DTE Energy 2008 Annual Report Download - page 12

Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and temporary investments purchased with remaining maturities of three months
or less.
Receivables
Accounts receivable are primarily composed of trade receivables and unbilled revenue. Our accounts receivable are stated at net realizable
value. Customer accounts are written off based upon approved regulatory and legislative requirements.
The allowance for doubtful accounts is calculated using the aging approach that utilizes rates developed in reserve studies. We establish an
allowance for uncollectible accounts based on historical losses and management’s assessment of existing economic conditions, customer
trends, 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 contractual past-due terms established with customers.
Unbilled revenues of $189 million and $162 million are included in customer accounts receivable at December 31, 2008 and 2007,
respectively.
Inventories
We value materials and supplies at average cost.
Gas inventory is determined using the last-in, first-out (LIFO) method. At December 31, 2008, the replacement cost of gas remaining in storage
exceeded the $14 million LIFO cost by $232 million. During 2008 MichCon liquidated 4.2 billion cubic feet of prior years’ LIFO layers. The
liquidation reduced 2008 cost of gas by approximately $21 million, but had no impact on earnings as a result of the GCR mechanism. At
December 31, 2007, the replacement cost of gas remaining in storage exceeded the $32 million LIFO cost by $288 million. During 2007,
MichCon liquidated 9.5 billion cubic feet of prior years’ LIFO layers. The liquidation reduced 2007 cost of gas by approximately $30 million,
but had no impact on earnings as a result of the GCR mechanism.
Gas Customer Choice Deferred Asset
Gas Customer Choice Deferred Asset represents gas provided to MichCon by suppliers of gas to customers that participate in the Customer
Choice program. As the gas is sold and billed to Customer Choice customers, primarily in the December through March heating season, this
asset is reduced. At the end of an April through March cycle each year, any balance is reconciled and settled with the various suppliers.
Property, Retirement and Maintenance, and Depreciation and Depletion
Summary of property by classification as of December 31:
Property is stated at cost and includes construction-related labor, materials, overheads and an allowance for funds used during construction
(AFUDC). AFUDC capitalized during 2008 and 2007 was approximately $6 million and $9 million, respectively. The cost of properties retired,
less salvage value, is charged to accumulated depreciation. Expenditures for maintenance and repairs are charged to expense when incurred.
We base depreciation provisions on straight-line and units-of-production rates approved by the MPSC. The composite depreciation rate was
3.2% in 2008, 3.1% in 2007, and 2.8% in 2006.
The average estimated useful life for gas distribution and transmission property was 40 years and 38 years, respectively, at December 31, 2008.
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(in Millions) 2008 2007
Property, Plant and Equipment
Distribution $2,327 $2,392
Storage 378 273
Transmission and Other
1,061 924
Total 3,766 3,589
Less Accumulated De
p
reciation
Distribution (955)(970)
Storage
(107) (100)
Transmission and Other (587)(523)
Total
(1,649) (1,593)
Net Property, Plant and Equipment $2,117 $ 1,996