DTE Energy 2008 Annual Report Download - page 16

Company will adopt SFAS No. 160 as of January 1, 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
Plan Assets. This FSP amends SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to
provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosure
requirements required by this FSP are effective for fiscal years ending after December 15, 2009. The Company will adopt this FSP on
December 31, 2009.
Stock-Based Compensation
Effective January 1, 2006, our 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 2008, 2007 and 2006 for stock-based compensation expense were approximately $5 million,
$3 million and $2 million, respectively. The cumulative effect of the adoption of SFAS 123(R) had an immaterial impact on our operation and
maintenance expense.
NOTE 3 — RESTRUCTURING
Performance Excellence Process
In 2005, we initiated a company-wide review of our operations called the Performance Excellence Process. We began a series of focused
improvement initiatives within MichCon and associated corporate support functions.
We have incurred costs to achieve (CTA) restructuring expense for employee severance and other costs. Other costs include project
management and consultant support. We cannot defer CTA costs at this time because a regulatory recovery mechanism has not been
established by the MPSC. We expect to seek a recovery mechanism in our next rate case expected to be filed in 2009.
Amounts expensed are recorded in the Operation and maintenance line on the Consolidated Statements of Operations. Costs incurred in 2008,
2007 and 2006 are as follows:
NOTE 4 — REGULATORY MATTERS
Regulation
We are subject to the regulatory jurisdiction of the MPSC, which issues orders pertaining to rates, recovery of certain costs, including the costs
of regulatory assets, conditions of service, accounting and operating-related matters.
Regulatory Assets and Liabilities
We apply the provisions of SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. SFAS No. 71 requires the recording of
regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in non-regulated businesses.
Continued applicability of SFAS No. 71 requires that rates be designed to recover specific costs of providing regulated services and be charged
to and collected from customers. Future regulatory changes or changes in the competitive environment could result in the Company
discontinuing the application of SFAS No. 71 for some or all of its business and require the write-off of the portion of any regulatory asset or
liability that was no longer probable of recovery through regulated rates. Management believes that currently available facts support the
continued application of SFAS No. 71.
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Employee Severance Costs Other Costs Total Cost
(in Millions) 2008 2007 2006 2008 2007 2006 2008 2007 2006
Costs incurre
d
$ — $3 $17 $7 $6 $7 $7
$9 $24