DTE Energy 2009 Annual Report Download - page 12

10
MICHIGAN CONSOLIDATED GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — BASIS OF PRESENTATION
Corporate Structure
MichCon is a Michigan corporation organized in 1898. MichCon is an indirect, wholly-owned subsidiary of DTE Energy. MichCon is
a public utility subject to regulation by the MPSC and the FERC. MichCon is engaged in the purchase, storage, transmission,
gathering, distribution and sale of natural gas to approximately 1.2 million customers throughout Michigan.
References in this report to “we”, “us”, “our” or “Company” are to MichCon.
Basis of Presentation
The accompanying consolidated financial statements are prepared using accounting principles generally accepted in the United States
of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the
Company’ s estimates.
Certain prior year balances were reclassified to match the current year’ s financial statement presentation.
Principles of Consolidation
The Company consolidates all majority owned subsidiaries and investments in entities in which it has controlling influence. Non-
majority owned investments are accounted for using the equity method when the Company is able to influence the operating policies
of the investee. Non-majority owned investments include investments in limited liability companies, partnerships or joint ventures.
When the Company does not influence the operating policies of an investee, the cost method is used. The Company eliminates all
intercompany balances and transactions.
We consolidate variable interest entities (VIEs) for which we are the primary beneficiary. In general, we determine whether we are the
primary beneficiary of a VIE through a qualitative analysis of risk which indentifies which variable interest holder absorbs the
majority of the financial risk or rewards and variability of the VIE. In performing this analysis, we consider all relevant facts and
circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the identification of
variable interest holders including equity owners, customers, suppliers and debt holders and which parties participated significantly in
the design of the entity. If the qualitative analysis is inconclusive, a specific quantitative analysis is performed. Refer to Note 3 for
discussion of changes in consolidation guidance applicable to VIEs.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
Revenues
Revenues from the sale, delivery and storage of natural gas are recognized as services are provided. The Company records revenues
for gas provided but unbilled at the end of each month. Our accrued revenues include a component for the cost of gas sold that is
recoverable through the GCR mechanism and certain other transactions that may create revenue refund obligations to GCR customers.
MichCon presents its revenue net of any revenue refund obligations to GCR customers. Annual GCR proceedings before the MPSC
permit MichCon to recover prudent and reasonable supply costs. Any overcollection or undercollection of costs, including interest,
will be reflected in future rates. See Note 9.