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EX-32.99 - CHIEF EXECUTIVE OFFICER SECTION 906 FORM 10-Q CERTIFICATION - DTE ELECTRIC - DTE ENERGY COa20150331ex3299.htm
EX-31.98 - CHIEF FINANCIAL OFFICER SECTION 302 FORM 10-Q CERTIFICATION - DTE ENERGY - DTE ENERGY COa20150331ex3198.htm
EX-12.61 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - DTE ENERGY - DTE ENERGY COa20150331ex1261.htm
EX-10.94 - DTE ENERGY AFFILIATES NONQUALIFIED PLANS MASTER TRUST FIRST AMENDMENT - DTE ENERGY COa20150331ex1094.htm
EX-32.97 - CHIEF EXECUTIVE OFFICER SECTION 906 FORM 10-Q CERTIFICATION - DTE ENERGY - DTE ENERGY COa20150331ex3297.htm
EX-31.99 - CHIEF EXECUTIVE OFFICER SECTION 302 FORM 10-Q CERTIFICATION - DTE ELECTRIC - DTE ENERGY COa20150331ex3199.htm
EX-12.62 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - DTE ELECTRIC - DTE ENERGY COa20150331ex1262.htm
EX-4.289 - SUPPLEMENTAL INDENTURE, DATED AS OF MARCH 1, 2015 - DTE ENERGY COa20150331ex4289.htm
EX-32.98 - CHIEF FINANCIAL OFFICER SECTION 906 FORM 10-Q CERTIFICATION - DTE ENERGY - DTE ENERGY COa20150331ex3298.htm
EX-31.100 - CHIEF FINANCIAL OFFICER SECTION 302 FORM 10-Q CERTIFICATION - DTE ELECTRIC - DTE ENERGY COa20150331ex31100.htm
EX-32.100 - CHIEF FINANCIAL OFFICER SECTION 906 FORM 10-Q CERTIFICATION - DTE ELECTRIC - DTE ENERGY COa20150331ex32100.htm
EX-31.97 - CHIEF EXECUTIVE OFFICER SECTION 302 FORM 10-Q CERTIFICATION - DTE ENERGY - DTE ENERGY COa20150331ex3197.htm


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2015
Commission File Number
 
Registrants; State of Incorporation; Address; and Telephone Number
 
I.R.S. Employer Identification No.
1-11607
 
DTE Energy Company
(a Michigan Corporation)
One Energy Plaza
Detroit, Michigan 48226-1279
313-235-4000
 
38-3217752
 
 
 
 
 
1-2198
 
DTE Electric Company
(a Michigan Corporation)
One Energy Plaza
Detroit, Michigan 48226-1279
313-235-4000
 
38-0478650
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 Company (DTE Energy)    Yes x No o            DTE Electric Company (DTE Electric)    Yes x No o
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                Yes x No o            DTE Electric                Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
DTE Energy
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
 
(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
 
 
 
(Do not check if a smaller
reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
DTE Energy                Yes o No x            DTE Electric                Yes o No x
Number of shares of Common Stock outstanding at March 31, 2015:
Registrant
 
Description
 
Shares
DTE Energy
 
Common Stock, without par value
 
179,330,405

 
 
 
 
 
DTE Electric
 
Common Stock, $10 par value, directly owned by DTE Energy
 
138,632,324

This combined Form 10-Q is filed separately by two registrants: DTE Energy and DTE Electric. Information contained herein relating to an individual registrant is filed by such registrant solely on its behalf. DTE Electric makes no representation as to information relating exclusively to DTE Energy.
DTE Electric, a wholly owned subsidiary of DTE Energy, meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
 




TABLE OF CONTENTS





DEFINITIONS

ASU
Accounting Standards Update issued by the FASB
 
 
CFTC
U.S. Commodity Futures Trading Commission
 
 
Customer Choice
Michigan legislation giving customers the option of retail access to alternative suppliers for electricity and natural gas
 
 
DOE
U.S. Department of Energy
 
 
DTE Electric
DTE Electric Company (a direct 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
 
 
EPA
U.S. Environmental Protection Agency
 
 
FASB
Financial Accounting Standards Board
 
 
FERC
Federal Energy Regulatory Commission
 
 
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.
 
 
GCR
A Gas Cost Recovery mechanism authorized by the MPSC that allows DTE Gas to recover through rates its natural gas costs
 
 
MDEQ
Michigan Department of Environmental Quality
 
 
MGP
Manufactured Gas Plant
 
 
MISO
Midcontinent Independent System Operator, Inc.
 
 
MPSC
Michigan Public Service Commission
 
 
MTM
Mark-to-market
 
 
NAV
Net Asset Value
 
 
NEIL
Nuclear Electric Insurance Limited
 
 
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.
 
 
NOV
Notice of Violation
 
 
NRC
U.S. Nuclear Regulatory Commission
 
 
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 Internal Revenue Service.
 
 
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
 
 
RDM
A Revenue Decoupling Mechanism authorized by the MPSC that is designed to minimize the impact on revenues of changes in average customer usage
 
 
REF
Reduced Emissions Fuel
 
 
Registrant(s)
DTE Energy and DTE Electric
 
 
Securitization
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
 
 

1



DEFINITIONS

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
 
 
VEBA
Voluntary Employees Beneficiary Association
 
 
VIE
Variable Interest Entity
Units of Measurement
 
 
 
Bcf
Billion cubic feet of natural gas
 
 
BTU
Heat value (energy content) of fuel
 
 
kWh
Kilowatthour of electricity
 
 
MMBtu
One million BTU
 
 
MWh
Megawatthour of electricity


2


FILING FORMAT
This combined Form 10-Q is separately filed by DTE Energy and DTE Electric. Information in this combined Form 10-Q 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. 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 in respect of debt securities of DTE Energy. This combined Form 10-Q should be read in its entirety. No one section of this combined Form 10-Q deals with all aspects of the subject matter of this combined Form 10-Q. This combined Form 10-Q report should be read in conjunction with the separately filed Consolidated Financial Statements and Notes to Consolidated Financial Statements and with Management's Discussion and Analysis included in DTE Energy's 2014 Annual Report on Form 10-K and DTE Electric's 2014 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS
Certain information presented herein includes “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 business of the Registrants. Words such as “anticipate,” “believe,” “expect,” “projected,” “aspiration” and “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:
impact of regulation by the EPA, FERC, MPSC, NRC and CFTC, 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;
environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements;
health, safety, financial, environmental and regulatory risks associated with ownership and operation of nuclear facilities;
changes in the cost and availability of coal and other raw materials, purchased power and natural gas;
the potential for losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions;
volatility in the short-term natural gas storage markets impacting third-party storage revenues related to DTE Energy;
volatility in commodity markets, deviations in weather and related risks impacting the results of DTE Energy's energy trading operations;
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;

3



the potential for increased costs or delays in completion of significant construction 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;
the cost of protecting assets against, or damage due to, terrorism or cyber attacks;
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.


4




Part I — Financial Information

Item 1. Financial Statements

DTE Energy Company

Consolidated Statements of Operations (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions, except per share amounts)
Operating Revenues
$
2,984

 
$
3,930

 
 
 
 
Operating Expenses
 
 
 
Fuel, purchased power and gas
1,398

 
2,155

Operation and maintenance
826

 
841

Depreciation and amortization
209

 
280

Taxes other than income
100

 
95

Asset (gains) losses and impairments, net
(10
)
 
(1
)
 
2,523

 
3,370

Operating Income
461

 
560

 
 
 
 
Other (Income) and Deductions
 
 
 
Interest expense
110

 
110

Interest income
(4
)
 
(2
)
Other income
(51
)
 
(41
)
Other expenses
10

 
8

 
65

 
75

Income Before Income Taxes
396

 
485

 
 
 
 
Income Tax Expense
122

 
158

 
 
 
 
Net Income
274

 
327

 
 
 
 
Less: Net Income Attributable to Noncontrolling Interests
1

 
1

 
 
 
 
Net Income Attributable to DTE Energy Company
$
273

 
$
326

 
 
 
 
Basic Earnings per Common Share
 
 
 
Net Income Attributable to DTE Energy Company
$
1.53

 
$
1.84

 
 
 
 
Diluted Earnings per Common Share
 
 
 
Net Income Attributable to DTE Energy Company
$
1.53

 
$
1.84

 
 
 
 
Weighted Average Common Shares Outstanding
 
 
 
Basic
178

 
177

Diluted
178

 
177

Dividends Declared per Common Share
$
0.69

 
$
0.66


See Combined Notes to Consolidated Financial Statements (Unaudited)

5



DTE Energy Company

Consolidated Statements of Comprehensive Income (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions)
Net Income
$
274

 
$
327

 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
Benefit obligations, net of taxes of $2 and $—, respectively
3

 

Foreign currency translation
(3
)
 
(1
)
Other comprehensive income (loss)

 
(1
)
 
 
 
 
Comprehensive income
274

 
326

Less comprehensive income attributable to noncontrolling interests
1

 
1

Comprehensive income attributable to DTE Energy Company
$
273

 
$
325


See Combined Notes to Consolidated Financial Statements (Unaudited)

6



DTE Energy Company

Consolidated Statements of Financial Position (Unaudited)

 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions)
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
99

 
$
48

Restricted cash
24

 
120

Accounts receivable (less allowance for doubtful accounts of $51 and $54, respectively)
 
 
 
Customer
1,534

 
1,504

Other
73

 
94

Inventories
 
 
 
Fuel and gas
333

 
512

Materials and supplies
300

 
292

Derivative assets
74

 
128

Regulatory assets
39

 
76

Other
312

 
313

 
2,788

 
3,087

Investments
 
 
 
Nuclear decommissioning trust funds
1,262

 
1,241

Other
649

 
628

 
1,911

 
1,869

Property
 
 
 
Property, plant and equipment
27,124

 
26,538

Less accumulated depreciation and amortization
(9,889
)
 
(9,718
)
 
17,235

 
16,820

Other Assets
 
 
 
Goodwill
2,018

 
2,018

Regulatory assets
3,643

 
3,651

Securitized regulatory assets

 
34

Intangible assets
100

 
102

Notes receivable
88

 
90

Derivative assets
40

 
44

Other
245

 
259

 
6,134

 
6,198

Total Assets
$
28,068

 
$
27,974


See Combined Notes to Consolidated Financial Statements (Unaudited)

7



DTE Energy Company

Consolidated Statements of Financial Position (Unaudited) — (Continued)

 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions, except shares)
LIABILITIES AND EQUITY
Current Liabilities
 
 
 
Accounts payable
$
825

 
$
973

Accrued interest
116

 
86

Dividends payable
124

 
122

Short-term borrowings

 
398

Current portion long-term debt, including capital leases
166

 
274

Derivative liabilities
52

 
77

Gas inventory equalization
130

 

Regulatory liabilities
79

 
153

Other
347

 
494

 
1,839

 
2,577

Long-Term Debt (net of current portion)
 
 
 
Mortgage bonds, notes and other
8,348

 
7,860

Junior subordinated debentures
480

 
480

Capital lease obligations
10

 
3

 
8,838

 
8,343

Other Liabilities
 

 
 

Deferred income taxes
3,858

 
3,776

Regulatory liabilities
665

 
667

Asset retirement obligations
2,022

 
1,962

Unamortized investment tax credit
52

 
41

Derivative liabilities
23

 
8

Accrued pension liability
1,282

 
1,280

Accrued postretirement liability
380

 
515

Nuclear decommissioning
184

 
182

Other
247

 
281

 
8,713

 
8,712

Commitments and Contingencies (Notes 6 and 12)
 
 
 



 


Equity
 
 
 
Common stock, without par value, 400,000,000 shares authorized, and 179,330,405 and 176,991,231 shares issued and outstanding, respectively
4,093

 
3,904

Retained earnings
4,727

 
4,578

Accumulated other comprehensive loss
(155
)
 
(155
)
Total DTE Energy Company Equity
8,665

 
8,327

Noncontrolling interests
13

 
15

Total Equity
8,678

 
8,342

Total Liabilities and Equity
$
28,068

 
$
27,974


See Combined Notes to Consolidated Financial Statements (Unaudited)

8



DTE Energy Company

Consolidated Statements of Cash Flows (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions)
Operating Activities
 
 
 
Net income
$
274

 
$
327

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
209

 
280

Nuclear fuel amortization
13

 
5

Allowance for equity funds used during construction
(5
)
 
(5
)
Deferred income taxes
84

 
77

Asset (gains) losses and impairments, net
(10
)
 
(1
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(8
)
 
(270
)
Inventories
172

 
147

Accounts payable
(123
)
 
100

Gas inventory equalization
130

 
142

Accrued pension obligation
2

 
(23
)
Accrued postretirement obligation
(135
)
 
(22
)
Derivative assets and liabilities
49

 
(51
)
Regulatory assets and liabilities
(4
)
 
(222
)
Other assets
2

 
50

Other liabilities
97

 
(2
)
Net cash from operating activities
747

 
532

Investing Activities
 
 
 
Plant and equipment expenditures — utility
(366
)
 
(399
)
Plant and equipment expenditures — non-utility
(39
)
 
(98
)
Acquisition
(240
)
 

Proceeds from sale of assets
13

 
3

Restricted cash for debt redemption, principally Securitization
96

 
66

Proceeds from sale of nuclear decommissioning trust fund assets
246

 
271

Investment in nuclear decommissioning trust funds
(250
)
 
(275
)
Other
(16
)
 
(10
)
Net cash used for investing activities
(556
)
 
(442
)
Financing Activities
 
 
 
Issuance of long-term debt, net of issuance costs
495

 

Redemption of long-term debt
(117
)
 
(115
)
Short-term borrowings, net
(398
)
 
244

Issuance of common stock
9

 

Repurchase of common stock

 
(50
)
Dividends on common stock
(122
)
 
(116
)
Other
(7
)
 
(7
)
Net cash used for financing activities
(140
)
 
(44
)
Net Increase in Cash and Cash Equivalents
51

 
46

Cash and Cash Equivalents at Beginning of Period
48

 
52

Cash and Cash Equivalents at End of Period
$
99

 
$
98

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 
 
Plant and equipment expenditures in accounts payable
$
186

 
$
212


See Combined Notes to Consolidated Financial Statements (Unaudited)

9



DTE Energy Company

Consolidated Statements of Changes in Equity (Unaudited)

 
 
 
 
 
 
 
Accumulated
Other Comprehensive Income (Loss)
 
Non-Controlling Interests
 
 
 
Common Stock
 
Retained Earnings
 
 
 
 
 
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

 

 
273

 

 
1

 
274

Dividends declared on common stock

 

 
(124
)
 

 

 
(124
)
Issuance of common stock
105

 
9

 

 

 

 
9

Contribution of common stock to VEBA Trust
1,428

 
117

 

 

 

 
117

Benefit obligations, net of tax

 

 

 
3

 

 
3

Foreign currency translation

 

 

 
(3
)
 

 
(3
)
Stock-based compensation, distributions to noncontrolling interests and other
806

 
63

 

 

 
(3
)
 
60

Balance, March 31, 2015
179,330

 
$
4,093

 
$
4,727

 
$
(155
)
 
$
13

 
$
8,678


See Combined Notes to Consolidated Financial Statements (Unaudited)

10



DTE Electric Company

Consolidated Statements of Operations (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions)
Operating Revenues
$
1,203

 
$
1,410

 
 
 
 
Operating Expenses
 
 
 
Fuel and purchased power
390

 
498

Operation and maintenance
317

 
342

Depreciation and amortization
155

 
228

Taxes other than income
73

 
71

 
935

 
1,139

Operating Income
268

 
271

 
 
 
 
Other (Income) and Deductions
 
 
 
Interest expense
63

 
63

Other income
(15
)
 
(13
)
Other expenses
9

 
7

 
57

 
57

Income Before Income Taxes
211

 
214

 
 
 
 
Income Tax Expense
74

 
77

 
 
 
 
Net Income
$
137

 
$
137


See Combined Notes to Consolidated Financial Statements (Unaudited)

11



DTE Electric Company

Consolidated Statements of Comprehensive Income (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions)
Net income
$
137

 
$
137

Other comprehensive income (loss), net of tax:
 
 
 
Transfer of benefit obligations, net of taxes of $18 and $—, respectively
28

 

Benefit obligations, net of taxes of $— and $(1), respectively

 
(1
)
Comprehensive income
$
165

 
$
136


See Combined Notes to Consolidated Financial Statements (Unaudited)

12



DTE Electric Company

Consolidated Statements of Financial Position (Unaudited)

 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions)
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
54

 
$
14

Restricted cash, principally Securitization

 
96

Accounts receivable (less allowance for doubtful accounts of $31 and $29, respectively)
 
 
 
Customer
664

 
688

Affiliates
53

 
31

Other
20

 
15

Inventories
 
 
 
Fuel
260

 
269

Materials and supplies
240

 
231

Notes receivable
 

 
 

Affiliates

 
8

Other
2

 
8

Regulatory assets
38

 
46

Prepaid property tax
82

 
44

Other
26

 
31

 
1,439

 
1,481

Investments
 
 
 
Nuclear decommissioning trust funds
1,262

 
1,241

Other
36

 
172

 
1,298

 
1,413

Property
 
 
 
Property, plant and equipment
20,395

 
19,805

Less accumulated depreciation and amortization
(7,408
)
 
(7,216
)
 
12,987

 
12,589

Other Assets
 
 
 
Regulatory assets
2,914

 
2,913

Securitized regulatory assets

 
34

Intangible assets
37

 
37

Other
174

 
182

 
3,125

 
3,166

Total Assets
$
18,849

 
$
18,649


See Combined Notes to Consolidated Financial Statements (Unaudited)

13



DTE Electric Company

Consolidated Statements of Financial Position (Unaudited) — (Continued)

 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions, except shares)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
 
 
 
Accounts payable
 
 
 
Affiliates
$
55

 
$
60

Other
356

 
366

Accrued interest
66

 
58

Accrued vacation
48

 
48

Current portion long-term debt, including capital leases
11

 
118

Regulatory liabilities
73

 
150

Deferred income taxes
8

 

Short-term borrowings
 
 
 
Affiliates
35

 
84

Other

 
50

Other
74

 
103

 
726

 
1,037

Long-Term Debt (net of current portion)
 
 
 
Mortgage bonds, notes and other
5,634

 
5,144

Capital lease obligations
10

 

 
5,644

 
5,144

Other Liabilities
 
 
 
Deferred income taxes
3,275

 
3,188

Regulatory liabilities
245

 
245

Asset retirement obligations
1,854

 
1,796

Unamortized investment tax credit
47

 
36

Nuclear decommissioning
184

 
182

Accrued pension liability — affiliates
1,112

 
1,200

Accrued postretirement liability — affiliates
392

 
520

Other
108

 
105

 
7,217

 
7,272

 
 
 
 
Commitments and Contingencies (Notes 6 and 12)

 

 
 
 
 
Shareholder’s Equity
 
 
 
Common stock, $10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding
3,786

 
3,786

Retained earnings
1,474

 
1,436

Accumulated other comprehensive income (loss)
2

 
(26
)
 
5,262

 
5,196

Total Liabilities and Shareholder’s Equity
$
18,849

 
$
18,649


See Combined Notes to Consolidated Financial Statements (Unaudited)

14



DTE Electric Company

Consolidated Statements of Cash Flows (Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions)
Operating Activities
 
 
 
Net income
$
137

 
$
137

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
155

 
228

Nuclear fuel amortization
13

 
5

Allowance for equity funds used during construction
(5
)
 
(5
)
Deferred income taxes
76

 
42

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(3
)
 
6

Inventories
2

 
55

Accounts payable
(8
)
 
73

Accrued pension liability — affiliates
(88
)
 
(20
)
Accrued postretirement liability — affiliates
(128
)
 
(15
)
Regulatory assets and liabilities
(43
)
 
(135
)
Other assets
(38
)
 
(28
)
Other liabilities
103

 
(31
)
Net cash from operating activities
173

 
312

Investing Activities
 
 
 
Plant and equipment expenditures
(311
)
 
(354
)
Acquisition
(240
)
 

Restricted cash for debt redemption, principally Securitization
96

 
65

Notes receivable from affiliate
8

 
200

Proceeds from sale of nuclear decommissioning trust fund assets
246

 
271

Investment in nuclear decommissioning trust funds
(250
)
 
(275
)
Transfer of Rabbi Trust assets to affiliate
137

 

Other
2

 
(8
)
Net cash used for investing activities
(312
)
 
(101
)
Financing Activities
 
 
 
Issuance of long-term debt, net of issuance costs
496

 

Redemption of long-term debt
(115
)
 
(113
)
Short-term borrowings, net — other
(50
)
 

Short-term borrowings, net — affiliate
(49
)
 
5

Dividends on common stock
(99
)
 
(93
)
Other
(4
)
 
(3
)
Net cash from (used for) financing activities
179

 
(204
)
Net Increase in Cash and Cash Equivalents
40

 
7

Cash and Cash Equivalents at Beginning of the Period
14

 
27

Cash and Cash Equivalents at End of the Period
$
54

 
$
34

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities
 
 
 
Plant and equipment expenditures in accounts payable
$
154

 
$
176


See Combined Notes to Consolidated Financial Statements (Unaudited)

15



DTE Electric Company

Consolidated Statements of Changes in Equity (Unaudited)

 
 
 
 
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Common Stock
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Total
 
(Dollars in millions, shares in thousands)
Balance, December 31, 2014
138,632

 
$
1,386

 
$
2,400

 
$
1,436

 
$
(26
)
 
$
5,196

Net Income

 

 

 
137

 

 
137

Dividends declared on common stock

 

 

 
(99
)
 

 
(99
)
Transfer of benefit obligations, net of tax

 

 

 

 
28

 
28

Balance, March 31, 2015
138,632

 
$
1,386

 
$
2,400

 
$
1,474

 
$
2

 
$
5,262


See Combined Notes to Consolidated Financial Statements (Unaudited)

16


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited)


Index of Combined Notes to Consolidated Financial Statements (Unaudited)
The Combined Notes to Consolidated Financial Statements (Unaudited) 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
 
Acquisition
 
DTE Energy and DTE Electric
Note 5
 
Asset Retirement Obligations
 
DTE Energy and DTE Electric
Note 6
 
Regulatory Matters
 
DTE Energy and DTE Electric
Note 7
 
Earnings per Share
 
DTE Energy
Note 8
 
Fair Value
 
DTE Energy and DTE Electric
Note 9
 
Financial and Other Derivative Instruments
 
DTE Energy and DTE Electric
Note 10
 
Long-Term Debt
 
DTE Energy and DTE Electric
Note 11
 
Short-Term Credit Arrangements and Borrowings
 
DTE Energy and DTE Electric
Note 12
 
Commitments and Contingencies
 
DTE Energy and DTE Electric
Note 13
 
Retirement Benefits and Trusteed Assets
 
DTE Energy and DTE Electric
Note 14
 
Stock-Based Compensation
 
DTE Energy and DTE Electric
Note 15
 
Segment and Related Information
 
DTE Energy

NOTE 1ORGANIZATION AND BASIS OF PRESENTATION
Corporate Structure
DTE Energy owns the following businesses:
DTE Electric is an electric utility engaged in the generation, purchase, distribution and sale of electricity to approximately 2.1 million customers in southeastern Michigan;
DTE Gas is a natural gas utility engaged in the purchase, storage, transportation, distribution and sale of natural gas to approximately 1.2 million customers throughout Michigan and the sale of storage and transportation capacity; and
Other businesses involved in 1) natural gas pipelines, gathering 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 and the CFTC.
Basis of Presentation
The Consolidated Financial Statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the DTE Energy 2014 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in the DTE Electric 2014 Annual Report on Form 10-K.
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.

17


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The Consolidated Financial Statements are unaudited, but in the Registrants' opinions 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 Combined 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, 2015.
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 DTE Electric were reclassified to match current year's financial statement 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 influence the operating policies of the investee. When the Registrants do not influence the operating policies of an investee, the cost method is used. 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 accounted for under the equity method.
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. As of March 31, 2015, the carrying amount of assets and liabilities in the Registrants' Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase and sale contracts are predominately related to working capital accounts and generally represent the amounts owed by or to the Registrants 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 significant 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 significant potential exposure to loss as a result of DTE Electric's variable interests through these long-term purchase contracts.
In 2001, DTE Electric financed a regulatory asset related to Fermi 2 and certain other regulatory assets through the sale of rate reduction bonds by a wholly-owned special purpose entity, Securitization. DTE Electric performed servicing activities including billing and collecting surcharge revenue for Securitization. The remaining amounts due on the rate reduction bonds were paid in March 2015. The associated regulatory assets were fully amortized by March 31, 2015. Securitization has an over-recovery of funds which will be returned to customers after receipt of an order from the MPSC. Subsequent to the pay-down of the bonds, Securitization is no longer a VIE but continues to be consolidated by the Registrants as a voting interest entity.
The maximum risk exposure for consolidated VIEs is reflected on the Registrants' Consolidated Statements of Financial Position. For non-consolidated VIEs, the maximum risk exposure is generally limited to its investment and amounts which it has guaranteed.

18


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following table summarizes the major Consolidated Statements of Financial Position items for consolidated VIEs as of March 31, 2015 and December 31, 2014. 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. Securitization, included in the DTE Energy table below for December 31, 2014, also relates to DTE Electric. 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.
 
March 31, 2015
 
December 31, 2014
 
Total
 
Securitization
 
Other
 
Total
 
(In millions)
ASSETS
 
 
 
 
 
 
 
Cash and cash equivalents
$
12

 
$

 
$
7

 
$
7

Restricted cash
9

 
96

 
8

 
104

Accounts receivable
12

 
26

 
15

 
41

Inventories
34

 

 
67

 
67

Property, plant and equipment, net
77

 

 
81

 
81

Securitized regulatory assets

 
34

 

 
34

Other current and long-term assets
6

 
1

 
6

 
7

 
$
150

 
$
157

 
$
184

 
$
341

 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Accounts payable and accrued current liabilities
$
11

 
$
3

 
$
8

 
$
11

Current portion long-term debt, including capital leases
8

 
105

 
10

 
115

Current regulatory liabilities

 
32

 

 
32

Mortgage bonds, notes and other
14

 

 
15

 
15

Capital lease obligations
1

 

 
3

 
3

Other current and long-term liabilities
6

 
9

 
6

 
15

 
$
40

 
$
149

 
$
42

 
$
191

Amounts for DTE Energy's non-consolidated VIEs as of March 31, 2015 and December 31, 2014 are as follows:
 
March 31, 2015
 
December 31, 2014
 
(In millions)
Other investments
$
136

 
$
134

Notes receivable
$
15

 
$
15


NOTE 2SIGNIFICANT ACCOUNTING POLICIES
Other Income
Other income for the Registrants is recognized for non-operating income such as equity earnings, allowance for equity funds used during construction and contract services. DTE Energy's Power & 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 is considered earned when refined coal is produced and tax credits are generated. Power & Industrial Projects recognized approximately $19 million and $17 million of Other income for the three months ended March 31, 2015 and 2014, respectively.

19


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

Changes in Accumulated Other Comprehensive Income (Loss)
For the three months ended March 31, 2015 and 2014, reclassifications out of accumulated other comprehensive income (loss) for the Registrants were not material. Refer to Note 13 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets", regarding the transfer of a portion of DTE Electric benefit obligations during the year. Changes in accumulated other comprehensive income (loss) are presented in the Registrants' Consolidated Statements of Changes in Equity.
Intangible Assets
DTE Energy has certain intangible assets relating to emission allowances, renewable energy credits and non-utility contracts as shown below:
 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions)
Emission allowances
$
1

 
$
1

Renewable energy credits
46

 
45

Contract intangible assets
123

 
122

 
170

 
168

Less accumulated amortization
60

 
57

Intangible assets, net
110

 
111

Less current intangible assets
10

 
9

 
$
100

 
$
102

DTE Electric has certain intangible assets relating to emission allowances and renewable energy credits as shown below:
 
March 31,
 
December 31,
 
2015
 
2014
 
(In millions)
Emission allowances
$
1

 
$
1

Renewable energy credits
46

 
45

 
47

 
46

Less current intangible assets
10

 
9

 
$
37

 
$
37

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 by the Registrants. DTE Energy amortizes contract intangible assets on a straight-line basis over the expected period of benefit, ranging from 1 to 26 years.
Income Taxes
The effective tax rate and unrecognized tax benefits of the Registrants are as follows:
 
Effective Tax Rate
 
Unrecognized
Tax Benefits
 
Three Months Ended March 31,
 
March 31,
 
2015
 
2014
 
2015
 
 
 
 
 
(In millions)
DTE Energy
31
%
 
33
%
 
$
9

DTE Electric
35
%
 
36
%
 
$
4


20


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The 2% decrease in DTE Energy's effective tax rate for the three months ended March 31, 2015 is primarily due to the inclusion in 2014 of $8 million of deferred tax expense resulting from New York state income tax reform enacted in March 2014. The 1% decrease in DTE Electric's effective tax rate for the three months ended March 31, 2015 is due to higher production tax credits.
If recognized, $2 million of the unrecognized tax benefits of the Registrants would favorably impact their effective tax rates. DTE Energy believes that it is possible that there will be a decrease in the unrecognized tax benefits of up to $6 million in the next twelve months. DTE Electric does not anticipate any material changes to the unrecognized tax benefits in the next twelve months.
DTE Electric had an income tax receivable with DTE Energy of $51 million and $29 million at March 31, 2015 and December 31, 2014, respectively.

NOTE 3NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. 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 revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. Early adoption is not permitted. The Registrants are currently assessing the impact of this ASU on their Consolidated Financial Statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for reporting periods beginning after December 15, 2015 and interim periods therein. It is to be applied retrospectively and early adoption is permitted. The Registrants are currently assessing the impact of this ASU on their Consolidated Financial Statements.

NOTE 4ACQUISITION
In October 2014, DTE Electric executed an agreement to purchase a 732 MW simple-cycle natural gas facility in Carson City, Michigan from The LS Power Group. The facility will serve to meet the needs of approximately 260,000 additional households during peak demand. DTE Electric closed on the acquisition of 100% equity interest in the facility on January 21, 2015.
DTE Electric has completed its valuation analysis to arrive at the fair value of the assets acquired. The cash consideration and total purchase price of approximately $240 million was allocated based on the underlying fair value of the assets acquired, which was primarily property, plant and equipment.
The pro forma results of operations have not been presented for DTE Electric as the effects of the acquisition were not material to either Registrant's consolidated results of operations.


21


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

NOTE 5ASSET RETIREMENT OBLIGATIONS
A reconciliation of the asset retirement obligations for the three months ended March 31, 2015 follows:
 
DTE Energy
 
DTE Electric
 
(In millions)
Asset retirement obligations at December 31, 2014
$
1,962

 
$
1,796

Accretion
28

 
26

Revision in estimated cash flows
32

 
32

Asset retirement obligations at March 31, 2015
$
2,022

 
$
1,854


NOTE 6REGULATORY MATTERS
2014 Electric Rate Case Filing
DTE Electric filed a rate case with the MPSC on December 19, 2014 requesting an increase in base rates of $370 million based on a projected twelve-month period ending June 30, 2016. The requested increase in base rates is due primarily to an increase in net plant resulting from infrastructure investments, plant acquisitions, environmental compliance and reliability improvement projects. The rate filing also included projected changes in sales, working capital, operation and maintenance expenses, return on equity and capital structure. New rates could be self-implemented in July 2015, with a final order expected in December 2015.
Refundable Revenue Decoupling / Deferred Gain Amortization
In September 2012, the MPSC approved DTE Electric's accounting application to defer for future amortization the gain resulting from the reversal of DTE Electric's $127 million regulatory liability associated with the operation of the RDM. The approved application provided for the amortization of the regulatory liability to income, at a monthly rate of approximately $10.6 million, beginning January 2014. On April 1, 2014, the MPSC approved DTE Electric's accounting application to suspend the amortization of the RDM regulatory liability as of June 30, 2014. DTE Electric amortized one-half of the RDM regulatory liability in the first six months of 2014 and resumed amortization of the remainder beginning January 1, 2015. If DTE Electric's base rates are increased prior to July 1, 2015, DTE Electric will cease amortization and refund to customers the remaining unamortized balance of the regulatory liability.
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, nitrogen oxide and sulfur dioxide emission allowances costs, urea costs, transmission costs and MISO costs. The MPSC reviews these costs, policies and practices for prudence in annual plan and reconciliation filings.
2012 PSCR Year — In March 2013, DTE Electric filed its 2012 PSCR reconciliation that included purchased power costs related to the manual shutdown of the Fermi 2 nuclear power plant in June 2012 caused by the failure of one of the plant's two non-safety related feed-water pumps. The plant was restarted on July 30, 2012, which restored production to approximately 68% of full capacity. In September 2013, the repair to the plant was completed and production was returned to full capacity. DTE Electric was able to purchase sufficient power from MISO to continue to provide uninterrupted service to customers. Certain intervenors in the reconciliation case have challenged the recovery of up to $32 million of the Fermi 2 related purchased power costs. In April 2015, an MPSC Administrative Law Judge issued a Proposal for Decision that challenged the recovery of approximately $50 million of such costs. Resolution of this matter is expected in 2016.


22


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

NOTE 7EARNINGS PER SHARE
DTE Energy reports both basic and diluted earnings per share. The calculation of diluted earnings per share assumes the issuance of potentially dilutive common shares outstanding during the period from the exercise of stock options. A reconciliation of both calculations is presented in the following table for the three months ended March 31:
 
Three Months Ended March 31,
 
2015
 
2014
 
(In millions, except per share amounts)
Basic Earnings per Share
 
 
 
Net income attributable to DTE Energy Company
$
273

 
$
326

Average number of common shares outstanding
178

 
177

Dividends declared — common shares
$
123

 
$
116

Dividends declared — net restricted shares
1

 

Total distributed earnings
$
124

 
$
116

Net income less distributed earnings
$
149

 
$
210

Distributed (dividends per common share)
$
0.69

 
$
0.66

Undistributed
0.84

 
1.18

Total Basic Earnings per Common Share
$
1.53

 
$
1.84

Diluted Earnings per Share
 
 
 
Net income attributable to DTE Energy Company
$
273

 
$
326

Average number of common shares outstanding
178

 
177

Dividends declared — common shares
$
123

 
$
116

Dividends declared — net restricted shares
1

 

Total distributed earnings
$
124

 
$
116

Net income less distributed earnings
$
149

 
$
210

Distributed (dividends per common share)
$
0.69

 
$
0.66

Undistributed
0.84

 
1.18

Total Diluted Earnings per Common Share
$
1.53

 
$
1.84


NOTE 8FAIR 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 March 31, 2015 and December 31, 2014. The Registrants believe they use valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.

23


DTE Energy Company — DTE Electric Company
Combined 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 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.

24


DTE Energy Company — DTE Electric Company
Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following table presents assets and liabilities for DTE Energy measured and recorded at fair value on a recurring basis as of March 31, 2015 and December 31, 2014:
 
March 31, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Netting
(a)
 
Net Balance
 
Level 1
 
Level 2
 
Level 3
 
Netting
(a)
 
Net Balance
 
(In millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents (b)
$
14

 
$
3

 
$

 
$

 
$
17

 
$
13

 
$
99

 
$

 
$

 
$
112

Nuclear decommissioning trusts
798

 
464

 

 

 
1,262

 
792

 
449

 

 

 
1,241

Other investments (c)
100

 
51

 

 

 
151

 
100

 
50

 

 

 
150

Derivative assets:
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Commodity Contracts:
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Natural Gas
315

 
87

 
41

 
(389
)
 
54

 
555

 
140

 
92

 
(681
)
 
106

Electricity

 
234

 
36

 
(215
)
 
55

 

 
295

 
47

 
(280
)
 
62

Other
42

 

 
1

 
(42
)
 
1

 
42

 

 
3

 
(42
)
 
3

Other derivative contracts (d)

 
8

 

 
(4
)
 
4

 

 
4

 

 
(3
)
 
1

Total derivative assets
357

 
329

 
78

 
(650
)
 
114

 
597

 
439

 
142

 
(1,006
)
 
172

Total
$
1,269

 
$
847

 
$
78

 
$
(650
)
 
$
1,544

 
$
1,502

 
$
1,037

 
$
142

 
$
(1,006
)
 
$
1,675

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity Contracts:
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Natural Gas
$
(369
)
 
$
(45
)
 
$
(41
)
 
$
428

 
$
(27
)
 
$
(578
)
 
$
(78
)
 
$
(62
)
 
$
679

 
$
(39
)
Electricity

 
(219
)
 
(43
)
 
217

 
(45
)
 

 
(290
)
 
(52
)
 
298

 
(44
)
Other
(32
)
 
(8
)
 
(6
)
 
46

 

 
(32
)
 
(9
)
 
(4
)
 
45

 

Other derivative contracts (d)

 
(7
)
 

 
4

 
(3
)
 

 
(5
)
 

 
3

 
(2
)
Total derivative liabilities
(401
)
 
(279
)
 
(90
)
 
695

 
(75
)
 
(610
)
 
(382
)
 
(118
)
 
1,025

 
(85
)
Total
$
(401
)
 
$
(279
)
 
$
(90
)
 
$
695

 
$
(75
)
 
$
(610
)
 
$
(382
)
 
$
(118
)
 
$
1,025

 
$
(85
)
Net Assets (Liabilities) at the end of the period
$
868

 
$
568

 
$
(12
)
 
$
45

 
$
1,469

 
$
892

 
$
655

 
$
24

 
$
19

 
$
1,590

Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
$
339

 
$
295

 
$
59

 
$
(602
)
 
$
91

 
$
582

 
$
504

 
$
109

 
$
(955
)
 
$
240

Noncurrent (e)
930

 
552

 
19

 
(48
)
 
1,453

 
920

 
533

 
33

 
(51
)