SIGNIFICANT ACCOUNTING POLICIES

Revenues

The Registrants' revenues from the sale and delivery of electricity, and DTE Energy's revenues from the sale, delivery, and storage of natural gas are recognized as services are provided. DTE Electric and DTE Gas record revenues for electricity and gas provided but unbilled at the end of each month. Rates for DTE Electric and DTE Gas include provisions to adjust billings for fluctuations in fuel and purchased power costs, cost of natural gas, and certain other costs. Revenues are adjusted for differences between actual costs subject to reconciliation and the amounts billed in current rates. Under or over recovered revenues related to these cost recovery mechanisms are included in Regulatory assets or liabilities on the Registrants' Consolidated Statements of Financial Position and are recovered or returned to customers through adjustments to the billing factors.

For further discussion of recovery mechanisms authorized by the MPSC, see Note 8 to the Consolidated Financial Statements, "Regulatory Matters".

DTE Energy's non-utility businesses recognize revenues as services are provided and products are delivered. For discussion of derivative contracts, see Note 12 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments".

Other Income

Other income for the Registrants is recognized for non-operating income such as equity earnings, allowance for equity funds used during construction, and contract services. DTE Energy's Power and Industrial Projects segment also recognizes Other income in connection with the sale of membership interests in reduced emissions fuel facilities to investors. In exchange for the cash received, the investors will receive a portion of the economic attributes of the facilities, including income tax attributes. The transactions are not treated as a sale of membership interests for financial reporting purposes. Other income is considered earned when refined coal is produced and tax credits are generated. Power and Industrial Projects recognized approximately $83 million, $78 million, and $81 million of Other income for the years ended December 31, 2015, 2014, and 2013, respectively.

For information on equity earnings by segment, see Note 20 to the Consolidated Financial Statements, "Segment and Related Information".

Accounting for ISO Transactions

DTE Electric participates in the energy market through MISO. MISO requires that DTE Electric submit hourly day-ahead, real-time, and FTR bids and offers for energy at locations across the MISO region. DTE Electric accounts for MISO transactions on a net hourly basis in each of the day-ahead, real-time, and FTR markets and net transactions across all MISO energy market locations. In any single hour DTE Electric records net purchases in Fuel, purchased power, and gas — utility and net sales in Operating Revenues — Utility operations on the Registrants' Consolidated Statements of Operations.

The Energy Trading segment participates in the energy markets through various independent system operators and regional transmission organizations (ISOs and RTOs). These markets require that Energy Trading submits hourly day-ahead, real-time bids and offers for energy at locations across each region. Energy Trading submits bids in the annual and monthly auction revenue rights and FTR auctions to the regional transmission organizations. Energy Trading accounts for these transactions on a net hourly basis for the day-ahead, real-time, and FTR markets. These transactions are related to trading contracts which, if derivatives, are presented on a net basis in Operating Revenues — Non-utility operations, and if non-derivatives, the realized gains and losses for sales are recorded in Operating Revenues — Non-utility operations and purchases are recorded in Fuel, purchased power, and gas — non-utility in the DTE Energy Consolidated Statements of Operations.

DTE Electric and Energy Trading record accruals for future net purchases adjustments based on historical experience, and reconcile accruals to actual costs when invoices are received from MISO and other ISOs and RTOs.

Changes in Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) is the change in common shareholders’ equity during a period from transactions and events from non-owner sources, including Net Income. The amounts recorded to Accumulated other comprehensive income (loss) for the Registrants include unrealized gains and losses on available-for-sale securities and changes in benefit obligations, consisting of deferred actuarial losses and prior service costs. The amounts recorded to Accumulated other comprehensive income (loss) relating solely to DTE Energy also include unrealized gains and losses from derivatives accounted for as cash flow hedges, DTE Energy's interest in other comprehensive income of equity investees which comprise the net unrealized gains and losses on investments, and foreign currency translation adjustments. Refer to Note 18 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets", regarding the transfer of a portion of DTE Electric benefit obligations during the year.

The following table summarizes the changes in DTE Energy's Accumulated other comprehensive income (loss) by component for the years ended December 31, 2015 and 2014:



	Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
	Net Unrealized Loss on Derivatives			Net Unrealized Gain/(Loss) on Investments			Benefit Obligations (b)			Foreign Currency Translation			Total
	(In millions)
Balance, December 31, 2013	$	(4	)	$	(6	)	$	(126	)	$	—		$	(136	)
Other comprehensive income (loss) before reclassifications	—			1			(25		)	(2		)	(26		)
Amounts reclassified from Accumulated other comprehensive income	—			—			7			—			7
Net current-period Other comprehensive income (loss)	—			1			(18		)	(2		)	(19		)
Balance, December 31, 2014	$	(4	)	$	(5	)	$	(144	)	$	(2	)	$	(155	)
Other comprehensive income (loss) before reclassifications	—			1			2			(4		)	(1		)
Amounts reclassified from Accumulated other comprehensive income	—			—			11			—			11
Net current-period Other comprehensive income (loss)	—			1			13			(4		)	10
Balance, December 31, 2015	$	(4	)	$	(4	)	$	(131	)	$	(6	)	$	(145	)

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(a)All amounts are net of tax, except for Foreign currency translation.


(b)	The amounts reclassified from Accumulated other comprehensive income (loss) are included in the computation of the net periodic pension and other postretirement benefit costs (see Note 18 to the Consolidated Financial Statements "Retirement Benefits and Trusteed Assets").

The following table summarizes the changes in DTE Electric's Accumulated other comprehensive income (loss) by component for the years ended December 31, 2015 and 2014:



	Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)
	Net Unrealized Gain on Investments		Benefit Obligations (b)			Total
	(In millions)
Balance, December 31, 2013	$	1	$	(17	)	$	(16	)
Other comprehensive loss before reclassifications	—		(12		)	(12		)
Amounts reclassified from Accumulated other comprehensive income	—		2			2
Net current-period Other comprehensive loss	—		(10		)	(10		)
Balance, December 31, 2014	$	1	$	(27	)	$	(26	)
Other comprehensive income before reclassifications	1		—			1
Transfer of amounts from Accumulated other comprehensive income to affiliate	—		27			27
Amounts reclassified from Accumulated other comprehensive income	—		—			—
Net current-period Other comprehensive income	1		27			28
Balance, December 31, 2015	$	2	$	—		$	2

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(a)All amounts are net of tax.


(b)	The amounts reclassified from Accumulated other comprehensive income (loss) are included in the computation of the net periodic pension and other postretirement benefit costs (see Note 18 to the Consolidated Financial Statements "Retirement Benefits and Trusteed Assets").

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents include cash on hand, cash in banks, and temporary investments purchased with remaining maturities of three months or less. Restricted cash consists of funds held to satisfy requirements of certain debt and DTE Energy partnership operating agreements. Restricted cash designated for interest and principal payments within one year is classified as a Current Asset.

Receivables

Accounts receivable are primarily composed of trade receivables and unbilled revenue. The Registrants' Accounts receivable are stated at net realizable value.

The allowance for doubtful accounts for DTE Electric and DTE Gas is generally calculated using the aging approach that utilizes rates developed in reserve studies. DTE Electric and DTE Gas establish an allowance for uncollectible accounts based on historical losses and management’s assessment of existing economic conditions, customer trends, and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the due date, which is typically in 21 days, however, factors such as assistance programs may delay aggressive action. DTE Electric and DTE Gas assess late payment fees on trade receivables based on past-due terms with customers. Customer accounts are written off when collection efforts have been exhausted. The time period for write-off is 150 days after service has been terminated.

The customer allowance for doubtful accounts for DTE Energy's other businesses is calculated based on specific review of probable future collections based on receivable balances in excess of 30 days.

DTE Energy unbilled revenues of $620 million and $773 million, including $237 million and $250 million of DTE Electric unbilled revenues, are included in Customer Accounts receivable at December 31, 2015 and 2014, respectively.

Notes Receivable

Notes receivable, or financing receivables, for DTE Energy are primarily comprised of capital lease receivables and loans and are included in Notes receivable and Other current assets on DTE Energy’s Consolidated Statements of Financial Position. Notes receivable, or financing receivables, for DTE Electric are primarily comprised of loans.

Notes receivable are typically considered delinquent when payment is not received for periods ranging from 60 to 120 days. The Registrants cease accruing interest (nonaccrual status), consider a note receivable impaired, and establish an allowance for credit loss when it is probable that all principal and interest amounts due will not be collected in accordance with the contractual terms of the note receivable. Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current.

In determining the allowance for credit losses for notes receivable, the Registrants consider the historical payment experience and other factors that are expected to have a specific impact on the counterparty’s ability to pay. In addition, the Registrants monitor the credit ratings of the counterparties from which they have Notes receivable.

Inventories

Inventory related to utility operations is generally valued at average cost. Inventory related to non-utility operations is valued at the lower of cost or market.

DTE Gas' natural gas inventory of $65 million and $43 million as of December 31, 2015 and 2014, respectively, is determined using the last-in, first-out (LIFO) method. The replacement cost of gas remaining in storage exceeded the LIFO cost by $60 million and $110 million at December 31, 2015 and 2014, respectively.

Property, Retirement and Maintenance, and Depreciation and Amortization

Property is stated at cost and includes construction-related labor, materials, overheads, and AFUDC for utility property. The cost of utility properties retired is charged to accumulated depreciation. Expenditures for maintenance and repairs are charged to expense when incurred, except for Fermi 2.

Utility property at DTE Electric and DTE Gas is depreciated over its estimated useful life using straight-line rates approved by the MPSC.

DTE Energy's non-utility property is depreciated over its estimated useful life using the straight-line method.

Depreciation and amortization expense also includes the amortization of certain regulatory assets for the Registrants.

Approximately $4 million and $16 million of expenses related to Fermi 2 refueling outages were accrued at December 31, 2015 and 2014, respectively. Amounts are accrued on a pro-rata basis, generally over an 18-month period, that coincides with scheduled refueling outages at Fermi 2. This accrual of outage costs matches the regulatory recovery of these costs in rates set by the MPSC. See Note 8 to the Consolidated Financial Statements, "Regulatory Matters".

The cost of nuclear fuel is capitalized. The amortization of nuclear fuel is included within Fuel, purchased power, and gas — utility in the DTE Energy Consolidated Statements of Operations, and Fuel and purchased power in the DTE Electric Consolidated Statements of Operations, and is recorded using the units-of-production method.

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds the expected discounted future cash flows generated by the asset, an impairment loss is recognized resulting in the asset being written down to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

Intangible Assets

DTE Energy has certain Intangible assets as shown below:



	December 31,
	2015		2014
	(In millions)
Emission allowances	$	1	$	1
Renewable energy credits	38		45
Contract intangible assets	117		122
	156		168
Less accumulated amortization	62		57
Intangible assets, net	94		111
Less current intangible assets	5		9
	$	89	$	102

DTE Electric has certain Intangible assets as shown below:



	December 31,
	2015		2014
	(In millions)
Emission allowances	$	1	$	1
Renewable energy credits	38		45
	39		46
Less current intangible assets	5		9
	$	34	$	37

Emission allowances and renewable energy credits are charged to expense, using average cost, as the allowances and credits are consumed in the operation of the businesses by the Registrants. DTE Energy amortizes contract Intangible assets on a straight-line basis over the expected period of benefit, ranging from 1 to 26 years. DTE Energy's Intangible assets amortization expense was $11 million in 2015, $12 million in 2014, and $14 million in 2013.

The following table summarizes DTE Energy's estimated contract intangible amortization expense expected to be recognized during each year through 2020:



Estimated amortization expense	(In millions)
2016	$	10
2017	$	7
2018	$	7
2019	$	7
2020	$	5

Excise and Sales Taxes

The Registrants record the billing of excise and sales taxes as a receivable with an offsetting payable to the applicable taxing authority, with no net impact on the Registrants' Consolidated Statements of Operations.

Deferred Debt Costs

The costs related to the issuance of long-term debt are deferred and amortized over the life of each debt issue. The deferred amounts are included in Other long-term assets on the Registrant's Consolidated Statements of Financial Position. In accordance with MPSC regulations applicable to DTE Energy’s electric and gas utilities the unamortized discount, premium, and expense related to utility debt redeemed with a refinancing are amortized over the life of the replacement issue. Discount, premium, and expense on early redemptions of debt associated with DTE Energy's non-utility operations are charged to earnings.

Investments in Debt and Equity Securities

The Registrants generally classify investments in debt and equity securities as either trading or available-for-sale and have recorded such investments at market value with unrealized gains or losses included in earnings or in Other comprehensive income or loss, respectively. Changes in the fair value of Fermi 2 nuclear decommissioning investments are recorded as adjustments to Regulatory assets or liabilities, due to a recovery mechanism from customers. The Registrants' equity investments are reviewed for impairment each reporting period. If the assessment indicates that the impairment is other than temporary, a loss is recognized resulting in the equity investment being written down to its estimated fair value. See Note 11 of the Consolidated Financial Statements, "Fair Value".

Government Grants

Grants are recognized when there is reasonable assurance that the grant will be received and that any conditions associated with the grant will be met. When grants are received related to Property, plant, and equipment, the Registrants reduce the cost of the assets on their Consolidated Statements of Financial Position, resulting in lower depreciation expense over the life of the associated asset. Grants received related to expenses are reflected as a reduction of the associated expense in the period in which the expense is incurred.

DTE Energy Foundation

DTE Energy's charitable contributions to the DTE Energy Foundation were $12 million, $25 million, and $18 million for the years ended December 31, 2015, 2014, and 2013, respectively. The DTE Energy Foundation is a non-consolidated not-for-profit private foundation, the purpose of which is to contribute to and assist charitable organizations.

Other Accounting Policies

See the following notes for other accounting policies impacting the Registrants’ Consolidated Financial Statements:



Note		Title
7		Asset Retirement Obligations
8		Regulatory Matters
9		Income Taxes
11		Fair Value
12		Financial and Other Derivative Instruments
19		Stock-Based Compensation