DTE Energy 2008 Annual Report Download

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M
ICHIGAN
C
ONSOLIDATED
G
AS
C
OMPANY
Consolidated Financial Statements as of December 31, 2008 and 2007 and for each of the three years in the period ended
December 31, 2008 and Independent Auditors’ Report

Table of contents

  • Page 1
    M ICHIGAN C ONSOLIDATED GAS C OMPANY Consolidated Financial Statements as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008 and Independent Auditors' Report

  • Page 2
    MICHIGAN CONSOLIDATED GAS C OMPANY TABLE OF CONTENTS PAGE Management's Narrative Analysis of Results of Operations Independent Auditors' Report Consolidated Statements of Operations Consolidated Statements of Financial Position Consolidated Statements of Cash Flows Consolidated Statements of ...

  • Page 3
    ... 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: Michigan Consolidated Gas Company (MichCon) net income increased $9 million in 2008 and $19 million in 2007. The...

  • Page 4
    ... stolen gas; Collectibility of accounts receivable; Increases in future expense and contributions to pension and other postretirement plans due to declines in value resulting from market conditions; The amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals...

  • Page 5
    ..., the financial position of Michigan Consolidated Gas Company and subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the...

  • Page 6
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (in Millions) 2008 Year Ended December 31 2007 2006 Operating Revenues Operating Expenses Cost of gas Operation and maintenance Depreciation and amortization Taxes other than income Asset gains, net Operating Income Other (...

  • Page 7
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31 (in Millions) 2008 2007 ASSETS Current Assets Cash and cash equivalents Accounts receivable (less allowance for doubtful accounts of $137 and $86, respectively) Customer Affiliates Other Inventories Gas ...

  • Page 8
    ... STATEMENTS OF FINANCIAL POSITION December 31 (in Millions, Except Shares) 2008 2007 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities Accounts payable Affiliates Other Dividends payable Short-term borrowings Affiliates Other Current portion of long-term debt Accrued gas cost recovery refund...

  • Page 9
    ... tax credits, net Asset gains, net Changes in assets and liabilities: Accounts receivable, net Inventories Accrued postretirement liability - affiliates Accrued pension liability - affiliates Recoverable pension and postretirement costs Accrued gas cost recovery Accounts payable Federal income...

  • Page 10
    ... (2) $ $ 754 52 (50) 756 71 5 (50) 782 80 (2) (1) 62 (37) 884 $ $ $ $ 2008 2007 2006 Net income Other comprehensive loss: Benefit obligations, net of tax of $(1), $- and $- Comprehensive income See Notes to Consolidated Financial Statements 8 $ 80 (1) 79 $ 71 - 71 $ 52 - 52 $ $ $

  • Page 11
    ... FINANCIAL STATEMENTS 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...

  • Page 12
    ..., and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the time the next bill is issued, typically monthly, however, factors such as assistance programs may delay aggressive action. We assess late payment fees on trade receivables based on...

  • Page 13
    ... of are reported at the lower of the carrying amount or fair value less costs 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
    ... storage field when it was sold in early 2004. See the following notes for other accounting policies impacting our financial statements: Note Title 2 4 5 10 12 New Accounting Pronouncements Regulatory Matters Income Taxes Financial and Other Derivative Instruments Retirement Benefits and Trusteed...

  • Page 15
    ...subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2008. Earlier adoption is prohibited. This...

  • Page 16
    ... 2009. Adoption of SFAS No. 160 will not have a material effect on our consolidated financial statements. Employers' Disclosures about Postretirement Benefit Plan Assets On December 30, 2008, the FASB issued FASB Staff Position (FSP) FAS 132(R)-1, Employers' Disclosures about Postretirement Benefit...

  • Page 17
    ... rate setting process allows for the recovery of pension and postretirement costs. The asset will reverse as the deferred items are recognized as benefit expenses in net income. (1) • Accrued GCR revenue - Receivable for the temporary under-recovery of and return on gas costs incurred by MichCon...

  • Page 18
    ...approving the collection of $34 million requested in the March 2008 filing. MichCon was authorized to implement the new UETM monthly surcharge for service rendered on and after January 1, 2009. Gas Cost Recovery Proceedings 2005-2006 Plan Year - In June 2006, MichCon filed its GCR reconciliation for...

  • Page 19
    ...in the 2005-2006 GCR reconciliation case. The $9 million under-recovery was included in the 2007-2008 GCR reconciliation. An MPSC order was issued on April 22, 2008 approving the settlement. 2007-2008 Plan Year / Base Gas Sale Consolidated - In August 2006, MichCon filed an application with the MPSC...

  • Page 20
    ... part of the consolidated federal income tax return of DTE Energy. Our federal income tax expense is determined on an individual company basis with no allocation of tax benefits or expenses from other affiliates of DTE Energy. We have an income tax payable of $2 million at December 31, 2008, and $10...

  • Page 21
    ... in relation to income tax for the years ended December 31, 2008 and 2007. The U.S. federal income tax returns for years 2004 and subsequent years remain subject to examination by the IRS for DTE Energy and its subsidiaries. The Michigan Business Tax for the year 2008 is subject to examination...

  • Page 22
    ... AND PREFERRED SECURITIES Long-Term Debt Our long-term debt outstanding and interest rates of debt outstanding at December 31 were: (in Millions) 2008 2007 First Mortgage Bonds, interest payable semi-annually 7.06% series due 2012 8.25% series due 2014 Remarketable securities, interest payable semi...

  • Page 23
    ... MichCon has a $244 million, five-year unsecured revolving credit facility expiring in October 2009 and a $181 million, five-year unsecured revolving credit agreement expiring in October 2010. The five-year credit facilities are with a syndicate of banks and may be utilized for general corporate...

  • Page 24
    ...use of credit reserves, the impact of which is immaterial for the year ended December 31, 2008. The ...identical assets or liabilities that the Company has 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...

  • Page 25
    ... markets. Non-exchange-traded fixed income securities are valued based upon quotations available from brokers or pricing services. For nonexchange traded fixed income securities, the trustees receive prices from pricing services. A primary price source is identified by asset type, class or issue for...

  • Page 26
    ...financial position and cash flows. However, we anticipate the cost deferral and rate recovery mechanism approved by the MPSC will prevent environmental costs from having a material adverse impact on our results of operations. Labor Contracts There are several bargaining units for our union employees...

  • Page 27
    ... in 2008 to be sponsored by DTE Energy Corporate Services, LLC (LLC), a subsidiary of DTE Energy, which also became the plan sponsor for all plans of DTE Energy and its affiliates. The changes in plan sponsorship did not change the pension cost or contributions allocated to MichCon, or the benefits...

  • Page 28
    ... as prepaid pension cost in the Consolidated Statements of Financial Position at December 31: (in Millions) 2008 2007 Accumulated benefit obligation, end of year Change in projected benefit obligation Projected benefit obligation, beginning of year Service cost Interest cost Actuarial loss...

  • Page 29
    ...loss Prior service cost $ $ 379 (4) 375 373 2 375 $ $ $ $ 23 2 25 25 - 25 Regulatory assets Other comprehensive loss Assumptions used in determining the projected benefit obligation and net pension costs are listed below: 2008 $ $ 2007 2006 Projected benefit obligation Discount rate Rate of...

  • Page 30
    ... rate and, in some cases, years of credited service. The cost of these plans was $4 million in 2008, $4 million in 2007 and $5 million in 2006. Other Postretirement Benefits The Company participates in plans sponsored by LLC that provide certain postretirement health care and life insurance benefits...

  • Page 31
    ... amounts recorded as accrued postretirement cost in the Consolidated Statements of Financial Position at December 31: (in Millions) 2008 2007 Change in accumulated postretirement benefit obligation Accumulated postretirement benefit obligation, beginning of year December 2007 cash flow Service cost...

  • Page 32
    ... 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 33
    ... related to the transfer of four carbon dioxide processing facilities from an affliated company to MichCon. Our accounts receivable from affiliated companies and accounts payable to affiliated companies are payable upon demand and are generally settled in cash within a monthly business cycle. 31