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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: Michigan Consolidated Gas Company (MichCon) net income increased $9 million in 2008 and $19 million in 2007.
The 2008 and 2007 increases were due primarily to higher gross margins.
Increase (Decrease) in Income Statement Components Compared to Prior Year
Gross margin increased $61 million and $19 million in 2008 and 2007, respectively. The increase in 2008 reflects $49 million from the
uncollectible tracking mechanism, $15 million related to the impacts of colder weather and $10 million favorable result of lower lost gas
recognized and higher valued gas received as compensation for transportation of third party customer gas, $7 million of 2007 GCR
disallowances, and $6 million of appliance repair revenue. The 2008 improvement was partially offset by $20 million of lower storage services
revenue and $13 million from customer conservation and lower volumes. The increase in 2007 is primarily due to $21 million from the
favorable effects of weather in 2007 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. Revenues include a component for the
cost of gas sold that is recoverable through the GCR mechanism.
Operation and maintenance expense increased $42 million in 2008 and $1 million in 2007. The 2008 increase is primarily attributable to
$56 million of higher uncollectible expenses, $8 million of outside services and $6 million of additional fleet and facility charges, partially
offset by $14 million of lower corporate support expenses and $14 million of reduced pension and retiree health benefit costs. The increase in
uncollectible expense is partially offset by increased revenues from the uncollectible tracking mechanism included in the gross margin
discussion. The 2007 increase was attributed to $5 million in increased information systems implementation costs, partially offset by $4 million
of lower uncollectible expense.
A
sset gains, net gain increased $23 million in 2008 and $3 million in 2007. Both increases are primarily attributable to the sale of base gas.
1
(in Millions) 2008 2007
Operating revenues $273 $ 31
Cost of gas
212 12
Gross margin 61 19
Operation and maintenance
42 1
Depreciation and amortization 9 (2)
Taxes other than income
(8) 2
Asset gains, ne
t
(23)(3)
Other (income) and deductions 17 (9)
Income tax provision 15 11
Net income $9
$19
(in Millions) 2008 2007 2006
Operating Revenues
Gas sales $1,789
$1,503 $1,509
End user transportation 143 140 135
1,932 1,643 1,644
Intermediate transportation 72 70 64
Other 111 129 103
$2,115 $ 1,842 $1,811
2008 2007 2006
Gas Markets (Bcf)
Gas sales 146 145 135
End user transportation 122 132 136
268 277 271
Intermediate transportation 437 399 372
705 676 643