DTE Energy 2007 Annual Report Download

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MICHIGAN CONSOLIDATED GAS COMPANY
Consolidated Financial Statements as of December 31, 2007 and 2006 and for each of the three years in the period ended December
31, 2007 and Report of Independent Registered Public Accounting Firm

Table of contents

  • Page 1
    MICHIGAN CONSOLIDATED GAS COMPANY Consolidated Financial Statements as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007 and Report of Independent Registered Public Accounting Firm

  • Page 2
    ... CONSOLIDATED GAS COMPANY TABLE OF CONTENTS Page Management' s Narrative Analysis of Results of Operations Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations Consolidated Statements of Financial Position Consolidated Statements of Cash Flows Consolidated...

  • Page 3
    ... in environmental costs due to the April 2005 gas rate order and the requirement to defer negative pension expense as a regulatory liability. Additionally, the comparability was impacted by the DTE Energy parent company no longer allocating $9 million of merger-related interest to MichCon effective...

  • Page 4
    ...and base gas sales. Higher gas prices and economic conditions have resulted in continued pressure on receivables and working capital requirements that are partially mitigated by the MPSC' s uncollectible true-up mechanism and GCR mechanism. We will continue to utilize the DTE Energy Operating System...

  • Page 5
    ... and defined benefit pension and other postretirement plans, respectively. As discussed in Note 1 to the consolidated financial statements, in connection with the required adoption of new accounting standards, in 2005 the Company changed its method of accounting for asset retirement obligations...

  • Page 6
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (in Millions) Year Ended December 31 2007 2006 2005 Operating Revenues Operating Expenses Cost of gas Operation and maintenance Depreciation and amortization Taxes other than income Asset (gains) and losses, net Operating ...

  • Page 7
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in Millions) December 31 2007 2006 ASSETS Current Assets Cash and cash equivalents Accounts receivable (less allowance for doubtful accounts of $86 and $96, respectively) Customer Affiliates Other Inventories Gas ...

  • Page 8
    ... Dividends payable Short-term borrowings Affiliates Other Current portion of long-term debt Accrued gas cost recovery refund Other Long-Term Debt (net of current portion) Other Liabilities Deferred income taxes Regulatory liabilities Accrued postretirement benefit costs Asset retirement obligations...

  • Page 9
    ... investment tax credits, net Asset (gains) and losses, net Changes in assets and liabilities: Accounts receivable, net Inventories Accrued postretirement benefit costs Prepaid benefit costs and due from affiliate Recoverable pension and postretirement costs Accrued gas cost recovery Accounts payable...

  • Page 10
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME Accumulated Other Comprehensive (Dollars in Millions, Common Stock Retained Shares in Thousands) Shares Amount Earnings Loss Total Balance, December 31, 2004 Net income ...

  • Page 11
    ... NOTE 1- SIGNIFICANT ACCOUNTING POLICIES Corporate Structure Michigan Consolidated Gas Company (MichCon) is a Michigan corporation organized in 1898. MichCon is an indirect, wholly-owned subsidiary of DTE Enterprises, Inc., and indirectly a wholly-owned subsidiary of DTE Energy Company. MichCon is...

  • Page 12
    ... $77 million LIFO cost by $236 million. During 2006, MichCon liquidated 5.1 billion cubic feet of prior years' LIFO layers. The liquidation reduced 2006 cost of gas by approximately $1 million, but had no impact on earnings as a result of the GCR mechanism. Property, Retirement and Maintenance, and...

  • Page 13
    ... of are reported at the lower of the carrying amount or fair value less cost to sell. Excise and Sales Taxes We record the billing of excise and sales taxes as a receivable with an offsetting payable to the applicable taxing authority, with no impact on the Consolidated Statements of Operations...

  • Page 14
    ...to MichCon' s 2004 GCR underrecovery related to the accounting treatment of the injected base gas remaining in the New Haven storage field when it was sold in early 2004. In 2005, we received a gas rate order from the MPSC which resulted in disallowances of approximately $42 million of costs related...

  • Page 15
    ... parent company, DTE Energy, adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective transition method. We receive an allocation of costs associated with stock compensation and the related impact of cumulative accounting adjustments. Our allocations for 2007 and 2006 for stock...

  • Page 16
    ...uncollectibles expense Deferred income taxes - Michigan Business Tax Less amount included in current assets Liabilities Asset removal costs Refundable income taxes Accrued GCR refund Safety and training cost refund Accrued pension Deferred income taxes - Michigan Business Tax Less amount included in...

  • Page 17
    ...-related deferred income taxes payable and amounts recognized pursuant to MPSC authorization. Accrued GCR refund - Liability for the temporary over-recovery of and a return on gas costs incurred by MichCon which are recoverable through the GCR mechanism. Safety and training cost refund - The MPSC...

  • Page 18
    ... the Consolidated Statements of Operations for the year ended December 31, 2007. The MPSC authorized MichCon to roll a net over-recovery, inclusive of interest, of $20 million into its 2006-2007 GCR reconciliation. On December 27, 2007, MichCon filed an appeal of the case with the Michigan Court of...

  • Page 19
    ...due to DTE Energy. Total income tax expense (benefit) varied from the statutory federal income tax rate for the following reasons: (Dollars in Millions) 2007 2006 2005 Income tax expense at 35% statutory rate $ 22 $ 33 Investment tax credit (1) (1) Depreciation (7) (7) Employee Stock Ownership Plan...

  • Page 20
    ... to income tax for the years ended December 31, 2007 and 2006. The U.S. federal income tax returns for years 2004 and subsequent years remain subject to examination by the IRS for DTE Energy Company and its subsidiaries. The Company also files tax returns in various local tax jurisdictions with...

  • Page 21
    ...in the indebtedness of DTE Energy. The following table shows the scheduled debt maturities and sinking fund requirements, excluding any unamortized discount or premium on debt: (in Millions) 2008 2009 2010 2011 2012 2013 and thereafter Total Amount to mature Debt Retirements and Redemptions $ 275...

  • Page 22
    ...lease contract that expires in 2020, with renewal options extending for five years. The components of the net investment in the capital lease at December 31, 2007 were as follows: (in Millions) 2008 2009 2010 2011 2012 Thereafter Total minimum future lease receipts Residual value of leased pipeline...

  • Page 23
    ... as notes payable, customer deposits and notes receivable approximate fair value and are not shown. At December 31, 2007, we had approximately $120 million of securities insured by insurers. Since December 31, 2007, overall credit market conditions have resulted in credit rating downgrades and may...

  • Page 24
    ...over funded or under funded status of defined benefit pension and defined benefit other postretirement plans in its financial statements, (2) recognize as a component of other comprehensive income, net of tax, the actuarial gains or losses and the prior service costs or credits that arise during the...

  • Page 25
    ... of Detroit Edison. It is the DTE Energy Company Retirement Plan ("DTE Plan"). The DTE Plan is noncontributory, covers substantially all employees not covered by the MichCon Plan and provides traditional retirement benefits to employees based on the employee' s years of benefit service, average...

  • Page 26
    ..., end of year Funded status of the Plans, November 30 December adjustment Funded status, December 31 Noncurrent assets Amounts recognized in regulatory assets Net actuarial loss Prior service cost Assumptions used in determining the projected benefit obligation and net pension costs are listed below...

  • Page 27
    ...eligible compensation, the employee' s contribution rate and, in some cases, years of credited service. The cost of these plans was $4 million in 2007 and $5 million in 2006, and 2005. Other Postretirement Benefits We provide certain postretirement health care and life insurance benefits for retired...

  • Page 28
    ... Projected benefit obligation Discount rate Net benefit costs Discount rate Expected long-term rate of return on plan assets Health care trend rate pre-65 Health care trend rate post-65 Ultimate health care trend rate Year in which ultimate reached 6.50% 5.70% 8.75% 8.00% 7.00% 5.00% 2011 5.70...

  • Page 29
    ... DTE Energy Company, including MichCon. These administrative and general expenses incurred by DTE Energy Corporate Services, LLC were then billed to various subsidiaries of DTE Energy, including MichCon. MichCon participates in a defined benefit retirement plan sponsored by another affiliate of DTE...

  • Page 30
    ... Costs Gas purchases Other services and interest Corporate expenses Other Dividends declared Dividends paid (in Millions) $ 4 $ 2 - 17 132 50 50 9 $ 4 - 13 68 50 50 11 5 - 14 93 50 50 December 31, 2007 2006 Assets Accounts receivable Prepaid pension assets Liabilities & Equity Accounts payable...