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Exhibit 99.1
MICHIGAN CONSOLIDATED GAS COMPANY
Consolidated Financial Statements as of December 31, 2010 and 2009 and for each of the three years in the period ended
December 31, 2010 and Report of Independent Registered Public Accounting Firm

Table of contents

  • Page 1
    Exhibit 99.1 MICHIGAN CONSOLIDATED GAS COMPANY Consolidated Financial Statements as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010 and Report of Independent Registered Public Accounting Firm

  • Page 2
    MICHIGAN CONSOLIDATED GAS COMPANY TABLE OF CONTENTS PAGE Definitions Management' s Narrative Analysis of Results of Operations Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations Consolidated Statements of Financial Position Consolidated Statements of Cash ...

  • Page 3
    ... Accounting Standards Board FERC Federal Energy Regulatory Commission GCR A Gas Recovery Recovery mechanism authorized by the MPSC that allows MichCon to recover through rates its natural gas costs. MichCon Michigan Consolidated Gas Company (an indirect wholly owned subsidiary of DTE Energy...

  • Page 4
    ... in the accompanying consolidated financial statements have been eliminated at DTE Energy as a result of purchase accounting adjustments. 2010 (in Millions) 2009 2008 Operating Revenues ...Cost of Gas ...Gross Margin ...Operation and Maintenance ...Depreciation and Amortization ...Taxes Other Than...

  • Page 5
    ... mitigating the impacts of economic conditions in our service territory and a revenue decoupling mechanism that addresses changes in average customer usage due to general economic conditions and conservation. These and other tracking mechanisms and surcharges are expected to result in lower earnings...

  • Page 6
    ...all material respects, the financial position of Michigan Consolidated Gas Company and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of...

  • Page 7
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (in Millions) Year Ended December 31 2010 2009 2008 Operating Revenues Operating Expenses Cost of gas Operation and maintenance Depreciation and amortization Taxes other than income Asset (gains), net Operating Income Other (...

  • Page 8
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in Millions) December 31 2010 2009 ASSETS Current Assets Cash and cash equivalents Accounts receivable (less allowance for doubtful accounts of $94 and $134, respectively) Customer Affiliates Other Inventories Gas ...

  • Page 9
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in Millions, Except Shares) December 31 2010 2009 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities Accounts payable Affiliates Other Short-term borrowings Affiliates Other Other Long-Term Debt Other Liabilities...

  • Page 10
    ...and investment 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 Income...

  • Page 11
    MICHIGAN CONSOLIDATED GAS COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME Common Stock (Dollars in Millions, Shares in Thousands) Shares Amount Retained Earnings Accumulated Other Comprehensive Loss Total Balance, December 31, 2007 Net income ...

  • Page 12
    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...

  • Page 13
    ... to customers through adjustments to the billing factors. See Note 9 for further discussion of cost recovery mechanisms. MichCon has an RDM that is designed to minimize the impact on revenues of changes in average customer usage of natural gas. The June 2010 MPSC order in MichCon' s 2009 rate case...

  • Page 14
    ...pay. In addition, the Company monitors the credit ratings of the counterparties from which we have notes receivable. Inventories MichCon generally values materials and supplies at average cost. Gas inventory of $43 million and $44 million as of December 31, 2010 and 2009, respectively, is determined...

  • Page 15
    ... and equity securities as trading and has recorded such investments at market value with unrealized gains or losses included in earnings. Stock-Based Compensation The Company received an allocation of costs from DTE Energy associated with stock-based compensation. Our allocation for 2010, 2009 and...

  • Page 16
    ...use of credit reserves, the impact of which is immaterial at December 31, 2010 and 2009. The Company believes ...quoted prices in active markets for 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...

  • Page 17
    ... analysis based upon estimated current borrowing rates when quoted market prices are not available. The table below shows the fair value and the carrying value for long-term debt securities. Certain other financial instruments, such as notes payable, customer deposits and notes receivable are not...

  • Page 18
    ... annually for 2011 through 2015. The Company amortizes capitalized software costs on a straight-line basis over the expected period of benefit, ranging from 5 to 15 years. NOTE 7 - ASSET RETIREMENT OBLIGATIONS The Company has conditional retirement obligations for gas pipeline retirement costs...

  • Page 19
    ..., conditions of service, accounting and operating-related matters. MichCon' s MPSCapproved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on our investments. MichCon operates natural gas storage and transportation...

  • Page 20
    ... current assets Liabilities Asset removal costs Negative pension offset Refundable income taxes Deferred income taxes - Michigan Business Tax Refundable self implemented rates Accrued GCR refund Other Less amount included in current liabilities and other liabilities 2010 2009 $ 413 $ 409 150 152...

  • Page 21
    ... tax assets will be reflected in rates. Refundable self implemented rates - Amounts refundable to customers for base rates implemented by MichCon in excess of amounts authorized in MPSC orders. Accrued GCR refund - Liability for the temporary over-recovery of and a return on gas costs incurred...

  • Page 22
    ... prudence in annual plan and reconciliation filings. The following table summarizes MichCon' s GCR reconciliation filing currently pending with the MPSC: GCR Year Date Filed Net Over-Recovery, Including Interest GCR Cost of Gas Sold 2009-2010 June 2010 $5.9 million $1.0 billion 2010-2011 Plan...

  • Page 23
    ...inside meters to the outside of residents' houses. Recovery of costs associated with these two programs is expected to be provided through these filings or future MichCon rate cases. Energy Optimization (EO) Plan In March 2009, MichCon filed an EO Plan with the MPSC as required under Michigan Public...

  • Page 24
    ... December 31: (in Millions) 2010 2009 Property, plant and equipment Pension and benefits Net operating loss Other comprehensive income Other, net Current deferred income tax assets Long term deferred income tax liabilities Deferred income tax liabilities Deferred income tax assets $ (341) (127) 76...

  • Page 25
    ...$9 million of unrecognized tax benefits by MichCon. In 2009, DTE Energy and its subsidiaries settled a federal tax audit for the 2004 through 2006 tax years. The resulting change to unrecognized tax benefits was not significant. Michigan Business Tax In July 2007, the Michigan Business Tax (MBT) was...

  • Page 26
    ... premium on debt: (in Millions) 2011 2012 2013 2014 2015 2016 and thereafter Total Amount to mature $ - $40 $ 60 $ 80 $ 140 $ 570 $ 890 Preferred and Preference Securities - Authorized and Unissued At December 31, 2010, MichCon had 7 million shares of preferred stock with a par value of $1 per...

  • Page 27
    ... asset for estimated investigation and remediation costs at former MGP sites. As of December 31, 2010 and December 31, 2009, the Company had $36 million, accrued for remediation. Any significant change in assumptions, such as remediation techniques, nature and extent of contamination and regulatory...

  • Page 28
    ... affiliates. MichCon is allocated net periodic benefit costs (credits) for its share of the amounts of the combined plans. In prior years, MichCon served as the plan sponsor for a pension plan for represented employees that changed in 2008 to be sponsored by DTE Energy Corporate Services, LLC (LLC...

  • Page 29
    ...) 2010 2009 2008 Service cost Interest cost Expected return on plan assets Amortization of: Net loss Prior service cost Net pension credit $ 12 $ 9 $ 10 42 40 42 (87) (93) (81) 2 - 17 1 - - $ (10) $ (34) $ (42) (in Millions) 2010 2009 Other changes in plan assets and benefit obligations...

  • Page 30
    ... Prior service cost Regulatory assets Other comprehensive loss $ $ $ $ 419 $ (4) 415 $ 413 $ 2 415 $ 414 (4) 410 409 1 410 Assumptions used in determining the projected benefit obligation and net pension costs are listed below: 2010 2009 2008 Projected benefit obligation Discount rate Rate of...

  • Page 31
    ... are diversified across U.S. and nonU.S. stocks, growth and value investment styles, and large and small market capitalizations. Fixed income securities generally include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Other assets such...

  • Page 32
    ... certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. (c) This category...

  • Page 33
    ... valued based on underlying securities, using quoted prices in actively traded markets. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class or issue for each...

  • Page 34
    ..., the employee' s contribution rate and, in some cases, years of credited service. The cost of these plans was $4 million in each of the years 2010, 2009, and 2008. Other Postretirement Benefits The Company participates in plans sponsored by LLC that provide certain postretirement health care and...

  • Page 35
    ... are listed below: 2010 2010 2009 $ $ 270 $ 118 115 70 37 32 - (26) 346 $ 270 $ (182) $ (218) $ (182) $ (218) $ $ 158 $ 136 2 (8) 12 2 152 $ 150 2009 2008 Projected benefit obligation Discount rate Net benefit costs Discount rate Expected long-term rate of return on plan assets Health care...

  • Page 36
    ... certain short-term fixed income securities and money market investments that are managed in separate accounts or commingled funds. Pricing for investments in this category are obtained from quoted prices in actively traded markets or valuations from brokers or pricing services. (c) This category...

  • Page 37
    ... valued based on underlying securities, using quoted prices in actively traded markets. Non-exchange traded fixed income securities are valued by the trustee based upon quotations available from brokers or pricing services. A primary price source is identified by asset type, class or issue for each...

  • Page 38
    ... Asset as the traditional rate setting process allows for the recovery of income tax costs. Grantor Trust The Company maintains a Grantor Trust to fund other postretirement benefit obligations that invests in life insurance contracts and income securities. Employees and retirees have no right...

  • Page 39
    ... another affiliate of DTE Energy. The following is a summary of transactions with affiliated companies: (in Millions) 2010 2009 2008 Revenues Storage and transportation services Other services Costs Gas purchases Other services and interest Corporate expenses Other Dividends declared Dividends paid...