DTE Energy 2014 Annual Report Download - page 16

We intend to focus on the following areas for growth:
• Obtaining investors in our REF projects;
• Relocating our underutilized REF facilities to alternative coal-fired power plants which may provide increased production and emission
reduction opportunities in 2015 and future years;
• Acquiring and developing landfill gas recovery facilities, renewable energy projects, and other energy projects which may qualify for tax
credits; and
• Providing operating services to owners of industrial and power plants.
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Energy Trading focuses on physical and financial power and gas marketing and trading, structured transactions, enhancement of returns from DTE
Energy’s asset portfolio, and optimization of contracted natural gas pipeline transportation and storage, and generating capacity positions. Energy Trading
also provides natural gas, power and related services which may include the management of associated storage and transportation contracts on the customers’
behalf and the supply or purchase of renewable energy credits to various customers. Our customer base is predominantly utilities, local distribution
companies, pipelines, producers and generators, and other marketing and trading companies. We enter into derivative financial instruments as part of our
marketing and hedging activities. These financial instruments are generally accounted for under the mark-to-market method, which results in the recognition
in earnings of unrealized gains and losses from changes in the fair value of the derivatives. We utilize forwards, futures, swaps and option contracts to
mitigate risk associated with our marketing and trading activity as well as for proprietary trading within defined risk guidelines. Energy Trading also
provides commodity risk management services to the other businesses within DTE Energy.
Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments and physical power and natural gas contracts
are deemed derivatives; whereas, natural gas inventory, contracts for pipeline transportation, renewable energy credits and storage assets are not derivatives.
As a result, this segment will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts
and assets. The segment’s strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards,
swaps and options. This results in gains and losses that are recognized in different interim and annual accounting periods.
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Energy Trading has market-based rate authority from the FERC to sell power and blanket authority from the FERC to sell natural gas at market prices.
Energy Trading is subject to FERC reporting requirements and market behavior rules. Energy Trading is also subject to the applicable laws, rules and
regulations related to the CFTC, U.S. Department of Homeland Security and DOE.
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Our strategy for the Energy Trading business is to deliver value-added services to our customers. We seek to manage this business in a manner
complementary to the growth of our other business segments. We focus on physical marketing and the optimization of our portfolio of energy assets. We
compete with electric and gas marketers, financial institutions, traders, utilities and other energy providers. The Energy Trading business is dependent upon
the availability of capital and an investment grade credit rating. The Company believes it has ample available capital capacity to support Energy Trading
activities. We monitor our use of capital closely to ensure that our commitments do not exceed capacity. A material credit restriction would negatively
impact our financial performance. Competitors with greater access to capital or at a lower cost may have a competitive advantage. We have risk management
and credit processes to monitor and mitigate risk.
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Corporate and Other includes various holding company activities and holds certain non-utility debt and energy-related investments.
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