DTE ENERGY CO - 10-Q filing on 2012-10-24

Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

ORGANIZATION AND BASIS OF PRESENTATION

Corporate Structure

DTE Energy owns the following businesses:


•	Detroit Edison, an electric utility engaged in the generation, purchase, distribution and sale of electricity to approximately 2.1 million customers in southeastern Michigan;


•	MichCon, 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) unconventional gas and oil project development and production; 3) power and industrial projects; and 4) energy marketing and trading operations.

Detroit Edison and MichCon are regulated by the MPSC. Certain activities of Detroit Edison and MichCon, as well as various other aspects of businesses under DTE Energy are regulated by the FERC. In addition, the Company is regulated by other federal and state regulatory agencies including the NRC, the EPA and the MDEQ.

References in this Report to “Company” or “DTE” are to DTE Energy and its subsidiaries, collectively.

Basis of Presentation

These Consolidated Financial Statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the 2011 Annual Report on Form 10-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 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, 2012.

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 influence the operating policies of the investee. Non-majority owned investments include investments in limited liability companies, partnerships or joint ventures. When the Company does not influence the operating policies of an investee, the cost method is used. These Consolidated Financial Statements also reflect the Company’s proportionate interests in certain jointly owned utility plants. The Company eliminates all intercompany balances and transactions.

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 evaluates whether an entity is a VIE whenever reconsideration events occur. The Company performs ongoing reassessments of all VIEs to determine if the primary beneficiary status has changed.

Legal entities within the Company’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 the Company retaining operational and customer default risk. These entities generally are VIEs. In addition, the Company has interests in certain VIEs that the Company shares control of all significant activities for those entities with the Company's partners, and therefore are accounted for under the equity method.

The Company has variable interests in VIEs through certain of its long-term purchase contracts. As of September 30, 2012, the carrying amount of assets and liabilities in the Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase contracts are predominately related to working capital accounts and generally represent the amounts owed by the Company for the deliveries associated with the current billing cycle under the contracts. The Company has not provided any form of financial support associated with these long-term contracts. There is no significant potential exposure to loss as a result of its variable interests through these long-term purchase contracts.

In 2001, Detroit Edison 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. Detroit Edison performs servicing activities including billing and collecting surcharge revenue for Securitization. This entity is a VIE, and is consolidated by the Company.

The maximum risk exposure for consolidated VIEs is reflected on the Company’s 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.

The following table summarizes the major balance sheet items for consolidated VIEs as of September 30, 2012 and December 31, 2011. Amounts at September 30, 2012 and December 31, 2011 for consolidated VIEs that are 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 are segregated in the restricted amounts column. VIEs, in which the Company 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 (in millions):



	September 30, 2012								December 31, 2011
	Securitization		Other		Total		Restricted Amounts		Securitization		Other		Total		Restricted Amounts
ASSETS
Cash and cash equivalents	$	—	$	4	$	4	$	—	$	—	$	25	$	25	$	—
Restricted cash	50		5		55		55		107		7		114		114
Accounts receivable	39		10		49		40		34		17		51		36
Inventories	—		144		144		—		—		183		183		—
Other current assets	—		3		3		—		—		1		1		—
Property, plant and equipment	—		65		65		20		—		73		73		23
Securitized regulatory assets	456		—		456		456		577		—		577		577
Other assets	8		6		14		14		10		6		16		16
	$	553	$	237	$	790	$	585	$	728	$	312	$	1,040	$	766
LIABILITIES
Accounts payable and accrued current liabilities	$	3	$	—	$	3	$	3	$	14	$	24	$	38	$	14
Current portion long-term debt, including capital leases	177		8		185		185		164		7		171		171
Other current liabilities	55		—		55		55		55		—		55		55
Mortgage bonds, notes and other	—		26		26		26		—		30		30		30
Securitization bonds	302		—		302		302		479		—		479		479
Capital lease obligations	—		11		11		11		—		14		14		14
Other long-term liabilities	7		1		8		7		7		2		9		8
	$	544	$	46	$	590	$	589	$	719	$	77	$	796	$	771

Amounts for non-consolidated VIEs as of September 30, 2012 and December 31, 2011 are as follows (in millions):



	September 30, 2012		December 31, 2011
Other investments	$	122	$	117
Notes receivable	7		7