DTE Energy 2010 Annual Report Download - page 23

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Gas Main Renewal and Gas Meter Move Out Programs
The June 3, 2010 MPSC gas rate case order required MichCon to make filings related to gas main renewal and meter move-out
programs. In a July 30, 2010 filing, MichCon proposed to implement a 10-year gas main renewal program beginning in 2012 which
would require capital expenditures of approximately $17 million per year for renewing gas distribution mains, retiring gas mains, and
where appropriate and when related to the gas main renewal or retirement activity, relocate inside meters to outside locations and
renew service lines.
In a September 30, 2010 filing, MichCon proposed to implement a 10-year gas meter move out program beginning in 2012 which
would require capital expenditures of approximately $22 million per year primarily for relocation of 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 Act 295 of 2008. The EO Plan
application is designed to help each customer class reduce their gas usage by: (1) building customer awareness of energy efficiency
options and (2) offering a diverse set of programs and participation options that result in energy savings for each customer class. In
March 2010, MichCon filed an amended EO Plan with the MPSC. MichCon’ s amended EO Plan proposed the recovery of EO
expenditures for the period 2010-2015 of $150 million and further requested approval of surcharges that are designed to recover these
costs, including a financial incentive mechanism. The MPSC approved the amended EO Plan and the surcharge and tariff sheets
reflecting the exclusion of the financial incentive mechanism. The disposition of the financial incentive mechanism is expected to be
addressed in the EO reconciliation case. In April 2010, MichCon filed a reconciliation for the 2009 plan year. The MichCon
reconciliation included an underrecovery of $0.2 million, net of incentives of $0.9 million. On February 8, 2011, the MPSC issued an
order approving MichCon’ s 2009 EO reconciliation filing, including financial incentives.
Other
The Company is unable to predict the outcome of the unresolved regulatory matters discussed herein. Resolution of these matters is
dependent upon future MPSC orders and appeals, which may materially impact the financial position, results of operations and cash
flows of the Company.
NOTE 10 — INCOME TAXES
Income Tax Summary
MichCon is part of the consolidated federal income tax return of DTE Energy. Our federal income tax expense is determined on an
individual company basis with no allocation of tax benefits or expenses from other affiliates of DTE Energy. MichCon has an income
tax receivable of $48 million at December 31, 2010, and $38 million at December 31, 2009 due from DTE Energy.
Total income tax expense varied from the statutory federal income tax rate for the following reasons:
(Dollars in Millions)
2010
2009
2008
Income tax expense at 35% statutory rate
$ 69
$ 46
$ 41
Depreciation
(7)
(7)
(7)
State and local income taxes, net of federal benefit
9
3
3
Life insurance trust
—
—
3
Other, net
(3)
(2)
(2)
Total
$ 68
$ 40
$ 38
Effective income tax rate
34.3%
30.0%
32.2%