DTE Energy 2007 Annual Report Download - page 18

base. Under the formula prescribed by the MPSC, MichCon recorded an under-recovery of approximately $11 million for
uncollectible expenses from May 2005 (when the mechanism took effect) through the end of 2005. In December 2006, the MPSC
issued an order authorizing MichCon to implement the UETM monthly surcharge for service rendered on and after January 1, 2007.
At December 31, 2007, approximately $3 million was outstanding.
As part of the March 2006 application with the MPSC, MichCon filed a review of its 2005 annual safety and training-related
expenditures. MichCon reported that actual safety and training-related expenditures for the initial period exceeded the pro-rata
amounts included in base rates and based on the under-recovered position, recommended no refund at this time. In the December 2006
order, the MPSC also approved MichCon’ s 2005 safety and training report.
2006 UETM — In March 2007, MichCon filed an application with the MPSC for approval of its UETM for 2006 requesting $33
million of under-recovery plus applicable carrying costs of $3 million. The March 2007 application included a report of MichCon’ s
2006 annual safety and training-related expenditures, which shows a $2 million over-recovery. In August 2007, MichCon filed revised
exhibits reflecting an agreement with the MPSC Staff to net the $2 million over-recovery and associated interest related to the 2006
safety and training-related expenditures against the 2006 UETM under-recovery. An MPSC order was issued in December 2007
approving the collection of $33 million requested in the August 2007 revised filing. MichCon is authorized to implement the new
UETM monthly surcharge for service rendered on and after January 1, 2008.
2007 UETM — MichCon accrued approximately $30 million of expenses under the UETM during 2007. An application will be filed
in 2008 for approval of its 2007 UETM.
Gas Cost Recovery Proceedings
2005-2006 Plan Year —In June 2006, MichCon filed its GCR reconciliation for the 2005-2006 GCR year. The filing supported a total
over-recovery, including interest through March 2006, of $13 million. MPSC Staff and other interveners filed testimony regarding the
reconciliation in which they recommended disallowances related to MichCon’ s implementation of its dollar cost averaging fixed price
program. In January 2007, MichCon filed testimony rebutting these recommendations. On December 18, 2007, the MPSC issued an
order adopting the adjustments proposed by the MPSC Staff resulting in an $8 million disallowance. Expense related to the
disallowance was reflected in 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 Appeals. MichCon is unable to predict the
outcome of the appeal.
2006-2007 Plan Year — In June 2007, MichCon filed its GCR reconciliation for the 2006-2007 GCR year. The filing supported a total
under-recovery, including interest through March 2007, of $18 million. An MPSC order in this case is expected in 2008.
2007-2008 Plan Year / Base Gas Sale Consolidated — In August 2006, MichCon filed an application with the MPSC requesting
permission to sell base gas that would become accessible with storage facilities upgrades. In December 2006, MichCon filed its 2007-
2008 GCR plan case proposing a maximum GCR factor of $8.49 per Mcf. In August 2007, a settlement agreement in this proceeding
was reached by all intervening parties that provides for a sharing with customers of the proceeds from the sale of base gas. In addition,
the agreement provides for a rate case filing moratorium until January 1, 2009, unless certain unanticipated changes occur that impact
income by more than $5 million. The settlement agreement was approved by the MPSC on August 21, 2007. MichCon’ s gas storage
enhancement projects, the main subject of the aforementioned settlement, will enable 17 billion cubic feet (Bcf) of gas to become
available for cycling. Under the settlement terms, MichCon delivered 13.4 Bcf of this gas to its customers through 2007 at a savings to
market-priced supplies of approximately $54 million. This settlement provides for MichCon to retain the proceeds from the sale of 3.6
Bcf of gas, which MichCon expects to sell in 2007 through 2009. In the fourth quarter of 2007, MichCon sold .75 Bcf of base gas and
recognized a pre-tax gain of $5 million for which cash proceeds were received in January 2008. By enabling MichCon to retain the
profit from the sale of this gas, the settlement provides MichCon with the opportunity to earn an 11% return on equity with no
customer rate increase for a period of five years from 2005 to 2010.
2008-2009 Plan Year — In December 2007, MichCon filed its GCR plan case for the 2008-2009 GCR Plan year. MichCon filed for a
maximum GCR factor of $8.36 per Mcf. An order in this case is expected during 2008.
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