DTE Energy 2007 Annual Report Download - page 3

Management’s Narrative Analysis of Results of Operations
Certain items reflected in the accompanying consolidated financial statements have been eliminated at DTE Energy as a result of
purchase accounting adjustments.
Factors impacting income: MichCon’ s net income increased $19 million in 2007 and $39 million in 2006 compared to the prior year,
primarily attributable to higher gross margins.
Increase (Decrease) in Income Statement Components Compared to Prior Year
(in Millions) 2007 2006
Operating revenues $ 31 $ (287)
Cost of gas 12 (328)
Gross margin 19 41
Operation and maintenance 1 10
Depreciation and amortization (2) (2)
Taxes other than income 2 11
Asset (gains) and losses, net (3) (48)
Other (income) and deductions (9) 5
Income tax provision (benefit) 11 26
Net income $ 19 $ 39
Gross margins increased $19 million in 2007 and $41 million in 2006, compared to the prior years. The increase in 2007 is primarily
due to $21 million from the favorable effects of weather and $28 million related to an increase in midstream services including storage
and transportation, partially offset by a $26 million unfavorable impact in lost gas recognized and $7 million in GCR disallowances.
The increase in 2006 is primarily due to $15 million in higher base rates and $22 million in higher revenue associated with the
uncollectible expense tracking mechanism authorized by the MPSC in the April 2005 gas rate order. Additionally, 2006 was impacted
by a $17 million favorable impact in lost gas recognized and an increase of $24 million in midstream services including storage and
transportation. Partially offsetting these increases were declines of $31 million due to warmer than normal weather and $26 million as
a result of customer conservation and lower volumes. The comparability of 2006 to 2005 is also affected by an adjustment we
recorded in the first quarter of 2005 related to an April 2005 MPSC order in our 2002 GCR reconciliation case that disallowed $26
million representing unbilled revenues at December 31, 2001. Revenues include a component for the cost of gas sold that is
recoverable through the GCR mechanism.
(in Millions) 2007 2006 2005
Operating Revenues
Gas sales $ 1,503 $ 1,509 $ 1,823
End user transportation 140 135 134
1,643 1,644 1,957
Intermediate transportation 70 64 56
Other 129 103 85
$ 1,842 $ 1,811 $ 2,098
2007 2006 2005
Gas Markets (Bcf)
Gas sales 145 135 164
End user transportation 132 136 157
277 271 321
Intermediate transportation 399 372 432
676 643 753
Operation and maintenance expense increased $1 million and $10 million in 2007 and 2006, respectively. The 2007 increase was
attributed to $5 million of increased Enterprise Business System implementation costs, partially offset by $4 million of lower
uncollectible expense. The 2006 increase is due to $14 million of higher uncollectible expense and $24 million in implementation
costs associated with our Performance Excellence Process, partially offset by $9 million of lower injuries and damages expenses and
lower labor and employee incentives. The comparability of 2006 to 2005 was affected by an adjustment we recorded in the second
quarter of 2005 for the disallowance of $11 million 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 in April 2005.
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