTE Energy is also committed to providing employees with the resources they need to lead healthier lifestyles, including an on-site clinic and fitness center. DTE Energy offers a Healthy Living Program to complete both an annual physical with biometric screenings and a Health Risk Assessment to avoid a medical premium surcharge, and offers participation in health education on disease management programs. COVID-19 Response During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and the other service territories throughout the United States in which DTE Energy operates. DTE Energy took quick action to ensure the safety and well-being of its employees. DTE Energy has successfully implemented work from home for over half of its employees and implemented extensive new safety procedures to ensure plant and employee safety, including the use of personal protective equipment, contact tracing, and cleaning of facilities. At the onset of the pandemic, DTE Energy temporarily paused all non-critical business activities. For the essential workers most critical to our continued operations, DTE Energy sequestered certain employees to protect their health and to ensure safe and reliable gas and electric service for DTE Energy customers. To further support employees during the pandemic, DTE Energy enhanced communications around its employee assistance programs, established an occupational health call center, and provided clinical case management for cases related to COVID-19.
DTE Energy continues to actively monitor risks related to COVID-19 and proper application of our safety protocol. DTE Energy is also committed to providing consistent, transparent communication to employees around safe practices, quarantine and testing protocols, vaccine availability, and timing of safely returning to office work. Compensation and Benefits DTE Energy is committed to offering compensation that is competitive, market driven, and internally equitable. Approximately half of DTE Energy's employees are represented by labor unions through which pay is uniformly determined through collectively bargained agreements regardless of an employee's gender or ethnicity. For non-represented employees, DTE Energy's human resources professionals establish pay ranges for each job classification and work with hiring leaders to make competitive offers within the range to candidates based on objective factors like years of experience and strength of skills relevant to the job. Annually, DTE Energy conducts a review of compensation practices as part of its affirmative action program and makes adjustments as needed to ensure that pay is fair and equitable. DTE Energy provides competitive, customizable benefits for all regular full-time and regular part-time employees. Innovative compensation and benefits initiatives at DTE Energy include: •A 401(k) plan/Employee Stock Ownership Plan that is available to all regular full-time and regular part-time employees, including automatic enrollment of new hires, automatic annual escalation of employee 401(k) contributions up to 10% of pay, and 401(k) matching contributions •Competitive health and welfare benefits •Child bonding/parental leave of absence •Additional vacation days available for employee purchase •Competitive incentive plans, which are offered to all non-represented employees to create alignment of corporate and individual goals •Tuition reimbursement Incentive Plans DTE Energy has two primary types of incentives that reward individuals for performance. The incentives are designed to tie compensation to performance and encourage individuals to align their interests with those of the shareholders and customers of the Company. •Annual incentive plans allow DTE Energy to reward individuals with annual cash bonuses for performance against pre-established objectives based on work performed in the prior year. Objectives are aligned with our core priorities and include metrics for employee engagement and safety, customer satisfaction, utility operating excellence, and financial metrics such as earnings per share and cash flows. •Long-term incentive plans allow DTE Energy to grant individuals long-term equity incentives to encourage continued employment with DTE Energy, to accomplish pre-defined long-term performance objectives, and to create shareholder alignment. Metrics include total shareholder return relative to industry peers and balance sheet health. For additional information on the metrics above, please see the "Annual and Long-term Incentives" section of DTE Energy's Proxy Statement. Additionally, refer to DTE Energy’s 2020 Environmental, Social, Governance and Sustainability report for further information on metrics tracked for DEI, health and safety, and other components of DTE Energy’s human capital management. The report is available through the Investor Relations page of DTE Energy’s website (www.dteenergy.com), and shall not be deemed incorporated by reference into this Form 10-K.
Item 1A. Risk Factors There are various risks associated with the operations of the Registrants' utility businesses and DTE Energy's non-utility businesses. To provide a framework to understand the operating environment of the Registrants, below is a brief explanation of the more significant risks associated with their businesses. Although the Registrants have tried to identify and discuss key risk factors, others could emerge in the future. Each of the following risks could affect performance. Regulatory, Legislative, and Legal Risks The Registrants are subject to rate regulation. Electric and gas rates for the utilities are set by the MPSC and the FERC and cannot be changed without regulatory authorization. The Registrants may be negatively impacted by new regulations or interpretations by the MPSC, the FERC, or other regulatory bodies. The Registrants' ability to recover costs may be impacted by the time lag between the incurrence of costs and the recovery of the costs in customers' rates. Regulators also may decide to disallow recovery of certain costs in customers' rates if they determine that those costs do not meet the standards for recovery under current governing laws and regulations. Regulators may also disagree with the Registrants' rate calculations under the various mechanisms that are intended to mitigate the risk to their utilities related to certain aspects of the business. If the Registrants cannot agree with regulators on an appropriate reconciliation of those mechanisms, it may impact the Registrants' ability to recover certain costs through customer rates. Regulators may also decide to eliminate these mechanisms in future rate cases, which may make it more difficult for the Registrants to recover their costs in the rates charged to customers. The Registrants cannot predict what rates the MPSC will authorize in future rate cases. New legislation, regulations, or interpretations could change how the business operates, impact the Registrants' ability to recover costs through rates or the timing of such recovery, or require the Registrants to incur additional expenses. Changes to Michigan's electric retail access program could negatively impact the Registrants' financial performance. The State of Michigan currently experiences a hybrid market, where the MPSC continues to regulate electric rates for DTE Electric customers, while alternative electric suppliers charge market-based rates. MPSC rate orders, and energy legislation enacted by the State of Michigan, have placed a 10% cap on the total potential retail access migration. However, even with the legislated 10% cap on participation, there continues to be legislative and financial risk associated with the electric retail access program. Electric retail access migration is sensitive to market price and full service electric price changes. The Registrants are required under current regulation to provide full service to retail access customers that choose to return, potentially resulting in the need for additional generating capacity. Environmental laws and liability may be costly. The Registrants are subject to, and affected by, numerous environmental regulations. These regulations govern air emissions, water quality, wastewater discharge, and disposal of solid and hazardous waste. Compliance with these regulations can significantly increase capital spending, operating expenses, and plant down times, and can negatively affect the affordability of the rates charged to customers. Uncertainty around future environmental regulations creates difficulty planning long-term capital projects in the Registrants' generation fleet and, for DTE Energy's gas distribution businesses. These laws and regulations require the Registrants to seek a variety of environmental licenses, permits, inspections, and other regulatory approvals. The Registrants could be required to install expensive pollution control measures or limit or cease activities, including the retirement of certain generating plants, based on these regulations. Additionally, the Registrants may become a responsible party for environmental cleanup at sites identified by a regulatory body. The Registrants cannot predict with certainty the amount and timing of future expenditures related to environmental matters because of the difficulty of estimating cleanup costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on potentially responsible parties. The Registrants may also incur liabilities as a result of potential future requirements to address climate change issues. Proposals for voluntary initiatives and mandatory controls are being discussed both in the United States and worldwide to reduce GHGs such as carbon dioxide, a by-product of burning fossil fuels. If increased regulations of GHG emissions are implemented, the operations of DTE Electric's fossil-fueled generation assets may be significantly impacted. Since there can be no assurances that environmental costs may be recovered through the regulatory process, the Registrants' financial performance may be negatively impacted as a result of environmental matters. For DTE Energy, future environmental regulation of natural gas extraction techniques, including hydraulic fracturing, being discussed both at the United States federal level and by some states may affect the profitability of natural gas extraction businesses which could affect demand for, and profitability of, DTE Energy's gas transportation businesses.
The Renewable Portfolio Standard and energy waste reduction may affect the Registrants' business and federal and state fuel standards may affect DTE Energy's non-utility investments. The Registrants are subject to existing Michigan, and potential future, federal legislation and regulation requiring them to secure sources of renewable energy. The Registrants have complied with the existing federal and state legislation, but do not know what requirements may be added by federal or state legislation in the future. In addition, the Registrants expect to comply with new Michigan legislation increasing the percentage of power required to be provided by renewable energy sources. The Registrants cannot predict the financial impact or costs associated with complying with potential future legislation and regulations. Compliance with these requirements can significantly increase capital expenditures and operating expenses and can negatively affect the affordability of the rates charged to customers. In addition, the Registrants are also required by Michigan legislation to implement energy waste reduction measures and provide energy waste reduction customer awareness and education programs. These requirements necessitate expenditures, and implementation of these programs creates the risk of reducing the Registrants' revenues as customers decrease their energy usage. The Registrants cannot predict how these programs will impact their business and future operating results. DTE Energy's non-utility renewable natural gas investments are also dependent on the federal Renewable Fuel Standard and California's Low Carbon Fuel Standard. Changes to these standards may affect DTE Energy's business and result in lower earnings. DTE Energy's ability to utilize production tax credits may be limited. To reduce U.S. dependence on imported oil, the Internal Revenue Code provides production tax credits as an incentive for taxpayers to produce fuels and electricity from alternative sources. The Registrants generated production tax credits from renewable energy generation and DTE Energy generated production tax credits from renewable gas recovery, reduced emission fuel, and gas production operations. If the Registrants' production tax credits were disallowed in whole or in part as a result of an IRS audit or changes in tax law, there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact the Registrants' earnings and cash flows. Operational Risks The Registrants' electric distribution system and DTE Energy's gas distribution system are subject to risks from their operation, which could reduce revenues, increase expenses, and have a material adverse effect on their business, financial position, and results of operations. The Registrants' electric distribution and DTE Energy’s gas distribution systems are subject to many operational risks. These operational systems and infrastructure have been in service for many years. Equipment, even when maintained in accordance with good utility practices, is subject to operational failure, including events that are beyond the Registrants' control, and could require significant operation and maintenance expense or capital expenditures to operate efficiently. Because the Registrants’ distribution systems are interconnected with those of third parties, the operation of the Registrants’ systems could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties. Construction and capital improvements to the Registrants' power facilities, DTE Energy's distribution systems and its Gas Storage and Pipelines business subject them to risk. The Registrants are managing ongoing, and planning future, significant construction and capital improvement projects at the Registrants' multiple power generation and distribution facilities, at DTE Energy's gas distribution system, and at DTE Energy's Gas Storage and Pipelines business. Many factors that could cause delays or increased prices for these complex projects are beyond the Registrants' control, including the cost of materials and labor, subcontractor performance, timing and issuance of necessary permits or approvals (including required certificates from regulatory agencies), construction disputes, impediments to acquiring rights-of-way or land rights on a timely basis and on acceptable terms, cost overruns, and weather conditions. Failure to complete these projects on schedule and on budget for any reason could adversely affect the Registrants' financial performance, operations, or expected investment returns at the affected facilities, businesses and development projects.
Operation of a nuclear facility subjects the Registrants to risk. Ownership of an operating nuclear generating plant subjects the Registrants to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, changes in federal nuclear regulation, increased capital expenditures to meet industry requirements, and operational factors that can significantly impact the performance and cost of operating a nuclear facility compared to other generation options. Insurance maintained by the Registrants for various nuclear-related risks may not be sufficient to cover the Registrants' costs in the event of an accident or business interruption at the nuclear generating plant, which may affect the Registrants' financial performance. In addition, the Registrants' nuclear decommissioning trust fund, to finance the decommissioning of the nuclear generating plant, may not be sufficient to fund the cost of decommissioning. A decline in market value of assets held in decommissioning trust funds due to poor investment performance or other factors may increase the funding requirements for these obligations. Any increase in funding requirements may have a material impact on the Registrants’ liquidity, financial position, or results of operations. The supply and/or price of energy commodities and/or related services may impact the Registrants' financial results. The Registrants are dependent on coal for much of their electrical generating capacity as well as uranium for their nuclear operations. DTE Energy's access to natural gas supplies is critical to ensure reliability of service for utility gas customers. DTE Energy's non-utility businesses are also dependent upon supplies and prices of energy commodities and services. Price fluctuations, fuel supply disruptions, and changes in transportation costs, could have a negative impact on the amounts DTE Electric charges utility customers for electricity and DTE Gas charges utility customers for gas, and on the profitability of DTE Energy's non-utility businesses. The Registrants' hedging strategies and regulatory recovery mechanisms may be insufficient to mitigate the negative fluctuations in commodity supply prices at their utility or DTE Energy's non-utility businesses, and the Registrants' financial performance may therefore be negatively impacted by price fluctuations. The price of energy also impacts the market for DTE Energy's non-utility businesses, particularly those that compete with utilities and alternative electric suppliers as well as midstream services that depend on the demand for natural gas. The supply and/or price of other industrial raw and finished inputs and/or related services may impact the Registrants' financial results. The Registrants are dependent on supplies of certain commodities, such as copper and limestone, among others, and industrial materials, and services in order to maintain day-to-day operations and maintenance of their facilities. Price fluctuations, or supply interruptions for these commodities and other items, could have a negative impact on the amounts charged to customers for the Registrants' utility products and, for DTE Energy, on the profitability of the non-utility businesses. Weather significantly affects operations. At both utilities, deviations from normal hot and cold weather conditions affect the Registrants' earnings and cash flows. Mild temperatures can result in decreased utilization of the Registrants' assets, lowering income and cash flows. At DTE Electric, ice storms, tornadoes, or high winds can damage the electric distribution system infrastructure and power generation facilities and require it to perform emergency repairs and incur material unplanned expenses. The expenses of storm restoration efforts may not be fully recoverable through the regulatory process. DTE Gas can experience higher than anticipated expenses from emergency repairs on its gas distribution infrastructure required as a result of weather-related issues. Unplanned power plant outages may be costly. Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. As a result of unforeseen maintenance, the Registrants may be required to make spot market purchases of electricity that exceed the costs of generation. The Registrants' financial performance may be negatively affected if unable to recover such increased costs. A work interruption may adversely affect the Registrants. There are several bargaining units for DTE Energy's approximately 5,200 and DTE Electric's approximately 2,800 represented employees. The majority of represented employees are under contracts that expire in 2021 and 2022. A union choosing to strike would have an impact on the Registrants' businesses. The Registrants are unable to predict the effect a work stoppage would have on their costs of operations and financial performance. Financial, Economic, and Market Risks DTE Energy's non-utility businesses may not perform to its expectations. DTE Energy relies on non-utility operations for a significant portion of earnings. If DTE Energy's current and contemplated non-utility investments do not perform at expected levels, DTE Energy could experience diminished earnings and a corresponding decline in shareholder value.
Adverse changes in the Registrants' credit ratings may negatively affect them. Regional and national economic conditions, increased scrutiny of the energy industry and regulatory changes, as well as changes in the Registrants' economic performance, could result in credit agencies reexamining their credit ratings. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in the Registrants' credit ratings below investment grade could restrict or discontinue their ability to access capital markets and could result in an increase in their borrowing costs, a reduced level of capital expenditures, and could impact future earnings and cash flows. In addition, a reduction in the Registrants' credit ratings may require them to post collateral related to various physical or financially settled contracts for the purchase of energy-related commodities, products, and services, which could impact their liquidity. Poor investment performance of pension and other postretirement benefit plan assets and other factors impacting benefit plan costs could unfavorably impact the Registrants' liquidity and results of operations. The Registrants' costs of providing non-contributory defined benefit pension plans and other postretirement benefit plans are dependent upon a number of factors, such as the rates of return on plan assets, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation, and the Registrants' required or voluntary contributions made to the plans. The performance of the debt and equity markets affects the value of assets that are held in trust to satisfy future obligations under the Registrants' plans. The Registrants have significant benefit obligations and hold significant assets in trust to satisfy these obligations. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below the Registrants' projected return rates. A decline in the market value of the pension and other postretirement benefit plan assets will increase the funding needs under the pension and other postretirement benefit plans if the actual asset returns do not recover these declines in the foreseeable future. Additionally, the pension and other postretirement benefit plan liabilities are sensitive to changes in interest rates. If interest rates decrease, the liabilities increase, resulting in increasing benefit expense and funding needs. Also, if future increases in pension and other postretirement benefit costs as a result of reduced plan assets are not recoverable from the Registrants' utility customers, the results of operations and financial position of the Registrants could be negatively affected. Without sustained growth in the plan investments over time to increase the value of plan assets, the Registrants could be required to fund these plans with significant amounts of cash. Such cash funding obligations could have a material impact on the Registrants' cash flows, financial position, or results of operations. The Registrants' ability to access capital markets is important. The Registrants' ability to access capital markets is important to operate their businesses and to fund capital investments. Turmoil in credit markets may constrain the Registrants' ability, as well as the ability of their subsidiaries, to issue new debt, including commercial paper, and refinance existing debt at reasonable interest rates. In addition, the level of borrowing by other energy companies and the market as a whole could limit the Registrants' access to capital markets. The Registrants' long-term revolving credit facilities do not expire until 2024, but the Registrants regularly access capital markets to refinance existing debt or fund new projects at the Registrants' utilities and DTE Energy's non-utility businesses, and the Registrants cannot predict the pricing or demand for those future transactions. Emerging technologies may have a material adverse effect on the Registrants. Advances in technology that produce power or reduce power consumption include cost-effective renewable energy technologies, distributed generation, energy waste reduction technologies, and energy storage devices. Such developments may impact the price of energy, may affect energy deliveries as customer-owned generation becomes more cost-effective, may require further improvements to our distribution systems to address changing load demands, and could make portions of our electric system power supply and/or distribution facilities obsolete prior to the end of their useful lives. Such technologies could also result in further declines in commodity prices or demand for delivered energy. Each of these factors could materially affect the Registrants’ results of operations, cash flows, or financial position. DTE Energy's participation in energy trading markets subjects it to risk. Events in the energy trading industry have increased the level of scrutiny on the energy trading business and the energy industry as a whole. In certain situations, DTE Energy may be required to post collateral to support trading operations, which could be substantial. If access to liquidity to support trading activities is curtailed, DTE Energy could experience decreased earnings potential and cash flows. Energy trading activities take place in volatile markets and expose DTE Energy to risks related to commodity price movements, deviations in weather, and other related risks. DTE Energy's trading business routinely has speculative trading positions in the market, within strict policy guidelines DTE Energy sets, resulting from the management of DTE Energy's business portfolio. To the extent speculative trading positions exist, fluctuating commodity prices can improve or diminish DTE Energy's financial results and financial position. DTE Energy manages its exposure by establishing and enforcing strict risk limits and risk management procedures. During periods of extreme volatility, these risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities.
Regional, national, and international economic conditions can have an unfavorable impact on the Registrants. The Registrants' utility and DTE Energy's non-utility businesses follow the economic cycles of the customers they serve and credit risk of counterparties they do business with. Should the financial conditions of some of DTE Energy's significant customers deteriorate as a result of regional, national or international economic conditions, reduced volumes of electricity and gas, and demand for energy services DTE Energy supplies, collections of accounts receivable, reductions in federal and state energy assistance funding, and potentially higher levels of lost gas or stolen gas and electricity could result in decreased earnings and cash flows. If DTE Energy's goodwill or other intangible assets become impaired, it may be required to record a charge to earnings. DTE Energy annually reviews the carrying value of goodwill associated with acquisitions it has made for impairment. Goodwill and other intangible assets are also reviewed on a quarterly basis whenever events or circumstances indicate that the carrying value of these assets may not be recoverable. Factors that may be considered for purposes of this analysis include a decline in stock price and market capitalization, slower industry growth rates, or material changes with customers or contracts that could negatively impact future cash flows. DTE Energy cannot predict the timing, strength, or duration of such changes or any subsequent recovery. If the carrying value of any goodwill or other intangible assets are determined to be not recoverable, DTE Energy may take a non-cash impairment charge, which could materially impact DTE Energy's results of operations and financial position. The Registrants may not be fully covered by insurance. The Registrants have a comprehensive insurance program in place to provide coverage for various types of risks, including catastrophic damage as a result of severe weather or other natural disasters, war, terrorism, cyber incidents, or a combination of other significant unforeseen events that could impact the Registrants' operations. Economic losses might not be covered in full by insurance, or the Registrants' insurers may be unable to meet contractual obligations. Safety and Security Risks The Registrants' businesses have safety risks. The Registrants' electric distribution system, power plants, renewable energy equipment, and other facilities, and DTE Energy's gas distribution system, gas infrastructure, and other facilities, could be involved in incidents that result in injury, death, or property loss to employees, customers, third parties, or the public. Although the Registrants have insurance coverage for many potential incidents, depending upon the nature and severity of any incident, they could experience financial loss, damage to their reputation, and negative consequences from regulatory agencies or other public authorities. Threats of cyber incidents, physical security, and terrorism could affect the Registrants' business. Issues may threaten the Registrants such as cyber incidents, physical security, or terrorism that may disrupt the Registrants' operations, and could harm the Registrants' operating results. Information security risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication and frequency of cyberattacks, and data security breaches. The Registrants' industry requires the continued operation of sophisticated information and control technology systems and network infrastructure. All of the Registrants' technology systems are vulnerable to disability or failures due to cyber incidents, physical security threats, acts of war or terrorism, and other causes, as well as loss of operational control of the Registrants' electric generation and distribution assets and, DTE Energy's gas distribution assets. If the Registrants' information technology systems were to fail and they were unable to recover in a timely way, the Registrants may be unable to fulfill critical business functions, which could have a material adverse effect on the Registrants' business, operating results, and financial condition. Suppliers, vendors, contractors, and information technology providers have access to systems that support the Registrants’ operations and maintain customer and employee data. A breach of these third-party systems could adversely affect the business as if it was a breach of our own system. Also, because the Registrants’ generation and distribution systems are part of an interconnected system, a disruption caused by a cyber incident at another utility, electric generator, system operator, or commodity supplier could also adversely affect the Registrants’ businesses, operating results, and financial condition. In addition, the Registrants' generation plants and electrical distribution facilities, and DTE Energy's gas pipeline and storage facilities in particular, may be targets of physical security threats or terrorist activities that could disrupt the Registrants' ability to produce or distribute some portion of their products. The Registrants have increased security as a result of past events and may be required by regulators or by the future threat environment to make investments in security that the Registrants cannot currently predict.
Failure to maintain the security of personally identifiable information could adversely affect the Registrants. In connection with the Registrants' businesses, they collect and retain personally identifiable information of their customers, shareholders, and employees. Customers, shareholders, and employees expect that the Registrants will adequately protect their personal information. The regulatory environment surrounding information security and privacy is increasingly demanding. A significant theft, loss, or fraudulent use of customer, shareholder, employee, or Registrant data by cybercrime or otherwise, could adversely impact the Registrants' reputation, and could result in significant costs, fines, and litigation. General and Other Risks The COVID-19 pandemic and resulting impact on business and economic conditions could negatively affect the Registrants' businesses and operations. The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets. The continued spread of COVID-19 and efforts to contain the virus, such as quarantines, closures, or reduced operations of businesses, governmental agencies and other institutions, have caused a recession, resulting in disruptions in various public, commercial, and industrial activities and have caused employee absences which interfered with certain operation and maintenance of the Registrants' facilities. Travel bans and restrictions, quarantines, and shelter in place orders could also cause us to experience operational delays, delay the delivery of critical infrastructure and other supplies we source globally, or delay the connection of electric or gas service to new customers, and have reduced the use of electricity and gas by certain customers in the commercial and industrial segments. Certain of our businesses have experienced lower sales volumes, and any of the foregoing circumstances could further adversely affect customer demand or revenues, impact the ability of the Registrants' suppliers, vendors or contractors to perform, or cause other unpredictable events, which could adversely affect the Registrants' businesses, results of operations or financial condition. The continued spread of COVID-19 has also led to disruption and volatility in the financial markets, which could increase the Registrants' costs to fund capital requirements and impact the operating results of our energy trading operations. To the extent that the Registrants' access to the capital markets is adversely affected by COVID-19, the Registrants may need to consider alternative sources of funding for our operations and for working capital, any of which could increase the Registrants' cost of capital. The extent to which COVID-19 may impact the Registrants' liquidity, financial condition, and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the severity of COVID-19 and related variants, vaccine distribution and other actions taken to contain it or treat its impact, and the extent to which normal economic and operating conditions can resume, among others. Our business continuity plans and insurance coverage may be insufficient to mitigate these adverse impacts to our business. In addition, the Registrants’ may be required to suspend shut offs for certain customers which may adversely impact the Registrants’ collections process and have a negative impact on our results of operations, financial condition, and liquidity.
Failure to attract and retain key executive officers and other skilled professional and technical employees could have an adverse effect on the Registrants’ operations. The Registrants' businesses are dependent on their ability to attract and retain skilled employees. Competition for skilled employees in some areas is high, and the inability to attract and retain these employees could adversely affect the Registrants' business and future operating results. In addition, the Registrants have an aging utility workforce, and the failure of a successful transfer of knowledge and expertise could negatively impact their operations. DTE Energy relies on cash flows from subsidiaries. DTE Energy is a holding company. Cash flows from the utility and non-utility subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, its ability to pay interest and dividends would be restricted.
The proposed spin-off of DTE Midstream (the "Proposed Spin-off") may not be completed on the currently contemplated timeline or terms, or at all, and may not achieve the intended benefits. The Proposed Spin-off, if completed, may also present additional risk to DTE Energy. The Proposed Spin-off is subject to conditions, including, without limitation, final DTE Energy Board of Directors approval. Unanticipated developments or changes in market conditions may delay the Proposed Spin-off, and the Proposed Spin-off may not occur on the currently contemplated timeline or at all. DTE Energy cannot predict with certainty when the benefits expected from the Proposed Spin-off will occur or the extent to which they will be achieved, if at all. Furthermore, there are various uncertainties and risks relating to the process of the Proposed Spin-off that could have a negative impact on our financial condition, results of operations, and cash flows, including disruption of our operations and impairment of our relationship with regulators, key personnel, customers, and vendors. If the Proposed Spin-off is successfully completed, DTE Energy will face new and unique risks, including having fewer assets, reduced financial resources and less diversification of revenue sources, which may adversely impact DTE Energy's financial condition, results of operations, and cash flows. In addition, the changes in our operational and financial profile may not meet some or all of our shareholders' investment strategies, which could cause investors to sell their DTE Energy shares and otherwise decrease demand for shares of DTE Energy common stock. Excess selling will cause the relative market price of DTE Energy common stock to decrease, and the market price of DTE Energy common stock may be subject to greater volatility following the completion of the Proposed Spin-off. While DTE Energy does not expect its credit ratings from Standard & Poor's Rating Service, Moody's Investor Service, and Fitch Ratings Inc. to drop below investment grade as a result of completing the Proposed Spin-off, there is no assurance that we will continue to maintain such investment grade credit ratings in the future. If a rating agency were to downgrade our rating below investment grade, our borrowing costs would increase and our funding sources could decrease. In addition, a failure by us to maintain an investment grade rating could affect our business relationships with suppliers and operating partners. The distribution of shares of the new midstream company ("DT Midstream") to DTE Energy shareholders in the Proposed Spin-off is expected to qualify as tax-free under Section 355 of the U.S. Internal Revenue Code. However, if the IRS determined on audit that the distribution is taxable, both DTE Energy and our shareholders could incur significant U.S. federal income tax liabilities. Following the Proposed Spin-off, the management and directors each of DTE Energy and DT Midstream may own common stock in both companies and Robert Skaggs, Jr., who will be a member of DT Midstream's Board, also serves on DTE Energy's Board and may be required to recuse himself from deliberations relating to arrangements between DTE Energy and DT Midstream in the future. This ownership and directorship overlap could create, or appear to create, potential conflicts of interest when the management and directors of one company face decisions that could have different implications for themselves and the other company. Potential conflicts of interest may also arise out of any commercial arrangements that DTE Energy and DT Midstream may enter into in the future.
Item 1B. Unresolved Staff Comments None.
Item 3. Legal Proceedings For more information on legal proceedings and matters related to the Registrants, see Notes 10 and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters" and "Commitments and Contingencies," respectively. For environmental proceedings in which the government is a party, the Registrants have included disclosures if any sanctions of $1 million or greater are expected.
Item 4. Mine Safety Disclosures Not applicable.
Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities DTE Energy common stock is listed under the ticker symbol "DTE" on the New York Stock Exchange, which is the principal market for such stock. At December 31, 2020, there were 193,770,617 shares of DTE Energy common stock outstanding. These shares were held by a total of 47,485 shareholders of record. All of the 138,632,324 issued and outstanding shares of DTE Electric common stock, par value $10 per share, are indirectly-owned by DTE Energy, and constitute 100% of the voting securities of DTE Electric. Therefore, no market exists for DTE Electric's common stock. For information on DTE Energy dividend restrictions, see Note 17 to the Consolidated Financial Statements in Item 8 of this Report, "Short-Term Credit Arrangements and Borrowings." All of DTE Energy's equity compensation plans that provide for the annual awarding of stock-based compensation have been approved by shareholders. For additional detail, see Note 22 to the Consolidated Financial Statements in Item 8 of this Report, "Stock-Based Compensation." See the following table for information as of December 31, 2020: | | | | | | | | | | | | | | | | | | | Number of Securities to be Issued Upon Exercise of Outstanding Options | | Weighted-Average Exercise Price of Outstanding Options | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | Plans approved by shareholders | — | | | $ | — | | | 1,393,916 | |
UNREGISTERED SALES OF DTE ENERGY EQUITY SECURITIES AND USE OF PROCEEDS Purchases of DTE Energy Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about DTE Energy's purchases of equity securities that are registered by DTE Energy pursuant to Section 12 of the Exchange Act of 1934 for the quarter ended December 31, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of Shares Purchased(a) | | Average Price
Paid per Share(a) | | Number of Shares Purchased as Part of Publicly Announced
Plans or Programs | | Average Price Paid per Share | | Maximum Dollar
Value that May
Yet Be Purchased Under the Plans or Programs | | 10/01/2020 — 10/31/2020 | 11,165 | | | $ | 130.43 | | | — | | | — | | | — | | | 11/01/2020 — 11/30/2020 | 791 | | | $ | 120.57 | | | — | | | — | | | — | | | 12/01/2020 — 12/31/2020 | 686 | | | $ | 125.02 | | | — | | | — | | | — | | | Total | 12,642 | | | | | — | | | | | |
(a)Represents shares of DTE Energy common stock withheld to satisfy income tax obligations upon the vesting of restricted stock based on the price in effect at the grant date.
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN Total Return to DTE Energy Shareholders (Includes reinvestment of dividends) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Return Percentage
Year Ended December 31, | | Company/Index | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 26.93 | | | 14.59 | | | 4.19 | | | 21.36 | | | (2.90) | | | S&P 500 Index | | 11.95 | | | 21.82 | | | (4.39) | | | 31.48 | | | 18.39 | | | S&P 500 Multi-Utilities Index | | 18.56 | | | 12.09 | | | 1.77 | | | 24.36 | | | (5.87) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Indexed Returns
Year Ended December 31, | | | Base Period | | | | | | | | | | | | Company/Index | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | DTE Energy Company | | 100.00 | | | 126.93 | | | 145.44 | | | 151.54 | | | 183.91 | | | 178.57 | | | S&P 500 Index | | 100.00 | | | 111.95 | | | 136.38 | | | 130.39 | | | 171.44 | | | 202.96 | | | S&P 500 Multi-Utilities Index | | 100.00 | | | 118.56 | | | 132.89 | | | 135.24 | | | 168.18 | | | 158.31 | |
Item 6. Selected Financial Data The following selected financial data of DTE Energy should be read in conjunction with the accompanying Management’s Discussion and Analysis in Item 7 of this Report and Combined Notes to Consolidated Financial Statements in Item 8 of this Report. This information has been omitted for DTE Electric per General Instruction I (2) (a) of Form 10-K for wholly-owned subsidiaries (reduced disclosure format). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | (In millions, except per share amounts) | | Operating Revenues | $ | 12,177 | | | $ | 12,669 | | | $ | 14,212 | | | $ | 12,607 | | | $ | 10,630 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net Income Attributable to DTE Energy Company(a) | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | $ | 1,134 | | | $ | 868 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted Earnings Per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | | | $ | 6.32 | | | $ | 4.83 | | | Financial Information | | | | | | | | | | | Dividends declared per share of common stock | $ | 4.12 | | | $ | 3.85 | | | $ | 3.60 | | | $ | 3.36 | | | $ | 3.06 | | Total Assets(b) | $ | 45,496 | | | $ | 42,268 | | | $ | 36,288 | | | $ | 33,767 | | | $ | 32,041 | | Long-Term Debt(c) | $ | 19,001 | | | $ | 15,935 | | | $ | 12,134 | | | $ | 12,185 | | | $ | 11,269 | | | Total DTE Energy Company Equity | $ | 12,425 | | | $ | 11,672 | | | $ | 10,237 | | | $ | 9,512 | | | $ | 9,011 | |
(a)The 2017 results include a $105 million net income tax benefit related to the enactment of the TCJA. (b)The 2019 increase includes $2.8 billion of Blue Union and LEAP assets acquired in December 2019. Refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions,” for additional information. (c)Long-Term Debt includes Finance lease obligations and excludes debt due within one year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following combined discussion is separately filed by DTE Energy and DTE Electric. However, DTE Electric does not make any representations as to information related solely to DTE Energy or the subsidiaries of DTE Energy other than itself. EXECUTIVE OVERVIEW DTE Energy is a diversified energy company with 2020 Operating Revenues of approximately $12.2 billion and Total Assets of approximately $45.5 billion. DTE Energy is the parent company of DTE Electric and DTE Gas, regulated electric and natural gas utilities engaged primarily in the business of providing electricity and natural gas sales, distribution, and storage services throughout Michigan. DTE Energy also operates three energy-related non-utility segments with operations throughout the United States. The following table summarizes DTE Energy's financial results: | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | 2018 | | (In millions, except per share amounts) | | Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | Diluted Earnings per Common Share | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | |
The increase in 2020 Net Income Attributable to DTE Energy Company was primarily due to higher earnings in the Electric, Gas Storage and Pipelines, and Corporate and Other segments, partially offset by lower earnings in the Energy Trading segment. The increase in 2019 Net Income Attributable to DTE Energy Company was due to higher earnings in the Electric, Gas, Energy Trading, and Corporate and Other segments, partially offset by lower earnings in the Gas Storage and Pipelines and Power and Industrial Projects segments.
COVID-19 Pandemic During the first quarter of 2020, the COVID-19 pandemic began impacting Michigan and other service territories throughout the United States in which the Registrants operate. DTE Energy took certain safety precautions including directing employees to work remotely whenever possible and pausing all non-critical business activities. The spread of COVID-19 and efforts to contain the virus resulted in closures and reduced operations of businesses, governmental agencies, and other institutions. Beginning in May 2020, DTE Energy resumed business activities that had been temporarily suspended. Local businesses and other institutions also resumed operations as new cases of COVID-19 began to decline and government restrictions were reduced. Impacts from the COVID-19 pandemic have included a reduction in sales volumes from commercial and industrial customers and an increase in sales volumes from residential customers within the Electric segment. COVID-19 has also impacted the Power and Industrial Projects segment, contributing to lower production in the REF business and lower demand in the Steel business. Operation and maintenance expense has been impacted by COVID-19, primarily in the Electric segment, due to higher costs for personal protective equipment and other health and safety-related costs, including shift premiums and related expenses associated with the sequestration of certain employees critical to continued operations. The Registrants implemented certain cost savings initiatives to offset some of these impacts, to the extent they did not affect safety or reliability of service. To date, impacts from the COVID-19 pandemic have not had a material effect on the Registrants' uncollectible expense or capital spend. In addition, the CARES Act was signed into law in March 2020 to assist individuals and employers with the impacts of the COVID-19 pandemic. This legislation resulted in various tax impacts to the Registrants. Refer to Note 11 to the Consolidated Financial Statements in Item 8 of this Report, "Income Taxes," for additional information. Please see detailed explanations of segment performance in the "Results of Operations" section below, including impacts from the COVID-19 pandemic where applicable. Also refer to the "Capital Resources and Liquidity" section for information on the impact of COVID-19 on the Registrants' liquidity and cost of capital. STRATEGY DTE Energy's strategy is to achieve long-term earnings growth, a strong balance sheet, and an attractive dividend yield. DTE Energy's utilities are investing capital to improve customer reliability through investments in base infrastructure and new generation, and to comply with environmental requirements. DTE Energy expects that planned significant capital investments will result in earnings growth. DTE Energy is focused on executing plans to achieve operational excellence and customer satisfaction with a focus on customer affordability. DTE Energy operates in a constructive regulatory environment and has solid relationships with its regulators. DTE Energy is committed to reduce the carbon emissions of its electric utility operations by 32% by 2023, 50% by 2030, and 80% by 2040 from 2005 carbon emissions levels. DTE Energy is also committed to a net zero carbon emissions goal by 2050 for its electric utility, gas utility, and DTE Midstream operations. To achieve the reduction goals in the near term, DTE Energy will transition away from coal-powered sources and incorporate more renewable energy, energy waste reduction projects, demand response, and natural gas fueled generation. DTE Energy has already begun the transition in the way it produces power through the continued retirement of its aging coal-fired plants. Refer to the "Capital Investments" section below for further discussion. DTE Energy has significant investments in non-utility businesses. DTE Energy employs disciplined investment criteria when assessing growth opportunities that leverage its assets, skills, and expertise, and provides diversity in earnings and geography. Specifically, DTE Energy invests in targeted energy markets with attractive competitive dynamics where meaningful scale is in alignment with its risk profile. DTE Energy expects growth opportunities in the Gas Storage and Pipelines and Power and Industrial Projects segments. These opportunities would be limited to Power and Industrial Projects if DTE Energy completes the planned spin-off of the DTE Midstream business and shifts its strategy to a predominantly pure-play utility, as discussed in the "Outlook" section below.
A key priority for DTE Energy is to maintain a strong balance sheet which facilitates access to capital markets and reasonably priced short-term and long-term financing. Near-term growth will be funded through internally generated cash flows and the issuance of debt and equity. DTE Energy has an enterprise risk management program that, among other things, is designed to monitor and manage exposure to earnings and cash flow volatility related to commodity price changes, interest rates, and counterparty credit risk. CAPITAL INVESTMENTS DTE Energy's utility businesses require significant capital investments to maintain and improve the electric generation and electric and natural gas distribution infrastructure and to comply with environmental regulations and renewable energy requirements. DTE Electric's capital investments over the 2021-2025 period are estimated at $14 billion, comprised of $5 billion for capital replacements and other projects, $7 billion for distribution infrastructure, and $2 billion for renewable generation. DTE Electric has retired five coal-fired generation units at the Trenton Channel, River Rouge, and St. Clair facilities and has announced plans to retire its remaining twelve coal-fired generating units. River Rouge's final unit will retire in 2021 and five additional coal-fired generating units at Trenton Channel and St. Clair will be retired in 2022. The remaining coal-fired generating units at the Belle River and Monroe facilities are expected to be retired by 2040. The retired facilities will be replaced with renewables, energy waste reduction, demand response, and natural gas fueled generation. DTE Gas' capital investments over the 2021-2025 period are estimated at $3 billion, comprised of $1.4 billion for base infrastructure and $1.6 billion for gas main renewal, meter move out, and pipeline integrity programs. DTE Electric and DTE Gas plan to seek regulatory approval for capital expenditures consistent with ratemaking treatment. DTE Energy's non-utility businesses' capital investments are primarily for expansion, growth, and ongoing maintenance. Gas Storage and Pipelines' capital investments over the 2021-2025 period are estimated at $1.2 billion to $1.7 billion for gathering and pipeline investments and expansions. Power and Industrial Projects' capital investments over the 2021-2025 period are estimated at $1 billion to $1.4 billion for industrial energy services and renewable energy projects. ENVIRONMENTAL MATTERS The Registrants are subject to extensive environmental regulations. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. Actual costs to comply could vary substantially. The Registrants expect to continue recovering environmental costs related to utility operations through rates charged to customers, as authorized by the MPSC. See Items 1. and 2. Business and Properties and Note 19 to the Consolidated Financial Statements in Item 8 of this Report, "Commitments and Contingencies," for further discussion of Environmental Matters.
OUTLOOK The next few years will be a period of rapid change for DTE Energy and for the energy industry. DTE Energy's strong utility base, combined with its integrated non-utility operations, position it well for long-term growth. Looking forward, DTE Energy will focus on several areas that are expected to improve future performance: •electric and gas customer satisfaction; •electric distribution system reliability; •new electric generation; •gas distribution system renewal; •rate competitiveness and affordability; •regulatory stability and investment recovery for the electric and gas utilities; •employee safety and engagement; •cost structure optimization across all business segments; •cash, capital, and liquidity to maintain or improve financial strength; and •investments that integrate assets and leverage skills and expertise. In addition, on October 27, 2020, DTE Energy announced its intention to spin-off the DTE Midstream business, reflecting a shift in strategy to a predominantly pure-play utility. DTE Energy expects to complete the separation by mid-year 2021, subject to final approval by its Board of Directors and satisfaction of other conditions. If the spin-off transaction is completed, it would result in a reduction to DTE Energy's earnings and cash flows. However, DTE Energy would remain well-positioned for long-term growth and focused on the key objectives noted above. DTE Energy will continue to pursue opportunities to grow its businesses in a disciplined manner if it can secure opportunities that meet its strategic, financial, and risk criteria. COVID-19 Pandemic DTE Energy will continue to monitor the impact of the COVID-19 pandemic on supply chains, markets, counterparties, and customers, and any related impacts on the operating costs, customer demand, and recoverability of assets in our business segments that could materially impact the Registrants' financial results. DTE Energy expects reduced electric demand from commercial and industrial customers and increased demand from residential customers to continue as long as businesses maintain more remote operations. Operation and maintenance expenses will also continue to be impacted in the near term by the need for personal protective equipment and other safety-related costs. DTE Energy will continue to review the allowance for doubtful accounts for any additional risk related to COVID-19 and will monitor any potential challenges to demand in the Power and Industrial Projects segment. DTE Energy will also continue to monitor and evaluate the impact of any regulatory and legislative activities related to the COVID-19 pandemic. Refer to Note 10 to the Consolidated Financial Statements, "Regulatory Matters," for further information on current regulatory issues. The Registrants cannot predict the ultimate impact of these factors to our Consolidated Financial Statements as future developments involving COVID-19 and related impacts on economic and operating conditions are highly uncertain. For further discussion of these uncertainties, refer to "Risk Factors" in Item 1A. of this Report. RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations includes financial information prepared in accordance with GAAP, as well as the non-GAAP financial measures, Utility Margin and Non-utility Margin, discussed below, which DTE Energy uses as measures of its operational performance. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
DTE Energy uses Utility Margin and Non-utility Margin, non-GAAP financial measures, to assess its performance by reportable segment. Utility Margin includes electric utility and gas utility Operating Revenues net of Fuel, purchased power, and gas expenses. The utilities’ fuel, purchased power, and natural gas supply are passed through to customers, and therefore, result in changes to the utilities’ revenues that are comparable to changes in such expenses. As such, DTE Energy believes Utility Margin provides a meaningful basis for evaluating the utilities’ operations across periods, as it excludes the revenue effect of fluctuations in these expenses. For the Electric segment, non-utility Operating Revenues are reported separately so that Utility Margin can be used to assess utility performance. The Non-utility Margin relates to the Power and Industrial Projects and Energy Trading segments. For the Power and Industrial Projects segment, Non-utility Margin primarily includes Operating Revenues net of Fuel, purchased power, and gas expenses. Operating Revenues include sales of refined coal to third parties and the affiliated Electric utility, metallurgical coke and related by-products, petroleum coke, renewable natural gas and related credits, and electricity, as well as rental income and revenues from utility-type consulting, management, and operational services. For the Energy Trading segment, Non-utility Margin includes revenue and realized and unrealized gains and losses from physical and financial power and gas marketing, optimization, and trading activities, net of Purchased power and gas related to these activities. DTE Energy evaluates its operating performance of these non-utility businesses using the measure of Operating Revenues net of Fuel, purchased power, and gas expenses. Utility Margin and Non-utility Margin are not measures calculated in accordance with GAAP and should be viewed as a supplement to and not a substitute for the results of operations presented in accordance with GAAP. Utility Margin and Non-utility Margin do not intend to represent operating income, the most comparable GAAP measure, as an indicator of operating performance and are not necessarily comparable to similarly titled measures reported by other companies. The following sections provide a detailed discussion of the operating performance and future outlook of DTE Energy's segments. Segment information, described below, includes intercompany revenues and expenses, and other income and deductions that are eliminated in the Consolidated Financial Statements. | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Net Income (Loss) Attributable to DTE Energy by Segment | | | | | | | Electric | $ | 777 | | | $ | 714 | | | $ | 664 | | | Gas | 186 | | | 185 | | | 150 | | | Gas Storage and Pipelines | 315 | | | 204 | | | 235 | | | Power and Industrial Projects | 134 | | | 133 | | | 161 | | | Energy Trading | 36 | | | 49 | | | 39 | | | Corporate and Other | (80) | | | (116) | | | (129) | | | | | | | | | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | |
ELECTRIC The Results of Operations discussion for DTE Electric is presented in a reduced disclosure format in accordance with General Instruction I (2) (a) of Form 10-K for wholly-owned subsidiaries.
The Electric segment consists principally of DTE Electric. Electric results and outlook are discussed below: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Utility operations | $ | 5,506 | | | $ | 5,224 | | | $ | 5,298 | | | Fuel and purchased power — utility | 1,386 | | | 1,387 | | | 1,552 | | | Utility Margin | 4,120 | | | 3,837 | | | 3,746 | | | Operating Revenues — Non-utility operations | 14 | | | 5 | | | — | | | Operation and maintenance | 1,489 | | | 1,434 | | | 1,437 | | | Depreciation and amortization | 1,057 | | | 949 | | | 836 | | | Taxes other than income | 297 | | | 311 | | | 307 | | | Asset (gains) losses and impairments, net | 41 | | | 13 | | | (1) | | | Operating Income | 1,250 | | | 1,135 | | | 1,167 | | | Other (Income) and Deductions | 365 | | | 284 | | | 310 | | | Income Tax Expense | 108 | | | 137 | | | 193 | | | Net Income Attributable to DTE Energy Company | $ | 777 | | | $ | 714 | | | $ | 664 | |
See DTE Electric's Consolidated Statements of Operations in Item 8 of this Report for a complete view of its results. Differences between the Electric segment and DTE Electric's Consolidated Statements of Operations are primarily due to non-utility operations at DTE Sustainable Generation and the classification of certain benefit costs. Refer to Note 21 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets" for additional information. Utility Margin increased $283 million in 2020 and $91 million in 2019. Revenues associated with certain mechanisms and surcharges are offset by related expenses elsewhere in the Registrants' Consolidated Statements of Operations. The following table details changes in various Utility Margin components relative to the comparable prior period: | | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Implementation of new rates | $ | 215 | | | $ | 183 | | | Base sales / rate mix | 52 | | | (23) | | | Regulatory mechanism — RPS | 19 | | | 27 | | | Regulatory mechanism — EWR | 18 | | | (1) | | | Weather | 8 | | | (109) | | | Regulatory mechanism — TRM | (12) | | | (11) | | | COVID-19 voluntary refund | (30) | | | — | | | Other regulatory mechanisms and other | 13 | | | 25 | | | Increase in Utility Margin | $ | 283 | | | $ | 91 | |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In thousands of MWh) | | DTE Electric Sales | | | | | | | Residential | 16,315 | | | 15,066 | | | 15,959 | | | Commercial | 15,648 | | | 16,955 | | | 17,282 | | | Industrial | 8,446 | | | 9,826 | | | 10,324 | | | Other | 220 | | | 226 | | | 221 | | | 40,629 | | | 42,073 | | | 43,786 | | Interconnection sales(a) | 1,808 | | | 3,046 | | | 2,796 | | | Total DTE Electric Sales | 42,437 | | | 45,119 | | | 46,582 | | | | | | | | | DTE Electric Deliveries | | | | | | | Retail and wholesale | 40,629 | | | 42,073 | | | 43,786 | | Electric retail access, including self-generators(b) | 3,746 | | | 4,550 | | | 4,737 | | | Total DTE Electric Sales and Deliveries | 44,375 | | | 46,623 | | | 48,523 | |
(a)Represents power that is not distributed by DTE Electric. (b)Represents deliveries for self-generators that have purchased power from alternative energy suppliers to supplement their power requirements. DTE Electric sales volumes decreased in 2020 primarily due to the impact of the COVID-19 pandemic on customers. Sales volumes decreased for commercial and industrial customers, partially offset by an increase in residential sales. The net decrease to DTE Electric sales volumes was also partially offset by slightly favorable weather in 2020 compared to 2019. Operating Revenues — Non-utility operations increased $9 million in 2020 and $5 million in 2019. The increase in both periods was due to renewable energy projects acquired by DTE Sustainable Generation in September 2019 and January 2020. Operation and maintenance expense increased $55 million in 2020 and decreased $3 million in 2019. The increase in 2020 was primarily due to COVID-19 related expenses of $50 million associated with the health and safety of employees, higher benefits expense of $15 million, higher EWR program expense of $11 million, higher RPS program expense of $9 million, and an $11 million adjustment in 2019 to defer expenses previously accrued for a new customer billing system. These increases were partially offset by lower generation expense of $25 million and lower distribution expense of $12 million. The decrease in 2019 was primarily due to lower uncollectible expense of $19 million, an $11 million deferral of expenses previously accrued for a new customer billing system, and decreased generation expense of $3 million. These decreases were partially offset by higher tree trim expense of $20 million (tree trim expenses increased by $63 million but were offset by amounts deferred to a regulatory asset of $43 million) and higher RPS program expense of $11 million. Depreciation and amortization expense increased $108 million in 2020 and $113 million in 2019. In 2020, the increase was primarily due to a $108 million increase resulting from a higher depreciable base and change in depreciation rates effective May 2019 and a $10 million increase resulting from new non-utility assets at DTE Sustainable Generation, partially offset by a decrease of $11 million associated with the TRM. In 2019, the increase was primarily due to a $126 million increase resulting from a higher depreciable base and change in depreciation rates effective May 2019 and a $4 million increase resulting from new non-utility assets at DTE Sustainable Generation, partially offset by a decrease of $17 million associated with the TRM. Taxes other than income decreased $14 million in 2020 and increased $4 million in 2019. In 2020, the decrease was primarily due to lower property taxes of $9 million as a result of a property tax settlement and lower payroll taxes of $3 million, which was primarily attributable to employee retention credits recognized pursuant to the CARES Act. In 2019, the increase was primarily due to a $2 million tax reserve released in 2018, higher property taxes of $1 million, and a $1 million increase resulting from new non-utility assets at DTE Sustainable Generation. Asset (gains) losses and impairments, net increased $28 million in 2020 and $14 million in 2019. The increase in 2020 was primarily due to a $41 million write-off of capital expenditures related to incentive compensation, which were disallowed in the May 8, 2020 rate order from the MPSC, compared to losses of $13 million in 2019. The increase in 2019 was primarily due to previously recorded capital expenditures of $13 million that were disallowed in the May 2, 2019 rate order.
Other (Income) and Deductions increased $81 million in 2020 and decreased $26 million in 2019. The increase in 2020 was primarily due to a change in investment earnings (loss of $3 million in 2020 compared to a gain of $37 million in 2019), $30 million of contributions to the DTE Energy Foundation and other not-for-profit organizations, and $22 million of higher interest expense. These increases were partially offset by a 2019 accrual of $6 million associated with an environmental-related settlement. The decrease in 2019 was primarily due to a change in investment earnings (gain of $37 million in 2019 compared to a loss of $11 million in 2018) and lower non-operating retirement benefits expense of $12 million, partially offset by higher interest expense of $32 million. Income Tax Expense decreased $29 million in 2020 and $56 million in 2019. The decrease in 2020 was primarily due to higher amortization of the TCJA regulatory liability and higher production tax credits, partially offset by higher earnings. The decrease in 2019 was primarily due to TCJA regulatory liability amortization of $35 million and higher production tax credits. Outlook— DTE Electric will continue to move forward in its efforts to achieve operational excellence, sustain strong cash flows, and earn its authorized return on equity. DTE Electric expects that planned significant capital investments will result in earnings growth. DTE Electric will maintain a strong focus on customers by increasing reliability and satisfaction while keeping customer rate increases affordable. Looking forward, additional factors may impact earnings such as weather, the outcome of regulatory proceedings, benefit plan design changes, investment returns and changes in discount rate assumptions in benefit plans and health care costs, uncertainty of legislative or regulatory actions regarding climate change, and effects of energy waste reduction programs. DTE Electric is also monitoring the impacts of the COVID-19 pandemic on future operations and financial results. Refer to the "Executive Overview" and "Outlook" sections above for DTE Energy's consideration of COVID-19 impacts on our business segments.
GAS The Gas segment consists principally of DTE Gas. Gas results and outlook are discussed below: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Utility operations | $ | 1,414 | | | $ | 1,482 | | | $ | 1,436 | | | Cost of gas — utility | 356 | | | 427 | | | 446 | | | Utility Margin | 1,058 | | | 1,055 | | | 990 | | | Operation and maintenance | 496 | | | 515 | | | 502 | | | Depreciation and amortization | 157 | | | 144 | | | 133 | | | Taxes other than income | 84 | | | 80 | | | 73 | | | Asset (gains) losses and impairments, net | 14 | | | — | | | — | | | Operating Income | 307 | | | 316 | | | 282 | | | Other (Income) and Deductions | 73 | | | 69 | | | 65 | | | Income Tax Expense | 48 | | | 62 | | | 67 | | | Net Income Attributable to DTE Energy Company | $ | 186 | | | $ | 185 | | | $ | 150 | |
Utility Margin increased $3 million in 2020 and $65 million in 2019. Revenues associated with certain mechanisms and surcharges are offset by related expenses elsewhere in DTE Energy's Consolidated Statements of Operations.
The following table details changes in various Utility Margin components relative to the comparable prior period: | | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Implementation of new rates | $ | 32 | | | $ | 32 | | | Infrastructure recovery mechanism | 17 | | | 3 | | | Regulatory mechanism — EWR | 9 | | | 2 | | | Midstream storage and transportation revenues | 4 | | | 20 | | | | | | | TCJA rate reduction liability | (9) | | | — | | | | | | | Weather | (46) | | | 8 | | | Other regulatory mechanisms and other | (4) | | | — | | | Increase in Utility Margin | $ | 3 | | | $ | 65 | |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In Bcf) | | Gas Markets | | | | | | | Gas sales | 126 | | | 139 | | | 135 | | | End-user transportation | 180 | | | 185 | | | 187 | | | 306 | | | 324 | | | 322 | | | Intermediate transportation | 477 | | | 497 | | | 329 | | | Total Gas sales | 783 | | | 821 | | | 651 | |
Sales changes are primarily due to more unfavorable weather in 2020 compared to 2019 and more favorable weather in 2019 compared to 2018. Intermediate transportation volumes fluctuate based on available market opportunities. Operation and maintenance expense decreased $19 million in 2020 and increased $13 million in 2019. The decrease in 2020 was primarily due to lower gas operations expense of $36 million, partially offset by higher EWR program expenses of $7 million, higher corporate overhead costs of $3 million, and a $6 million adjustment in 2019 to defer expenses previously accrued for a new customer billing system. The increase in 2019 was primarily due to higher gas operations expenses of $22 million, higher customer service costs and related administrative expenses of $7 million, and higher EWR expenses of $2 million, partially offset by decreased uncollectible expense of $14 million and a $6 million adjustment in 2019 to defer expenses previously accrued for a new customer billing system. Depreciation and amortization expense increased $13 million in 2020 and $11 million in 2019. The increase in 2020 was primarily due to a higher depreciable base and change in depreciation rates effective October 2020. The increase in 2019 was primarily due to a higher depreciable base. Taxes other than income increased$4 million in 2020 and $7 million in 2019. The 2020 increase was primarily due to higher property taxes of $8 million, partially offset by lower payroll taxes of $3 million, which was primarily attributable to employee retention credits recognized pursuant to the CARES Act. The 2019 increase was primarily due to higher property taxes. Asset (gains) losses and impairments, net increased$14 million in 2020 primarily due to the write-off of capital expenditures related to incentive compensation, which were disallowed in the July 17, 2020 rate case settlement. Other (Income) and Deductions increased $4 million in 2020 and $4 million in 2019. The increase in 2020 was primarily due to lower investments earnings of $2 million and higher interest expense of $2 million. The increase in 2019 was primarily due to higher interest expense of $8 million, partially offset by lower contributions to the DTE Energy Foundation and other not-for-profit organizations of $6 million. Income Tax Expense decreased $14 million in 2020 and $5 million in 2019. The decrease in 2020 was primarily due to higher amortization of the TCJA regulatory liability and lower earnings. The decrease in 2019 was primarily due to the absence of a $10 million TCJA expense recorded in 2018, partially offset by higher earnings.
Outlook — DTE Gas will continue to move forward in its efforts to achieve operational excellence, sustain strong cash flows, and earn its authorized return on equity. DTE Gas expects that planned significant infrastructure capital investments will result in earnings growth. Looking forward, additional factors may impact earnings such as weather, the outcome of regulatory proceedings, benefit plan design changes, and investment returns and changes in discount rate assumptions in benefit plans and health care costs. DTE Gas expects to continue its efforts to improve productivity and decrease costs while improving customer satisfaction with consideration of customer rate affordability. DTE Gas filed a rate case with the MPSC on February 12, 2021 requesting an increase in base rates of $195 million based on a projected twelve-month period ending December 31, 2022. The requested increase in base rates is primarily due to an increase in net plant resulting from infrastructure investments and operating and maintenance expenses. The rate filing also requested an increase in return on equity from 9.9% to 10.25% and includes projected changes in sales and working capital. A final MPSC order in this case is expected by December 2021. DTE Gas is also monitoring the impacts of the COVID-19 pandemic on future operations and financial results. Refer to the "Executive Overview" and "Outlook" sections above for DTE Energy's consideration of COVID-19 impacts on our business segments.
GAS STORAGE AND PIPELINES The Gas Storage and Pipelines segment consists of the non-utility gas pipelines and storage businesses. Gas Storage and Pipelines results and outlook are discussed below: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Non-utility operations | $ | 754 | | | $ | 501 | | | $ | 485 | | | Cost of sales — Non-utility | 21 | | | 18 | | | 22 | | | Operation and maintenance | 151 | | | 120 | | | 103 | | | Depreciation and amortization | 151 | | | 94 | | | 82 | | | Taxes other than income | 15 | | | 8 | | | 8 | | | Asset (gains) losses and impairments, net | (2) | | | 1 | | | — | | | Operating Income | 418 | | | 260 | | | 270 | | | Other (Income) and Deductions | (25) | | | (34) | | | (61) | | | Income Tax Expense | 116 | | | 74 | | | 68 | | | Net Income | 327 | | | 220 | | | 263 | | | Less: Net Income Attributable to Noncontrolling Interests | 12 | | | 16 | | | 28 | | | Net Income Attributable to DTE Energy Company | $ | 315 | | | $ | 204 | | | $ | 235 | |
Operating Revenues — Non-utility operations increased $253 million in 2020 and $16 million in 2019. The increase in 2020 was primarily due to higher pipeline and gathering revenues from the first full year of Blue Union, as well as the LEAP pipeline which was placed in-service during the third quarter 2020. These increases were partially offset by lower physical sales of gas from AGS customers and lower storage revenues. The 2019 increase was primarily due to one month of activity for Blue Union in December 2019 and the first full year of Birdsboro Pipeline operations. Cost of sales — Non-utility increased $3 million in 2020 and decreased $4 million in 2019. The increase in 2020 was primarily due to the first full year of Blue Union, partially offset by lower physical purchases of gas from AGS customers. The decrease in 2019 was driven primarily by lower physical purchases of gas from AGS customers. Operation and maintenance expense increased $31 million in 2020 and $17 million in 2019. The 2020 increase was primarily due to the first full year of Blue Union and transaction costs related to the planned spin-off of DTE Midstream, partially offset by cost savings initiatives. The 2019 increase was primarily due to transaction costs associated with the Blue Union and LEAP acquisition and higher labor-related expenses. Depreciation and amortization expense increased $57 million in 2020 and $12 million in 2019. The 2020 increase was primarily due to the first full year of Blue Union. The 2019 increase was primarily due to additional pipeline and gathering assets placed into service during the year.
Taxes other than income increased$7 million in 2020 primarily related to property taxes incurred during the first full year of Blue Union. Other (Income) and Deductions decreased $9 million in 2020 and $27 million in 2019. The 2020 decrease was primarily due to interest expense related to the Blue Union acquisition, partially offset by a post-acquisition settlement of $20 million and higher earnings from pipeline investments. The 2019 decrease was primarily due to lower earnings from pipeline investments and higher interest expense. Income Tax Expense increased$42 million in 2020 and $6 million in 2019. The 2020 increase was primarily due to higher earnings. The 2019 increase was primarily due to tax impacts from placing the NEXUS pipeline in-service in late 2018, partially offset by lower earnings. Net Income Attributable to Noncontrolling Interests decreased $4 million in 2020 and $12 million in 2019. The decrease in both periods was primarily due to the May 2019 purchase of an additional 30% ownership interest in SGG. Outlook — DTE Energy believes its long-term agreements with producers and the quality of the natural gas reserves in the Marcellus/Utica and Haynesville shale regions soundly position the business for future revenues. Gas Storage and Pipelines will continue to execute quality investments, with a focus on continued organic growth from well-positioned existing assets. Recent declines in commodity prices can have a negative impact on customers of Gas Storage and Pipelines if sustained for an extended period. DTE Energy continues to work with its customers by executing short, medium, and long-term storage, gathering, and transportation contracts. On October 27, 2020, DTE Energy announced that its Board of Directors has authorized management to pursue a plan to spin-off the DTE Midstream business. DTE Energy expects to complete the separation by mid-year 2021, subject to final approval by its Board of Directors and satisfaction of other conditions. Refer to Note 4 to the Consolidated Financial Statements in Item 8 of this Report, “Acquisitions and Dispositions,” for additional information.
POWER AND INDUSTRIAL PROJECTS The Power and Industrial Projects segment is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and pipeline-quality gas from renewable energy projects. Power and Industrial Projects results and outlook are discussed below: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Non-utility operations | $ | 1,224 | | | $ | 1,560 | | | $ | 2,204 | | | Fuel, purchased power, and gas — non-utility | 901 | | | 1,220 | | | 1,888 | | | Non-utility Margin | 323 | | | 340 | | | 316 | | | Operation and maintenance | 294 | | | 328 | | | 363 | | | Depreciation and amortization | 72 | | | 69 | | | 67 | | | Taxes other than income | 10 | | | 11 | | | 12 | | | Asset (gains) losses and impairments, net | (18) | | | 1 | | | 27 | | | Operating Loss | (35) | | | (69) | | | (153) | | | Other (Income) and Deductions | (120) | | | (126) | | | (89) | | | Income Taxes | | | | | | | Expense (Benefit) | 26 | | | 20 | | | (7) | | | Production Tax Credits | (66) | | | (83) | | | (188) | | | (40) | | | (63) | | | (195) | | | Net Income | 125 | | | 120 | | | 131 | | | Less: Net Loss Attributable to Noncontrolling Interests | (9) | | | (13) | | | (30) | | | Net Income Attributable to DTE Energy Company | $ | 134 | | | $ | 133 | | | $ | 161 | |
Operating Revenues — Non-utility operations decreased $336 million in 2020 and $644 million in 2019. The changes are due to the following: | | | | | | | 2020 | | (In millions) | | Lower production and sale of membership interests in the REF business | $ | (234) | | | Lower demand in the Steel business | (142) | | | Expired contracts in the Renewables business | (21) | | | New projects and higher production in the Renewables business | 30 | | | New projects in the On-site business | 31 | | | $ | (336) | | | | | 2019 | | (In millions) | | Sale of membership interests and project terminations in the REF business | $ | (645) | | | Expired contract in the Renewables business | (17) | | | Higher prices in the Steel business | 24 | | | Other | (6) | | | $ | (644) | |
Non-utility Margin decreased $17 million in 2020 and increased $24 million in 2019. The changes are due to the following: | | | | | | | 2020 | | (In millions) | | Lower demand in the Steel business | $ | (50) | | | Expired contracts in the Renewables business | (18) | | | New projects in the On-site business | 22 | | | New projects and higher production in the Renewables business | 27 | | | Other | 2 | | | $ | (17) | | | | | 2019 | | (In millions) | | Sale of membership interests and project terminations in the REF business | $ | 22 | | | Higher prices in the Steel business | 19 | | | Expired contract in the Renewables business | (18) | | | Other | 1 | | | $ | 24 | |
Operation and maintenance expense decreased $34 million in 2020 and $35 million in 2019. The 2020 decrease was primarily due to $46 million of lower maintenance spending associated with lower production and terminated contracts, partially offset by $12 million of costs associated with new projects. The 2019 decrease was primarily due to $33 million associated with the sale of membership interests in the REF business and $9 million of lower spend in the Renewables business primarily due to an expired contract, partially offset by $7 million of higher maintenance spend in the Steel business. Asset (gains) losses and impairments, net increased $19 million in 2020 from the net loss of $1 million in 2019, and increased by $26 million in 2019 from the net loss of $27 million in 2018. The 2020 increase was primarily due to $11 million in the Steel business for an asset sale and the write-off of environmental liabilities upon completing site remediation, $4 million for the sale of assets in the On-site business, and $2 million for the divestiture of a project in the Renewables business. The 2019 increase was primarily due to higher losses incurred in 2018, including a $15 million liability adjustment related to contingent consideration and an $8 million asset write-off in the Renewables business in anticipation of a contract ending in 2020.
Other (Income) and Deductions decreased $6 million in 2020 and increased $37 million in 2019. The 2020 decrease was primarily due to a $22 million settlement charge associated with a qualified pension plan in the Steel business and a change in insurance proceeds in the REF and Renewables businesses ($7 million received in 2019). This decrease was partially offset by $12 million of higher interest income associated with lease transactions in the On-site business and $11 million of profit recognized from the sale of membership interests in the REF business. The 2019 increase was primarily due to the sale of membership interests in the REF business and higher equity earnings at various projects. Income Taxes — Production Tax Credits decreased by $17 million in 2020 and $105 million in 2019. The decrease in both periods was primarily due to the sale of membership interests in the REF business. Net Loss Attributable to Noncontrolling Interests decreased by $4 million in 2020 and $17 million in 2019. The 2020 decrease was primarily due to lower production in the REF business. The 2019 decrease was primarily due to the sale of membership interests in the REF business. Outlook — Power and Industrial Projects will continue to leverage its extensive energy-related operating experience and project management capability to develop additional energy and renewable natural gas projects to serve energy intensive industrial customers in addition to optimizing the REF facilities until the phase-out at the end of 2021. Beginning in 2022, Power and Industrial Projects expects decreases in Other Income and Production Tax Credits that will cause a corresponding reduction to Net Income as REF facilities will cease operations. Over the long-term, Power and Industrial Projects expects that growth in industrial energy services projects and renewable energy projects will offset the decreases to Net Income caused by the REF phase-out. Power and Industrial Projects is also monitoring all other impacts from the COVID-19 pandemic on future operations and financial results. Refer to the "Executive Overview" and "Outlook" sections above for DTE Energy's consideration of COVID-19 impacts on our business segments.
ENERGY TRADING Energy Trading focuses on physical and financial power, natural gas and environmental marketing and trading, structured transactions, enhancement of returns from its asset portfolio, and optimization of contracted natural gas pipeline transportation and storage positions. Energy Trading also provides natural gas, power, environmental and related services, which may include the management of associated storage and transportation contracts on the customers' behalf and the supply or purchase of renewable energy creditsenvironmental attributes to various customers. Energy Trading results and outlook are discussed below: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Non-utility operations | $ | 3,863 | | | $ | 4,610 | | | $ | 5,557 | | | Purchased power and gas — non-utility | 3,725 | | | 4,455 | | | 5,417 | | | Non-utility Margin | 138 | | | 155 | | | 140 | | | Operation and maintenance | 77 | | | 75 | | | 75 | | | Depreciation and amortization | 5 | | | 6 | | | 5 | | | Taxes other than income | 4 | | | 4 | | | 5 | | | Operating Income | 52 | | | 70 | | | 55 | | | Other (Income) and Deductions | 4 | | | 4 | | | 3 | | | Income Tax Expense | 12 | | | 17 | | | 13 | | | Net Income Attributable to DTE Energy Company | $ | 36 | | | $ | 49 | | | $ | 39 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Operating Revenues — Non-utility operations | $ | 4,277 |
| | $ | 2,575 |
| | $ | 2,459 |
| | Purchased power and gas — non-utility | 4,077 |
| | 2,552 |
| | 2,417 |
| | Non-utility Margin | 200 |
| | 23 |
| | 42 |
| | Operation and maintenance | 68 |
| | 63 |
| | 67 |
| | Depreciation and amortization | 5 |
| | 3 |
| | 2 |
| | Taxes other than income | 4 |
| | 2 |
| | 4 |
| | Operating Income (Loss) | 123 |
| | (45 | ) | | (31 | ) | | Other (Income) and Deductions | 2 |
| | 29 |
| | 6 |
| | Income Tax Expense (Benefit) | 49 |
| | (29 | ) | | (15 | ) | | Net Income (Loss) Attributable to DTE Energy Company | $ | 72 |
| | $ | (45 | ) | | $ | (22 | ) |
Operating Revenues — Non-utility operations and Purchased power and gas — non-utility were impacted by an increasea decrease in both volumes and gas prices for the yearyears ended December 31, 2017,2020 and 2019, primarily in the gas structured strategy. For 2016, these line items were impacted by an increase in volumes, partially offset by a decrease in gas prices, primarily in the gas structured strategy.
Non-utility Margin increased $177 decreased $17 million in 20172020 and decreased $19increased $15 million in 2016.2019. The change in both periods was primarily due to timing from the unrealized and realized margins presented in the following tables: | | | | | | | 2017 | | | (In millions) | Unrealized Margins(a) | | Favorable results, primarily in gas structured and gas full requirements strategies(b) | $ | 113 |
| | Unfavorable results, primarily in power and gas trading and power full requirements strategies | (26 | ) | | | $ | 87 |
| Realized Margins(a) | | Favorable results, primarily in gas structured, environmental trading and gas storage strategies(c) | $ | 103 |
| | Unfavorable results, primarily in the power full requirements strategy | (13 | ) | | | $ | 90 |
| | Increase in Non-utility Margin | $ | 177 |
|
| | | | | | (a) | Natural2020 | | (In millions) | Unrealized Margins(a) | | Favorable results, primarily in gas structured, transactions typically involve a physical purchase or sale of naturalenvironmental trading, and power full requirements strategies | $ | 83 | | Unfavorable results, primarily in gas transportation and gas full requirements strategies(b) | (58) | | | 25 | | Realized Margins(a) | | Favorable results, primarily in the future and/or naturalpower full requirements, gas basis financial instruments which are derivativestrading, and a related non-derivative pipeline transportation contract. Thesegas storage strategies | 21 | | Unfavorable results, primarily in environmental trading, power trading, gas structured, transactions can resultand gas transportation strategies(c) | (63) | | | (42) | | Decrease in significant earnings volatility as the derivative components are marked-to-market without revaluing the related non-derivative contracts.Non-utility Margin | $ | (17) | |
(a)Natural gas structured transactions typically involve a physical purchase or sale of natural gas in the future and/or natural gas basis financial instruments which are derivatives and a related non-derivative pipeline transportation contract. These gas structured transactions can result in significant earnings volatility as the derivative components are marked-to-market without revaluing the related non-derivative contracts. (b)Amount includes $15 million of timing related losses related to gas strategies which will reverse in future periods as the underlying contracts settle. (c)Amount includes $10 million of timing related gains related to gas strategies recognized in previous periods that reversed as the underlying contracts settled. | | | | | | (b) | Amount includes $113 million of timing related gains related to gas strategies which will reverse in future periods as the underlying contracts settle.2019 |
| (In millions) | Unrealized Margins(a) | | (c)Favorable results, primarily in gas structured and gas transportation strategies(b) | Amount includes $95 million of timing related losses related to gas strategies recognized in previous periods that reversed as the underlying contracts settled.$ |
| | | | | | | 2016 | | | (In millions) | Unrealized Margins(a) | | Unfavorable results, primarily in gas structured, gas full requirements, gas transportation, and power trading strategies(b) | $ | (74 | ) | | Favorable results, primarily in gas trading and power full requirements strategies | 28 |
| | | $ | (46 | ) | Realized Margins(a) | | | Favorable results, primarily in power full requirements, gas full requirements, power trading, and gas structured strategies | $ | 48 |
| Unfavorable results, primarily in the gas transportation strategy(c) | (21 | ) | | | $ | 27 |
| | Decrease in Non-utility Margin | $ | (19 | ) |
| 104 | | (a)Unfavorable results, primarily in environmental and gas trading, and power full requirements strategies | Natural gas structured transactions typically involve a physical purchase or sale of natural gas in the future and/or natural gas basis financial instruments which are derivatives and a related non-derivative pipeline transportation contract. These gas structured transactions can result in significant earnings volatility as the derivative components are marked-to-market without revaluing the related non-derivative contracts. |
| (28) | | (b) | Amount includes $46 million of timing related losses related to gas strategies which will reverse in future periods as the underlying contracts settle. |
| 76 | | (c)Realized Margins(a) | Amount includes $4 million of timing related gains related to | Favorable results, primarily in power full requirements, environmental trading, and gas transportation strategies recognized | 74 | | Unfavorable results, primarily in previous periods that reversed as the underlying contracts settled.gas structured and gas full requirements strategies(c) | (135) | | | (61) | | | Increase in Non-utility Margin | $ | 15 | |
Other (Income)(a)Natural gas structured transactions typically involve a physical purchase or sale of natural gas in the future and/or natural gas basis financial instruments which are derivatives and Deductions decreased$27a related non-derivative pipeline transportation contract. These gas structured transactions can result in significant earnings volatility as the derivative components are marked-to-market without revaluing the related non-derivative contracts.
(b)Amount includes $87 million of timing related losses related to gas strategies which will reverse in 2017 and increased $23future periods as the underlying contracts settle. (c)Amount includes $61 million of timing related gains related to gas strategies recognized in 2016. The change in bothprevious periods was primarily due to 2016 contributions tothat reversed as the DTE Energy Foundation.underlying contracts settled. Outlook — In the near-term, Energy Trading expects market conditions to remain challenging and thechallenging. The profitability of this segment may be impacted by the volatility in commodity prices and the uncertainty of impacts associated with financial reform, regulatory changes, and changes in operating rules of RTOs. Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments, and physical power and natural gas contracts, and certain environmental contracts are deemed derivatives,derivatives; whereas, natural gas and environmental inventory, contracts for pipeline transportation, renewable energy credits,storage assets, and storage assetssome environmental contracts are not derivatives. As a result, Energy Trading will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. Energy Trading's strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards, swaps, and options. This results in gains and losses that are recognized in different interim and annual accounting periods. See also the "Fair Value" section herein and Notes 1213 and 1314 to the Consolidated Financial Statements in Item 8 of this Report, "Fair Value" and "Financial and Other Derivative Instruments," respectively.
CORPORATE AND OTHER Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments.certain investments, including funds supporting regional development and economic growth. The 20172020 net loss of $103$80 million represents an increasea decrease of $42$36 million from the 20162019 net loss of $61 million$116 million. This decrease was primarily due primarilya tax adjustment recorded in 2020 pursuant to the remeasurementCARES Act, which allowed the carryback of deferrednet operating losses five years for tax assetsyears 2018 through 2020. This enabled DTE Energy to carryback 2018 net operating losses to 2013 and liabilities to reflect the reductionresulted in the corporate tax rate from the enactment of the TCJA in December 2017 resulting in income tax expense ofa $34 million and the contribution of land and improvementsreduction to the DTE Energy Beacon Park Foundation. The 2016 net loss of $61 million represents an increase of $13 million from the 2015 net loss of $48 million due primarilyIncome Tax Expense. Refer to state tax adjustments related to the Gas Storage and Pipelines acquisition and the write-off of unamortized debt issuance costs associated with the redemption of Junior Subordinated Debentures. See Note 1011 to the Consolidated Financial Statements in Item 8 of this Report, "Income Taxes."Taxes", for additional information regarding the CARES Act and related impacts.
The 2019 net loss of $116 million represents a decrease of $13 million from the 2018 net loss of $129 million. This decrease was primarily due to lower state income taxes and decreased contributions to not-for-profit organizations, partially offset by higher interest expense and impairment of an equity method investment.
CAPITAL RESOURCES AND LIQUIDITY Cash Requirements DTE Energy uses cash to maintain and invest in the electric and natural gas utilities, to grow the non-utility businesses, to retire and pay interest on long-term debt, and to pay dividends. DTE Energy believes it will have sufficient internal and external capital resources to fund anticipated capital and operating requirements. DTE Energy expects that cash from operations in 20182021 will be approximately $2.0$3.0 billion. DTE Energy anticipates base level utility capital investments, including environmental, renewable, and energy waste reduction expenditures; expenditures for non-utility businesses; and contributions to equity method investees in 20182021 of approximately $3.6$4.2 billion. DTE Energy plans to seek regulatory approval to include utility capital expenditures in regulatory rate base consistent with prior treatment. Capital spending for growth of existing or new non-utility businesses will depend on the existence of opportunities that meet strict risk-return and value creation criteria.
Refer to the "Capital Investments" section above for additional information on DTE Energy's capital strategy and estimated spend over the next five years. Any capital commitments are also included in the disclosure of Purchase Commitments within Note 19 to the Consolidated Financial Statements, "Commitments and Contingencies."
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | Cash and Cash Equivalents | (In millions) | | Cash Flow From (Used For) | | | | | | | Operating Activities | | | | | | | Net Income | $ | 1,112 |
| | $ | 834 |
| | $ | 720 |
| | Adjustments to reconcile Net Income to Net cash from operating activities: | | | | | | | Depreciation and amortization | 1,030 |
| | 976 |
| | 852 |
| | Nuclear fuel amortization | 53 |
| | 58 |
| | 46 |
| | Allowance for equity funds used during construction | (23 | ) | | (21 | ) | | (21 | ) | | Deferred income taxes | 196 |
| | 265 |
| | 237 |
| | Asset (gains) losses and impairments, net | 38 |
| | 8 |
| | 107 |
| | Working capital and other | (289 | ) | | (36 | ) | | (25 | ) | | Net cash from operating activities | 2,117 |
| | 2,084 |
| | 1,916 |
| | Investing Activities | | | | | | | Plant and equipment expenditures — utility | (2,037 | ) | | (1,898 | ) | | (1,817 | ) | | Plant and equipment expenditures — non-utility | (213 | ) | | (147 | ) | | (203 | ) | | Acquisition, net of cash acquired | — |
| | (1,147 | ) | | (241 | ) | | Restricted cash for debt redemption, principally Securitization, net | (2 | ) | | 1 |
| | 97 |
| | Contributions to equity method investees | (299 | ) | | (239 | ) | | (98 | ) | | Other | (13 | ) | | 42 |
| | 58 |
| | Net cash used for investing activities | (2,564 | ) | | (3,388 | ) | | (2,204 | ) | | Financing Activities | | | | | | | Issuance of long-term debt, net of issuance costs | 1,398 |
| | 2,035 |
| | 956 |
| | Redemption of long-term debt | (385 | ) | | (807 | ) | | (286 | ) | | Repurchase of long-term debt | — |
| | (59 | ) | | — |
| | Issuance of equity units, net of issuance costs | — |
| | 654 |
| | — |
| | Short-term borrowings, net | 122 |
| | — |
| | 101 |
| | Repurchase of common stock | (51 | ) | | (33 | ) | | — |
| | Dividends on common stock and other | (592 | ) | | (531 | ) | | (501 | ) | | Contributions from noncontrolling interests | 50 |
| | 114 |
| | 23 |
| | Distributions to noncontrolling interests | (40 | ) | | (5 | ) | | (8 | ) | | Other | (81 | ) | | (9 | ) | | (8 | ) | | Net cash from financing activities | 421 |
| | 1,359 |
| | 277 |
| | Net Increase (Decrease) in Cash and Cash Equivalents | $ | (26 | ) | | $ | 55 |
| | $ | (11 | ) |
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | $ | 93 | | | $ | 76 | | | $ | 89 | | | Net cash from operating activities | 3,697 | | | 2,649 | | | 2,680 | | | Net cash used for investing activities | (4,070) | | | (5,732) | | | (3,347) | | | Net cash from financing activities | 796 | | | 3,100 | | | 654 | | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 423 | | | 17 | | | (13) | | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 516 | | | $ | 93 | | | $ | 76 | |
Cash from Operating Activities A majority of DTE Energy's operating cash flows are provided by the electric and natural gas utilities, which are significantly influenced by factors such as weather, electric retail access, regulatory deferrals, regulatory outcomes, economic conditions, changes in working capital, and operating costs. CashNet cash from operations increased $33 million$1.0 billion in 2017.2020. The increase in operating cash flows reflectswas primarily due to an increase in Net Income, and adjustments for non-cash and non-operating items, primarily Depreciation and amortization, and Assets (gains) lossescash from tax refunds and impairments,working capital items.
Net cash from operations decreased $31 million in 2019. The reduction was primarily due to a decrease in cash from working capital items, partially offset by a decrease toan increase in non-cash items, primarily Deferred income taxes and working capital adjustments. Cash from operations increased $168 million in 2016. The increase in operating cash flows reflects an increase in Net Income and adjustments for non-cash and non-operating items, primarily Depreciation and amortization, partially offset by decreases from Asset (gains) losses and impairments, net and working capital items.amortization.
The change in working capital items in 20172020 was primarily due to an increase in cash related to increases of cash used for Accounts Receivable, Inventories, Accrued pension liability, Derivative assets and liabilities, Equity earnings of equity method investees,receivable, net, Accounts payable, and Other current and noncurrent assets and liabilities, partially offset by increasesa decrease in cash from the Accruedrelated to Prepaid postretirement liability,benefit costs and Regulatory assets and liabilities. The change in working capital items in 20162019 was primarily related to increasesan increase in cash used for Accounts receivable,payable and RegulatoryOther current and noncurrent assets and liabilities, partially offset by increasesan increase in cash fromrelated to Accounts payable,receivable, net, Accrued pension liability, and Accrued postretirement liability.costs, and Regulatory assets and liabilities.
Cash used for Investing Activities Cash inflows associated with investing activities are primarily generated from the sale of assets, while cash outflows are the result of plant and equipment expenditures.expenditures and acquisitions. In any given year, DTE Energy looks to realize cash from under-performing or non-strategic assets or matured, fully valued assets. Capital spending within the utility businesses is primarily to maintain and improve electric generation and the electric and natural gas distribution infrastructure, and to comply with environmental regulations and renewable energy requirements. Capital spending within the non-utility businesses is primarily for ongoing maintenance, expansion, and growth. DTE Energy looks to make growth investments that meet strict criteria in terms of strategy, management skills, risks, and returns. All new investments are analyzed for their rates of return and cash payback on a risk adjusted basis. DTE Energy has been disciplined in how it deploys capital and will not make investments unless they meet the criteria. For new business lines, DTE Energy initially invests based on research and analysis. DTE Energy starts with a limited investment, evaluates the results, and either expands or exits the business based on those results. In any given year, the amount of growth capital will be determined by the underlying cash flows of DTE Energy, with a clear understanding of any potential impact on its credit ratings. Net cash used for investing activities decreased $824 million$1.7 billion in 20172020 due primarily to a decrease in Acquisitions related to business combinations, net of cash acquired, primarily driven by DTE Energy's 2016 acquisition of midstream natural gas assets, partially offset by increased capital expenditures,Blue Union and LEAP in 2019 for net cash of $2.3 billion. The decrease was also due to lower Contributions to equity method investees, primarily the NEXUS Pipeline as it continues to develop,partially offset by an increase in Plant and two acquisitions of landfill gas facilities, which are presented in Investing Activities - Other.equipment expenditures. Net cash used for investing activities increased $1.2$2.4 billion in 20162019 due primarily to DTE Energy'sthe acquisition of midstream natural gas assets, net of cash acquired of $83 million, of $1.1 billion, as described in Note 4 to the Consolidated Financial Statements in Item 8 of this Report, "AcquisitionsBlue Union and Exit Activities," as well as increasedLEAP and higher Plant and equipment expenditures, partially offset by lower Contributions to equity method investees, primarily the NEXUS Pipeline as it continues to develop.investees. Cash from Financing Activities DTE Energy relies on both short-term borrowing and long-term financing as a source of funding for capital requirements not satisfied by its operations. DTE Energy's strategy is to have a targeted debt portfolio blend of fixed and variable interest rates and maturity. DTE Energy continually evaluates its leverage target, which is currently 50% to 54%,targets balance sheet financial metrics to ensure it is consistent with the objective of a strong investment grade debt rating. Net cash from financing activities decreased $938 million$2.3 billion in 2017.2020. The decrease iswas primarily attributabledue to a decreasethe issuance of equity units and common stock associated with the acquisition of Blue Union and LEAP in 2019, as well as an increase in cash used for Short-term borrowings, net and the Acquisition related deferred payment in 2020. These decreases were partially offset by higher cash from Issuances of long-term debt, net of issuance costs and equity units, Contributions fromlower Purchases of noncontrolling interests, an increase in Dividends on common stock, and Distributions to noncontrolling interests, partially offset by an increase to Short-term borrowings, and a decrease to Redemptions and Repurchases of long-term debt.interest, principally SGG. Net cash from financing activities increased $1.1$2.4 billion in 2016.2019. The increase iswas primarily attributabledue to increasesan increase in Issuancescash from issuances of long-term debt, and equity units, which arecommon stock, and short-term borrowings, partially offset by increasedan increase in cash used for Redemptions of long-term debt and a decrease in Short-term borrowings.Purchases of noncontrolling interests, principally SGG. The increased issuances in 20162019 were primarily related to the acquisition of midstream natural gas assets. SeeBlue Union and LEAP. For further details, inrefer to the "Acquisition Financing" section of Note 1415 to the Consolidated Financial Statements in Item 88. of this Report, "Long-Term Debt."
Outlook DTE Energy expects cash flows from operations to increase over the long-term, primarily as a result of growth from the utility and non-utility businesses. Growth in the utilities is expected to be driven primarily by capital spending to maintain and improve the electric generation and electric and natural gas distribution infrastructure and to comply with new and existing state and federal regulations that will result in additional environmental and renewable energy investments which will increase the base from which rates are determined. Non-utility growth is expected from additional investments, primarily in the Gas Storage and Pipelines and Power and Industrial Projects segments. Power and Industrial Projects cash flows are expected to temporarily decrease beginning in 2022 as REF facilities will have ceased operations. Growth from new industrial energy services projects and renewable energy investments are expected to offset these decreases over the long-term. DTE Energy's intention to spin-off the DTE Midstream business could also reduce cash flows if the separation transaction is completed. However, DTE Energy would still expect higher cash flows from operations over the long-term due to the growth of its utilities and other non-utility operations. DTE Energy will continue to assess the impact of the potential spin-off transaction on its cash flows, including any financing activity related to the separation of DTE Midstream. DTE Energy may be impacted by the timing of collection or refund of various recovery and tracking mechanisms as a result of timing of MPSC orders. Energy prices are likely to be a source of volatility with regard to working capital requirements for the foreseeable future. DTE Energy continues its efforts to identify opportunities to improve cash flows through working capital initiatives and maintaining flexibility in the timing and extent of long-term capital projects.
DTE Energy has approximately $110$469 million in long-term debt, including capitalfinance leases, maturing in the next twelve months. The repayment of the debt is expected to be paidmade through internally generated funds or the issuance of new long-term debt. DTE Energy has approximately $1.4$3.1 billion of available liquidity at December 31, 2017,2020, consisting of cash and amounts available under unsecured revolving credit agreements. At the discretion of management and depending upon economic and financial market conditions, DTE Energy expects to issue equity up to $300$200 million in 2018 through the dividend reinvestment plan and pension and other employee benefit plans. At the discretion of management, and depending upon financial market conditions,2021. If issued, DTE Energy may make contributionsanticipates up to $200$100 million includingof these equity issuances will be made through contributions from DTE Electric of $175 million, to itsthe qualified pension plans in 2018.at DTE Electric. DTE Energy does not anticipate making any contributions to theits other postretirement benefit plans in 2018.2021. Any additional equity issuances are expected to be made through the dividend reinvestment plan and other employee benefit plans.
To finance the acquisition of midstream natural gas assets in December 2019, DTE Energy issued equity units that will result in the issuance of common stock in November 2022. This transaction is not expected to impact DTE Energy's cash flows. Future cash flow impacts will relate primarily to the payment of DTE Energy's remaining stock purchase liability associated with the equity units. Refer to Note 15 to the Consolidated Financial Statements, "Long-Term Debt," for additional information. Over the long-term, DTE Energy does not have any other equity commitments and will continue to evaluate equity needs on an annual basis in consideration of economic and financial market conditions. DTE Energy has paid quarterly cash dividends for more than 100 consecutive years and expects to continue paying regular cash dividends in the future, including approximately $0.8 billion in 2021. Any payment of future dividends is subject to approval by the Board of Directors and may depend on DTE Energy's future earnings, capital requirements, and financial condition. Over the long-term, DTE Energy expects continued dividend growth and is targeting a payout ratio consistent with pure-play utility companies. Various subsidiaries and equity investees of DTE Energy have entered into contracts which contain ratings triggers and are guaranteed by DTE Energy. These contracts contain provisions which allow the counterparties to require that DTE Energy post cash or letters of credit as collateral in the event that DTE Energy's credit rating is downgraded below investment grade. Certain of these provisions (known as "hard triggers") state specific circumstances under which DTE Energy can be required to post collateral upon the occurrence of a credit downgrade, while other provisions (known as "soft triggers") are not as specific. For contracts with soft triggers, it is difficult to estimate the amount of collateral which may be requested by counterparties and/or which DTE Energy may ultimately be required to post. The amount of such collateral which could be requested fluctuates based on commodity prices (primarily natural gas, power, environmental, and coal) and the provisions and maturities of the underlying transactions. As of December 31, 2017,2020, DTE Energy's contractual obligation to post collateral in the form of cash or letters of credit in the event of a downgrade to below investment grade, under both hard trigger and soft trigger provisions, was approximately $456$428 million.
DTE Energy is actively monitoring the impact of the COVID-19 pandemic on capital markets and any related effects to our cost of capital. During 2020, concerns over the pandemic led to an impact in liquidity in the commercial paper market and increases to related borrowing costs. Despite these impacts, the Registrants have maintained adequate liquidity due to the availability of committed credit facilities, and by raising additional liquidity through term loans and the public issuance of debt, while paying off maturing commercial paper. DTE Energy believes it will have sufficient operating flexibility, cash resources and funding sources to maintain adequate amounts of liquidity and to meet future operating cash and capital expenditure needs. However, virtually all of DTE Energy's businesses are capital intensive, or require access to capital, and the inability to access adequate capital could adversely impact earnings and cash flows. See Notes 9, 10, 14, 16, 18,11, 15, 17, 19, and 2021 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters," "Income Taxes," "Long-Term Debt," "Short-Term Credit Arrangements and Borrowings," "Commitments and Contingencies," and "Retirement Benefits and Trusteed Assets.Assets," respectively.
Contractual Obligations The following table details DTE Energy's, including DTE Electric's, contractual obligations for debt redemptions, leases, purchase obligations, and other long-term obligations as of December 31, 2017:2020: | | | | Total | | 2018 | | 2019-2020 | | 2021-2022 | | 2023 and Thereafter | | Total | | 2021 | | 2022-2023 | | 2024-2025 | | 2026 and Thereafter | | | (In millions) | | (In millions) | | Long-term debt: | | | | | | | | | | Long-term debt: | | Mortgage bonds, notes, and other(a) | $ | 11,227 |
| | $ | 104 |
| | $ | 2,180 |
| | $ | 1,078 |
| | $ | 7,865 |
| Mortgage bonds, notes, and other(a) | $ | 18,393 | | | $ | 462 | | | $ | 4,643 | | | $ | 2,645 | | | $ | 10,643 | | | Junior subordinated debentures(b) | 1,180 |
| | — |
| | — |
| | — |
| | 1,180 |
| Junior subordinated debentures(b) | 1,210 | | | — | | | — | | | — | | | 1,210 | | | Capital lease obligations | 6 |
| | 5 |
| | 1 |
| | — |
| | — |
| | | Finance lease obligations | | Finance lease obligations | 34 | | | 8 | | | 16 | | | 3 | | | 7 | | | Interest | 9,877 |
| | 504 |
| | 970 |
| | 849 |
| | 7,554 |
| Interest | 11,655 | | | 682 | | | 1,251 | | | 1,029 | | | 8,693 | | Stock purchase contract(c) | 68 |
| | 34 |
| | 34 |
| | — |
| | — |
| Stock purchase contract(c) | 104 | | | 52 | | | 52 | | | — | | | — | | | Operating leases | 166 |
| | 40 |
| | 56 |
| | 22 |
| | 48 |
| Operating leases | 172 | | | 37 | | | 53 | | | 21 | | | 61 | | Electric, gas, fuel, transportation, and storage purchase obligations(d) | 5,713 |
| | 2,162 |
| | 1,421 |
| | 663 |
| | 1,467 |
| Electric, gas, fuel, transportation, and storage purchase obligations(d) | 5,144 | | | 2,048 | | | 1,663 | | | 661 | | | 772 | | Long-term DTE Electric renewable energy power purchase agreements(e)(f) | 1,219 |
| | 85 |
| | 166 |
| | 166 |
| | 802 |
| Long-term DTE Electric renewable energy power purchase agreements(e)(f) | 1,291 | | | 81 | | | 180 | | | 186 | | | 844 | | Other long-term obligations(g)(h)(i) | 614 |
| | 484 |
| | 106 |
| | 16 |
| | 8 |
| | | Other purchase obligations | | Other purchase obligations | 1,060 | | | 869 | | | 103 | | | 70 | | | 18 | | Total obligations | $ | 30,070 |
| | $ | 3,418 |
| | $ | 4,934 |
| | $ | 2,794 |
| | $ | 18,924 |
| $ | 39,063 | | | $ | 4,239 | | | $ | 7,961 | | | $ | 4,615 | | | $ | 22,248 | |
| | (a) | Excludes $15 million of unamortized debt discount and $69 million of unamortized debt issuance costs. |
| | (b) | Excludes $35 million of unamortized debt issuance costs.(a)Excludes $25 million of unamortized debt discount and $104 million of unamortized debt issuance costs. (b)Excludes $35 million of unamortized debt issuance costs. (c)Includes $3 million of interest. (d)Excludes amounts associated with full requirements contracts where no stated minimum purchase volume is required and $58 million of obligations between DTE Electric and affiliates of DTE Energy. (e)The agreements represent the minimum obligations with suppliers for renewable energy and renewable energy credits under existing contract terms which expire from 2030 through 2035. DTE Electric's share of plant output ranges from 28% to 100%. (f)Excludes $51 million of power purchase agreements between DTE Electric and non-utility affiliates of DTE Energy. (g)Excludes $316 million of other long-term liabilities that do not reflect contractual obligations or for which the timing of payments cannot be reasonably estimated, including $10 million of liabilities for unrecognized tax benefits. (h)At December 31, 2020, DTE Energy met the minimum pension funding levels required under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 for the defined benefit pension plans. DTE Energy may contribute more than the minimum funding requirements for the pension plans and may also make contributions to other postretirement benefit plans; however, these amounts are not included in the table above as such amounts are discretionary. Planned funding levels are disclosed in the "Capital Resources and Liquidity" and "Critical Accounting Estimates" sections herein and in Note 21 to the Consolidated Financial Statements in Item 8 of this Report, "Retirement Benefits and Trusteed Assets."
|
| | (c) | Includes $2 million of interest.
|
| | (d) | Excludes amounts associated with full requirements contracts where no stated minimum purchase volume is required. |
| | (e) | The agreements represent the minimum settlements with suppliers for renewable energy and renewable energy credits under existing contract terms which expire from 2030 through 2035. DTE Electric's share of plant output ranges from 44% to 100%. |
| | (f) | Excludes a power purchase agreement with a non-utility affiliate of DTE Energy. |
| | (g) | Includes liabilities for unrecognized tax benefits of $10 million. |
| | (h) | Excludes other long-term liabilities of $178 million not directly derived from contracts or other agreements. |
| | (i) | At December 31, 2017, DTE Energy met the minimum pension funding levels required under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 for the defined benefit pension plans. DTE Energy may contribute more than the minimum funding requirements for the pension plans and may also make contributions to the other postretirement benefit plans; however, these amounts are not included in the table above as such amounts are discretionary. Planned funding levels are disclosed in the "Capital Resources and Liquidity" and "Critical Accounting Estimates" sections herein and in Note 20 to the Consolidated Financial Statements in Item 8 of this Report, "Retirement Benefits and Trusteed Assets." |
Credit Ratings Credit ratings are intended to provide banks and capital market participants with a framework for comparing the credit quality of securities and are not a recommendation to buy, sell, or hold securities. DTE Energy, DTE Electric, and DTE Gas' credit ratings affect their costs of capital and other terms of financing, as well as their ability to access the credit and commercial paper markets. DTE Energy, DTE Electric, and DTE Gas' management believes that the current credit ratings provide sufficient access to capital markets. However, disruptions in the banking and capital markets not specifically related to DTE Energy, DTE Electric, and DTE Gas may affect their ability to access these funding sources or cause an increase in the return required by investors.
As part of the normal course of business, DTE Electric, DTE Gas, and various non-utility subsidiaries of DTE Energy routinely enter into physical or financially settled contracts for the purchase and sale of electricity, natural gas, coal, capacity, storage, and other energy-related products and services. Certain of these contracts contain provisions which allow the counterparties to request that DTE Energy posts cash or letters of credit in the event that the senior unsecured debt rating of DTE Energy is downgraded below investment grade. The amount of such collateral which could be requested fluctuates based upon commodity prices and the provisions and maturities of the underlying transactions and could be substantial. Also, upon a downgrade below investment grade, DTE Energy, DTE Electric, and DTE Gas could have restricted access to the commercial paper market, and if DTE Energy is downgraded below investment grade, the non-utility businesses, especially the Energy Trading and Power and Industrial Projects segments, could be required to restrict operations due to a lack of available liquidity. A downgrade below investment grade could potentially increase the borrowing costs of DTE Energy, DTE Electric, and DTE Gas and their subsidiaries and may limit access to the capital markets. The impact of a downgrade will not affect DTE Energy, DTE Electric, and DTE Gas' ability to comply with existing debt covenants. While DTE Energy, DTE Electric, and DTE Gas currently do not anticipate such a downgrade, they cannot predict the outcome of current or future credit rating agency reviews.
In April 2020, Fitch Ratings downgraded DTE Energy's unsecured debt rating from BBB+ to BBB. The downgrade primarily reflects increased leverage and business risk associated with DTE Energy's acquisition of midstream natural gas assets in December 2019. Refer to Note 4 to the Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information. The downgrade has not negatively impacted DTE Energy's liquidity or access to the capital markets.
In October 2020, DTE Energy announced its intent to spin-off its Midstream business. We do not expect the separation transaction to negatively impact DTE Energy's credit ratings, liquidity, or access to the capital markets.
CRITICAL ACCOUNTING ESTIMATES The preparation of the Registrants' Consolidated Financial Statements in conformity with generally accepted accounting principles requires that management apply accounting policies and make estimates and assumptions that affect results of operations and the amounts of assets and liabilities reported in the Consolidated Financial Statements. The Registrants' management believes that the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions in matters that are inherently uncertain and that may change in subsequent periods. Additional discussion of these accounting policies can be found in the Combined Notes to Consolidated Financial Statements in Item 8 of this Report. Regulation A significant portion of the Registrants' businesses are subject to regulation. This results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. DTE Electric and DTE Gas are required to record regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Future regulatory changes or changes in the competitive environment could result in the discontinuance of this accounting treatment for regulatory assets and liabilities for some or all of the Registrants' businesses. The Registrants' management believes that currently available facts support the continued use of regulatory assets and liabilities and that all regulatory assets and liabilities are recoverable or refundable in the current rate environment. See Note 910 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters." Derivatives Derivatives are generally recorded at fair value and shown as Derivative assets or liabilities. Changes in the fair value of the derivative instruments are recognized in earnings in the period of change. The normal purchases and normal sales exception requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that are designated as normal purchases and normal sales are not recorded at fair value. Substantially all of the commodity contracts entered into by DTE Electric and DTE Gas meet the criteria specified for this exception.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Registrants make certain assumptions they believe that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Registrants and their counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at December 31, 20172020 and 2016.2019. The Registrants believe they use valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs. The fair values the Registrants calculate for their derivatives may change significantly as inputs and assumptions are updated for new information. Actual cash returns realized on derivatives may be different from the results the Registrants estimate using models. As fair value calculations are estimates based largely on commodity prices, the Registrants perform sensitivity analyses on the fair values of forward contracts. See the sensitivity analysis in Item 7A. of this report, "Quantitative and Qualitative Disclosures About Market Risk." See also the "Fair Value" section herein. See Notes 1213 and 1314 to the Consolidated Financial Statements in Item 8 of this Report, "Fair Value" and "Financial and Other Derivative Instruments," respectively. Asset Impairments
Goodwill Certain of DTE Energy's reporting units have goodwill or allocated goodwill resulting from business combinations. DTE Energy performs an impairment test for each of the reporting units with goodwill annually or whenever events or circumstances indicate that the value of goodwill may be impaired.
In performing Step 1 of the impairment test, DTE Energy compares the fair value of the reporting unit to its carrying value including goodwill. If the carrying value including goodwill were to exceed the fair value of a reporting unit, Step 2 of the testan impairment loss would be performed. Step 2 ofrecognized. A goodwill impairment loss is measured as the impairment test requiresamount by which a reporting unit's carrying value exceeds fair value, not to exceed the carrying valueamount of goodwill to be reduced to its fair value, if lower, as of the test date.goodwill. For Step 1 of the test, DTE Energy estimates the reporting unit's fair value using standard valuation techniques, including techniques which use estimates of projected future results and cash flows to be generated by the reporting unit. Such techniques generally includeFor certain reporting units, the fair values were calculated using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. The income approach includes a terminal value that utilizes an earnings multipleassumed long-term growth rate approach, which incorporates management's assumptions regarding sustainable long-term growth of the current market values of comparable entities. Thesereporting units. The income approach cash flow valuations involve a number of estimates that require broad assumptions and significant judgment by management regarding future performance. DTE Energy also employs market-based valuation techniques to test the reasonableness
One of the indicationsmost significant assumptions utilized in determining the fair value of value for the reporting units determined under the cash flow technique.market approach is implied market multiples for certain peer companies. Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of the test date. DTE Energy performs an annual impairment test each October. In between annual tests, DTE Energy monitors its estimates and assumptions regarding estimated future cash flows, including the impact of movements in market indicators in future quarters, and will update the impairment analyses if a triggering event occurs. While DTE Energy believes the assumptions are reasonable, actual results may differ from projections. To the extent projected results or cash flows are revised downward, the reporting unit may be required to write down all or a portion of its goodwill, which would adversely impact DTE Energy's earnings. DTE Energy performed its annual impairment test as of October 1, 20172020 and determined that the estimated fair value of each reporting unit exceeded its carrying value, and no impairment existed. As part of the annual impairment test, DTE Energy also compared the aggregate fair value of the reporting units to its overall market capitalization. The implied premium of the aggregate fair value over market capitalization is likely attributable to an acquisition control premium (the price in excess of a stock's market price that investors typically pay to gain control of an entity).
The results of the test and key estimates that were incorporated are as follows as of the October 1, 20172020 valuation date: | | | Reporting Unit | | Goodwill | | Fair Value Reduction %(a) | | Discount Rate | | Terminal Multiple(b) | | Valuation Methodology(c) | Reporting Unit | | Goodwill | | Fair Value Reduction %(a) | | Discount Rate | | | Valuation Methodology(b)(c) | | | | (In millions) | | | | | | | | (In millions) | | | | | | | | | Electric | | $ | 1,208 |
| | 46 | % | | 6 | % | | 10.0x | | DCF, assuming stock sale | Electric | | $ | 1,208 | | | 49 | % | | 5.0 | % | | | DCF and market multiples analysis | | Gas | | 743 |
| | 35 | % | | 6 | % | | 11.0x | | DCF, assuming stock sale | Gas | | 743 | | | 47 | % | | 5.0 | % | | | DCF and market multiples analysis | | Gas Storage and Pipelines | | 299 |
| | 48 | % | | 8 | % | | 11.0x | | DCF, assuming asset sale | Gas Storage and Pipelines | | 472 | | | 18 | % | | 7.5 | % | | | DCF and market multiples analysis | Power and Industrial Projects(d) | | 26 |
| | 21 | % | | 8 | % | | 10.0x | | DCF, assuming asset sale(e) | | | Power and Industrial Projects | | Power and Industrial Projects | | 26 | | | 58 | % | | 7.1 | % | | | DCF | | Energy Trading | | 17 |
| | 32 | % | | 13 | % | | n/a(f) | | DCF, assuming asset sale | Energy Trading | | 17 | | | 68 | % | | 8.2 | % | | | DCF | | | | $ | 2,293 |
| | | | | | | $ | 2,466 | | | | | |
| | (a) | Percentage by which the fair value of equity of the reporting unit would need to decline to equal its carrying value, including goodwill. |
| | (b) | Multiple of enterprise value (sum of debt plus equity value) to earnings before interest, taxes, depreciation, and amortization (EBITDA). |
| | (c) | Discounted cash flows (DCF) incorporated 2018-2022 projected cash flows plus a calculated terminal value. |
| | (d) | Power and Industrial Projects excludes the Biomass reporting unit, as this unit has no allocated goodwill. |
| | (e) | Asset sales were assumed, except for Power and Industrial Projects' reduced emissions fuels projects, which assumed stock sales. |
| | (f) | Due to lack of market comparable information for Energy Trading, DTE Energy capitalized the terminal year cash flows at the weighted average cost of capital (WACC) in lieu of applying a terminal EBITDA multiple. |
(a)Percentage by which the fair value of equity of the reporting unit would need to decline to equal its carrying value, including goodwill. (b)Discounted cash flows (DCF) incorporated 2021-2025 projected cash flows plus a calculated terminal value. For each of the reporting units, DTE Energy capitalized the terminal year cash flows at the weighted average costs of capital (WACC) less an assumed long-term growth rate of 2.0%. Management applied equal weighting to the DCF and market multiples analysis, where applicable, to determine the fair value of the respective reporting units. (c)Due to lack of market comparable information for the Power & Industrial and Energy Trading reporting units, DTE Energy did not perform a market multiples analysis. Business Combinations The assets acquired and liabilities assumed in a business combination are recorded at their estimated fair values at the date of acquisition. The excess purchase price over the fair value of net assets acquired is recognized as goodwill. The fair value of the assets acquired and liabilities assumed are determined based on significant estimates and assumptions, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in future market prices. In some cases, DTE Energy engages independent third-party valuation firms to assist in determining the fair values. Refer to Note 4 to the Consolidated Financial Statements, "Acquisitions and Dispositions." Long-Lived Assets The Registrants evaluate the carrying value of long-lived assets, excluding goodwill, when circumstances indicate that the carrying value of those assets may not be recoverable. Conditions that could have an adverse impact on the cash flows and fair value of the long-lived assets are deteriorating business climate, condition of the asset, or plans to dispose of the asset before the end of its useful life. The review of long-lived assets for impairment requires significant assumptions about operating strategies and estimates of future cash flows, which require assessments of current and projected market conditions. An impairment evaluation is based on an undiscounted cash flow analysis at the lowest level for which independent cash flows of long-lived assets can be identified from other groups of assets and liabilities. Impairment may occur when the carrying value of the asset exceeds the future undiscounted cash flows. When the undiscounted cash flow analysis indicates a long-lived asset is not recoverable, the amount of the impairment loss is determined by measuring the excess of the long-lived asset over its fair value. An impairment would require the Registrants to reduce both the long-lived asset and current period earnings by the amount of the impairment, which would adversely impact their earnings.
Pension and Other Postretirement Costs DTE Energy sponsors both funded and unfunded defined benefit pension plans and other postretirement benefit plans for eligible employees of the Registrants. The measurement of the plan obligations and cost of providing benefits under these plans involve various factors, including numerous assumptions and accounting elections. When determining the various assumptions that are required, DTE Energy considers historical information as well as future expectations. The benefit costs are affected by, among other things, the actual rate of return on plan assets, the long-term expected return on plan assets, the discount rate applied to benefit obligations, the incidence of mortality, the expected remaining service period of plan participants, level of compensation and rate of compensation increases, employee age, length of service, the anticipated rate of increase of health care costs, benefit plan design changes, and the level of benefits provided to employees and retirees. Pension and other postretirement benefit costs attributed to the segments are included with labor costs and ultimately allocated to projects within the segments, some of which are capitalized.
DTE Energy had pension costs of $172$148 million in 2017, $1672020, $112 million in 2016,2019, and $221$148 million in 2015.2018. Other postretirement benefit credits were $31$49 million in 2017, $1112020, $1 million in 2016,2019, and $99$36 million in 2015.2018. Pension costs and other postretirement benefit credits for 20172020 were calculated based upon several actuarial assumptions, including an expected long-term rate of return on plan assets of 7.50%7.10% for the pension plans and 7.75%7.20% for the other postretirement benefit plans. In developing the expected long-term rate of return assumptions, DTE Energy evaluated asset class risk and return expectations, as well as inflation assumptions. Projected returns are based on broad equity, bond, and other markets. DTE Energy's 20182021 expected long-term rate of return on pension plan assets is based on an asset allocation assumption utilizing active and passive investment management of 40%37% in equity markets, 32%38% in fixed income markets, including long duration bonds, and 28%25% invested in other assets. DTE Energy's 20182021 expected long-term rate of return on other postretirement plan assets is based on an asset allocation assumption utilizing active and passive investment management of 40%23% in equity markets, 26%52% in fixed income markets, and 34%25% invested in other assets. Because of market volatility, DTE Energy periodically reviews the asset allocation and rebalances the portfolio when considered appropriate. Given market conditions and financial market risk considerations, DTE Energy is maintaininglowering its long-term rate of return assumptionsassumption for the pension plans to 7.00% and lowering the other post retirementpostretirement plans at 7.50% and 7.75%, respectivelyto 6.70% for 2018.2021. DTE Energy believes these rates are reasonable assumptions for the long-term raterates of return on the planplans' assets for 20182021 given its investment strategy.their respective asset allocations and DTE's capital market expectations. DTE Energy will continue to evaluate the actuarial assumptions, including its expected rate of return, at least annually. DTE Energy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the expected return on plan assets by the market-related value (MRV) of plan assets at the beginning of the year, taking into consideration anticipated contributions and benefit payments that are to be made during the year. Current accounting rules provide that the MRV of plan assets can be either fair value or a calculated value that recognizes changes in fair value in a systematic and rational manner over not more than five years. For the pension plans, DTE Energy uses a calculated value when determining the MRV of the pension plan assets and recognizes changes in fair value over a three-year period. Accordingly, the future value of assets will be impacted as previously deferred gains or losses are recognized. PositiveFavorable asset performance in 20172020 resulted in unrecognized net gains. As of December 31, 2017,2020, DTE Energy had $223$507 million of cumulative gains related to investment performance in prior years that remain to bewere not yet recognized in the calculation of the MRV of pension assets related to investment performance in 2017 and 2016.assets. For the other postretirement benefit plans, DTE Energy uses fair value when determining the MRV of other postretirement benefit plan assets, therefore all investment gains and losses have been recognized in the calculation of MRV for these plans. The discount rate that DTE Energy utilizes for determining future pension and other postretirement benefit obligations is based on a yield curve approach and a review of bonds that receive one of the two highest ratings given by a recognized rating agency. The yield curve approach matches projected pension plan and other postretirement benefit payment streams with bond portfolios reflecting actual liability duration unique to the plans. The discount rate determined on this basis was 3.70%2.57% for the pension and 2.58% for the other postretirement plans at December 31, 2020 compared to 3.28% and 3.29%, respectively, for the pension and other postretirement plans at December 31, 2017 compared to 4.25% for the pension and other postretirement plans at December 31, 2016.2019. DTE Energy changed the mortality assumptionassumptions as of December 31, 20172020 to reflect recent plan experience and the updated MP-2017base tables and projection scale, along withscales published by the actual experience and credibilitySociety of each population.Actuaries. The mortality assumptions used at December 31, 20172020 are the RP-2014PRI-2012 mortality table projected back to 20062018 using Scale MP-2014MP-2019, and projected forward from 2018 using Scale MP-2017MP-2020 with generational projection. The base mortality tables vary by type of plan, employee's union status and employment status, with additional adjustments to reflect the actual experience and credibility of each population.
DTE Energy estimates the 2018that total pension costs will be approximately $150$136 million in 2018,2021, compared to $172$148 million in 2017.2020. The reduction in2020 total pension costs included $25 million of one-time settlement charges. Excluding these charges, total pension costs are expected to increase from 2020 to 2021, which is primarily due to updated demographic assumptions and positive asset performance, offset by a lower discount rate.rate and expected rate of return. The 20182021 other postretirement benefit credit will beis estimated at approximately $30$39 million compared to $31$49 million in 2017.2020. The expected decrease in the credit is primarily due to a lower discount rate and expected rate of return. The health care trend rates for DTE Energy assume 6.75% for pre-65 participants and 7.25% for post-65 participants for 2018,2021, trending down to 4.50% for both pre-65 and post-65 participants in 2030.2033. Future actual pension and other postretirement benefit costs or credits will depend on future investment performance, changes in future discount rates, and various other factors related to plan design.
Lowering the expected long-term rate of return on the plan assets by one percentage point would have increased the 20172020 pension costs by approximately $42$47 million. Lowering the discount rate and the salary increase assumptions by one percentage point would have increased the 20172020 pension costs by approximately $38$23 million. Lowering the expected long-term rate of return on plan assets by one percentage point would have decreased the 20172020 other postretirement credit by approximately $18 million. Lowering the discount rate assumptionand the salary increase assumptions by one percentage point would have decreased the 20172020 other postretirement credit by approximately $26 million. Lowering the health care cost trend assumptions by one percentage point would have increased the other postretirement credit for 2017 by approximately $5$18 million. The value of the qualified pension and other postretirement benefit plan assets was $6.5$7.5 billion at December 31, 20172020 and $5.8$6.8 billion at December 31, 2016.2019. At December 31, 2017,2020, DTE Energy's qualified pension plans were underfunded by $807$653 million and its other postretirement benefit plans were underfundedoverfunded by $62$153 million. The 2017 funding levelsIn 2020, the funded status of the pension plans improved as positive asset performance and plan sponsor contributions and favorable asset returns were partially offset by a decrease in discount rates. The funded status of the other postretirement benefit plans improved as favorable asset returns and a favorable change in healthcare cost assumptions were partially offset by a decrease in discount rates. Pension and other postretirement costs and pension cash funding requirements may increase in future years without typical returns in the financial markets. DTE Energy made contributions to its qualified pension plans of $223$92 million in 20172020 and $179$150 million in 2016.2019. At the discretion of management, consistent with the Pension Protection Act of 2006, and depending upon financial market conditions, DTE Energy anticipates making contributions to its qualified pension plans of up to $200$107 million in 20182021 and up to $415$128 million over the next five years. DTE Energy did not make other postretirement benefit plan contributions in 2017 and made contributions of $20 million in 2016.2020 or 2019. DTE Energy does not anticipate making any contributions to its other postretirement plans in 20182021 or over the next five years. The planned pension contributions will be made in cash and/or DTE Energy common stock. See Note 2021 to the Consolidated Financial Statements in Item 8 of this Report, "Retirement Benefits and Trusteed Assets." Legal Reserves The Registrants are involved in various legal proceedings, claims, and litigation arising in the ordinary course of business. The Registrants regularly assess their liabilities and contingencies in connection with asserted or potential matters and establish reserves when appropriate. Legal reserves are based upon the Registrants' management’s assessment of pending and threatened legal proceedings and claims against the Registrants. Accounting for Tax Obligations The Registrants are required to make judgments regarding the potential tax effects of various financial transactions and results of operations in order to estimate their obligations to taxing authorities. The Registrants account for uncertain income tax positions using a benefit recognition model with a two-step approach, a more-likely-than-not recognition criterion, and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If the benefit does not meet the more likely than not criteria for being sustained on its technical merits, no benefit will be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Registrants also have non-income tax obligations related to property, sales and use, and employment-related taxes, and ongoing appeals related to these tax matters.
Accounting for tax obligations requires judgments, including assessing whether tax benefits are more likely than not to be sustained, and estimating reserves for potential adverse outcomes regarding tax positions that have been taken. The Registrants also assess their ability to utilize tax attributes, including those in the form of carry-forwards, for which the benefits have already been reflected in the Consolidated Financial Statements. The Registrants believe the resulting tax reserve balances as of December 31, 20172020 and 20162019 are appropriate. The ultimate outcome of such matters could result in favorable or unfavorable adjustments to the Registrants' Consolidated Financial Statements, and such adjustments could be material. See Note 1011 to the Consolidated Financial Statements in Item 8 of this Report, "Income Taxes."
NEW ACCOUNTING PRONOUNCEMENTS See Note 3 to the Consolidated Financial Statements in Item 8 of this Report, "New Accounting Pronouncements."
FAIR VALUE Derivatives are generally recorded at fair value and shown as Derivative assets or liabilities. Contracts DTE Energy typically classifies as derivative instruments include power, natural gas, oil,some environmental contracts, and certain coal forwards, futures, options and swaps, and foreign currency exchange contracts. Items DTE Energy does not generally account for as derivatives include natural gas and environmental inventory, pipeline transportation contracts, renewable energy credits,storage assets, and storage assets.some environmental contracts. See Notes 1213 and 1314 to the Consolidated Financial Statements in Item 8 of this Report, "Fair Value" and "Financial and Other Derivative Instruments," respectively. The tables below do not include the expected earnings impact of non-derivative natural gas storage, transportation, certain power contracts, and renewable energy creditssome environmental contracts which are subject to accrual accounting. Consequently, gains and losses from these positions may not match with the related physical and financial hedging instruments in some reporting periods, resulting in volatility in the Registrants' reported period-by-period earnings; however, the financial impact of the timing differences will reverse at the time of physical delivery and/or settlement. The Registrants manage their MTM risk on a portfolio basis based upon the delivery period of their contracts and the individual components of the risks within each contract. Accordingly, the Registrants record and manage the energy purchase and sale obligations under their contracts in separate components based on the commodity (e.g. electricity or natural gas), the product (e.g. electricity for delivery during peak or off-peak hours), the delivery location (e.g. by region), the risk profile (e.g. forward or option), and the delivery period (e.g. by month and year). The Registrants have established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). For further discussion of the fair value hierarchy, see Note 1213 to the Consolidated Financial Statements in Item 8 of this Report, "Fair Value." The following table provides details on changes in DTE Energy's MTM net asset (or liability) position: | | | | | | | Total | | | (In millions) | | MTM at December 31, 2016 | $ | (86 | ) | | Reclassified to realized upon settlement | (52 | ) | | Changes in fair value recorded to income | 128 |
| | Amounts recorded to unrealized income | 76 |
| | Changes in fair value recorded in regulatory liabilities | 25 |
| | Change in collateral | (7 | ) | | MTM at December 31, 2017 | $ | 8 |
|
| | | | | | | Total | | (In millions) | | MTM at December 31, 2019 | $ | 5 | | | Reclassified to realized upon settlement | 92 | | | Changes in fair value recorded to income | (83) | | | Amounts recorded to unrealized income | 9 | | | Changes in fair value recorded in regulatory liabilities | 20 | | | | | | | Change in collateral | (6) | | | MTM at December 31, 2020 | $ | 28 | |
The table below shows the maturity of DTE Energy's MTM positions. The positions from 20212024 and beyond principally represent longer tenor gas structured transactions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Source of Fair Value | | 2021 | | 2022 | | 2023 | | 2024 and Beyond | | Total Fair Value | | | (In millions) | | Level 1 | | $ | 10 | | | $ | 1 | | | $ | (1) | | | $ | — | | | $ | 10 | | | Level 2 | | 39 | | | — | | | (5) | | | (8) | | | 26 | | | Level 3 | | 11 | | | 3 | | | — | | | (16) | | | (2) | | | MTM before collateral adjustments | | $ | 60 | | | $ | 4 | | | $ | (6) | | | $ | (24) | | | 34 | | | Collateral adjustments | | | | | | | | | | (6) | | | MTM at December 31, 2020 | | | | | | | | | | $ | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | Source of Fair Value | | 2018 | | 2019 | | 2020 | | 2021 and Beyond | | Total Fair Value | | | | (In millions) | | Level 1 | | $ | 3 |
| | $ | 3 |
| | $ | (1 | ) | | $ | 2 |
| | $ | 7 |
| | Level 2 | | (16 | ) | | 6 |
| | 4 |
| | 3 |
| | (3 | ) | | Level 3 | | (5 | ) | | 10 |
| | 1 |
| | (15 | ) | | (9 | ) | | MTM before collateral adjustments | | $ | (18 | ) | | $ | 19 |
| | $ | 4 |
| | $ | (10 | ) | | (5 | ) | | Collateral adjustments | | | | | | | | | | 13 |
| | MTM at December 31, 2017 | | | | | | | | | | $ | 8 |
|
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Price Risk The Electric and Gas businesses have commodity price risk, primarily related to the purchases of coal, natural gas, uranium, and electricity. However, the Registrants do not bear significant exposure to earnings risk, as such changes are included in the PSCR and GCR regulatory rate-recovery mechanisms. In addition, changes in the price of natural gas can impact the valuation of lost and stolen gas, storage sales, and transportation services revenue at the Gas segment. The Gas segment manages its market price risk related to storage sales revenue primarily through the sale of long-term storage contracts. The Registrants are exposed to short-term cash flow or liquidity risk as a result of the time differential between actual cash settlements and regulatory rate recovery. DTE Energy's Gas Storage and Pipelines segment has exposure tois dependent on the continued availability of natural gas price fluctuations which impact the pricingproduction and reserves in its areas of operation. Low prices for natural gas, storage, gathering,including those resulting from regional basis differentials, could adversely affect development of additional reserves and transportation.production that is accessible to our pipeline and storage assets. DTE Energy manages its exposure through the use of short, medium, and long-term storage, gathering, and transportation contracts. DTE Energy's Power and Industrial Projects business segment is subject to electricity, natural gas, and coal product price risk. DTE Energy manages its exposure to commodity price risk through the use of long-term contracts. DTE Energy's Energy Trading business segment has exposure to electricity, natural gas, coal,environmental, crude oil, heating oil, and foreign currency exchange price fluctuations. These risks are managed by the energy marketing and trading operations through the use of forward energy, capacity, storage, options, and futures contracts, within pre-determinedpredetermined risk parameters. Credit Risk Bankruptcies DTE Energy's Power and Industrial Projects segment holds ownership interests in, and operates, five generating plants that sell electric output from renewable sources under long-term power purchase agreements with PG&E. PG&E filed for Chapter 11 bankruptcy protection on January 29, 2019. PG&E emerged from Chapter 11 bankruptcy effective July 1, 2020. DTE's renewable power purchase agreements were assumed under PG&E's Reorganization Plan and payment has been received for all past due receivables related to these agreements. Allowance for Doubtful Accounts The Registrants regularly review contingent matters, existing and future economic conditions, customer trends and other factors relating to customers and their contracts and record provisions for amounts considered at risk of probable loss in the allowance for doubtful accounts. The Registrants believe their accrued amounts are adequate for probable loss. Trading Activities DTE Energy is exposed to credit risk through trading activities. Credit risk is the potential loss that may result if the trading counterparties fail to meet their contractual obligations. DTE Energy utilizes both external and internal credit assessments when determining the credit quality of trading counterparties.
The following table displays the credit quality of DTE Energy's trading counterparties as of December 31, 2017:2020: | | | | Credit Exposure
Before Cash
Collateral | | Cash
Collateral | | Net Credit
Exposure | | Credit Exposure
Before Cash
Collateral | | Cash
Collateral | | Net Credit
Exposure | | | (In millions) | | (In millions) | Investment Grade(a) | | | | | | Investment Grade(a) | | | A- and Greater | $ | 226 |
| | $ | — |
| | $ | 226 |
| A- and Greater | $ | 222 | | | $ | — | | | $ | 222 | | | BBB+ and BBB | 265 |
| | — |
| | 265 |
| BBB+ and BBB | 214 | | | — | | | 214 | | | BBB- | 65 |
| | — |
| | 65 |
| BBB- | 12 | | | — | | | 12 | | | Total Investment Grade | 556 |
| | — |
| | 556 |
| Total Investment Grade | 448 | | | — | | | 448 | | Non-investment grade(b) | 6 |
| | — |
| | 6 |
| Non-investment grade(b) | 10 | | | — | | | 10 | | Internally Rated — investment grade(c) | 295 |
| | (1 | ) | | 294 |
| Internally Rated — investment grade(c) | 413 | | | (1) | | | 412 | | Internally Rated — non-investment grade(d) | 20 |
| | (2 | ) | | 18 |
| Internally Rated — non-investment grade(d) | 62 | | | (2) | | | 60 | | | Total | $ | 877 |
| | $ | (3 | ) | | $ | 874 |
| Total | $ | 933 | | | $ | (3) | | | $ | 930 | |
| | (a) | This category includes counterparties with minimum credit ratings of Baa3 assigned by Moody’s Investors Service (Moody’s) or BBB- assigned by Standard & Poor’s Rating Group, a division of McGraw-Hill Companies, Inc. (Standard & Poor’s). The five largest counterparty exposures, combined, for this category represented approximately 15% of the total gross credit exposure. |
| | (b) | This category includes counterparties with credit ratings that are below investment grade. The five largest counterparty exposures, combined, for this category represented approximately 1% of the total gross credit exposure. |
| | (c) | This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s, but are considered investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures, combined, for this category represented approximately 12% of the total gross credit exposure. |
| | (d) | This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s, and are considered non-investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures, combined, for this category represented approximately 2% of the total gross credit exposure. |
(a)This category includes counterparties with minimum credit ratings of Baa3 assigned by Moody’s Investors Service (Moody’s) or BBB- assigned by Standard & Poor’s Rating Group, a division of McGraw-Hill Companies, Inc. (Standard & Poor’s). The five largest counterparty exposures, combined, for this category represented 13% of the total gross credit exposure. (b)This category includes counterparties with credit ratings that are below investment grade. The five largest counterparty exposures, combined, for this category represented 1% of the total gross credit exposure. (c)This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s but are considered investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures, combined, for this category represented 14% of the total gross credit exposure. (d)This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s and are considered non-investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures, combined, for this category represented 4% of the total gross credit exposure. Other The Registrants engage in business with customers that are non-investment grade. The Registrants closely monitor the credit ratings of these customers and, when deemed necessary and permitted under the tariffs, request collateral or guarantees from such customers to secure their obligations. Interest Rate Risk DTE Energy is subject to interest rate risk in connection with the issuance of debt. In order to manage interest costs, DTE Energy may use treasury locks and interest rate swap agreements. DTE Energy's exposure to interest rate risk arises primarily from changes in U.S. Treasury rates, commercial paper rates, and LIBOR. As of December 31, 2017,2020, DTE Energy had floating rate debt of $38 million and a floating rate debt-to-total debt ratio of approximately 4.8%0.2%. Foreign Currency Exchange Risk DTE Energy has foreign currency exchange risk arising from market price fluctuations associated with fixed priced contracts. These contracts are denominated in Canadian dollars and are primarily for the purchase and sale of natural gas and power, as well as for long-term transportation capacity. To limit DTE Energy's exposure to foreign currency exchange fluctuations, DTE Energy has entered into a series of foreign currency exchange forward contracts through June 2022.2030. Summary of Sensitivity Analyses The RegistrantsSensitivity analyses were performed sensitivity analyses on the fair values of commodity contracts for DTE Energy and long-term debt obligations.obligations for the Registrants. The commodity contracts listed below principally relate to energy marketing and trading activities. The sensitivity analyses involved increasing and decreasing forward prices and rates at December 31, 20172020 and 20162019 by a hypothetical 10% and calculating the resulting change in the fair values. The hypothetical losses related to long-term debt would be realized only if DTE Energy transferred all of its fixed-rate long-term debt to other creditors.
The results of the sensitivity analyses: | | | | | Assuming a 10% Increase in Prices/Rates | | Assuming a 10% Decrease in Prices/Rates | | | Assuming a
10% Increase in Prices/Rates | | Assuming a
10% Decrease in Prices/Rates | | | | | As of December 31, | | As of December 31, | | | As of December 31, | | As of December 31, | | | Activity | | 2017 | | 2016 | | 2017 | | 2016 | | Change in the Fair Value of | Activity | | 2020 | | 2019 | | 2020 | | 2019 | | Change in the Fair Value of | | | | (In millions) | | | | (In millions) | | | | | Gas contracts | | $ | — |
| | $ | 14 |
| | $ | — |
| | $ | (14 | ) | | Commodity contracts | Gas contracts | | $ | 23 | | | $ | 6 | | | $ | (23) | | | $ | (6) | | | Commodity contracts | | Power contracts | | $ | 5 |
| | $ | 18 |
| | $ | (7 | ) | | $ | (18 | ) | | Commodity contracts | Power contracts | | $ | 5 | | | $ | 4 | | | $ | (5) | | | $ | (5) | | | Commodity contracts | | Environmental contracts | | Environmental contracts | | $ | (7) | | | $ | (3) | | | $ | 5 | | | $ | 3 | | | Commodity contracts | | | Interest rate risk — DTE Energy | | $ | (576 | ) | | $ | (529 | ) | | $ | 581 |
| | $ | 510 |
| | Long-term debt | Interest rate risk — DTE Energy | | $ | (651) | | | $ | (698) | | | $ | 671 | | | $ | 724 | | | Long-term debt | | Interest rate risk — DTE Electric | | $ | (246 | ) | | $ | (235 | ) | | $ | 263 |
| | $ | 252 |
| | Long-term debt | Interest rate risk — DTE Electric | | $ | (285) | | | $ | (286) | | | $ | 300 | | | $ | 305 | | | Long-term debt | |
For further discussion of market risk, see Management's Discussion and Analysis in Item 7 of this Report and Note 1314 to the Consolidated Financial Statements in Item 8 of this Report, "Financial and Other Derivative Instruments."
Item 8. Financial Statements and Supplementary Data The following Consolidated Financial Statements and financial statement schedules are included herein: | | | | | | | | | Page | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial Statement Schedule | | | |
DTE Energy — Controls and Procedures (a) Evaluation of disclosure controls and procedures Management of DTE Energy carried out an evaluation, under the supervision and with the participation of DTE Energy's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of DTE Energy's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2017,2020, which is the end of the period covered by this report. Based on this evaluation, DTE Energy's CEO and CFO have concluded that such disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by DTE Energy in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms and (ii) is accumulated and communicated to DTE Energy's management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations in the effectiveness of any disclosure controls and procedures, management cannot provide absolute assurance that the objectives of its disclosure controls and procedures will be attained. (b) Management’s report on internal control over financial reporting Management of DTE Energy is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, DTE Energy's CEO and CFO, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management of DTE Energy has assessed the effectiveness of DTE Energy’s internal control over financial reporting as of December 31, 2017.2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO) in Internal Control - Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2017,2020, DTE Energy’s internal control over financial reporting was effective based on those criteria. The effectiveness of DTE Energy’s internal control over financial reporting as of December 31, 20172020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm who also audited DTE Energy’s financial statements, as stated in their report which appears herein. (c) Changes in internal control over financial reporting There have been no changes in DTE Energy's internal control over financial reporting during the quarter ended December 31, 20172020 that have materially affected, or are reasonably likely to materially affect, DTE Energy's internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of DTE Energy Company Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial position of DTE Energy Company and its subsidiaries(the “Company”) as of December 31, 20172020 and 2016,2019,and the related consolidated statementsof operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2017, 2020,including the related notes and financial statement schedule of valuation and qualifying accountslisted in the accompanying index for each of the three years in the period ended December 31, 2017 listed in the accompanying index2020 (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 20162019, and the results of theiritsoperations and theiritscash flows for each of the three years in the period ended December 31, 20172020in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Reportreport on Internal Controlinternal control over Financial Reporting.financial reporting. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matterarising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for the Effects of New, or Changes to Existing, Regulatory Matters As described in Note 10 to the consolidated financial statements, the Company recorded $4,257 million of regulatory assets and $3,402 million of regulatory liabilities as of December 31, 2020. The Company is required to record regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Continued applicability of regulatory accounting treatment requires that rates be designed to recover specific costs of providing regulatory services and be charged to and collected from customers. Future regulatory changes could result in a discontinuance of this accounting treatment for regulatory assets and liabilities for some or all of the Company’s regulated businesses and may require the write-off of the portion of any regulatory asset or liability that was no longer probable of recovery through regulated rates. Management believes that currently available facts support the continued use of regulatory assets and liabilities and that all regulatory assets and liabilities are recoverable or refundable in the current regulatory environment. The principal considerations for our determination that performing procedures relating to the Company's accounting for the effects of new, or changes to existing, regulatory matters is a critical audit matter are the significant judgment by management in assessing the potential outcome and resulting accounting implications of new, or changes to existing, regulatory matters; this in turn led to a high degree of auditor judgment, subjectivity and effort in evaluating the appropriateness of management’s assessment and audit evidence obtained related to the assessment. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment and implementation of new regulatory matters or changes to existing regulatory matters. These procedures also included, among others, assessing (i) the reasonableness of management’s assessment of impacts arising from correspondence with regulators and changes in laws and regulations and (ii) the appropriateness of disclosures in the consolidated financial statements. Testing regulatory assets and liabilities, including those subject to pending rate orders, involved considering the provisions and formulas outlined in the rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan February 16, 201819, 2021
We have served as the Company’s auditor since 2008.
DTE Energy Company Consolidated Statements of Operations | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions, except per share amounts) | | (In millions, except per share amounts) | | Operating Revenues | | | | | | Operating Revenues | | | Utility operations | $ | 6,434 |
| | $ | 6,497 |
| | $ | 6,238 |
| Utility operations | $ | 6,845 | | | $ | 6,638 | | | $ | 6,670 | | | Non-utility operations | 6,173 |
| | 4,133 |
| | 4,099 |
| Non-utility operations | 5,332 | | | 6,031 | | | 7,542 | | | | 12,607 |
|
| 10,630 |
|
| 10,337 |
| | 12,177 | | | 12,669 | | | 14,212 | | | | | | | | | | | | | | | | Operating Expenses | | | | | | Operating Expenses | | | Fuel, purchased power, and gas — utility | 1,881 |
| | 1,968 |
| | 2,081 |
| Fuel, purchased power, and gas — utility | 1,719 | | | 1,798 | | | 1,981 | | | Fuel, purchased power, and gas — non-utility | 5,283 |
| | 3,562 |
| | 3,481 |
| | | Fuel, purchased power, gas, and other — non-utility | | Fuel, purchased power, gas, and other — non-utility | 4,141 | | | 5,053 | | | 6,630 | | | Operation and maintenance | 2,335 |
| | 2,302 |
| | 2,214 |
| Operation and maintenance | 2,443 | | | 2,419 | | | 2,451 | | | Depreciation and amortization | 1,030 |
| | 976 |
| | 852 |
| Depreciation and amortization | 1,443 | | | 1,263 | | | 1,124 | | | Taxes other than income | 391 |
| | 370 |
| | 364 |
| Taxes other than income | 410 | | | 414 | | | 405 | | | Asset (gains) losses and impairments, net | 41 |
| | 7 |
| | 106 |
| Asset (gains) losses and impairments, net | 35 | | | 15 | | | 27 | | | | 10,961 |
| | 9,185 |
| | 9,098 |
| | 10,191 | | | 10,962 | | | 12,618 | | | Operating Income | 1,646 |
| | 1,445 |
| | 1,239 |
| Operating Income | 1,986 | | | 1,707 | | | 1,594 | | | | | | | | | | | | | | | | Other (Income) and Deductions | | | | | | Other (Income) and Deductions | | | Interest expense | 536 |
| | 472 |
| | 450 |
| Interest expense | 720 | | | 641 | | | 559 | | | Interest income | (12 | ) | | (20 | ) | | (13 | ) | Interest income | (38) | | | (17) | | | (12) | | | Non-operating retirement benefits, net | | Non-operating retirement benefits, net | 50 | | | 39 | | | 37 | | | Other income | (268 | ) | | (207 | ) | | (209 | ) | Other income | (388) | | | (350) | | | (333) | | | Other expenses | 103 |
| | 95 |
| | 61 |
| Other expenses | 104 | | | 70 | | | 127 | | | | 359 |
| | 340 |
| | 289 |
| | 448 | | | 383 | | | 378 | | | Income Before Income Taxes | 1,287 |
| | 1,105 |
| | 950 |
| Income Before Income Taxes | 1,538 | | | 1,324 | | | 1,216 | | | | | | | | | | | Income Tax Expense | 175 |
| | 271 |
| | 230 |
| Income Tax Expense | 167 | | | 152 | | | 98 | | | | | | | | | | | | | Net Income | 1,112 |
| | 834 |
| | 720 |
| Net Income | 1,371 | | | 1,172 | | | 1,118 | | | | | | | | | | | Less: Net Loss Attributable to Noncontrolling Interests | (22 | ) | | (34 | ) | | (7 | ) | | | Less: Net Income (Loss) Attributable to Noncontrolling Interests | | Less: Net Income (Loss) Attributable to Noncontrolling Interests | 3 | | | 3 | | | (2) | | | | | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
| Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | | | | | | | | | | | | | | Basic Earnings per Common Share | | | | | | Basic Earnings per Common Share | | | | Net Income Attributable to DTE Energy Company | $ | 6.32 |
| | $ | 4.84 |
| | $ | 4.05 |
| Net Income Attributable to DTE Energy Company | $ | 7.09 | | | $ | 6.32 | | | $ | 6.18 | | | | | | | | | | | | | | | | Diluted Earnings per Common Share | | | | | | Diluted Earnings per Common Share | | | | Net Income Attributable to DTE Energy Company | $ | 6.32 |
| | $ | 4.83 |
| | $ | 4.05 |
| Net Income Attributable to DTE Energy Company | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | | | | | | | | | | | | | | | | Weighted Average Common Shares Outstanding | | | | | | Weighted Average Common Shares Outstanding | | | Basic | 179 |
| | 179 |
| | 179 |
| Basic | 193 | | | 185 | | | 181 | | | Diluted | 179 |
| | 179 |
| | 179 |
| Diluted | 193 | | | 185 | | | 181 | | | Dividends Declared per Common Share | $ | 3.36 |
| | $ | 3.06 |
| | $ | 2.84 |
| |
See Combined Notes to Consolidated Financial Statements
DTE Energy Company Consolidated Statements of Comprehensive Income | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Net Income | $ | 1,112 |
| | $ | 834 |
| | $ | 720 |
| Net Income | $ | 1,371 | | | $ | 1,172 | | | $ | 1,118 | | | | | | | | | | | | | | | | Other comprehensive income (loss), net of tax: | | | | | | Other comprehensive income (loss), net of tax: | | | Benefit obligations, net of taxes of $5, $6, and $8, respectively | 10 |
| | 11 |
| | 13 |
| | | Net unrealized gains on derivatives during the period, net of taxes of $—, $—, and $—, respectively | 1 |
| | — |
| | — |
| | | Net unrealized gains on investments during the period, net of taxes of $1, $1, and $—, respectively | 1 |
| | 1 |
| | 1 |
| | | Benefit obligations, net of taxes of $3, $2, and $2, respectively | | Benefit obligations, net of taxes of $3, $2, and $2, respectively | 8 | | | 8 | | | 8 | | | Net unrealized gains (losses) on derivatives, net of taxes of $1, $(4), and $0, respectively | | Net unrealized gains (losses) on derivatives, net of taxes of $1, $(4), and $0, respectively | 2 | | | (12) | | | (1) | | | | Foreign currency translation | 1 |
| | — |
| | (4 | ) | Foreign currency translation | 1 | | | 1 | | | (2) | | | Other comprehensive income | 13 |
| | 12 |
| | 10 |
| | | Other comprehensive income (loss) | | Other comprehensive income (loss) | 11 | | | (3) | | | 5 | | | | | | | | | | | | | | | | Comprehensive income | 1,125 |
| | 846 |
| | 730 |
| Comprehensive income | 1,382 | | | 1,169 | | | 1,123 | | | Less: Comprehensive loss attributable to noncontrolling interests | (22 | ) | | (34 | ) | | (7 | ) | | | Less: Comprehensive income (loss) attributable to noncontrolling interests | | Less: Comprehensive income (loss) attributable to noncontrolling interests | 3 | | | 3 | | | (2) | | | Comprehensive Income Attributable to DTE Energy Company | $ | 1,147 |
| | $ | 880 |
| | $ | 737 |
| Comprehensive Income Attributable to DTE Energy Company | $ | 1,379 | | | $ | 1,166 | | | $ | 1,125 | |
See Combined Notes to Consolidated Financial Statements
DTE Energy Company Consolidated Statements of Financial Position | | | | December 31, | | December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | ASSETS | ASSETS | ASSETS | | Current Assets | | | | Current Assets | | | Cash and cash equivalents | $ | 66 |
| | $ | 92 |
| Cash and cash equivalents | $ | 514 | | | $ | 93 | | | Restricted cash | 23 |
| | 21 |
| Restricted cash | 2 | | | 0 | | | Accounts receivable (less allowance for doubtful accounts of $49 and $41, respectively) | | | | | | Accounts receivable (less allowance for doubtful accounts of $104 and $91, respectively) | | Accounts receivable (less allowance for doubtful accounts of $104 and $91, respectively) | | | Customer | 1,758 |
| | 1,522 |
| Customer | 1,665 | | | 1,642 | | | Other | 98 |
| | 71 |
| Other | 127 | | | 245 | | | Inventories | | | | Inventories | | | Fuel and gas | 399 |
| | 416 |
| Fuel and gas | 335 | | | 373 | | | Materials and supplies | 380 |
| | 356 |
| | | Materials, supplies, and other | | Materials, supplies, and other | 381 | | | 386 | | | Derivative assets | 103 |
| | 47 |
| Derivative assets | 116 | | | 133 | | | Regulatory assets | 55 |
| | 42 |
| Regulatory assets | 129 | | | 5 | | | Other | 199 |
| | 195 |
| Other | 229 | | | 209 | | | | 3,081 |
| | 2,762 |
| | 3,498 | | | 3,086 | | | Investments | | | | Investments | | | | | Nuclear decommissioning trust funds | 1,492 |
| | 1,320 |
| Nuclear decommissioning trust funds | 1,855 | | | 1,661 | | | Investments in equity method investees | 1,073 |
| | 752 |
| Investments in equity method investees | 1,868 | | | 1,862 | | | Other | 232 |
| | 201 |
| Other | 196 | | | 265 | | | | 2,797 |
| | 2,273 |
| | 3,919 | | | 3,788 | | | Property | | | | Property | | | | | Property, plant, and equipment | 31,424 |
| | 30,029 |
| Property, plant, and equipment | 37,997 | | | 35,072 | | | Accumulated depreciation and amortization | (10,703 | ) | | (10,299 | ) | Accumulated depreciation and amortization | (10,028) | | | (9,755) | | | | 20,721 |
| | 19,730 |
| | 27,969 | | | 25,317 | | | Other Assets | | | | Other Assets | | | | | Goodwill | 2,293 |
| | 2,286 |
| Goodwill | 2,466 | | | 2,464 | | | Regulatory assets | 3,723 |
| | 3,871 |
| Regulatory assets | 4,128 | | | 4,171 | | | | Intangible assets | 867 |
| | 842 |
| Intangible assets | 2,339 | | | 2,393 | | | Notes receivable | 73 |
| | 73 |
| Notes receivable | 280 | | | 202 | | | Derivative assets | 51 |
| | 34 |
| Derivative assets | 40 | | | 41 | | | Prepaid postretirement costs | | Prepaid postretirement costs | 561 | | | 454 | | | Operating lease right-of-use assets | | Operating lease right-of-use assets | 152 | | | 169 | | | Other | 161 |
| | 170 |
| Other | 144 | | | 183 | | | | 7,168 |
| | 7,276 |
| | 10,110 | | | 10,077 | | | Total Assets | $ | 33,767 |
| | $ | 32,041 |
| Total Assets | $ | 45,496 | | | $ | 42,268 | |
See Combined Notes to Consolidated Financial Statements
DTE Energy Company Consolidated Statements of Financial Position — (Continued) | | | | December 31, | | December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions, except shares) | | (In millions, except shares) | | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | Current Liabilities | | | | Current Liabilities | | | Accounts payable | $ | 1,171 |
| | $ | 1,079 |
| Accounts payable | $ | 1,029 | | | $ | 1,076 | | | Accrued interest | 111 |
| | 96 |
| Accrued interest | 158 | | | 147 | | | Dividends payable | 158 |
| | 148 |
| Dividends payable | 210 | | | 195 | | | Short-term borrowings | 621 |
| | 499 |
| Short-term borrowings | 38 | | | 828 | | | Current portion long-term debt, including capital leases | 109 |
| | 14 |
| | | Current portion long-term debt, including finance leases | | Current portion long-term debt, including finance leases | 469 | | | 687 | | | Derivative liabilities | 99 |
| | 69 |
| Derivative liabilities | 68 | | | 83 | | | Regulatory liabilities | 18 |
| | 34 |
| Regulatory liabilities | 39 | | | 65 | | | Operating lease liabilities | | Operating lease liabilities | 33 | | | 33 | | | Acquisition related deferred payment | | Acquisition related deferred payment | 0 | | | 379 | | | Other | 525 |
| | 498 |
| Other | 647 | | | 504 | | | | 2,812 |
| | 2,437 |
| | 2,691 | | | 3,997 | | | Long-Term Debt (net of current portion) | | | | Long-Term Debt (net of current portion) | | | | | Mortgage bonds, notes, and other | 11,039 |
| | 10,506 |
| Mortgage bonds, notes, and other | 17,802 | | | 14,778 | | | | Junior subordinated debentures | 1,145 |
| | 756 |
| Junior subordinated debentures | 1,175 | | | 1,146 | | | Capital lease obligations | 1 |
| | 7 |
| | | Finance lease obligations | | Finance lease obligations | 24 | | | 11 | | | | 12,185 |
| | 11,269 |
| | 19,001 | | | 15,935 | | | Other Liabilities | | | | Other Liabilities | | | | | Deferred income taxes | 1,888 |
| | 4,162 |
| Deferred income taxes | 2,822 | | | 2,315 | | | Regulatory liabilities | 2,875 |
| | 555 |
| Regulatory liabilities | 3,363 | | | 3,264 | | | Asset retirement obligations | 2,320 |
| | 2,197 |
| Asset retirement obligations | 2,839 | | | 2,672 | | | Unamortized investment tax credit | 122 |
| | 93 |
| Unamortized investment tax credit | 162 | | | 166 | | | Derivative liabilities | 47 |
| | 98 |
| Derivative liabilities | 60 | | | 86 | | | Accrued pension liability | 924 |
| | 1,152 |
| Accrued pension liability | 797 | | | 808 | | | Accrued postretirement liability | 61 |
| | 36 |
| Accrued postretirement liability | 407 | | | 385 | | | Nuclear decommissioning | 220 |
| | 194 |
| Nuclear decommissioning | 283 | | | 249 | | | Operating lease liability | | Operating lease liability | 111 | | | 127 | | | Other | 323 |
| | 349 |
| Other | 371 | | | 428 | | | | 8,780 |
| | 8,836 |
| | 11,215 | | | 10,500 | | | Commitments and Contingencies (Notes 9 and 18) | | | | | | Commitments and Contingencies (Notes 10 and 19) | | Commitments and Contingencies (Notes 10 and 19) | | | | | |
|
| |
|
| | 0 | | 0 | | Equity | | | | Equity | | | Common stock, without par value, 400,000,000 shares authorized, and 179,386,967 and 179,432,581 shares issued and outstanding, respectively | 3,989 |
| | 4,030 |
| | | Common stock (No par value, 400,000,000 shares authorized, and 193,770,617 and 192,208,533 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively) | | Common stock (No par value, 400,000,000 shares authorized, and 193,770,617 and 192,208,533 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively) | 5,406 | | | 5,233 | | | Retained earnings | 5,643 |
| | 5,114 |
| Retained earnings | 7,156 | | | 6,587 | | | Accumulated other comprehensive loss | (120 | ) | | (133 | ) | Accumulated other comprehensive loss | (137) | | | (148) | | | Total DTE Energy Company Equity | 9,512 |
| | 9,011 |
| Total DTE Energy Company Equity | 12,425 | | | 11,672 | | | Noncontrolling interests | 478 |
| | 488 |
| Noncontrolling interests | 164 | | | 164 | | | Total Equity | 9,990 |
| | 9,499 |
| Total Equity | 12,589 | | | 11,836 | | | Total Liabilities and Equity | $ | 33,767 |
| | $ | 32,041 |
| Total Liabilities and Equity | $ | 45,496 | | | $ | 42,268 | |
See Combined Notes to Consolidated Financial Statements
DTE Energy Company Consolidated Statements of Cash Flows | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | Operating Activities | (In millions) | | Net Income | $ | 1,371 | | | $ | 1,172 | | | $ | 1,118 | | | Adjustments to reconcile Net Income to Net cash from operating activities: | | | | | | | Depreciation and amortization | 1,443 | | | 1,263 | | | 1,124 | | | Nuclear fuel amortization | 37 | | | 60 | | | 45 | | | Allowance for equity funds used during construction | (25) | | | (24) | | | (28) | | | Deferred income taxes | 407 | | | 329 | | | 114 | | | Equity earnings of equity method investees | (132) | | | (111) | | | (132) | | | Dividends from equity method investees | 142 | | | 160 | | | 74 | | | Asset (gains) losses and impairments, net | 47 | | | 14 | | | 29 | | | Changes in assets and liabilities: | | | | | | | Accounts receivable, net | 111 | | | 49 | | | (44) | | | Inventories | 45 | | | 59 | | | (32) | | | Prepaid postretirement benefit costs | (107) | | | (24) | | | (45) | | | Accounts payable | 0 | | | (288) | | | 146 | | | Accrued pension liability | (11) | | | (29) | | | (87) | | | Accrued postretirement liability | 22 | | | 0 | | | (61) | | | Derivative assets and liabilities | (23) | | | (28) | | | 31 | | | Regulatory assets and liabilities | 104 | | | 160 | | | 15 | | | Other current and noncurrent assets and liabilities | 266 | | | (113) | | | 413 | | | Net cash from operating activities | 3,697 | | | 2,649 | | | 2,680 | | | Investing Activities | | | | | | | Plant and equipment expenditures — utility | (3,241) | | | (2,724) | | | (2,439) | | | Plant and equipment expenditures — non-utility | (616) | | | (273) | | | (274) | | | Acquisitions related to business combinations, net of cash acquired | (126) | | | (2,470) | | | 0 | | | Proceeds from sale of assets | 13 | | | 0 | | | 0 | | | Proceeds from sale of nuclear decommissioning trust fund assets | 2,350 | | | 788 | | | 1,203 | | | Investment in nuclear decommissioning trust funds | (2,350) | | | (794) | | | (1,188) | | | Distributions from equity method investees | 24 | | | 10 | | | 9 | | | Contributions to equity method investees | (37) | | | (149) | | | (637) | | | Notes receivable | (85) | | | (98) | | | 2 | | | Other | (2) | | | (22) | | | (23) | | | Net cash used for investing activities | (4,070) | | | (5,732) | | | (3,347) | | | Financing Activities | | | | | | | Issuance of long-term debt, net of issuance costs | 3,692 | | | 2,506 | | | 1,432 | | | Redemption of long-term debt | (882) | | | (821) | | | (105) | | | | | | | | | Issuance of equity units, net of issuance costs | 0 | | | 1,265 | | | 0 | | | Short-term borrowings, net | (790) | | | 219 | | | (12) | | | Issuance of common stock | 2 | | | 1,023 | | | 0 | | | | | | | | | Dividends paid on common stock | (760) | | | (692) | | | (620) | | | Contributions from noncontrolling interests, principally REF entities | 36 | | | 38 | | | 53 | | | Distributions to noncontrolling interests | (39) | | | (59) | | | (48) | | | Purchases of noncontrolling interest, principally SGG | 0 | | | (300) | | | 0 | | | Acquisition related deferred payment, excluding accretion | (380) | | | 0 | | | 0 | | | Other | (83) | | | (79) | | | (46) | | | Net cash from financing activities | 796 | | | 3,100 | | | 654 | | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 423 | | | 17 | | | (13) | | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 93 | | | 76 | | | 89 | | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 516 | | | $ | 93 | | | $ | 76 | | | | | | | | | Supplemental disclosure of cash information | | | | | | | Cash paid (received) for: | | | | | | | Interest, net of interest capitalized | $ | 679 | | | $ | 595 | | | $ | 572 | | Income taxes(a) | $ | (360) | | | $ | 18 | | | $ | (26) | | | Supplemental disclosure of non-cash investing and financing activities | | | | | | | | | | | | | Plant and equipment expenditures in accounts payable | $ | 266 | | | $ | 311 | | | $ | 307 | | | Premium on equity units | $ | 0 | | | $ | 150 | | | $ | 0 | |
| | | | | | | | | | | | |
| Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | Operating Activities | (In millions) | | Net Income | $ | 1,112 |
| | $ | 834 |
| | $ | 720 |
| | Adjustments to reconcile Net Income to Net cash from operating activities: | | | | | | | Depreciation and amortization | 1,030 |
| | 976 |
| | 852 |
| | Nuclear fuel amortization | 53 |
| | 58 |
| | 46 |
| | Allowance for equity funds used during construction | (23 | ) | | (21 | ) | | (21 | ) | | Deferred income taxes | 196 |
| | 265 |
| | 237 |
| | Equity earnings of equity method investees | (102 | ) | | (68 | ) | | (66 | ) | | Dividends from equity method investees | 74 |
| | 68 |
| | 64 |
| | Asset (gains) losses and impairments, net | 38 |
| | 8 |
| | 107 |
| | Changes in assets and liabilities: | | | | | | | Accounts receivable, net | (252 | ) | | (226 | ) | | 259 |
| | Inventories | (4 | ) | | 37 |
| | 1 |
| | Accounts payable | 129 |
| | 145 |
| | (158 | ) | | Accrued pension liability | (228 | ) | | 19 |
| | (147 | ) | | Accrued postretirement liability | 25 |
| | (192 | ) | | (287 | ) | | Derivative assets and liabilities | (94 | ) | | 126 |
| | 47 |
| | Regulatory assets and liabilities | 217 |
| | (40 | ) | | 85 |
| | Other current and noncurrent assets and liabilities | (54 | ) | | 95 |
| | 177 |
| | Net cash from operating activities | 2,117 |
| | 2,084 |
| | 1,916 |
| | Investing Activities | | | | | | | Plant and equipment expenditures — utility | (2,037 | ) | | (1,898 | ) | | (1,817 | ) | | Plant and equipment expenditures — non-utility | (213 | ) | | (147 | ) | | (203 | ) | | Acquisition, net of cash acquired | — |
| | (1,147 | ) | | (241 | ) | | Restricted cash for debt redemption, principally Securitization, net | (2 | ) | | 1 |
| | 97 |
| | Proceeds from sale of nuclear decommissioning trust fund assets | 1,240 |
| | 1,457 |
| | 885 |
| | Investment in nuclear decommissioning trust funds | (1,226 | ) | | (1,463 | ) | | (898 | ) | | Distributions from equity method investees | 10 |
| | 11 |
| | 19 |
| | Contributions to equity method investees | (299 | ) | | (239 | ) | | (98 | ) | | Other | (37 | ) | | 37 |
| | 52 |
| | Net cash used for investing activities | (2,564 | ) | | (3,388 | ) | | (2,204 | ) | | Financing Activities | | | | | | | Issuance of long-term debt, net of issuance costs | 1,398 |
| | 2,035 |
| | 956 |
| | Redemption of long-term debt | (385 | ) | | (807 | ) | | (286 | ) | | Repurchase of long-term debt | — |
| | (59 | ) | | — |
| | Issuance of equity units, net of issuance costs | — |
| | 654 |
| | — |
| | Short-term borrowings, net | 122 |
| | — |
| | 101 |
| | Repurchase of common stock | (51 | ) | | (33 | ) | | — |
| | Dividends on common stock | (592 | ) | | (531 | ) | | (501 | ) | | Contributions from noncontrolling interests | 50 |
| | 114 |
| | 23 |
| | Distributions to noncontrolling interests | (40 | ) | | (5 | ) | | (8 | ) | | Other | (81 | ) | | (9 | ) | | (8 | ) | | Net cash from financing activities | 421 |
| | 1,359 |
| | 277 |
| | Net Increase (Decrease) in Cash and Cash Equivalents | (26 | ) | | 55 |
| | (11 | ) | | Cash and Cash Equivalents at Beginning of Period | 92 |
| | 37 |
| | 48 |
| | Cash and Cash Equivalents at End of Period | $ | 66 |
| | $ | 92 |
| | $ | 37 |
| | | | | | | | | Supplemental disclosure of cash information | | | | | | | Cash paid (received) for: | | | | | | | Interest, net of interest capitalized | $ | 495 |
| | $ | 448 |
| | $ | 428 |
| | Income taxes | $ | 4 |
| | $ | (1 | ) | | $ | 14 |
| | Supplemental disclosure of non-cash investing and financing activities | | | | | | | Plant and equipment expenditures in accounts payable | $ | 295 |
| | $ | 312 |
| | $ | 207 |
| | Premium on equity units | $ | — |
| | $ | 98 |
| | $ | — |
|
See Combined Notes to Consolidated Financial Statements
DTE Energy Company Consolidated Statements of Changes in Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | | | | Common Stock | | | | | | | | Shares | | Amount | | | | | Total | | | (Dollars in millions, shares in thousands) | | Balance, December 31, 2014 | 176,991 |
| | $ | 3,904 |
| | $ | 4,578 |
| | $ | (155 | ) | | $ | 15 |
| | $ | 8,342 |
| | Net Income (Loss) | — |
| | — |
| | 727 |
| | — |
| | (7 | ) | | 720 |
| | Dividends declared on common stock | — |
| | — |
| | (510 | ) | | — |
| | — |
| | (510 | ) | | Issuance of common stock | 105 |
| | 9 |
| | — |
| | — |
| | — |
| | 9 |
| | Contribution of common stock to pension plan | 1,428 |
| | 117 |
| | — |
| | — |
| | — |
| | 117 |
| | Benefit obligations, net of tax | — |
| | — |
| | — |
| | 13 |
| | — |
| | 13 |
| | Net change in unrealized gains on investments, net of tax | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Foreign currency translation | — |
| | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) | | Stock-based compensation, net contributions from noncontrolling interests, and other | 946 |
| | 93 |
| | (1 | ) | | — |
| | 15 |
| | 107 |
| | Balance, December 31, 2015 | 179,470 |
| | $ | 4,123 |
| | $ | 4,794 |
| | $ | (145 | ) | | $ | 23 |
| | $ | 8,795 |
| | Implementation of ASU 2016-09 | — |
| | — |
| | 3 |
| | — |
| | — |
| | 3 |
| | Net Income (Loss) | — |
| | — |
| | 868 |
| | — |
| | (34 | ) | | 834 |
| | Dividends declared on common stock | — |
| | — |
| | (548 | ) | | — |
| | — |
| | (548 | ) | | Repurchase of common stock | (394 | ) | | (33 | ) | | — |
| | — |
| | — |
| | (33 | ) | | Premium on equity units | — |
| | (98 | ) | | — |
| | — |
| | — |
| | (98 | ) | | Issuance costs of equity units | — |
| | (18 | ) | | — |
| | — |
| | — |
| | (18 | ) | | Acquisition of SGG | — |
| | — |
| | — |
| | — |
| | 390 |
| | 390 |
| | Benefit obligations, net of tax | — |
| | — |
| | — |
| | 11 |
| | — |
| | 11 |
| | Net change in unrealized gains on investments, net of tax | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Stock-based compensation, net contributions from noncontrolling interests, and other | 357 |
| | 56 |
| | (3 | ) | | — |
| | 109 |
| | 162 |
| | Balance, December 31, 2016 | 179,433 |
| | $ | 4,030 |
| | $ | 5,114 |
| | $ | (133 | ) | | $ | 488 |
| | $ | 9,499 |
| | Net Income (Loss) | — |
| | — |
| | 1,134 |
| | — |
| | (22 | ) | | 1,112 |
| | Dividends declared on common stock | — |
| | — |
| | (602 | ) | | — |
| | — |
| | (602 | ) | | Repurchase of common stock | (524 | ) | | (51 | ) | | — |
| | — |
| | — |
| | (51 | ) | | Benefit obligations, net of tax | — |
| | — |
| | — |
| | 10 |
| | — |
| | 10 |
| | Net change in unrealized gains on derivatives, net of tax | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Net change in unrealized gains on investments, net of tax | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Foreign currency translation | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Stock-based compensation, net contributions from noncontrolling interests, and other | 478 |
| | 10 |
| | (3 | ) | | — |
| | 12 |
| | 19 |
| | Balance, December 31, 2017 | 179,387 |
| | $ | 3,989 |
| | $ | 5,643 |
| | $ | (120 | ) | | $ | 478 |
| | $ | 9,990 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | | | Common Stock | | | | | | | Shares | | Amount | | | | | Total | | (Dollars in millions, shares in thousands) | | Balance, December 31, 2017 | 179,387 | | | $ | 3,989 | | | $ | 5,643 | | | $ | (120) | | | $ | 478 | | | $ | 9,990 | | | Implementation of ASU 2016-01 | — | | | — | | | 5 | | | (5) | | | — | | | $ | 0 | | | Net Income (Loss) | — | | | — | | | 1,120 | | | — | | | (2) | | | 1,118 | | | Dividends declared on common stock ($3.60 per Common Share) | — | | | — | | | (653) | | | — | | | — | | | (653) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of common stock | 255 | | | 26 | | | — | | | — | | | — | | | 26 | | | Contribution of common stock to pension plan | 1,751 | | | 175 | | | — | | | — | | | — | | | 175 | | | Other comprehensive income, net of tax | — | | | — | | | — | | | 5 | | | — | | | 5 | | | Stock-based compensation, net contributions from noncontrolling interests, and other | 532 | | | 55 | | | (3) | | | — | | | 4 | | | 56 | | | Balance, December 31, 2018 | 181,925 | | | $ | 4,245 | | | $ | 6,112 | | | $ | (120) | | | $ | 480 | | | $ | 10,717 | | | Implementation of ASU 2018-02 | — | | | — | | | 25 | | | (25) | | | — | | | 0 | | | Net Income | — | | | — | | | 1,169 | | | — | | | 3 | | | 1,172 | | | Dividends declared on common stock ($3.85 per Common Share) | — | | | — | | | (714) | | | — | | | — | | | (714) | | | | | | | | | | | | | | | Issuance of common stock | 8,634 | | | 1,014 | | | — | | | — | | | — | | | 1,014 | | | Premium on equity units | — | | | (150) | | | — | | | — | | | — | | | (150) | | | Issuance costs of equity units | — | | | (30) | | | — | | | — | | | — | | | (30) | | | Contribution of common stock to pension plan | 815 | | | 100 | | | — | | | — | | | — | | | 100 | | | Other comprehensive loss, net of tax | — | | | — | | | — | | | (3) | | | — | | | (3) | | | Purchase of noncontrolling interests, principally SGG | — | | | (3) | | | — | | | — | | | (297) | | | (300) | | | Stock-based compensation, net distributions to noncontrolling interests, and other | 835 | | | 57 | | | (5) | | | — | | | (22) | | | 30 | | | Balance, December 31, 2019 | 192,209 | | | $ | 5,233 | | | $ | 6,587 | | | $ | (148) | | | $ | 164 | | | $ | 11,836 | | | | | | | | | | | | | | | Net Income | — | | | — | | | 1,368 | | | — | | | 3 | | | 1,371 | | | Dividends declared on common stock ($4.12 per Common Share) | — | | | — | | | (796) | | | — | | | — | | | (796) | | | Issuance of common stock | 192 | | | 22 | | | — | | | — | | | — | | | 22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contribution of common stock to pension plan | 694 | | | 82 | | | — | | | — | | | — | | | 82 | | | Other comprehensive income, net of tax | — | | | — | | | — | | | 11 | | | — | | | 11 | | | | | | | | | | | | | | | Stock-based compensation, net distributions to noncontrolling interests, and other | 676 | | | 69 | | | (3) | | | — | | | (3) | | | 63 | | | Balance, December 31, 2020 | 193,771 | | | $ | 5,406 | | | $ | 7,156 | | | $ | (137) | | | $ | 164 | | | $ | 12,589 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric — Controls and Procedures (a) Evaluation of disclosure controls and procedures Management of DTE Electric carried out an evaluation, under the supervision and with the participation of DTE Electric’sElectric's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of DTE Electric’sElectric's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2017,2020, which is the end of the period covered by this report. Based on this evaluation, DTE Electric’sElectric's CEO and CFO have concluded that such disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by DTE Electric in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms and (ii) is accumulated and communicated to DTE Electric’sElectric's management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations in the effectiveness of any disclosure controls and procedures, management cannot provide absolute assurance that the objectives of its disclosure controls and procedures will be attained. (b) Management’s report on internal control over financial reporting Management of DTE Electric is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, DTE Electric's CEO and CFO, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management of DTE Electric has assessed the effectiveness of DTE Electric’sElectric's internal control over financial reporting as of December 31, 2017.2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO) in Internal Control - Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2017,2020, DTE Electric’sElectric's internal control over financial reporting was effective based on those criteria. This annual report does not include an audit report of DTE Electric’sElectric's independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to audit by DTE Electric’sElectric's independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit DTE Electric to provide only management’s report in this annual report. (c) Changes in internal control over financial reporting There have been no changes in DTE Electric’sElectric's internal control over financial reporting during the quarter ended December 31, 20172020 that have materially affected, or are reasonably likely to materially affect, DTE Electric’sElectric's internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholder of DTE Electric Company Opinion on the Financial Statements We have audited the accompanying consolidatedstatements of financial positionof DTE Electric Company and itssubsidiaries (the “Company”) as of December 31, 20172020 and 2016, 2019,and the related consolidated statements of operations, of comprehensive income, of changes in shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2017,2020,including the related notes and financial statement schedule of valuation and qualifying accountslisted in the accompanying index for each of the three years in the period ended December 31, 2017 listed in the accompanying index2020 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 2016,2019, and the results of their itsoperations and theiritscash flows for each of the three years in the period ended December 31, 20172020 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidatedfinancial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for the Effects of New, or Changes to Existing, Regulatory Matters As described in Note 10 to the consolidated financial statements, the Company recorded $3,563 million of regulatory assets and $2,450 million of regulatory liabilities as of December 31, 2020. The Company is required to record regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Continued applicability of regulatory accounting treatment requires that rates be designed to recover specific costs of providing regulatory services and be charged to and collected from customers. Future regulatory changes could result in a discontinuance of this accounting treatment for regulatory assets and liabilities for some or all of the Company’s regulated businesses and may require the write-off of the portion of any regulatory asset or liability that was no longer probable of recovery through regulated rates. Management believes that currently available facts support the continued use of regulatory assets and liabilities and that all regulatory assets and liabilities are recoverable or refundable in the current regulatory environment.
The principal considerations for our determination that performing procedures relating to the Company's accounting for the effects of new, or changes to existing, regulatory matters is a critical audit matter are the significant judgment by management in assessing the potential outcome and resulting accounting implications of new, or changes to existing, regulatory matters; this in turn led to a high degree of auditor judgment, subjectivity and effort in evaluating the appropriateness of management’s assessment and audit evidence obtained related to the assessment. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment and implementation of new regulatory matters or changes to existing regulatory matters. These procedures also included, among others, assessing (i) the reasonableness of management’s assessment of impacts arising from correspondence with regulators and changes in laws and regulations and (ii) the appropriateness of disclosures in the consolidated financial statements. Testing regulatory assets and liabilities, including those subject to pending rate orders, involved considering the provisions and formulas outlined in the rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan February 16, 201819, 2021
We have served as the Company's auditor since 2008.
DTE Electric Company Consolidated Statements of Operations | | | | | | | | | | Year Ended December 31, | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | | 2017 | | 2016 | | 2015 | | (In millions) | | | (In millions) | | | Operating Revenues — Utility operations | $ | 5,102 |
| | $ | 5,225 |
| | $ | 4,900 |
| | | Operating Revenues | | Operating Revenues | $ | 5,506 | | | $ | 5,224 | | | $ | 5,298 | | | | | | | | | | | | | | | | Operating Expenses | | | | | | Operating Expenses | | | Fuel and purchased power — utility | 1,454 |
| | 1,532 |
| | 1,574 |
| Fuel and purchased power — utility | 1,397 | | | 1,390 | | | 1,552 | | | Operation and maintenance | 1,428 |
| | 1,455 |
| | 1,342 |
| Operation and maintenance | 1,505 | | | 1,452 | | | 1,470 | | | Depreciation and amortization | 753 |
| | 750 |
| | 633 |
| Depreciation and amortization | 1,043 | | | 946 | | | 836 | | | Taxes other than income | 302 |
| | 284 |
| | 277 |
| Taxes other than income | 296 | | | 310 | | | 307 | | | Asset (gains) losses and impairments, net | | Asset (gains) losses and impairments, net | 41 | | | 13 | | | (1) | | | | 3,937 |
| | 4,021 |
| | 3,826 |
| | 4,282 | | | 4,111 | | | 4,164 | | | Operating Income | 1,165 |
| | 1,204 |
| | 1,074 |
| Operating Income | 1,224 | | | 1,113 | | | 1,134 | | | | | | | | | | | | | | | | Other (Income) and Deductions | | | | | | Other (Income) and Deductions | | | Interest expense | 274 |
| | 264 |
| | 258 |
| Interest expense | 331 | | | 313 | | | 283 | | | Interest income | — |
| | (8 | ) | | — |
| Interest income | (2) | | | (2) | | | 0 | | | Non-operating retirement benefits, net | | Non-operating retirement benefits, net | (1) | | | (1) | | | 0 | | | Other income | (77 | ) | | (61 | ) | | (60 | ) | Other income | (87) | | | (107) | | | (83) | | | Other expenses | 40 |
| | 34 |
| | 40 |
| Other expenses | 96 | | | 56 | | | 77 | | | | 237 |
| | 229 |
| | 238 |
| | 337 | | | 259 | | | 277 | | | Income Before Income Taxes | 928 |
| | 975 |
| | 836 |
| Income Before Income Taxes | 887 | | | 854 | | | 857 | | | | | | | | | | | Income Tax Expense | 327 |
| | 353 |
| | 292 |
| Income Tax Expense | 109 | | | 138 | | | 193 | | | | | | | | | | | Net Income | $ | 601 |
| | $ | 622 |
| | $ | 544 |
| Net Income | $ | 778 | | | $ | 716 | | | $ | 664 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric Company Consolidated Statements of Comprehensive Income | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Net Income | $ | 601 |
| | $ | 622 |
| | $ | 544 |
| Net Income | $ | 778 | | | $ | 716 | | | $ | 664 | | | Other comprehensive income, net of tax: | | | | | | | | Transfer of benefit obligations, net of taxes of $18 in 2015 | — |
| | — |
| | 27 |
| | | Net unrealized gains on investments during the period, net of taxes of $1, $—, and $—, respectively | 1 |
| | — |
| | 1 |
| | | | Other comprehensive income | 1 |
|
| — |
|
| 28 |
| Other comprehensive income | 0 | | | 0 | | | 0 | | | Comprehensive Income | $ | 602 |
|
| $ | 622 |
|
| $ | 572 |
| Comprehensive Income | $ | 778 | | | $ | 716 | | | $ | 664 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric Company Consolidated Statements of Financial Position | | | | December 31, | | December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | ASSETS | ASSETS | ASSETS | | Current Assets | | | | Current Assets | | | Cash and cash equivalents | $ | 15 |
| | $ | 13 |
| Cash and cash equivalents | $ | 16 | | | $ | 12 | | | Accounts receivable (less allowance for doubtful accounts of $31 and $25, respectively) | | | | | | | Accounts receivable (less allowance for doubtful accounts of $57 and $46, respectively) | | Accounts receivable (less allowance for doubtful accounts of $57 and $46, respectively) | | | Customer | 791 |
| | 728 |
| Customer | 763 | | | 729 | | | Affiliates | 20 |
| | 12 |
| Affiliates | 13 | | | 25 | | | Other | 37 |
| | 29 |
| Other | 62 | | | 41 | | | Inventories | | | | Inventories | | | Fuel | 190 |
| | 225 |
| Fuel | 187 | | | 187 | | | Materials and supplies | 275 |
| | 271 |
| Materials and supplies | 292 | | | 280 | | | | Regulatory assets | 50 |
| | 36 |
| Regulatory assets | 123 | | | 5 | | | Other | 68 |
| | 63 |
| Other | 71 | | | 78 | | | | 1,446 |
| | 1,377 |
| | 1,527 | | | 1,357 | | | Investments | | | | Investments | | | | | Nuclear decommissioning trust funds | 1,492 |
| | 1,320 |
| Nuclear decommissioning trust funds | 1,855 | | | 1,661 | | | Other | 36 |
| | 36 |
| Other | 42 | | | 38 | | | | 1,528 |
| | 1,356 |
| | 1,897 | | | 1,699 | | | Property | | | | Property | | | | | Property, plant, and equipment | 22,972 |
| | 22,094 |
| Property, plant, and equipment | 26,171 | | | 24,279 | | | Accumulated depreciation and amortization | (7,984 | ) | | (7,721 | ) | Accumulated depreciation and amortization | (7,050) | | | (6,706) | | | | 14,988 |
| | 14,373 |
| | 19,121 | | | 17,573 | | | Other Assets | | | | Other Assets | | | | | Regulatory assets | 3,005 |
| | 3,113 |
| Regulatory assets | 3,440 | | | 3,448 | | | | Intangible assets | 25 |
| | 31 |
| Intangible assets | 11 | | | 15 | | | Prepaid postretirement costs — affiliates | 113 |
| | 114 |
| Prepaid postretirement costs — affiliates | 335 | | | 266 | | | Operating lease right-of-use assets | | Operating lease right-of-use assets | 75 | | | 87 | | | Other | 123 |
| | 125 |
| Other | 107 | | | 143 | | | | 3,266 |
| | 3,383 |
| | 3,968 | | | 3,959 | | | Total Assets | $ | 21,228 |
| | $ | 20,489 |
| Total Assets | $ | 26,513 | | | $ | 24,588 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric Company Consolidated Statements of Financial Position — (Continued) | | | | December 31, | | December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions, except shares) | | (In millions, except shares) | | LIABILITIES AND SHAREHOLDER'S EQUITY | LIABILITIES AND SHAREHOLDER'S EQUITY | LIABILITIES AND SHAREHOLDER'S EQUITY | | Current Liabilities | | | | Current Liabilities | | | Accounts payable | | | | Accounts payable | | | Affiliates | $ | 52 |
| | $ | 58 |
| Affiliates | $ | 62 | | | $ | 59 | | | Other | 416 |
| | 452 |
| Other | 410 | | | 406 | | | Accrued interest | 72 |
| | 65 |
| Accrued interest | 91 | | | 84 | | | Current portion long-term debt, including capital leases | 5 |
| | 6 |
| | | | Current portion long-term debt, including finance leases | | Current portion long-term debt, including finance leases | 468 | | | 636 | | | Regulatory liabilities | 17 |
| | 27 |
| Regulatory liabilities | 18 | | | 40 | | | Short-term borrowings | | | | Short-term borrowings | | | Affiliates | 116 |
| | 117 |
| Affiliates | 101 | | | 97 | | | Other | 238 |
| | 62 |
| Other | 0 | | | 354 | | | Operating lease liabilities | | Operating lease liabilities | 11 | | | 12 | | | Other | 145 |
| | 146 |
| Other | 219 | | | 155 | | | | 1,061 |
| | 933 |
| | 1,380 | | | 1,843 | | | Long-Term Debt (net of current portion) | | | | Long-Term Debt (net of current portion) | | | | | Mortgage bonds, notes, and other | 6,017 |
| | 5,878 |
| Mortgage bonds, notes, and other | 7,774 | | | 6,548 | | | Capital lease obligations | 1 |
| | 7 |
| | | Finance lease obligations | | Finance lease obligations | 13 | | | 4 | | | | 6,018 |
| | 5,885 |
| | 7,787 | | | 6,552 | | | Other Liabilities | | | | Other Liabilities | | | | | Deferred income taxes | 2,088 |
| | 3,793 |
| Deferred income taxes | 2,525 | | | 2,355 | | | Regulatory liabilities | 2,137 |
| | 229 |
| Regulatory liabilities | 2,432 | | | 2,546 | | | Asset retirement obligations | 2,125 |
| | 2,012 |
| Asset retirement obligations | 2,607 | | | 2,447 | | | Unamortized investment tax credit | 120 |
| | 90 |
| Unamortized investment tax credit | 162 | | | 166 | | | Nuclear decommissioning | 220 |
| | 194 |
| Nuclear decommissioning | 283 | | | 249 | | | Accrued pension liability — affiliates | 811 |
| | 1,008 |
| Accrued pension liability — affiliates | 731 | | | 717 | | | Accrued postretirement liability — affiliates | 311 |
| | 269 |
| Accrued postretirement liability — affiliates | 384 | | | 367 | | | Operating lease liabilities | | Operating lease liabilities | 56 | | | 67 | | | Other | 72 |
| | 81 |
| Other | 96 | | | 84 | | | | 7,884 |
| | 7,676 |
| | 9,276 | | | 8,998 | | | Commitments and Contingencies (Notes 9 and 18) |
|
| |
|
| | | Commitments and Contingencies (Notes 10 and 19) | | Commitments and Contingencies (Notes 10 and 19) | 0 | | 0 | | | | | | | | Shareholder's Equity | | | | Shareholder's Equity | | | Common stock, $10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding | 4,306 |
| | 4,206 |
| | | Common stock ($10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding for both periods) | | Common stock ($10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding for both periods) | 5,447 | | | 4,811 | | | Retained earnings | 1,956 |
| | 1,787 |
| Retained earnings | 2,623 | | | 2,384 | | | Accumulated other comprehensive income | 3 |
| | 2 |
| | | | Total Shareholder's Equity | 6,265 |
| | 5,995 |
| Total Shareholder's Equity | 8,070 | | | 7,195 | | | Total Liabilities and Shareholder's Equity | $ | 21,228 |
| | $ | 20,489 |
| Total Liabilities and Shareholder's Equity | $ | 26,513 | | | $ | 24,588 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric Company Consolidated Statements of Cash Flows | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | Operating Activities | (In millions) | Operating Activities | (In millions) | | Net Income | $ | 601 |
| | $ | 622 |
| | $ | 544 |
| Net Income | $ | 778 | | | $ | 716 | | | $ | 664 | | | Adjustments to reconcile Net Income to Net cash from operating activities: | | | | | | Adjustments to reconcile Net Income to Net cash from operating activities: | | | Depreciation and amortization | 753 |
| | 750 |
| | 633 |
| Depreciation and amortization | 1,043 | | | 946 | | | 836 | | | Nuclear fuel amortization | 53 |
| | 58 |
| | 46 |
| Nuclear fuel amortization | 37 | | | 60 | | | 45 | | | Allowance for equity funds used during construction | (18 | ) | | (18 | ) | | (20 | ) | Allowance for equity funds used during construction | (23) | | | (22) | | | (19) | | | Deferred income taxes | 345 |
| | 342 |
| | 320 |
| Deferred income taxes | 89 | | | 97 | | | 189 | | | Asset (gains) losses and impairments, net | | Asset (gains) losses and impairments, net | 41 | | | 13 | | | 0 | | | Changes in assets and liabilities: | | | | | | Changes in assets and liabilities: | | | Accounts receivable, net | (80 | ) | | (64 | ) | | 33 |
| Accounts receivable, net | (42) | | | 20 | | | 33 | | | Inventories | 31 |
| | 26 |
| | (22 | ) | Inventories | (12) | | | (17) | | | 15 | | | Prepaid postretirement benefit costs — affiliates | 1 |
| | (90 | ) | | (24 | ) | Prepaid postretirement benefit costs — affiliates | (69) | | | (77) | | | (76) | | | Accounts payable | (2 | ) | | 59 |
| | (46 | ) | Accounts payable | 20 | | | (57) | | | 54 | | | Accrued pension liability — affiliates | (197 | ) | | 32 |
| | (224 | ) | Accrued pension liability — affiliates | 14 | | | (1) | | | (93) | | | Accrued postretirement liability — affiliates | 42 |
| | (38 | ) | | (213 | ) | Accrued postretirement liability — affiliates | 17 | | | 89 | | | (33) | | | Regulatory assets and liabilities | 202 |
| | 10 |
| | 65 |
| Regulatory assets and liabilities | 55 | | | 139 | | | 4 | | | Other current and noncurrent assets and liabilities | (147 | ) | | (34 | ) | | 58 |
| Other current and noncurrent assets and liabilities | (43) | | | (197) | | | 101 | | | Net cash from operating activities | 1,584 |
| | 1,655 |
| | 1,150 |
| Net cash from operating activities | 1,905 | | | 1,709 | | | 1,720 | | | Investing Activities | | | | | | Investing Activities | | | | | | | Plant and equipment expenditures | (1,574 | ) | | (1,503 | ) | | (1,545 | ) | Plant and equipment expenditures | (2,674) | | | (2,200) | | | (1,989) | | | Acquisitions | — |
| | — |
| | (310 | ) | | | Restricted cash for debt redemption, principally Securitization, net | — |
| | — |
| | 96 |
| | | | Proceeds from sale of nuclear decommissioning trust fund assets | 1,240 |
| | 1,457 |
| | 885 |
| Proceeds from sale of nuclear decommissioning trust fund assets | 2,350 | | | 788 | | | 1,203 | | | Investment in nuclear decommissioning trust funds | (1,226 | ) | | (1,463 | ) | | (898 | ) | Investment in nuclear decommissioning trust funds | (2,350) | | | (794) | | | (1,188) | | | Transfer of Rabbi Trust assets to affiliate | — |
| | — |
| | 137 |
| | | Other | 18 |
| | 36 |
| | 14 |
| | | Notes receivable and other | | Notes receivable and other | (8) | | | (21) | | | (15) | | | Net cash used for investing activities | (1,542 | ) | | (1,473 | ) | | (1,621 | ) | Net cash used for investing activities | (2,682) | | | (2,227) | | | (1,989) | | | Financing Activities | | | | | | Financing Activities | | | | | | | Issuance of long-term debt, net of issuance costs | 435 |
| | 355 |
| | 495 |
| Issuance of long-term debt, net of issuance costs | 1,683 | | | 643 | | | 519 | | | Redemption of long-term debt | (300 | ) | | (10 | ) | | (135 | ) | Redemption of long-term debt | (632) | | | 0 | | | 0 | | | Repurchase of long-term debt | — |
| | (59 | ) | | — |
| | | | Capital contribution by parent company | 100 |
| | 120 |
| | 300 |
| Capital contribution by parent company | 636 | | | 180 | | | 325 | | | Short-term borrowings, net — affiliate | (1 | ) | | 41 |
| | (8 | ) | Short-term borrowings, net — affiliate | 4 | | | (4) | | | (15) | | | Short-term borrowings, net — other | 176 |
| | (210 | ) | | 222 |
| Short-term borrowings, net — other | (354) | | | 205 | | | (89) | | | Dividends on common stock | (432 | ) | | (420 | ) | | (395 | ) | | | Dividends paid on common stock | | Dividends paid on common stock | (539) | | | (494) | | | (461) | | | Other | (18 | ) | | (1 | ) | | (7 | ) | Other | (17) | | | (18) | | | (7) | | | Net cash from (used for) financing activities | (40 | ) | | (184 | ) | | 472 |
| | | Net cash from financing activities | | Net cash from financing activities | 781 | | | 512 | | | 272 | | | Net Increase (Decrease) in Cash and Cash Equivalents | 2 |
| | (2 | ) | | 1 |
| Net Increase (Decrease) in Cash and Cash Equivalents | 4 | | | (6) | | | 3 | | | Cash and Cash Equivalents at Beginning of Period | 13 |
| | 15 |
| | 14 |
| Cash and Cash Equivalents at Beginning of Period | 12 | | | 18 | | | 15 | | | Cash and Cash Equivalents at End of Period | $ | 15 |
| | $ | 13 |
| | $ | 15 |
| Cash and Cash Equivalents at End of Period | $ | 16 | | | $ | 12 | | | $ | 18 | | | | | | | | | | | | | | | | Supplemental disclosure of cash information | | | | | | Supplemental disclosure of cash information | | | Cash paid (received) for: | | | | | | | | Cash paid for: | | Cash paid for: | | | Interest, net of interest capitalized | $ | 252 |
| | $ | 252 |
| | $ | 244 |
| Interest, net of interest capitalized | $ | 315 | | | $ | 295 | | | $ | 283 | | | Income taxes | $ | (16 | ) | | $ | 6 |
| | $ | (53 | ) | Income taxes | $ | 14 | | | $ | 46 | | | $ | 0 | | | Supplemental disclosure of non-cash investing and financing activities | | | | | | Supplemental disclosure of non-cash investing and financing activities | | | Plant and equipment expenditures in accounts payable | $ | 191 |
| | $ | 232 |
| | $ | 150 |
| Plant and equipment expenditures in accounts payable | $ | 174 | | | $ | 192 | | | $ | 181 | |
See Combined Notes to Consolidated Financial Statements
DTE Electric Company Consolidated Statements of Changes in Shareholder's Equity | | | | | | | | | | | | | | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | | | | | | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | | | Common Stock | | | | Common Stock | | | | Shares | | Amount | | Total | | | Shares | | Amount | | Total | | (Dollars in millions, shares in thousands) | | | (Dollars in millions, shares in thousands) | | | Balance, December 31, 2014 | 138,632 |
| | $ | 1,386 |
| | $ | 2,400 |
| | $ | 1,436 |
| | $ | (26 | ) | | $ | 5,196 |
| | | Balance, December 31, 2017 | | Balance, December 31, 2017 | 138,632 | | | $ | 1,386 | | | $ | 2,920 | | | $ | 1,956 | | | $ | 3 | | | $ | 6,265 | | | Implementation of ASU 2016-01 | | Implementation of ASU 2016-01 | — | | | — | | | — | | | 3 | | | (3) | | | 0 | | | Net Income | — |
| | — |
| | — |
| | 544 |
| | — |
| | 544 |
| Net Income | — | | | — | | | — | | | 664 | | | — | | | 664 | | | Dividends declared on common stock | — |
| | — |
| | — |
| | (395 | ) | | — |
| | (395 | ) | Dividends declared on common stock | — | | | — | | | — | | | (461) | | | — | | | (461) | | | Transfer of benefit obligations, net of tax | — |
| | — |
| | — |
| | — |
| | 27 |
| | 27 |
| | | Net change in unrealized gains on investments, net of tax | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | | | Capital contribution by parent company | — |
| | — |
| | 300 |
| | — |
| | — |
| | 300 |
| Capital contribution by parent company | — | | | — | | | 325 | | | — | | | — | | | 325 | | | Balance, December 31, 2015 | 138,632 |
| | $ | 1,386 |
| | $ | 2,700 |
| | $ | 1,585 |
| | $ | 2 |
| | $ | 5,673 |
| | | Balance, December 31, 2018 | | Balance, December 31, 2018 | 138,632 | | | $ | 1,386 | | | $ | 3,245 | | | $ | 2,162 | | | $ | 0 | | | $ | 6,793 | | | | Net Income | — |
| | — |
| | — |
| | 622 |
| | — |
| | 622 |
| Net Income | — | | | — | | | — | | | 716 | | | — | | | 716 | | | Dividends declared on common stock | — |
| | — |
| | — |
| | (420 | ) | | — |
| | (420 | ) | Dividends declared on common stock | — | | | — | | | — | | | (494) | | | — | | | (494) | | | | Capital contribution by parent company | — |
| | — |
| | 120 |
| | — |
| | — |
| | 120 |
| Capital contribution by parent company | — | | | — | | | 180 | | | — | | | — | | | 180 | | | Balance, December 31, 2016 | 138,632 |
| | $ | 1,386 |
| | $ | 2,820 |
| | $ | 1,787 |
| | $ | 2 |
| | $ | 5,995 |
| | | Balance, December 31, 2019 | | Balance, December 31, 2019 | 138,632 | | | $ | 1,386 | | | $ | 3,425 | | | $ | 2,384 | | | $ | 0 | | | $ | 7,195 | | | | Net Income | — |
| | — |
| | — |
| | 601 |
| | — |
| | 601 |
| Net Income | — | | | — | | | — | | | 778 | | | — | | | 778 | | | Dividends declared on common stock | — |
| | — |
| | — |
| | (432 | ) | | — |
| | (432 | ) | Dividends declared on common stock | — | | | — | | | — | | | (539) | | | — | | | (539) | | | Net change in unrealized gains on investments, net of tax | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | | | Capital contribution by parent company | — |
| | — |
| | 100 |
| | — |
| | — |
| | 100 |
| Capital contribution by parent company | — | | | — | | | 636 | | | — | | | — | | | 636 | | | Balance, December 31, 2017 | 138,632 |
| | $ | 1,386 |
| | $ | 2,920 |
| | $ | 1,956 |
| | $ | 3 |
| | $ | 6,265 |
| | | Balance, December 31, 2020 | | Balance, December 31, 2020 | 138,632 | | | $ | 1,386 | | | $ | 4,061 | | | $ | 2,623 | | | $ | 0 | | | $ | 8,070 | |
See Combined Notes to Consolidated Financial Statements
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements
Index of Combined Notes to Consolidated Financial Statements The Combined Notes to Consolidated Financial Statements are a combined presentation for DTE Energy and DTE Electric. The following list indicates the Registrant(s) to which each note applies: | | | | | | | | | | | | | | | | Note 1 | | Organization and Basis of Presentation | | DTE Energy and DTE Electric | | Note 2 | | Significant Accounting Policies | | DTE Energy and DTE Electric | | Note 3 | | New Accounting Pronouncements | | DTE Energy and DTE Electric | | Note 4 | | Acquisitions and Dispositions | | DTE Energy | | Note 5 | | Revenue | | DTE Energy and DTE Electric | | Note 6 | | Goodwill | | DTE Energy | | Note 7 | | Property, Plant, and Equipment | | DTE Energy and DTE Electric | | Note 8 | | Jointly-Owned Utility Plant | | DTE Energy and DTE Electric | | Note 9 | | Asset Retirement Obligations | | DTE Energy and DTE Electric | | Note 10 | | Regulatory Matters | | DTE Energy and DTE Electric | | Note 11 | | Income Taxes | | DTE Energy and DTE Electric | | Note 12 | | Earnings Per Share | | DTE Energy | | Note 13 | | Fair Value | | DTE Energy and DTE Electric | | Note 14 | | Financial and Other Derivative Instruments | | DTE Energy and DTE Electric | | Note 15 | | Long-Term Debt | | DTE Energy and DTE Electric | | Note 16 | | Preferred and Preference Securities | | DTE Energy and DTE Electric | | Note 17 | | Short-Term Credit Arrangements and Borrowings | | DTE Energy and DTE Electric | | Note 18 | | Leases | | DTE Energy and DTE Electric | | Note 19 | | Commitments and Contingencies | | DTE Energy and DTE Electric | | Note 20 | | Nuclear Operations | | DTE Energy and DTE Electric | | Note 21 | | Retirement Benefits and Trusteed Assets | | DTE Energy and DTE Electric | | Note 22 | | Stock-Based Compensation | | DTE Energy and DTE Electric | | Note 23 | | Segment and Related Information | | DTE Energy | | Note 24 | | Related Party Transactions | | DTE Energy and DTE Electric | | Note 25 | | Supplementary Quarterly Financial Information (Unaudited) | | DTE Energy and DTE Electric | | | | | | Note 1 | | Organization and Basis of Presentation | | DTE Energy and DTE Electric | Note 2 | | Significant Accounting Policies | | DTE Energy and DTE Electric | Note 3 | | New Accounting Pronouncements | | DTE Energy and DTE Electric | Note 4 | | Acquisitions and Exit Activities | | DTE Energy | Note 5 | | Goodwill | | DTE Energy | Note 6 | | Property, Plant, and Equipment | | DTE Energy and DTE Electric | Note 7 | | Jointly-Owned Utility Plant | | DTE Energy and DTE Electric | Note 8 | | Asset Retirement Obligations | | DTE Energy and DTE Electric | Note 9 | | Regulatory Matters | | DTE Energy and DTE Electric | Note 10 | | Income Taxes | | DTE Energy and DTE Electric | Note 11 | | Earnings Per Share | | DTE Energy | Note 12 | | Fair Value | | DTE Energy and DTE Electric | Note 13 | | Financial and Other Derivative Instruments | | DTE Energy and DTE Electric | Note 14 | | Long-Term Debt | | DTE Energy and DTE Electric | Note 15 | | Preferred and Preference Securities | | DTE Energy and DTE Electric | Note 16 | | Short-Term Credit Arrangements and Borrowings | | DTE Energy and DTE Electric | Note 17 | | Capital and Operating Leases | | DTE Energy and DTE Electric | Note 18 | | Commitments and Contingencies | | DTE Energy and DTE Electric | Note 19 | | Nuclear Operations | | DTE Energy and DTE Electric | Note 20 | | Retirement Benefits and Trusteed Assets | | DTE Energy and DTE Electric | Note 21 | | Stock-Based Compensation | | DTE Energy and DTE Electric | Note 22 | | Segment and Related Information | | DTE Energy | Note 23 | | Related Party Transactions | | DTE Electric | Note 24 | | Supplementary Quarterly Financial Information (Unaudited) | | DTE Energy and DTE Electric |
NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION Corporate Structure DTE Energy owns the following businesses: •DTE Electric is a public utility engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million customers in southeastern Michigan; •DTE Gas is a public utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million customers throughout Michigan and the sale of storage and transportation capacity; and •Other businesses primarily involved in 1) services related to the gathering, transportation, and storage of natural gas pipelines, gathering, and storage;gas; 2) power and industrial projects; and 3) energy marketing and trading operations. DTE Electric and DTE Gas are regulated by the MPSC. Certain activities of DTE Electric and DTE Gas, as well as various other aspects of businesses under DTE Energy are regulated by the FERC. In addition, the Registrants are regulated by other federal and state regulatory agencies including the NRC, the EPA, the MDEQ,EGLE, and for DTE Energy, the CFTC.CFTC and CARB.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Basis of Presentation The accompanying Consolidated Financial Statements of the Registrants are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the Registrants' estimates. The information in these combined notes relates to each of the Registrants as noted in the Index of Combined Notes to Consolidated Financial Statements. However, DTE Electric does not make any representation as to information related solely to DTE Energy or the subsidiaries of DTE Energy other than itself. Certain prior year balances for the Registrants were reclassified to match the current year's Consolidated Financial Statements presentation. Principles of Consolidation The Registrants consolidate all majority-owned subsidiaries and investments in entities in which they have controlling influence. Non-majority owned investments are accounted for using the equity method when the Registrants are able to significantly influence the operating policies of the investee. When the Registrants do not influence the operating policies of an investee, the equity investment is valued at cost method is used.minus any impairments, if applicable. These Consolidated Financial Statements also reflect the Registrants' proportionate interests in certain jointly-owned utility plants. The Registrants eliminate all intercompany balances and transactions. The Registrants evaluate whether an entity is a VIE whenever reconsideration events occur. The Registrants consolidate VIEs for which they are the primary beneficiary. If a Registrant is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, a Registrant considers all relevant facts and circumstances, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE. The Registrants perform ongoing reassessments of all VIEs to determine if the primary beneficiary status has changed. Legal entities within DTE Energy's Power and Industrial Projects segment enter into long-term contractual arrangements with customers to supply energy-related products or services. The entities are generally designed to pass-through the commodity risk associated with these contracts to the customers, with DTE Energy retaining operational and customer default risk. These entities generally are VIEs and consolidated when DTE Energy is the primary beneficiary. In addition, DTE Energy has interests in certain VIEs through which control of all significant activities is shared with partners, and therefore are generally accounted for under the equity method. DTE Energy currently owns a 55%an 85% interest in SGG, which owns and operates midstream natural gas assets. SGG has contracts through which certain construction risk iswas designed to pass-through to the customers, with DTE Energy retaining operational and customer default risk. SGG is a VIE with DTE Energy as the primary beneficiary. See Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities," for more information. The Registrants holdhave variable interests in NEXUS, including awhich include DTE Energy's 50% ownership interest.interest and DTE Electric's transportation services contract. NEXUS is a joint venture which is in the process of constructingowns a 255-mile256-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers. NEXUS also owns Generation Pipeline, LLC, a 25-mile regulated pipeline system located in northern Ohio, which was acquired in September 2019. NEXUS is a VIE as it has insufficient equity at risk to finance its activities. The Registrants are not the primary beneficiaries, as the power to direct significant activities is shared between the owners of the equity interests. DTE Energy accounts for its ownership interest in NEXUS under the equity method. The Registrants hold ownership interests in certain limited partnerships. The limited partnerships include investment funds which support regional development and economic growth, as well as,and an operational business providing energy-related products. These entities are generally VIEs as a result of certain characteristics of the limited partnership voting rights. The ownership interests are accounted for under the equity method as the Registrants are not the primary beneficiaries.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
DTE Energy has variable interests in VIEs through certain of its long-term purchase and sale contracts. DTE Electric has variable interests in VIEs through certain of its long-term purchase contracts.contracts, including the transportation services contract with NEXUS. As of December 31, 2017,2020, the carrying amount of assets and liabilities in DTE Energy's Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase and sale contracts are predominantly related to working capital accounts and generally represent the amounts owed by or to DTE Energy for the deliveries associated with the current billing cycle under the contracts. As of December 31, 2017,2020, the carrying amount of assets and liabilities in DTE Electric's Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase contracts are predominantly related to working capital accounts and generally represent the amounts owed by DTE Electric for the deliveries associated with the current billing cycle under the contracts. The Registrants have not provided any significant form of financial support associated with these long-term contracts. There is no significant0 material potential exposure to loss as a result of DTE Energy's variable interests through these long-term purchase and sale contracts. In addition, there is no significant0 material potential exposure to loss as a result of DTE Electric's variable interests through these long-term purchase contracts. The maximum risk exposure for consolidated VIEs is reflected on the Registrants' Consolidated Statements of Financial Position and for DTE Energy, in Note 1819 to the Consolidated Financial Statements, "Commitments and Contingencies," related to the REF guarantees and indemnities. For non-consolidated VIEs, the maximum risk exposure of the Registrants is generally limited to their investment, notes receivable, future funding commitments, and amounts which DTE Energy has guaranteed. See Note 1819 to the Consolidated Financial Statements, "Commitments and Contingencies," for further discussion of the NEXUS guarantee arrangements. The following table summarizes the major Consolidated Statements of Financial Position items for consolidated VIEs as of December 31, 20172020 and 2016.2019. All assets and liabilities of a consolidated VIE are presented where it has been determined that a consolidated VIE has either (1) assets that can be used only to settle obligations of the VIE or (2) liabilities for which creditors do not have recourse to the general credit of the primary beneficiary. VIEs, in which DTE Energy holds a majority voting interest and is the primary beneficiary, that meet the definition of a business and whose assets can be used for purposes other than the settlement of the VIE's obligations have been excluded from the table below. Amounts for DTE Energy's consolidated VIEs are as follows: | | | | December 31, 2017 | | December 31, 2016 | | December 31, 2020 | | December 31, 2019 | | | SGG(a) | | Other | | Total | | SGG(a) | | Other | | Total | | SGG(a) | | Other | | Total | | SGG(a) | | Other | | Total | | | (In millions) | | (In millions) | | ASSETS | | | | | | | | | | | | ASSETS | | | Cash and cash equivalents | $ | 23 |
| | $ | 14 |
| | $ | 37 |
| | $ | 36 |
| | $ | 27 |
| | $ | 63 |
| Cash and cash equivalents | $ | 34 | | | $ | 20 | | | $ | 54 | | | $ | 16 | | | $ | 11 | | | $ | 27 | | | Restricted cash | — |
| | 8 |
| | 8 |
| | — |
| | 7 |
| | 7 |
| | | | Accounts receivable | 11 |
| | 42 |
| | 53 |
| | 8 |
| | 34 |
| | 42 |
| Accounts receivable | 8 | | | 28 | | | 36 | | | 8 | | | 19 | | | 27 | | | Inventories | 3 |
| | 114 |
| | 117 |
| | 3 |
| | 112 |
| | 115 |
| Inventories | 0 | | | 107 | | | 107 | | | 0 | | | 74 | | | 74 | | | Property, plant, and equipment, net | 400 |
| | 75 |
| | 475 |
| | 398 |
| | 76 |
| | 474 |
| Property, plant, and equipment, net | 402 | | | 23 | | | 425 | | | 410 | | | 33 | | | 443 | | | Goodwill | 25 |
| | — |
| | 25 |
| | 17 |
| | — |
| | 17 |
| Goodwill | 25 | | | 0 | | | 25 | | | 25 | | | 0 | | | 25 | | | Intangible assets | 572 |
| | — |
| | 572 |
| | 586 |
| | — |
| | 586 |
| Intangible assets | 527 | | | 0 | | | 527 | | | 542 | | | 0 | | | 542 | | | Other current and long-term assets | 4 |
| | — |
| | 4 |
| | 1 |
| | 1 |
| | 2 |
| Other current and long-term assets | 2 | | | 33 | | | 35 | | | 2 | | | 0 | | | 2 | | | | $ | 1,038 |
| | $ | 253 |
| | $ | 1,291 |
| | $ | 1,049 |
| | $ | 257 |
| | $ | 1,306 |
| | $ | 998 | | | $ | 211 | | | $ | 1,209 | | | $ | 1,003 | | | $ | 137 | | | $ | 1,140 | | | | | | | | | | | | | | | | | | | | | | | | | | | | LIABILITIES | | | | | | | | | | | | LIABILITIES | | | Accounts payable and accrued current liabilities | $ | 26 |
| | $ | 47 |
| | $ | 73 |
| | $ | 19 |
| | $ | 32 |
| | $ | 51 |
| Accounts payable and accrued current liabilities | $ | 0 | | | $ | 22 | | | $ | 22 | | | $ | 2 | | | $ | 13 | | | $ | 15 | | | Current portion long-term debt, including capital leases | — |
| | 4 |
| | 4 |
| | — |
| | 5 |
| | 5 |
| | | Mortgage bonds, notes, and other | — |
| | 1 |
| | 1 |
| | — |
| | 5 |
| | 5 |
| | | Short-term borrowings | | Short-term borrowings | 0 | | | 38 | | | 38 | | | 0 | | | 0 | | | 0 | | | | Other current and long-term liabilities | 1 |
| | 16 |
| | 17 |
| | 2 |
| | 15 |
| | 17 |
| Other current and long-term liabilities | 7 | | | 4 | | | 11 | | | 7 | | | 7 | | | 14 | | | | $ | 27 |
| | $ | 68 |
| | $ | 95 |
| | $ | 21 |
| | $ | 57 |
| | $ | 78 |
| | $ | 7 | | | $ | 64 | | | $ | 71 | | | $ | 9 | | | $ | 20 | | | $ | 29 | |
| | (a) | Amounts shown are 100% of SGG's assets and liabilities, of which DTE Energy owns 55%. |
(a)Amounts shown are 100% of SGG's assets and liabilities, of which DTE Energy owns 85% at December 31, 2020 and 2019.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Amounts for DTE Energy's non-consolidated VIEs are as follows: | | | | | | | | December 31, | | | December 31, 2017 | | December 31, 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Investments in equity method investees | $ | 811 |
| | $ | 509 |
| Investments in equity method investees | $ | 1,507 | | | $ | 1,503 | | | Notes receivable | $ | 17 |
| | $ | 15 |
| Notes receivable | $ | 47 | | | $ | 21 | | | Future funding commitments | $ | 598 |
| | $ | 692 |
| Future funding commitments | $ | 26 | | | $ | 63 | |
Equity Method Investments Investments in non-consolidated affiliates that are not controlled by the Registrants, but over which they have significant influence, are accounted for using the equity method. Certain of the equity method investees are also considered VIEs and disclosed in the non-consolidated VIEs table above. At December 31, 20172020 and 2016,2019, DTE Energy's share of the underlying equity in the net assets of the investees exceeded the carrying amounts of Investments in equity method investees by $72$80 million and $73$74 million, respectively. The difference is being amortized over the life of the underlying assets. As of December 31, 2020 and 2019, DTE Energy's consolidated retained earnings balance includes undistributed earnings from equity method investments of $109 million and $129 million, respectively. DTE Energy equity method investees are described below: | | | | | Investments | | % Owned | | | Investments | | % Owned | | | Segment | | 2017 | | 2016 | | 2017 | | 2016 | | Description | Segment | | 2020 | | 2019 | | 2020 | | 2019 | | Description | | | | (In millions) | | | | (In millions) | | | | | | | | Significant Equity Method Investees | | | | | | Significant Equity Method Investees | | | Gas Storage and Pipelines | | | | | | Gas Storage and Pipelines | | | NEXUS Pipeline | | $ | 640 |
| | $ | 322 |
| | 50% | | 50% | | A 255-mile pipeline under construction to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers | NEXUS Pipeline | | $ | 1,349 | | | $ | 1,345 | | | 50% | | 50% | | 256-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers. Also includes Generation Pipeline, a 25-mile pipeline located in northern Ohio | | Vector Pipeline | | 115 |
| | 100 |
| | 40% | | 40% | | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | Vector Pipeline | | 134 | | | 131 | | | 40% | | 40% | | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | | Millennium Pipeline | | 124 |
| | 116 |
| | 26% | | 26% | | 251-mile pipeline serving markets in the Northeast | Millennium Pipeline | | 208 | | | 209 | | | 26% | | 26% | | 263-mile pipeline serving markets in the Northeast | | | | 879 |
| | 538 |
| | | 1,691 | | | 1,685 | | | | Other Equity Method Investees | | | | | | Other Equity Method Investees | | | | | | | Other Segments | | 194 |
| | 214 |
| | Other Segments | | 177 | | | 177 | | | | | | $ | 1,073 |
| | $ | 752 |
| | | $ | 1,868 | | | $ | 1,862 | | |
The balances in Other Equity Method Investees are individually insignificant and are primarily from the Power and Industrial Projects segment. These investments are comprised of projects that deliver energy and utility-type products and services to an industrial customer,customers, sell electricity from renewable energy projects under long-term power purchase agreements, and produce and sell metallurgical coke. For further information by segment, see Note 2223 to the Consolidated Financial Statements, "Segment and Related Information."
The following table presents summarized financial information of subsidiaries not consolidated and 50 percent or less owned by DTE Energy. The amounts included in the table below represents 100% of the results of continuing operations of such entities accounted for under the equity method of accounting.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Summarized balance sheet data is as follows:
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | | (In millions) | | Current Assets | $ | 351 | | | $ | 374 | | | Non-current assets | $ | 5,235 | | | $ | 5,260 | | | Current Liabilities | $ | 319 | | | $ | 414 | | | Non-current liabilities | $ | 686 | | | $ | 698 | | | | | |
Summarized income statement data is as follows: | | | | | | | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues | $ | 1,227 | | | $ | 1,210 | | | $ | 883 | | | Operating Expenses | $ | 847 | | | $ | 853 | | | $ | 622 | | | | | | | | | Net Income | $ | 395 | | | $ | 313 | | | $ | 365 | | | | | | | | | | | | | |
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES Revenues
The Registrants' revenues from the sale and delivery of electricity, and DTE Energy's revenues from the sale, delivery, and storage of natural gas are recognized as services are provided. DTE Electric and DTE Gas record revenues for electricity and gas provided but unbilled at the end of each month. Rates for DTE Electric and DTE Gas include provisions to adjust billings for fluctuations in fuel and purchased power costs, cost of natural gas, and certain other costs. Revenues are adjusted for differences between actual costs subject to reconciliation and the amounts billed in current rates. Under or over recovered revenues related to these cost recovery mechanisms are included in Regulatory assets or liabilities on the Registrants' Consolidated Statements of Financial Position and are recovered or returned to customers through adjustments to the billing factors.
For further discussion of recovery mechanisms authorized by the MPSC, see Note 9 to the Consolidated Financial Statements, "Regulatory Matters."
DTE Energy's non-utility businesses recognize revenues as services are provided and products are delivered. For discussion of derivative contracts, see Note 13 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments."
Other Income Other income for the Registrants is recognized for non-operating income such as equity earnings of equity method investees, allowance for equity funds used during construction, contract services, and gains (losses) from trading securities.securities, primarily from those held in DTE Energy's rabbi trust. DTE Energy's Power and Industrial Projects segment also recognizes Other income in connection with the sale of membership interests in reduced emissions fuel facilities to investors. In exchange for the cash received, the investors will receive a portion of the economic attributes of the facilities, including income tax attributes. The transactions are not treated as a sale of membership interests for financial reporting purposes. Other income related to fixed non-refundable cash payments received from investors for which the earnings process is not contingent upon production of refined coal is recognized on a straight-line basis over the non-cancelable contract term as the economic benefit from the ownership of the facility is transferred to investors. Other income related to cash payments that is contingent upon production of refined coal is considered earned and recognized when the contingency regarding the timing and amount of payment is resolved, generally as refined coal is produced and tax credits are generated. The following is a summary of DTE Energy's Other income: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Income from REF entities | $ | 139 | | | $ | 130 | | | $ | 98 | | | Equity earnings of equity method investees | 132 | | | 111 | | | 132 | | Gains from rabbi trust securities(a) | 28 | | | 37 | | | 6 | | | Contract services | 28 | | | 29 | | | 51 | | | Allowance for equity funds used during construction | 25 | | | 24 | | | 28 | | | Gas Storage and Pipelines post-acquisition settlement | 20 | | | 0 | | | 0 | | | Other | 16 | | | 19 | | | 18 | | | $ | 388 | | | $ | 350 | | | $ | 333 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Equity earnings of equity method investees | $ | 102 |
| | $ | 68 |
| | $ | 66 |
| | Income from REF entities | 77 |
| | 75 |
| | 83 |
| | Gains from trading securities | 26 |
| | 15 |
| | 1 |
| | Allowance for equity funds used during construction | 23 |
| | 21 |
| | 21 |
| | Contract services | 19 |
| | 21 |
| | 27 |
| | Other | 21 |
| | 7 |
| | 11 |
| | | $ | 268 |
| | $ | 207 |
| | $ | 209 |
|
The following is a summary of DTE Electric's(a)Losses from rabbi trust securities are recorded separately to Other income:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Gains from trading securities allocated from DTE Energy | $ | 26 |
| | $ | 15 |
| | $ | 1 |
| | Contract services | 21 |
| | 20 |
| | 27 |
| | Allowance for equity funds used during construction | 18 |
| | 18 |
| | 20 |
| | Equity earnings of equity method investees | 1 |
| | 2 |
| | 2 |
| | Other | 11 |
| | 6 |
| | 10 |
| | | $ | 77 |
| | $ | 61 |
| | $ | 60 |
|
For informationexpenses on equity earnings of equity method investees by segment, see Note 22 to the Consolidated Financial Statements "Segment and Related Information."of Operations.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following is a summary of DTE Electric's Other income:
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | Gains from rabbi trust securities allocated from DTE Energy(a) | $ | 28 | | | $ | 37 | | | $ | 6 | | | Contract services | 28 | | | 32 | | | 51 | | | Allowance for equity funds used during construction | 23 | | | 22 | | | 19 | | | | | | | | | Other | 8 | | | 16 | | | 7 | | | $ | 87 | | | $ | 107 | | | $ | 83 | |
(a)Losses from rabbi trust securities are recorded separately to Other expenses on the Consolidated Statements of Operations. For information on equity earnings of equity method investees by segment, see Note 23 to the Consolidated Financial Statements, "Segment and Related Information." Accounting for ISO Transactions DTE Electric participates in the energy market through MISO. MISO requires that DTE Electric submit hourly day-ahead, real-time, and FTR bids and offers for energy at locations across the MISO region. DTE Electric accounts for MISO transactions on a net hourly basis in each of the day-ahead, real-time, and FTR markets and net transactions across all MISO energy market locations.markets. In any single hour, transactions in each of the MISO energy markets are netted based on MWh to determine if DTE Electric recordsis in a net sale or purchase position. Net purchases are recorded in Fuel, purchased power, and gas — utility and net sales are recorded in Operating Revenues — Utility operations on the Registrants' Consolidated Statements of Operations. The Energy Trading segment participates in the energy markets through various ISOs and RTOs. These markets require that Energy Trading submits hourly day-ahead, real-time bids and offers for energy at locations across each region. Energy Trading submits bids in the annual and monthly auction revenue rights and FTR auctions to the RTOs. Energy Trading accounts for these transactions on a net hourly basis for the day-ahead, real-time, and FTR markets. These transactions are related to trading contracts which, if derivatives, are presented on a net basis in Operating Revenues — Non-utility operations, and if non-derivatives, the realized gains and losses for sales are recorded in Operating Revenues — Non-utility operations and purchases are recorded in Fuel, purchased power, gas, and gas other — non-utility in the DTE Energy Consolidated Statements of Operations. DTE Electric and Energy Trading record accruals for future net purchases adjustments based on historical experience and reconcile accruals to actual costs when invoices are received from MISO and other ISOs and RTOs. Derivatives Energy Trading classifies derivative transactions as revenue or expense based on the intent of the transaction (buy or sell). Revenues are recorded on a gross or net basis within the income statement depending upon whether it represents a non-trading activity or trading activity, respectively. For additional information, refer to Note 14 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments". Changes in Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) is the change in common shareholders’ equity during a period from transactions and events from non-owner sources, including Net Income. The amounts recorded to Accumulated other comprehensive income (loss) for the RegistrantsDTE Energy include unrealized gains and losses on available-for-sale securities and changes in benefit obligations, consisting of deferred actuarial losses and prior service costs. The amounts recorded to Accumulated other comprehensive income (loss) relating solely to DTE Energy also includecosts, unrealized gains and losses from derivatives accounted for as cash flow hedges, DTE Energy's interest in other comprehensive income of equity investees which comprise the net unrealized gains and losses on investments, and foreign currency translation adjustments. ReferDTE Energy releases income tax effects from accumulated other comprehensive income when the circumstances upon which they are premised cease to Note 20 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets," regarding the transfer of a portion of DTE Electric benefit obligationsexist. Changes in 2015. The following table summarizes the changes in DTE Energy's Accumulated other comprehensive income (loss) by component(a) forare presented in DTE Energy's Consolidated Statements of Changes in Equity and DTE Electric's Consolidated Statements of Changes in Shareholder's Equity. For the yearsyear ended December 31, 2017 and 2016:2020, reclassifications out of Accumulated other comprehensive income (loss) were not material.
| | | | | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Derivatives | | Net Unrealized Gain (Loss) on Investments | | Benefit Obligations(b) | | Foreign Currency Translation | | Total | | | (In millions) | | Balance, December 31, 2015 | $ | (4 | ) | | $ | (4 | ) | | $ | (131 | ) | | $ | (6 | ) | | $ | (145 | ) | | Other comprehensive loss before reclassifications | — |
| | — |
| | (3 | ) | | — |
| | (3 | ) | | Amounts reclassified from Accumulated other comprehensive income | — |
| | 1 |
| | 14 |
| | — |
| | 15 |
| | Net current-period Other comprehensive income | — |
| | 1 |
|
| 11 |
|
| — |
|
| 12 |
| | Balance, December 31, 2016 | $ | (4 | ) | | $ | (3 | ) |
| $ | (120 | ) |
| $ | (6 | ) |
| $ | (133 | ) | | Other comprehensive income (loss) before reclassifications | — |
| | 1 |
| | (3 | ) | | 1 |
| | (1 | ) | | Amounts reclassified from Accumulated other comprehensive income | 1 |
| | — |
| | 13 |
| | — |
| | 14 |
| | Net current-period Other comprehensive income | 1 |
| | 1 |
|
| 10 |
|
| 1 |
|
| 13 |
| | Balance, December 31, 2017 | $ | (3 | ) | | $ | (2 | ) |
| $ | (110 | ) |
| $ | (5 | ) |
| $ | (120 | ) |
| | (a) | All amounts are net of tax, except for Foreign currency translation. |
| | (b) | The amounts reclassified from Accumulated other comprehensive income (loss) are included in the computation of the net periodic pension and other postretirement benefit costs (see Note 20 to the Consolidated Financial Statements "Retirement Benefits and Trusteed Assets"). |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
On January 1, 2019, DTE Energy reclassified $25 million of stranded tax effects resulting from the TCJA from Accumulated other comprehensive income (loss) to Retained Earnings. The reclassification was recorded upon adoption of ASU No. 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. For the year ended December 31, 2019, reclassifications out of Accumulated other comprehensive income (loss) not relating to the adoption of this standard were not material.
The following table summarizes the changes in DTE Energy's Accumulated other comprehensive income (loss) by component(a) for the years ended December 31, 2020 and 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Derivatives | | | | Benefit Obligations(b) | | Foreign Currency Translation | | Total | | (In millions) | | Balance, December 31, 2018 | $ | (11) | | | | | $ | (102) | | | $ | (7) | | | $ | (120) | | | Other comprehensive income (loss) before reclassifications | (14) | | | | | (7) | | | 1 | | | (20) | | | Amounts reclassified from Accumulated other comprehensive income (loss) | 2 | | | | | 15 | | | 0 | | | 17 | | | Net current-period Other comprehensive income (loss) | (12) | | | | | 8 | | | 1 | | | (3) | | | Implementation of ASU 2018-02 | (2) | | | | | (23) | | | 0 | | | (25) | | | Balance, December 31, 2019 | $ | (25) | | | | | $ | (117) | | | $ | (6) | | | $ | (148) | | | Other comprehensive income (loss) before reclassifications | (3) | | | | | (2) | | | 1 | | | (4) | | | Amounts reclassified from Accumulated other comprehensive income (loss) | 5 | | | | | 10 | | | 0 | | | 15 | | | Net current-period Other comprehensive income | 2 | | | | | 8 | | | 1 | | | 11 | | | Balance, December 31, 2020 | $ | (23) | | | | | $ | (109) | | | $ | (5) | | | $ | (137) | |
(a)All amounts are net of tax, except for Foreign currency translation. (b)The amounts reclassified from Accumulated other comprehensive income (loss) are included in the computation of the net periodic pension and other postretirement benefit costs (see Note 21 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets"). Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents include cash on hand, cash in banks, and temporary investments purchased with remaining maturities of three months or less. Restricted cash consists of funds held in separate bank accounts to satisfy requirements of certain debtcontractual obligations and DTE Energy partnership operating agreements.guarantee performance. Restricted cash designated for interest and principal payments within one year is classified as a Current Asset. Financing Receivables Accounts receivableFinancing receivables are primarily composed of trade receivables, notes receivable, and unbilled revenue. The Registrants' Accounts receivableRegistrant's financing receivables are stated at net realizable value.
DTE Energy unbilled revenues of $944 million and $855 million at December 31, 2020 and 2019, respectively, include $260 million and $263 million of DTE Electric unbilled revenues, respectively, included in Customer Accounts receivable. The Registrants monitor the credit quality of their financing receivables on a regular basis by reviewing credit quality indicators and monitoring for trigger events, such as a credit rating downgrade or bankruptcy. Credit quality indicators include, but are not limited to, ratings by credit agencies where available, collection history, collateral, counterparty financial statements and other internal metrics. Utilizing such data, the Registrants have determined three internal grades of credit quality. Internal grade 1 includes financing receivables for counterparties where credit rating agencies have ranked the counterparty as investment grade. To the extent credit ratings are not available, the Registrants utilize other credit quality indicators to determine the level of risk associated with the financing receivable. Internal grade 1 may include financing receivables for counterparties for which credit rating agencies have ranked the counterparty as below investment grade, however, due to favorable information on other credit quality indicators, the Registrants have determined the risk level to be similar to that of an investment grade counterparty. Internal grade 2 includes financing receivables for counterparties with limited credit information and those with a higher risk profile based upon credit quality indicators. Internal grade 3 reflects financing receivables for which the counterparties have the greatest level of risk, including those in bankruptcy status.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following represents the Registrants' financing receivables by year of origination, classified by internal grade of credit risk. The related credit quality indicators and risk ratings utilized to develop the internal grades have been updated through December 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | Year of origination | | 2020 | | 2019 | | 2018 and prior | | Total | | 2020 and prior | | (In millions) | | Notes receivable | | | | | | | | | | | Internal grade 1 | $ | 0 | | | $ | 14 | | | $ | 10 | | | $ | 24 | | | $ | 14 | | | Internal grade 2 | 68 | | | 43 | | | 6 | | | 117 | | | 2 | | Total notes receivable(a) | $ | 68 | | | $ | 57 | | | $ | 16 | | | $ | 141 | | | $ | 16 | | | | | | | | | | | | | Net investment in leases | | | | | | | | | | | Net investment in leases, internal grade 1 | $ | 6 | | | $ | 0 | | | $ | 39 | | | $ | 45 | | | $ | 0 | | | Net investment in leases, internal grade 2 | 131 | | | 0 | | | 1 | | | 132 | | | 0 | | Total net investment in leases(a) | $ | 137 | | | $ | 0 | | | $ | 40 | | | $ | 177 | | | $ | 0 | |
(a)For DTE Energy, included in Current Assets — Other and Other Assets — Notes Receivable on the Consolidated Statements of Financial Position. For DTE Electric, included in Current Assets — Other and Other Assets — Other on the Consolidated Statements of Financial Position. The allowance for doubtful accounts on accounts receivable for DTE Electric and DTE Gasthe utility entities is generally calculated using thean aging approach that utilizes rates developed in reserve studies. DTE Electric and DTE Gas establish an allowance for uncollectible accounts based on historical losses and management’smanagement's assessment of existing and future economic conditions, customer trends and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the due date, which is typically in 21 days, however, factors such as assistance programs may delay aggressive action. DTE Electric and DTE Gas generally assess late payment fees on trade receivables based on past-due terms with customers. Customer accounts are written off when collection efforts have been exhausted. The time period for write-off is 150 days after service has been terminated. The customer allowance for doubtful accounts for DTE Energy'snon-utility businesses and other receivables for both utility and non-utility businesses is generally calculated based on specific review of probable future collections based on receivable balances generally in excess of 30 days. DTE Energy unbilled revenues Existing and future economic conditions, customer trends and other factors are also considered. Receivables are written off on a specific identification basis and determined based upon the specific circumstances of $1 billion and $814 million, including $290 million and $267 million of DTE Electric unbilled revenues, are included in Customer Accounts receivable at December 31, 2017 and 2016, respectively.
Notes Receivablethe associated receivable.
Notes receivable or financing receivables, for DTE Energy are primarily comprised of capitalfinance lease receivables and loans andthat are included in Notes receivableReceivable and Other current assets on DTE Energy’sEnergy's Consolidated Statements of Financial Position. Notes receivable or financing receivables, for DTE Electric are primarily comprised of loans. Notes receivable are typically considered delinquent when payment is not received for periods ranging from 60 to 120 days. The Registrants cease accruing interest (nonaccrual status), consider a note receivable impaired, and establish an allowance for credit loss when it is probable that all principal and interest amounts due will not be collected in accordance with the contractual terms of the note receivable. Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current. In determining the allowance for credit losses for notes receivable, the Registrants consider the historical payment experience and other factors that are expected to have a specific impact on the counterparty’scounterparty's ability to pay.pay including existing and future economic conditions. DTE Energy has off balance sheet exposure in the form of a revolving credit facility. Refer to Note 19, "Commitments and Contingencies," for additional information. In determining the level of credit reserve needed, DTE considers the likelihood of funding in addition to the other factors noted above. A reserve may be established when it is likely that funding will occur. Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to the contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following table presents a roll-forward of the activity for the Registrants' financing receivables credit loss reserves as of December 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | Trade accounts receivable | | Other receivables | | | | | | Total | | Trade and other accounts receivable | | (In millions) | | Beginning reserve balance, January 1, 2020 | $ | 87 | | | $ | 4 | | | | | | | $ | 91 | | | $ | 46 | | | Current period provision | 100 | | | 3 | | | | | | | 103 | | | 61 | | | | | | | | | | | | | | | Write-offs charged against allowance | (136) | | | (4) | | | | | | | (140) | | | (80) | | | Recoveries of amounts previously written off | 50 | | | 0 | | | | | | | 50 | | | 30 | | | Ending reserve balance, December 31, 2020 | $ | 101 | | | $ | 3 | | | | | | | $ | 104 | | | $ | 57 | |
The Registrants have been monitoring the impacts from the COVID-19 pandemic on our customers and various counterparties. For DTE Electric and DTE Gas, the allowance for doubtful accounts has been increased to account for additional risk related to the pandemic. As of December 31, 2020, the impact of these increases has not been material. In April 2020, the MPSC issued an order in response to the COVID-19 pandemic and authorized the deferral of certain uncollectible expense that is in excess of the amount used to set current rates. As a result of the order, the Registrants monitorbegan deferring uncollectible expense as Regulatory assets, including $2 million at DTE Gas for the credit ratingsyear ended December 31, 2020. For DTE Electric, deferrals recorded throughout the year were reversed and recorded to expense as a result of the counterparties fromMPSC approval of DTE Electric's one-time accounting application in December 2020. Refer to Note 10 to the Consolidated Financial Statements, "Regulatory Matters," for further information. For DTE Energy, uncollectible expense was $103 million, $111 million, and $140 million for the years ended December 31, 2020, 2019, and 2018, respectively, which they have notes receivable.is primarily comprised of the current period provision for allowance for doubtful accounts adjusted for regulatory deferrals at DTE Gas. For DTE Electric, uncollectible expense was $62 million, $65 million, and $85 million for the years ended December 31, 2020, 2019, and 2018, respectively, which is primarily comprised of the current period provision for allowance for doubtful accounts. There are 0 material amounts of past due financing receivables for the Registrants as of December 31, 2020. Inventories Inventory related to utility operations is generally valued at average cost. Inventory related toand non-utility operations is valued at the lower of cost or net realizable value.value, where cost is generally valued using average cost. DTE Gas' natural gas inventory of $29 million and $45$40 million as of December 31, 20172020 and 2016, respectively,2019 is determined using the last-in, first-out (LIFO) method. The replacement cost of gas in inventory exceeded the LIFO cost by $81$62 million and $132$49 million at December 31, 20172020 and 2016,2019, respectively. Property, Retirement and Maintenance, and Depreciation and Amortization Property is stated at cost and includes construction-related labor, materials, overheads, and AFUDC for utility property. The cost of utility properties retired is charged to accumulated depreciation. Expenditures for maintenance and repairs are charged to expense when incurred, except for outage-related maintenance repairs for Fermi 2.incurred. Utility property at DTE Electric and DTE Gas is depreciated over its estimated useful life using straight-line rates approved by the MPSC.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
DTE Energy's non-utility property is depreciated over its estimated useful life using the straight-line method. Depreciation and amortization expense also includes the amortization of certain regulatory assets for the Registrants. Approximately $15 million and $27 million of expenses related to Fermi 2 refueling outages were accrued at December 31, 2017 and 2016, respectively. Amounts are accrued on a pro-rata basis, generally over an 18-month period, that coincides with scheduled refueling outages at Fermi 2. This accrual of outage costs matches the regulatory recovery of these costs in rates set by the MPSC. See Note 9 to the Consolidated Financial Statements, "Regulatory Matters."
The cost of nuclear fuel is capitalized. The amortization of nuclear fuel is included within Fuel, purchased power, and gas — utility in the DTE Energy Consolidated Statements of Operations, and Fuel and purchased power in the DTE Electric Consolidated Statements of Operations, and is recorded using the units-of-production method. See Note 67 to the Consolidated Financial Statements, "Property, Plant, and Equipment."
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted future cash flows generated by the asset, an impairment loss is recognized resulting in the asset being written down to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Intangible Assets The Registrants have certain Intangible assets as shown below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Useful Lives | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | | | | (In millions) | | Intangible assets subject to amortization | | | | | | | | | | | | | | Customer relationships(a) | 40 years(b) | | $ | 770 |
| | $ | (24 | ) | | $ | 746 |
| | $ | 770 |
| | $ | (5 | ) | | $ | 765 |
| | Contract intangibles | 6 to 26 years | | 168 |
| | (72 | ) | | 96 |
| | 111 |
| | (65 | ) | | 46 |
| | | | | 938 |
| | (96 | ) | | 842 |
| | 881 |
| | (70 | ) | | 811 |
| | | | | | | | | | | | | | | | | DTE Electric renewable energy credits | (c) | | 24 |
| | — |
| | 24 |
| | 30 |
| | — |
| | 30 |
| | DTE Electric emission allowances | (c) | | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | | | | 25 |
| | — |
| | 25 |
| | 31 |
| | — |
| | 31 |
| | Long-term intangible assets | | | | | | | | | | | | | | | DTE Electric | | | $ | 25 |
| | $ | — |
| | $ | 25 |
| | $ | 31 |
| | $ | — |
| | $ | 31 |
| | DTE Energy | | | $ | 963 |
| | $ | (96 | ) | | $ | 867 |
| | $ | 912 |
| | $ | (70 | ) | | $ | 842 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Useful Lives | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | | | (In millions) | | Intangible assets subject to amortization | | | | | | | | | | | | | | Customer relationships | 25 to 40 years(a) | | $ | 2,252 | | | $ | (121) | | | $ | 2,131 | | | $ | 2,252 | | | $ | (66) | | | $ | 2,186 | | | Contract intangibles | 6 to 26 years | | 289 | | | (92) | | | 197 | | | 268 | | | (76) | | | 192 | | | | | 2,541 | | | (213) | | | 2,328 | | | 2,520 | | | (142) | | | 2,378 | | | | | | | | | | | | | | | | | DTE Electric renewable energy credits | (b) | | 8 | | | — | | | 8 | | | 15 | | | — | | | 15 | | | | | | | | | | | | | | | | | DTE Electric zonal resource credits | (c) | | 3 | | | — | | | 3 | | | 0 | | | — | | | 0 | | | DTE Electric Long-term intangible assets | | 11 | | | — | | | 11 | | | 15 | | | — | | | 15 | | | | | | | | | | | | | | | | | DTE Energy Long-term intangible assets | | $ | 2,552 | | | $ | (213) | | | $ | 2,339 | | | $ | 2,535 | | | $ | (142) | | | $ | 2,393 | |
| | (a) | In October 2016, DTE Energy acquired midstream natural gas assets that are part of the Gas Storage and Pipelines segment. The intangible assets recorded as a result of the acquisition pertain to existing customer relationships. See Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities," for additional information. |
| | (b) | The useful life of the customer relationship intangible assets is based on the number of years in which the assets are expected to economically contribute to the business. The expected economic benefit incorporates existing customer contracts and expected renewal rates based on the estimated volume and production lives of gas resources in the region. |
| | (c) | Emission allowances and renewable energy credits are charged to expense, using average cost, as the allowances and credits are consumed in the operation of the business. |
(a)The useful lives of the customer relationship intangible assets are based on the number of years in which the assets are expected to economically contribute to the business. The expected economic benefit incorporates existing customer contracts and expected renewal rates based on the estimated volume and production lives of gas resources in the region. (b)Renewable energy credits are charged to expense, using average cost, as the credits are consumed in the operation of the business. (c)Zonal resource credits are amortized on a straight-line basis over the period that they are in effect. The following table summarizes DTE Energy's estimated customer relationship and contract intangible amortization expense expected to be recognized during each year through 2022:2025: | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | | (In millions) | | Estimated amortization expense | $ | 26 |
| | $ | 26 |
| | $ | 25 |
| | $ | 25 |
| | $ | 25 |
|
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | (In millions) | | Estimated amortization expense | $ | 73 | | | $ | 73 | | | $ | 73 | | | $ | 73 | | | $ | 73 | |
DTE Energy amortizes customer relationship and contract intangible assets on a straight-line basis over the expected period of benefit. DTE Energy's Intangible assets amortization expense was $29$71 million in 2017, $162020, $33 million in 2016,2019, and $11$27 million in 2015.2018. Excise and Sales Taxes The Registrants record the billing of excise and sales taxes as a receivable with an offsetting payable to the applicable taxing authority, with no0 net impact on the Registrants’ Consolidated Statements of Operations. Deferred Debt Costs The costs related to the issuance of long-term debt are deferred and amortized over the life of each debt issue. The deferred amounts are included as a direct deduction from the carrying amount of each debt issue in Mortgage bonds, notes, and other and Junior subordinated debentures on DTE Energy's Consolidated Statements of Financial Position and in Mortgage bonds, notes, and other on DTE Electric's Consolidated Statements of Financial Position. In accordance with MPSC regulations applicable to DTE Energy’s electric and gas utilities, the unamortized discount, premium, and expense related to utility debt redeemed with a refinancing are amortized over the life of the replacement issue. Discount, premium, and expense on early redemptions of debt associated with DTE Energy's non-utility operations are charged to earnings.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Investments in Debt and Equity Securities The Registrants generally classifyrecord investments in debt and equity securities as either trading or available-for-sale and have recorded such investments at market value with unrealized gains or losses included in earnings or in Other comprehensive income or loss, respectively.earnings. Changes in the fair value of Fermi 2 nuclear decommissioning investments are recorded as adjustments to Regulatory assets or liabilities, due to a recovery mechanism from customers. The Registrants' equity investments are reviewed for impairment each reporting period. If the assessment indicates that thean impairment is other than temporary,exists, a loss is recognized resulting in the equity investment being written down to its estimated fair value. See Note 1213 of the Consolidated Financial Statements, "Fair Value." Government Grants
Grants are recognized when there is reasonable assurance that the grant will be received and that any conditions associated with the grant will be met. When grants are received related to Property, plant, and equipment, the Registrants reduce the cost of the assets on their Consolidated Statements of Financial Position, resulting in lower depreciation expense over the life of the associated asset. Grants received related to expenses are reflected as a reduction of the associated expense in the period in which the expense is incurred.
DTE Energy Foundation DTE Energy's charitable contributions to the DTE Energy Foundation were $43 million, $26$20 million and $12$22 million for the years ended December 31, 2017, 2016,2020 and 2015,December 31, 2018, respectively. There were 0 charitable contributions made to the DTE Energy Foundation for the year ended December 31, 2019. The DTE Energy Foundation is a non-consolidated not-for-profit private foundation, the purpose of which is to contribute to and assist charitable organizations. Other Accounting Policies See the following notes for other accounting policies impacting the Registrants’ Consolidated Financial Statements: | | | | | | | | | | Note | | Title | 85 | | Revenue | | 7 | | Property, Plant, and Equipment | | 9 | | Asset Retirement Obligations | 910 | | Regulatory Matters | 1011 | | Income Taxes | 1213 | | Fair Value | 1314 | | Financial and Other Derivative Instruments | 2018 | | Leases | | 21 | | Retirement Benefits and Trusteed Assets | 2122 | | Stock-Based Compensation |
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS Recently IssuedAdopted Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. The objectives of this ASU are to improve upon revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and timing of recognition. The core principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This ASU also requires expanded qualitative and quantitative disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. The standard is to be applied retrospectively. The Registrants will adopt the standard effective January 1, 2018 using the modified retrospective approach. The Registrants have substantially completed the assessment of the amended ASU's impact, on their Consolidated Financial Statements. The ASU will not significantly affect the Registrants' financial position or results of operations. The Registrants will continue to monitor the impact of the ASU on existing revenue recognition internal controls, policies, and procedures. Industry-related issues being vetted through the final stages of the American Institute of Certified Public Accountants' Power and Utilities Industry Task Force process, which are not expected to have a significant impact on the Registrants, will continue to be monitored. The ASU will result in additional disclosures for revenue compared to the current guidance. Accordingly, the Registrants are evaluating information that would be useful for users of the Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), a replacement of Leases (Topic 840). This guidance requires a lessee to account for leases as finance or operating leases, and include disclosure of key information about leasing arrangements. Both types of leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. This standard is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Registrants do not plan to early adopt the standard. A modified retrospective approach is required for leases existing or entered into after the beginning of the earliest comparative period in the Consolidated Financial Statements, with certain practical expedients permitted. The Registrants expect an increase in assets and liabilities, as well as additional disclosures, however, they are currently assessing the impact of this ASU on their Consolidated Financial Statements. This assessment includes monitoring unresolved utility industry implementation guidance. The Registrants have conducted outreach activities across their lines of business and have begun implementation of a third-party software tool that will assist with the initial adoption and ongoing compliance.
In June 2016, the FASB issued ASU No. 2016-13,Financial Instruments —- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments., as amended. The amendments in this update replacehave replaced the previous incurred loss impairment methodology in current generally accepted accounting principles with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasts, to informdevelop credit loss estimates. The ASU requires entities to use the new methodology to measure impairment of financial instruments, including accounts receivable, and may result in earlier recognition of credit losses than under previous generally accepted accounting principles. Entities willmust apply the new guidance as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Registrants adopted the standard effective January 1, 2020. The adoption of the ASU is effective fordid not have an impact on the Registrants beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Registrants are currently assessingRegistrants' financial position or results of operations. Additional required disclosures have been included in Note 2 to the impact of this standard on their Consolidated Financial Statements.Statements, “Significant Accounting Policies.” In MarchJanuary 2017, the FASB issued ASU No. 2017-07, Compensation — Retirement Benefits2017-04, Intangibles - Goodwill and Other (Topic 715)350): ImprovingSimplifying the PresentationTest for Goodwill Impairment. The guidance removes Step 2 of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require that an employer report the service cost component ingoodwill impairment test, which requires a hypothetical purchase price allocation to determine the same line item or items as other compensation costs arising from services rendered byamount of goodwill impairment. Under the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside income from operations. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. The standardASU, a goodwill impairment will be applied retrospectively for the presentationamount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The ASU is effective for the Registrants for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted.goodwill. The Registrants will adoptadopted the standardASU effective January 1, 2018.2020. The componentsadoption of net periodic benefit costs (credits) for pension benefits and other postretirement benefits are disclosed in Note 20 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets." The ASU willdid not have a significantan impact on the Registrants' Consolidated Financial Statements.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
In FebruaryAugust 2018, the FASB issued ASU No. 2018-02, Income Statement2018-13, Fair Value Measurements (Topic 820): Disclosure Framework - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive IncomeChanges to the Disclosure Requirements for Fair Value Measurement. The amendments in this update allowmodify the disclosure requirements on fair value measurements in Topic 820. The Registrants adopted the ASU effective January 1, 2020. The Registrants have updated Note 13 to the Consolidated Financial Statements, "Fair Value," to incorporate the disclosure changes required by the ASU. In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA.Cloud Computing Arrangement That Is a Service Contract. The amendments in this update alsoalign the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The Registrants adopted the standard effective January 1, 2020 using the prospective approach. The adoption of the ASU did not have an impact on the Registrants’ Consolidated Financial Statements. On a prospective basis, costs within the scope of this amendment will be accounted for consistent with any underlying service contracts. Capitalized implementation costs will be reflected in Other noncurrent assets on the Consolidated Statements of Financial Position and amortization of these costs will be reflected in Operation and maintenance within the Consolidated Statements of Operations. Cash flow activity will be reflected in the Other current and noncurrent assets and liabilities line within the Operating Activities section of the Consolidated Statements of Cash Flows. In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The Registrants adopted the ASU effective January 1, 2020. The Registrants have updated Note 21 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets," to incorporate the disclosure changes required by the ASU. In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The amendments in this update modify the requirements for determining whether fees paid to a decision maker or service provider are variable interests and require reporting entities to disclose theirconsider indirect interests held through related parties under common control on a proportional basis. The Registrants adopted the ASU effective January 1, 2020. The adoption of the ASU did not have a significant impact on the Registrants’ Consolidated Financial Statements. Recently Issued Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting policy for releasing income taxes by removing certain exceptions, and clarifying certain requirements regarding franchise taxes, goodwill, consolidated tax effects from accumulated other comprehensive income.expenses, and annual effective tax rate calculations. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2018,2020. The Registrants will adopt the ASU on its effective date using a modified retrospective approach. The ASU will not have a significant impact on the Registrants' Consolidated Financial Statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended. The amendments in this update provide optional expedients and interim periods therein. Early adoption is permitted.exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The optional expedients are effective for the modification of existing contracts or new arrangements executed March 12, 2020 through December 31, 2022. The Registrants are currently assessing the impact of this standard on their Consolidated Financial Statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The amendments in this update simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts indexed to and potentially settled in an entity's own equity. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2021, and interim periods therein. Early adoption is permitted. The ASU will not have a significant impact on the Registrants' Consolidated Financial Statements.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) NOTE 4 — ACQUISITIONS AND EXIT ACTIVITIESDISPOSITIONS Power and Industrial Projects Segment Acquisition On February 18, 2020, DTE Energy closed on the purchase of an 8 MW combined heat and power generation facility from South Jersey Industries (“SJI”) that provides electricity and hot and chilled water to a hotel and casino in Atlantic City, New Jersey. Direct transaction costs primarily related to advisory fees were immaterial and are included in Operation and maintenance in DTE Energy's Consolidated Statements of Operations. The fair value of consideration provided for the acquisition was approximately $95 million paid in cash. The acquisition was accounted for using the acquisition method of accounting for business combinations. Accordingly, the cost was allocated to the underlying net assets based on their respective fair values as shown below: | | | | | | | (In millions) | | Contract intangibles | $ | 17 | | | Property, plant, and equipment, net | 76 | | | Working capital | 2 | | | Total | $ | 95 | |
The intangible assets recorded pertain to existing customer contracts and were estimated by applying the income approach, based on discounted projected cash flows attributable to the existing agreements. The contract intangible assets are amortized on a straight-line basis over a period of 13 years, which is based on the number of years the assets are expected to economically contribute to the business. The pro forma financial information has not been presented for DTE Energy because the effects of the acquisition were not material to the Consolidated Statements of Operations. Electric Segment Acquisition Effective September 12, 2019, DTE Sustainable Generation closed on the purchase of 89 MW of renewable energy projects located in Michigan from Heritage Sustainable Energy in support of DTE Energy's renewable energy goals. Direct transaction costs primarily related to advisory fees were immaterial and were included in Operation and maintenance in DTE Energy's Consolidated Statements of Operations for the period incurred. The fair value of consideration provided for the acquisition was approximately $175 million, paid in cash. The acquisition was accounted for using the acquisition method of accounting for business combinations. Accordingly, the cost was allocated to the underlying net assets based on their respective fair values as shown below: | | | | | | | (In millions) | | Contract intangibles | $ | 109 | | | Property, plant, and equipment, net | 60 | | | Working capital | 6 | | | Total | $ | 175 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The intangible assets recorded pertain to existing customer contracts and were estimated by applying the income approach, based on discounted projected cash flows attributable to the existing agreements. The contract intangible assets are amortized on a straight-line basis with useful lives ranging from 11 years to 13 years, which is based on the remaining number of years the assets are expected to economically contribute to the business. The pro forma financial information has not been presented for DTE Energy because the effects of the acquisition were not material to the Consolidated Statements of Operations. In conjunction with the above acquisition, DTE Sustainable Generation closed on a purchase and sale agreement with Heritage Sustainable Energy in January 2020 to acquire an additional renewable energy project for approximately $33 million paid in cash. The acquired projects are non-utility operations and related revenues are classified accordingly as Operating Revenues - Non-utility operations within DTE Energy's Consolidated Statements of Operations and the Electric segment results of operations. Refer to Note 23 to the Consolidated Financial Statements, "Segment and Related Information." Gas Storage and Pipelines Segment Acquisition Effective October 1, 2016,On December 4, 2019, DTE Energy closed on the purchase of midstream natural gas assets in support of theits strategy to continue to grow and earn competitive returns for shareholders. DTE Energy purchased 100%100 percent of AGS,M5 Louisiana Gathering, LLC and its wholly owned subsidiaries from Momentum Midstream and Indigo Natural Resources. The acquisition includes the Blue Union and LEAP assets which provide natural gas gathering and other midstream services to producers located primarily in PennsylvaniaLouisiana. The acquired assets are part of DTE Energy's non-utility Gas Storage and West Virginia, and 40%Pipelines segment.
The fair value of SGG, located in West Virginia, from M3 Midstream. In addition, DTE Energy purchased 15% of SGG from Vega Energy Partners, resulting in 55% total ownership of SGG by DTE Energy. Consideration transferredthe consideration provided for the entities acquired was approximately $1.2$2.74 billion and included $2.36 billion paid in cash and the assumption of SGG debt of $204 million. The $204an estimated $380 million of debtcontingent consideration to be paid upon completion of the LEAP gathering pipeline. A liability for the contingent consideration payment was comprisedrecorded upon acquisition and adjusted each period for accretion. Refer to the Acquisition related deferred payment line in the Consolidated Statements of DTE Energy's 55% interest in SGGFinancial Position for the liability balance for the respective reporting periods. Accretion expense of $112$5 million and 45% related to noncontrolling interest partners$1 million was recorded for the years ended December 31, 2020 and 2019, respectively. In July 2020, the LEAP gathering pipeline achieved the final milestone of $92 million. its construction and consideration of $385 million was paid on July 27, 2020 in 2 equal installments.
The acquisition was financed through the issuance of Equity Units, common stock, and Senior Notes. These entities are part of DTE Energy's Gas Storage and Pipelines segment which owns and manages a network of natural gas gathering, transmission, and storage facilities servicing the Midwest, Ontario, and Northeast markets. SGG has been deemed to be a VIE, and DTE Energy is the primary beneficiary. Thus, SGG's assets and liabilities are included in DTE Energy's Consolidated Statements of Financial Position. See Note 115 to the Consolidated Financial Statements, "Organization and Basis of Presentation,"Long-Term Debt," for more information. DTE Energy applied purchaseThe acquisition was accounted for using the acquisition method of accounting to the acquired entities.for business combinations. The excess purchase price over the fair value of net assets acquired was classified as goodwill. September 30, 2017The factors contributing to the recognition of goodwill were based on various strategic benefits that are expected to be realized from the Blue Union and LEAP acquisition. The acquisition will provide DTE Energy with a platform for midstream growth and access to further investment opportunities in the Haynesville basin. The goodwill is being deducted for income tax purposes.
December 3, 2020 marked the expiration of the one-year period from the acquisition to revise the fair value of assets acquired and liabilities assumed. As a result theof purchase accounting adjustments through September 30, 2017 contributedDecember 3, 2020, approximately $7$2 million of additional goodwill.goodwill was recognized. The factors contributingpurchase price is no longer subject to the recognitionresolution of goodwill were based on various strategic benefits that are expected to be realized from the AGSany indemnification claims and SGG acquisition. The acquisition provides DTE Energy with a platform for midstream growthall cash consideration paid and access to further investment opportunitiesheld in the Appalachian basin, an additional connection to the NEXUS Pipeline which should drive incremental volumes on the NEXUS Pipeline, and a new set of producer relationships that may lead to more partnering opportunities. The goodwill is expected to be deductible for income tax purposes.escrow has been released.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The final allocation of the purchase price was based on estimated fair values of the AGSBlue Union and SGGLEAP assets acquired and liabilities assumed at the date of acquisition, October 1, 2016.December 4, 2019. The components of the final purchase price allocation, inclusive of purchase accounting adjustments, are as follows: | | | | | | | (In millions) | | Assets | | | Cash | $ | 83 |
| | Accounts receivable | 24 |
| | Inventory | 6 |
| | Property, plant, and equipment, net | 719 |
| | Goodwill | 275 |
| | Customer relationship intangibles | 770 |
| | Other current assets | 1 |
| | | $ | 1,878 |
| | Liabilities | | | Accounts payable | $ | 19 |
| | Other current liabilities | 11 |
| | Long-term debt | 204 |
| | Other long-term liabilities | 20 |
| | | $ | 254 |
| | Less: Noncontrolling interest | 392 |
| | Total cash consideration | $ | 1,232 |
|
| | | | | | | (In millions) | | Assets | | | Cash | $ | 62 | | | Accounts receivable | 31 | | | | | Property, plant, and equipment, net | 1,034 | | | Goodwill | 173 | | | Customer relationship intangibles | 1,473 | | | Other current assets | 1 | | | $ | 2,774 | | | Liabilities | | | Accounts payable | $ | 26 | | | Acquisition related deferred payment | 380 | | | Other current liabilities | 2 | | | Asset retirement obligations | 9 | | | $ | 417 | | | Total cash consideration | $ | 2,357 | | | |
The intangible assets recorded as a result of the acquisition pertain to existing customer relationships, which were valued at approximately $770 million$1.47 billion as of the acquisition date. The fair value of the intangible assets acquired was estimated by applying the income approach. The income approach wasis based upon discounted projected future cash flows attributable to the existing contracts and agreements. The fair value measurement wasis based on significant unobservable inputs, including management estimates and assumptions, and thus represents a Level 3 measurement, pursuant to the applicable accounting guidance. Key estimates and inputs includedinclude revenue and expense projections and discount rates based on the risks associated with the entities. The intangible assets are amortized on a straight-line basis over a period of 40 years, which is based on the number of years the assets are expected to economically contribute to the business. The expected economic benefit incorporates existing customer contracts with a weighted-averageweighted average amortization life of 1013 years and expected renewal rates, based on the estimated volume and production lives of gas resources in the region. The fair value of the noncontrolling interest in the table above was derived based on the purchase price DTE Energy paid for the 55% interest in SGG.
DTE Energy evaluated pre-acquisition contingencies relating See Note 2 to the purchase that existed as of the acquisition date. Based on the evaluation, DTE Energy determined that $30 million of certain pre-acquisition contingencies, related to repairing existing rights-of-way, were probable in nature and estimable as of the acquisition date. Accordingly, DTE Energy recorded its best estimatesConsolidated Financial Statements, "Significant Accounting Policies," for these contingencies as part of purchase accounting, which are included in the Other current and long-term liabilities in the purchase price allocation table above.more information.
DTE Energy incurred $15$18 million of direct transaction costs for the year ended December 31, 2016.2019. These costs were primarily related to advisory fees and included in Operation and maintenance in DTE Energy's 20162019 Consolidated Statements of Operations. Additionally, DTE Energy incurred $49 million of issuance costs related to the acquisition financing, of which $10 million were included in Mortgage bonds, notes, and other, and $39 million were included in Common Stock in DTE Energy's Consolidated Statements of Financial Position. DTE Energy's 20162019 Consolidated Statements of Operations included Operating Revenues — Non-utility operations of $39$15 million and Net Income of $4$3 million associated with the acquired entities for the three-monthone-month period following the acquisition date, excluding the $15$18 million transaction costs described above. The pro forma financial information was not presented for DTE Energy because the effects of the acquisition were not material to the Consolidated Statements of Operations. DTE Midstream Spin-off
On October 27, 2020, DTE Energy announced that its Board of Directors has authorized management to pursue a plan to spin-off the DTE Midstream business. DTE Energy expects to complete the separation by mid-year 2021, subject to final approval by its Board of Directors, the Form 10 registration statement being declared effective by the Securities and Exchange Commission, regulatory approvals, and satisfaction of other conditions. DTE Energy shareholder approval is not required to effect the separation transaction. Upon closing of the transaction, DTE Energy shareholders will own shares of both DTE Energy and the new midstream company ("DT Midstream"). The planned separation transaction is intended to be a tax-free spin-off for DTE Energy and its shareholders for U.S. federal income tax purposes. There can be no assurance that any separation transaction will ultimately occur or, if one does occur, of its terms or timing.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 5 — REVENUE
Exit ActivitiesSignificant Accounting Policy
OnUpon the adoption of Topic 606, revenue is measured based upon the consideration specified in a contract with a customer at the time when performance obligations are satisfied. Under Topic 606, a performance obligation is a promise in a contract to transfer a distinct good or service or a series of distinct goods or services to the customer. The Registrants recognize revenue when performance obligations are satisfied by transferring control over a product or service to a customer. The Registrants have determined control to be transferred when the product is delivered or the service is provided to the customer. For the years ended December 17, 2015, 31, 2020, 2019, and 2018, recognition of revenue for the Registrants subsequent to the adoption of Topic 606 is substantially similar in amount and approach to that prior to adoption.
Rates for DTE Electric and DTE Gas include provisions to adjust billings for fluctuations in fuel and purchased power costs, cost of natural gas, and certain other costs. Revenues are adjusted for differences between actual costs subject to reconciliation and the amounts billed in current rates. Under or over recovered revenues related to these cost recovery mechanisms are included in Regulatory assets or liabilities on the Registrants' Consolidated Statements of Financial Position and are recovered or returned to customers through adjustments to the billing factors. For discussion of derivative contracts, see Note 14 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments." Disaggregation of Revenue The following is a summary of revenues disaggregated by segment for DTE Energy: | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | | | (In millions) | Electric(a) | | | | | | | | | Residential | $ | 2,825 | | | $ | 2,427 | | | $ | 2,494 | | | | | Commercial | 1,739 | | | 1,795 | | | 1,794 | | | | | Industrial | 592 | | | 659 | | | 690 | | | | Other(b) | 364 | | | 348 | | | 320 | | | | Total Electric operating revenues(c) | $ | 5,520 | | | $ | 5,229 | | | $ | 5,298 | | | | | | | | | | | | | Gas | | | | | | | | | Gas sales | $ | 971 | | | $ | 1,043 | | | $ | 1,055 | | | | | End User Transportation | 218 | | | 219 | | | 232 | | | | | Intermediate Transportation | 79 | | | 78 | | | 58 | | | | Other(b) | 146 | | | 142 | | | 91 | | | | Total Gas operating revenues(d) | $ | 1,414 | | | $ | 1,482 | | | $ | 1,436 | | | | | | | | | | | | | Other segment operating revenues | | | | | | | | Gas Storage and Pipelines(e) | $ | 754 | | | $ | 501 | | | $ | 485 | | | | Power and Industrial Projects(f) | $ | 1,224 | | | $ | 1,560 | | | $ | 2,204 | | | | Energy Trading(g) | $ | 3,863 | | | $ | 4,610 | | | $ | 5,557 | | | |
(a)Revenues generally represent those of DTE Electric, except $14 million and $5 million of Other revenues related to DTE Sustainable Generation for the years ended December 31, 2020 and 2019, respectively. (b)Includes revenue adjustments related to various regulatory mechanisms. (c)Includes $26 million, $22 million, and $21 million under Alternative Revenue Programs and $22 million, $19 million, and $20 million of other revenues, which are both outside the scope of Topic 606, for the years ended December 31, 2020, 2019, and 2018, respectively. (d)Includes $10 million, $8 million, and $2 million under Alternative Revenue Programs and $8 million, $7 million, and $7 million of other revenues, which are both outside the scope of Topic 606, for the years ended December 31, 2020, 2019, and 2018, respectively. (e)Includes revenues outside the scope of Topic 606 primarily related to $9 million of contracts accounted for as leases for each of the years ended December 31, 2020 and 2019. (f)Includes revenues outside the scope of Topic 606 primarily related to $99 million, $121 million, and $125 million of contracts accounted for as leases for the years ended December 31, 2020, 2019, and 2018, respectively. (g)Includes revenues outside the scope of Topic 606 primarily related to $2.7 billion, $3.4 billion, and $4.5 billion of derivatives for the years ended December 31, 2020, 2019, and 2018, respectively.
DTE Energy announcedCompany — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Nature of Goods and Services The following is a description of principal activities, separated by reportable segments, from which DTE Energy generates revenue. For more detailed information about reportable segments, see Note 23 to the closureConsolidated Financial Statements, “Segment and Related Information.” The Registrants have contracts with customers which may contain more than one performance obligation. When more than one performance obligation exists in a contract, the consideration under the contract is allocated to the performance obligations based on the relative standalone selling price. DTE Energy generally determines standalone selling prices based on the prices charged to customers or the use of the Shenango coke battery plantadjusted market assessment approach. The adjusted market assessment approach involves the evaluation of the market in responsewhich DTE Energy sells goods or services and estimating the price that a customer in that market would be willing to pay. Under Topic 606, when a sharp downturncustomer simultaneously receives and consumes the product or service provided, revenue is considered to be recognized over time. Alternatively, if it is determined that the criteria for recognition of revenue over time is not met, the revenue is considered to be recognized at a point in time. Electric Electric consists principally of DTE Electric. Electric revenues are primarily comprised of the supply and delivery of electricity, and related capacity. Revenues are primarily associated with cancellable contracts, with the exception of certain long-term contracts with commercial and industrial customers. Revenues, including estimated unbilled amounts, are generally recognized over time based upon volumes delivered or through the passage of time ratably based upon providing a stand-ready service. The Registrants have determined that the above methods represent a faithful depiction of the transfer of control to the customer. Unbilled revenues are typically determined utilizing approved tariff rates and estimated meter volumes. Estimated unbilled amounts recognized in revenue are subject to adjustment in the North American steel industry. The plant, which was includedfollowing reporting period as actual volumes by customer class are known. Revenues are typically subject to tariff rates based upon customer class and type of service and are billed and received monthly. Tariff rates are determined by the MPSC on a per unit or monthly basis. Gas Gas consists principally of DTE Gas. Gas revenues are primarily comprised of the supply and delivery of natural gas, and other services including storage, transportation, and appliance maintenance. Revenues are primarily associated with cancellable contracts with the exception of certain long-term contracts with commercial and industrial customers. Revenues, including estimated unbilled amounts, are generally recognized over time based upon volumes delivered or through the passage of time ratably based upon providing a stand-ready service. DTE Energy has determined that the above methods represent a faithful depiction of the transfer of control to the customer. Unbilled revenues are typically determined using both estimated meter volumes and estimated usage based upon the number of unbilled days and historical temperatures. Estimated unbilled amounts recognized in revenue are subject to adjustment in the following reporting period as actual volumes by customer class and service type are known. Revenues are typically subject to tariff rates or other rates subject to regulatory oversight and are billed and received monthly. Tariff rates are determined by the MPSC on a per unit or monthly basis. Gas Storage and Pipelines Gas Storage and Pipelines revenues generally consist of services related to the gathering, transportation, and storage of natural gas. Contracts are primarily long-term in nature. Revenues, including estimated unbilled amounts, are generally recognized over time based upon services provided or through the passage of time ratably based upon providing a stand-ready service. Unbilled amounts are generally determined using estimated volumes based on preliminary meter data and contracted rates and typically result in minor adjustments in the following reporting period. DTE Energy has determined that the above methods represent a faithful depiction of the transfer of control to the customer. Revenues are typically billed and received monthly. Pricing for such revenues may consist of demand rates, commodity rates, transportation rates, and other associated fees. Consideration may consist of both fixed and variable components and may be subject to minimum volume commitments. Generally, uncertainties in the variable consideration components are resolved and revenues are known at the time of recognition.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Power and Industrial Projects Power and Industrial Projects segment, is located in Pittsburgh, PA. As a resultrevenues include contracts accounted for as leases which are outside of the closure, DTE Energy recorded a one-time pre-tax non-cash impairment chargescope of $111 million. The charge included $96 million to fully impairTopic 606. For performance obligations within the long-lived assets, employee severance expenses related toscope of Topic 606, the workforce reductiontiming of approximately 170 employees for $3 million, and other expenses, including write downs of inventory, of $12 million. DTE Energy's coke production has been shifted to a larger, more efficient coke battery plant inrevenue recognition is dependent upon when control over the associated product or service is transferred. Revenues at Power and Industrial Projects, segment. Productionwithin the scope of Topic 606, generally consist of sales of refined coal, coal, blast furnace coke, coke oven gas, electricity, equipment maintenance services, and other energy related products and services. Revenues, including estimated unbilled amounts, for the sale of blast furnace coke are generally recognized at a point in time when the product is delivered, which represents the transfer of control to the customer. Other revenues are generally recognized over time based upon services provided or through the passage of time ratably based upon providing a stand-ready service. DTE Energy has determined that the above methods represent a faithful depiction of the transfer of control to the customer. Market based pricing structures exist in such contracts including adjustments for consumer price or other indices. Consideration may consist of both fixed and variable components. Generally, uncertainties in the variable consideration components are resolved and revenues are known at the time of recognition. Billing terms vary and are generally monthly with payment terms typically within 30 days following billing. Energy Trading Energy Trading revenues consist primarily of derivative contracts outside of the scope of Topic 606. For performance obligations within the scope of Topic 606, the timing of revenue recognition is dependent upon when control over the associated product or service is transferred. Revenues, including estimated unbilled amounts, within the scope of Topic 606 arising from the Shenango coke battery plant ceasedsale of natural gas, electricity, power capacity, and other energy related products are generally recognized over time based upon volumes delivered or through the passage of time ratably based upon providing a stand-ready service. DTE Energy has determined that the above methods represent a faithful depiction of the transfer of control to the customer. Revenues are known at the time of recognition. Payment for the aforementioned revenues is generally due from customers in January 2016.the month following delivery. ARevenues associated with RECs are recognized at a point in time when control of the RECs are transferred to the customer which is deemed to be when the subject RECs are entered for transfer to the customer in the applicable regulatory tracking system. Revenues associated with RECs under a wholesale full requirements power contract are deferred until control has been transferred. The deferred revenues represent a contract liability for which payment has been received and the amounts have been estimated using the adjusted market assessment approach. With the exception of RECs, generally all other performance obligations associated with wholesale full requirements power contracts are satisfied over time in conjunction with the delivery of power. At the time power is delivered, DTE Energy may not have control over the RECs as the RECs are not self-generated and may not yet have been procured resulting in deferred revenues.
Deferred Revenue The following is a summary of the charges in the Consolidated Statements of Operations resulting from DTE Energy's exit activities is shown below:deferred revenue activity: | | | | | | | DTE Energy | | (In millions) | | Beginning Balance, January 1, 2020 | $ | 75 | | | Increases due to cash received or receivable, excluding amounts recognized as revenue during the period | 55 | | | Revenue recognized that was included in the deferred revenue balance at the beginning of the period | (43) | | | Ending Balance, December 31, 2020 | $ | 87 | |
| | | | | | | 2015 | | | (In millions) | | Fuel, purchased power, and gas — non-utility | $ | 5 |
| | Operation and maintenance | 10 |
| | Asset (gains) losses and impairments, net | 96 |
| | Total exit activity charges | $ | 111 |
|
As of December 31, 2017,The deferred revenues at DTE Energy had approximately $1 million accruedgenerally represent amounts paid by or receivable from customers for which the associated performance obligation has not yet been satisfied.
Deferred revenues include amounts associated with REC performance obligations under certain wholesale full requirements power contracts. Deferred revenues associated with RECs are recognized as revenue when control of the RECs has transferred. Other performance obligations associated with deferred revenues include providing products and services related to customer prepayments. Deferred revenues associated with these exit activitiesproducts and expects future cash payments of this remaining balanceservices are recognized when control has transferred to the customer.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following table represents deferred revenue amounts for DTE Energy that are expected to be maderecognized as revenue in 2018. DTE Energy doesfuture periods: | | | | | | | DTE Energy | | (In millions) | | 2021 | $ | 59 | | | 2022 | 7 | | | 2023 | 3 | | | 2024 | 3 | | | 2025 | 7 | | | 2026 and thereafter | 8 | | | $ | 87 | |
Transaction Price Allocated to the Remaining Performance Obligations In accordance with optional exemptions available under Topic 606, the Registrants did not anticipate incurring significant additional expenses, including required environmental remediation costs, in connectiondisclose the value of unsatisfied performance obligations for (1) contracts with an original expected length of one year or less, (2) with the closure.exception of fixed consideration, contracts for which revenue is recognized at the amount to which the Registrants have the right to invoice for goods provided and services performed, and (3) contracts for which variable consideration relates entirely to an unsatisfied performance obligation.
Such contracts consist of varying types of performance obligations across the segments, including the supply and delivery of energy related products and services. Contracts with variable volumes and/or variable pricing, including those with pricing provisions tied to a consumer price or other index, have also been excluded as the related consideration under the contract is variable at inception of the contract. Contract lengths vary from cancellable to multi-year.
The Registrants expect to recognize revenue for the following amounts related to fixed consideration associated with remaining performance obligations in each of the future periods noted: | | | | | | | | | | | | | DTE Energy | | DTE Electric | | (In millions) | | 2021 | $ | 285 | | | $ | 8 | | | 2022 | 323 | | | 7 | | | 2023 | 263 | | | 7 | | | 2024 | 158 | | | 7 | | | 2025 | 113 | | | 1 | | | 2026 and thereafter | 501 | | | 0 | | | $ | 1,643 | | | $ | 30 | |
NOTE 56 — GOODWILL DTE Energy has goodwill resulting from business combinations. The following is the summary of change in the carrying amount of goodwill for the years ended December 31: | | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Balance as of January 1 | $ | 2,464 | | | $ | 2,293 | | | Goodwill attributable to Gas Storage and Pipelines 2019 acquisition of Blue Union and LEAP | 2 | | | 171 | | | Balance at December 31 | $ | 2,466 | | | $ | 2,464 | |
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Balance as of January 1 | $ | 2,286 |
| | $ | 2,018 |
| | Goodwill attributable to Gas Storage and Pipelines acquisition | 7 |
| | 268 |
| | Balance at December 31 | $ | 2,293 |
| | $ | 2,286 |
|
Refer to Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities," for additional information related to the acquisition.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 67 — PROPERTY, PLANT, AND EQUIPMENT The following is a summary of Property, plant, and equipment by classification as of December 31: | | | | | | | | | | | | | 2020 | | 2019 | | Property, plant, and equipment | (In millions) | | DTE Electric | | | | | Zero carbon generation | | | | | Nuclear | $ | 3,295 | | | $ | 3,022 | | | Renewables | 1,817 | | | 1,362 | | | Fossil and other generation | 8,031 | | | 7,644 | | | Distribution | 10,354 | | | 9,715 | | | Other | 2,674 | | | 2,536 | | | Total DTE Electric | 26,171 | | | 24,279 | | | DTE Gas | | | | | Distribution | 4,517 | | | 4,164 | | | Storage | 576 | | | 570 | | | Transmission and other | 1,341 | | | 1,244 | | | Total DTE Gas | 6,434 | | | 5,978 | | | Non-utility and other | | | | | Gas Storage and Pipelines | 3,981 | | | 3,524 | | | Power and Industrial Projects | 1,194 | | | 1,108 | | | Other | 217 | | | 183 | | | Non-utility and other | 5,392 | | | 4,815 | | | Total DTE Energy | 37,997 | | | 35,072 | | | Accumulated depreciation and amortization | | | | | DTE Electric | | | | | Zero carbon generation | | | | | Nuclear | (373) | | | (344) | | | Renewables | (295) | | | (243) | | | Fossil and other generation | (3,014) | | | (2,873) | | | Distribution | (2,686) | | | (2,553) | | | Other | (682) | | | (693) | | | Total DTE Electric | (7,050) | | | (6,706) | | | DTE Gas | | | | | Distribution | (1,215) | | | (1,334) | | | Storage | (146) | | | (172) | | | Transmission and other | (403) | | | (409) | | | Total DTE Gas | (1,764) | | | (1,915) | | | Non-utility and other | | | | | Gas Storage and Pipelines | (511) | | | (459) | | | Power and Industrial Projects | (619) | | | (604) | | | Other | (84) | | | (71) | | | Non-utility and other | (1,214) | | | (1,134) | | | Total DTE Energy | (10,028) | | | (9,755) | | | Net DTE Energy Property, plant, and equipment | $ | 27,969 | | | $ | 25,317 | | | Net DTE Electric Property, plant, and equipment | $ | 19,121 | | | $ | 17,573 | |
AFUDC and Capitalized Interest AFUDC represents the cost of financing construction projects for regulated businesses, including the estimated cost of debt and authorized return-on-equity. The debt component is recorded as a reduction to interest expense and the equity component is recorded as other income. Non-regulated businesses record capitalized interest as a reduction to interest expense.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) | | | | | | | | | | | 2017 | | 2016 | | Property, plant, and equipment | (In millions) | | DTE Electric | | | | | Generation | $ | 12,166 |
| | $ | 11,990 |
| | Distribution | 8,637 |
| | 8,134 |
| | Other | 2,169 |
| | 1,970 |
| | Total DTE Electric | 22,972 |
|
| 22,094 |
| | DTE Gas | | | | | Distribution | 3,523 |
| | 3,382 |
| | Storage | 533 |
| | 503 |
| | Transmission and other | 1,118 |
| | 925 |
| | Total DTE Gas | 5,174 |
| | 4,810 |
| | Non-utility and other | 3,278 |
| | 3,125 |
| | Total DTE Energy | 31,424 |
| | 30,029 |
| | Accumulated depreciation and amortization | | | | | DTE Electric | | | | | Generation | (4,403 | ) | | (4,364 | ) | | Distribution | (2,914 | ) | | (2,769 | ) | | Other | (667 | ) | | (588 | ) | | Total DTE Electric | (7,984 | ) | | (7,721 | ) | | DTE Gas | | | | | Distribution | (1,238 | ) | | (1,198 | ) | | Storage | (159 | ) | | (152 | ) | | Transmission and other | (384 | ) | | (370 | ) | | Total DTE Gas | (1,781 | ) | | (1,720 | ) | | Non-utility and other | (938 | ) | | (858 | ) | | Total DTE Energy | (10,703 | ) | | (10,299 | ) | | Net DTE Energy Property, plant, and equipment | $ | 20,721 |
| | $ | 19,730 |
| | Net DTE Electric Property, plant, and equipment | $ | 14,988 |
| | $ | 14,373 |
|
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Electric AFUDC | 5.47 | % | | 5.43 | % | | 5.41 | % | | DTE Gas AFUDC | 5.56 | % | | 5.56 | % | | 5.71 | % | | Non-regulated businesses capitalized interest | 3.90 | % | | 4.00 | % | | 4.00 | % |
The following is a summary of the Registrants' AFUDC and interest capitalized for the years ended December 31: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Energy | (In millions) | | Allowance for debt funds used during construction and interest capitalized | $ | 22 | | | $ | 15 | | | $ | 15 | | | Allowance for equity funds used during construction | 25 | | | 24 | | | 28 | | | Total | $ | 47 | | | $ | 39 | | | $ | 43 | |
| | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | | (In millions) | | Allowance for debt funds used during construction and interest capitalized | $ | 13 |
| | $ | 10 |
| | $ | 8 |
| | $ | 8 |
| | Allowance for equity funds used during construction | 23 |
| | 21 |
| | 18 |
| | 18 |
| | Total | $ | 36 |
| | $ | 31 |
| | $ | 26 |
| | $ | 26 |
|
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Electric | (In millions) | | Allowance for debt funds used during construction | $ | 10 | | | $ | 10 | | | $ | 9 | | | Allowance for equity funds used during construction | 23 | | | 22 | | | 19 | | | Total | $ | 33 | | | $ | 32 | | | $ | 28 | |
Depreciation and Amortization The composite depreciation rate for DTE Electric was approximately 3.6%4.2%, 4.0%, and 3.7% in 20172020, 2019 and 3.5% in 2016 and 2015.2018, respectively. The composite depreciation rate for DTE Gas was 2.7%, 2.4%, and 2.6% in 2017, 2016, and 2015, respectively.2.8% for all periods. The average estimated useful life for each major class of utility Property, plant, and equipment as of December 31, 20172020 follows: | | | | | | | | | | | Estimated Useful Lives in Years | | Utility | | Generation | | Distribution | | Storage | | DTE Electric | | 40 | | 41 | | N/A | | DTE Gas | | N/A | | 50 | | 53 |
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | Estimated Useful Lives in Years | | Utility | | Generation | | Distribution | | Storage | | DTE Electric | | 32 | | 38 | | N/A | | DTE Gas | | N/A | | 49 | | 58 |
The estimated useful lives for DTE Electric's Other utility assets range from 43 to 6280 years, while the estimated useful lives for DTE Gas' Transmission and other utility assets range from 53 to 7080 years. The estimated useful lives for major classes of DTE Energy's non-utility assets and facilities range from 3 to 8370 years. The following is a summary of Depreciation and amortization expense for DTE Energy: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Property, plant, and equipment | $ | 1,120 | | | $ | 997 | | | $ | 878 | | | Regulatory assets and liabilities | 245 | | | 227 | | | 212 | | | Intangible assets | 71 | | | 33 | | | 27 | | | Other | 7 | | | 6 | | | 7 | | | $ | 1,443 | | | $ | 1,263 | | | $ | 1,124 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Property, plant, and equipment | $ | 865 |
| | $ | 783 |
| | $ | 740 |
| | Regulatory assets and liabilities | 165 |
| | 193 |
| | 150 |
| Securitized regulatory assets(a) | — |
| | — |
| | (38 | ) | | | $ | 1,030 |
| | $ | 976 |
| | $ | 852 |
|
| | (a) | Securitization surcharges ended in December 2014 with remaining over recovery refunded to customers in 2015. Securitization bonds were paid and Securitization regulatory assets amortization was completed in 2015. The $38 million credit represents the final adjustments to close out the Securitization program. |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following is a summary of Depreciation and amortization expense for DTE Electric: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Property, plant, and equipment | $ | 831 | | | $ | 748 | | | $ | 652 | | | Regulatory assets and liabilities | 207 | | | 193 | | | 179 | | | | | | | | | Other | 5 | | | 5 | | | 5 | | | $ | 1,043 | | | $ | 946 | | | $ | 836 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Property, plant, and equipment | $ | 620 |
| | $ | 582 |
| | $ | 545 |
| | Regulatory assets and liabilities | 133 |
| | 168 |
| | 126 |
| Securitized regulatory assets(a) | — |
| | — |
| | (38 | ) | | | $ | 753 |
| | $ | 750 |
| | $ | 633 |
|
| | (a) | Securitization surcharges ended in December 2014 with remaining over recovery refunded to customers in 2015. Securitization bonds were paid and Securitization regulatory assets amortization was completed in 2015. The $38 million credit represents the final adjustments to close out the Securitization program. |
Capitalized software costs are classified as Property, plant, and equipment and the related amortization is included in accumulated depreciation and amortization on the Registrants' Consolidated Financial Statements. The Registrants capitalize the costs associated with computer software developed or obtained for use in their businesses. The Registrants amortize capitalized software costs on a straight-line basis over the expected period of benefit, ranging from 3 to 15 years for DTE Energy and 43 to 15 years for DTE Electric. The following balances for capitalized software relate to DTE Energy: | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Amortization expense of capitalized software | $ | 101 |
| | $ | 89 |
| | $ | 98 |
| Amortization expense of capitalized software | $ | 129 | | | $ | 123 | | | $ | 108 | | | Gross carrying value of capitalized software | $ | 890 |
| | $ | 715 |
| | | Gross carrying value of capitalized software | $ | 866 | | | $ | 906 | | | | Accumulated amortization of capitalized software | $ | 500 |
| | $ | 435 |
| | | Accumulated amortization of capitalized software | $ | 432 | | | $ | 520 | | |
The following balances for capitalized software relate to DTE Electric: | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | (In millions) | | Amortization expense of capitalized software | $ | 118 | | | $ | 112 | | | $ | 101 | | | Gross carrying value of capitalized software | $ | 756 | | | $ | 811 | | | | | Accumulated amortization of capitalized software | $ | 363 | | | $ | 462 | | | |
| | | | | | | | | | | | | | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Amortization expense of capitalized software | $ | 93 |
| | $ | 83 |
| | $ | 80 |
| | Gross carrying value of capitalized software | $ | 774 |
| | $ | 610 |
| | | | Accumulated amortization of capitalized software | $ | 423 |
| | $ | 365 |
| | |
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Property under capital leases for the Registrants is as follows:
| | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | | (In millions) | | Gross property under capital leases | $ | 44 |
| | $ | 44 |
| | $ | 18 |
| | $ | 18 |
| | Accumulated amortization of property under capital leases | $ | 38 |
| | $ | 32 |
| | $ | 12 |
| | $ | 6 |
|
NOTE 78 — JOINTLY-OWNED UTILITY PLANT DTE Electric has joint ownership interest in two2 power plants, Belle River and Ludington Hydroelectric Pumped Storage. DTE Electric’s share of direct expenses of the jointly-owned plants are included in Fuel, purchased power, and gas — utility and Operation and maintenance expenses in the DTE Energy Consolidated Statements of Operations and Fuel and purchased power— utility and Operation and maintenance expenses in the DTE Electric Consolidated Statements of Operations. OwnershipDTE Electric's ownership information of the two2 utility plants as of December 31, 20172020 was as follows:
| | | | | | | | | | | | | Belle River | | Ludington
Hydroelectric
Pumped Storage | | In-service date | 1984-1985 | | 1973 | | Total plant capacity | 1,270 MW | | 2,220 MW | | Ownership interest | 81% | | 49% | | Investment in Property, plant, and equipment (in millions) | $ | 1,932 | | | $ | 609 | | | Accumulated depreciation (in millions) | $ | 945 | | | $ | 181 | |
| | | | | | | | | | | Belle River | | Ludington Hydroelectric Pumped Storage | | In-service date | 1984-1985 | | 1973 | | Total plant capacity | 1,270 MW | | 2,080 MW | | Ownership interest | (a) | | 49% | | Investment in Property, plant, and equipment (in millions) | $ | 1,814 |
| | $ | 559 |
| | Accumulated depreciation (in millions) | $ | 1,060 |
| | $ | 188 |
|
| | (a) | DTE Electric's ownership interest is 63% in Unit No. 1, 81% of the facilities applicable to Belle River used jointly by the Belle River and St. Clair Power Plants and 75% in common facilities used at Unit No. 2. |
Belle River The Michigan Public Power Agency (MPPA) has an ownership interestinterests in Belle River Unit No. 1 and other related facilities. The MPPA is entitled to 19% of the total capacity and energy of the plant and is responsible for the same percentage of the plant’s operation, maintenance, and capital improvement costs. Ludington Hydroelectric Pumped Storage Consumers Energy Company has an ownership interest in the Ludington Hydroelectric Pumped Storage Plant. Consumers Energy is entitled to 51% of the total capacity and energy of the plant and is responsible for the same percentage of the plant’s operation, maintenance, and capital improvement costs.
NOTE 89 — ASSET RETIREMENT OBLIGATIONS DTE Electric has a legal retirement obligation for the decommissioning costs for its Fermi 1 and Fermi 2 nuclear plants, dismantlement of facilities located on leased property, and various other operations. DTE Electric has conditional retirement obligations for asbestos and PCB removal at certain of its power plants and various distribution equipment. DTE Gas has conditional retirement obligations for gas pipelines, certain service centers, compressor and gate stations. The Registrants recognize such obligations as liabilities at fair market value when they are incurred, which generally is at the time the associated assets are placed in service. Fair value is measured using expected future cash outflows discounted at the Registrants' credit-adjusted risk-free rate. For its utility operations, the Registrants recognize in the Consolidated Statements of Operations removal costs in accordance with regulatory treatment. Any differences between costs recognized related to asset retirement and those reflected in rates are recognized as either a Regulatory asset or liability on the Consolidated Statements of Financial Position.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
If a reasonable estimate of fair value cannot be made in the period in which the retirement obligation is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. Natural gas storage system and certain other distribution assets for DTE Gas and substations, manholes, and certain other distribution assets for DTE Electric have an indeterminate life. Therefore, no liability has been recorded for these assets.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Changes to asset retirement obligations for 20172020, 2019, and 2018 were as follows: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Energy | (In millions) | | Asset retirement obligations at January 1 | $ | 2,672 | | | $ | 2,469 | | | $ | 2,320 | | | Accretion | 157 | | | 149 | | | 140 | | | Liabilities incurred | 25 | | | 20 | | | 27 | | | Liabilities settled | (14) | | | (17) | | | (16) | | | Revision in estimated cash flows | (1) | | | 51 | | | (2) | | | Asset retirement obligations at December 31 | $ | 2,839 | | | $ | 2,672 | | | $ | 2,469 | |
| | | | | | | | 2020 | | 2019 | | 2018 | | | DTE Energy | | DTE Electric | | | | (In millions) | | | Asset retirement obligations at December 31, 2016 | $ | 2,197 |
| | $ | 2,012 |
| | | DTE Electric | | DTE Electric | (In millions) | | Asset retirement obligations at January 1 | | Asset retirement obligations at January 1 | $ | 2,447 | | | $ | 2,271 | | | $ | 2,125 | | | Accretion | 131 |
| | 120 |
| Accretion | 145 | | | 138 | | | 129 | | | Liabilities incurred | 2 |
| | 1 |
| Liabilities incurred | 18 | | | 1 | | | 27 | | | Liabilities settled | (6 | ) | | (2 | ) | Liabilities settled | (8) | | | (14) | | | (8) | | | Revision in estimated cash flows | (4 | ) | | (6 | ) | Revision in estimated cash flows | 5 | | | 51 | | | (2) | | | Asset retirement obligations at December 31, 2017 | $ | 2,320 |
| | $ | 2,125 |
| | | Asset retirement obligations at December 31 | | Asset retirement obligations at December 31 | $ | 2,607 | | | $ | 2,447 | | | $ | 2,271 | |
Approximately $1.9$2.2 billion of the asset retirement obligations represent nuclear decommissioning liabilities that are funded through a surcharge to electric customers over the life of the Fermi 2 nuclear plant. The NRC has jurisdiction over the decommissioning of nuclear power plants and requires minimum decommissioning funding based upon a formula. The MPSC and FERC regulate the recovery of costs of decommissioning nuclear power plants and both require the use of external trust funds to finance the decommissioning of Fermi 2. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 and the disposal of low-level radioactive waste. DTE Electric believes the MPSC collections will be adequate to fund the estimated cost of decommissioning. The decommissioning assets, anticipated earnings thereon, and future revenues from decommissioning collections will be used to decommission Fermi 2. DTE Electric expects the liabilities to be reduced to zero0 at the conclusion of the decommissioning activities. If amounts remain in the trust funds for Fermi 2 following the completion of the decommissioning activities, those amounts will be disbursed based on rulings by the MPSC and FERC. A portion of the funds recovered through the Fermi 2 decommissioning surcharge and deposited in external trust accounts is designated for the removal of non-radioactive assets and returning the site to greenfield. This removal and greenfielding is not considered a legal liability. Therefore, it is not included in the asset retirement obligation, but is reflected as the Nuclear decommissioning liability. The decommissioning of Fermi 1 is funded by DTE Electric. Contributions to the Fermi 1 trust are discretionary. For additional discussion of Nuclear decommissioning trust fund assets, see Note 1213 to the Consolidated Financial Statements, "Fair Value."
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) NOTE 910 — REGULATORY MATTERS Regulation DTE Electric and DTE Gas are subject to the regulatory jurisdiction of the MPSC, which issues orders pertaining to rates, recovery of certain costs, including the costs of generating facilities and regulatory assets, conditions of service, accounting, and operating-related matters. DTE Electric is also regulated by the FERC with respect to financing authorization, and wholesale electric activities.market activities, certain affiliate transactions, the acquisition and disposition of certain generation and other facilities, and, in conjunction with the NERC, compliance with mandatory reliability standards. Regulation results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. The Registrants are unable to predict the outcome of theany unresolved regulatory matters discussed herein. Resolution of these matters is dependent upon future MPSC and FERC orders and appeals, which may materially impact the Consolidated Financial Statements of the Registrants.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Regulatory Assets and Liabilities DTE Electric and DTE Gas are required to record Regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Continued applicability of regulatory accounting treatment requires that rates be designed to recover specific costs of providing regulated services and be charged to and collected from customers. Future regulatory changes or changes in the competitive environment could result in the discontinuance of this accounting treatment for Regulatory assets and liabilities for some or all of the Registrants' businesses and may require the write-off of the portion of any Regulatory asset or liability that was no longer probable of recovery through regulated rates. Management believes that currently available facts support the continued use of Regulatory assets and liabilities and that all Regulatory assets and liabilities are recoverable or refundable in the current regulatory environment. The following are balances and a brief description of the Registrants' Regulatory assets and liabilities at December 31: | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | Assets | (In millions) | | Recoverable pension and other postretirement costs | | | | | | | | | Pension | $ | 2,000 |
| | $ | 2,159 |
| | $ | 1,502 |
| | $ | 1,642 |
| | Other postretirement costs | 278 |
| | 286 |
| | 211 |
| | 207 |
| | Asset retirement obligation | 569 |
| | 613 |
| | 569 |
| | 613 |
| | Removal costs asset | 299 |
| | 193 |
| | 299 |
| | 193 |
| | Recoverable Michigan income taxes | 213 |
| | 231 |
| | 171 |
| | 187 |
| | Deferred environmental costs | 75 |
| | 78 |
| | — |
| | — |
| | Unamortized loss on reacquired debt | 65 |
| | 59 |
| | 46 |
| | 39 |
| | Transitional Reconciliation Mechanism | 46 |
| | 30 |
| | 46 |
| | 30 |
| | Customer360 deferred costs | 45 |
| | 33 |
| | 45 |
| | 33 |
| | Recoverable income taxes related to AFUDC equity | 41 |
| | 59 |
| | 35 |
| | 53 |
| | Other recoverable income taxes | 26 |
| | 57 |
| | 26 |
| | 57 |
| | Nuclear Performance Evaluation and Review Committee Tracker | 22 |
| | — |
| | 22 |
| | — |
| | Accrued PSCR/GCR revenue | 17 |
| | 22 |
| | 17 |
| | 19 |
| | Other | 82 |
| | 93 |
| | 66 |
| | 76 |
| | | 3,778 |
| | 3,913 |
| | 3,055 |
| | 3,149 |
| | Less amount included in Current Assets | (55 | ) | | (42 | ) | | (50 | ) | | (36 | ) | | | $ | 3,723 |
| | $ | 3,871 |
| | $ | 3,005 |
| | $ | 3,113 |
|
| | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | Liabilities | (In millions) | | Refundable federal income taxes | $ | 2,384 |
| | $ | — |
| | $ | 1,946 |
| | $ | — |
| | Removal costs liability | 265 |
| | 266 |
| | — |
| | — |
| | Renewable energy | 112 |
| | 145 |
| | 112 |
| | 145 |
| | Negative other postretirement offset | 80 |
| | 56 |
| | 67 |
| | 55 |
| | Negative pension offset | 21 |
| | 36 |
| | — |
| | — |
| | Fermi 2 refueling outage | 15 |
| | 27 |
| | 15 |
| | 27 |
| | Refundable self-implemented rates | 2 |
| | 27 |
| | 2 |
| | 27 |
| | Other | 14 |
| | 32 |
| | 12 |
| | 2 |
| | | 2,893 |
| | 589 |
| | 2,154 |
| | 256 |
| | Less amount included in Current Liabilities | (18 | ) | | (34 | ) | | (17 | ) | | (27 | ) | | | $ | 2,875 |
| | $ | 555 |
| | $ | 2,137 |
| | $ | 229 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | Assets | (In millions) | | Recoverable pension and other postretirement costs | | | | | | | | | Pension | $ | 1,938 | | | $ | 1,983 | | | $ | 1,477 | | | $ | 1,497 | | | Other postretirement costs | 165 | | | 201 | | | 108 | | | 131 | | | Recoverable undepreciated costs on retiring plants | 664 | | | 657 | | | 664 | | | 657 | | | Fermi 2 asset retirement obligation | 645 | | | 669 | | | 645 | | | 669 | | | Recoverable Michigan income taxes | 176 | | | 189 | | | 142 | | | 152 | | | Enhanced Tree Trimming Program deferred costs | 119 | | | 43 | | | 119 | | | 43 | | | Accrued PSCR revenue | 100 | | | 3 | | | 100 | | | 3 | | | Recoverable income taxes related to AFUDC equity | 64 | | | 56 | | | 54 | | | 47 | | | Energy Waste Reduction incentive | 62 | | | 54 | | | 49 | | | 43 | | | Deferred environmental costs | 57 | | | 66 | | | 0 | | | 0 | | | Unamortized loss on reacquired debt | 55 | | | 56 | | | 41 | | | 40 | | | Nuclear Performance Evaluation and Review Committee Tracker | 55 | | | 48 | | | 55 | | | 48 | | | Customer360 deferred costs | 51 | | | 55 | | | 51 | | | 55 | | | Non-service pension and other postretirement costs | 21 | | | 15 | | | 0 | | | 0 | | | Other recoverable income taxes | 19 | | | 20 | | | 19 | | | 20 | | | Transitional Reconciliation Mechanism | 11 | | | 10 | | | 11 | | | 10 | | | | | | | | | | | | | | | | | | | Other | 55 | | | 51 | | | 28 | | | 38 | | | 4,257 | | | 4,176 | | | 3,563 | | | 3,453 | | | Less amount included in Current Assets | (129) | | | (5) | | | (123) | | | (5) | | | $ | 4,128 | | | $ | 4,171 | | | $ | 3,440 | | | $ | 3,448 | | | | | | | | | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | Liabilities | (In millions) | | Refundable federal income taxes | $ | 2,255 | | | $ | 2,359 | | | $ | 1,827 | | | $ | 1,911 | | | Removal costs liability | 831 | | | 700 | | | 410 | | | 483 | | | Negative other postretirement offset | 122 | | | 93 | | | 86 | | | 69 | | | Non-service pension and other postretirement costs | 78 | | | 46 | | | 36 | | | 21 | | | COVID-19 voluntary refund | 30 | | | 0 | | | 30 | | | 0 | | | Renewable energy | 21 | | | 54 | | | 21 | | | 54 | | | | | | | | | | | Accrued GCR refund | 20 | | | 23 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other | 45 | | | 54 | | | 40 | | | 48 | | | 3,402 | | | 3,329 | | | 2,450 | | | 2,586 | | | Less amount included in Current Liabilities | (39) | | | (65) | | | (18) | | | (40) | | | $ | 3,363 | | | $ | 3,264 | | | $ | 2,432 | | | $ | 2,546 | |
As noted below, certain Regulatory assets for which costs have been incurred have been included (or are expected to be included, for costs incurred subsequent to the most recently approved rate case) in DTE Electric's or DTE Gas' rate base, thereby providing a return on invested costs (except as noted). Certain other regulatory assets are not included in rate base but accrue recoverable carrying charges until surcharges to collect the assets are billed. Certain Regulatory assets do not result from cash expenditures and therefore do not represent investments included in rate base or have offsetting liabilities that reduce rate base. ASSETS | | • | Recoverable pension and other postretirement costs — Accounting standards for pension and other postretirement benefit costs require, among other things, the recognition in Other comprehensive income of the actuarial gains or losses and the prior service costs that arise during the period but that are not immediately recognized as components of net periodic benefit costs. DTE Electric and DTE Gas record the impact of actuarial gains or losses and prior service costs as a Regulatory asset since the traditional rate setting process allows for the recovery of pension and other postretirement costs. The asset will reverse as the deferred items are amortized and recognized as components of net periodic benefit costs.(a)
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| | • | Asset retirement obligation — This obligation is for Fermi 2 decommissioning costs. The asset captures the timing differences between expense recognition and current recovery in rates and will reverse over the remaining life of the related plant.(a)
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| | • | Removal costs asset — Receivable for the recovery of asset removal expenditures in excess of amounts collected from customers.(a)
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•Recoverable pension and other postretirement costs — Accounting standards for pension and other postretirement benefit costs require, among other things, the recognition in Other comprehensive income of the actuarial gains or losses and the prior service costs that arise during the period but are not immediately recognized as components of net periodic benefit costs. DTE Electric and DTE Gas record the impact of actuarial gains or losses and prior service costs as Regulatory assets since the traditional rate setting process allows for the recovery of pension and other postretirement costs. The asset will reverse as the deferred items are amortized and recognized as components of net periodic benefit costs.(a) •Recoverable undepreciated costs on retiring plants — Deferral of estimated remaining balances associated with coal power plants expected to be retired by the end of 2022. •Fermi 2 asset retirement obligation — This obligation is for Fermi 2 decommissioning costs. The asset captures the timing differences between expense recognition and current recovery in rates and will reverse over the remaining life of the related plant.(a) •Recoverable Michigan income taxes — The State of Michigan enacted a corporate income tax resulting in the establishment of state deferred tax liabilities for DTE Energy's utilities. Offsetting Regulatory assets were also recorded as the impacts of the deferred tax liabilities will be reflected in rates as the related taxable temporary differences reverse and flow through current income tax expense. •Enhanced Tree Trimming Program deferred costs — The MPSC approved the deferral of costs for a tree trimming surge through 2022, aimed at reducing the number and duration of customer interruptions. Recovery of these costs and related amortization will be determined at a future rate proceeding. •Accrued PSCR revenue — Receivable for the temporary under-recovery of and carrying costs on fuel and purchased power costs incurred by DTE Electric which are recoverable through the PSCR mechanism. •Recoverable income taxes related to AFUDC equity — Accounting standards for income taxes require recognition of a deferred tax liability for the equity component of AFUDC. A Regulatory asset is required for the future increase in taxes payable related to the equity component of AFUDC that will be recovered from customers through future rates over the remaining life of the related plant. | | • | Deferred environmental costs — The MPSC approved the deferral of investigation and remediation costs associated with DTE Gas' former MGP sites. Amortization of deferred costs is over a ten-year period beginning in the year after costs were incurred, with recovery (net of any insurance proceeds) through base rate filings.(a)
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DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) •Energy Waste Reduction incentive — DTE Electric and DTE Gas operate MPSC approved energy waste reduction programs designed to reduce overall energy usage by their customers. The utilities are eligible to earn an incentive by exceeding statutory savings targets. The utilities have consistently exceeded the savings targets and recognize the incentive as a Regulatory asset in the period earned.(a) •Deferred environmental costs — The MPSC approved the deferral of investigation and remediation costs associated with DTE Gas' former MGP sites. Amortization of deferred costs is over a ten-year period beginning in the year after costs were incurred, with recovery (net of any insurance proceeds) through base rate filings.(a) •Unamortized loss on reacquired debt — The unamortized discount, premium, and expense related to debt redeemed with a refinancing are deferred, amortized, and recovered over the life of the replacement issue. Transitional Reconciliation Mechanism•Nuclear Performance Evaluation and Review Committee Tracker — The MPSC approved the recoveryDeferral and amortization of the deferred net incremental revenue requirementcertain costs associated with the transitionoversight and review of PLD customers to DTE Electric's distribution system, effective July 1, 2014. Annual reconciliations will be filednuclear power generation program, including safety and surcharges will be implementedregulatory compliance, nuclear leadership, nuclear facilities, as well as operation and financial performance, pursuant to recover approved amounts.
the MPSC authorization. Deferrals are amortized over a five-year period with recovery through base rate filings.•Customer360 deferred costs — The MPSC approved the deferral and amortization of certain costs associated with implementing Customer360, which is an integrated software application that enables improved interface among customer service, billing, meter reading, credit and collections, device management, account management, and retail access. Amortization of deferred costs over a 15-year amortization period began after the billing system was put into operation during the second quarter of 2017. The deferred costs are recorded as Regulatory Assets at DTE Electric and DTE Gas receives an intercompany charge for their proportionate share of amortization expense.Recoverable income taxes related•Non-service pension and other postretirement costs — Upon adoption of ASU 2017-07 on January 1, 2018, certain non-service pension and other postretirement costs are no longer capitalized into Property, Plant & Equipment. Such costs may be recorded to AFUDC equity — Accounting standardsRegulatory assets for income taxes require recognition of a deferred tax liabilityratemaking purposes and recovered as amortization expense based on the composite depreciation rate for the equity component of AFUDC. A regulatory asset is required for the future increase in taxes payable related to the equity component of AFUDC that will be recovered from customers through future rates over the remaining life of the related plant.
plant-in-service.•Other recoverable income taxes — Income taxes receivable from DTE Electric's customers representing the difference in property-related deferred income taxes and amounts previously reflected in DTE Electric's rates. This asset will reverse over the remaining life of the related plant. Nuclear Performance Evaluation and Review Committee Tracker•Transitional Reconciliation Mechanism — Deferral and amortizationThe MPSC approved the recovery of certain coststhe deferred net incremental revenue requirement associated with oversightthe transition of PLD customers to DTE Electric's distribution system, effective July 1, 2014. Annual reconciliations are filed and reviewsurcharges are implemented to recover approved amounts.
(a)Regulatory assets not earning a return or accruing carrying charges. LIABILITIES •Refundable federal income taxes — In December 2017, the TCJA was enacted and reduced the corporate income tax rate, effective January 1, 2018. DTE Electric and DTE Gas remeasured deferred taxes, resulting in a reduction to deferred tax liabilities, to reflect the impact of the TCJA on the cumulative temporary differences expected to reverse after the effective date. Regulatory liabilities were also recorded to offset the impact of the deferred tax remeasurement reflected in rates. •Removal costs liability — The amounts collected from customers in excess of the estimated cost of future asset removal activities. Cost of removal is included within depreciation rates approved by the MPSC. In 2019, the MPSC approved a settlement agreement in DTE Gas' depreciation case to increase depreciation rates effective following an order in the next general rate case. The new depreciation rates became effective October 1, 2020. In connection with the settlement agreement and the new rates, DTE Gas also re-measured the amount of historical depreciation expense that had been allocated between accumulated depreciation and cost of removal. The reallocation was performed to provide a more accurate estimate of DTE Electric's nuclear power generation program, including safety and regulatory compliance, nuclear leadership, nuclear facilities,Gas' reserve balances on assets under the group depreciation methodology. Based upon the reallocation, it was determined that the amounts collected for asset removal expenditures, as well as operation and financial performance, pursuanta component of depreciation, further exceeded actual asset removal expenditures. Accordingly, DTE Gas reallocated amounts from accumulated depreciation to the MPSC authorization. The approved five-year amortization period began January 1, 2018, with recovery (netremoval cost regulatory balance, resulting in an increase to the Removal cost liability as of carrying costs) through base rate filings. December 31, 2020.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Accrued PSCR/GCR revenue — Receivable for the temporary under-recovery of and carrying costs on fuel and purchased power costs incurred by DTE Electric which are recoverable through the PSCR mechanism and temporary under-recovery of and carrying costs on gas costs incurred by DTE Gas which are recoverable through the GCR mechanism.
| | (a) | Regulatory assets not earning a return or accruing carrying charges. |
LIABILITIES
Refundable federal income taxes — DTE Electric and DTE Gas' remeasurement of deferred taxes due to the enactment of the TCJA, which reflects the net impact of the tax rate change on cumulative temporary differences expected to reverse after the effective date of January 1, 2018. Refer to "2017 Tax Reform" section below for additional information.
Removal costs liability — The amount collected from customers for the funding of future asset removal activities.
Renewable energy — Amounts collected in rates in excess of renewable energy expenditures.
•Negative other postretirement offset — DTE Electric and DTE Gas' negative other postretirement costs are not included as a reduction to their authorized rates; therefore, DTE Electric and DTE Gas are accruing a Regulatory liability to eliminate the impact on earnings of the negative other postretirement expense accrual. The Regulatory liabilities will reverse to the extent DTE Electric and DTE Gas' other postretirement expense is positive in future years. Negative•Non-service pension offset and other postretirement costs— Upon adoption of ASU 2017-07 on January 1, 2018, certain non-service pension and other postretirement cost activity is no longer credited to Property, Plant & Equipment. Such costs may be recorded to regulatory liabilities for ratemaking purposes and refunded through credits to amortization expense based on the composite depreciation rate for plant-in-service.
•COVID-19 voluntary refund — The one-time refund obligation owed to DTE Gas' negative pension costs are not included as a reductionElectric customers due to its authorized rates; therefore, DTE Gas is accruing a Regulatory liability to eliminatecertain sales increases driven by the impact on earnings of the negative pension expense accrued. This Regulatory liability will reverseCOVID-19 pandemic. Refer to the extent DTE Gas' pension expense is positive"2020 Accounting Applications" section below for additional information related to the voluntary refund. •Renewable energy — Amounts collected in future years. Fermi 2 refueling outage — Accrued liability for refueling outage at Fermi 2 pursuant to MPSC authorization.
Refundable self-implemented rates— Amounts refundable to customers for base rates implemented from August 1, 2016 to December 31, 2016 in excess of amounts authorizedrenewable energy expenditures.
•Accrued GCR refund— Liability for the temporary over-recovery of and a return on gas costs incurred by DTE Gas which are recoverable through the GCR mechanism. 2020 COVID-19 Response In response to the COVID-19 pandemic, the MPSC issued an order on April 15, 2020 to provide guidance and direction to utilities and other stakeholders on topics including customer protections and affordability, utility accounting, regulatory activities, energy assistance, and energy waste reduction and demand response continuity. The order authorizes the deferral of uncollectible expense that is in excess of the amount used to set current rates effective March 24, 2020, the date of Michigan's executive order to "Stay Home, Stay Safe". The Registrants implemented the deferral in the January 2017second quarter 2020, and there is currently no expiration for the ability to defer these costs. With the approval of DTE Electric's October 26, 2020 accounting application as noted below, DTE Electric rate order fromvoluntarily reversed its 2020 deferral and recorded as expense, with deferrals resuming in January 2021. DTE Gas deferred $2 million of uncollectible expense as Regulatory assets through December 31, 2020 as a result of the MPSC. MPSC's COVID-19 response order.2016On July 23, 2020, the MPSC further ordered that utilities seeking to recover COVID-19 related expenses beyond uncollectible expense may make an informational filing no later than November 2, 2020. The Registrants did not make a filing, but will continue to monitor MPSC activities involving COVID-19.
2019 Electric Rate Case Filing DTE Electric filed a rate case with the MPSC on February 1, 2016July 8, 2019 requesting an increase in base rates of $344$351 million based on a projected twelve-month period ending July 31, 2017.April 30, 2021. The requested increase in base rates was primarily due to an increase in net plant resulting from distribution infrastructure and generation investments. The rate filing also requested an increase in return on equity from 10.0% to 10.5% and included projected changes in sales and operating and maintenance expenses. On August 1, 2016, DTE Electric self-implemented a base rate increase of $245 million. On January 31, 2017,May 8, 2020, the MPSC issued an order approving an annual revenue increase of $184$188 million for serviceservices rendered on or after February 7, 2017. The MPSC authorizedMay 15, 2020 and a return on equity of 10.1%9.9%. The order also disallowed $41 million of capital expenditures related to incentive compensation previously recorded during 2018-2020. The disallowance was recorded during the second quarter 2020 and is included in Asset (gains) losses and impairment, net on the Consolidated Statements of Operations for the year ended December 31, 2020.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) 2020 Accounting Applications On July 9, 2020, the MPSC approved DTE Electric's request to accelerate amortization of the portion of its Refundable federal income taxes regulatory liability related to non-plant accumulated deferred income tax balances that resulted from the TCJA. DTE Electric will increase amortization by $102 million beginning in May 2021, which will fully amortize this portion of the liability by the end of 2021 instead of April 28, 2017,2033. The accelerated amortization will not impact customer rates and will allow DTE Electric to defer its next rate case filing previously set for July 2020 to at least March 2021. On October 26, 2020, DTE Electric filed an application with the MPSC requesting accounting authority for a one-time regulatory liability. DTE Electric proposed accruing a $30 million voluntary refund obligation due to refund its customers their pro-rata share ofcertain sales increases resulting from the revenue collected throughunusual and unprecedented electricity usage patterns driven by the self-implementation surcharge in effect from August 1, 2016 through February 7, 2017.COVID-19 pandemic. On September 15, 2017,December 9, 2020, the MPSC approved DTE Electric's request. Accordingly, DTE Electric recorded a settlement authorizingregulatory liability and reduction to Operating revenues of $30 million. Amortization of the regulatory liability will be used to offset the cost of service related to new plant in 2022. The regulatory liability will be amortized beginning January 1, 2022 through the earlier of new base rates or December 31, 2022. The one-time accounting treatment does not impact customer rates and will allow DTE Electric to refundfurther defer its customers $38.5 millionnext rate case filing from March 2021 to May 2021. Additionally, as noted above, DTE Electric began deferring uncollectible expense in the second quarter 2020 as a result of the self-implementation surcharge duringMPSC's COVID-19 response order. With the monthsapproval of the October through December 2017.26th accounting application, DTE Electric has refundedvoluntarily reversed this deferral and recorded as expense. This action only applies to DTE Electric in 2020 and the majoritydeferral of uncollectible expense will resume beginning in January 2021, as approved by the settlement liability as ofMPSC on its December 31, 2017.9, 2020 order. 2017 Electric2019 Gas Rate Case Filing
DTE ElectricGas filed a rate case with the MPSC on April 19, 2017November 25, 2019 requesting an increase in base rates of $231$204 million based on a projected twelve-month period ending September 30, 2021. The requested increase in base rates was primarily due to an increase in net plant resulting from infrastructure investments and operating and maintenance expenses. The rate filing also requested an increase in return on equity from 10.0% to 10.5% and included projected changes in sales and working capital. On July 17, 2020, DTE Gas reached a settlement with all intervening parties in the case and filed a settlement agreement authorizing the company to increase base rates by $110 million, reflecting a return on equity of 9.9%. The resulting rates are a net increase to customers of $51 million as an existing Infrastructure Recovery Mechanism (IRM) surcharge will be rolled into the new base rates. The settlement agreement also approved a $20 million annual increase to the amortization of the portion of the Refundable federal income taxes regulatory liability related to non-plant accumulated deferred income tax balances resulting from the TCJA. This increased amortization will cease upon DTE Gas receiving its next rate order. The MPSC approved the settlement agreement on August 20, 2020 and DTE Gas implemented the increases to rates and amortization effective October 1, 2020. In addition, the settlement agreement disallowed capitalized expenditures related to incentive compensation, consistent with the MPSC order issued for DTE Electric on May 8, 2020. In anticipation of this result, DTE Gas recorded a disallowance of $14 million during the second quarter 2020, which is included in Asset (gains) losses and impairment, net on the Consolidated Statements of Operations for the year ended December 31, 2018.2020. 2021 Gas Rate Case Filing DTE Gas filed a rate case with the MPSC on February 12, 2021 requesting an increase in base rates of $195 million based on a projected twelve-month period ending December 31, 2022. The requested increase in base rates is primarily due to an increase in net plant resulting from infrastructure investments environmental compliance, and reliability improvement projects.operating and maintenance expenses. The rate filing also includes projected changes in sales, operation and maintenance expenses, and working capital. The rate filing also requestsrequested an increase in return on equity from 10.1%9.9% to 10.5%. To mitigate the impact to its customers resulting from ASU No. 2017-07, Compensation — Retirement Benefits (Topic 715), DTE Electric suggested regulatory accounting treatment for the pension10.25% and postretirement cost components previously included as capital overhead. If the MPSC adopts DTE Electric's suggestion, the rate request will be reduced. For further discussion of ASU No. 2017-07, see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements." On November 1, 2017, DTE Electric self-implemented a base rate increase of $125 million.includes projected changes in sales and working capital. A final MPSC order in this case is expected by April 2018.December 2021.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
PSCR Proceedings
The PSCR process is designed to allow DTE Electric to recover all of its power supply costs if incurred under reasonable and prudent policies and practices. DTE Electric's power supply costs include fuel and related transportation costs, purchased and net interchange power costs, NOx and SO2 emission allowances costs, urea costs, transmission costs, MISO, and other related costs. The MPSC reviews these costs, policies, and practices for prudence in annual plan and reconciliation filings.
2015 PSCR Year — In March 2016, DTE Electric filed its 2015 PSCR reconciliation that included the recovery of approximately $13 million of costs related to the pass through of a billing adjustment associated with a previous MPSC ordered customer refund. On July 12, 2017, the MPSC issued an order that disallowed recovery of this 2015 PSCR billing adjustment pass through of approximately $16 million, inclusive of interest. DTE Electric recorded the impact of the disallowance in the second quarter of 2017 and filed a claim of appeal with the Michigan Court of Appeals in August 2017.
Certificate of Necessity
On July 31, 2017, DTE Electric filed a request for authority to build a 1,100 megawatt natural gas fueled combined cycle generation facility at DTE Electric's Belle River Power Plant. DTE Electric requested the MPSC to issue three CONs for the following: (1) power supplied by the proposed project is needed, (2) the size, fuel type, and other design characteristics of the proposed project represent the most reasonable and prudent means of meeting the power need, and (3) the estimated capital costs of $989 million for the proposed project will be recoverable in rates from DTE Electric's customers. DTE Electric expects an order in this proceeding from the MPSC by April 27, 2018.
2017 Gas Rate Case Filing
DTE Gas filed a rate case with the MPSC on November 22, 2017 requesting an increase in base rates of $85.1 million based on a projected twelve-month period ending September 30, 2019. The requested increase in base rates is primarily due to an increase in net plant. The rate filing also includes projected changes in sales, operations, maintenance expenses, and working capital. The rate filing also requests an increase in return on equity from 10.1% to 10.5%. To mitigate the impact to its customers resulting from ASU No. 2017-07, Compensation — Retirement Benefits (Topic 715), DTE Gas suggested regulatory accounting treatment for the pension and postretirement cost components previously included as capital overhead. If the MPSC adopts DTE Gas' suggestion, the rate request will be reduced. For further discussion of ASU No. 2017-07, see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements." A final MPSC order in this case is expected by September 2018.
2017 Tax Reform
On December 27, 2017, the MPSC issued an order to consider changes in the rates of all Michigan rate-regulated utilities to reflect the effects of the federal TCJA. On January 19, 2018, DTE Electric and DTE Gas filed information with the MPSC regarding the potential change in revenue requirements due to the TCJA effective January 1, 2018, and outlined our recommended method to flow the current and deferred tax benefits of those impacts to ratepayers.
NOTE 1011 — INCOME TAXES Income Tax Summary DTE Energy files a consolidated federal income tax return. DTE Electric is a part of the consolidated federal income tax return of DTE Energy. DTE Energy and its subsidiaries file consolidated and/or separate company income tax returns in various states and localities, including a consolidated return in the State of Michigan. DTE Electric is part of the Michigan consolidated income tax return of DTE Energy. The federal, state and local income tax expense for DTE Electric is determined on an individual company basis with no allocation of tax expenses or benefits from other affiliates of DTE Energy. DTE Electric had income tax receivables with DTE Energy of $12$8 million and $9$14 million at December 31, 20172020 and 2016,2019, respectively.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
The Registrants' total Income Tax Expense varied from the statutory federal income tax rate for the following reasons: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Energy | (In millions) | | Income Before Income Taxes | $ | 1,538 | | | $ | 1,324 | | | $ | 1,216 | | | Income tax expense at 21% statutory rate | $ | 323 | | | $ | 278 | | | $ | 255 | | | State and local income taxes, net of federal benefit | 81 | | | 48 | | | 60 | | | Production tax credits | (121) | | | (128) | | | (223) | | | TCJA regulatory liability amortization | (76) | | | (38) | | | 0 | | | Net operating loss carryback | (34) | | | 0 | | | 0 | | | AFUDC equity | (4) | | | (4) | | | (14) | | | Employee Stock Ownership Plan dividends | (4) | | | (3) | | | (3) | | | Investment tax credits | (4) | | | (4) | | | (4) | | | Stock based compensation | (3) | | | (7) | | | (3) | | | Enactment of the Tax Cuts and Jobs Act | 0 | | | 0 | | | 21 | | | Noncontrolling interests | 1 | | | 0 | | | 2 | | | Depreciation | 2 | | | 2 | | | 2 | | | Other, net | 6 | | | 8 | | | 5 | | | Income Tax Expense | $ | 167 | | | $ | 152 | | | $ | 98 | | | Effective income tax rate | 10.9 | % | | 11.5 | % | | 8.1 | % |
| | | | | | | | | | 2020 | | 2019 | | 2018 | | | 2017 | | 2016 | | 2015 | | | DTE Energy | (In millions) | | | DTE Electric | | DTE Electric | (In millions) | | Income Before Income Taxes | $ | 1,287 |
| | $ | 1,105 |
| | $ | 950 |
| Income Before Income Taxes | $ | 887 | | | $ | 854 | | | $ | 857 | | | Income tax expense at 35% statutory rate | $ | 450 |
| | $ | 387 |
| | $ | 333 |
| | | Income tax expense at 21% statutory rate | | Income tax expense at 21% statutory rate | $ | 186 | | | $ | 179 | | | $ | 180 | | | State and local income taxes, net of federal benefit | | State and local income taxes, net of federal benefit | 50 | | | 49 | | | 49 | | | TCJA regulatory liability amortization | | TCJA regulatory liability amortization | (62) | | | (35) | | | 0 | | | Production tax credits | (189 | ) | | (145 | ) | | (122 | ) | Production tax credits | (55) | | | (45) | | | (35) | | | Investment tax credits | (4 | ) | | (5 | ) | | (7 | ) | Investment tax credits | (4) | | | (4) | | | (3) | | | Depreciation | (4 | ) | | (4 | ) | | (4 | ) | | | Noncontrolling interests | 8 |
| | 12 |
| | 2 |
| | | AFUDC equity | (18 | ) | | (10 | ) | | (8 | ) | AFUDC equity | (4) | | | (4) | | | (3) | | | Employee Stock Ownership Plan dividends | (5 | ) | | (5 | ) | | (5 | ) | Employee Stock Ownership Plan dividends | (2) | | | (2) | | | (2) | | | Stock based compensation | (14 | ) | | — |
| | — |
| | | Subsidiary stock loss | — |
| | (10 | ) | | — |
| | | State and local income taxes, net of federal benefit | 51 |
| | 58 |
| | 35 |
| | | | Enactment of the Tax Cuts and Jobs Act | (105 | ) | | — |
| | — |
| Enactment of the Tax Cuts and Jobs Act | 0 | | | 0 | | | 7 | | | Depreciation | | Depreciation | 2 | | | 2 | | | 2 | | | Other, net | 5 |
| | (7 | ) | | 6 |
| Other, net | (2) | | | (2) | | | (2) | | | Income Tax Expense | $ | 175 |
| | $ | 271 |
| | $ | 230 |
| Income Tax Expense | $ | 109 | | | $ | 138 | | | $ | 193 | | | Effective income tax rate | 13.6 | % | | 24.5 | % | | 24.2 | % | Effective income tax rate | 12.3 | % | | 16.2 | % | | 22.5 | % |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | DTE Electric | (In millions) | | Income Before Income Taxes | $ | 928 |
| | $ | 975 |
| | $ | 836 |
| | Income tax expense at 35% statutory rate | $ | 325 |
| | $ | 341 |
| | $ | 293 |
| | Production tax credits | (36 | ) | | (30 | ) | | (31 | ) | | Investment tax credits | (4 | ) | | (4 | ) | | (5 | ) | | Depreciation | 3 |
| | 3 |
| | 3 |
| | AFUDC equity | (5 | ) | | (6 | ) | | (7 | ) | | Employee Stock Ownership Plan dividends | (3 | ) | | (3 | ) | | (3 | ) | | State and local income taxes, net of federal benefit | 48 |
| | 56 |
| | 43 |
| | Other, net | (1 | ) | | (4 | ) | | (1 | ) | | Income Tax Expense | $ | 327 |
| | $ | 353 |
| | $ | 292 |
| | Effective income tax rate | 35.2 | % | | 36.2 | % | | 34.9 | % |
Components of the Registrants' Income Tax Expense were as follows:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | DTE Energy | (In millions) | | Current income tax expense (benefit) | | | | | | | Federal | $ | (22 | ) | | $ | (1 | ) | | $ | (3 | ) | | State and other income tax | 1 |
| | 7 |
| | (4 | ) | | Total current income taxes | (21 | ) | | 6 |
| | (7 | ) | | Deferred income tax expense | | | | | | | Federal | 118 |
| | 184 |
| | 178 |
| | State and other income tax | 78 |
| | 81 |
| | 59 |
| | Total deferred income taxes | 196 |
| | 265 |
| | 237 |
|
| $ | 175 |
| | $ | 271 |
| | $ | 230 |
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DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Components of the Registrants' Income Tax Expense were as follows:
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Energy | (In millions) | | Current income tax expense (benefit) | | | | | | | Federal | $ | (247) | | | $ | (184) | | | $ | (17) | | | State and other income tax | 7 | | | 7 | | | 1 | | | Total current income taxes | (240) | | | (177) | | | (16) | | | Deferred income tax expense | | | | | | | Federal | 310 | | | 275 | | | 38 | | | State and other income tax | 97 | | | 54 | | | 76 | | | Total deferred income taxes | 407 | | | 329 | | | 114 | | | | | | | | | | | | | | | $ | 167 | | | $ | 152 | | | $ | 98 | |
| | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | DTE Electric | (In millions) | DTE Electric | (In millions) | | Current income tax expense (benefit) | | | | | | | | Current income tax expense | | Current income tax expense | | | Federal | $ | (17 | ) | | $ | — |
| | $ | (26 | ) | Federal | $ | 15 | | | $ | 25 | | | $ | 0 | | | State and other income tax | (1 | ) | | 11 |
| | (2 | ) | State and other income tax | 5 | | | 16 | | | 4 | | | Total current income taxes | (18 | ) | | 11 |
| | (28 | ) | Total current income taxes | 20 | | | 41 | | | 4 | | | Deferred income tax expense | | | | | | Deferred income tax expense | | | | | | | Federal | 270 |
| | 268 |
| | 252 |
| Federal | 30 | | | 51 | | | 131 | | | State and other income tax | 75 |
| | 74 |
| | 68 |
| State and other income tax | 59 | | | 46 | | | 58 | | | Total deferred income taxes | 345 |
| | 342 |
| | 320 |
| Total deferred income taxes | 89 | | | 97 | | | 189 | |
| $ | 327 |
| | $ | 353 |
| | $ | 292 |
| | | | | | $ | 109 | | | $ | 138 | | | $ | 193 | |
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts in the Registrant's Consolidated Financial Statements. Consistent with the original establishment of these deferred tax liabilities (assets), no recognition of these non-cash transactions have beenare not reflected in the Consolidated Statements of Cash Flows. The Registrants' deferred tax assets (liabilities) were comprised of the following at December 31: | | | | DTE Energy | | DTE Electric | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | 2020 | | 2019 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Property, plant, and equipment | $ | (3,276 | ) | | $ | (4,880 | ) | | $ | (2,698 | ) | | $ | (3,819 | ) | Property, plant, and equipment | $ | (4,032) | | | $ | (3,755) | | | $ | (3,099) | | | $ | (2,956) | | | Regulatory assets and liabilities | (94 | ) | | (879 | ) | | (31 | ) | | (778 | ) | Regulatory assets and liabilities | (108) | | | (47) | | | (53) | | | 4 | | | Tax credit carry-forwards | 947 |
| | 643 |
| | 193 |
| | 116 |
| Tax credit carry-forwards | 1,144 | | | 1,161 | | | 278 | | | 252 | | | Pension and benefits | 334 |
| | 643 |
| | 302 |
| | 518 |
| Pension and benefits | 321 | | | 300 | | | 264 | | | 258 | | | Federal net operating loss carry-forward | 83 |
| | 190 |
| | 47 |
| | 42 |
| Federal net operating loss carry-forward | 265 | | | 276 | | | 0 | | | 0 | | | | State and local net operating loss carry-forwards | 70 |
| | 59 |
| | 5 |
| | 1 |
| State and local net operating loss carry-forwards | 155 | | | 117 | | | 0 | | | 0 | | | Investments in equity method investees | (82 | ) | | (119 | ) | | — |
| | — |
| Investments in equity method investees | (667) | | | (465) | | | 0 | | | 0 | | | Other | 170 |
| | 217 |
| | 94 |
| | 127 |
| Other | 141 | | | 138 | | | 85 | | | 87 | | | | (1,848 | ) | | (4,126 | ) | | (2,088 | ) | | (3,793 | ) | | (2,781) | | | (2,275) | | | (2,525) | | | (2,355) | | | Less valuation allowance | (40 | ) | | (36 | ) | | — |
| | — |
| Less valuation allowance | (41) | | | (40) | | | 0 | | | 0 | | | Long-term deferred income tax liabilities | $ | (1,888 | ) | | $ | (4,162 | ) | | $ | (2,088 | ) | | $ | (3,793 | ) | Long-term deferred income tax liabilities | $ | (2,822) | | | $ | (2,315) | | | $ | (2,525) | | | $ | (2,355) | | | | | | | | | | | | | Deferred income tax assets | $ | 1,814 |
| | $ | 1,463 |
| | $ | 830 |
| | $ | 569 |
| Deferred income tax assets | $ | 2,241 | | | $ | 2,264 | | | $ | 883 | | | $ | 865 | | | Deferred income tax liabilities | (3,702 | ) | | (5,625 | ) | | (2,918 | ) | | (4,362 | ) | Deferred income tax liabilities | (5,063) | | | (4,579) | | | (3,408) | | | (3,220) | | | | $ | (1,888 | ) | | $ | (4,162 | ) | | $ | (2,088 | ) | | $ | (3,793 | ) | | $ | (2,822) | | | $ | (2,315) | | | $ | (2,525) | | | $ | (2,355) | |
Tax credit carry-forwards for DTE Energy include $640 million$1.1 billion of general business credits that expire from 20342032 through 2037 and $307 million of alternative minimum tax credits that will be refundable over the next four years. The alternative minimum tax credits are production tax credits earned prior to 2006 but not utilized. The majority of these alternative minimum tax credits were generated from projects that had received a private letter ruling (PLR) from the IRS. These PLRs provide assurance as to the appropriateness of using these credits to offset taxable income, however, these tax credits are subject to IRS audit and adjustment.2040. No valuation allowance is required for the tax credits carry-forward deferred tax asset.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) DTE Energy has a pre-tax federal net operating loss carry-forward of $397 million$1.3 billion as of December 31, 2017, which2020. The net operating loss carry-forwards generated in 2015 and 2016 will expire from 2035 through 2037.2036, and the net operating loss carry-forward generated in 2018 and subsequent years will be carried forward indefinitely. No valuation allowance is required for the federal net operating loss deferred tax asset. DTE Energy has state and local deferred tax assets related to net operating loss carry-forwards of $70$155 million and $59$117 million at December 31, 20172020 and 2016,2019, respectively. The state and local net operating loss carry-forwards expire from 20182021 through 2037.2040. DTE Energy has recorded valuation allowances at December 31, 20172020 and 20162019 of approximately $41 million and $40 million, and $36 million, respectively, with respectwhich are primarily related to these deferred tax assets. In assessing the realizability of deferred tax assets, DTE Energy considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Tax credit carry-forwards for DTE Electric include $193$278 million of general business credits that expire from 20352036 through 2037.2040. No valuation allowance is required for the tax credits carry-forward deferred tax asset. DTE Electric has a federal net operating loss carry-forward of $226 million as of December 31, 2017, which will expire in 2035. No valuation allowance is required for the federal net operating loss deferred tax asset. DTE Electric has0 state and local deferred tax assets related to net operating loss carry-forwards of $5 million at December 31, 2017, while there was $1 million state and local deferred tax asset related to net operating loss carry-forwards at2020 or December 31, 2016. No valuation allowance is required for DTE Electric's state and local net operating loss carry-forwards.2019.
The above tables exclude unamortized investment tax credits that are shown separately on the Registrants' Consolidated Statements of Financial Position. Investment tax credits are deferred and amortized to income over the average life of the related property. Tax CutsCARES Act
To assist individuals and Jobsemployers with the impacts of the COVID-19 pandemic, the CARES Act On December 22, 2017, was signed into law in March 2020. The CARES Act included certain tax relief provisions applicable to the TCJA was enacted reducingRegistrants including a) the immediate refund of the corporate incomeAMT credit, b) the ability to carryback net operating losses five years for tax rate from 35% to 21%, effective January 1, 2018. years 2018 through 2020, c) the employee retention credit, and d) delayed payment of employer payroll taxes.
As a result of these provisions, DTE Energy received $220 million of refunds from the enactment,U.S. Treasury during the deferred tax assets and liabilities were remeasured to reflectyear ended December 31, 2020, including $153 million for the impactimmediate refund of the TCJA2018 remaining AMT credit balance and $67 million as a result of carrying back the 2018 net operating loss to 2013. In addition, the carryback of the 2018 net operating loss to 2013 resulted in a $34 million reduction in Income Tax Expense for the year ended December 31, 2020 due primarily to the difference in rates between the two years (35% in 2013 and 21% in 2018). During the second quarter 2020, the Registrants filed a claim for employee retention credits of $6 million, of which $3 million is attributable to DTE Electric. These amounts are included in Taxes other than income in the Consolidated Statements of Operations for the year ended December 31, 2020. The Registrants have also deferred employer payroll taxes of $44 million, of which $23 million is attributable to DTE Electric, increasing the amount of Current Liabilities - Other and Other Liabilities - Other on the cumulative temporary differences expected to reverse after the effective date. The net impactRegistrants' Consolidated Statements of this remeasurement was a decrease in deferred tax liabilitiesFinancial Position as of $2.56 billion, of which $2.45 billion was attributable to regulated utilities and offset to regulatory assets and liabilities. This regulatory treatment is consistent with prior precedent set by the MPSC from previous tax law changes. The remaining $105 million was attributable to the non-utility entities and was recognized as a net reduction to income tax expense in 2017. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), directing taxpayers to consider the implications of the TCJA as provisional when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The amounts above represent our best estimate based on interpretations of the TCJA. In accordance with SAB 118, the amounts recorded are considered provisional and will continue to be analyzed throughout 2018, which may result in additional changes.31, 2020.
Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits for the Registrants is as follows: | | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | DTE Energy | (In millions) | DTE Energy | (In millions) | | Balance at January 1 | $ | 10 |
| | $ | 3 |
| | $ | 9 |
| Balance at January 1 | $ | 10 | | | $ | 10 | | | $ | 10 | | | Additions for tax positions of prior years | — |
| | 7 |
| | — |
| Additions for tax positions of prior years | 0 | | | 0 | | | 0 | | | Lapse of statute of limitations | — |
| | — |
| | (6 | ) | | | | Balance at December 31 | $ | 10 |
| | $ | 10 |
| | $ | 3 |
| Balance at December 31 | $ | 10 | | | $ | 10 | | | $ | 10 | |
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | DTE Electric | (In millions) | | Balance at January 1 | $ | 13 |
| | $ | 4 |
| | $ | 4 |
| | Additions for tax positions of prior years | — |
| | 9 |
| | — |
| | Balance at December 31 | $ | 13 |
| | $ | 13 |
| | $ | 4 |
|
DTE Energy had $8 million of unrecognized tax benefits at December 31, 2017 and 2016 that, if recognized, would favorably impact its effective tax rate. DTE Energy does not anticipate any material decrease in unrecognized tax benefits in the next twelve months.
DTE Electric had $10 million of unrecognized tax benefits at December 31, 2017 and 2016 that, if recognized, would favorably impact its effective tax rate. DTE Electric does not anticipate any material decrease in unrecognized tax benefits in the next twelve months.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | DTE Electric | (In millions) | | Balance at January 1 | $ | 13 | | | $ | 13 | | | $ | 13 | | | Additions for tax positions of prior years | 0 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31 | $ | 13 | | | $ | 13 | | | $ | 13 | |
DTE Energy had $8 million of unrecognized tax benefits at December 31, 2020 and 2019 that, if recognized, would favorably impact its effective tax rate. DTE Electric had $10 million of unrecognized tax benefits at December 31, 2020 and 2019 that, if recognized, would favorably impact its effective tax rate. The Registrants do not anticipate any material decrease in unrecognized tax benefits in the next twelve months. The Registrants recognize interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on their Consolidated Statements of Operations. Accrued interest pertaining to income taxes for DTE Energy totaled $3$5 million and $4 million at December 31, 20172020 and 2016.2019, respectively. DTE Energy recognized interest expense related to income taxes of a nominal amount in 2017, $2$1 million in 2016,2020, 2019, and a nominal amount in 2015.2018. DTE Energy hadhas 0t accrued noany penalties pertaining to income taxes. Accrued interest pertaining to income taxes for DTE Electric totaled $4$6 million at December 31, 20172020 and 2016.2019. DTE Electric recognized interest expense related to income taxes of a nominal amount in 2017, $32020 and $1 million in 2016,2019 and a nominal amount in 2015.2018. DTE Electric hadhas 0t accrued noany penalties pertaining to income taxes. In 2017,2020, DTE Energy, including DTE Electric, settled a federal tax audit for the 20152018 tax year. DTE Energy's federal income tax returns for 20162019 and subsequent years remain subject to examination by the IRS. DTE Energy's Michigan Business Tax returns for the years 2008-2011 and Michigan Corporate Income Tax returns for the year 20082015 and subsequent years remain subject to examination by the State of Michigan. DTE Energy also files tax returns in numerous state and local jurisdictions with varying statutes of limitation.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) NOTE 1112 — EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net income, adjusted for income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the dilution that would occur if any potentially dilutive instruments were exercised or converted into common shares. DTE Energy's participating securities are restricted shares under the stock incentive program that contain rights to receive non-forfeitable dividends. Equity units, performance shares, and stock options do not receive cash dividends; as such, these awards are not considered participating securities. For additional information, see Notes 1415 and 2122 to the Consolidated Financial Statements, "Long-Term Debt" and "Stock-Based Compensation," respectively. The following is a reconciliation of DTE Energy's basic and diluted income per share calculation for the years ended December 31: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions, except per share amounts) | | Basic Earnings per Share | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | Less: Allocation of earnings to net restricted stock awards | (2) | | | (2) | | | (2) | | | Net income available to common shareholders — basic | $ | 1,366 | | | $ | 1,167 | | | $ | 1,118 | | | | | | | | | Average number of common shares outstanding — basic | 193 | | | 185 | | | 181 | | | Basic Earnings per Common Share | $ | 7.09 | | | $ | 6.32 | | | $ | 6.18 | | | | | | | | | Diluted Earnings per Share | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,368 | | | $ | 1,169 | | | $ | 1,120 | | | Less: Allocation of earnings to net restricted stock awards | (2) | | | (2) | | | (2) | | | Net income available to common shareholders — diluted | $ | 1,366 | | | $ | 1,167 | | | $ | 1,118 | | | | | | | | | | | | | | | | | | | | | | | | | | | Average number of common shares outstanding - diluted | 193 | | | 185 | | | 181 | | Diluted Earnings per Common Share(a) | $ | 7.08 | | | $ | 6.31 | | | $ | 6.17 | |
(a)Equity Units excluded from the calculation of diluted EPS were approximately 10.3 million for the years ended December 31, 2020 and 2019, respectively, and 6.3 million for the year ended December 31, 2018, as the dilutive stock price threshold was not met. For more information, see Note 15 to the Consolidated Financial Statements, "Long-Term Debt."
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions, except per share amounts) | | Basic Earnings per Share | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
| | Less: Allocation of earnings to net restricted stock awards | (2 | ) | | (2 | ) | | (2 | ) | | Net income available to common shareholders — basic | $ | 1,132 |
| | $ | 866 |
| | $ | 725 |
| | | | | | | | | Average number of common shares outstanding | 179 |
| | 179 |
| | 179 |
| | Basic Earnings per Common Share | $ | 6.32 |
| | $ | 4.84 |
| | $ | 4.05 |
| | | | | | | | | Diluted Earnings per Share | | | | | | | Net Income Attributable to DTE Energy Company | $ | 1,134 |
| | $ | 868 |
| | $ | 727 |
| | Less: Allocation of earnings to net restricted stock awards | (2 | ) | | (2 | ) | | (2 | ) | | Net income available to common shareholders — diluted | $ | 1,132 |
| | $ | 866 |
| | $ | 725 |
| | | | | | | | | Average number of common shares outstanding | 179 |
| | 179 |
| | 179 |
| Diluted Earnings per Common Share(a) | $ | 6.32 |
| | $ | 4.83 |
| | $ | 4.05 |
|
| | (a) | The 2016 Equity Units excluded from the calculation of diluted EPS were approximately 6 million and 7.1 million for the years ended December 31, 2017 and 2016, respectively, as the dilutive stock price threshold was not met. For more information, see Note 14 to the Consolidated Financial Statements, "Long-Term Debt." |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 1213 — FAIR VALUE Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Registrants make certain assumptions they believe that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Registrants and their counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at December 31, 20172020 and 2016.2019. The Registrants believe they use valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Registrants classify fair value balances based on the fair value hierarchy defined as follows: •Level 1 — Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Registrants have the ability to access as of the reporting date. •Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. •Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table presents assets and liabilities for DTE Energy measured and recorded at fair value on a recurring basis:basis(a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Level 1 | | Level 2 | | Level 3 | | Other(b) | | Netting(c) | | Net Balance | | Level 1 | | Level 2 | | Level 3 | | Other(b) | | Netting(c) | | Net Balance | | (In millions) | | Assets | | | | | | | | | | | | | | | | | | | | | | | | Cash equivalents(d) | $ | 438 | | | $ | 0 | | | $ | 0 | | | $ | — | | | $ | — | | | $ | 438 | | | $ | 15 | | | $ | 0 | | | $ | 0 | | | $ | — | | | $ | — | | | $ | 15 | | | Nuclear decommissioning trusts | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities | 947 | | | 0 | | | 0 | | | 222 | | | — | | | 1,169 | | | 1,046 | | | 0 | | | 0 | | | 0 | | | — | | | 1,046 | | | Fixed income securities | 102 | | | 371 | | | 0 | | | 82 | | | — | | | 555 | | | 160 | | | 378 | | | 0 | | | 0 | | | — | | | 538 | | | Private equity and other | 0 | | | 0 | | | 0 | | | 104 | | | — | | | 104 | | | 0 | | | 0 | | | 0 | | | 43 | | | — | | | 43 | | | Cash equivalents | 27 | | | 0 | | | 0 | | | — | | | — | | | 27 | | | 34 | | | 0 | | | 0 | | | — | | | — | | | 34 | | Other investments(e) | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities | 55 | | | 0 | | | 0 | | | — | | | — | | | 55 | | | 140 | | | 0 | | | 0 | | | — | | | — | | | 140 | | | Fixed income securities | 8 | | | 0 | | | 0 | | | — | | | — | | | 8 | | | 79 | | | 0 | | | 0 | | | — | | | — | | | 79 | | | Cash equivalents | 97 | | | 0 | | | 0 | | | — | | | — | | | 97 | | | 4 | | | 0 | | | 0 | | | — | | | — | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative assets | | | | | | | | | | | | | | | | | | | | | | | | Commodity contracts(f) | | | | | | | | | | | | | | | | | | | | | | | | | Natural gas | 99 | | | 74 | | | 60 | | | — | | | (156) | | | 77 | | | 205 | | | 76 | | | 74 | | | — | | | (266) | | | 89 | | | Electricity | 0 | | | 128 | | | 52 | | | — | | | (120) | | | 60 | | | 0 | | | 223 | | | 83 | | | — | | | (225) | | | 81 | | | Environmental & Other | 0 | | | 150 | | | 4 | | | — | | | (135) | | | 19 | | | 0 | | | 110 | | | 3 | | | — | | | (110) | | | 3 | | | Foreign currency exchange contracts | 0 | | | 0 | | | 0 | | | — | | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | — | | | 0 | | | 1 | | | Total derivative assets | 99 | | | 352 | | | 116 | | | — | | | (411) | | | 156 | | | 205 | | | 410 | | | 160 | | | — | | | (601) | | | 174 | | | Total | $ | 1,773 | | | $ | 723 | | | $ | 116 | | | $ | 408 | | | $ | (411) | | | $ | 2,609 | | | $ | 1,683 | | | $ | 788 | | | $ | 160 | | | $ | 43 | | | $ | (601) | | | $ | 2,073 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | Commodity contracts(f) | | | | | | | | | | | | | | | | | | | | | | | | | Natural gas | $ | (88) | | | $ | (59) | | | $ | (76) | | | $ | — | | | $ | 151 | | | $ | (72) | | | $ | (221) | | | $ | (41) | | | $ | (89) | | | $ | — | | | $ | 266 | | | $ | (85) | | | Electricity | 0 | | | (126) | | | (42) | | | — | | | 125 | | | (43) | | | 0 | | | (231) | | | (67) | | | — | | | 225 | | | (73) | | | Environmental & Other | 0 | | | (137) | | | 0 | | | — | | | 129 | | | (8) | | | 0 | | | (121) | | | 0 | | | — | | | 110 | | | (11) | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency exchange contracts | 0 | | | (5) | | | 0 | | | — | | | 0 | | | (5) | | | 0 | | | 0 | | | 0 | | | — | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | $ | (88) | | | $ | (327) | | | $ | (118) | | | $ | — | | | $ | 405 | | | $ | (128) | | | $ | (221) | | | $ | (393) | | | $ | (156) | | | $ | — | | | $ | 601 | | | $ | (169) | | | Net Assets (Liabilities) at end of period | $ | 1,685 | | | $ | 396 | | | $ | (2) | | | $ | 408 | | | $ | (6) | | | $ | 2,481 | | | $ | 1,462 | | | $ | 395 | | | $ | 4 | | | $ | 43 | | | $ | 0 | | | $ | 1,904 | | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | Current | $ | 532 | | | $ | 260 | | | $ | 92 | | | $ | — | | | $ | (330) | | | $ | 554 | | | $ | 218 | | | $ | 320 | | | $ | 123 | | | $ | — | | | $ | (513) | | | $ | 148 | | | Noncurrent | 1,241 | | | 463 | | | 24 | | | 408 | | | (81) | | | 2,055 | | | 1,465 | | | 468 | | | 37 | | | 43 | | | (88) | | | 1,925 | | | Total Assets | $ | 1,773 | | | $ | 723 | | | $ | 116 | | | $ | 408 | | | $ | (411) | | | $ | 2,609 | | | $ | 1,683 | | | $ | 788 | | | $ | 160 | | | $ | 43 | | | $ | (601) | | | $ | 2,073 | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Current | $ | (84) | | | $ | (223) | | | $ | (79) | | | $ | — | | | $ | 318 | | | $ | (68) | | | $ | (211) | | | $ | (300) | | | $ | (85) | | | $ | — | | | $ | 513 | | | $ | (83) | | | Noncurrent | (4) | | | (104) | | | (39) | | | — | | | 87 | | | (60) | | | (10) | | | (93) | | | (71) | | | — | | | 88 | | | (86) | | | Total Liabilities | $ | (88) | | | $ | (327) | | | $ | (118) | | | $ | — | | | $ | 405 | | | $ | (128) | | | $ | (221) | | | $ | (393) | | | $ | (156) | | | $ | — | | | $ | 601 | | | $ | (169) | | | Net Assets (Liabilities) at end of period | $ | 1,685 | | | $ | 396 | | | $ | (2) | | | $ | 408 | | | $ | (6) | | | $ | 2,481 | | | $ | 1,462 | | | $ | 395 | | | $ | 4 | | | $ | 43 | | | $ | 0 | | | $ | 1,904 | |
(a)See footnotes on following page. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Level 1 | | Level 2 | | Level 3 | | Other(a) | | Netting(b) | | Net Balance | | Level 1 | | Level 2 | | Level 3 | | Netting(b) | | Net Balance | | | (In millions) | | Assets: | | | | | | | | | | | | | | | | | | | | | | Cash equivalents(c) | $ | 16 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 19 |
| | $ | 14 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | 17 |
| | Nuclear decommissioning trusts | | | | | | | | | | | | | | | | | | | | | | | Equity securities | 978 |
| | — |
| | — |
| | — |
| | — |
| | 978 |
| | 887 |
| | — |
| | — |
| | — |
| | 887 |
| | Fixed income securities | 18 |
| | 477 |
| | — |
| | — |
| | — |
| | 495 |
| | 11 |
| | 414 |
| | — |
| | — |
| | 425 |
| | Private equity securities | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Cash equivalents | 14 |
| | — |
| | — |
| | — |
| | — |
| | 14 |
| | 8 |
| | — |
| | — |
| | — |
| | 8 |
| Other investments(d) | | | | | | | | | | |
|
| | | | | | | | | |
|
| | Equity securities | 118 |
| | — |
| | — |
| | — |
| | — |
| | 118 |
| | 104 |
| | — |
| | — |
| | — |
| | 104 |
| | Fixed income securities | 72 |
| | — |
| | — |
| | — |
| | — |
| | 72 |
| | 58 |
| | — |
| | — |
| | — |
| | 58 |
| | Cash equivalents | 4 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | 3 |
| | — |
| | — |
| | — |
| | 3 |
| | Derivative assets: | | | | | | | | | | | | | | | | | | | | | | | Commodity Contracts: | | | | | | | | | | | | | | | | | | | | | | | Natural Gas | 148 |
| | 112 |
| | 97 |
| | — |
| | (256 | ) | | 101 |
| | 216 |
| | 79 |
| | 53 |
| | (306 | ) | | 42 |
| | Electricity | — |
| | 243 |
| | 42 |
| | — |
| | (241 | ) | | 44 |
| | — |
| | 154 |
| | 39 |
| | (157 | ) | | 36 |
| | Other | — |
| | — |
| | 9 |
| | — |
| | — |
| | 9 |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | Foreign currency exchange contracts | — |
| | 1 |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
| | 6 |
| | — |
| | (5 | ) | | 1 |
| | Total derivative assets | 148 |
| | 356 |
| | 148 |
| | — |
| | (498 | ) | | 154 |
| | 216 |
| | 239 |
| | 94 |
| | (468 | ) | | 81 |
| | Total | $ | 1,368 |
| | $ | 836 |
| | $ | 148 |
| | $ | 5 |
| | $ | (498 | ) | | $ | 1,859 |
| | $ | 1,301 |
| | $ | 656 |
| | $ | 94 |
| | $ | (468 | ) | | $ | 1,583 |
| | | | | | | | | | | | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | | | | | | | | | | | | | | | Commodity Contracts: | | | | | | | | | | | | | | | | | | | | | | | Natural Gas | $ | (141 | ) | | $ | (111 | ) | | $ | (126 | ) | | $ | — |
| | $ | 263 |
| | $ | (115 | ) | | $ | (226 | ) | | $ | (86 | ) | | $ | (149 | ) | | $ | 321 |
| | $ | (140 | ) | | Electricity | — |
| | (245 | ) | | (30 | ) | | — |
| | 246 |
| | (29 | ) | | — |
| | (159 | ) | | (30 | ) | | 163 |
| | (26 | ) | | Other | — |
| | — |
| | (1 | ) | | — |
| | 1 |
| | — |
| | — |
| | — |
| | (3 | ) | | 2 |
| | (1 | ) | | Foreign currency exchange contracts | — |
| | (3 | ) | | — |
| | — |
| | 1 |
| | (2 | ) | | — |
| | (3 | ) | | — |
| | 3 |
| | — |
| | Total derivative liabilities | (141 | ) | | (359 | ) | | (157 | ) | | — |
| | 511 |
| | (146 | ) | | (226 | ) | | (248 | ) | | (182 | ) | | 489 |
| | (167 | ) | | Total | $ | (141 | ) | | $ | (359 | ) | | $ | (157 | ) | | $ | — |
| | $ | 511 |
| | $ | (146 | ) | | $ | (226 | ) | | $ | (248 | ) | | $ | (182 | ) | | $ | 489 |
| | $ | (167 | ) | | Net Assets (Liabilities) at end of period | $ | 1,227 |
| | $ | 477 |
| | $ | (9 | ) | | $ | 5 |
| | $ | 13 |
| | $ | 1,713 |
| | $ | 1,075 |
| | $ | 408 |
| | $ | (88 | ) | | $ | 21 |
| | $ | 1,416 |
| | Assets: | | | | | | | | | | | | | | | | | | | | | | | Current | $ | 157 |
| | $ | 298 |
| | $ | 104 |
| | $ | — |
| | $ | (437 | ) | | $ | 122 |
| | $ | 205 |
| | $ | 199 |
| | $ | 60 |
| | $ | (400 | ) | | $ | 64 |
| | Noncurrent | 1,211 |
| | 538 |
| | 44 |
| | 5 |
| | (61 | ) | | 1,737 |
| | 1,096 |
| | 457 |
| | 34 |
| | (68 | ) | | 1,519 |
| | Total Assets | $ | 1,368 |
| | $ | 836 |
| | $ | 148 |
| | $ | 5 |
| | $ | (498 | ) | | $ | 1,859 |
| | $ | 1,301 |
| | $ | 656 |
| | $ | 94 |
| | $ | (468 | ) | | $ | 1,583 |
| | Liabilities: | | | | | | | | | | | | | | | | | | | | | | | Current | $ | (137 | ) | | $ | (313 | ) | | $ | (108 | ) | | $ | — |
| | $ | 459 |
| | $ | (99 | ) | | $ | (203 | ) | | $ | (211 | ) | | $ | (79 | ) | | $ | 424 |
| | $ | (69 | ) | | Noncurrent | (4 | ) | | (46 | ) | | (49 | ) | | — |
| | 52 |
| | (47 | ) | | (23 | ) | | (37 | ) | | (103 | ) | | 65 |
| | (98 | ) | | Total Liabilities | $ | (141 | ) | | $ | (359 | ) | | $ | (157 | ) | | $ | — |
| | $ | 511 |
| | $ | (146 | ) | | $ | (226 | ) | | $ | (248 | ) | | $ | (182 | ) | | $ | 489 |
| | $ | (167 | ) | | Net Assets (Liabilities) at end of period | $ | 1,227 |
| | $ | 477 |
| | $ | (9 | ) | | $ | 5 |
| | $ | 13 |
| | $ | 1,713 |
| | $ | 1,075 |
| | $ | 408 |
| | $ | (88 | ) | | $ | 21 |
| | $ | 1,416 |
|
| | (a) | Amounts represent assets valued at NAV as a practical expedient for fair value. |
| | (b) | Amounts represent the impact of master netting agreements that allow DTE Energy to net gain and loss positions and cash collateral held or placed with the same counterparties. |
| | (c) | At December 31, 2017, available-for-sale securities of $19 million included $8 million and $11 million of cash equivalents included in Restricted cash and Other investments on DTE Energy's Consolidated Statements of Financial Position, respectively. At December 31, 2016, available-for-sale securities of $17 million, included $7 million and $10 million of cash equivalents included in Restricted cash and Other investments on DTE Energy's Consolidated Statements of Financial Position, respectively. |
| | (d) | Excludes cash surrender value of life insurance investments. |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
(b)Amounts represent assets valued at NAV as a practical expedient for fair value.
(c)Amounts represent the impact of master netting agreements that allow DTE Energy to net gain and loss positions and cash collateral held or placed with the same counterparties. (d)At December 31, 2020, the $438 million consisted of $436 million and $2 million of cash equivalents included in Cash and cash equivalents and Restricted cash, respectively, on DTE Energy's Consolidated Statements of Financial Position. At December 31, 2019, the $15 million consisted of $4 million and $11 million of cash equivalents included in Cash and cash equivalents and Other investments, respectively, on DTE Energy's Consolidated Statements of Financial Position. (e)Excludes cash surrender value of life insurance investments. (f)For contracts with a clearing agent, DTE Energy nets all activity across commodities. This can result in some individual commodities having a contra balance. The following table presents assets for DTE Electric measured and recorded at fair value on a recurring basis:basis as of: | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | | December 31, 2017 | | December 31, 2016 | | Level 1 | | Level 2 | | Level 3 | | Other(a) | | Net Balance | | Level 1 | | Level 2 | | Level 3 | | Other(a) | Net Balance | | | Level 1 | | Level 2 | | Level 3 | | Other(a) | | Net Balance | | Level 1 | | Level 2 | | Level 3 | | Net Balance | | (In millions) | | | (In millions) | | | Assets: | | | | | | | | | | | | | | | | | | | | Assets | | Assets | | Cash equivalents(b) | $ | 8 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | 11 |
| | $ | 8 |
| | $ | 3 |
| | $ | — |
| | $ | 11 |
| Cash equivalents(b) | $ | 4 | | | $ | 0 | | | $ | 0 | | | $ | — | | | $ | 4 | | | $ | 11 | | | $ | 0 | | | $ | 0 | | | $ | — | | $ | 11 | | | Nuclear decommissioning trusts | | | | | | | | | | | | | | | | | | Nuclear decommissioning trusts | | | Equity securities | 978 |
| | — |
| | — |
| | — |
| | 978 |
| | 887 |
| | — |
| | — |
| | 887 |
| Equity securities | 947 | | | 0 | | | 0 | | | 222 | | | 1,169 | | | 1,046 | | | 0 | | | 0 | | | 0 | | 1,046 | | | Fixed income securities | 18 |
| | 477 |
| | — |
| | — |
| | 495 |
| | 11 |
| | 414 |
| | — |
| | 425 |
| Fixed income securities | 102 | | | 371 | | | 0 | | | 82 | | | 555 | | | 160 | | | 378 | | | 0 | | | 0 | | 538 | | | Private equity securities | — |
| | — |
| | — |
| | 5 |
| | 5 |
| | — |
| | — |
| | — |
| | — |
| | | Private equity and other | | Private equity and other | 0 | | | 0 | | | 0 | | | 104 | | | 104 | | | 0 | | | 0 | | | 0 | | | 43 | | 43 | | | Cash equivalents | 14 |
| | — |
| | — |
| | — |
| | 14 |
| | 8 |
| | — |
| | — |
| | 8 |
| Cash equivalents | 27 | | | 0 | | | 0 | | | — | | | 27 | | | 34 | | | 0 | | | 0 | | | — | | 34 | | | Other investments | | | | | | | | | | | | | | | | | | Other investments | | | Equity securities | 11 |
| | — |
| | — |
| | — |
| | 11 |
| | 9 |
| | — |
| | — |
| | 9 |
| Equity securities | 16 | | | 0 | | | 0 | | | — | | | 16 | | | 13 | | | 0 | | | 0 | | | — | | 13 | | | Fixed income securities | | Fixed income securities | 11 | | | 0 | | | 0 | | | — | | | 11 | | | 0 | | | 0 | | | 0 | | | — | | 0 | | | | Derivative assets — FTRs | — |
| | — |
| | 9 |
| | — |
| | 9 |
| | — |
| | — |
| | 2 |
| | 2 |
| Derivative assets — FTRs | 0 | | | 0 | | | 4 | | | — | | | 4 | | | 0 | | | 0 | | | 3 | | | — | | 3 | | | Total | $ | 1,029 |
| | $ | 480 |
| | $ | 9 |
| | $ | 5 |
| | $ | 1,523 |
| | $ | 923 |
| | $ | 417 |
| | $ | 2 |
| | $ | 1,342 |
| Total | $ | 1,107 | | | $ | 371 | | | $ | 4 | | | $ | 408 | | | $ | 1,890 | | | $ | 1,264 | | | $ | 378 | | | $ | 3 | | | $ | 43 | | $ | 1,688 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | | | | | | | Assets | | Assets | | | Current | $ | 8 |
| | $ | 3 |
| | $ | 9 |
| | $ | — |
| | $ | 20 |
| | $ | 8 |
| | $ | 3 |
| | $ | 2 |
| | $ | 13 |
| Current | $ | 4 | | | $ | 0 | | | $ | 4 | | | $ | — | | | $ | 8 | | | $ | 11 | | | $ | 0 | | | $ | 3 | | | $ | — | | $ | 14 | | | Noncurrent | 1,021 |
| | 477 |
| | — |
| | 5 |
| | 1,503 |
| | 915 |
| | 414 |
| | — |
| | 1,329 |
| Noncurrent | 1,103 | | | 371 | | | 0 | | | 408 | | | 1,882 | | | 1,253 | | | 378 | | | 0 | | | 43 | | 1,674 | | | Total Assets | $ | 1,029 |
| | $ | 480 |
| | $ | 9 |
| | $ | 5 |
| | $ | 1,523 |
| | $ | 923 |
| | $ | 417 |
| | $ | 2 |
| | $ | 1,342 |
| Total Assets | $ | 1,107 | | | $ | 371 | | | $ | 4 | | | $ | 408 | | | $ | 1,890 | | | $ | 1,264 | | | $ | 378 | | | $ | 3 | | | $ | 43 | | $ | 1,688 | |
| | (a) | Amounts represent assets valued at NAV as a practical expedient for fair value. |
| | (b) | At December 31, 2017, available-for-sale securities of $11 million consisted of cash equivalents included in Other investments on DTE Electric's Consolidated Statements of Financial Position. At December 31, 2016, available-for-sale securities of $11 million consisted of cash equivalents included in Other investments on DTE Electric's Consolidated Statements of Financial Position. |
(a)Amounts represent assets valued at NAV as a practical expedient for fair value. (b)At December 31, 2020, the $4 million consisted of cash equivalents included in Cash and cash equivalents on DTE Electric's Consolidated Statements of Financial Position. At December 31, 2019, the $11 million consisted of cash equivalents included in Other investments on DTE Electric's Consolidated Statements of Financial Position. Cash Equivalents Cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value table are comprised of short-term investments and money market funds. Nuclear Decommissioning Trusts and Other Investments The nuclear decommissioning trusts and other investments hold debt and equity securities directly and indirectly through institutional mutual funds and commingled funds. Other assets such as private market investments are used to enhance long-term returns while improving portfolio diversification. All pricing for investments in this category are classified as NAV assets. Exchange-traded debt and equity securities held directly, as well as publicly-traded commingled funds, are valued using quoted market prices in actively traded markets. Non-exchange-tradedNon-exchange traded fixed income securities are valued based upon quotations available from brokers or pricing services. The institutional mutual Non-publicly traded commingled funds holdholding exchange-traded equity or debt securities (exchange and non-exchange traded) and are valued based on publicly availablestated NAVs. AThere are no significant restrictions for these funds and investments may be redeemed with 7 to 65 days notice depending on the fund. There is no intention to sell the investment in these commingled funds.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Private equity and other assets include a diversified group of funds that are classified as NAV assets. These funds primarily invest in private equity partnerships, as well as real estate and private debt. Distributions are received through the liquidation of the underlying fund assets over the life of the funds. There are generally no redemption rights. The limited partner must hold the fund for its life or find a third-party buyer, which may need to be approved by the general partner. The funds are established with varied contractual durations generally in the range of 7 years to 12 years. The fund life can often be extended by several years by the general partner, and further extended with the approval of the limited partners. Unfunded commitments related to these investments totaled $183 million and $151 million as of December 31, 2020 and 2019, respectively. For pricing the nuclear decommissioning trusts and other investments, a primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee determines that another price source is considered preferable. The Registrants have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, the Registrants selectively corroborate the fair value of securities by comparison of market-based price sources. Investment policies and procedures are determined by DTE Energy's Trust Investments Department which reports to DTE Energy's Vice President and Treasurer.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Derivative Assets and Liabilities Derivative assets and liabilities are comprised of physical and financial derivative contracts, including futures, forwards, options, and swaps that are both exchange-traded and over-the-counter traded contracts. Various inputs are used to value derivatives depending on the type of contract and availability of market data. Exchange-traded derivative contracts are valued using quoted prices in active markets. The Registrants consider the following criteria in determining whether a market is considered active: frequency in which pricing information is updated, variability in pricing between sources or over time, and the availability of public information. Other derivative contracts are valued based upon a variety of inputs including commodity market prices, broker quotes, interest rates, credit ratings, default rates, market-based seasonality, and basis differential factors. The Registrants monitor the prices that are supplied by brokers and pricing services and may use a supplemental price source or change the primary price source of an index if prices become unavailable or another price source is determined to be more representative of fair value. The Registrants have obtained an understanding of how these prices are derived. Additionally, the Registrants selectively corroborate the fair value of their transactions by comparison of market-based price sources. Mathematical valuation models are used for derivatives for which external market data is not readily observable, such as contracts which extend beyond the actively traded reporting period. The Registrants have established a Risk Management Committee whose responsibilities include directly or indirectly ensuring all valuation methods are applied in accordance with predefined policies. The development and maintenance of the Registrants' forward price curves has been assigned to DTE Energy's Risk Management Department, which is separate and distinct from the trading functions within DTE Energy. The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Energy for the years ended December 31, 2017 and 2016:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | | Natural Gas | | Electricity | | Other | | Total | | Natural Gas | | Electricity | | Other | | Total | | | (In millions) | | Net Assets (Liabilities) as of January 1 | $ | (96 | ) | | $ | 9 |
| | $ | (1 | ) | | $ | (88 | ) | | $ | (5 | ) | | $ | 6 |
| | $ | (5 | ) | | $ | (4 | ) | | Transfers into Level 3 from Level 2 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Transfers from Level 3 into Level 2 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Total gains (losses) | | | | | | | | | | | | | | | | | Included in earnings | (29 | ) | | 109 |
| | 2 |
| | 82 |
| | (159 | ) | | (2 | ) | | 1 |
| | (160 | ) | | Recorded in Regulatory liabilities | — |
| | — |
| | 25 |
| | 25 |
| | — |
| | — |
| | 6 |
| | 6 |
| | Purchases, issuances, and settlements: | | | | | | | | | | | | | | | | | Purchases | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | Settlements | 96 |
| | (106 | ) | | (18 | ) | | (28 | ) | | 68 |
| | 4 |
| | (3 | ) | | 69 |
| | Net Assets (Liabilities) as of December 31 | $ | (29 | ) | | $ | 12 |
| | $ | 8 |
| | $ | (9 | ) | | $ | (96 | ) | | $ | 9 |
| | $ | (1 | ) | | $ | (88 | ) | | The amount of total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31, 2017 and 2016 and reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, and gas — non-utility in DTE Energy's Consolidated Statements of Operations | $ | (30 | ) | | $ | 50 |
| | $ | 1 |
| | $ | 21 |
| | $ | (166 | ) | | $ | 7 |
| | $ | 2 |
| | $ | (157 | ) |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE ElectricEnergy: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | Natural Gas | | Electricity | | Other | | Total | | Natural Gas | | Electricity | | Other | | Total | | (In millions) | | Net Assets (Liabilities) as of January 1 | $ | (15) | | | $ | 16 | | | $ | 3 | | | $ | 4 | | | $ | (49) | | | $ | (2) | | | $ | 7 | | | $ | (44) | | | | | | | | | | | | | | | | | | | Transfers from Level 3 into Level 2 | (2) | | | 0 | | | 0 | | | (2) | | | 0 | | | 0 | | | 0 | | | 0 | | | Total gains (losses) | | | | | | | | | | | | | | | | | Included in earnings | (75) | | | 113 | | | (7) | | | 31 | | | 15 | | | 77 | | | (1) | | | 91 | | | Recorded in Regulatory liabilities | 0 | | | 0 | | | 20 | | | 20 | | | 0 | | | 0 | | | 2 | | | 2 | | | Purchases, issuances, and settlements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Settlements | 76 | | | (119) | | | (12) | | | (55) | | | 19 | | | (59) | | | (5) | | | (45) | | | Net Assets (Liabilities) as of December 31 | $ | (16) | | | $ | 10 | | | $ | 4 | | | $ | (2) | | | $ | (15) | | | $ | 16 | | | $ | 3 | | | $ | 4 | | Total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31(a) | $ | (4) | | | $ | 70 | | | $ | (70) | | | $ | (4) | | | $ | (1) | | | $ | 59 | | | $ | (38) | | | $ | 20 | | | Total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31 | $ | 0 | | | $ | 0 | | | $ | 4 | | | $ | 4 | | | $ | 0 | | | $ | 0 | | | $ | 3 | | | $ | 3 | |
(a)Amounts are reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, gas, and other — non-utility in DTE Energy's Consolidated Statements of Operations. The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2017 and 2016:DTE Electric: | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Net Assets as of January 1 | $ | 2 |
| | $ | 3 |
| Net Assets as of January 1 | $ | 3 | | | $ | 6 | | | Change in fair value recorded in Regulatory liabilities | 25 |
| | 6 |
| Change in fair value recorded in Regulatory liabilities | 20 | | | 2 | | | Purchases, issuances, and settlements: | | | | Purchases, issuances, and settlements: | | | Settlements | (18 | ) | | (7 | ) | Settlements | (19) | | | (5) | | | Net Assets as of December 31 | $ | 9 |
| | $ | 2 |
| Net Assets as of December 31 | $ | 4 | | | $ | 3 | | | The amount of total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31, 2017 and 2016 and reflected in DTE Electric's Consolidated Statements of Financial Position | $ | 9 |
| | $ | 2 |
| | | Total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31 | | Total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31 | $ | 4 | | | $ | 3 | |
Derivatives are transferred between levels primarily due to changes in the source data used to construct price curves as a result of changes in market liquidity. Transfers in and transfers out are reflected as if they had occurred at the beginning of the period. There were no transfers between Levels 1 and 2 for the Registrants during the years ended December 31, 2017 and 2016, and there were no transfers from or into Level 3 for DTE Electric during the same periods.years ended December 31, 2020 and 2019. The following tables present the unobservable inputs related to DTE Energy's Level 3 assets and liabilities as of December 31, 2017 and 2016:liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | | | | | | | | | | | | Commodity Contracts | | Derivative Assets | | Derivative Liabilities | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average | | | (In millions) | | | | | | | | | | | | | Natural Gas | | $ | 60 | | | $ | (76) | | | Discounted Cash Flow | | Forward basis price (per MMBtu) | | $ | (0.86) | | — | | $ | 2.50 | /MMBtu | | $ | (0.07) | /MMBtu | | Electricity | | $ | 52 | | | $ | (42) | | | Discounted Cash Flow | | Forward basis price (per MWh) | | $ | (9) | | — | | $ | 6 | /MWh | | $ | 0 | /MWh |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | | | | | | | | | | | | Commodity Contracts | | Derivative Assets | | Derivative Liabilities | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average | | | | (In millions) | | | | | | | | | | | | | Natural Gas | | $ | 97 |
| | $ | (126 | ) | | Discounted Cash Flow | | Forward basis price (per MMBtu) | | $ | (1.10 | ) | — | | $ | 9.75 | /MMBtu | | $ | (0.03 | )/MMBtu | | Electricity | | $ | 42 |
| | $ | (30 | ) | | Discounted Cash Flow | | Forward basis price (per MWh) | | $ | (5 | ) | — | | $ | 15 | /MWh | | $ | 2 | /MWh |
115
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2016 | | | | | | | | | | | | | Commodity Contracts | | Derivative Assets | | Derivative Liabilities | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average | | | | (In millions) | | | | | | | | | | | | | Natural Gas | | $ | 53 |
| | $ | (149 | ) | | Discounted Cash Flow | | Forward basis price (per MMBtu) | | $ | (1.00 | ) | — | | $ | 7.90 | /MMBtu | | $ | (0.05 | )/MMBtu | | Electricity | | $ | 39 |
| | $ | (30 | ) | | Discounted Cash Flow | | Forward basis price (per MWh) | | $ | (6 | ) | — | | $ | 12 | /MWh | | $ | 1 | /MWh |
Combined Notes to Consolidated Financial Statements — (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | | | | | | | | | | | | Commodity Contracts | | Derivative Assets | | Derivative Liabilities | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average | | | (In millions) | | | | | | | | | | | | | Natural Gas | | $ | 74 | | | $ | (89) | | | Discounted Cash Flow | | Forward basis price (per MMBtu) | | $ | (1.78) | | — | | $ | 5.78 | /MMBtu | | $ | (0.09) | /MMBtu | | Electricity | | $ | 83 | | | $ | (67) | | | Discounted Cash Flow | | Forward basis price (per MWh) | | $ | (10) | | — | | $ | 6 | /MWh | | $ | 0 | /MWh |
The unobservable inputs used in the fair value measurement of the electricity and natural gas commodity types consist of inputs that are less observable due in part to lack of available broker quotes, supported by little, if any, market activity at the measurement date or are based on internally developed models. Certain basis prices (i.e., the difference in pricing between two locations) included in the valuation of natural gas and electricity contracts were deemed unobservable. The weighted average price for unobservable inputs was calculated using the average of forward price curves for natural gas and electricity and the absolute value of monthly volumes. The inputs listed above would have had a direct impact on the fair values of the above security types if they were adjusted. A significant increase (decrease) in the basis price would resulthave resulted in a higher (lower) fair value for long positions, with offsetting impacts to short positions.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Fair Value of Financial Instruments The fair value of financial instruments included in the table below is determined by using quoted market prices when available. When quoted prices are not available, pricing services may be used to determine the fair value with reference to observable interest rate indexes. The Registrants have obtained an understanding of how the fair values are derived. The Registrants also selectively corroborate the fair value of their transactions by comparison of market-based price sources. Discounted cash flow analyses based upon estimated current borrowing rates are also used to determine fair value when quoted market prices are not available. The fair values of notes receivable, excluding capital leases, and notes payable are generally estimated using discounted cash flow techniques that incorporate market interest rates as well as assumptions about the remaining life of the loans and credit risk. Depending on the information available, other valuation techniques may be used that rely on internal assumptions and models. Valuation policies and procedures for the Registrants are determined by DTE Energy's Treasury Department which reports to DTE Energy's Vice President and Treasurer and DTE Energy's Controller's Department which reports to DTE Energy's Vice President, Controller, and Chief Accounting Officer.
The following table presents the carrying amount and fair value of financial instruments for DTE Energy asEnergy: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Carrying | | Fair Value | | Carrying | | Fair Value | | Amount | | Level 1 | | Level 2 | | Level 3 | | Amount | | Level 1 | | Level 2 | | Level 3 | | (In millions) | Notes receivable(a), excluding lessor finance leases | $ | 141 | | | $ | 0 | | | $ | 0 | | | $ | 141 | | | $ | 184 | | | $ | 0 | | | $ | 0 | | | $ | 184 | | | Short-term borrowings | $ | 38 | | | $ | 0 | | | $ | 38 | | | $ | 0 | | | $ | 828 | | | $ | 0 | | | $ | 828 | | | $ | 0 | | Notes payable(b) | $ | 19 | | | $ | 0 | | | $ | 0 | | | $ | 19 | | | $ | 25 | | | $ | 0 | | | $ | 0 | | | $ | 25 | | Long-term debt(c) | $ | 19,439 | | | $ | 2,547 | | | $ | 18,230 | | | $ | 1,397 | | | $ | 16,606 | | | $ | 2,572 | | | $ | 14,207 | | | $ | 1,252 | |
(a)Current portion included in Current Assets — Other on DTE Energy's Consolidated Statements of December 31, 2017Financial Position. (b)Included in Current Liabilities — Other and 2016:Other Liabilities — Other on DTE Energy's Consolidated Statements of Financial Position. (c)Includes debt due within one year, unamortized debt discounts, and issuance costs. Excludes finance lease obligations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Carrying | | Fair Value | | Carrying | | Fair Value | | | Amount | | Level 1 | | Level 2 | | Level 3 | | Amount | | Level 1 | | Level 2 | | Level 3 | | | (In millions) | Notes receivable(a), excluding capital leases | $ | 38 |
| | $ | — |
| | $ | — |
| | $ | 38 |
| | $ | 36 |
| | $ | — |
| | $ | — |
| | $ | 36 |
| | Dividends payable | $ | 158 |
| | $ | 158 |
| | $ | — |
| | $ | — |
| | $ | 148 |
| | $ | 148 |
| | $ | — |
| | $ | — |
| | Short-term borrowings | $ | 621 |
| | $ | — |
| | $ | 621 |
| | $ | — |
| | $ | 499 |
| | $ | — |
| | $ | 499 |
| | $ | — |
| Notes payable — Other(b), excluding capital leases | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | 12 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 17 |
| Long-term debt(c) | $ | 12,288 |
| | $ | 1,939 |
| | $ | 10,571 |
| | $ | 764 |
| | $ | 11,270 |
| | $ | 1,465 |
| | $ | 9,384 |
| | $ | 1,056 |
|
| | (a) | Current portion included in Current Assets — Other on DTE Energy's Consolidated Statements of Financial Position. |
| | (b) | Included in Current Liabilities — Other and Other Liabilities — Other on DTE Energy's Consolidated Statements of Financial Position. |
| | (c) | Includes debt due within one year, unamortized debt discounts, premiums, and issuance costs. Excludes Capital lease obligations. |
The following table presents the carrying amount and fair value of financial instruments for DTE Electric asElectric: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Carrying | | Fair Value | | Carrying | | Fair Value | | Amount | | Level 1 | | Level 2 | | Level 3 | | Amount | | Level 1 | | Level 2 | | Level 3 | | (In millions) | Notes receivable — Other(a) | $ | 16 | | | $ | 0 | | | $ | 0 | | | $ | 16 | | | $ | 9 | | | $ | 0 | | | $ | 0 | | | $ | 9 | | | Short-term borrowings — affiliates | $ | 101 | | | $ | 0 | | | $ | 0 | | | $ | 101 | | | $ | 97 | | | $ | 0 | | | $ | 0 | | | $ | 97 | | | Short-term borrowings — other | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | 354 | | | $ | — | | | $ | 354 | | | $ | 0 | | Notes payable(b) | $ | 17 | | | $ | 0 | | | $ | 0 | | | $ | 17 | | | $ | 21 | | | $ | 0 | | | $ | 0 | | | $ | 21 | | Long-term debt(c) | $ | 8,236 | | | $ | 0 | | | $ | 9,579 | | | $ | 379 | | | $ | 7,180 | | | $ | 0 | | | $ | 7,916 | | | $ | 173 | |
(a)Included in Current Assets — Other and Other Assets — Other on DTE Electric's Consolidated Statements of December 31, 2017Financial Position. (b)Included in Current Liabilities — Other and 2016:Other Liabilities — Other on DTE Electric's Consolidated Statements of Financial Position. (c)Includes debt due within one year, unamortized debt discounts, and issuance costs. Excludes finance lease obligations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Carrying | | Fair Value | | Carrying | | Fair Value | | | Amount | | Level 1 | | Level 2 | | Level 3 | | Amount | | Level 1 | | Level 2 | | Level 3 | | | (In millions) | Notes receivable(a), excluding capital leases | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | Short-term borrowings — affiliates | $ | 116 |
| | $ | — |
| | $ | — |
| | $ | 116 |
| | $ | 117 |
| | $ | — |
| | $ | — |
| | $ | 117 |
| | Short-term borrowings — other | $ | 238 |
| | $ | — |
| | $ | 238 |
| | $ | — |
| | 62 |
| | $ | — |
| | $ | 62 |
| | $ | — |
| Notes payable — Other(b), excluding capital leases | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 6 |
| Long-term debt(c) | $ | 6,017 |
| | $ | — |
| | $ | 6,441 |
| | $ | 171 |
| | $ | 5,878 |
| | $ | — |
| | $ | 6,026 |
| | $ | 264 |
|
| | (a) | Current portion included in Current Assets — Other on DTE Electric's Consolidated Statements of Financial Position. |
| | (b) | Included in Current Liabilities — Other and Other Liabilities — Other on DTE Electric's Consolidated Statements of Financial Position. |
| | (c) | Includes debt due within one year, unamortized debt discounts, and issuance costs. Excludes Capital lease obligations. |
For further fair value information on financial and derivative instruments, see Note 1314 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments."
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Nuclear Decommissioning Trust Funds DTE Electric has a legal obligation to decommission its nuclear power plants following the expiration of its operating licenses. This obligation is reflected as an Asset retirement obligation on DTE Electric's Consolidated Statements of Financial Position. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 and the disposal of low-level radioactive waste. See Note 89 to the Consolidated Financial Statements, "Asset Retirement Obligations." The following table summarizes DTE Electric's fair value of the nuclear decommissioning trust fund assets: | | | | | | | | December 31, | | | December 31, 2017 | | December 31, 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Fermi 2 | $ | 1,475 |
| | $ | 1,291 |
| Fermi 2 | $ | 1,841 | | | $ | 1,650 | | | Fermi 1 | 3 |
| | 3 |
| Fermi 1 | 3 | | | 3 | | | Low-level radioactive waste | 14 |
| | 26 |
| Low-level radioactive waste | 11 | | | 8 | |
| $ | 1,492 |
| | $ | 1,320 |
| | $ | 1,855 | | | $ | 1,661 | |
The costs of securities sold are determined on the basis of specific identification. The following table sets forth DTE Electric's gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds: | | | | Year Ended December 31, | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Realized gains | $ | 83 |
| | $ | 74 |
| | $ | 39 |
| Realized gains | $ | 192 | | | $ | 56 | | | $ | 65 | | | Realized losses | $ | (29 | ) | | $ | (63 | ) | | $ | (33 | ) | Realized losses | $ | (111) | | | $ | (31) | | | $ | (42) | | | Proceeds from sale of securities | $ | 1,240 |
| | $ | 1,457 |
| | $ | 885 |
| Proceeds from sale of securities | $ | 2,350 | | | $ | 788 | | | $ | 1,203 | |
Realized gains and losses from the sale of securities forand unrealized gains and losses incurred by the Fermi 2 trust are recorded to the Regulatory assetassets and the Nuclear decommissioning liability. Realized gains and losses from the sale of securities forand unrealized gains and losses on the low-level radioactive waste funds are recorded to the Nuclear decommissioning liability. The following table sets forth DTE Electric's fair value and unrealized gains and losses for the nuclear decommissioning trust funds: | | | | December 31, 2017 | | December 31, 2016 | | December 31, 2020 | | December 31, 2019 | | | Fair
Value | | Unrealized
Gains | | Unrealized Losses | | Fair
Value | | Unrealized
Gains | | Unrealized Losses | | Fair
Value | | Unrealized
Gains | | Unrealized Losses | | Fair
Value | | Unrealized
Gains | | Unrealized Losses | | | (In millions) | | (In millions) | | Equity securities | $ | 978 |
| | $ | 320 |
| | $ | (32 | ) | | $ | 887 |
| | $ | 222 |
| | $ | (46 | ) | Equity securities | $ | 1,169 | | | $ | 481 | | | $ | (6) | | | $ | 1,046 | | | $ | 396 | | | $ | (39) | | | Fixed income securities | 495 |
| | 13 |
| | (3 | ) | | 425 |
| | 11 |
| | (5 | ) | Fixed income securities | 555 | | | 20 | | | (1) | | | 538 | | | 24 | | | (1) | | | Private equity securities | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | Private equity and other | | Private equity and other | 104 | | | — | | | — | | | 43 | | | — | | | — | | | Cash equivalents | 14 |
| | — |
| | — |
| | 8 |
| | — |
| | — |
| Cash equivalents | 27 | | | — | | | — | | | 34 | | | — | | | — | | | | $ | 1,492 |
| | $ | 333 |
|
| $ | (35 | ) | | $ | 1,320 |
| | $ | 233 |
|
| $ | (51 | ) | | $ | 1,855 | | | $ | 501 | | | $ | (7) | | | $ | 1,661 | | | $ | 420 | | | $ | (40) | |
The following table summarizes the fair value of the fixed income securities held in nuclear decommissioning trust funds by contractual maturity: | | | | | | | December 31, 2017 | | | (In millions) | | Due within one year | $ | 23 |
| | Due after one through five years | 102 |
| | Due after five through ten years | 115 |
| | Due after ten years | 255 |
| | | $ | 495 |
|
| | | | | | | December 31, 2020 | | (In millions) | | Due within one year | $ | 51 | | | Due after one through five years | 101 | | | Due after five through ten years | 89 | | | Due after ten years | 232 | | | $ | 473 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
SecuritiesFixed income securities held in the Nuclearnuclear decommissioning trust funds are classified as available-for-sale. As DTE Electric doesinclude $82 million of non-publicly traded commingled funds that do not have the ability to hold impaired investments for a period of time sufficient to allow for the anticipated recovery of market value, all unrealized losses are considered to be other-than-temporary impairments.contractual maturity date.
Unrealized losses incurred by the Fermi 2 trust are recognized as a Regulatory asset and Nuclear decommissioning liability. Unrealized losses on the low-level radioactive waste funds are recognized as a Nuclear decommissioning liability.
Other Securities At December 31, 20172020 and 2016,2019, the Registrants' securities included in Other investments on the Consolidated Statements of Financial Position were comprised primarily of moneyinvestments within DTE Energy's rabbi trust. The rabbi trust was established to fund certain non-qualified pension benefits, and therefore changes in market value are recognized in earnings. Gains and equity securities. There were no unrealized losses on available-for-sale securities which were reclassified out of Other comprehensive income (loss) and realized into Net Income for DTE Energy or DTE Electric during the years ended December 31, 2017 and 2016. Gains related to trading securities held at December 31, 2017, 2016, and 2015 were $26 million, $15 million, and $1 million, respectively, for the Registrants. The trading gains or losses related to the Rabbi Trust assets, included in Other investments at DTE Energy, are allocated from DTE Energy to DTE Electric.Electric and are included in Other Income or Other Expense, respectively, in the Registrants' Consolidated Statements of Operations. The following table summarizes DTE Energy's gains (losses) related to the trust: | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | (In millions) | | Gains (losses) related to equity securities | $ | (1) | | | $ | 27 | | | $ | (8) | | | Gains (losses) related to fixed income securities | (2) | | | 10 | | | (3) | | | $ | (3) | | | $ | 37 | | | $ | (11) | |
NOTE 1314 — FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS The Registrants recognize all derivatives at their fair value as Derivative assets or liabilities on their respective Consolidated Statements of Financial Position unless they qualify for certain scope exceptions, including the normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge); or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in the value of the underlying exposure is deferred in Accumulated other comprehensive income (loss) and later reclassified into earnings when the underlying transaction occurs. Gains or losses from the ineffective portion of cash flow hedges are recognized in earnings immediately. For fair value hedges, changes in fair values for the derivative and hedged item are recognized in earnings each period. For derivatives that do not qualify or are not designated for hedge accounting, changes in fair value are recognized in earnings each period. The Registrants' primary market risk exposure is associated with commodity prices, credit, and interest rates. The Registrants have risk management policies to monitor and manage market risks. The Registrants use derivative instruments to manage some of the exposure. DTE Energy uses derivative instruments for trading purposes in its Energy Trading segment. Contracts classified as derivative instruments include electricity, natural gas, oil, certain coalenvironmental contracts, forwards, futures, options, swaps, and foreign currency exchange contracts. Items not classified as derivatives include natural gas and environmental inventory, pipeline transportation contracts, renewable energy credits,some environmental contracts, and natural gas storage assets. DTE Electric — DTE Electric generates, purchases, distributes, and sells electricity. DTE Electric uses forward energy contracts to manage changes in the price of electricity and fuel. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Other derivative contracts are MTM and recoverable through the PSCR mechanism when settled. This results in the deferral of unrealized gains and losses as Regulatory assets or liabilities until realized. DTE Gas — DTE Gas purchases, stores, transports, distributes, and sells natural gas, and buys and sells storagetransportation and transportationstorage capacity. DTE Gas has fixed-priced contracts for portions of its expected natural gas supply requirements through March 2020.2023. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. DTE Gas may also sell forward transportation and storage capacity contracts. Forward transportation and storage contracts are generally not derivatives and are therefore accounted for under the accrual method. Gas Storage and Pipelines — This segment is primarily engaged in services related to the gathering, transportation, and storage of natural gas. Primarily fixed-priced contracts are used in the marketing and management of transportation and storage services. Generally, these contracts are not derivatives and are therefore accounted for under the accrual method.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Power and Industrial Projects — This segment manages and operates energy and pulverized coal projects, a coke battery, reduced emissions fuel projects, landfillrenewable gas recovery, and power generation assets. Primarily fixed-price contracts are used in the marketing and management of the segment assets. These contracts are generally not derivatives and are therefore accounted for under the accrual method.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Energy Trading — Commodity Price Risk — Energy Trading markets and trades electricity, natural gas physical products, and energy financial instruments, and provides energy and asset management services utilizing energy commodity derivative instruments. Forwards, futures, options, and swap agreements are used to manage exposure to the risk of market price and volume fluctuations in its operations. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met. Energy Trading — Foreign Currency Exchange Risk — Energy Trading has foreign currency exchange forward contracts to economically hedge fixed Canadian dollar commitments existing under natural gas and power purchase and sale contracts and natural gas transportation contracts. Energy Trading enters into these contracts to mitigate price volatility with respect to fluctuations of the Canadian dollar relative to the U.S. dollar. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met. Corporate and Other — Interest Rate Risk — DTE Energy may use interest rate swaps, treasury locks, and other derivatives to hedge the risk associated with interest rate market volatility. Credit Risk — DTE Energy maintains credit policies that significantly minimize overall credit risk. These policies include an evaluation of potential customers’ and counterparties’ financial condition, including the viability of underlying productive assets, credit rating, collateral requirements, or other credit enhancements such as letters of credit or guarantees. DTE Energy generally uses standardized agreements that allow the netting of positive and negative transactions associated with a single counterparty. DTE Energy maintains a provision for credit losses based on factors surrounding the credit risk of its customers, historical trends, and other information. Based on DTE Energy's credit policies and its December 31, 20172020 provision for credit losses, DTE Energy’s exposure to counterparty nonperformance is not expected to have a material adverse effect on DTE Energy's Consolidated Financial Statements. Derivative Activities DTE Energy manages its MTM risk on a portfolio basis based upon the delivery period of its contracts and the individual components of the risks within each contract. Accordingly, it records and manages the energy purchase and sale obligations under its contracts in separate components based on the commodity (e.g. electricity or natural gas), the product (e.g. electricity for delivery during peak or off-peak hours), the delivery location (e.g. by region), the risk profile (e.g. forward or option), and the delivery period (e.g. by month and year). The following describes the categories of activities represented by their operating characteristics and key risks: •Asset Optimization — Represents derivative activity associated with assets owned and contracted by DTE Energy, including forward natural gas purchases and sales, natural gas transportation, and storage capacity. Changes in the value of derivatives in this category typically economically offset changes in the value of underlying non-derivative positions, which do not qualify for fair value accounting. The difference in accounting treatment of derivatives in this category and the underlying non-derivative positions can result in significant earnings volatility. •Marketing and Origination — Represents derivative activity transacted by originating substantially hedged positions with wholesale energy marketers, producers, end-users, utilities, retail aggregators, and alternative energy suppliers. •Fundamentals Based Trading — Represents derivative activity transacted with the intent of taking a view, capturing market price changes, or putting capital at risk. This activity is speculative in nature as opposed to hedging an existing exposure. •Other — Includes derivative activity at DTE Electric related to FTRs. Changes in the value of derivative contracts at DTE Electric are recorded as Derivative assets or liabilities, with an offset to Regulatory assets or liabilities as the settlement value of these contracts will be included in the PSCR mechanism when realized.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table presents the fair value of derivative instruments for DTE Energy:
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Derivative
Assets | | Derivative
Liabilities | | Derivative
Assets | | Derivative
Liabilities | | (In millions) | | Derivatives designated as hedging instruments | | | | | | | | | Foreign currency exchange contracts | $ | 0 | | | $ | (4) | | | $ | 0 | | | $ | 0 | | | Derivatives not designated as hedging instruments | | | | | | | | | Commodity contracts | | | | | | | | | Natural gas | $ | 233 | | | $ | (223) | | | $ | 355 | | | $ | (351) | | | Electricity | 180 | | | (168) | | | 306 | | | (298) | | | Environmental & Other | 154 | | | (137) | | | 113 | | | (121) | | | Foreign currency exchange contracts | 0 | | | (1) | | | 1 | | | 0 | | | Total derivatives not designated as hedging instruments | $ | 567 | | | $ | (529) | | | $ | 775 | | | $ | (770) | | | | | | | | | | | Current | $ | 446 | | | $ | (386) | | | $ | 646 | | | $ | (596) | | | Noncurrent | 121 | | | (147) | | | 129 | | | (174) | | | Total derivatives | $ | 567 | | | $ | (533) | | | $ | 775 | | | $ | (770) | |
The following table presents the fair value of derivative instruments as of December 31, 2017 and 2016 for DTE Energy: | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Derivative
Assets | | Derivative
Liabilities | | Derivative
Assets | | Derivative
Liabilities | | | (In millions) | | Derivatives not designated as hedging instruments: | | | | | | | | | Commodity Contracts: | | | | | |
| | |
| | Natural Gas | $ | 357 |
| | $ | (378 | ) | | $ | 348 |
| | $ | (461 | ) | | Electricity | 285 |
| | (275 | ) | | 193 |
| | (189 | ) | | Other | 9 |
| | (1 | ) | | 2 |
| | (3 | ) | | Foreign currency exchange contracts | 1 |
| | (3 | ) | | 6 |
| | (3 | ) | | Total derivatives not designated as hedging instrument | $ | 652 |
| | $ | (657 | ) | | $ | 549 |
| | $ | (656 | ) | | | | | | | | | | | Current | $ | 540 |
| | $ | (558 | ) | | $ | 447 |
| | $ | (493 | ) | | Noncurrent | 112 |
| | (99 | ) | | 102 |
| | (163 | ) | | Total derivatives | $ | 652 |
| | $ | (657 | ) | | $ | 549 |
| | $ | (656 | ) |
The following table presents the fair value of derivative instruments as of December 31, 2017 and 2016 for DTE Electric:
| | | | December 31, | | December 31, | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | FTRs — Other current assets | $ | 9 |
| | $ | 2 |
| FTRs — Other current assets | $ | 4 | | | $ | 3 | | | Total derivatives not designated as hedging instruments | $ | 9 |
| | $ | 2 |
| Total derivatives not designated as hedging instruments | $ | 4 | | | $ | 3 | |
Certain of DTE Energy's derivative positions are subject to netting arrangements which provide for offsetting of asset and liability positions as well as related cash collateral. Such netting arrangements generally do not have restrictions. Under such netting arrangements, DTE Energy offsets the fair value of derivative instruments with cash collateral received or paid for those contracts executed with the same counterparty, which reduces DTE Energy's Total Assets and Liabilities. Cash collateral is allocated between the fair value of derivative instruments and customer accounts receivable and payable with the same counterparty on a pro-rata basis to the extent there is exposure. Any cash collateral remaining, after the exposure is netted to zero, is reflected in Accounts receivable and Accounts payable as collateral paid or received, respectively. DTE Energy also provides and receives collateral in the form of letters of credit which can be offset against net Derivative assets and liabilities as well as Accounts receivable and payable. DTE Energy had issued letters of credit of approximately $4 million and $2$7 million outstanding at December 31, 20172020 and 2016, respectively,$6 million at December 31, 2019, which could be used to offset net Derivative liabilities. Letters of credit received from third parties which could be used to offset net Derivative assets were $4$9 million and $2$4 million at December 31, 20172020 and 2016,2019, respectively. Such balances of letters of credit are excluded from the tables below and are not netted with the recognized assets and liabilities in DTE Energy's Consolidated Statements of Financial Position. For contracts with certain clearing agents, the fair value of derivative instruments is netted against realized positions with the net balance reflected as either 1) a Derivative asset or liability or 2) an Account receivable or payable. Other than certain clearing agents, Accounts receivable and Accounts payable that are subject to netting arrangements have not been offset against the fair value of Derivative assets and liabilities. For DTE Energy, the total cash collateral posted, net of cash collateral received, was $28 million and $34 million as of December 31, 2017 and 2016, respectively. DTE Energy had $9 million of cash collateral related to unrealized positions to net against Derivative assets while Derivative liabilities are shown net of cash collateral of $22 million as of December 31, 2017. DTE Energy had $7 million of cash collateral related to unrealized positions to net against Derivative assets while Derivative liabilities are shown net of cash collateral of $28 million as of December 31, 2016. DTE Energy recorded cash collateral paid of $18 million and cash collateral received of $3 million not related to unrealized derivative positions as of December 31, 2017. DTE Energy recorded cash collateral paid of $18 million and cash collateral received of $5 million not related to unrealized derivative positions as of December 31, 2016. These amounts are included in Accounts receivable and Accounts payable and are recorded net by counterparty.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table presents net cash collateral offsetting arrangements for DTE Energy:
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | | (In millions) | | Cash collateral netted against Derivative assets | $ | (12) | | | $ | 0 | | | Cash collateral netted against Derivative liabilities | 6 | | | 0 | | Cash collateral recorded in Accounts receivable(a) | 14 | | | 13 | | Cash collateral recorded in Accounts payable(a) | (1) | | | (3) | | | Total net cash collateral posted (received) | $ | 7 | | | $ | 10 | |
(a)Amounts are recorded net by counterparty. The following table presents the netting offsets of Derivative assets and liabilities for DTE Energy at December 31, 2017 and 2016:Energy: | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Gross Amounts of Recognized Assets (Liabilities) | | Gross Amounts Offset in the Consolidated Statements of Financial Position | | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position | | Gross Amounts of Recognized Assets (Liabilities) | | Gross Amounts Offset in the Consolidated Statements of Financial Position | | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position | | | (In millions) | | Derivative assets: | | | | | | | | | | | | | Commodity Contracts: | | | | | | | | | | | | | Natural Gas | $ | 357 |
| | $ | (256 | ) | | $ | 101 |
| | $ | 348 |
| | $ | (306 | ) | | $ | 42 |
| | Electricity | 285 |
| | (241 | ) | | 44 |
| | 193 |
| | (157 | ) | | 36 |
| | Other | 9 |
| | — |
| | 9 |
| | 2 |
| | — |
| | 2 |
| | Foreign currency exchange contracts | 1 |
| | (1 | ) | | — |
| | 6 |
| | (5 | ) | | 1 |
| | Total derivative assets | $ | 652 |
| | $ | (498 | ) | | $ | 154 |
| | $ | 549 |
| | $ | (468 | ) | | $ | 81 |
| | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | | | | | Commodity Contracts: | | | | | | | | | | | | | Natural Gas | $ | (378 | ) | | $ | 263 |
| | $ | (115 | ) | | $ | (461 | ) | | $ | 321 |
| | $ | (140 | ) | | Electricity | (275 | ) | | 246 |
| | (29 | ) | | (189 | ) | | 163 |
| | (26 | ) | | Other | (1 | ) | | 1 |
| | — |
| | (3 | ) | | 2 |
| | (1 | ) | | Foreign currency exchange contracts | (3 | ) | | 1 |
| | (2 | ) | | (3 | ) | | 3 |
| | — |
| | Total derivative liabilities | $ | (657 | ) | | $ | 511 |
| | $ | (146 | ) | | $ | (656 | ) | | $ | 489 |
| | $ | (167 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Gross Amounts of Recognized Assets (Liabilities) | | Gross Amounts Offset in the Consolidated Statements of Financial Position | | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position | | Gross Amounts of Recognized Assets (Liabilities) | | Gross Amounts Offset in the Consolidated Statements of Financial Position | | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position | | (In millions) | | Derivative assets | | | | | | | | | | | | | Commodity contracts | | | | | | | | | | | | | Natural gas | $ | 233 | | | $ | (156) | | | $ | 77 | | | $ | 355 | | | $ | (266) | | | $ | 89 | | | Electricity | 180 | | | (120) | | | 60 | | | 306 | | | (225) | | | 81 | | | Environmental & Other | 154 | | | (135) | | | 19 | | | 113 | | | (110) | | | 3 | | | Foreign currency exchange contracts | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 1 | | | Total derivative assets | $ | 567 | | | $ | (411) | | | $ | 156 | | | $ | 775 | | | $ | (601) | | | $ | 174 | | | | | | | | | | | | | | | Derivative liabilities | | | | | | | | | | | | | Commodity contracts | | | | | | | | | | | | | Natural gas | $ | (223) | | | $ | 151 | | | $ | (72) | | | $ | (351) | | | $ | 266 | | | $ | (85) | | | Electricity | (168) | | | 125 | | | (43) | | | (298) | | | 225 | | | (73) | | | Environmental & Other | (137) | | | 129 | | | (8) | | | (121) | | | 110 | | | (11) | | | Interest rate contracts | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | Foreign currency exchange contracts | (5) | | | 0 | | | (5) | | | 0 | | | 0 | | | 0 | | | Total derivative liabilities | $ | (533) | | | $ | 405 | | | $ | (128) | | | $ | (770) | | | $ | 601 | | | $ | (169) | |
The following table presents the netting offsets of Derivative assets and liabilities showing the reconciliation of derivative instruments to DTE Energy's Consolidated Statements of Financial Position at December 31, 2017 and 2016:Position: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities | | Current | | Noncurrent | | Current | | Noncurrent | | Current | | Noncurrent | | Current | | Noncurrent | | (In millions) | | Total fair value of derivatives | $ | 446 | | | $ | 121 | | | $ | (386) | | | $ | (147) | | | $ | 646 | | | $ | 129 | | | $ | (596) | | | $ | (174) | | | Counterparty netting | (318) | | | (81) | | | 318 | | | 81 | | | (513) | | | (88) | | | 513 | | | 88 | | | Collateral adjustment | (12) | | | 0 | | | 0 | | | 6 | | | 0 | | | 0 | | | 0 | | | 0 | | | Total derivatives as reported | $ | 116 | | | $ | 40 | | | $ | (68) | | | $ | (60) | | | $ | 133 | | | $ | 41 | | | $ | (83) | | | $ | (86) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities | | | Current | | Noncurrent | | Current | | Noncurrent | | Current | | Noncurrent | | Current | | Noncurrent | | | (In millions) | | Total fair value of derivatives | $ | 540 |
| | $ | 112 |
| | $ | (558 | ) | | $ | (99 | ) | | $ | 447 |
| | $ | 102 |
| | $ | (493 | ) | | $ | (163 | ) | | Counterparty netting | (437 | ) | | (52 | ) | | 437 |
| | 52 |
| | (396 | ) | | (65 | ) | | 396 |
| | 65 |
| | Collateral adjustment | — |
| | (9 | ) | | 22 |
| | — |
| | (4 | ) | | (3 | ) | | 28 |
| | — |
| | Total derivatives as reported | $ | 103 |
| | $ | 51 |
| | $ | (99 | ) | | $ | (47 | ) | | $ | 47 |
| | $ | 34 |
| | $ | (69 | ) | | $ | (98 | ) |
The effect of derivatives not designated as hedging instruments on DTE Energy's Consolidated Statements of Operations for years ended December 31, 2017 and 2016 is as follows:
| | | | | | | | | | | | | | | Location of Gain (Loss) Recognized in Income on Derivatives | | Gain (Loss) Recognized in Income on Derivatives for Years Ended December 31, | | Derivatives not Designated as Hedging Instruments | | | 2017 | | 2016 | | | | | | (In millions) | | Commodity Contracts: | | | | | | | | Natural Gas | | Operating Revenues — Non-utility operations | | $ | (74 | ) | | $ | (153 | ) | | Natural Gas | | Fuel, purchased power, and gas — non-utility | | 97 |
| | (2 | ) | | Electricity | | Operating Revenues — Non-utility operations | | 105 |
| | 43 |
| | Other | | Operating Revenues — Non-utility operations | | 2 |
| | 5 |
| | Foreign currency exchange contracts | | Operating Revenues — Non-utility operations | | (2 | ) | | (2 | ) | | Total | | | | $ | 128 |
| | $ | (109 | ) |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The effect of derivatives not designated as hedging instruments on DTE Energy's Consolidated Statements of Operations is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Location of Gain (Loss) Recognized in Income on Derivatives | | Gain (Loss) Recognized in Income on Derivatives for Years Ended December 31, | | | | 2020 | | 2019 | | 2018 | | | | | (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commodity contracts | | | | | | | | | | Natural gas | | Operating Revenues — Non-utility operations | | $ | (70) | | | $ | 44 | | | $ | (42) | | | Natural gas | | Fuel, purchased power, gas, and other — non-utility | | 20 | | | (5) | | | (94) | | | Electricity | | Operating Revenues — Non-utility operations | | 91 | | | 44 | | | 49 | | | Environmental & Other | | Operating Revenues — Non-utility operations | | (118) | | | (26) | | | (1) | | | Foreign currency exchange contracts | | Operating Revenues — Non-utility operations | | (6) | | | (2) | | | 7 | | | Total | | | | $ | (83) | | | $ | 55 | | | $ | (81) | |
Revenues and energy costs related to trading contracts are presented on a net basis in DTE Energy's Consolidated Statements of Operations. Commodity derivatives used for trading purposes, and financial non-trading commodity derivatives, are accounted for using the MTM method with unrealized and realized gains and losses recorded in Operating Revenues — Non-utility operations. Non-trading physical commodity sale and purchase derivative contracts are generally accounted for using the MTM method with unrealized and realized gains and losses for sales recorded in Operating Revenues — Non-utility operations and purchases recorded in Fuel, purchased power, gas, and gasother — non-utility. The following represents the cumulative gross volume of DTE Energy's derivative contracts outstanding as of December 31, 2017: | | | | | | | | | | Commodity | | Number of Units | Natural Gasgas (MMBtu) | | 1,822,796,3011,757,668,006 |
| | Electricity (MWh) | | 29,715,26829,383,355 |
| | | | Foreign Currency Exchange (Canadian dollars)currency exchange ($ CAD) | | 108,023,948144,655,453 |
| | | | | Renewable Energy Certificates (MWh) | | 9,221,803 | | | Carbon emissions (Metric Ton) | | 12,495,202 | |
Various subsidiaries of DTE Energy have entered into contracts which contain ratings triggers and are guaranteed by DTE Energy. These contracts contain provisions which allow the counterparties to require that DTE Energy post cash or letters of credit as collateral in the event that DTE Energy’s credit rating is downgraded below investment grade. Certain of these provisions (known as “hard triggers”"hard triggers") state specific circumstances under which DTE Energy can be required to post collateral upon the occurrence of a credit downgrade, while other provisions (known as “soft triggers”"soft triggers") are not as specific. For contracts with soft triggers, it is difficult to estimate the amount of collateral which may be requested by counterparties and/or which DTE Energy may ultimately be required to post. The amount of such collateral which could be requested fluctuates based on commodity prices (primarily natural gas, power, environmental, and coal) and the provisions and maturities of the underlying transactions. As of December 31, 2017,2020, DTE Energy's contractual obligation to post collateral in the form of cash or letters of credit in the event of a downgrade to below investment grade, under both hard trigger and soft trigger provisions, was approximately $456$428 million. As of December 31, 2017,2020, DTE Energy had approximately $535$451 million of derivatives in net liability positions, for which hard triggers exist. There is no0 collateral that has been posted against such liabilities, including cash and letters of credit. Associated derivative net asset positions for which contractual offset exists were approximately $468$401 million. The net remaining amount of approximately $67$50 million is derived from the $456$428 million noted above.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 1415 — LONG-TERM DEBT Long-Term Debt DTE Energy's long-term debt outstanding and weighted average interest rates of debt outstanding at December 31 were: | | | | Interest Rate(a) | | Maturity Date | | 2017 | | 2016 | | Interest Rate(a) | | Maturity Date | | 2020 | | 2019 | | | | (In millions) | | | | | | (In millions) | | Mortgage bonds, notes, and other | | | | | Mortgage bonds, notes, and other | | | DTE Energy Debt, Unsecured | 3.1% | | 2019 — 2033 | | $ | 3,825 |
| | $ | 3,325 |
| DTE Energy Debt, Unsecured | 2.7% | | 2022 — 2033 | | $ | 8,175 | | | $ | 6,625 | | | DTE Electric Taxable Debt, Principally Secured | 4.3% | | 2020 — 2047 | | 5,755 |
| | 5,615 |
| DTE Electric Taxable Debt, Principally Secured | 3.9% | | 2021 — 2050 | | 8,030 | | | 6,930 | | DTE Electric Tax-Exempt Revenue Bonds(b) | 4.3% | | 2020 — 2030 | | 310 |
| | 310 |
| DTE Electric Tax-Exempt Revenue Bonds(b) | 4.1% | | 2021 — 2030 | | 278 | | | 310 | | | DTE Gas Taxable Debt, Principally Secured | 4.8% | | 2018 — 2047 | | 1,330 |
| | 1,250 |
| DTE Gas Taxable Debt, Principally Secured | 4% | | 2023 — 2050 | | 1,910 | | | 1,710 | | | Other Long-Term Debt, including Non-Recourse Debt | | 7 |
| | 92 |
| | | | | 11,227 |
| | 10,592 |
| | | Unamortized debt discount and premium, net | | (15 | ) | | (10 | ) | | | | | 18,393 | | | 15,575 | | | Unamortized debt discount | | Unamortized debt discount | | (25) | | | (24) | | | Unamortized debt issuance costs | | (69 | ) | | (67 | ) | Unamortized debt issuance costs | | (104) | | | (91) | | | Long-term debt due within one year | | (104 | ) | | (9 | ) | Long-term debt due within one year | | (462) | | | (682) | | | | | $ | 17,802 | | | $ | 14,778 | | | | | | $ | 11,039 |
| | $ | 10,506 |
| | | Junior Subordinated Debentures | | | | | Junior Subordinated Debentures | | | | | | Subordinated Debentures | 5.5% | | 2062 — 2077 | | $ | 1,180 |
| | $ | 780 |
| Subordinated Debentures | 5.3% | | 2076 — 2080 | | $ | 1,210 | | | $ | 1,180 | | | Unamortized debt issuance costs | | (35 | ) | | (24 | ) | Unamortized debt issuance costs | | (35) | | | (34) | | | | | $ | 1,145 |
| | $ | 756 |
| | $ | 1,175 | | | $ | 1,146 | |
| | (a) | Weighted average interest rate as of December 31, 2017. |
| | (b) | DTE Electric Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to DTE Electric on terms substantially mirroring the Revenue Bonds. |
(a)Weighted average interest rate as of December 31, 2020. (b)DTE Electric Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to DTE Electric on terms substantially mirroring the Revenue Bonds. DTE Electric's long-term debt outstanding and weighted average interest rates of debt outstanding at December 31 were: | | | | Interest Rate(a) | | Maturity Date | | 2017 | | 2016 | | Interest Rate(a) | | Maturity Date | | 2020 | | 2019 | | | | (In millions) | | | | | | (In millions) | | Mortgage bonds, notes, and other | | | | | Mortgage bonds, notes, and other | | | Taxable Debt, Principally Secured | 4.3% | | 2020 — 2047 | | $ | 5,755 |
| | $ | 5,615 |
| Taxable Debt, Principally Secured | 3.9% | | 2021 — 2050 | | $ | 8,030 | | | $ | 6,930 | | Tax-Exempt Revenue Bonds(b) | 4.3% | | 2020 — 2030 | | 310 |
| | 310 |
| Tax-Exempt Revenue Bonds(b) | 4.1% | | 2021 — 2030 | | 278 | | | 310 | | | | | | 6,065 |
| | 5,925 |
| | | 8,308 | | | 7,240 | | | Unamortized debt discount | | (10 | ) | | (10 | ) | Unamortized debt discount | | (16) | | | (15) | | | Unamortized debt issuance costs | | (38 | ) | | (37 | ) | Unamortized debt issuance costs | | (56) | | | (45) | | | Long-term debt due within one year | | Long-term debt due within one year | | (462) | | | (632) | | | | | $ | 6,017 |
| | $ | 5,878 |
| | $ | 7,774 | | | $ | 6,548 | | |
| | (a) | Weighted average interest rate as of December 31, 2017. |
| | (b) | Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to DTE Electric on terms substantially mirroring the Revenue Bonds. |
(a)Weighted average interest rate as of December 31, 2020. (b)Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to DTE Electric on terms substantially mirroring the Revenue Bonds.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Debt Issuances In 2017,2020, the following debt was issued: | | | Company | | Month | | Type | | Interest Rate | | Maturity Date | | Amount | Company | | Month | | Type | | Interest Rate | | Maturity Date | | Amount | | | | (In millions) | | | | | | | | | | | (In millions) | | DTE Electric | | DTE Electric | | February | | Mortgage Bonds(a) | | 2.25% | | 2030 | | $ | 600 | | | DTE Electric | | DTE Electric | | February | | Mortgage Bonds(a) | | 2.95% | | 2050 | | 500 | | | DTE Electric | | DTE Electric | | April | | Mortgage Bonds(b) | | 2.63% | | 2031 | | 600 | | | DTE Energy | | March | | Senior Notes(a) | | 3.80% | | 2027 | | $ | 500 |
| DTE Energy | | August | | Senior Notes(c) | | 1.05% | | 2025 | | 800 | | | DTE Electric | | August | | General and Refunding Mortgage Bonds(b) | | 3.75% | | 2047 | | 440 |
| | | DTE Gas | | September | | First Mortgage Bonds(a) | | 3.08% | | 2029 | | 40 |
| DTE Gas | | August | | Mortgage Bonds(d) | | 2.35% | | 2030 | | 125 | | | DTE Gas | | September | | First Mortgage Bonds(a) | | 3.75% | | 2047 | | 40 |
| DTE Gas | | August | | Mortgage Bonds(d) | | 3.20% | | 2050 | | 125 | | | DTE Energy | | November | | Junior Subordinated Debentures(a) | | 5.25% | | 2077 | | 400 |
| DTE Energy | | October | | Junior Subordinated Debentures(e) | | 4.38% | | 2080 | | 230 | | | DTE Energy | | DTE Energy | | October | | Senior Notes(f) | | 0.55% | | 2022 | | 750 | | | | | $ | 1,420 |
| | $ | 3,730 | |
| | (a) | Proceeds were used for repayment of short-term borrowings and general corporate purposes. |
| | (b) | Proceeds were used to repay $300 million of DTE Electric's 2008 series G 5.60% Senior Notes due on June 15, 2018, for the repayment of short-term borrowings and general corporate purposes.(a)Proceeds used for the repayment of $300 million of DTE Electric's 2010 Series A 4.89% Senior Notes due 2020, repayment of short-term borrowings, capital expenditures, and for other general corporate purposes. (b)Proceeds used for the repayment of $300 million of DTE Electric's 2010 Series B 3.45% Senior Notes due 2020, repayment of $32 million of DTE Electric's 2008 Series KT Variable Rate Senior Notes due 2020, repayment of short-term borrowings, capital expenditures, and for other general corporate purposes. (c)Proceeds used for the repayment of short-term borrowings and for general corporate purposes. (d)Proceeds used for the repayment of $50 million of DTE Gas's 2008 Series I 6.36% Senior Notes due 2020 and for general corporate purposes, including capital expenditures. (e)Proceeds used for the repayment of $200 million of DTE Energy's 2012 Series C 5.25% Junior Subordinated Debentures due 2062 and for general corporate purposes. (f)Proceeds used for the repayment of DTE Energy's $500 million unsecured term loan expiring March 2021, repayment of DTE Energy's $167 million unsecured term loan expiring June 2021, and general corporate purposes. |
Debt Redemptions In 2017,2020, the following debt was redeemed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | Month | | Type | | Interest Rate | | Maturity Date | | Amount | | | | | | | | | | | (In millions) | | DTE Electric | | March | | Senior Notes | | 4.89% | | 2020 | | $ | 300 | | | DTE Electric | | July | | Senior Notes | | 5.63% | | 2020 | | 32 | | | DTE Electric | | July | | Senior Notes | | 3.45% | | 2020 | | 300 | | | DTE Gas | | September | | Senior Notes | | 6.36% | | 2020 | | 50 | | | DTE Energy | | October | | Junior Subordinated Debentures | | 5.25% | | 2062 | | 200 | | | | | | | | | | | | | | | | | | | | | | | $ | 882 | |
| | | | | | | | | | | | | | | Company | | Month | | Type | | Interest Rate | | Maturity Date | | Amount | | | | | | | | | | | | (In millions) | | DTE Electric | | August | | Senior Notes | | 5.60% | | 2018 | | $ | 300 |
| | DTE Energy | | September | | Secured Note(a) | | 7.29% | | 2029 | | 77 |
| | DTE Energy | | Various | | Other Long-Term Debt | | Various | | 2017 | | 8 |
| | | | | | | | | | | | $ | 385 |
|
| | (a) | DTE Energy's Gas Storage and Pipelines segment recognized a $16 million net loss on extinguishment of debt associated with early repayment, consisting of $20 million of early redemption premiums and $4 million of unamortized debt premiums. The loss is reflected in Other (Income) and Deductions — Interest Expense on the Consolidated Statements of Operations. |
The following table shows the Registrants' scheduled debt maturities, excluding any unamortized discount or premium on debt: | | | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 and Thereafter | | Total | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 and Thereafter | | Total | | | (In millions) | | (In millions) | DTE Energy(a) | $ | 104 |
| | $ | 1,497 |
| | $ | 683 |
| | $ | 462 |
| | $ | 616 |
| | $ | 9,045 |
| | $ | 12,407 |
| DTE Energy(a) | $ | 462 | | | $ | 3,466 | | | $ | 1,177 | | | $ | 1,425 | | | $ | 1,220 | | | $ | 11,853 | | | $ | 19,603 | | | DTE Electric | $ | — |
| | $ | — |
| | $ | 632 |
| | $ | 462 |
| | $ | 316 |
| | $ | 4,655 |
| | $ | 6,065 |
| DTE Electric | $ | 462 | | | $ | 316 | | | $ | 202 | | | $ | 400 | | | $ | 350 | | | $ | 6,578 | | | $ | 8,308 | |
| | (a) | (a)Amounts include DTE Electric's scheduled debt maturities. |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Electric's scheduled debt maturities.
Junior Subordinated Debentures At December 31, 2017, DTE Energy had the following Junior Subordinated Debentures:
| | | | | | | | | | | Interest Rate | | Maturity Date | | Amount | | | | | | | (In millions) | | 2012 Series C | 5.25% | | 2062 | | $ | 200 |
| | 2016 Series B | 5.375% | | 2076 | | 300 |
| | 2016 Series F | 6.00% | | 2076 | | 280 |
| | 2017 Series E | 5.25% | | 2077 | | 400 |
| | | | | | | $ | 1,180 |
|
DTE Energy has the right to defer interest payments on the debt securities.Junior Subordinated Debentures. Should DTE Energy exercise this right, it cannot declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock during the deferral period. Any deferred interest payments will bear additional interest at the rate associated with the related debt issue. As of December 31, 2017,2020, no interest payments have been deferred on the debt securities.Junior Subordinated Debentures.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Cross Default Provisions Substantially all of the net utility properties of DTE Electric and DTE Gas are subject to the lien of mortgages. Should DTE Electric or DTE Gas fail to timely pay their indebtedness under these mortgages, such failure may create cross defaults in the indebtedness of DTE Energy. Gas Storage and Pipelines Segment Acquisition Financing Effective October 1, 2016,In December 2019, DTE Energy closed on the purchase of midstream natural gas assets. The acquisition was financed through the issuance of Equity Units, Senior Notes, and Senior Notes.common stock. See Note 4 to the Consolidated Financial Statements, "Acquisitions and Exit Activities,Dispositions," for more information on the acquisition.
In October 2016,November 2019, DTE issued $675 million$1.3 billion of Equity Units. Each Equity Unit has a stated amount of $50 and was initially issued in the form of a Corporate Unit, is comprised of (i) a forward purchase contract to buy DTE Energy common stock (stock purchase contract) and (ii) a 1/20 undivided beneficial ownership interest in a $1,000 principal amount of DTE Energy’s 20162019 Series C 1.5%F 2.25% RSNs due 2024.2025. The RSN debt instruments and the stock purchase contract equity instruments are deemed to be separate instruments as the investor may trade the RSNs separately from the stock purchase contracts and may also settle the stock purchase contracts separately. The Corporate Units are listed on the New York Stock Exchange under the symbol DTV.DTP. The stock purchase contract obligates the holder to purchase from DTE Energy on the settlement date, OctoberNovember 1, 2019,2022, for a price of $50 per stock purchase contract, the following number of shares of DTE Energy’s common stock, subject to anti-dilution adjustments: •if the AMV of DTE Energy’s common stock, which is the average volume-weighted average price of DTE Energy’s common stock for the trading days during the 20 consecutive scheduled trading day period ending on the third scheduled trading day immediately preceding the stock purchase contract settlement date, is equal to or greater than $116.31, 0.4299$157.50, 0.3175 shares of common stock; •if the AMV is less than $116.31$157.50 but greater than $93.05,$126.00, a number of shares of common stock equal to $50 divided by the AMV, rounded to the nearest 1/10,000th of a share;AMV; and •if the AMV is less than or equal to $93.05, 0.5373$126.00, 0.3968 shares of common stock. The RSNs bear interest at a rate of 1.5%2.25% per year, payable quarterly, and mature on OctoberNovember 1, 2024.2025. The RSNs will be remarketed in 2019.2022. If this remarketing is successful, the interest rate on the RSNs will be reset, and interest thereafter interest will be payable semi-annually at the reset rate. If there is no successful remarketing, the interest rate on the RSNs will not be reset, and thereset. The holders of the RSNs willwould have the right to put the RSNs to DTE Energy at a price equal to 100% of the principal amount, and the proceeds of the put right willwould be deemed to have been applied against the holders’ obligation under the stock purchase contracts. DTE Energy may also redeem, in whole or in part, the RSNs in the event of a failed final remarketing.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
On January 1, 2017, DTE Energy began paying the stock purchase contract holders quarterly contract adjustment payments at a rate of 5% per year of the stated amount of $50 per Equity Unit, or $2.50 per year. The present value of the future contract adjustment payments of $98$150 million was recorded as a reduction of shareholders’ equity, offset by the stock purchase contract liability. The stock purchase contract liability is included in Current Liabilities — Other and Other Liabilities — Other on DTE Energy’s Consolidated Statements of Financial Position. On February 1, 2020, DTE Energy began paying the stock purchase contract holders quarterly contract adjustment payments at a rate of 4% per year of the stated amount of $50 per Equity Unit, or $2 per year. Interest payments on the RSNs are being recorded as interest expense and stock purchase contract payments are being charged against the liability. Accretion of the stock purchase contract liability is recorded as imputed interest expense.
The treasury stock method is used to compute diluted EPS for the stock purchase contract. Under the treasury stock method, the stock purchase contract will only have a dilutive effect when the settlement rate is based on the market value of DTE’s common stock that is greater than $116.31$157.50 (the threshold appreciation price). At December 31, 2017,2020, the stock purchase price contract was anti-dilutive and, therefore, not included in the computation of diluted earnings per share. If payments for the stock purchase contract are deferred, DTE Energy may not make any cash distributions related to its capital stock, including dividends, redemptions, repurchases, liquidation payments or guarantee payments. Also, during the deferral period, DTE Energy may not make any payments on or redeem or repurchase any debt securities that are equal in right of payment with, or subordinated to, the RSNs.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Until settlement of the stock purchase contracts, the shares of stock underlying each contract are not outstanding. Under the terms of the stock purchase contracts, assuming no anti-dilution or other adjustments, DTE Energy will issue between 5.88.3 million and 7.310.3 million shares of its common stock in October 2019.November 2022. A total of 913 million shares of DTE Energy’s common stock have been reserved for issuance in connection with the stock purchase contracts. Selected information about DTE Energy’s 2016 Equity Units is presented below: | | | Issuance Date | | Units Issued | | Total Net Proceeds | | Total Long-Term Debt | | RSN Annual Interest Rate | | Stock Purchase Contract Annual Rate | | Stock Purchase Settlement Date | | Stock Purchase Contract Liability(a) | | RSN Maturity Date | Issuance Date | | Units Issued | | Total Net Proceeds | | Total Long-Term Debt | | RSN Annual Interest Rate | | Stock Purchase Contract Annual Rate | | Stock Purchase Settlement Date | | Stock Purchase Contract Liability(a) | | RSN Maturity Date | | (In millions, except interest rates) | (In millions, except interest rates) | (In millions, except interest rates) | | 10/5/2016 | | 13.5 | | $ | 654 |
| | $ | 675 |
| | 1.5% | | 5.0% | | 10/1/2019 | | $ | 98 |
| | 10/1/2024 | | | 11/1/19 | | 11/1/19 | | 26 | | $ | 1,268 | | | $ | 1,300 | | | 2.25% | | 4.0% | | 11/1/2022 | | $ | 150 | | | 11/1/2025 |
| | (a) | Payments of $32 million were made in 2017. The stock purchase contract liability was $66 million and $98 million at December 31, 2017 and 2016, respectively, exclusive of interest. |
In October 2016, DTE Energy issued $400(a)Payments of $49 million were made in 2020. The stock purchase contract liability was $101 million and $150 million as of 2016 Series D 1.50% Senior Notes dueDecember 31, 2020 and 2019, and $600 millionrespectively, exclusive of Series E 2.85% Senior Notes due 2026. The proceeds from the Senior Notes were used for the acquisition and general corporate purposes.interest.
NOTE 1516 — PREFERRED AND PREFERENCE SECURITIES As of December 31, 2017,2020, the amount of authorized and unissued stock is as follows: | | | | | | | | | | | | | | | | | | | | | | Company | | Type of Stock | | Par Value | | Shares Authorized | | DTE Energy | | Preferred | | $ | 0 | | | 5,000,000 | | | DTE Electric | | Preferred | | $ | 100 | | | 6,747,484 | | | DTE Electric | | Preference | | $ | 1 | | | 30,000,000 | | | DTE Gas | | Preferred | | $ | 1 | | | 7,000,000 | | | DTE Gas | | Preference | | $ | 1 | | | 4,000,000 | |
| | | | | | | | | | | | Company | | Type of Stock | | Par Value | | Shares Authorized | | DTE Energy | | Preferred | | $ | — |
| | 5,000,000 |
| | DTE Electric | | Preferred | | $ | 100 |
| | 6,747,484 |
| | DTE Electric | | Preference | | $ | 1 |
| | 30,000,000 |
| | DTE Gas | | Preferred | | $ | 1 |
| | 7,000,000 |
| | DTE Gas | | Preference | | $ | 1 |
| | 4,000,000 |
|
NOTE 1617 — SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS DTE Energy, DTE Electric, and DTE Gas have unsecured revolving credit agreements that can be used for general corporate borrowings, but are intended to provide liquidity support for each of the companies’ commercial paper programs. Borrowings under the revolvers are available at prevailing short-term interest rates. Additionally, DTE Energy also has other facilities to support letter of credit issuance. During 2020, the Registrants entered into a series of unsecured term loans to raise additional liquidity, including terms consistent with the unsecured revolving credit agreements. Several of these term loans were entered into and subsequently repaid in 2020. One unsecured term loan remains as of December 31, 2020, a $200 million loan entered into by DTE Electric in November 2020 with a maturity date in November 2021. Through December 31, 2020, 0 amounts have been drawn and commitment fees have not been material. The loan will terminate if no amounts are drawn by April 30, 2021.
In May 2020, DTE Lake Erie Generation, Inc., an indirect wholly-owned subsidiary of DTE Energy, entered into a C$110 million unsecured revolving credit agreement to fund construction of on-site electric generation and related infrastructure projects at a Canadian integrated steel manufacturing facility in Ontario, Canada. The revolving credit agreement is guaranteed by DTE Energy and there was C$49 million outstanding as of December 31, 2020. The revolving credit agreement expires in May 2023 and has terms consistent with DTE Energy's unsecured revolving credit agreements.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The unsecured revolving credit agreements require DTE Energy, DTE Electric, and DTE Gas to maintain a total funded debt to capitalization ratio of no more than 0.65 to 1. In the agreements, “total"total funded debt”debt" means all indebtedness of each respective company and their consolidated subsidiaries, including capitalfinance lease obligations, hedge agreements, and guarantees of third parties’ debt, but excluding contingent obligations, nonrecourse and junior subordinated debt, and certain equity-linked securities and, except for calculations at the end of the second quarter, certain DTE Gas short-term debt. “Capitalization”"Capitalization" means the sum of (a) total funded debt plus (b) “consolidated"consolidated net worth,”" which is equal to consolidated total equity of each respective company and their consolidated subsidiaries (excluding pension effects under certain FASB statements), as determined in accordance with accounting principles generally accepted in the United States of America. At December 31, 2017,2020, the total funded debt to total capitalization ratios for DTE Energy, DTE Electric, and DTE Gas were 0.540.59 to 1, 0.500.51 to 1, and 0.48 to 1, respectively, and were in compliance with this financial covenant. The availability under the facilities in place at December 31, 20172020 is shown in the following table: | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | DTE Gas | | Total | | | (In millions) | | Unsecured letter of credit facility, expiring in February 2019 | $ | 150 |
| | $ | — |
| | $ | — |
| | $ | 150 |
| | Unsecured letter of credit facility, expiring in September 2019 | 70 |
| | — |
| | — |
| | 70 |
| | Unsecured revolving credit facility, expiring April 2022 | 1,200 |
| | 400 |
| | 300 |
| | 1,900 |
| | | 1,420 |
| | 400 |
| | 300 |
| | 2,120 |
| | Amounts outstanding at December 31, 2017 | | | | | | | | | Commercial paper issuances | 83 |
| | 238 |
| | 300 |
| | 621 |
| | Letters of credit | 124 |
| | — |
| | — |
| | 124 |
| | | 207 |
| | 238 |
| | 300 |
| | 745 |
| | Net availability at December 31, 2017 | $ | 1,213 |
| | $ | 162 |
| | $ | — |
| | $ | 1,375 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | DTE Gas | | Total | | (In millions) | | Unsecured letter of credit facility, expiring in February 2021 | $ | 150 | | | $ | 0 | | | $ | 0 | | | $ | 150 | | | Unsecured letter of credit facility, expiring in August 2021 | 110 | | | 0 | | | 0 | | | 110 | | | Unsecured term loan, expiring in November 2021 | 0 | | | 200 | | | 0 | | | 200 | | | Unsecured Canadian revolving credit facility, expiring May 2023 | 86 | | | 0 | | | 0 | | | 86 | | | Unsecured revolving credit facility, expiring April 2024 | 1,500 | | | 500 | | | 300 | | | 2,300 | | | 1,846 | | | 700 | | | 300 | | | 2,846 | | | Amounts outstanding at December 31, 2020 | | | | | | | | | | | | | | | | | Letters of credit | 193 | | | 0 | | | 0 | | | 193 | | | | | | | | | | | Revolver borrowings | 38 | | | 0 | | | 0 | | | 38 | | | 231 | | | 0 | | | 0 | | | 231 | | | Net availability at December 31, 2020 | $ | 1,615 | | | $ | 700 | | | $ | 300 | | | $ | 2,615 | |
DTE Energy has approximately $9$59 million of other outstanding letters of credit which are used for various corporate purposes and are not included in the facilities described above. These letters of credit include a $50 million uncommitted letter of credit facility entered into by DTE Energy in July 2020, of which the full amount has been drawn. The facility expires in July 2021 with an automatic renewal provision. TheFor DTE Energy, the weighted average interest rate for short-term borrowings was 1.1% and 2.0% at December 31, 2020 and 2019, respectively. For DTE Electric, the weighted average interest rate for short-term borrowings was 1.9% and 0.9% at December 31, 2017 and 2016, respectively, for DTE Energy. The weighted average interest rate for2019. There were no short-term borrowings was 1.5% and 0.8% atoutstanding as of December 31, 2017 and 2016, respectively, for DTE Electric.2020.
In conjunction with maintaining certain exchange tradedexchange-traded risk management positions, DTE Energy may be required to post collateral with its clearing agent.agents. DTE Energy has a demand financing agreements with its clearing agents, including an agreement for up to $100 million with its clearing agent.an indefinite term and an agreement for up to $150 million currently contracted through 2022 and subject to renewal. The $100 million agreement, as amended, also allows for up to $50 million of additional margin financing provided that DTE Energy posts a letter of credit for the incremental amount and allowsamount. Both agreements allow the right of setoff with posted collateral. At December 31, 2017,2020, the capacity under this facilitythese facilities was $100$300 million. The amount outstanding under this agreementthese agreements was $56$49 million and $50$114 million at December 31, 20172020 and 2016,2019, respectively, and was fully offset by the posted collateral. Dividend Restrictions Certain of DTE Energy’s credit facilities contain a provision requiring DTE Energy to maintain a total funded debt to capitalization ratio, as defined in the agreements, of no more than 0.65 to 1, which has the effect of limiting the amount of dividends DTE Energy can pay in order to maintain compliance with this provision. At December 31, 2017,2020, the effect of this provision was a restriction on dividend payments to restrict the payment of approximately $1.8no more than $2.8 billion of DTE Energy's Retained earnings totaling $5.6of $7.2 billion. There are no0 other effective limitations with respect to DTE Energy’s ability to pay dividends.
NOTE 17 — CAPITAL AND OPERATING LEASES
Lessee — Operating Lease — The Registrants lease various assets under operating leases, including coal railcars, office buildings, a warehouse, computers, vehicles, and other equipment. The lease arrangements expire at various dates through 2046.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 18 — LEASES
Lessee Leases at DTE Energy are primarily comprised of various forms of equipment, computer hardware, coal railcars, production facilities, buildings, and certain easement leases with terms ranging from approximately 2 to 40 years. Leases at DTE Electric are primarily comprised of various forms of equipment, computer hardware, coal railcars, and certain easement leases with terms ranging from approximately 2 to 40 years. A lease is deemed to exist when the Registrants have the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Registrants have the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. Lease liabilities are determined utilizing a discount rate to determine the present values of lease payments. Topic 842 requires the use of the rate implicit in the lease when it is readily determinable. When the rate implicit in the lease is not readily determinable, the incremental borrowing rate is used. The Registrants have determined their respective incremental borrowing rates based upon the rate of interest that would have been paid on a collateralized basis over similar tenors to that of the leases. The incremental borrowing rates for DTE Electric and DTE Gas have been determined utilizing respective secured borrowing rates for first mortgage bonds with like tenors of remaining lease terms. Incremental borrowing rates for non-utility entities have been determined utilizing an implied secured borrowing rate based upon an unsecured rate for a similar tenor of remaining lease terms, which is then adjusted for the estimated impact of collateral. Certain leases of the Registrants contain escalation clauses whereby the payments are adjusted for consumer price or labor indices. DTE Energy has leases with non-index based escalation clauses for fixed dollar or percentage increases. DTE Electric has leases with non-index based escalation clauses for fixed dollar increases. DTE Energy also has leases with variable payments based upon usage of, or revenues associated with, the leased assets. DTE Electric also has leases with variable payments based upon the usage of the leased assets. Certain leases of easements and coal railcars contain provisions whereby the Registrants have the option to terminate the lease agreement by giving notice of such termination during the time frames specified in the respective lease. The Registrants have considered such provisions in the determination of the lease term when it is reasonably certain that the lease would be terminated. The Registrants have certain leases which contain purchase options. Based upon the nature of the leased property and terms of the purchase options, the Registrants have determined it is not reasonably certain that such purchase options will be utilized. Thus, the impact of the purchase options has not been included in the determination of right-of-use assets and lease liabilities for the subject leases. The Registrants have certain leases which contain renewal options. Where the renewal options were deemed reasonably certain to occur, the impacts of such options were included in the determination of the right of use assets and lease liabilities. The Registrants have agreements with lease and non-lease components, which are generally accounted for separately. Consideration in a lease is allocated between lease and non-lease components based upon the estimated relative standalone prices. The Registrants have certain coal railcar leases for which non-lease and lease components are accounted for as a single lease component, as permitted under Topic 842.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following is a summary of the components of lease cost for the years ended December 31: | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | | | (In millions) | | Operating lease cost | $ | 39 | | | $ | 41 | | | $ | 14 | | | $ | 17 | | | | | Finance lease cost: | | | | | | | | | | | Amortization of right-of-use assets | 5 | | | 4 | | | 4 | | | 4 | | | | | Interest of lease liabilities | 0 | | | 0 | | | 0 | | | 0 | | | | | Total finance lease cost | 5 | | | 4 | | | 4 | | | 4 | | | | | Variable lease cost | 10 | | | 10 | | | 0 | | | 0 | | | | | Short-term lease cost | 12 | | | 10 | | | 6 | | | 3 | | | | | | | | | | | | | | | $ | 66 | | | $ | 65 | | | $ | 24 | | | $ | 24 | | | |
The Registrants have elected not to apply the recognition requirements of Topic 842 to leases with a term of 12 months or less. DTE Energy and DTE Electric record operating, variable, and short-term lease costs as Operating Expenses on the Consolidated Statements of Operations, except for certain amounts that may be capitalized to other assets. The following is a summary of other information related to leases for the years ended December 31: | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | (In millions) | | Supplemental Cash Flows Information | | | | | | | | | Cash paid for amounts included in the measurement of these liabilities: | | | | | | | | | Operating cash flows for finance leases | $ | 3 | | | $ | 5 | | | $ | 2 | | | $ | 5 | | | Operating cash flows for operating leases | $ | 40 | | | $ | 40 | | | $ | 14 | | | $ | 16 | | | | | | | | | | | Right-of-use assets obtained in exchange for lease obligations: | | | | | | | | | Operating leases | $ | 18 | | | $ | 68 | | | $ | 0 | | | $ | 27 | | | Finance leases | $ | 19 | | | $ | 8 | | | $ | 14 | | | $ | 0 | | | | | | | | | | | Weighted Average Remaining Lease Term (Years) | | | | | | | | | Operating leases | 9.3 | | 9.7 | | 10.4 | | 10.6 | | Finance leases | 7.6 | | 9.1 | | 3.1 | | 2.0 | | | | | | | | | | Weighted Average Discount Rate | | | | | | | | | Operating leases | 3.4 | % | | 3.5 | % | | 3.3 | % | | 3.3 | % | | Finance leases | 2.0 | % | | 3.1 | % | | 1.0 | % | | 3.1 | % |
The Registrants' future minimum lease payments under non-cancelable operating leases atfor remaining periods as of December 31, 2017 were:2020 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | | (In millions) | | 2021 | $ | 37 | | | $ | 8 | | | $ | 13 | | | $ | 6 | | | 2022 | 31 | | | 8 | | | 12 | | | 6 | | | 2023 | 22 | | | 8 | | | 10 | | | 6 | | | 2024 | 13 | | | 2 | | | 8 | | | 1 | | | 2025 | 8 | | | 1 | | | 6 | | | 0 | | | 2026 and thereafter | 61 | | | 7 | | | 32 | | | 0 | | | Total future minimum lease payments | 172 | | | 34 | | | 81 | | | 19 | | | Imputed interest | (28) | | | (3) | | | (14) | | | 0 | | | Lease liabilities | $ | 144 | | | $ | 31 | | | $ | 67 | | | $ | 19 | |
| | | | | | | | | | | DTE Energy | | DTE Electric | | | (In millions) | | 2018 | $ | 40 |
| | $ | 15 |
| | 2019 | 34 |
| | 14 |
| | 2020 | 22 |
| | 9 |
| | 2021 | 13 |
| | 9 |
| | 2022 | 9 |
| | 6 |
| | 2022 and thereafter | 48 |
| | 38 |
| | Total minimum lease payments | $ | 166 |
| | $ | 91 |
|
Rental expense for DTE Energy operating leases was $51 million in 2017 and $43 million in 2016 and 2015, including rental expense forCompany — DTE Electric operatingCompany
Combined Notes to Consolidated Financial Statements — (Continued) Finance leases reported on the Consolidated Statements of Financial Position are as follows for the years ended December 31: | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | (In millions) | | Right-of-use assets, within Property, plant, and equipment, net | $ | 29 | | | $ | 15 | | | $ | 16 | | | $ | 7 | | | Current lease liabilities, within Current Liabilities — Other | $ | 7 | | | $ | 4 | | | $ | 6 | | | $ | 3 | | | Long-term lease liabilities | $ | 24 | | | $ | 11 | | | $ | 13 | | | $ | 4 | |
Lessor During 2020, DTE Energy executed a sale of membership interests in the REF business accounted for as a finance lease arrangement with a term of less than 2 years, resulting in a net investment in finance leases of $28$8 million and selling profit of $11 million. Also in 2017, $28 million2020, DTE Energy completed construction of and began operating certain energy infrastructure assets for a large industrial customer under a long-term agreement, where the assets will transfer to the customer at the end of the contract term in 2016, and $32 million in 2015.2040. DTE Energy has accounted for a portion of the agreement as a finance lease arrangement, recognizing a net investment of $133 million. Lessor — Capital Lease — DTE Energy leases a portion of its pipeline system to the Vector Pipeline through a capitalfinance lease contract that expires in 2020,has been renewed through 2025, with additional renewal options extending for five years.reasonably certain to be exercised through 2040. DTE Energy owns a 40% interest in the Vector Pipeline. In addition, DTE Energy's net investment in finance leases relating to Vector Pipeline was $39 million at December 31, 2020, and is included in the finance leases table below.
DTE Energy has twoalso leases various assets under operating leases for a pipeline, energy services agreements,facilities and related equipment. Such leases are comprised of both fixed payments and variable payments which are contingent on volumes, with terms ranging from 2 to 24 years. Generally, the operating leases do not have renewal provisions or options to purchase the assets at the end of the lease. The operating leases generally do not have termination for whichconvenience provisions. Termination may be allowed under specific circumstances stated in the lease contract, such as under an event of default. Certain of the finance and operating leases have lease terms that extend to the end of the estimated economic life of the leased assets, thereby resulting in no residual value. Any remaining residual values under the finance and operating leases are expected to be recovered through rates, renewals or new lease contracts. Residual values have been determined using the estimated economic life of the leased assets. The finance and operating leases do not contain residual value guarantees. Certain of the operating leases have both lease and non-lease components. The lease and non-lease components are allocated based upon estimated relative standalone selling prices. A lease is deemed to exist when the Registrants have provided other parties with the right to control the use of identified property, plant or equipment, as conveyed through a portioncontract, for a certain period of time and consideration received. The right to control is deemed to occur when the Registrants have provided other parties with the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. DTE Energy’s lease income associated with operating leases was as follows for the years ended December 31: | | | | | | | | | | | | | | | 2020 | | 2019 | | | | (In millions) | Fixed payments(a) | $ | 66 | | | $ | 65 | | | | Variable payments(a) | 124 | | | 128 | | | | | $ | 190 | | | $ | 193 | | | |
(a)Includes $108 million and $130 million of lease payments reported in Operating Revenues and $82 million and $63 million of lease payments reported in Other income on DTE Energy's Consolidated Statements of Operations as of December 31, 2020 and 2019, respectively.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) DTE Energy’s minimum future rental revenues under operating leases for remaining periods as of December 31, 2020 are accountedas follows: | | | | | | | DTE Energy | | (In millions) | | 2021 | $ | 62 | | | 2022 | 22 | | | 2023 | 22 | | | 2024 | 22 | | | 2025 | 19 | | | 2026 and thereafter | 175 | | | $ | 322 | |
Depreciation expense associated with DTE Energy's property under operating leases was $27 million and $26 million for the years ended December 31, 2020 and 2019, respectively. The following is a summary of property under operating leases for DTE Energy as capital leases. These agreements were extended during the year and expire in 2019 and 2026.of December 31: | | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Gross property under operating leases | $ | 447 | | | $ | 445 | | | Accumulated amortization of property under operating leases | $ | 197 | | | $ | 173 | |
The components of DTE Energy'sEnergy’s net investment in capitalfinance leases atfor remaining periods as of December 31, 2017, were2020 are as follows: | | | | | | | | | DTE Energy | | (In millions) | | 2021 | $ | 24 | | | | | 2022 | 20 | | | | | 2023 | 19 | | | | | 2024 | 19 | | | | | 2025 | 19 | | | | | 2026 and thereafter | 253 | | | | | Total minimum future lease receipts | 354 | | | | | Residual value of leased pipeline | 17 | | | | | Less unearned income | 193 | | | | | Net investment in finance lease | 178 | | | | | Less current portion | 9 | | | | | $ | 169 | | | |
| | | | | | | DTE Energy | | | (In millions) | | 2018 | $ | 13 |
| | 2019 | 10 |
| | 2020 | 9 |
| | 2021 | — |
| | 2022 | — |
| | 2023 and thereafter | 1 |
| | Total minimum future lease receipts | 33 |
| | Residual value of leased pipeline | 40 |
| | Less unearned income | (15 | ) | | Net investment in capital lease | 58 |
| | Less current portion | (7 | ) | | | $ | 51 |
|
NOTE 1819 — COMMITMENTS AND CONTINGENCIES Environmental DTE Electric Air — DTE Electric is subject to the EPA ozone and fine particulate transport and acid rain regulations that limit power plant emissions of SO2 and NOxX. The EPA and the State of Michigan have also issued emission reduction regulations relating to ozone, fine particulate, regional haze, mercury, and other air pollution. These rules have led to controls on fossil-fueled power plants to reduce SO2, NOxX, mercury, and other emissions. Additional rulemakings may occur over the next few years which could require additional controls for SO2, NOxX, and other hazardous air pollutants.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The Cross State Air Pollution Rule (CSAPR), required further reductions of SO2 and NOx emissions beginning in January 2015. On September 7, 2016, the EPA finalized an update to the CSAPR ozone season program by issuing the CSAPR Update Rule. This rule is expected to reduce summertime (May - September) NOx emissions from power plants in 22 states in the eastern half of the U.S., including DTE Electric facilities. The CSAPR Update Rule is intended to reduce air quality impacts of the interstate transport of air pollution on downwind areas' ability to meet the 2008 ozone National Ambient Air Quality Standards implementing power sector emission budgets and NOx allowance trading programs. DTE Electric expects to meet its obligations under CSAPR. DTE Electric does not expect this rule to have a material effect on its compliance program.
The EPA proposed revised air quality standards for ground level ozone in November 2014 and specifically requested comments on the form and level of the ozone standards. The standards were finalized in October 2015. The State of Michigan recommended to the EPA in October 2016 which areas of the state are not attaining the new standard. In November 2017,On April 30, 2018, the EPA completedfinalized the majorityState of Michigan's recommended marginal non-attainment designation for southeast Michigan. The State is required to develop and implement a plan to address the United States attainment/unclassifiablesoutheast Michigan ozone non-attainment area designations.by 2021. The Registrants expect the EPA to complete the remaining designations, including the non-attainment area designations with the 2015 ozone standards by the first quarter in 2018. DTE Electric cannot predict the scope and associated financial impact of the revisedState's plan to address the ozone standardsnon-attainment area at this time. In July 2009, DTE Energythe Registrants received a NOV/FOV from the EPA alleging, among other things, that five5 DTE Electric power plants violated New Source Performance standards, Prevention of Significant Deterioration requirements, and operating permit requirements under the Clean Air Act. In June 2010, the EPA issued a NOV/FOV making similar allegations related to a project and outage at Unit 2 of the Monroe Power Plant. In March 2013, DTE Energy received a supplemental NOV from the EPA relating to the July 2009 NOV/FOV. The supplemental NOV alleged additional violations relating to the New Source Review provisions under the Clean Air Act, among other things. In August 2010, the U.S. Department of Justice, at the request of the EPA, brought a civil suit in the U.S. District Court for the Eastern District of Michigan against DTE Energy and DTE Electric, related to the June 2010 NOV/FOV and the outage work performed at Unit 2 of the Monroe Power Plant. In August 2011, the U.S. District Court judge granted DTE Energy's motion for summary judgment in the civil case, dismissing the case and entering judgment in favor of DTE Energy and DTE Electric. In October 2011, the EPA filed a Notice of Appeal to the Court of Appeals for the Sixth Circuit. In March 2013, the Court of Appeals remanded the case to the U.S. District Court for review of the procedural component of the New Source Review notification requirements. In September 2013, the EPA filed a motion seeking leave to amend their complaint regarding the June 2010 NOV/FOV adding additional claims related to outage work performed at the Trenton Channel and Belle River Power Plants as well as additional claims related to work performed at the Monroe Power Plant. In March 2014, the U.S. District Court judge again granted DTE Energy's motion for summary judgment dismissing the civil case related to Monroe Unit 2. In April 2014, the U.S. District Court judge granted motions filed by the EPA and the Sierra Club to amend their New Source Review complaint adding additional claims for Monroe Units 1, 2, and 3, Belle River Units 1 and 2, and Trenton Channel Unit 9. In October 2014, the EPA and the U.S. Department of Justice filed a notice of appeal of the U.S. District Court judge's dismissal of the Monroe Unit 2 case. The amended New Source Review claims were all stayed pending resolution of the appeal by the Court of Appeals for the Sixth Circuit. On January 10, 2017, a divided panel of the Court reversed the decision of the U.S. District Court. On May 8, 2017, DTE Energy and DTE Electric filed a motion to stay the mandate pending filing of a petition for writ of certiorari with the U.S. Supreme Court. The Sixth Circuit granted the motion on May 16, 2017, staying the claims in the U.S. District Court until the U.S. Supreme Court disposes of the case. DTE Electric and DTE Energy filed a petition for writ of certiorari on July 31, 2017. On December 11, 2017, the U.S. Supreme Court denied certiorari. As a result of the Supreme Court electing not to review the matter, the case was sent back to the U.S. District Court for further proceedings.proceedings and on June 14, 2018 the case was stayed pending settlement negotiations. In May 2020, the Registrants, the United States, and the Sierra Club reached a settlement, which was memorialized in the form of a Consent Decree and a separate settlement agreement (Separate Agreement) between the Registrants and Sierra Club. The Registrants are in discussionConsent Decree was submitted and received by the U.S. District Court and the public comment period ended on June 14, 2020. The Consent Decree was entered with the EPA regardingU.S. District Court with an effective date of July 23, 2020 and DTE Electric subsequently paid a civil penalty of $2 million. Sierra Club submitted the Separate Agreement for entry by the U.S. District Court on May 22, 2020; however, the United States opposed the entry of the Separate Agreement. After reviewing the matter, the U.S. District Court determined that the Separate Agreement is a private settlement agreement and therefore, it should not be incorporated into the Consent Decree or entered by the Court. Based on this, matter.Sierra Club voluntarily withdrew its initial complaint in the case, acknowledging that it has resolved the matter privately with DTE Electric by way of the Separate Agreement. On December 3, 2020, the U.S. District Court entered an Opinion and Order Granting Intervenor's Motion for Voluntary Dismissal. As of December 31, 2020, $5 million remains accrued for the settlement with spend expected to begin in early 2021. The Separate Agreement also requires DTE to contribute at least $2 million to community based environmental projects, no later than June 30, 2021. The Registrants believe that the plants and generating units identified by the EPA and the Sierra Club have complied with all applicable federal environmental regulations. Depending upon the outcome of the litigation and further discussions with the EPA regarding the two NOVs/FOVs, DTE Electric could beis required to install additional pollution control equipmentretire, repower, refuel, or retrofit units at some or all of the4 power plants by the dates set forth in question,the Consent Decree and implement early retirement of facilities where control equipment is not economical, engage ina supplemental environmental programs, and/or pay fines.project. The Registrants cannot predictdo not expect the financial impact or outcome of this matter or the timing of its resolution.to have a material impact on their Consolidated Financial Statements.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The EPA has implemented regulatory actions under the Clean Air Act to address emissions of GHGs from the utility sector and other sectors of the economy. Among these actions, in 2015 the EPA finalized performance standards for emissions of carbon dioxide from new and existing fossil-fuel fired EGUs. The performance standards for existing EGUs, known as the EPA Clean Power Plan, were challenged by petitioners and stayed by the U.S. Supreme Court in February 2016 pending final review by the courts. On October 10, 2017, the EPA, under a new administration, proposed to rescind the Clean Power Plan, and in August 2018, the EPA proposed revised emission guidelines for GHGs from existing EGUs. On June 19, 2019, the EPA Administrator officially repealed the Clean Power Plan and finalized its replacement, named the ACE rule. The ACE Rule requires the state of Michigan to submit a plan in 2022 that includes GHG standards for existing coal-fired power plant units in Michigan. These final rules do not impact DTE Energy's commitment for its electric utility operations to reduce carbon emissions 32% by 2023, 50% by 2030, and 80% by 2040 from 2005 carbon emissions levels, or its goal of net 0 emissions for its electric utility operations by 2050. In addition to the GHG standards for existing EGUs, in December 2018, the EPA issued proposed revisions to the carbon dioxide performance standards for new, modified, or reconstructed fossil-fuel fired EGUs. The carbon standards for new sources are not expected to have a material impact on DTE Electric, since DTE Electric has no plans to build new coal-fired generation and any potential new gas generation will be able to comply with the standards. In February 2016, the U.S. Supreme Court granted petitioners' requests for a stay of the carbon rules for existing EGUs (also known as the EPA Clean Power Plan) pending final review by the courts. The Clean Power Plan has no legal effect while the stay is in place. On March 28, 2017, a presidential executive order was issued on "Promoting Energy Independence and Economic Growth." The order instructs the EPA to review, and if appropriate, suspend, revise or rescind the Clean Power Plan rule. Additionally, federal agencies have been directed to conduct a review of all existing regulations that potentially burden the development and use of domestically produced energy resources. Following the issuance of this order, the federal government requested the U.S. Court of Appeals for the D.C. Circuit to hold all legal challenges in abeyance until the review of these regulations is completed. On October 10, 2017, the EPA proposed to rescind the Clean Power Plan and announced its intent to issue an ANPR seeking input as to whether it should replace the rule and, if so, what form it should take. It is not possible to determine the potential impact of the EPA's repeal and possible replacement of the Clean Power Plan on existing sources at this time. Pending or future legislation or other regulatory actions could have a material impact on DTE Electric's operations and financial position and the rates charged to its customers. Impacts include expenditures for environmental equipment beyond what is currently planned, financing costs related to additional capital expenditures, the purchase of emission credits from market sources, higher costs of purchased power, and the retirement of facilities where control equipment is not economical. DTE Electric would seek to recover these incremental costs through increased rates charged to its utility customers, as authorized by the MPSC. To comply with air pollution requirements, DTE Electric has spent approximately $2.4 billion through 2017.billion. DTE Electric does not0t anticipate additional capital expenditures for air pollution requirements through 2024.2025, subject to the results of future rulemakings. Water — In response to an EPA regulation, DTE Electric was required to examine alternatives for reducing the environmental impacts of the cooling water intake structures at several of its facilities. Based on the results of completed studies and expected future studies, DTE Electric may be required to install technologies to reduce the impacts of the water intake structures. A final rule became effective in October 2015.2014. The final rule requires studies to be completed and submitted as part of the National Pollutant Discharge Elimination System (NPDES)NPDES permit application process to determine the type of technology needed to reduce impacts to fish. DTE Electric has initiated the process of completing the required studies. Final compliance for the installation of any required technology will be determined by eachthe state on a case by case, site specific basis. DTE Electric is currently evaluating the compliance options and working with the State of Michigan on evaluating whether any controls are needed. These evaluations/studies may require modifications to some existing intake structures. It is not possible to quantify the impact of this rulemaking at this time. Contaminated and Other Sites — Prior to the construction of major interstate natural gas pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke, or oil. The facilities, which produced gas, have been designated as MGP sites. DTE Electric conducted remedial investigations at contaminated sites, including three3 former MGP sites. Cleanup of one of the MGP sites is complete, and the site is closed. The investigations have revealed contamination related to the by-products of gas manufacturing at each MGP site. In addition to the MGP sites, DTE Electric is also in the process of cleaning up other contaminated sites, including the area surrounding an ash landfill, electrical distribution substations, electric generating power plants, and underground and aboveground storage tank locations. The findings of these investigations indicated that the estimated cost to remediate these sites is expected to be incurred over the next several years. At December 31, 20172020 and 2016,2019, DTE Electric had $6$10 million and $8 million, respectively, accrued for remediation, respectively.remediation. These costs are not discounted to their present value. Any change in assumptions, such as remediation techniques, nature and extent of contamination, and regulatory requirements, could impact the estimate of remedial action costs for the sites and affect DTE Electric’s financial position and cash flows. DTE Electric believes the likelihood of a material change to the accrued amount is remote based on current knowledge of the conditions at each site.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Coal Combustion Residuals and Effluent Limitations Guidelines — A final EPA rule for the disposal of coal combustion residuals, commonly known as coal ash, became effective in October 2015, and was revised in October 2016. In2016, July 2018, September 2017,2020, and November 2020. The rule is based on the EPA indicated that it intends to reconsider certain provisionscontinued listing of the CCR Rule, but the naturecoal ash as a non-hazardous waste and timing of such a reconsideration is unknown.relies on various self-implementation design and performance standards. DTE Electric owns and operates three3 permitted engineered coal ash storage facilities to dispose of coal ash from coal-fired power plants and operates a number of smaller impoundments at its power plants.plants subject to certain provisions in the CCR obligations vary based on plant life, but includerule. At certain facilities, the installationrule currently requires ongoing sampling and testing of monitoring wells, compliance with groundwater standards, and the closure of landfills and basins at the end of the useful life of the associated power plant orplant. On September 28, 2020, the CCR rule "A Holistic Approach to Closure Part A: Deadline to Initiate Closure and Enhancing Public Access to Information" became effective and establishes April 11, 2021 as the new deadline for all unlined impoundments (including units previously classified as "clay-lined") to initiate closure. Additionally, the rule amends certain reporting requirements and CCR website requirements. On November 12, 2020, an additional revision to the CCR Rule "A Holistic Approach to Closure Part B: Alternate Demonstration for Unlined Surface Impoundments" was published in the Federal Register that provides a basin becomes inactive.
DTE Energy Company —process to determine if certain unlined impoundments consist of an alternative liner system that may be as protective as the current liners specified in the CCR rule, and therefore may continue to operate. DTE Electric Companyis currently evaluating both final rules to determine any changes to DTE Electric's plans in the operation and closure of coal ash impoundments.
Combined NotesAt the State level, legislation was signed by the Governor in December 2018 and provides for further regulation of the CCR program in Michigan. Additionally, the bill provides the basis of a CCR program that EGLE has submitted to Consolidated Financial Statements — (Continued)
the EPA for approval to fully regulate the CCR program in Michigan in lieu of a Federal permit program.
In November 2015,October 2020, the EPA finalizedpublished in the Federal Register the final version of the ELG Reconsideration Rule (Final Rule) which updates the 2015 ELG Rule (2015 Rule). The Final Rule establishes the technology-based effluent limitations guidelines and standards applicable to flue gas desulfurization (FGD) wastewater and bottom ash transport water. The EPA set the applicability dates for the steam electric power generating industry which may require additional controlsbottom ash transport water and FGD wastewater retrofits to be installed between 2018"as soon as possible" beginning October 13, 2021 and 2023.no later than December 31, 2025. Compliance schedules for individual facilities and individual waste streams are determined through issuance of new wastewaterNPDES permits by the State of Michigan. The State of Michigan has issued a National Pollutant Discharge Elimination SystemNPDES permit for the Belle River Power Plant establishing a compliance deadline of December 31, 2021.2021 based on the 2015 Rule. Due to completion of the Final Rule in 2020, the compliance deadlines within the NPDES permit for Belle River Power Plant will be revised accordingly. No new permits that would require ELG compliance have been issued for other facilities, consequently no compliance timelines have been established. Under the current rule, certain ELG requirements would be required to be performed in conjunction with the CCR. Over the next six years, to comply with the ELG requirements of the November 2015 rules and for the CRR requirements, costs associated with the building of new facilities or installation of controls are estimated to be approximately $295 million. On April 12, 2017, the EPA granted a petition for reconsideration of the 2015 ELG Rule. The EPA also signed an administrative stay of the ELG Rule’s compliance deadlines for fly ash transport water, bottom ash transport water, and flue gas desulfurization (FGD)FGD wastewater, among others. On June 6, 2017, the EPA published in the Federal Register a proposed rule (Postponement Rule) to postpone certain applicable deadlines within the 2015 ELG rule. The final rulePostponement Rule was published on September 18, 2017, which2017. The Postponement Rule nullified the administrative stay but also extended the earliest compliance deadlines for theonly FGD wastewater and bottom ash transport water until November 1, 2020 in order for the EPA to propose and finalize a new ruling. On October 13, 2020, the EPA finalized the ELG Reconsideration Rule which revised the regulations from the 2015 ELG rule. The Reconsideration Rule revises requirements for two specific waste streams produced by steam electric power plants: FGD wastewater and bottom ash transport water. The Reconsideration Rule also provides additional compliance opportunities by finalizing low utilization and cessation of coal burning subcategories. The Reconsideration Rule provides new opportunities for DTE Electric to evaluate existing ELG compliance requirements,strategies and make any necessary adjustments to ensure full compliance with the ELGs in a cost effective manner. DTE Electric is currently evaluating compliance strategies, technologies and system designs for both FGD wastewater and bottom ash transport water system to achieve compliance with the final deadlines, and compliance costs will not be known untilrule. DTE Electric has estimated the EPA completes its reconsiderationimpact of the CCR and ELG Rule.rules to be $721 million of capital expenditures, including $601 million through 2025.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) DTE Gas Air — In June 2020, DTE Energy expanded its net zero goal to include its gas utility operations by committing to reduce greenhouse gas emissions to net 0 by 2050 from procurement of natural gas through delivery. In addition, DTE Gas committed to partner with customers to help them reduce GHG emissions through energy efficiency and participation in a voluntary emissions offset program. Further details of the DTE Gas net zero goal will emerge as the company evaluates strategies and technologies for reducing emissions. Contaminated and Other Sites — DTE Gas owns or previously owned, 14 former MGP sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. Cleanup of six8 of the MGP sites is complete and the sites are closed. DTE Gas has also completed partial closure of six4 additional sites. Cleanup activities associated with the remaining sites will continue over the next several years. The MPSC has established a cost deferral and rate recovery mechanism for investigation and remediation costs incurred at former MGP sites. In addition to the MGP sites, DTE Gas is also in the process of cleaning up other contaminated sites, including gate stations, gas pipeline releases, and underground storage tank locations. As of December 31, 20172020 and 2016,2019, DTE Gas had $41$24 million and $43$25 million, respectively, accrued for remediation, respectively.remediation. These costs are not discounted to their present value. Any change in assumptions, such as remediation techniques, nature and extent of contamination, and regulatory requirements, could impact the estimate of remedial action costs for the sites and affect DTE Gas' financial position and cash flows. DTE Gas anticipates the cost amortization methodology approved by the MPSC, which allows for amortization of the MGP costs over a ten-year period beginning with the year subsequent to the year the MGP costs were incurred, will prevent environmentalthe associated investigation and remediation costs from having a material adverse impact on DTE Gas' results of operations. Non-utility DTE Energy's non-utility businesses are subject to a number of environmental laws and regulations dealing with the protection of the environment from various pollutants. In March 2019, the EPA issued an FOV to EES Coke, the Michigan coke battery facility that is a wholly-owned subsidiary of DTE Energy, alleging that the 2008 and 2014 permits issued by EGLE did not comply with the Clean Air Act. In September 2020, the EPA issued another FOV alleging EES Coke's 2018 and 2019 SO2 emissions exceeded projections and hence violated non-attainment new source review requirements. EES Coke evaluated the EPA's alleged violations and believes that the permits approved by EGLE complied with the Clean Air Act. EES Coke also responded to the EPA's September 2020 allegations demonstrating its actual emissions are compliant with non-attainment new source review requirements. Discussions with the EPA are ongoing. At the present time, DTE Energy cannot predict the outcome or financial impact of this FOV. In January 2021, DTE Midstream announced a goal to achieve net 0 greenhouse gas emissions by 2050, including a 30% reduction in carbon emissions in the next decade. To achieve this goal, DTE Midstream plans comprehensive integration of carbon capture strategies to reduce carbon emissions in its operations. Other In 2010, the EPA finalized a new one-hour SO2 ambient air quality standard that requires states to submit plans and associated timelines for non-attainment areas that demonstrate attainment with the new SO2 standard in phases. Phase 1 addresses non-attainment areas designated based on ambient monitoring data. Phase 2 addresses non-attainment areas with large sources of SO2 and modeled concentrations exceeding the National Ambient Air Quality Standards for SO2. Phase 3 addresses smaller sources of SO2 with modeled or monitored exceedances of the new SO2 standard. Michigan's Phase 1 non-attainment area includes DTE Energy facilities in southwest Detroit and areas of Wayne County. Modeling runs by the MDEQEGLE suggest that emission reductions may be required by significant sources of SO2 emissions in these areas, including DTE Electric power plants and DTE Energy's Michigan coke battery facility. As part of the state implementation planSIP process, DTE Energy has worked with the MDEQEGLE to develop air permits reflecting significant SO2 emission reductions that, in combination with other non-DTE Energy sources' emission reduction strategies, will help the state attain the standard and sustain its attainment. Since several non-DTE Energy sources are also part of the proposed compliance plan, DTE Energy is unable to determine the full impact of the final required emissions reductions on DTE's facilities at this time. Michigan's Phase 2 non-attainment area includes DTE Electric facilities in St. Clair County. State implementationEGLE has not made a final determination on SIP strategy for this area, pending the EPA's review of a clean data determination request. Until agency plans (SIPs) for Phase 2 areas describing the control strategy and timeline for demonstrating compliance with the new SO2 standard are due to the EPA by April 2018. DTE Energy is currently working with the MDEQ to develop the required SIP.final, DTE Energy is unable to determine the full impact of the SIP strategy, as it is currently under development.impacts.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Synthetic Fuel Guarantees DTE Energy discontinued the operations of its synthetic fuel production facilities throughout the United States as of December 31, 2007. DTE Energy provided certain guarantees and indemnities in conjunction with the sales of interests in its synfuel facilities. The guarantees cover potential commercial, environmental, oil price, and tax-related obligations that will survive until 90 days after expiration of all applicable statutes of limitations. DTE Energy estimates that its maximum potential liability under these guarantees at December 31, 20172020 was approximately $620$400 million. Payment under these guarantees is considered remote. REF Guarantees DTE Energy has provided certain guarantees and indemnities in conjunction with the sales of interests in or lease of its REF facilities. The guarantees cover potential commercial, environmental, and tax-related obligations that will survive until 90 days after expiration of all applicable statutes of limitations. DTE Energy estimates that its maximum potential liability under these guarantees at December 31, 20172020 was approximately $386$581 million. PaymentPayments under these guarantees isare considered remote. NEXUS Guarantees NEXUS entered intois party to certain 15-year capacity lease agreements for the transportation of natural gas with DTE Gas and Texas Eastern Transmission, LP, an unrelated third party. Pursuant to the terms of thoseIn conjunction with these agreements, in December 2016, DTE Energy executed separate guarantee agreements withprovided certain guarantees on behalf of NEXUS to DTE Gas and Texas Eastern Transmission, LP, with maximum potential payments totaling $80$209 million and $10$335 million at December 31, 2017,2020, respectively; each representing 50% of all payment obligations due and payable by NEXUS. Should NEXUS fail to perform under the terms of those agreements, DTE Energy is required to perform on its behalf. Each guarantee terminates at the earlier of (i) such time as all of the guaranteed obligations have been fully performed, or (ii) two months following the end of the primary term of the capacity lease agreements. Subsequent to the NEXUS in-service date, theThe amount of each guarantee decreases annually as payments are made by NEXUS to each of the aforementioned counterparties. NEXUS is also party to certain 15-year capacity agreements for the transportation of natural gas with Vector, an equity method investee of DTE Energy. Pursuant to the terms of those agreements, in October 2018, DTE Energy executed a guarantee agreement with Vector, with a maximum potential payment totaling $7 million at December 31, 2020, representing 50% of the first-year payment obligations due and payable by NEXUS. The guarantee terminates at the earlier of (i) such time as all of the guaranteed obligations have been fully performed or (ii) 15 years from the date DTE Energy entered into the guarantee. Should NEXUS fail to perform under the terms of these agreements, DTE Energy is required to perform on its behalf. Payments under these guarantees are considered remote. Other Guarantees In certain limited circumstances, the Registrants enter into contractual guarantees. The Registrants may guarantee another entity’s obligation in the event it fails to perform and may provide guarantees in certain indemnification agreements. Finally, the Registrants may provide indirect guarantees for the indebtedness of others. DTE Energy’s guarantees are not individually material with maximum potential payments totaling $55$50 million at December 31, 2017. Payment2020. Payments under these guarantees isare considered remote. DTE Energy isThe Registrants are periodically required to obtain performance surety bonds in support of obligations to various governmental entities and other companies in connection with its operations. As of December 31, 2017,2020, DTE Energy had approximately $58$125 million of performance bonds outstanding.outstanding, including $69 million for DTE Electric. In the event that such bonds are called for nonperformance, DTE Energythe Registrants would be obligated to reimburse the issuer of the performance bond. DTE Energy isThe Registrants are released from the performance bonds as the contractual performance is completed and does not believe that a material amount of any currently outstanding performance bonds will be called.
Labor ContractsVector Line of Credit
There are several bargaining units forIn July 2019, DTE Energy, subsidiaries' approximate 5,000 represented employees, including DTE Electric's approximate 2,700 represented employees.as lender, entered into a revolving term credit facility with Vector, as borrower, in the amount of C$70 million. The majoritycredit facility was executed in response to the passage of Canadian regulations requiring oil and gas pipelines to demonstrate their financial ability to respond to a catastrophic event and exists for the sole purpose of satisfying these regulations. Vector may only draw upon the facility if the funds are required to respond to a catastrophic event. The maximum potential payment under the line of credit at December 31, 2020 is $55 million. The funding of a loan under the terms of the represented employees are under contracts that expire in 2020 and 2021.credit facility is considered remote.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Labor Contracts
There are several bargaining units for DTE Energy subsidiaries' approximate 5,200 represented employees, including DTE Electric's approximate 2,800 represented employees. The majority of the represented employees are under contracts that expire in 2021 and 2022. Purchase Commitments As of December 31, 2017,2020, the Registrants were party to numerous long-term purchase commitments relating to a variety of goods and services required for their businesses. These agreements primarily consist of fuel supply commitments and renewable energy contracts for the Registrants, as well as energy trading contracts for DTE Energy. The Registrants estimate the following commitments from 20182021 through 2051 for DTE Energy, and 20182021 through 20332051 for DTE Electric, as detailed in the following table: | | | | | | | | | | | DTE Energy | | DTE Electric | | | (In millions) | | 2018 | $ | 2,731 |
| | $ | 930 |
| | 2019 | 1,045 |
| | 320 |
| | 2020 | 638 |
| | 192 |
| | 2021 | 474 |
| | 149 |
| | 2022 | 371 |
| | 88 |
| | 2023 and thereafter | 2,277 |
| | 820 |
| | | $ | 7,536 |
| | $ | 2,499 |
|
| | | | | | | | | | | | | DTE Energy | | DTE Electric | | (In millions) | | 2021 | $ | 2,998 | | | $ | 1,132 | | | 2022 | 1,142 | | | 246 | | | 2023 | 804 | | | 226 | | | 2024 | 520 | | | 159 | | | 2025 | 397 | | | 209 | | | 2026 and thereafter | 1,634 | | | 969 | | | $ | 7,495 | | | $ | 2,941 | |
Utility capital expenditures, expenditures for non-utility businesses, and contributions to equity method investees will be approximately $3.6$4.2 billion and $1.9$3.0 billion in 20182021 for DTE Energy and DTE Electric, respectively. The Registrants have made certain commitments in connection with the estimated 20182021 annual capital expenditures and contributions to equity method investees. Bankruptcies DTE Energy's Power and Industrial Projects segment holds ownership interests in, and operates, 5 generating plants that sell electric output from renewable sources under long-term power purchase agreements with PG&E. PG&E filed for Chapter 11 bankruptcy protection on January 29, 2019. PG&E emerged from Chapter 11 bankruptcy effective July 1, 2020. DTE's renewable power purchase agreements were assumed under PG&E's Reorganization Plan and payment has been received for all past due receivables related to these agreements. COVID-19 Pandemic DTE Energy is actively monitoring the impact of the COVID-19 pandemic on supply chains, markets, counterparties, and customers, and any related impacts on operating costs, customer demand, and recoverability of assets that could materially impact the Registrants' financial results. Impacts from the COVID-19 pandemic for the year ended December 31, 2020 include a reduction in DTE Electric sales volumes from commercial and industrial customers and an increase in residential customer sales volumes. This shift contributed to a net reduction in DTE Electric sales volumes for the year ended December 31, 2020, but the impact to earnings has been mitigated by favorable rate mix. Operation and maintenance expense has also been impacted by COVID-19, primarily at DTE Electric, due to higher costs for personal protective equipment and other health and safety-related costs, including shift premiums and related expenses associated with the sequestration of certain employees critical to continued operations. The Registrants implemented certain cost savings initiatives to offset some of these impacts, to the extent they did not affect safety or reliability of service. Impacts from the COVID-19 pandemic did not have a material effect on the Registrants' capital spending. For non-utility businesses, COVID-19 has primarily impacted the Power and Industrial Projects segment, contributing to lower production in the REF business and lower demand in the Steel business. These impacts were most significant in March and April 2020 when government orders to cease non-essential business activity resulted in temporary shut-down of certain operations. While these impacts have adversely affected Operating revenues and Other income from REF entities, Net income has not been significantly impacted due to related decreases in Operating expenses.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Finally, as discussed in Note 2, "Significant Accounting Policies", the allowance for doubtful accounts was increased at our utilities due to additional risk relating to COVID-19. However, the impact of these increases has not been material. In consideration of the above factors and all other current and expected impacts to the Registrants' performance and cash flows resulting from the COVID-19 pandemic, there have been no material adjustments or reserves deemed necessary to the Consolidated Financial Statements as of December 31, 2020. The Registrants cannot predict the future impacts of the COVID-19 pandemic on the Consolidated Financial Statements, as developments involving COVID-19 and its related effects on economic and operating conditions remain highly uncertain. Other Contingencies The Registrants are involved in certain other legal, regulatory, administrative, and environmental proceedings before various courts, arbitration panels, and governmental agencies concerning claims arising in the ordinary course of business. These proceedings include certain contract disputes, additional environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. The Registrants cannot predict the final disposition of such proceedings. The Registrants regularly review legal matters and record provisions for claims that they can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Registrants' Consolidated Financial Statements in the periods they are resolved. For a discussion of contingencies related to regulatory matters and derivatives, see Notes 910 and 1314 to the Consolidated Financial Statements, "Regulatory Matters" and "Financial and Other Derivative Instruments," respectively.
NOTE 1920 — NUCLEAR OPERATIONS Property Insurance DTE Electric maintains property insurance policies specifically for the Fermi 2 plant. These policies cover such items as replacement power and property damage. NEIL is the primary supplier of the insurance policies. DTE Electric maintains a policy for extra expenses, including replacement power costs necessitated by Fermi 2’s unavailability due to an insured event. This policy has a 12-week waiting period and provides an aggregate $490 million of coverage over a three-year period. DTE Electric has $1.5 billion in primary coverage and $1.25 billion of excess coverage for stabilization, decontamination, debris removal, repair and/or replacement of property, and decommissioning. The combined coverage limit for total property damage is $2.75 billion. The total limit for property damage for non-nuclear events is $2$1.8 billion and an aggregate of $328 million of coverage for extra expenses over a two-year period. On January 13, 2015,December 20, 2019, the Terrorism Risk Insurance Program Reauthorization Act of 20152019 was signed, extending TRIA through December 31, 2020.2027. For multiple terrorism losses caused by acts of terrorism not covered under the TRIA occurring within one year after the first loss from terrorism, the NEIL policies would make available to all insured entities up to $3.2 billion, plus any amounts recovered from reinsurance, government indemnity, or other sources to cover losses.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Under NEIL policies, DTE Electric could be liable for maximum assessments of up to approximately $47$43 million per event if the loss associated with any one event at any nuclear plant should exceed the accumulated funds available to NEIL. Public Liability Insurance As required by federal law, DTE Electric maintains $450 million of public liability insurance for a nuclear incident. For liabilities arising from a terrorist act outside the scope of TRIA, the policy is subject to one industry aggregate limit of $300 million. Further, under the Price-Anderson Amendments Act of 2005, deferred premium charges up to $127$138 million could be levied against each licensed nuclear facility, but not more than $19$20 million per year per facility. Thus, deferred premium charges could be levied against all owners of licensed nuclear facilities in the event of a nuclear incident at any of these facilities.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) Nuclear Fuel Disposal Costs In accordance with the Federal Nuclear Waste Policy Act of 1982, DTE Electric has a contract with the DOE for the future storage and disposal of spent nuclear fuel from Fermi 2 that required DTE Electric to pay the DOE a fee of 1 mill per kWh of Fermi 2 electricity generated and sold. The fee was a component of nuclear fuel expense. The 1 mill per kWh DOE fee was reduced to zero0 effective May 16, 2014. The DOE's Yucca Mountain Nuclear Waste Repository program for the acceptance and disposal of spent nuclear fuel was terminated in 2011. DTE Electric is a party in the litigation against the DOE for both past and future costs associated with the DOE's failure to accept spent nuclear fuel under the timetable set forth in the Federal Nuclear Waste Policy Act of 1982. In July 2012, DTE Electric executed a settlement agreement with the federal government for costs associated with the DOE's delay in acceptance of spent nuclear fuel from Fermi 2 for permanent storage. The settlement agreement, including extensions, provides for a claims process and payment of delay-related costs experienced by DTE Electric through 2019. DTE Electric's claims are being settled and paid on a timely basis. The settlement proceeds reduce the cost of the dry cask storage facility assets and provide reimbursement for related operating expenses. DTE Electric currently employs a spent nuclear fuel storage strategy utilizing a fuel pool and a dry cask storage facility. The spent nuclear fuel storage strategy is expected to provide sufficient spent fuel storage capability for the life of the plant as defined by the originalDTE Electric's operating license.license agreement. The federal government continues to maintain its legal obligation to accept spent nuclear fuel from Fermi 2 for permanent storage. Issues relating to long-term waste disposal policy and to the disposition of funds contributed by DTE Electric ratepayers to the federal waste fund await future governmental action.
NOTE 21 — RETIREMENT BENEFITS AND TRUSTEED ASSETS DTE Energy's subsidiary, DTE Energy Corporate Services, LLC, sponsors defined benefit pension plans and other postretirement plans covering certain employees of the Registrants. The table below represents the pension and other postretirement benefit plans of each Registrant at December 31, 2020: | | | | | | | | | | | | | Registrants | | DTE Energy | | DTE Electric | | Qualified Pension Plans | | | | | DTE Energy Company Retirement Plan | X | | X | | DTE Gas Company Retirement Plan for Employees Covered by Collective Bargaining Agreements | X | | | Shenango Inc. Pension Plan(a) | X | | | | Non-qualified Pension Plans | | | | DTE Energy Company Supplemental Retirement Plan(b) | X | | X | DTE Energy Company Executive Supplemental Retirement Plan(b) | X | | X | | DTE Energy Company Supplemental Severance Benefit Plan | X | | | | Other Postretirement Benefit Plans | | | | | The DTE Energy Company Comprehensive Non-Health Welfare Plan | X | | X | | The DTE Energy Company Comprehensive Retiree Group Health Care Plan | X | | X | | DTE Supplemental Retiree Benefit Plan | X | | X | | DTE Energy Company Retiree Reimbursement Arrangement Plan | X | | X |
(a)Sponsored by Shenango, LLC (b)Sponsored by DTE Energy Company
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
NOTE 20 — RETIREMENT BENEFITS AND TRUSTEED ASSETS
DTE Energy's subsidiary, DTE Energy Corporate Services, LLC (LLC), sponsors defined benefit pension plans and other postretirement plans covering substantially all employees of the Registrants.
The table below represents the pension and other postretirement benefit plans which employees of each Registrant participated at December 31, 2017: | | | | | | Registrants | | DTE Energy | | DTE Electric | Qualified Pension Plans | | | | DTE Energy Company Retirement Plan | X | | X | DTE Gas Company Retirement Plan for Employees Covered by Collective Bargaining Agreements | X | | | Shenango Inc. Pension Plan | X | | | Nonqualified Pension Plans | | | | DTE Energy Company Supplemental Retirement Plan | X | | X | DTE Energy Company Executive Supplemental Retirement Plan(a)
| X | | X | DTE Energy Company Supplemental Severance Benefit Plan | X | | | Other Postretirement Benefit Plans | | | | The DTE Energy Company Comprehensive Non-Health Welfare Plan | X | | X | The DTE Energy Company Comprehensive Retiree Group Health Care Plan | X | | X | DTE Supplemental Retiree Benefit Plan | X | | X | DTE Energy Company Retiree Reimbursement Arrangement Plan | X | | X |
| | (a) | Sponsored by the DTE Energy subsidiary, DTE Energy Holding Company. |
DTE Electric participates in various plans that provide pension and other postretirement benefits for DTE Energy and its affiliates. The plans are sponsored by the LLC. DTE Electric accounts for its participation in DTE Energy's qualified and nonqualifiednon-qualified pension plans by applying multiemployer accounting. DTE Electric accounts for its participation in other postretirement benefit plans by applying multiple-employer accounting. Within multiemployer and multiple-employer plans, participants pool plan assets for investment purposes and to reduce the cost of plan administration. The primary difference between plan types is assets contributed in multiemployer plans can be used to provide benefits for all participating employers, while assets contributed within a multiple-employer plan are restricted for use by the contributing employer. As a result of multiemployer accounting treatment, capitalized costs associated with these plans are reflected in Property, plant, and equipment in DTE Electric's Consolidated Statements of Financial Position. The same capitalized costs are reflected as Regulatory assets and liabilities in DTE Energy's Consolidated Statements of Financial Position. In addition, the service cost and non-service cost components are presented in Operation and maintenance in DTE Electric's Consolidated Statements of Operations. The same non-service cost components are presented in Other (Income) and Deductions — Non-operating retirement benefits, net in DTE Energy's Consolidated Statements of Operations. Plan participants of all plans are solely DTE Energy and affiliate employees.participants. Pension Plan Benefits DTE Energy has qualified defined benefit retirement plans for eligible represented and non-represented employees. The plans are noncontributory and provide traditional retirement benefits based on the employee's years of benefit service, average final compensation, and age at retirement. In addition, certain represented and non-represented employees are covered under cash balance provisions that determine benefits on annual employer contributions and interest credits. DTE Energy also maintains supplemental nonqualified,non-qualified, noncontributory, retirement benefit plans for selectedcertain management employees. These plans provide for benefits that supplement those provided by DTE Energy’s other retirement plans. Net pension cost for DTE Energy includes the following components: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Service cost | $ | 99 | | | $ | 84 | | | $ | 99 | | | Interest cost | 186 | | | 219 | | | 202 | | | Expected return on plan assets | (334) | | | (325) | | | (329) | | | Amortization of: | | | | | | | Net actuarial loss | 171 | | | 131 | | | 176 | | | Prior service cost | 1 | | | 1 | | | 0 | | | Settlements | 25 | | | 2 | | | 0 | | | Net pension cost | $ | 148 | | | $ | 112 | | | $ | 148 | |
| | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income (loss) | | | | | Net actuarial loss | $ | 137 | | | $ | 156 | | | Amortization of net actuarial loss | (193) | | | (133) | | | | | | | Amortization of prior service cost | (1) | | | (1) | | | Total recognized in Regulatory assets and Other comprehensive income (loss) | $ | (57) | | | $ | 22 | | | Total recognized in net periodic pension cost, Regulatory assets, and Other comprehensive income (loss) | $ | 91 | | | $ | 134 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Net pension cost for DTE Energy includes the following components:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Service cost | $ | 92 |
| | $ | 92 |
| | $ | 100 |
| | Interest cost | 214 |
| | 219 |
| | 210 |
| | Expected return on plan assets | (311 | ) | | (309 | ) | | (296 | ) | | Amortization of: | | | | | | | Net actuarial loss | 176 |
| | 164 |
| | 205 |
| | Prior service cost | 1 |
| | 1 |
| | — |
| | Other | — |
| | — |
| | 2 |
| | Net pension cost | $ | 172 |
| | $ | 167 |
| | $ | 221 |
|
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Other changes in plan assets and benefit obligations recognized in Regulatory assets and Other comprehensive income (loss) | | | | | Net actuarial loss | $ | 27 |
| | $ | 197 |
| | Amortization of net actuarial loss | (176 | ) | | (164 | ) | | Prior service cost (credit) | (11 | ) | | 7 |
| | Amortization of prior service cost | (1 | ) | | (1 | ) | | Total recognized in Regulatory assets and Other comprehensive income (loss) | $ | (161 | ) | | $ | 39 |
| | Total recognized in net periodic pension cost, Regulatory assets, and Other comprehensive income (loss) | $ | 11 |
| | $ | 206 |
| | Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income (loss) into net periodic benefit cost during next fiscal year | | | | | Net actuarial loss | $ | 178 |
| | $ | 172 |
| | Prior service cost | $ | — |
| | $ | 1 |
|
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
The following table reconciles the obligations, assets, and funded status of the plans as well as the amounts recognized as prepaid pension cost or pension liability in DTE Energy's Consolidated Statements of Financial Position at December 31: | | | | DTE Energy | | DTE Energy | | | 2017 | | 2016 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Accumulated benefit obligation, end of year | $ | 5,149 |
| | $ | 4,753 |
| Accumulated benefit obligation, end of year | $ | 5,843 | | | $ | 5,387 | | | Change in projected benefit obligation | | | | Change in projected benefit obligation | | | | | Projected benefit obligation, beginning of year | $ | 5,171 |
| | $ | 4,971 |
| Projected benefit obligation, beginning of year | $ | 5,810 | | | $ | 5,124 | | | Service cost | 92 |
| | 92 |
| Service cost | 99 | | | 84 | | | Interest cost | 214 |
| | 219 |
| Interest cost | 186 | | | 219 | | | Plan amendments | (11 | ) | | 7 |
| | | | Actuarial loss | 391 |
| | 141 |
| Actuarial loss | 619 | | | 719 | | | | Special termination benefits | | Special termination benefits | 3 | | | 0 | | | Benefits paid | (281 | ) | | (259 | ) | Benefits paid | (353) | | | (336) | | | Settlements | | Settlements | (60) | | | 0 | | | Projected benefit obligation, end of year | $ | 5,576 |
| | $ | 5,171 |
| Projected benefit obligation, end of year | $ | 6,304 | | | $ | 5,810 | | | Change in plan assets | | | | Change in plan assets | | | | | Plan assets at fair value, beginning of year | $ | 4,012 |
| | $ | 3,832 |
| Plan assets at fair value, beginning of year | $ | 4,993 | | | $ | 4,273 | | | Actual return on plan assets | 674 |
| | 253 |
| Actual return on plan assets | 815 | | | 888 | | | Company contributions | 231 |
| | 186 |
| Company contributions | 102 | | | 168 | | | Benefits paid | (281 | ) | | (259 | ) | Benefits paid | (353) | | | (336) | | | Settlements | | Settlements | (60) | | | 0 | | | Plan assets at fair value, end of year | $ | 4,636 |
| | $ | 4,012 |
| Plan assets at fair value, end of year | $ | 5,497 | | | $ | 4,993 | | | Funded status | $ | (940 | ) | | $ | (1,159 | ) | Funded status | $ | (807) | | | $ | (817) | | | Amount recorded as: | | | | Amount recorded as: | | | | | Current liabilities | $ | (16 | ) | | $ | (7 | ) | Current liabilities | $ | (10) | | | $ | (9) | | | Noncurrent liabilities | (924 | ) | | (1,152 | ) | Noncurrent liabilities | (797) | | | (808) | | | | $ | (940 | ) | | $ | (1,159 | ) | | $ | (807) | | | $ | (817) | | | Amounts recognized in Accumulated other comprehensive income (loss), pre-tax | | | | Amounts recognized in Accumulated other comprehensive income (loss), pre-tax | | | | | Net actuarial loss | $ | 163 |
| | $ | 163 |
| Net actuarial loss | $ | 142 | | | $ | 153 | | | Prior service cost | 6 |
| | 8 |
| Prior service cost | 3 | | | 4 | | | | $ | 169 |
| | $ | 171 |
| | $ | 145 | | | $ | 157 | | Amounts recognized in Regulatory assets(a) | | | | Amounts recognized in Regulatory assets(a) | | | | | Net actuarial loss | $ | 2,014 |
| | $ | 2,163 |
| Net actuarial loss | $ | 1,949 | | | $ | 1,995 | | | Prior service credit | (14 | ) | | (4 | ) | Prior service credit | (11) | | | (12) | | | | $ | 2,000 |
| | $ | 2,159 |
| | $ | 1,938�� | | | $ | 1,983 | |
(a)See Note 10 to the Consolidated Financial Statements, "Regulatory Matters." | | (a) | See Note 9 to the Consolidated Financial Statements, "Regulatory Matters." |
The increases in DTE Energy's pension benefit obligation for the years ended December 31, 2020 and 2019 were primarily due to actuarial loss in both periods, which was primarily driven by decreases in discount rates. The increase in the pension benefit obligation in 2020 was partially offset by a one-time settlement described below. In December 2020, a DTE Energy non-regulated qualified pension plan used plan assets to purchase an annuity contract from a third-party insurance company. The annuity contract will be used to settle the benefit obligations for certain plan participants. The transaction resulted in a $60 million reduction to the plan's projected benefit obligation and plan assets, as well as a one-time settlement charge of $22 million. The settlement charge is a component of net pension cost and is included in Non-operating retirement benefits, net in DTE Energy's Consolidated Statements of Operations for the year ended December 31, 2020.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The Registrants' policy is to fund pension costs by contributing amounts consistent with the provisions of the Pension Protection Act of 2006, and additional amounts when it deems appropriate. The following table provides cash contributions to the qualified pension plans in: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | DTE Energy | $ | 92 | | | $ | 150 | | | $ | 175 | | | DTE Electric | $ | 60 | | | $ | 100 | | | $ | 175 | |
DTE Energy's contributions of $92 million in 2020 included $82 million of common stock and $10 million of cash. Details of the contribution of common stock to the DTE Energy Company Affiliates Employee Benefit Plans Master Trust are as follows: | | | | | | | | | | | | | | | | | | | | | | Date | | Number of Shares | | Price per Share | | Amount | | | | | | | (In millions) | | September 8, 2020 | | 694,444 | | $118.08 | | $ | 82 | |
The above contribution was made on behalf of December 31: | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | DTE Energy | $ | 223 |
| | $ | 179 |
| | $ | 177 |
| | DTE Electric | 185 |
| | 145 |
| | 145 |
|
DTE Electric and DTE Gas, for which DTE Electric and DTE Gas paid DTE Energy cash consideration of $60 million and $22 million, respectively, in September 2020. At the discretion of management and depending upon financial market conditions, DTE Energy anticipates making up to $200$107 million in contributions, including $175 million of DTE Electric contributions to the qualified pension plans in 2018.
2021, including up to $100 million of equity contributions to the qualified pension plans at DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Electric.
DTE Energy's subsidiaries are responsible for their share of qualified and nonqualifiednon-qualified pension benefit costs. DTE Electric's allocated portion of pension benefit costs included in capital expenditures and operating and maintenance expense were $136$106 million, $93 million, and $120 million for the years ended December 31, 20172020, 2019, and 2016, and $176 million for the year ended December 31, 2015.2018, respectively. These amounts include recognized contractual termination benefit charges, curtailment gains, and settlement charges. At December 31, 2017,2020, the benefits related to DTE Energy's qualified and nonqualifiednon-qualified pension plans expected to be paid in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows: | | | | | | | (In millions) | | 2018 | $ | 299 |
| | 2019 | 301 |
| | 2020 | 316 |
| | 2021 | 317 |
| | 2022 | 323 |
| | 2023-2027 | 1,692 |
| | Total | $ | 3,248 |
|
| | | | | | | (In millions) | | 2021 | $ | 352 | | | 2022 | 363 | | | 2023 | 368 | | | 2024 | 352 | | | 2025 | 360 | | | 2026-2030 | 1,757 | | | Total | $ | 3,552 | |
Assumptions used in determining the projected benefit obligation and net pension costs of DTE Energy are: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | Projected benefit obligation | | | | | | | Discount rate | 2.57% | | 3.28% | | 4.40% | | Rate of compensation increase | 3.80% | | 3.85% | | 3.85% | | Cash balance interest crediting rate | 2.00% | | 3.30% | | 3.70% | | Net pension costs | | | | | | | Discount rate | 3.28% | | 4.40% | | 3.70% | | Rate of compensation increase | 3.85% | | 3.85% | | 3.85% | | Expected long-term rate of return on plan assets | 7.10% | | 7.30% | | 7.50% | | Cash balance interest crediting rate | 3.30% | | 3.70% | | 3.70% |
| | | | | | | | | 2017 | | 2016 | | 2015 | | Projected benefit obligation | | | | | | | Discount rate | 3.70% | | 4.25% | | 4.50% | | Rate of compensation increase | 4.98% | | 4.65% | | 4.65% | | Net pension costs | | | | | | | Discount rate | 4.25% | | 4.50% | | 4.12% | | Rate of compensation increase | 4.65% | | 4.65% | | 4.65% | | Expected long-term rate of return on plan assets | 7.50% | | 7.75% | | 7.75% |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) DTE Energy employs a formal process in determining the long-term rate of return for various asset classes. Management reviews historic financial market risks and returns and long-term historic relationships between the asset classes of equities, fixed income, and other assets, consistent with the widely accepted capital market principle that asset classes with higher volatility generate a greater return over the long-term. Current market factors such as inflation, interest rates, asset class risks, and asset class returns are evaluated and considered before long-term capital market assumptions are determined. The long-term portfolio return is also established employing a consistent formal process, with due consideration of diversification, active investment management, and rebalancing. Peer data is reviewed to check for reasonableness. As a result of this process, the Registrants have long-term rate of return assumptions for the pension plans of 7.50%7.00% and other postretirement benefit plans of 7.75%6.70% for 2018.2021. The Registrants believe these rates are a reasonable assumption for the long-term rate of return on plan assets for 20182021 given the current investment strategy. The DTE Energy Company Affiliates Employee Benefit Plans Master Trust employs a total returnliability driven investment approachprogram whereby a mixthe characteristics of equities, fixed income, and other investmentsplan liabilities are used to maximize the long-term return on plan assets consistent with prudent levels of risk, with consideration given to the liquidity needs of the plan.considered when determining investment policy. Risk tolerance is established through consideration of future plan cash flows, plan funded status, and corporate financial considerations. The investment portfolio contains a diversified blend of equity, fixed income, and other investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks growth and value stocks, and large and small market capitalizations. Fixed income securitiesinvestments generally include market durationU.S. Treasuries, other governmental debt, diversified corporate bonds, of companies from diversified industries, mortgage-backed securities, non-U.S. securities, bank loans, and U.S. Treasuries. Pension assets include long duration U.S. government and diversified corporate bonds intended to partially mitigate liability volatility caused by changes in discount rates.mortgage-backed securities. Other assets, such as private markets and hedge funds,investments are used to enhance long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner, to potentially increase the portfolio beyond the market value of invested assets and/or reduce portfolio investment risk. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. Target allocations for DTE Energy's pension plan assets as of December 31, 2020 are listed below: | | | | | | | U.S. Large Capitalization (Cap) Equity Securities | 18 | % | | U.S. Small Cap and Mid Cap Equity Securities | 3 | | | Non-U.S. Equity Securities | 16 | | | Fixed Income Securities | 38 | | | | | Hedge Funds and Similar Investments | 14 | | | Private Equity and Other | 11 | | | 100 | % |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Target allocations for DTE Energy's pension plan assets as of December 31, 2017 are listed below:
| | | | U.S. Large Capitalization (Cap) Equity Securities | 18 | % | U.S. Small Cap and Mid Cap Equity Securities | 5 |
| Non-U.S. Equity Securities | 17 |
| Fixed Income Securities | 32 |
| Hedge Funds and Similar Investments | 20 |
| Private Equity and Other | 8 |
| | 100 | % |
The following tables provide the fair value measurement amounts for DTE Energy's pension plan assets at December 31, 20172020 and 20162019(a): | | | | December 31, 2017 | | December 31, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 1 | | Level 2 | | Other(b) | | Total | | Level 1 | | Level 2 | | Other(b) | | Total | | December 31, 2020 | | December 31, 2019 | | | (In millions) | | Level 1 | | Level 2 | | | Other(b) | | Total | | Level 1 | | Level 2 | | | Other(b) | | Total | | DTE Energy asset category: | | | | | | | | | | | | | | | | DTE Energy asset category: | (In millions) | Short-term Investments(c) | $ | — |
| | $ | 114 |
| | $ | — |
| | $ | 114 |
| | $ | — |
| | $ | 22 |
| | $ | — |
| | $ | 22 |
| Short-term Investments(c) | $ | 92 | | | $ | 0 | | | | $ | 0 | | | $ | 92 | | | $ | 99 | | | $ | 0 | | | | $ | 0 | | | $ | 99 | | | Equity Securities | | | | | | | | | | | | | | |
|
| Equity Securities | | | | | | U.S. Large Cap(d) | 821 |
| | 5 |
| | — |
| | 826 |
| | 875 |
| | 5 |
| | — |
| | 880 |
| | U.S. Small Cap and Mid Cap(e) | 229 |
| | 5 |
| | — |
| | 234 |
| | 229 |
| | 3 |
| | — |
| | 232 |
| | Non-U.S.(f) | 529 |
| | 13 |
| | 280 |
| | 822 |
| | 479 |
| | 18 |
| | 269 |
| | 766 |
| | Fixed Income Securities(g) | 1 |
| | 1,453 |
| | — |
| | 1,454 |
| | 1 |
| | 1,037 |
| | 52 |
| | 1,090 |
| | Domestic(d) | | Domestic(d) | 167 | | | 0 | | | | 1,093 | | | 1,260 | | | 172 | | | 0 | | | | 870 | | | 1,042 | | International(e) | | International(e) | 100 | | | 0 | | | | 791 | | | 891 | | | 387 | | | 0 | | | | 322 | | | 709 | | | Fixed Income Securities | | Fixed Income Securities | | | | | | Governmental(f) | | Governmental(f) | 459 | | | 95 | | | | 0 | | | 554 | | | 569 | | | 0 | | | | 0 | | | 569 | | Corporate(g) | | Corporate(g) | 0 | | | 1,404 | | | | 0 | | | 1,404 | | | 0 | | | 1,452 | | | | 0 | | | 1,452 | | | Hedge Funds and Similar Investments(h) | 265 |
| | — |
| | 593 |
| | 858 |
| | 231 |
| | — |
| | 578 |
| | 809 |
| Hedge Funds and Similar Investments(h) | 238 | | | 61 | | | | 411 | | | 710 | | | 169 | | | 0 | | | | 502 | | | 671 | | Private Equity and Other(i) | — |
| | — |
| | 328 |
| | 328 |
| | — |
| | — |
| | 213 |
| | 213 |
| Private Equity and Other(i) | 0 | | | 0 | | | | 586 | | | 586 | | | 0 | | | 0 | | | | 451 | | | 451 | | Securities Lending(j) | (53 | ) | | (13 | ) | | — |
| | (66 | ) | | (53 | ) | | (25 | ) | | — |
| | (78 | ) | | Securities Lending Collateral(j) | 53 |
| | 13 |
| | — |
| | 66 |
| | 53 |
| | 25 |
| | — |
| | 78 |
| | | | DTE Energy Total | $ | 1,845 |
| | $ | 1,590 |
| | $ | 1,201 |
| | $ | 4,636 |
| | $ | 1,815 |
| | $ | 1,085 |
| | $ | 1,112 |
| | $ | 4,012 |
| DTE Energy Total | $ | 1,056 | | | $ | 1,560 | | | | $ | 2,881 | | | $ | 5,497 | | | $ | 1,396 | | | $ | 1,452 | | | | $ | 2,145 | | | $ | 4,993 | |
| | (a) | For a description of levels within the fair value hierarchy, see Note 12(a)For a description of levels within the fair value hierarchy, see Note 13 to the Consolidated Financial Statements, "Fair Value." |
| | (b) | Amounts represent assets valued at NAV as a practical expedient for fair value. |
| | (c) | This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. |
| | (d) | This category represents portfolios of large capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. |
| | (e) | This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. |
| | (f) | This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as NAV assets. |
| | (g) | This category includes corporate bonds from diversified industries, U.S. Treasuries, and mortgage-backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as NAV assets. |
| | (h) | This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds or limited partnership funds are classified as NAV assets. |
| | (i) | This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. All pricing for investments in this category are classified as NAV assets. |
| | (j) | DTE Energy has a securities lending program with a third-party agent. The program allows the agent to lend certain securities from DTE Energy's pension trusts to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with their securities lending agency agreements. |
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements, — (Continued)
"Fair Value."
(b)Amounts represent assets valued at NAV as a practical expedient for fair value.
(c)This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets. (d)This category represents portfolios of large, medium and small capitalization domestic equities. Investments in this category include exchange-traded securities for which unadjusted quoted prices can be obtained and exchange-traded securities held in a commingled fund classified as NAV assets. (e)This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category include exchange-traded securities for which unadjusted quoted prices can be obtained and exchange-traded securities held in a commingled fund classified as NAV assets. (f)This category includes U.S. Treasuries, bonds, and other governmental debt. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. (g)This category primarily consists of corporate bonds from diversified industries, bank loans, and mortgage backed securities. Pricing for investments in this category is obtained from quotations from broker or pricing services. (h)This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds and limited partnership funds are classified as NAV assets. (i)This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in real estate and private debt. All pricing for investments in this category are classified as NAV assets. The pension trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on stated NAVs. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered preferable. DTE Energy has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, DTE Energy selectively corroborates the fair value of securities by comparison of market-based price sources. There were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2017 and 2016 for DTE Energy.
Other Postretirement Benefits The Registrants participate in defined benefit plans sponsored by the LLC that provide certain other postretirement health care and life insurance benefits for employees who are eligible for these benefits. The Registrants' policy is to fund certain trusts to meet its other postretirement benefit obligations. Separate qualified VEBA and other benefit trusts exist. DTE Energy did not make any contributions to these trusts during 20172020 and does not anticipate making any contributions to the trusts in 2018.2021. DTE Energy and DTE Electric offer a defined contribution VEBA for eligible represented and non-represented employees, in lieu of defined benefit post-employment health care benefits. The Registrants allocate a fixed amount per year to an account in a defined contribution VEBA for each employee. These accounts are managed either by the Registrant (for non-represented and certain represented groups) or by the Utility Workers of America for Local 223 employees. DTE Energy contributions to the VEBA for these accounts were $8$15 million in 2017, $62020, $13 million in 2016,2019, and $5$11 million in 2015,2018, including DTE Electric contributions of $3$7 million in 2017, 2016,2020, and 2015.$6 million in 2019, and $5 million in 2018.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The Registrants also contribute a fixed amount to a Retiree Reimbursement Account, for certain current and future non-represented and represented retirees, spouses, and surviving spouses when the youngest of the retiree's covered household becomes eligible for Medicare Part A based on age. The amount of the annual allocation to each participant is determined by the employee's retirement date and increases each year for each eligible participant at the lower of the rate of medical inflation or 2%. Net other postretirement credit for DTE Energy includes the following components: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Service cost | $ | 26 | | | $ | 22 | | | $ | 27 | | | Interest cost | 56 | | | 70 | | | 69 | | | Expected return on plan assets | (128) | | | (96) | | | (143) | | | Amortization of: | | | | | | | Net actuarial loss | 16 | | | 12 | | | 11 | | | Prior service credit | (19) | | | (9) | | | 0 | | | | | | | | | | | | | | | Net other postretirement credit | $ | (49) | | | $ | (1) | | | $ | (36) | |
| | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets and Other comprehensive income (loss) | | | | | Net actuarial (gain) loss | $ | (38) | | | $ | 34 | | | Amortization of net actuarial loss | (16) | | | (12) | | | Prior service credit | 0 | | | (53) | | | Amortization of prior service credit | 19 | | | 9 | | | | | | | Total recognized in Regulatory assets and Other comprehensive income (loss) | $ | (35) | | | $ | (22) | | | Total recognized in net periodic benefit cost, Regulatory assets, and Other comprehensive income (loss) | $ | (84) | | | $ | (23) | |
Net other postretirement credit for DTE Electric includes the following components: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Service cost | $ | 20 | | | $ | 16 | | | $ | 20 | | | Interest cost | 43 | | | 53 | | | 53 | | | Expected return on plan assets | (87) | | | (65) | | | (98) | | | Amortization of: | | | | | | | Net actuarial loss | 11 | | | 5 | | | 8 | | | Prior service credit | (14) | | | (7) | | | 0 | | | | | | | | | Net other postretirement cost (credit) | $ | (27) | | | $ | 2 | | | $ | (17) | |
| | | | | | | | | | | | | 2020 | | 2019 | | (In millions) | | Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets | | | | | Net actuarial (gain) loss | $ | (26) | | | $ | 41 | | | Amortization of net actuarial loss | (11) | | | (5) | | | Prior service credit | 0 | | | (33) | | | Amortization of prior service credit | 14 | | | 7 | | | | | | | Total recognized in Regulatory assets | $ | (23) | | | $ | 10 | | | Total recognized in net periodic benefit cost and Regulatory assets | $ | (50) | | | $ | 12 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Net other postretirement credit for DTE Energy includes the following components:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Service cost | $ | 27 |
| | $ | 27 |
| | $ | 34 |
| | Interest cost | 73 |
| | 80 |
| | 81 |
| | Expected return on plan assets | (130 | ) | | (129 | ) | | (131 | ) | | Amortization of: | | | | | | | Net actuarial loss | 13 |
| | 30 |
| | 43 |
| | Prior service credit | (14 | ) | | (118 | ) | | (126 | ) | | Other | — |
| | (1 | ) | | — |
| | Net other postretirement credit | $ | (31 | ) | | $ | (111 | ) | | $ | (99 | ) |
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets and Other comprehensive income (loss) | | | | | Net actuarial gain | $ | (21 | ) | | $ | (68 | ) | | Amortization of net actuarial loss | (13 | ) | | (30 | ) | | Prior service credit | (1 | ) | | — |
| | Amortization of prior service credit | 14 |
| | 119 |
| | Total recognized in Regulatory assets and Other comprehensive income (loss) | $ | (21 | ) | | $ | 21 |
| | Total recognized in net periodic benefit cost, Regulatory assets, and Other comprehensive income (loss) | $ | (52 | ) | | $ | (90 | ) | | Estimated amounts to be amortized from Regulatory assets and Accumulated other comprehensive income (loss) into net periodic benefit cost during next fiscal year | | | | | Net actuarial loss | $ | 11 |
| | $ | 16 |
| | Prior service credit | $ | (1 | ) | | $ | (14 | ) |
Net other postretirement credit for DTE Electric includes the following components:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Service cost | $ | 20 |
| | $ | 20 |
| | $ | 25 |
| | Interest cost | 56 |
| | 61 |
| | 62 |
| | Expected return on plan assets | (90 | ) | | (90 | ) | | (90 | ) | | Amortization of: | | | | | | | Net actuarial loss | 8 |
| | 21 |
| | 31 |
| | Prior service credit | (10 | ) | | (89 | ) | | (95 | ) | | Net other postretirement credit | $ | (16 | ) | | $ | (77 | ) | | $ | (67 | ) |
| | | | | | | | | | | 2017 | | 2016 | | | (In millions) | | Other changes in plan assets and accumulated postretirement benefit obligation recognized in Regulatory assets | | | | | Net actuarial (gain) loss | $ | 2 |
| | $ | (59 | ) | | Amortization of net actuarial loss | (8 | ) | | (21 | ) | | Amortization of prior service credit | 10 |
| | 89 |
| | Total recognized in Regulatory assets | $ | 4 |
| | $ | 9 |
| | Total recognized in net periodic benefit cost and Regulatory assets | $ | (12 | ) | | $ | (68 | ) | | Estimated amounts to be amortized from Regulatory assets into net periodic benefit cost during next fiscal year | | | | | Net actuarial loss | $ | 8 |
| | $ | 10 |
| | Prior service credit | $ | — |
| | $ | (10 | ) |
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
The following table reconciles the obligations, assets, and funded status of the plans including amounts recorded as Accrued postretirement liability in the Registrants' Consolidated Statements of Financial Position at December 31: | | | | DTE Energy | | DTE Electric | | DTE Energy | | DTE Electric | | | 2017 | | 2016 | | 2017 | | 2016 | | 2020 | | 2019 | | 2020 | | 2019 | | | (In millions) | | (In millions) | | Change in accumulated postretirement benefit obligation | | | | | | | | Change in accumulated postretirement benefit obligation | | | Accumulated postretirement benefit obligation, beginning of year | $ | 1,795 |
| | $ | 1,846 |
| | $ | 1,373 |
| | $ | 1,414 |
| Accumulated postretirement benefit obligation, beginning of year | $ | 1,751 | | | $ | 1,645 | | | $ | 1,337 | | | $ | 1,247 | | | Service cost | 27 |
| | 27 |
| | 20 |
| | 20 |
| Service cost | 26 | | | 22 | | | 20 | | | 16 | | | Interest cost | 73 |
| | 80 |
| | 56 |
| | 61 |
| Interest cost | 56 | | | 70 | | | 43 | | | 53 | | | Actuarial (gain) loss | 101 |
| | (75 | ) | | 84 |
| | (62 | ) | | | Plan amendments | | Plan amendments | 0 | | | (53) | | | 0 | | | (33) | | | Actuarial loss | | Actuarial loss | 54 | | | 153 | | | 31 | | | 118 | | | | Benefits paid | (86 | ) | | (83 | ) | | (63 | ) | | (60 | ) | Benefits paid | (80) | | | (86) | | | (62) | | | (64) | | | Accumulated postretirement benefit obligation, end of year | $ | 1,910 |
| | $ | 1,795 |
| | $ | 1,470 |
| | $ | 1,373 |
| Accumulated postretirement benefit obligation, end of year | $ | 1,807 | | | $ | 1,751 | | | $ | 1,369 | | | $ | 1,337 | | | Change in plan assets | | | | | | | | Change in plan assets | | | | | | | | | Plan assets at fair value, beginning of year | $ | 1,758 |
| | $ | 1,617 |
| | $ | 1,218 |
| | $ | 1,131 |
| Plan assets at fair value, beginning of year | $ | 1,819 | | | $ | 1,689 | | | $ | 1,236 | | | $ | 1,158 | | | Actual return on plan assets | 252 |
| | 122 |
| | 172 |
| | 87 |
| Actual return on plan assets | 220 | | | 215 | | | 145 | | | 141 | | | Company contributions | — |
| | 20 |
| | — |
| | — |
| | | | Benefits paid | (162 | ) | | (1 | ) | | (118 | ) | | — |
| Benefits paid | (79) | | | (85) | | | (61) | | | (63) | | | Plan assets at fair value, end of year | $ | 1,848 |
| | $ | 1,758 |
| | $ | 1,272 |
| | $ | 1,218 |
| Plan assets at fair value, end of year | $ | 1,960 | | | $ | 1,819 | | | $ | 1,320 | | | $ | 1,236 | | | Funded status | $ | (62 | ) | | $ | (37 | ) | | $ | (198 | ) | | $ | (155 | ) | Funded status | $ | 153 | | | $ | 68 | | | $ | (49) | | | $ | (101) | | | Amount recorded as: | | | | | | | | | Amount recorded as:(a) | | Amount recorded as:(a) | | | | | | | | | Noncurrent assets | $ | — |
| | $ | — |
| | $ | 113 |
| | $ | 114 |
| Noncurrent assets | $ | 561 | | | $ | 454 | | | $ | 335 | | | $ | 266 | | | Current liabilities | (1 | ) | | (1 | ) | | — |
| | — |
| Current liabilities | (1) | | | (1) | | | 0 | | | 0 | | | Noncurrent liabilities | (61 | ) | | (36 | ) | | (311 | ) | | (269 | ) | Noncurrent liabilities | (407) | | | (385) | | | (384) | | | (367) | | | | $ | (62 | ) | | $ | (37 | ) | | $ | (198 | ) | | $ | (155 | ) | | $ | 153 | | | $ | 68 | | | $ | (49) | | | $ | (101) | | | Amounts recognized in Accumulated other comprehensive income (loss), pre-tax | | | | | | | | Amounts recognized in Accumulated other comprehensive income (loss), pre-tax | | | | | | | | | Net actuarial (gain) loss | $ | (1 | ) | | $ | 12 |
| | $ | — |
| | $ | — |
| | | Net actuarial gain | | Net actuarial gain | $ | (7) | | | $ | (8) | | | $ | 0 | | | $ | 0 | | | | $ | (1 | ) | | $ | 12 |
| | $ | — |
| | $ | — |
| | Amounts recognized in Regulatory assets(a) | | | | | | | �� | | | | | | $ | (7) | | | $ | (8) | | | $ | 0 | | | $ | 0 | | Amounts recognized in Regulatory assets(b) | | Amounts recognized in Regulatory assets(b) | | | | | | | | | Net actuarial loss | $ | 279 |
| | $ | 300 |
| | $ | 211 |
| | $ | 217 |
| Net actuarial loss | $ | 234 | | | $ | 289 | | | $ | 156 | | | $ | 193 | | | Prior service credit | (1 | ) | | (14 | ) | | — |
| | (10 | ) | Prior service credit | (69) | | | (88) | | | (48) | | | (62) | | | | $ | 278 |
| | $ | 286 |
| | $ | 211 |
| | $ | 207 |
| | | | | $ | 165 | | | $ | 201 | | | $ | 108 | | | $ | 131 | |
(a)Prior year balances for DTE Energy were recast to be consistent with the current year gross presentation of Noncurrent assets and Noncurrent liabilities. | | (a) | See Note 9 to the Consolidated Financial Statements, "Regulatory Matters." |
(b)See Note 10 to the Consolidated Financial Statements, "Regulatory Matters." The increases in the Registrants' other postretirement benefit obligation for the years ended December 31, 2020 and 2019 were primarily due to actuarial loss in both periods, which was primarily driven by decreases in discount rates and partially offset by favorable changes in healthcare cost assumptions. The increase in the other postretirement benefit obligation in 2019 was also partially offset by plan amendments. The following table reflects other postretirement benefit plans with accumulated postretirement benefit obligations in excess of plan assets as of December 31: | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy | | DTE Electric | | 2020 | | 2019 | | 2020 | | 2019 | | (In millions) | | Accumulated postretirement benefit obligation | $ | 878 | | | $ | 840 | | | $ | 826 | | | $ | 795 | | | Fair value of plan assets | 470 | | | 454 | | | 442 | | | 428 | | | Accumulated postretirement benefit obligation in excess of plan assets | $ | 408 | | | $ | 386 | | | $ | 384 | | | $ | 367 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) At December 31, 2017,2020, the benefits expected to be paid, including prescription drug benefits, in each of the next five years and in the aggregate for the five fiscal years thereafter for the Registrants are as follows: | | | | | | | | | | | DTE Energy | | DTE Electric | | | (In millions) | | 2018 | $ | 94 |
| | $ | 73 |
| | 2019 | 99 |
| | 77 |
| | 2020 | 103 |
| | 80 |
| | 2021 | 105 |
| | 82 |
| | 2022 | 108 |
| | 84 |
| | 2023-2027 | 567 |
| | 437 |
| | Total | $ | 1,076 |
| | $ | 833 |
|
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
| | | | | | | | | | | | | DTE Energy | | DTE Electric | | (In millions) | | 2021 | $ | 82 | | | $ | 62 | | | 2022 | 87 | | | 66 | | | 2023 | 91 | | | 69 | | | 2024 | 92 | | | 70 | | | 2025 | 95 | | | 72 | | | 2026-2030 | 497 | | | 376 | | | Total | $ | 944 | | | $ | 715 | |
Assumptions used in determining the accumulated postretirement benefit obligation and net other postretirement benefit costs of the Registrants are: | | | | | | | | | 2017 | | 2016 | | 2015 | | Accumulated postretirement benefit obligation | | | | | | | Discount rate | 3.70% | | 4.25% | | 4.50% | | Health care trend rate pre- and post- 65 | 6.75 / 7.25% | | 6.50 / 6.75% | | 6.25 / 6.75% | | Ultimate health care trend rate | 4.50% | | 4.50% | | 4.50% | | Year in which ultimate reached pre- and post- 65 | 2030 | | 2028 | | 2027 | | Other postretirement benefit costs | | | | | | | Discount rate | 4.25% | | 4.50% | | 4.10% | | Expected long-term rate of return on plan assets | 7.75% | | 8.00% | | 8.00% | | Health care trend rate pre- and post- 65 | 6.50 / 6.75% | | 6.25 / 6.75% | | 7.50 / 6.50% | | Ultimate health care trend rate | 4.50% | | 4.50% | | 4.50% | | Year in which ultimate reached pre- and post- 65 | 2028 | | 2027 | | 2025 / 2024 |
A one percentage point increase in health care cost trend rates would have increased the total service cost and interest cost components of benefit costs for DTE Energy by $5 million, including $4 million for DTE Electric, in 2017 and would have increased the accumulated benefit obligation for DTE Energy by $97 million, including $72 million for DTE Electric, at December 31, 2017. A one percentage point decrease in the health care cost trend rates would have decreased the total service and interest cost components of benefit costs for DTE Energy by $4 million, including $3 million for DTE Electric, in 2017 and would have decreased the accumulated benefit obligation for DTE Energy by $84 million, including $63 million for DTE Electric, at December 31, 2017. | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | Accumulated postretirement benefit obligation | | | | | | | Discount rate | 2.58% | | 3.29% | | 4.40% | | Health care trend rate pre- and post- 65 | 6.75 / 7.25% | | 6.75 / 7.25% | | 6.75 / 7.25% | | Ultimate health care trend rate | 4.50% | | 4.50% | | 4.50% | | Year in which ultimate reached pre- and post- 65 | 2033 | | 2032 | | 2031 | | Other postretirement benefit costs | | | | | | | Discount rate | 3.29% | | 4.40% | | 3.70% | | | | | | | | Expected long-term rate of return on plan assets | 7.20% | | 7.30% | | 7.75% | | Health care trend rate pre- and post- 65 | 6.75 / 7.25% | | 6.75 / 7.25% | | 6.75 / 7.25% | | Ultimate health care trend rate | 4.50% | | 4.50% | | 4.50% | | Year in which ultimate reached pre- and post- 65 | 2032 | | 2031 | | 2030 |
The process used in determining the long-term rate of return foron assets and the investment approach for the other postretirement benefit plans is similar to thosethat previously described for the pension plans. The DTE Energy Company Master VEBA Trust employs a liability driven investment program whereby the characteristics of plan liabilities are considered when determining investment policy. Risk tolerance is established through consideration of future plan cash flows, plan funded status, and corporate financial considerations. The investment portfolio contains a diversified blend of equity, fixed income, and other investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks and large and small market capitalizations. Fixed income investments generally include U.S. Treasuries, other governmental debt, diversified corporate bonds, bank loans, and mortgage-backed securities. Other investments are used to enhance long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner to potentially increase the portfolio beyond the market value of invested assets and/or reduce portfolio investment risk. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. Target allocations for the Registrants' other postretirement benefit plan assets as of December 31, 20172020 are listed below: | | | | | | | U.S. Large Cap Equity Securities | 1611 | % | | U.S. Small Cap and Mid Cap Equity Securities | 42 |
| | Non-U.S. Equity Securities | 2010 |
| | Fixed Income Securities | 2652 |
| | Hedge Funds and Similar Investments | 2011 |
| | Private Equity and Other | 14 |
| | 100 | % |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following tables provide the fair value measurement amounts for the Registrants' other postretirement benefit plan assets at December 31, 20172020 and 20162019(a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Level 1 | | Level 2 | | | | Other(b) | | Total | | Level 1 | | Level 2 | | | | Other(b) | | Total | | (In millions) | | DTE Energy asset category: | | | | | | | | | | | | | | | | | | | | Short-term Investments(c) | $ | 21 | | | $ | 0 | | | | | $ | 0 | | | $ | 21 | | | $ | 80 | | | $ | 0 | | | | | $ | 0 | | | $ | 80 | | | Equity Securities | | | | | | | | | | | | | | | | | | | | Domestic(d) | 51 | | | 0 | | | | | 200 | | | 251 | | | 51 | | | 0 | | | | | 273 | | | 324 | | International(e) | 23 | | | 0 | | | | | 178 | | | 201 | | | 182 | | | 0 | | | | | 89 | | | 271 | | | Fixed Income Securities | | | | | | | | | | | | | | | | | | | | Governmental(f) | 40 | | | 45 | | | | | 0 | | | 85 | | | 74 | | | 0 | | | | | 0 | | | 74 | | Corporate(g) | 0 | | | 477 | | | | | 379 | | | 856 | | | 0 | | | 256 | | | | | 251 | | | 507 | | Hedge Funds and Similar Investments(h) | 61 | | | 17 | | | | | 124 | | | 202 | | | 71 | | | 0 | | | | | 182 | | | 253 | | Private Equity and Other(i) | 0 | | | 0 | | | | | 344 | | | 344 | | | 0 | | | 0 | | | | | 310 | | | 310 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Energy Total | $ | 196 | | | $ | 539 | | | | | $ | 1,225 | | | $ | 1,960 | | | $ | 458 | | | $ | 256 | | | | | $ | 1,105 | | | $ | 1,819 | | | | | | | | | | | | | | | | | | | | | | | DTE Electric asset category: | | | | | | | | | | | | | | | | | | | | Short-term Investments(c) | $ | 14 | | | $ | 0 | | | | | $ | 0 | | | $ | 14 | | | $ | 55 | | | $ | 0 | | | | | $ | 0 | | | $ | 55 | | | Equity Securities | | | | | | | | | | | | | | | | | | | | Domestic(d) | 33 | | | 0 | | | | | 131 | | | 164 | | | 34 | | | 0 | | | | | 185 | | | 219 | | International(e) | 16 | | | 0 | | | | | 117 | | | 133 | | | 124 | | | 0 | | | | | 60 | | | 184 | | | Fixed Income Securities | | | | | | | | | | | | | | | | | | | | Governmental(f) | 24 | | | 31 | | | | | 0 | | | 55 | | | 48 | | | 0 | | | | | 0 | | | 48 | | Corporate(g) | 0 | | | 321 | | | | | 263 | | | 584 | | | 0 | | | 168 | | | | | 176 | | | 344 | | Hedge Funds and Similar Investments(h) | 41 | | | 11 | | | | | 83 | | | 135 | | | 49 | | | 0 | | | | | 123 | | | 172 | | Private Equity and Other(i) | 0 | | | 0 | | | | | 235 | | | 235 | | | 0 | | | 0 | | | | | 214 | | | 214 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DTE Electric Total | $ | 128 | | | $ | 363 | | | | | $ | 829 | | | $ | 1,320 | | | $ | 310 | | | $ | 168 | | | | | $ | 758 | | | $ | 1,236 | |
(a)For a description of levels within the fair value hierarchy see Note 13 to the Consolidated Financial Statements, "Fair Value." (b)Amounts represent assets valued at NAV as a practical expedient for fair value. (c)This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets. (d)This category represents portfolios of large, medium and small capitalization domestic equities. Investments in this category include exchange-traded securities for which unadjusted quoted prices can be obtained and exchange-traded securities held in a commingled fund classified as NAV assets. (e)This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category include exchange-traded securities for which unadjusted quoted prices can be obtained and exchange-traded securities held in a commingled fund classified as NAV assets. (f)This category includes U.S. Treasuries, bonds and other governmental debt. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. (g)This category primarily consists of corporate bonds from diversified industries, bank loans, and mortgage backed securities. Pricing for investments in this category is obtained from quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as NAV assets. (h)This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds and limited partnership funds are classified as NAV assets. (i)This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in real estate and private debt. All investments in this category are classified as NAV assets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | Level 1 | | Level 2 | | Other(b) | | Total | | Level 1 | | Level 2 | | Other(b) | | Total | | DTE Energy asset category: | (In millions) | Short-term Investments(c) | $ | 13 |
| | $ | 2 |
| | $ | — |
| | $ | 15 |
| | $ | 39 |
| | $ | 1 |
| | $ | — |
| | $ | 40 |
| | Equity Securities | | | | | | | | | | | | | | | | U.S. Large Cap(d) | 284 |
| | — |
| | — |
| | 284 |
| | 284 |
| | — |
| | — |
| | 284 |
| U.S. Small Cap and Mid Cap(e) | 131 |
| | — |
| | — |
| | 131 |
| | 156 |
| | — |
| | — |
| | 156 |
| Non-U.S.(f) | 288 |
| | 1 |
| | 77 |
| | 366 |
| | 262 |
| | 1 |
| | 61 |
| | 324 |
| Fixed Income Securities(g) | 29 |
| | 324 |
| | 130 |
| | 483 |
| | 15 |
| | 299 |
| | 125 |
| | 439 |
| Hedge Funds and Similar Investments(h) | 116 |
| | — |
| | 219 |
| | 335 |
| | 114 |
| | — |
| | 224 |
| | 338 |
| Private Equity and Other(i) | — |
| | — |
| | 234 |
| | 234 |
| | — |
| | — |
| | 177 |
| | 177 |
| Securities Lending(j) | (39 | ) | | (1 | ) | | — |
| | (40 | ) | | (28 | ) | | (3 | ) | | — |
| | (31 | ) | Securities Lending Collateral(j) | 39 |
| | 1 |
| | — |
| | 40 |
| | 28 |
| | 3 |
| | — |
| | 31 |
| | DTE Energy Total | $ | 861 |
| | $ | 327 |
| | $ | 660 |
| | $ | 1,848 |
| | $ | 870 |
| | $ | 301 |
| | $ | 587 |
| | $ | 1,758 |
| | | | | | | | | | | | | | | | | | | DTE Electric asset category: | | | | | | | | | | | | | | | | Short-term Investments(c) | $ | 9 |
| | $ | 1 |
| | $ | — |
| | $ | 10 |
| | $ | 28 |
| | $ | 1 |
| | $ | — |
| | $ | 29 |
| | Equity Securities | | | | | | |
|
| | | | | | | |
|
| U.S. Large Cap(d) | 195 |
| | — |
| | — |
| | 195 |
| | 195 |
| | — |
| | — |
| | 195 |
| U.S. Small Cap and Mid Cap(e) | 91 |
| | — |
| | — |
| | 91 |
| | 109 |
| | — |
| | — |
| | 109 |
| Non-U.S.(f) | 200 |
| | 1 |
| | 52 |
| | 253 |
| | 182 |
| | 1 |
| | 41 |
| | 224 |
| Fixed Income Securities(g) | 20 |
| | 218 |
| | 92 |
| | 330 |
| | 10 |
| | 203 |
| | 90 |
| | 303 |
| Hedge Funds and Similar Investments(h) | 80 |
| | — |
| | 150 |
| | 230 |
| | 80 |
| | — |
| | 154 |
| | 234 |
| Private Equity and Other(i) | — |
| | — |
| | 163 |
| | 163 |
| | — |
| | — |
| | 124 |
| | 124 |
| Securities Lending(j) | (27 | ) | | (1 | ) | | — |
| | (28 | ) | | (20 | ) | | (1 | ) | | — |
| | (21 | ) | Securities Lending Collateral(j) | 27 |
| | 1 |
| | — |
| | 28 |
| | 20 |
| | 1 |
| | — |
| | 21 |
| | DTE Electric Total | $ | 595 |
| | $ | 220 |
| | $ | 457 |
| | $ | 1,272 |
| | $ | 604 |
| | $ | 205 |
| | $ | 409 |
| | $ | 1,218 |
|
| | (a) | For a description of levels within the fair value hierarchy see Note 12 to the Consolidated Financial Statements, "Fair Value." |
| | (b) | Amounts represent assets valued at NAV as a practical expedient for fair value. |
| | (c) | This category predominantly represents certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. |
| | (d) | This category represents portfolios of large capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. |
| | (e) | This category represents portfolios of small and medium capitalization domestic equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. |
| | (f) | This category primarily consists of portfolios of non-U.S. developed and emerging market equities. Investments in this category are exchange-traded securities whereby unadjusted quote prices can be obtained. Exchange-traded securities held in a commingled fund are classified as NAV assets. |
| | (g) | This category includes corporate bonds from diversified industries, U.S. Treasuries, bank loans, and mortgage backed securities. Pricing for investments in this category is obtained from quoted prices in actively traded markets and quotations from broker or pricing services. Non-exchange traded securities and exchange-traded securities held in commingled funds are classified as NAV assets. |
| | (h) | This category utilizes a diversified group of strategies that attempt to capture financial market inefficiencies and includes publicly traded mutual funds, commingled funds and limited partnership funds. Pricing for mutual funds in this category is obtained from quoted prices in actively traded markets. Commingled funds and limited partnership funds are classified as NAV assets. |
| | (i) | This category includes a diversified group of funds and strategies that primarily invests in private equity partnerships. This category also includes investments in timber and private mezzanine debt. All investments in this category are classified as NAV assets. |
| | (j) | The Registrants have a securities lending program with a third-party agent. The program allows the agent to lend certain securities from the Registrants' VEBA trust to selected entities against receipt of collateral (in the form of cash) as provided for and determined in accordance with their securities lending agency agreements. |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The DTE Energy Company Master VEBA Trust holds debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. The commingled funds and institutional mutual funds hold exchange-traded equity or debt securities and are valued based on NAVs. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price source is considered preferable. The Registrants have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, the Registrants selectively corroborate the fair values of securities by comparison of market-based price sources. There were no significant transfers between Level 2 and Level 1 in the years ended December 31, 2017 and 2016 for either of the Registrants.
Defined Contribution Plans The Registrants also sponsor defined contribution retirement savings plans. Participation in one of these plans is available to substantially all represented and non-represented employees. For substantially all employees, the Registrants match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. Additionally, for eligible represented and non-represented employees who do not participate in the Pension Plans, the Registrants annually contribute an amount equivalent to 4% (8% for certain DTE Gas represented employees) of an employee's eligible pay to the employee's defined contribution retirement savings plan. For DTE Energy, the cost of these plans was $57$73 million, $51$65 million, and $49$61 million for the years ended December 31, 2017, 2016,2020, 2019, and 2015,2018, respectively. For DTE Electric, the cost of these plans was $27$34 million, for the year ended December 31, 2017,$31 million, and $23$29 million for the years ended December 31, 20162020, 2019, and 2015.2018, respectively. Plan Changes
In 2015, certain executive retirement benefit plans were amended to transfer the obligation for benefits as attributed to the LLC. The related plan liabilities were transferred from DTE Electric and DTE Gas to the LLC and DTE Energy. The related Rabbi Trust assets were also transferred to DTE Energy from DTE Electric.
NOTE 2122 — STOCK-BASED COMPENSATION DTE Energy’s stock incentive program permits the grant of incentive stock options, non-qualifying stock options, stock awards, performance shares, and performance units to employees and members of its Board of Directors. As a result of a stock award, a settlement of an award of performance shares, or by exercise of a participant’s stock option, DTE Energy may deliver common stock from its authorized but unissued common stock and/or from outstanding common stock acquired by or on behalf of DTE Energy in the name of the participant. Key provisions of the stock incentive program are: •Authorized limit is 14,500,00016,500,000 shares of common stock; •Prohibits the grant of a stock option with an exercise price that is less than the fair market value of DTE Energy’s stock on the date of the grant; and •Imposes the following award limits to a single participant in a single calendar year, (1) options for more than 500,000 shares of common stock; (2) stock awards for more than 150,000 shares of common stock; (3) performance share awards for more than 300,000 shares of common stock (based on the maximum payout under the award); or (4) more than 1,000,000 performance units, which have a face amount of $1.00 each. DTE Energy records compensation expense at fair value over the vesting period for all awards it grants. The following table summarizes the components of stock-based compensation for DTE Energy: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Stock-based compensation expense | $ | 63 | | | $ | 71 | | | $ | 64 | | | Tax benefit | $ | 12 | | | $ | 13 | | | $ | 13 | | Stock-based compensation cost capitalized in Property, plant, and equipment(a) | $ | 0 | | | $ | 16 | | | $ | 11 | |
(a)In DTE Electric's May 2020 rate order, the MPSC disallowed certain capital expenditures related to incentive compensation. Therefore, beginning in 2020, no stock-based compensation cost will be capitalized in Property, plant, and equipment. Refer to Note 10 to the Consolidated Financial Statements, "Regulatory Matters," for further information.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table summarizes the components of stock-based compensation for DTE Energy:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Stock-based compensation expense | $ | 58 |
| | $ | 61 |
| | $ | 34 |
| | Tax benefit | $ | 23 |
| | $ | 24 |
| | $ | 13 |
| | Stock-based compensation cost capitalized in Property, plant, and equipment | $ | 9 |
| | $ | 10 |
| | $ | 5 |
|
Stock Options
Options are exercisable according to the terms of the individual stock option award agreements and expire ten years after the date of the grant. The option exercise price equals the fair value of the stock on the date that the option was granted. Stock options vest ratably over a three-year period.
The following table summarizes DTE Energy's stock option activity for the year ended December 31, 2017:
| | | | | | | | | | | | | | Number of Options | | Weighted Average Exercise Price | | Aggregate Intrinsic
Value
(In millions) | | Options outstanding and exercisable at December 31, 2016 | 171,517 |
| | $ | 41.59 |
| | | | Exercised | (65,523 | ) | | $ | 39.37 |
| | | | Options outstanding and exercisable at December 31, 2017 | 105,994 |
| | $ | 42.95 |
| | $ | 7 |
|
As of December 31, 2017, the weighted average remaining contractual life for the exercisable shares is 2.05 years. As of December 31, 2017, all options were vested. No options vested during 2017.
There were no options granted during 2017, 2016, or 2015. The intrinsic value of options exercised for the years ended December 31, 2017 and 2016 was $4 million. The intrinsic value of options for the year ended December 31, 2015 was $7 million. No option expense was recognized for 2017, 2016, or 2015.
The number, weighted average exercise price, and weighted average remaining contractual life of DTE Energy options outstanding as of December 31, 2017 were as follows:
| | | | | | | | | | | | | | | | | | Range of Exercise Prices | | Number of Options | | Weighted Average
Exercise Price | | Weighted Average
Remaining Contractual Life (Years) | | $ | 27.00 | — | | $ | 38.00 |
| | 6,194 |
| | $ | 27.70 |
| | 1.16 | | $ | 38.01 | — | | $ | 42.00 |
| | 2,300 |
| | $ | 41.79 |
| | 0.15 | | $ | 42.01 | — | | $ | 45.00 |
| | 97,500 |
| | $ | 43.95 |
| | 2.15 | | | | | | 105,994 |
| | $ | 42.95 |
| | 2.05 |
Restricted Stock Awards Stock awards granted under the plan are restricted for varying periods, generally for three years. Participants have all rights of a shareholder with respect to a stock award, including the right to receive dividends and vote the shares. Prior to vesting in stock awards, the participant: (i) may not sell, transfer, pledge, exchange, or otherwise dispose of shares; (ii) shall not retain custody of the share certificates; and (iii) will deliver to DTE Energy a stock power with respect to each stock award upon request. The stock awards are recorded at cost that approximates fair value on the date of grant. The cost is amortized to compensation expense over the vesting period.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
Stock award activity for DTE EnergyThe fair value of awards vested were not material for the years ended December 31, was:
| | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | Fair value of awards vested (in millions) | $ | 10 |
| | $ | 9 |
| | $ | 9 |
| | Restricted common shares awarded | 136,825 |
| | 145,240 |
| | 144,300 |
| | Weighted average market price of shares awarded | $ | 99.53 |
| | $ | 87.28 |
| | $ | 83.43 |
| | Compensation cost charged against income (in millions) | $ | 11 |
| | $ | 11 |
| | $ | 10 |
|
The following table summarizes DTE Energy’s restricted stock awards activity2020, 2019, and 2018. Compensation cost charged against income was $13 million for the year ended December 31, 2017:
| | | | | | | | | | Restricted
Stock | | Weighted Average
Grant Date
Fair Value | | Balance at December 31, 2016 | 385,285 |
| | $ | 80.10 |
| | Grants | 136,825 |
| | $ | 99.53 |
| | Forfeitures | (11,745 | ) | | $ | 90.24 |
| | Vested and issued | (144,601 | ) | | $ | 72.08 |
| | Balance at December 31, 2017 | 365,764 |
| | $ | 90.26 |
|
Performance Share Awards Performance shares awarded under the plan are for a specified number of shares of DTE Energy common stock that entitle the holder to receive a cash payment, shares of DTE Energy common stock, or a combination thereof. The final value of the award is determined by the achievement of certain performance objectives and market conditions. The awards vest at the end of a specified period, usually three years. Awards granted in 2017, 2016,2020, 2019, and 20152018 were primarily deemed to be equity awards. The DTE Energy stock price and number of probable shares attributable to market conditions for such equity awards are fair valued only at the grant date. DTE Energy accounts for performance share awards by accruing compensation expense over the vesting period based on: (i) the number of shares expected to be paid which is based on the probable achievement of performance objectives; and (ii) the closing stock price market value. The settlement of the award is based on the closing price at the settlement date. DTE Energy recorded compensation expense foractivity relating to performance share awards as follows: | | | | | | | | | | | | | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Compensation expense | $ | 47 |
| | $ | 50 |
| | $ | 24 |
| Cash settlements(a) | $ | 15 |
| | $ | 7 |
| | $ | 13 |
| Stock settlements(a) | $ | 66 |
| | $ | 38 |
| | $ | 71 |
|
| | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions, except per share amounts) | | Weighted average grant date fair value of awards granted (per share) | $ | 129.68 | | | $ | 115.85 | | | $ | 105.64 | | Awards settled in cash(a) | $ | 21 | | | $ | 19 | | | $ | 13 | | Awards settled in stock(a) | $ | 53 | | | $ | 79 | | | $ | 39 | | | Compensation expense | $ | 50 | | | $ | 60 | | | $ | 53 | |
| | (a) | Sum of cash and stock settlements approximates the intrinsic value of the awards. |
(a)Sum of awards settled in cash and stock approximates the intrinsic value of the awards. During the vesting period, the recipient of a performance share award has no shareholder rights. During the period beginning on the date the performance shares are awarded and ending on the certification date of the performance objectives, the number of performance shares awarded will be increased, assuming full dividend reinvestment at the fair market value on the dividend payment date. The cumulative number of performance shares will be adjusted to determine the final payment based on the performance objectives achieved. Performance share awards are nontransferable and are subject to risk of forfeiture. The following table summarizes DTE Energy’s performance share activity for the period ended December 31, 2020: | | | | | | | | | | | | | Performance Shares | | Weighted Average
Grant Date
Fair Value | | Balance at December 31, 2019 | 1,226,031 | | | $ | 107.35 | | | Grants | 383,813 | | | $ | 129.68 | | | Forfeitures | (43,768) | | | $ | 116.94 | | | Payouts | (438,639) | | | $ | 99.22 | | | Balance at December 31, 2020 | 1,127,437 | | | $ | 117.06 | |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
The following table summarizes DTE Energy’s performance share activity for the period ended December 31, 2017:
| | | | | | | | | | Performance Shares | | Weighted Average
Grant Date
Fair Value | | Balance at December 31, 2016 | 1,392,512 |
| | $ | 79.97 |
| | Grants | 494,688 |
| | $ | 98.47 |
| | Forfeitures | (49,547 | ) | | $ | 87.12 |
| | Payouts | (513,252 | ) | | $ | 70.60 |
| | Balance at December 31, 2017 | 1,324,401 |
| | $ | 90.31 |
|
Unrecognized Compensation Costs As of December 31, 2017,2020, DTE Energy's total unrecognized compensation cost related to non-vested stock incentive plan arrangements and the weighted average recognition period was as follows: | | | | | | | Unrecognized
Compensation
Cost | | Weighted Average
to be Recognized | | | Unrecognized
Compensation
Cost | | Weighted Average
to be Recognized | | (In millions) | | (In years) | | | (In millions) | | (In years) | | | Stock awards | $ | 13 |
| | 1.12 | Stock awards | $ | 19 | | | 1.60 | | Performance shares | 51 |
| | 1.11 | Performance shares | 49 | | | 1.04 | | | $ | 64 |
| | 1.11 | | $ | 68 | | | 1.19 |
Allocated Stock-Based Compensation DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation. DTE Electric's allocation for 2017, 2016,2020, 2019, and 20152018 for stock-based compensation expense was approximately $34$37 million, $43 million, and $38 million, and $21 million, respectively.
NOTE 2223 — SEGMENT AND RELATED INFORMATION DTE Energy sets strategic goals, allocates resources, and evaluates performance based on the following structure: Electric segment consists principally of DTE Electric, which is engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million residential, commercial, and industrial customers in southeastern Michigan. Gas segment consists principally of DTE Gas, which is engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers throughout Michigan and the sale of storage and transportation capacity. Gas Storage and Pipelines consists is primarily engaged in services related to the gathering, transportation, and storage of natural gas pipeline, gathering, and storage businesses.gas. Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and pipeline-quality gas from renewable energy projects. Energy Trading consists of energy marketing and trading operations. Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments.certain investments, including funds supporting regional development and economic growth. The federal income tax provisions or benefits of DTE Energy’s subsidiaries are determined on an individual company basis and recognize the tax benefit of tax credits and net operating losses, if applicable. The state and local income tax provisions of the utility subsidiaries are also determined on an individual company basis and recognize the tax benefit of various tax credits and net operating losses, if applicable. The subsidiaries record federal, state, and local income taxes payable to or receivable from DTE Energy based on the federal, state, and local tax provisions of each company.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
Inter-segment billing for goods and services exchanged between segments is based upon tariffed or market-based prices of the provider and primarily consists of the sale of reduced emissions fuel, power sales, and natural gas sales in the following segments: | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | (In millions) | Electric(a) | $ | 61 | | | $ | 56 | | | $ | 52 | | | Gas | 16 | | | 12 | | | 12 | | | Gas Storage and Pipelines | 26 | | | 27 | | | 36 | | | Power and Industrial Projects | 464 | | | 596 | | | 642 | | | Energy Trading | 31 | | | 22 | | | 27 | | | Corporate and Other | 2 | | | 2 | | | 2 | | | | | | | | | $ | 600 | | | $ | 715 | | | $ | 771 | |
| | | | | | | | | | | | | | | Year Ended December 31, | | | 2017 | | 2016 | | 2015 | | | (In millions) | | Electric | $ | 48 |
| | $ | 43 |
| | $ | 36 |
| | Gas | 8 |
| | 9 |
| | 3 |
| | Gas Storage and Pipelines | 42 |
| | 9 |
| | 8 |
| | Power and Industrial Projects | 569 |
| | 602 |
| | 785 |
| | Energy Trading | 35 |
| | 39 |
| | 32 |
| | Corporate and Other | 2 |
| | 2 |
| | 4 |
| | | $ | 704 |
| | $ | 704 |
| | $ | 868 |
|
Financial data of DTE Energy's business segments follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | (In millions) | | 2020 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 5,506 | | | 1,414 | | | 0 | | | 0 | | | 0 | | | 0 | | | (75) | | | $ | 6,845 | | | Operating Revenues — Non-utility operations | $ | 14 | | | 0 | | | 754 | | | 1,224 | | | 3,863 | | | 2 | | | (525) | | | $ | 5,332 | | | Depreciation and amortization | $ | 1,057 | | | 157 | | | 151 | | | 72 | | | 5 | | | 1 | | | 0 | | | $ | 1,443 | | | Interest expense | $ | 337 | | | 80 | | | 113 | | | 37 | | | 6 | | | 331 | | | (184) | | | $ | 720 | | | Interest income | $ | (4) | | | (5) | | | (9) | | | (22) | | | (2) | | | (180) | | | 184 | | | $ | (38) | | | Equity in earnings of equity method investees | $ | 0 | | | 1 | | | 106 | | | 17 | | | 0 | | | 8 | | | 0 | | | $ | 132 | | | Income Tax Expense (Benefit) | $ | 108 | | | 48 | | | 116 | | | (40) | | | 12 | | | (77) | | | 0 | | | $ | 167 | | | Net Income (Loss) Attributable to DTE Energy Company | $ | 777 | | | 186 | | | 315 | | | 134 | | | 36 | | | (80) | | | 0 | | | $ | 1,368 | | | Investment in equity method investees | $ | 6 | | | 12 | | | 1,691 | | | 125 | | | 0 | | | 34 | | | 0 | | | $ | 1,868 | | | Capital expenditures and acquisitions | $ | 2,701 | | | 574 | | | 517 | | | 186 | | | 5 | | | 0 | | | 0 | | | $ | 3,983 | | | Goodwill | $ | 1,208 | | | 743 | | | 472 | | | 26 | | | 17 | | | 0 | | | 0 | | | $ | 2,466 | | | Total Assets | $ | 26,588 | | | 6,339 | | | 5,068 | | | 696 | | | 807 | | | 8,071 | | | (2,073) | | | $ | 45,496 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | | (In millions) | | 2017 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 5,102 |
| | 1,388 |
| | — |
| | — |
| | — |
| | — |
| | (56 | ) | | $ | 6,434 |
| | Operating Revenues — Non-utility operations | $ | — |
| | — |
| | 453 |
| | 2,089 |
| | 4,277 |
| | 2 |
| | (648 | ) | | $ | 6,173 |
| | Depreciation and amortization | $ | 753 |
| | 123 |
| | 76 |
| | 72 |
| | 5 |
| | 1 |
| | — |
| | $ | 1,030 |
| | Interest expense | $ | 274 |
| | 65 |
| | 77 |
| | 29 |
| | 5 |
| | 192 |
| | (106 | ) | | $ | 536 |
| | Interest income | $ | — |
| | (7 | ) | | (14 | ) | | (7 | ) | | (2 | ) | | (88 | ) | | 106 |
| | $ | (12 | ) | | Equity in earnings of equity method investees | $ | 1 |
| | 2 |
| | 90 |
| | 9 |
| | — |
| | — |
| | — |
| | $ | 102 |
| Income Tax Expense (Benefit)(a) | $ | 321 |
| | 78 |
| | (30 | ) | | (195 | ) | | 49 |
| | (48 | ) | | — |
| | $ | 175 |
| | Net Income (Loss) Attributable to DTE Energy Company | $ | 606 |
| | 146 |
| | 275 |
| | 138 |
| | 72 |
| | (103 | ) | | — |
| | $ | 1,134 |
| | Investment in equity method investees | $ | 7 |
| | 11 |
| | 879 |
| | 150 |
| | — |
| | 26 |
| | — |
| | $ | 1,073 |
| | Capital expenditures and acquisitions | $ | 1,574 |
| | 463 |
| | 137 |
| | 56 |
| | 7 |
| | 13 |
| | — |
| | $ | 2,250 |
| | Goodwill | $ | 1,208 |
| | 743 |
| | 299 |
| | 26 |
| | 17 |
| | — |
| | — |
| | $ | 2,293 |
| | Total Assets | $ | 21,163 |
| | 5,072 |
| | 2,594 |
| | 593 |
| | 725 |
| | 5,324 |
| | (1,704 | ) | | $ | 33,767 |
|
| | (a) | Includes Income Tax Expense (Benefit) of $(5) million, $(115) million, $(21) million, $2 million, and $34 million for Electric — non-utility, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other, respectively, related to the enactment of the TCJA. |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | (In millions) | | 2019 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 5,224 | | | 1,482 | | | 0 | | | 0 | | | 0 | | | 0 | | | (68) | | | $ | 6,638 | | | Operating Revenues — Non-utility operations | $ | 5 | | | 0 | | | 501 | | | 1,560 | | | 4,610 | | | 2 | | | (647) | | | $ | 6,031 | | | Depreciation and amortization | $ | 949 | | | 144 | | | 94 | | | 69 | | | 6 | | | 1 | | | 0 | | | $ | 1,263 | | | Interest expense | $ | 315 | | | 78 | | | 73 | | | 33 | | | 8 | | | 266 | | | (132) | | | $ | 641 | | | Interest income | $ | (2) | | | (6) | | | (8) | | | (9) | | | (4) | | | (120) | | | 132 | | | $ | (17) | | | Equity in earnings of equity method investees | $ | 1 | | | 2 | | | 97 | | | 14 | | | 0 | | | (3) | | | 0 | | | $ | 111 | | | Income Tax Expense (Benefit) | $ | 137 | | | 62 | | | 74 | | | (63) | | | 17 | | | (75) | | | 0 | | | $ | 152 | | | Net Income (Loss) Attributable to DTE Energy Company | $ | 714 | | | 185 | | | 204 | | | 133 | | | 49 | | | (116) | | | 0 | | | $ | 1,169 | | | Investment in equity method investees | $ | 5 | | | 11 | | | 1,685 | | | 130 | | | 0 | | | 31 | | | 0 | | | $ | 1,862 | | | Capital expenditures and acquisitions | $ | 2,368 | | | 530 | | | 2,510 | | | 54 | | | 5 | | | 0 | | | 0 | | | $ | 5,467 | | | Goodwill | $ | 1,208 | | | 743 | | | 470 | | | 26 | | | 17 | | | 0 | | | 0 | | | $ | 2,464 | | | Total Assets | $ | 24,617 | | | 5,717 | | | 4,832 | | | 537 | | | 798 | | | 7,610 | | | (1,843) | | | $ | 42,268 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | (In millions) | | 2018 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 5,298 | | | 1,436 | | | 0 | | | 0 | | | 0 | | | 0 | | | (64) | | | $ | 6,670 | | | Operating Revenues — Non-utility operations | $ | 0 | | | 0 | | | 485 | | | 2,204 | | | 5,557 | | | 3 | | | (707) | | | $ | 7,542 | | | Depreciation and amortization | $ | 836 | | | 133 | | | 82 | | | 67 | | | 5 | | | 1 | | | 0 | | | $ | 1,124 | | | Interest expense | $ | 283 | | | 70 | | | 68 | | | 31 | | | 6 | | | 220 | | | (119) | | | $ | 559 | | | Interest income | $ | 0 | | | (6) | | | (9) | | | (9) | | | (3) | | | (104) | | | 119 | | | $ | (12) | | | Equity in earnings of equity method investees | $ | 0 | | | 2 | | | 123 | | | 3 | | | 0 | | | 4 | | | 0 | | | $ | 132 | | | Income Tax Expense (Benefit) | $ | 193 | | | 67 | | | 68 | | | (195) | | | 13 | | | (48) | | | 0 | | | $ | 98 | | | Net Income (Loss) Attributable to DTE Energy Company | $ | 664 | | | 150 | | | 235 | | | 161 | | | 39 | | | (129) | | | 0 | | | $ | 1,120 | | | Investment in equity method investees | $ | 7 | | | 12 | | | 1,585 | | | 134 | | | 0 | | | 33 | | | 0 | | | $ | 1,771 | | | Capital expenditures and acquisitions | $ | 1,979 | | | 460 | | | 176 | | | 91 | | | 5 | | | 2 | | | 0 | | | $ | 2,713 | | | Goodwill | $ | 1,208 | | | 743 | | | 299 | | | 26 | | | 17 | | | 0 | | | 0 | | | $ | 2,293 | | | Total Assets | $ | 22,501 | | | 5,378 | | | 3,161 | | | 495 | | | 909 | | | 6,153 | | | (2,309) | | | $ | 36,288 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | | (In millions) | | 2016 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 5,225 |
| | 1,324 |
| | — |
| | — |
| | — |
| | — |
| | (52 | ) | | $ | 6,497 |
| | Operating Revenues — Non-utility operations | $ | — |
| | — |
| | 302 |
| | 1,906 |
| | 2,575 |
| | 2 |
| | (652 | ) | | $ | 4,133 |
| | Depreciation and amortization | $ | 750 |
| | 106 |
| | 45 |
| | 72 |
| | 3 |
| | — |
| | — |
| | $ | 976 |
| | Interest expense | $ | 264 |
| | 60 |
| | 39 |
| | 32 |
| | 6 |
| | 148 |
| | (77 | ) | | $ | 472 |
| | Interest income | $ | (8 | ) | | (6 | ) | | (9 | ) | | (8 | ) | | (1 | ) | | (65 | ) | | 77 |
| | $ | (20 | ) | | Equity in earnings of equity method investees | $ | 2 |
| | 6 |
| | 60 |
| | — |
| | — |
| | — |
| | — |
| | $ | 68 |
| | Income Tax Expense (Benefit) | $ | 353 |
| | 77 |
| | 71 |
| | (140 | ) | | (29 | ) | | (61 | ) | | — |
| | $ | 271 |
| | Net Income (Loss) Attributable to DTE Energy Company | $ | 622 |
| | 138 |
| | 119 |
| | 95 |
| | (45 | ) | | (61 | ) | | — |
| | $ | 868 |
| | Investment in equity method investees | $ | 11 |
| | 10 |
| | 538 |
| | 166 |
| | — |
| | 27 |
| | — |
| | $ | 752 |
| | Capital expenditures and acquisitions | $ | 1,503 |
| | 395 |
| | 1,322 |
| | 39 |
| | 7 |
| | 3 |
| | — |
| | $ | 3,269 |
| | Goodwill | $ | 1,208 |
| | 743 |
| | 292 |
| | 26 |
| | 17 |
| | — |
| | — |
| | $ | 2,286 |
| | Total Assets | $ | 20,417 |
| | 4,729 |
| | 2,417 |
| | 683 |
| | 660 |
| | 4,648 |
| | (1,513 | ) | | $ | 32,041 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electric | | Gas | | Gas Storage and Pipelines | | Power and Industrial Projects | | Energy Trading | | Corporate and Other | | Reclassifications
and
Eliminations | | Total | | | (In millions) | | 2015 | | | | | | | | | | | | | | | | | Operating Revenues — Utility operations | $ | 4,901 |
| | 1,376 |
| | — |
| | — |
| | — |
| | — |
| | (39 | ) | | $ | 6,238 |
| | Operating Revenues — Non-utility operations | $ | — |
| | — |
| | 243 |
| | 2,224 |
| | 2,459 |
| | 2 |
| | (829 | ) | | $ | 4,099 |
| | Depreciation and amortization | $ | 637 |
| | 104 |
| | 30 |
| | 78 |
| | 2 |
| | 1 |
| | — |
| | $ | 852 |
| | Interest expense | $ | 258 |
| | 62 |
| | 24 |
| | 32 |
| | 6 |
| | 132 |
| | (64 | ) | | $ | 450 |
| | Interest income | $ | — |
| | (7 | ) | | (8 | ) | | (8 | ) | | (2 | ) | | (52 | ) | | 64 |
| | $ | (13 | ) | | Equity in earnings of equity method investees | $ | 2 |
| | 6 |
| | 47 |
| | 8 |
| | — |
| | 3 |
| | — |
| | $ | 66 |
| | Income Tax Expense (Benefit) | $ | 290 |
| | 72 |
| | 70 |
| | (140 | ) | | (15 | ) | | (47 | ) | | — |
| | $ | 230 |
| | Net Income (Loss) Attributable to DTE Energy Company | $ | 542 |
| | 132 |
| | 107 |
| | 16 |
| | (22 | ) | | (48 | ) | | — |
| | $ | 727 |
| | Investment in equity method investees | $ | 10 |
| | 9 |
| | 296 |
| | 183 |
| | — |
| | 16 |
| | — |
| | $ | 514 |
| | Capital expenditures and acquisitions | $ | 1,785 |
| | 273 |
| | 161 |
| | 36 |
| | 6 |
| | — |
| | — |
| | $ | 2,261 |
| | Goodwill | $ | 1,208 |
| | 743 |
| | 24 |
| | 26 |
| | 17 |
| | — |
| | — |
| | $ | 2,018 |
| | Total Assets | $ | 19,503 |
| | 4,294 |
| | 1,047 |
| | 860 |
| | 590 |
| | 3,496 |
| | (1,128 | ) | | $ | 28,662 |
|
NOTE 2324 — RELATED PARTY TRANSACTIONS DTE Energy enters into related party transactions with certain equity method investees, primarily NEXUS. DTE Gas is party to a 15-year capacity lease agreement with NEXUS for the transportation of natural gas. Under the lease agreement, DTE Gas provides firm pipeline capacity in the DTE Gas system in order for NEXUS to provide service to its customers from an interconnect between NEXUS and DTE Gas. DTE Gas charges NEXUS a fixed daily pipeline reservation charge for this capacity. DTE Electric and DTE Gas are also party to respective 20-year and 15-year service agreements with NEXUS for the transportation of natural gas. Under the service agreements, NEXUS provides firm pipeline capacity to transport natural gas to DTE Electric and to service DTE Gas customers. DTE Electric and DTE Gas incur a firm daily pipeline reservation charge, which is recovered through the respective PSCR and GCR mechanisms. DTE Energy Trading also enters into related party transactions with NEXUS for the transportation of natural gas.
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued) The following table summarizes the amounts resulting from these transactions included in the Consolidated Statements of Operations for the years ended December 31: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | | (In millions) | | Operating Revenues — Utility operations | | | | | | | DTE Gas | $ | 32 | | | $ | 32 | | | $ | 6 | | | Fuel, purchased power, and gas — utility | | | | | | | DTE Electric | $ | 8 | | | $ | 8 | | | $ | 1 | | | DTE Gas | $ | 21 | | | $ | 22 | | | $ | 1 | | | Fuel, purchased power, gas, and other — non-utility | | | | | | | DTE Energy Trading | $ | 27 | | | $ | 13 | | | $ | 1 | |
Other related party transactions with equity method investees include transactions with Vector Pipeline and Millennium Pipeline. Refer to Note 18 to the Consolidated Financial Statements, "Leases," for lease activity related to Vector Pipeline. Other transactions relating to Vector Pipeline and Millennium Pipeline were not material for the years ended December 31, 2020, 2019, and 2018. DTE Electric has agreements with affiliated companies to sell energy for resale, purchase fuel and power, provide fuel supply services, and provide power plant operation and maintenance services. DTE Electric has agreements with certain DTE Energy affiliates where DTE Electricit charges the affiliates for their use of the shared capital assets of DTE Electric. A shared services company accumulates various corporate support services expenses and charges various subsidiaries of DTE Energy, including DTE Electric. DTE Electric records federal, state, and local income taxes payable to or receivable from DTE Energy based on its federal, state, and local tax provisions.
DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements — (Continued)
The following is a summary of DTE Electric's transactions with affiliated companies: | | | | | | | | | | 2020 | | 2019 | | 2018 | | | 2017 | | 2016 | | 2015 | | (In millions) | | | (In millions) | | | Revenues | | | | | | | | Revenues and Other Income | | Revenues and Other Income | | | Energy sales | $ | 9 |
| | $ | 10 |
| | $ | 2 |
| Energy sales | $ | 8 | | | $ | 10 | | | $ | 9 | | | Other services | $ | (4 | ) | | $ | (1 | ) | | $ | 6 |
| Other services | $ | 2 | | | $ | 5 | | | $ | 4 | | | Shared capital assets | $ | 39 |
| | $ | 33 |
| | $ | 33 |
| Shared capital assets | $ | 51 | | | $ | 47 | | | $ | 43 | | | Costs | | | | | | Costs | | | Fuel and purchased power | $ | 6 |
| | $ | 10 |
| | $ | 9 |
| Fuel and purchased power | $ | 16 | | | $ | 9 | | | $ | 7 | | | Other services and interest | $ | (2 | ) | | $ | (1 | ) | | $ | 2 |
| Other services and interest | $ | 1 | | | $ | 23 | | | $ | 33 | | | Corporate expenses, net | $ | 370 |
| | $ | 370 |
| | $ | 334 |
| | | Corporate expenses | | Corporate expenses | $ | 367 | | | $ | 372 | | | $ | 377 | | | Other | | | | | | Other | | | Dividends declared | $ | 432 |
| | $ | 420 |
| | $ | 395 |
| Dividends declared | $ | 539 | | | $ | 494 | | | $ | 461 | | | Dividends paid | $ | 432 |
| | $ | 420 |
| | $ | 395 |
| Dividends paid | $ | 539 | | | $ | 494 | | | $ | 461 | | | Capital contribution from DTE Energy | $ | 100 |
| | $ | 120 |
| | $ | 300 |
| Capital contribution from DTE Energy | $ | 636 | | | $ | 180 | | | $ | 325 | |
DTE Electric's Accounts receivable and Accounts payable related to Affiliates are payable upon demand and are generally settled in cash within a monthly business cycle. Notes receivable and Short-term borrowings related to Affiliates are subject to a credit agreement with DTE Energy whereby short-term excess cash or cash shortfalls are remitted to or funded by DTE Energy. This credit arrangement involves the charge and payment of interest at market-based rates. Refer to DTE Electric's Consolidated Statements of Financial Position for affiliate balances at December 31, 20172020 and 2016.2019. DTE Electric'sThere were $20 million in charitable contributions to the DTE Energy Foundation was $7 million for the the year ended December 31, 2017. There were no contributionsmade by DTE Electric to the DTE Energy Foundation for the year ended December 31, 2020 and 0 contributions for the years ended December 31, 20162019, and 2015.2018. The DTE Energy Foundation is a non-consolidated not-for-profit private foundation, the purpose of which is to contribute and assist charitable organizations.
See the following notes for other related party transactions impacting DTE Electric’s Consolidated Financial Statements:
| | | | Note | | Title | 20 | | Retirement Benefits and Trusteed Assets | 21 | | Stock-Based Compensation |
DTE Energy Company — DTE Electric Company Combined Notes to Consolidated Financial Statements — (Continued)
See the following notes for other related party transactions impacting DTE Electric’s Consolidated Financial Statements:
| | | | | | | | | | Note | | Title | | | | | 1 | | Organization and Basis of Presentation | | 21 | | Retirement Benefits and Trusteed Assets | | 22 | | Stock-Based Compensation |
NOTE 2425 — SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED) DTE Energy QuarterlyThe sum of quarterly earnings per share may not equal full year totals,year-end amounts, since quarterly computations are based on weighted average common shares outstanding during each quarter.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | (In millions, except per share amounts) | | 2020 | | | | | | | | | | | Operating Revenues | $ | 3,022 | | | $ | 2,583 | | | $ | 3,284 | | | $ | 3,288 | | | $ | 12,177 | | | Operating Income | $ | 546 | | | $ | 367 | | | $ | 608 | | | $ | 465 | | | $ | 1,986 | | | Net Income Attributable to DTE Energy Company | $ | 340 | | | $ | 277 | | | $ | 476 | | | $ | 275 | | | $ | 1,368 | | | Basic Earnings per Share | $ | 1.77 | | | $ | 1.44 | | | $ | 2.47 | | | $ | 1.42 | | | $ | 7.09 | | | Diluted Earnings per Share | $ | 1.76 | | | $ | 1.44 | | | $ | 2.46 | | | $ | 1.42 | | | $ | 7.08 | | | 2019 | | | | | | | | | | | Operating Revenues | $ | 3,514 | | | $ | 2,888 | | | $ | 3,119 | | | $ | 3,148 | | | $ | 12,669 | | | Operating Income | $ | 542 | | | $ | 300 | | | $ | 450 | | | $ | 415 | | | $ | 1,707 | | | Net Income Attributable to DTE Energy Company | $ | 401 | | | $ | 182 | | | $ | 319 | | | $ | 267 | | | $ | 1,169 | | | Basic Earnings per Share | $ | 2.20 | | | $ | 0.99 | | | $ | 1.74 | | | $ | 1.40 | | | $ | 6.32 | | | Diluted Earnings per Share | $ | 2.19 | | | $ | 0.99 | | | $ | 1.73 | | | $ | 1.40 | | | $ | 6.31 | |
| | | | | | | | | | | | | | | | | | | | | | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | | (In millions, except per share amounts) | | 2017 | | | | | | | | | | | Operating Revenues | $ | 3,236 |
| | $ | 2,855 |
| | $ | 3,245 |
| | $ | 3,271 |
| | $ | 12,607 |
| | Operating Income | $ | 569 |
| | $ | 303 |
| | $ | 418 |
| | $ | 356 |
| | $ | 1,646 |
| Net Income Attributable to DTE Energy Company(a) | $ | 400 |
| | $ | 177 |
| | $ | 270 |
| | $ | 287 |
| | $ | 1,134 |
| | Basic Earnings per Share | $ | 2.23 |
| | $ | 0.99 |
| | $ | 1.51 |
| | $ | 1.60 |
| | $ | 6.32 |
| | Diluted Earnings per Share | $ | 2.23 |
| | $ | 0.99 |
| | $ | 1.51 |
| | $ | 1.60 |
| | $ | 6.32 |
| | 2016 | | | | | | | | | | | Operating Revenues | $ | 2,566 |
| | $ | 2,262 |
| | $ | 2,928 |
| | $ | 2,874 |
| | $ | 10,630 |
| | Operating Income | $ | 381 |
| | $ | 256 |
| | $ | 507 |
| | $ | 301 |
| | $ | 1,445 |
| | Net Income Attributable to DTE Energy Company | $ | 247 |
| | $ | 152 |
| | $ | 338 |
| | $ | 131 |
| | $ | 868 |
| | Basic Earnings per Share | $ | 1.38 |
| | $ | 0.84 |
| | $ | 1.88 |
| | $ | 0.73 |
| | $ | 4.84 |
| | Diluted Earnings per Share | $ | 1.37 |
| | $ | 0.84 |
| | $ | 1.88 |
| | $ | 0.73 |
| | $ | 4.83 |
|
| | (a) | Includes a net Income Tax Benefit of $(105) million related to the enactment of the TCJA in the fourth quarter. |
DTE Electric | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | (In millions) | | 2020 | | | | | | | | | | | Operating Revenues | $ | 1,212 | | | $ | 1,309 | | | $ | 1,690 | | | $ | 1,295 | | | $ | 5,506 | | | Operating Income | $ | 214 | | | $ | 263 | | | $ | 541 | | | $ | 206 | | | $ | 1,224 | | | Net Income | $ | 94 | | | $ | 183 | | | $ | 400 | | | $ | 101 | | | $ | 778 | | | 2019 | | | | | | | | | | | Operating Revenues | $ | 1,235 | | | $ | 1,190 | | | $ | 1,519 | | | $ | 1,280 | | | $ | 5,224 | | | Operating Income | $ | 226 | | | $ | 223 | | | $ | 440 | | | $ | 224 | | | $ | 1,113 | | | Net Income | $ | 147 | | | $ | 133 | | | $ | 307 | | | $ | 129 | | | $ | 716 | |
| | | | | | | | | | | | | | | | | | | | | | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | | (In millions) | | 2017 | | | | | | | | | | | Operating Revenues | $ | 1,175 |
| | $ | 1,218 |
| | $ | 1,434 |
| | $ | 1,275 |
| | $ | 5,102 |
| | Operating Income | $ | 217 |
| | $ | 272 |
| | $ | 395 |
| | $ | 281 |
| | $ | 1,165 |
| | Net Income | $ | 106 |
| | $ | 138 |
| | $ | 219 |
| | $ | 138 |
| | $ | 601 |
| | 2016 | | | | | | | | | | | Operating Revenues | $ | 1,153 |
| | $ | 1,215 |
| | $ | 1,608 |
| | $ | 1,249 |
| | $ | 5,225 |
| | Operating Income | $ | 245 |
| | $ | 265 |
| | $ | 501 |
| | $ | 193 |
| | $ | 1,204 |
| | Net Income | $ | 127 |
| | $ | 135 |
| | $ | 285 |
| | $ | 75 |
| | $ | 622 |
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Item 9A. Controls and Procedures See Item 8. Financial Statements and Supplementary Data for management’s evaluation of the Registrants' disclosure controls and procedures, their report on internal control over financial reporting, and their conclusion on changes in internal control over financial reporting.
Item 9B. Other Information None.
Part III Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
DTE Electric
Information required of DTE Electric by Part III (Items 10, 11, 12, and 13) of this Form 10-K is omitted per General Instruction I (2) (c) of Form 10-K for wholly-owned subsidiaries (reduced disclosure format).
Item 14. Principal Accountant Fees and Services
DTE Energy
Information required of DTE Energy by Part III (Items 10, 11, 12, 13, and 14) of this Form 10-K is incorporated by reference from DTE Energy’s definitive Proxy Statement for its 20182021 Annual Meeting of Shareholders to be held May 3, 2018.20, 2021. The Proxy Statement will be filed with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of DTE Energy's fiscal year covered by this report on Form 10-K, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K.
Information required of DTE Electric by Part III (Items 10, 11, 12, and 13) of this Form 10-K is omitted per General Instruction I (2) (c) of Form 10-K for wholly-owned subsidiaries (reduced disclosure format).
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services DTE Electric For the years ended December 31, 2017 and 2016, professional services were performed by PricewaterhouseCoopers LLP (PwC). The following table presents fees for professional services rendered by PwCPricewaterhouseCoopers LLP (PwC) for the audit of DTE Electric’s consolidated annual financial statements for the years ended December 31, 20172020 and 2016, respectively,2019 and fees billed for other services rendered by PwC during those periods.
| | | | 2017 | | 2016 | | 2020 | | 2019 | Audit fees(a) | $ | 1,428,500 |
| | $ | 1,330,268 |
| Audit fees(a) | $ | 1,492,572 | | | $ | 1,408,900 | | Audit-related fees(b) | 12,000 |
| | 12,000 |
| Audit-related fees(b) | 12,000 | | | 52,000 | | | Total | $ | 1,440,500 |
| | $ | 1,342,268 |
| Total | $ | 1,504,572 | | | $ | 1,460,900 | |
| | (a) | Represents the aggregate fees for the audits of DTE Electric’s annual financial statements included in the Annual Reports on Form 10-K and for the reviews of the financial statements included in the Quarterly Reports on Form 10-Q. |
| | (b) | Represents the aggregate fees billed for audit-related services for various attest services. |
(a)Represents the aggregate fees for the audits of DTE Electric’s consolidated financial statements included in the Annual Reports on Form 10-K, reviews of the consolidated financial statements included in the Quarterly Reports on Form 10-Q, and audit services provided in connection with certain regulatory filings and debt issuances. Audit fees are presented on an Audit Year basis in accordance with SEC guidelines and include an estimate of fees incurred for the most recent Audit Year. (b)Represents the aggregate fees billed for audit-related services and various attest services. The above listed fees were pre-approved by the DTE Energy Audit Committee. Prior to engagement, the DTE Energy Audit Committee pre-approves these services by category of service. The DTE Energy Audit Committee may delegate to the chair of the Audit Committee, or to one or more other designated members of the Audit Committee, the authority to grant pre-approvals of all permitted services or classes of these permitted services to be provided by the independent auditor up to, but not exceeding, a pre-defined limit.auditor. The decision of the designated member to pre-approve a permitted service will be reported to the DTE Energy Audit Committee at the next scheduled meeting.
Part IV Item 15. Exhibits and Financial Statement Schedules A.The following documents are filed as part of this Annual Report on Form 10-K. (a)Consolidated Financial Statements. See "Item 8 — Financial Statements and Supplementary Data." (b)Financial statement schedule. See "Item 8 — Financial Statements and Supplementary Data." (c)Exhibits. | | | | | | | | | | | | | | | | | | | | | A.Exhibit Number | The following documents are filed as part of this Annual Report on Form 10-K. | Description | | DTE
Energy | | DTE
Electric |
| | | | | | | (1) | Consolidated Financial Statements. See “Item 8 — Financial Statements and Supplementary Data.” |
| (i) Exhibits filed herewith: | | | (2) | Financial statement schedule. See “Item 8 — Financial Statements and Supplementary Data.” |
| | | | | | | | Exhibit Number | | Description | | DTE
| | DTE
Electric
Description of the Company’s: 2016 Series B 5.375% Junior Subordinated Debentures due 2076; 2016 Series F 6.00% Junior Subordinated Debentures due 2076; and 2017 Series E 5.25% Junior Subordinated Debentures due 2077 | | X | | | | | | | | | | | | (i) Exhibits filed herewith: | | | | | | | | | | | | | | ComputationDescription of Ratio of Earnings to Fixed Chargesthe Company’s 2020 Series G 4.375% Junior Subordinated Debentures due 2080 | | X | | | | | | | | | | | | Computation of Ratio of Earnings to Fixed Charges | | | | X | | | | | | | | | | Subsidiaries of DTE Energy | | X | | | | | | | | | | | | Consent of PricewaterhouseCoopers LLP | | X | | | | | | | | | | | | Consent of PricewaterhouseCoopers LLP | | | | X | | | | | | | | | | Chief Executive Officer Section 302 Form 10-K Certification of Periodic Report | | X | | | | | | | | | | | | Chief Financial Officer Section 302 Form 10-K Certification of Periodic Report | | X | | | | | | | | | | | | Chief Executive Officer Section 302 Form 10-K Certification of Periodic Report | | | | X | | | | | | | | | | Chief Financial Officer Section 302 Form 10-K Certification of Periodic Report | | | | X | | | | | | | | | 101.INS | | XBRL Instance Document | | X | | X | | | | | | | | | 101.SCH | | XBRL Taxonomy Extension Schema | | X | | X | | | | | | | | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | | X | | X | | | | | | | | | 101.DEF | | XBRL Taxonomy Extension Definition Database | | X | | X | | | | | | | | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase | | X | | X | | | | | | | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | | X | | X | | | | | | | | | 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | X | | X | | | | | | | | | | (ii) Exhibits furnished herewith: | | | | | | | | | | | | | | Chief Executive Officer Section 906 Form 10-K Certification of Periodic Report | | X | | | | | | | | | | | | Chief Financial Officer Section 906 Form 10-K Certification of Periodic Report | | X | | | | | | | | | | | | Chief Executive Officer Section 906 Form 10-K Certification of Periodic Report | | | | X | | | | | | | | | | Chief Financial Officer Section 906 Form 10-K Certification of Periodic Report | | | | X | | | | | | | | | | (iii) Exhibits incorporated by reference: | | | | | | | | | | | | | Certain exhibits listed below refer to "The Detroit Edison Company" and "Michigan Consolidated Gas Company" and were effective prior to the change to DTE Electric Company and DTE Gas Company, respectively, effective January 1, 2013. | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | 3(a)Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | 3(a) | | | | X | | | | | | | | | | | 3(b) | | | | X | | |
| | | | | | | | Exhibit Number3(c) | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | | | | 3(c) | | | | | | X | | | | | | | | | 3(d) | | | | | | X | | | | | | | | | 4(a) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X
| | | | | | | | | | | | | | X
| | | | | | | | | | | | | | X | | | | | | | | | | | | | | X
| | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | 4(b)Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | 4(b) | | Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-1 to Detroit Edison's Registration Statement on Form A-2 (File No. 2-1630)) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below: (P) | | X | | X | | | | | | | | | | Supplemental Indenture, dated as of December 1, 1940, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-14 to Detroit Edison's Registration Statement on Form A-2 (File No. 2-4609)). (amendment) (P) | | X | | X | | | | | | | | | | Supplemental Indenture, dated as of September 1, 1947, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-20 to Detroit Edison's Registration Statement on Form S-1 (File No. 2-7136)). (amendment) (P) | | X | | X | | | | | | | | | | Supplemental Indenture, dated as of March 1, 1950, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-22 to Detroit Edison's Registration Statement on Form S-1 (File No. 2-8290)). (amendment) (P) | | X | | X | | | | | | | | | | Supplemental Indenture, dated as of November 15, 1951, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-23 to Detroit Edison's Registration Statement on Form S-1 (File No. 2-9226)). (amendment) (P) | | X | | X | | | | | | | | | | Supplemental Indenture, dated as of August 15, 1957, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 3-B-30 to Detroit Edison's Form 8-K dated September 11, 1957). (amendment) (P) | | X | | X | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | | Supplemental Indenture, dated as of December 1, 1966, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 2-B-32 to Detroit Edison's Registration Statement on Form S-9 (File No. 2-25664)). (amendment) (P) | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | XDTE
Energy | | XDTE
Electric | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | Supplemental Indenture, dated as of August 15, 2011, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A. as successor trustee (Exhibit 4-277 to Detroit Edison's Form 10-Q for the quarter ended September 30, 2011). (2011 Series D, 2011 Series E, 2011 Series F) | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | 4(c) | | | | X | | X | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | 4(c) | | Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-152 to Detroit Edison's Registration Statement (File No. 33-50325)) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below: (P) | | X | | X | | | | | | | | | | | | X | | X | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | X | | | | | | | | | | Eighteenth Supplemental Indenture, dated as of September 15, 2005, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.1 to Detroit Edison's Form 8-K dated September 29, 2005). (2005 Series C 5.19% Senior Notes due October 1, 2023) | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | XDTE
Energy | | XDTE
Electric | | | | | | | | | 4(d) | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | | | | | X | | X | | | | | | | | 4(d) | | | | X | | | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | 4(e) | | Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (Exhibit 7-D to Michigan Consolidated Gas Company Registration Statement No. 2-5252) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below: (P) | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | |
| | | | | | | | Exhibit Number | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | 10(a) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | 10(a) | | | | X | | | | | | | | | | | 10(b) | | Certain arrangements pertaining to the employment of Gerard M. Anderson with The Detroit Edison Company, dated October 6, 1993 (Exhibit 10-48 to The Detroit Edison Company's Form 10-K for the year ended December 31, 1993) (P) | | X | | X | | | | | | | | | 10(c) | | | | X | | X | | | | | | | | | 10(d) | | | | X | | | | | | | | | | 10(e) | | | | X | | | | | | | | | | 10(f)10(e) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | 10(g)10(f) | | | | X | | | | | | | | | | 10(h)10(g) | | | | X | | X | | | | | | | | 10(i)10(h) | | | | X | | | | | | | | | | 10(j)10(i) | | | | X | | | | | | | | | |
| | | | | | | | Exhibit Number10(j) | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | | | | | X | | | | | | | | | | 10(k) | | | | X | | | | | | | | | | 10(l)10(k) | | | | X | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | 10(m)Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | 10(l) | | | | X | | | | | | | | | | | 10(m) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | 10(n) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | | 10(n) | | | | X | | | | | | | | | | | | | | X | | | | | | | | | | 10(o) | | | | X | | | | | | | | | | | 10(o) | | | | X | | | | | | | | | | 10(p) | | | | X | | | | | | | | | | | 10(p) | | | | X | | | | | | | | | | 10(q) | | | | X | | | | | | | | | | | 10(q) | | | | X | | | | | | | | | | 10(r) | | | | X | | | | | | | | | |
| | | | | | | | Exhibit Number10(r) | | Description | | DTE
Energy
| | DTE
Electric
| | | | | | | | 10(s) | | Form of Third Amended and Restated DTE Energy Company Five-Year Credit Agreement, dated as of October 21, 2011 and amended and restated as of April 16, 2015, by and among DTE Energy Company, the lenders party thereto, Citibank, N.A., as Administrative Agent, and Barclays Bank PLC, The Bank of Nova Scotia and JPMorgan Chase Bank, N.A. as Co-Syndication Agents (Exhibit 10.01 to DTE Energy Company's Form 8-K filed on April 21, 2015) | | X | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | 10(s) | | Request for Extension of Termination Date, dated as of April 16, 2017, to the Third Amended and Restated Five-Year Credit Agreement, dated as of October 21, 2011, amended and restated as of April 5, 2013, and amended and restated as of April 16, 2015, by and among DTE Energy, the lenders party thereto, Citibank, N.A., as Administrative Agent, and Barclays Bank PLC, The Bank of Nova Scotia and JPMorgan Chase Bank, N.A, as Co-Syndication Agents (Exhibit 10.104 to DTE Energy’s Form 10-Q for the quarter ended June 30, 2017) | | X | | | | | | | | | | 10(t) | | Form of Third Amended and Restated DTE Gas Company Five-Year Credit Agreement, dated as of October 21, 2011 and amended and restated as of April 16, 2015, by and among DTE Gas Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Barclays Bank PLC, Citibank, N.A., and Bank of America, N.A., as Co-Syndication Agents (Exhibit 10.02 to DTE Energy Company's Form 8-K filed on April 21, 2015) | | X | | | | | | | | | | | 10(t) | | Request for Extension of Termination Date, dated as of April 16, 2017, to the Third Amended and Restated Five-Year Credit Agreement, dated as of October 21, 2011, amended and restated as of April 5, 2013, and amended and restated as of April 16, 2015, by and among DTE Gas the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Barclays Bank PLC, Citibank, N.A. and Bank of America, N.A., as Co-Syndication Agents (Exhibit 10.105 to DTE Energy’s Form 10-Q for the quarter ended June 30, 2017) | | X
| | | | | | | | | | 10(u) | | Form of Third Amended and Restated DTE Electric Company Five-Year Credit Agreement, dated as of October 21, 2011 and amended and restated as of April 16, 2015, by and among DTE Electric Company, the lenders party thereto, Barclays Bank PLC, as Administrative Agent, and Citibank N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Bank, National Association as Co-Syndication Agents (Exhibit 10.01 to DTE Energy Company's and DTE Electric Company's Form 8-K filed on April 21, 2015) | | X | | X | | | | | | | | | 10(u) | | Request for Extension of Termination Date, dated as of April 16, 2017, to the Third Amended and Restated Five-Year Credit Agreement, dated as of October 21, 2011, amended and restated as of April 5, 2013, and further amended and restated as of April 16, 2015, by and among DTE Electric Company, the lenders party thereto, Barclays Bank PLC., as Administrative Agent, and Citibank, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association as Co-Syndication Agents (Exhibit 10.106 to DTE Energy’s and DTE Electric Company's Form 10-Q for the quarter ended June 30, 2017) | | X | | X | | | | | | | | 10(v) | | | | X | | | | | | | | | | 10(w)10(v) | | | | X | | | | | | | | | | 10(x)10(w) | |
| | X | | | | | | | | | | | 10(x) | | Certain arrangements pertaining to the employment of Gerardo Norcia, dated July 1, 2019 (Exhibit 10.107 to DTE Energy's Form 10-K for the year ended December 31, 2019) | | X | | | | | | | | | | | 10(y) | | | | X | | | | | | | | | | | 10(z) | | | | X | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Exhibit Number | | Description | | DTE
Energy | | DTE
Electric | | | | | | | | | 10(aa) | | | | X | | | | | | | | | | | 10(bb) | | | | X | | | | | | | | | | | 10(cc) | | | | X | | X | | | | | | | | | 10(dd) | | | | X | | X | | | | | | | | | 10(ee) | | | | X | | |
Item 16. Form 10-K Summary None.
DTE Energy Company Schedule II — Valuation and Qualifying Accounts | | | | Year Ending December 31, | | Year Ending December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Allowance for Doubtful Accounts (shown as deduction from Accounts receivable in DTE Energy's Consolidated Statements of Financial Position) | | | | | | Allowance for Doubtful Accounts (shown as deduction from Accounts receivable in DTE Energy's Consolidated Statements of Financial Position) | | | Balance at Beginning of Period | $ | 41 |
| | $ | 49 |
| | $ | 54 |
| Balance at Beginning of Period | $ | 91 | | | $ | 91 | | | $ | 49 | | | Additions: | | | | | | Additions: | | | Charged to costs and expenses | 80 |
| | 78 |
| | 93 |
| Charged to costs and expenses | 103 | | | 111 | | | 140 | | Charged to other accounts(a) | 26 |
| | 18 |
| | 14 |
| Charged to other accounts(a) | 50 | | | 56 | | | 55 | | Deductions(b) | (98 | ) | | (104 | ) | | (112 | ) | Deductions(b) | (140) | | | (167) | | | (153) | | | Balance at End of Period | $ | 49 |
| | $ | 41 |
| | $ | 49 |
| Balance at End of Period | $ | 104 | | | $ | 91 | | | $ | 91 | |
(a)Collection of accounts previously written off. | | (a) | Collection of accounts previously written off. |
| | (b) | Uncollectible accounts written off. |
(b)Uncollectible accounts written off.
DTE Electric Company Schedule II — Valuation and Qualifying Accounts | | | | Year Ending December 31, | | Year Ending December 31, | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 | | | (In millions) | | (In millions) | | Allowance for Doubtful Accounts (shown as deduction from Accounts receivable in DTE Electric's Consolidated Statements of Financial Position) | | | | | | Allowance for Doubtful Accounts (shown as deduction from Accounts receivable in DTE Electric's Consolidated Statements of Financial Position) | | | Balance at Beginning of Period | $ | 25 |
| | $ | 28 |
| | $ | 29 |
| Balance at Beginning of Period | $ | 46 | | | $ | 53 | | | $ | 31 | | | Additions: | |
| | |
| | |
| Additions: | | | Charged to costs and expenses | 55 |
| | 49 |
| | 51 |
| Charged to costs and expenses | 61 | | | 65 | | | 85 | | Charged to other accounts(a) | 14 |
| | 8 |
| | 6 |
| Charged to other accounts(a) | 30 | | | 36 | | | 36 | | Deductions(b) | (63 | ) | | (60 | ) | | (58 | ) | Deductions(b) | (80) | | | (108) | | | (99) | | | Balance at End of Period | $ | 31 |
| | $ | 25 |
| | $ | 28 |
| Balance at End of Period | $ | 57 | | | $ | 46 | | | $ | 53 | |
| | (a) | Collection of accounts previously written off. |
| | (b) | Uncollectible accounts written off. |
(a)Collection of accounts previously written off.
(b)Uncollectible accounts written off.
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, DTE Energy Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | | | | | DTE ENERGY COMPANY | | | (Registrant) | | | | | | | | By: | DTE ENERGY COMPANY/S/ GERARDO NORCIA | | | (Registrant) | | | | | | | | By: | /S/ GERARD M. ANDERSON | | | Gerard M. Anderson
Chairman of the BoardGerardo Norcia
President and
Chief Executive Officer |
Date: February 16, 201819, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of DTE Energy Company and in the capacities and on the date indicated. | | | | | | | | | | | | | | | | By: | /S/ GERARDO NORCIA | | By: | /S/ DAVID RUUD | | Gerardo Norcia
President,
Chief Executive Officer, and Director
(Principal Executive Officer) | | | David Ruud
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer) | | | | | | | By: | /S/ MARK C. ROLLING | | By: | /S/ RUTH G. SHAW | | Mark C. Rolling
Vice President, Controller, and Chief Accounting Officer
(Principal Accounting Officer) | | | Ruth G. Shaw, Director | | | | | | | By: | /S/ GERARD M. ANDERSON | | By: | /S/ ROBERT C. SKAGGS, JR. | | Gerard M. Anderson | | | Robert C. Skaggs, Jr., Director | | Executive Chairman, and Director | | | | | | | | | | By: | /S/ GERARD M. ANDERSON | | By: | /S/ PETER B. OLEKSIAK | | Gerard M. Anderson
Chairman of the Board,
Chief Executive Officer, and Director
(Principal Executive Officer) | | | Peter B. Oleksiak
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer) | | | | | | By: | /S/ JEFFREY A. JEWELL | | By: | /S/ CHARLES W. PRYOR, JR. | | Jeffrey A. Jewell
Vice President, Controller, and Chief Accounting Officer
(Principal Accounting Officer) | | | Charles W. Pryor, Jr., Director | | | | | | By: | /S/ DAVID A. BRANDON | | By: | /S/ JOSUE ROBLES, JR.DAVID A. THOMAS | | David A. Brandon, Director | | | Josue Robles, Jr.,David A. Thomas, Director | | | | | | | By: | /S/ W. FRANK FOUNTAIN, JR. | | By: | /S/ RUTH G. SHAW | | W. Frank Fountain, Jr., Director | | | Ruth G. Shaw, Director | | | | | | By: | /S/ CHARLES G. MCCLURE JR. | | By: | /S/ ROBERT C. SKAGGS, JR.GARY TORGOW | | Charles G. McClure Jr., Director | | | Robert C. Skaggs, Jr.,Gary Torgow, Director | | | | | | | By: | /S/ GAIL J. MCGOVERN | | By: | /S/ DAVID A. THOMASJAMES H. VANDENBERGHE | | Gail J. McGovern, Director | | | David A. Thomas,James H. Vandenberghe, Director | | | | | | | By: | /S/ MARK A. MURRAY | | By: | /S/ JAMES H. VANDENBERGHEVALERIE M. WILLIAMS | | Mark A. Murray, Director | | | James H. Vandenberghe,Valerie M. Williams, Director | | | | | | By: | /S/ JAMES B. NICHOLSON | | | | | James B. Nicholson, Director | | | | | | | | | | | | | | | | | | |
Date: February 16, 2018
19, 2021
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, DTE Electric Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | | | | | DTE ELECTRIC COMPANY | | | (Registrant) | | | | | | | | By: | DTE ELECTRIC COMPANY/S/ GERARDO NORCIA | | | (Registrant) | | | | | | | | By: | /S/ GERARD M. ANDERSON | | | Gerard M. Anderson
Chairman of the BoardGerardo Norcia
President and
Chief Executive Officer |
Date: February 16, 201819, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of DTE Electric Company and in the capacities and on the date indicated. | | | | | | | | | | | | | | | | By: | /S/ GERARD M. ANDERSONGERARDO NORCIA | | By: | /S/ PETER B. OLEKSIAKDAVID RUUD | | Gerard M. Anderson
Chairman of the Board,
Gerardo Norcia
President,
Chief Executive Officer, and Director
(Principal Executive Officer) | | | Peter B. Oleksiak
Senior Vice President and
David Ruud
Chief Financial Officer,
and Director
(Principal Financial Officer) | | | | | | | By: | /S/ JEFFREY A. JEWELLMARK C. ROLLING | | By: | /S/ LISA A. MUSCHONGJOANN CHAVEZ | | Jeffrey A. Jewell
Mark C. Rolling
Vice President, Controller, and Chief Accounting Officer
(Principal Accounting Officer)
| | | JoAnn Chavez, Director | | | | | | | By: | /S/ LISA A. MUSCHONG | | | | | Lisa A. Muschong, Director | | | | | | By: | /S/ DAVID E. MEADOR | | By: | /S/ BRUCE D. PETERSON | | David E. Meador, Director | | | Bruce D. Peterson, Director |
Date: February 16, 201819, 2021 Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Securities Exchange Act of 1934 by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Securities Exchange Act of 1934. No annual report, proxy statement, form of proxy, or other proxy soliciting material has been sent to security holders of DTE Electric Company during the period covered by this Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2020.
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