Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

SIGNIFICANT ACCOUNTING POLICIES

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 $19 million of Other income for the three months ended March 31, 2016 and 2015, respectively.

Changes in Accumulated Other Comprehensive Income (Loss)

For the three months ended March 31, 2016 and 2015, reclassifications out of Accumulated other comprehensive income (loss) for the Registrants were not material. Changes in Accumulated other comprehensive income (loss) are presented in DTE Energy's Consolidated Statements of Changes in Equity and DTE Electric's Consolidated Statements of Changes in Shareholder's Equity.

Income Taxes

The effective tax rate and unrecognized tax benefits of the Registrants are as follows:



	Effective Tax Rate				Unrecognized Tax Benefits
	Three Months Ended March 31,				March 31,
	2016		2015		2016
					(In millions)
DTE Energy	26	%	31	%	$	3
DTE Electric	36	%	35	%	$	4

The 5% decrease in DTE Energy's effective tax rate for the three months ended March 31, 2016 is primarily due to higher production tax credits in 2016.

DTE Energy had $2 million of unrecognized tax benefits that, if recognized, would favorably impact its effective tax rate. DTE Electric had $3 million of unrecognized tax benefits that, if recognized, would favorably impact its effective tax rate. The Registrants do not anticipate any material changes to the unrecognized tax benefits in the next twelve months.

DTE Electric had income tax receivables with DTE Energy of $6 million at March 31, 2016 and December 31, 2015, respectively.

Unrecognized Compensation Costs

As of March 31, 2016, DTE Energy had $82 million of total unrecognized compensation cost related to non-vested stock incentive plan arrangements. That cost is expected to be recognized over a weighted-average period of 1.79 years.

Allocated Stock-Based Compensation

DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation of $10 million and $4 million for the three months ended March 31, 2016 and 2015, respectively.