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DTE DTE Energy

Filed: 4 May 21, 4:16pm

Exhibit 99.1

DTE Gas Company

Unaudited Consolidated Financial Statements as of and for the three months ended March 31, 2021






TABLE OF CONTENTS





DEFINITIONS
AFUDCAllowance for Funds Used During Construction
ASUAccounting Standards Update issued by the FASB
CompanyDTE Gas Company and any subsidiary companies
COVID-19Coronavirus disease of 2019
Customer ChoiceMichigan legislation giving customers the option of retail access to alternative suppliers for natural gas
DTE EnergyDTE Energy Company, directly or indirectly the parent of DTE Electric Company, DTE Gas, and numerous non-utility subsidiaries
DTE GasDTE Gas Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies
EGLEMichigan Department of Environment, Great Lakes, and Energy, formerly known as Michigan Department of Environmental Quality
EPAU.S. Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
MGPManufactured Gas Plant
MPSCMichigan Public Service Commission
NEXUSNEXUS Gas Transmission, LLC, a joint venture in which a subsidiary of DTE Energy owns a 50% partnership interest
RepresentedEmployees of DTE Gas covered by collective bargaining agreements
TCJATax Cuts and Jobs Act of 2017, which reduced the corporate Federal income tax rate from 35% to 21%
Topic 606FASB issued ASU No. 2014-09, Revenue From Contracts with Customers, as amended
VIEVariable Interest Entity

1


DTE Gas Company

Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31,
20212020
(In millions)
Operating Revenues$605 $533 
Operating Expenses
Cost of gas191 174 
Operation and maintenance129 121 
Depreciation and amortization43 37 
Taxes other than income26 24 
389 356 
Operating Income216 177 
Other (Income) and Deductions
Interest expense20 20 
Interest income(1)(1)
Other income(1)(1)
Other expenses1 
19 21 
Income Before Income Taxes197 156 
Income Tax Expense29 36 
Net Income$168 $120 

See Notes to Consolidated Financial Statements (Unaudited)

2


DTE Gas Company

Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended
March 31,
20212020
(In millions)
Net Income$168 $120 
Other comprehensive income — 
Comprehensive Income$168 $120 

See Notes to Consolidated Financial Statements (Unaudited)

3


DTE Gas Company

Consolidated Statements of Financial Position (Unaudited)
March 31,December 31,
20212020
(In millions)
ASSETS
Current Assets
Cash and cash equivalents$ $— 
Accounts receivable (less allowance for doubtful accounts of $41 and $32, respectively)
Customer304 281 
Affiliates42 27 
Other4 
Inventories
Gas11 40 
Materials and supplies22 21 
Gas customer choice deferred asset16 40 
Notes receivable
Affiliates1 
Other2 
Regulatory assets11 
Prepaid property tax24 17 
Other6 
443 440 
Investments40 40 
Property
Property, plant, and equipment6,522 6,434 
Accumulated depreciation and amortization(1,786)(1,764)
4,736 4,670 
Other Assets
Regulatory assets644 666 
Notes Receivable
Net investment in lease38 38 
Other8 
Prepaid pension costs — affiliates218 211 
Prepaid postretirement costs — affiliates233 227 
Other11 
1,152 1,154 
Total Assets$6,371 $6,304 

See Notes to Consolidated Financial Statements (Unaudited)
4


DTE Gas Company

Consolidated Statements of Financial Position (Unaudited) - Continued
March 31,December 31,
20212020
(In millions, except shares)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable
Affiliates$20 $22 
Other159 167 
Short-term borrowings
Affiliates29 167 
Gas inventory equalization68 — 
Regulatory liabilities3 21 
Other65 70 
344 447 
Long-Term Debt1,901 1,901 
Other Liabilities
Deferred income taxes739 699 
Regulatory liabilities918 920 
Asset retirement obligations172 170 
Accrued pension liability — affiliates99 100 
Accrued postretirement liability — affiliates7 
Other37 37 
1,972 1,933 
Commitments and Contingencies (Note 9)
Shareholder's Equity
Common stock ($1 par value, 15,100,000 shares authorized, and 10,300,000 shares issued and outstanding for both periods)1,109 1,109 
Retained earnings1,045 914 
Total Shareholder's Equity2,154 2,023 
Total Liabilities and Shareholder's Equity$6,371 $6,304 

See Notes to Consolidated Financial Statements (Unaudited)

5


DTE Gas Company

Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
20212020
(In millions)
Operating Activities
Net Income$168 $120 
Adjustments to reconcile Net Income to Net cash from operating activities:
Depreciation and amortization43 37 
Allowance for equity funds used during construction(1)— 
Deferred income taxes30 30 
Changes in assets and liabilities:
Accounts receivable, net(40)(19)
Inventories28 28 
Prepaid pension costs — affiliates(7)(6)
Prepaid postretirement benefit costs — affiliates(6)(6)
Accounts payable8 (16)
Gas inventory equalization68 62 
Accrued pension liability — affiliates(1)— 
Regulatory assets and liabilities4 
Other current and noncurrent assets and liabilities10 
Net cash from operating activities304 240 
Investing Activities
Plant and equipment expenditures(128)(123)
Notes receivable and other(1)
Net cash used for investing activities(129)(122)
Financing Activities
Short-term borrowings, net (41)
Short-term borrowings, net — affiliate(138)— 
Dividends paid on common stock(37)(33)
Other (1)
Net cash used for financing activities(175)(75)
Net Increase in Cash and Cash Equivalents 43 
Cash and Cash Equivalents at Beginning of Period 
Cash and Cash Equivalents at End of Period$ $44 
Supplemental disclosure of non-cash investing and financing activities
Plant and equipment expenditures in accounts payable$43 $42 

See Notes to Consolidated Financial Statements (Unaudited)

6


DTE Gas Company

Consolidated Statements of Changes in Shareholder's Equity (Unaudited)
Common StockAdditional Paid-in CapitalRetained Earnings
SharesAmountTotal
(Dollars in millions, shares in thousands)
Balance, December 31, 202010,300 $10 $1,099 $914 $2,023 
Net Income— — — 168 168 
Dividends declared on common stock— — — (37)(37)
Balance, March 31, 202110,300 10 1,099 1,045 2,154 

Common StockAdditional Paid-in CapitalRetained Earnings
SharesAmountTotal
(Dollars in millions, shares in thousands)
Balance, December 31, 201910,300 $10 $979 $863 $1,852 
Net Income— — — 120 120 
Dividends declared on common stock— — — (33)(33)
Balance, March 31, 202010,300 10 979 950 1,939 

See Notes to Consolidated Financial Statements (Unaudited)

7


NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Corporate Structure
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. The Company is regulated by the MPSC and certain activities are regulated by the FERC. In addition, the Company is regulated by other federal and state regulatory agencies including the EPA and EGLE.
Basis of Presentation
The Consolidated Financial Statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's 2020 Consolidated Financial Statements furnished on Form 8-K.
The accompanying Consolidated Financial Statements 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 Company's estimates.
The Consolidated Financial Statements are unaudited but, in the Company's opinion include all adjustments necessary to present a fair statement of the results for the interim periods. All adjustments are of a normal recurring nature, except as otherwise disclosed in these Consolidated Financial Statements and Notes to Consolidated Financial Statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, 2021.
Certain prior year balances were reclassified to match the current year's Consolidated Financial Statements presentation.
Principles of Consolidation
The Company consolidates all majority-owned subsidiaries and investments in entities in which it has controlling influence. Non-majority owned investments are accounted for using the equity method when the Company is able to significantly influence the operating policies of the investee. When the Company does not influence the operating policies of an investee, the equity investment is valued at cost minus any impairments, if applicable. The Company eliminates all intercompany balances and transactions.
The Company evaluates whether an entity is a VIE whenever reconsideration events occur. The Company consolidates VIEs for which it is the primary beneficiary. If the Company 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, the Company 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 Company performs ongoing reassessments of all VIEs to determine if the primary beneficiary status has changed.
The Company holds a variable interest in NEXUS through purchases under a long-term transportation capacity contract. NEXUS, a joint venture with a subsidiary of DTE Energy, owns a 256-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers. NEXUS is a VIE as it has insufficient equity at risk to finance its activities. The Company is not the primary beneficiary, as the power to direct significant activities is shared between the owners of the equity interests.
As of March 31, 2021, the carrying amount of liabilities in the Company's Consolidated Statements of Financial Position that relate to its variable interest under the long-term contract are primarily related to working capital accounts and generally represent the amounts owed by the Company for transportation associated with the current billing cycle under the contract. The Company has not provided any significant form of financial support associated with the long-term contract. There is no material potential exposure to loss as a result of the Company's variable interest through the long-term contract.

8


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
The interim effective tax rates of DTE Gas are as follows:
Effective Tax Rate
Three Months Ended March 31,
20212020
DTE Gas15 %23 %
The tax rates are affected by estimated annual permanent items, including AFUDC equity and other flow-through items, as well as discrete items that may occur in any given period, but are not consistent from period to period.
The 8% decrease in the effective tax rate for the three months ended March 31, 2021 was primarily due to higher amortization of the TCJA regulatory liability in 2021.
The Company had income tax receivables with DTE Energy of $27 million and $26 million at March 31, 2021 and December 31, 2020, respectively.
Allocated Stock-Based Compensation
The Company received an allocation of costs from DTE Energy associated with stock-based compensation of $3 million and $2 million for the three months ended March 31, 2021 and 2020, respectively.
Cash and Cash Equivalents
Cash and cash equivalents generally include cash on hand, cash in banks, and temporary investments purchased with remaining maturities of three months or less.
Financing Receivables
Financing receivables are primarily composed of trade receivables, notes receivable, and unbilled revenue. The Company's financing receivables are stated at net realizable value.
The Company monitors the credit quality of 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 Company has 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 Company utilizes 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 Company has 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.
9


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
The following represents the Company's 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 March 31, 2021.
Year of origination
202120202019 and PriorTotal
(In millions)
Notes receivable, internal grade 2$$$$9 
Net investment in leases, internal grade 1(a)
$— $— $39 $39 
_______________________________________
(a)Current portion included in Current Assets — Notes receivable — Other on the Consolidated Statements of Financial Position.
The allowance for doubtful accounts on accounts receivable for the Company is generally calculated using an aging approach that utilizes rates developed in reserve studies. The Company establishes an allowance for uncollectible accounts based on historical losses and management'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. The Company generally assesses 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 allowance for doubtful accounts for other receivables is generally calculated based on specific review of probable future collections based on receivable balances generally in excess of 30 days. 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 the associated receivable.
Notes receivable are primarily comprised of finance lease receivables and loans that are included in Notes Receivable and Other current assets on the Consolidated Statements of Financial Position.
Notes receivable are typically considered delinquent when payment is not received for periods ranging from 60 to 120 days. The Company ceases accruing interest (nonaccrual status), considers a note receivable impaired, and establishes 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. In determining the allowance for credit losses for notes receivable, the Company considers the historical payment experience and other factors that are expected to have a specific impact on the counterparty's ability to pay including existing and future economic conditions.
The following tables present a roll-forward of the activity for the Company's financing receivables credit loss reserves:
Trade accounts receivableOther receivablesTotal
(In millions)
Beginning reserve balance, January 1, 2021$30 $$32 
Current period provision11 — 11 
Write-offs charged against allowance(12)— (12)
Recoveries of amounts previously written off10 — 10 
Ending reserve balance, March 31, 2021$39 $2 $41 

Trade accounts receivableOther receivablesTotal
(In millions)
Beginning reserve balance, January 1, 2020$29 $$32 
Current period provision15 — 15 
Write-offs charged against allowance(15)— (15)
Recoveries of amounts previously written off— 
Ending reserve balance, March 31, 2020$34 $$37 
10


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
Uncollectible expense was $12 million and $15 million for the three months ended March 31, 2021 and 2020, respectively, which is primarily comprised of the current period provision for allowance for doubtful accounts.
There are no material amounts of past due financing receivables for the Company as of March 31, 2021.

NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted 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 for income taxes by removing certain exceptions, and clarifying certain requirements regarding franchise taxes, goodwill, consolidated tax expenses, and annual effective tax rate calculations. The Company adopted the ASU on January 1, 2021 using the modified retrospective and prospective approaches, where applicable. The adoption of the ASU did not have a significant impact on the Company's 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 Company adopted the ASU effective January 1, 2021 using the modified retrospective approach. The adoption of the ASU did not have an impact on the Company's Consolidated Financial Statements.
Recently Issued Pronouncements
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 exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The guidance can be applied prospectively from any date beginning March 12, 2020 through December 31, 2022. The optional relief is temporary and cannot be applied to contract modifications and hedging relationships entered into or evaluated after December 31, 2022. The Company presently has various contracts that reference LIBOR and is assessing how this standard may be applied to specific contract modifications.

NOTE 4 — REVENUE
Disaggregation of Revenue
The following is a summary of disaggregated revenues for the Company:
Three Months Ended March 31,
20212020
(In millions)
Gas sales$453 $387 
End User Transportation85 77 
Intermediate Transportation26 26 
Other(a)
41 43 
Total Gas operating revenues(b)
$605 $533 
_______________________________________
(a)Includes revenue adjustments related to various regulatory mechanisms.
(b)Includes $2 million under Alternative Revenue Programs for the three months ended March 31, 2020 and $2 million of Other revenues for both the three months ended March 31, 2021 and 2020, which are all outside the scope of Topic 606.
11


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
Transaction Price Allocated to the Remaining Performance Obligations
In accordance with optional exemptions available under Topic 606, the Company did not disclose the value of unsatisfied performance obligations for (1) contracts with an original expected length of one year or less, (2) with the exception of fixed consideration, contracts for which revenue is recognized at the amount to which the Company has 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, including the supply and delivery of energy related products and services. Contracts with variable volumes and/or variable pricing 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 Company expects to recognize revenue for the following amounts related to fixed consideration associated with remaining performance obligations in each of the future periods noted:
(In millions)
2021$70 
202291 
202376 
202462 
202554 
2026 and thereafter340 
$693 

NOTE 5 — REGULATORY MATTERS
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 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.

NOTE 6 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 Company makes certain assumptions it believes 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 Company and its counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at March 31, 2021 and December 31, 2020. The Company believes it uses valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.
12


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
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 Company classifies 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 Company has 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.
As of March 31, 2021 and December 31, 2020, the Company had $4 million of equity securities recorded at fair value on a recurring basis and classified as Level 1 assets. These assets, which exclude the cash surrender value of life insurance investments, were included in Other investments on the Consolidated Statements of Financial Position for both periods.
The following table presents the carrying amount and fair value of financial instruments:
March 31, 2021December 31, 2020
CarryingFair ValueCarryingFair Value
AmountLevel 1Level 2Level 3AmountLevel 1Level 2Level 3
(In millions)
Notes receivable — affiliates$1 $ $ $1 $$— $— $
Notes receivable — other, excluding lessor finance leases$9 $ $ $9 $$— $— $
Short-term borrowings — affiliates$29 $ $ $29 $167 $— $— $167 
Long-term debt(a)
$1,901 $ $915 $1,155 $1,901 $— $1,179 $1,019 
_______________________________________
(a)Includes unamortized debt discounts and issuance costs.
For further fair value information on financial and derivative instruments, see Note 7 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments."

NOTE 7 — FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS
The Company recognizes all derivatives at their fair value as Derivative assets or liabilities on the 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 derivative gain or loss is deferred in Accumulated other comprehensive income (loss) and later reclassified into earnings when the underlying transaction occurs. 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.
13


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
The Company's primary market risk exposure is associated with commodity prices, credit, and interest rates. The Company has risk management policies to monitor and manage market risks. The Company purchases, stores, transports, distributes, and sells natural gas, and buys and sells transportation and storage capacity. The Company has fixed-priced contracts for portions of its expected natural gas supply requirements through March 2024. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Forward transportation and storage contracts are generally not derivatives and are therefore accounted for under the accrual method.

NOTE 8 SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
The Company has a $300 million unsecured revolving credit agreement that can be used for general corporate borrowings but is intended to provide liquidity support for the Company's commercial paper program. Borrowings under the revolver are available at prevailing short-term interest rates. The facility will expire in April 2025, except for $13 million of availability that will expire in April 2024. As of March 31, 2021, the Company did not have any commercial paper or revolver borrowings outstanding.
The unsecured revolving credit agreement requires the Company to maintain a total funded debt to capitalization ratio of no more than 0.65 to 1. In the agreement, "total funded debt" means all indebtedness of the Company and its consolidated subsidiaries, including finance lease obligations, hedge agreements, and guarantees of third parties' debt, but excluding contingent obligations, nonrecourse and junior subordinated debt, and, except for calculations at the end of the second quarter, certain short-term debt. "Capitalization" means the sum of (a) total funded debt plus (b) "consolidated net worth," which is equal to consolidated total equity of the Company and its 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 March 31, 2021, the total funded debt to total capitalization ratio for the Company was 0.47 to 1 and was in compliance with this financial covenant.

NOTE 9 COMMITMENTS AND CONTINGENCIES
Environmental
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 zero by 2050 from procurement of natural gas through delivery. As part of DTE Energy's 2050 net zero commitment, DTE Gas launched its CleanVision Natural Gas Balance program in January 2021 that offers customers a way to reduce their carbon footprint using carbon offsets and renewable natural gas. The carbon offset program is focused on protecting Michigan forests that naturally absorb carbon dioxide.
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. The Company 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 eight of the MGP sites is complete, and the sites are closed. The Company has also completed partial closure of four 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, the Company is also in the process of cleaning up other contaminated sites, including gate stations, gas pipeline releases, and underground storage tank locations. At March 31, 2021 and December 31, 2020, the Company had $24 million accrued for 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 the Company's financial position and cash flows. The Company 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 the associated investigation and remediation costs from having a material adverse impact on the Company's results of operations.
14


DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
Guarantees
In certain limited circumstances, the Company enters into contractual guarantees. The Company may guarantee another entity’s obligation in the event it fails to perform and may provide guarantees in certain indemnification agreements. The Company may also provide indirect guarantees for the indebtedness of others.
Labor Contracts
There are several bargaining units for the Company's approximate 1,200 represented employees, which represents 67% of the Company's total employees. The majority of the represented employees are under contracts that expire in 2021.
Purchase Commitments
The Company has made certain commitments in connection with 2021 annual capital expenditures that are expected to be approximately $620 million.
COVID-19 Pandemic
The Company 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 Company's financial results.
COVID-19 has resulted in some incremental costs for personal protective equipment and other health and safety-related matters. However, these costs did not result in a significant impact to the Company's Operation and maintenance expenses for the three months ended March 31, 2021.
In consideration of these limited impacts and any expected impacts to future 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 March 31, 2021.
The Company 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 Company is 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 Company cannot predict the final disposition of such proceedings. The Company regularly reviews legal matters and records provisions for claims that it can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Consolidated Financial Statements in the periods they are resolved.
For a discussion of contingencies related to regulatory matters, see Note 5 to the Consolidated Financial Statements, "Regulatory Matters."

NOTE 10 RETIREMENT BENEFITS AND TRUSTEED ASSETS
The Company participates in various plans that provide defined benefit pension and other postretirement benefits for DTE Energy and its affiliates. The plans are primarily sponsored by DTE Energy's subsidiary, DTE Energy Corporate Services, LLC, and cover substantially all employees of the Company. The Company accounts for its participation in the represented qualified pension plan by applying single-employer accounting. Non-represented participation in qualified pension plans, and non-represented and represented participation in non-qualified pension plans, are accounted for by applying multiemployer accounting. Participation in other postretirement benefit plans is accounted for 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. Plan participants of all plans are solely DTE Energy and affiliate participants.
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DTE Gas Company
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
The following table details the components of net periodic benefit costs (credits) for represented pension benefits and other postretirement benefits:
Pension BenefitsOther Postretirement Benefits
2021202020212020
(In millions)
Three Months Ended March 31,
Service cost$4 $$2 $
Interest cost5 3 
Expected return on plan assets(10)(10)(10)(10)
Amortization of:
Net actuarial loss5 2 
Prior service credit — (2)(2)
Net periodic benefit cost (credit)$4 $$(5)$(6)
DTE Energy's subsidiaries accounted for under multiemployer guidance are responsible for their share of qualified and non-qualified pension benefit costs. The Company's allocated portion of pension benefit costs for non-represented plans included in capital expenditures and regulatory liabilities were $1 million for the three months ended March 31, 2021 and nominal for the three months ended March 31, 2020. These amounts include recognized contractual termination benefit charges, curtailment gains, and settlement charges.
Pension and Other Postretirement Contributions
At the discretion of management and depending upon financial market conditions, the Company anticipates making up to $7 million in contributions to the represented pension plans and no contributions to the non-represented pension plans in 2021. The Company does not anticipate making contributions to its other postretirement benefit plans in 2021.
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