SIGNIFICANT ACCOUNTING POLICIES

Other Income

The following is a summary of DTE Energy's Other income:



	Three Months Ended March 31,
	2018		2017
	(In millions)
Income from REF entities	$	23	$	18
Equity earnings of equity method investees	21		26
Contract services	20		4
Allowance for equity funds used during construction	7		7
Gains from equity securities	—		8
Other	10		1
	$	81	$	64

The following is a summary of DTE Electric's Other income:



	Three Months Ended March 31,
	2018		2017
	(In millions)
Contract services	$	20	$	4
Allowance for equity funds used during construction	5		6
Gains from equity securities allocated from DTE Energy	—		8
Other	2		1
	$	27	$	19

Changes in Accumulated Other Comprehensive Income (Loss)

For the three months ended March 31, 2018 and 2017, 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. For further discussion regarding changes in Accumulated other comprehensive income (loss), see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements."

Income Taxes

The 2018 estimated annual effective tax rates for DTE Energy and DTE Electric are 13% and 22%, respectively. These tax rates are affected by estimated annual permanent items, including AFUDC equity, production tax credits, and other flow-through items, as well as discrete items that may occur in any given period, but are not consistent from period to period.

The interim effective tax rate of the Registrants are as follows:



	Effective Tax Rate
	Three Months Ended March 31,
	2018		2017
DTE Energy	16	%	22	%
DTE Electric	25	%	35	%

The 6% decrease in DTE Energy's effective tax rate for the three months ended March 31, 2018 was primarily due to the reduction of the corporate tax rate from 35% to 21%, which became effective in 2018. The decrease in the effective tax rate was partially offset by true-up adjustments to the remeasurement of deferred taxes in 2018 of $21 million, which increased the effective tax rate by 5%, and the reduction of excess tax benefits on stock-based compensation of $10 million, which increased the effective tax rate by 2%. For further discussion regarding the true-up adjustments, see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements."

The 10% decrease in DTE Electric's effective tax rate for the three months ended March 31, 2018 was primarily due to the reduction of the corporate tax rate from 35% to 21%, which became effective in 2018, partially offset by true-up adjustments to the remeasurement of deferred taxes in 2018 of $8 million, which increased the effective tax rate by 4%.

DTE Energy's total amount of unrecognized tax benefits as of March 31, 2018 was $8 million, of which $8 million, if recognized, would favorably impact its effective tax rate. DTE Electric's total amount of unrecognized tax benefits as of March 31, 2018 was $10 million, of which $10 million, 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 $13 million and $12 million at March 31, 2018 and December 31, 2017, respectively.

Unrecognized Compensation Costs

As of March 31, 2018, DTE Energy had $111 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 1.75 years.

Allocated Stock-Based Compensation

DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation of $9 million and $8 million for the three months ended March 31, 2018 and 2017, respectively.

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.

The following is a table that provides a reconciliation of DTE Energy's Cash and cash equivalents as well as Restricted cash reported within the Consolidated Statements of Financial Position that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:



	Three Months Ended March 31,
	2018		2017
	(In millions)
Cash and cash equivalents	$	164	$	82
Restricted cash	22		20
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	186	$	102