SIGNIFICANT ACCOUNTING POLICIES

Other Income

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)
Equity earnings of equity method investees	$	46	$	26	$	99	$	77
Income from REF entities	27		20		75		60
Contract services	11		9		43		17
Allowance for equity funds used during construction	7		5		20		17
Gains from equity securities	5		6		6		19
Other	3		8		19		14
	$	99	$	74	$	262	$	204

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In millions)
Contract services	$	11	$	9	$	44	$	18
Allowance for equity funds used during construction	5		4		14		14
Gains from equity securities allocated from DTE Energy	5		6		6		19
Other	2		2		8		6
	$	23	$	21	$	72	$	57

Changes in Accumulated Other Comprehensive Income (Loss)

For the three and nine months ended September 30, 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 12% 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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
DTE Energy	9	%	22	%	12	%	22	%
DTE Electric	21	%	35	%	22	%	35	%

The 13% decrease and the 10% decrease in DTE Energy's effective tax rate for the three and nine months ended September 30, 2018 and 2017, respectively, 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 for the three months ended September 30, 2018 was also impacted by an increase in annual production tax credits, offset by a $20 million valuation allowance for the AMT credit carryover. The decrease in the effective tax rate for the nine months ended September 30, 2018 was also impacted by an increase in annual production tax credits, partially offset by true-up adjustments to the remeasurement of deferred taxes in 2018 of $21 million, $20 million valuation allowance for the AMT credit carryover, a reduction of excess tax benefits on stock-based compensation and other adjustments. For further discussion regarding the true-up adjustments, and the valuation allowance, see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements."

The 14% decrease and the 13% decrease in DTE Electric's effective tax rate for the three and nine months ended September 30, 2018 and 2017, respectively, 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 for the nine months ended September 30, 2018 was partially offset by true-up adjustments to the remeasurement of deferred taxes in 2018 of $7 million.

DTE Energy's total amount of unrecognized tax benefits as of September 30, 2018 was $8 million, which if recognized, would favorably impact its effective tax rate. DTE Electric's total amount of unrecognized tax benefits as of September 30, 2018 was $10 million, which 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 payables of $4 million with DTE Energy at September 30, 2018 and income tax receivables with DTE Energy of $12 million at December 31, 2017.

Unrecognized Compensation Costs

As of September 30, 2018, DTE Energy had $86 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 1.29 years.

Allocated Stock-Based Compensation

DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation of $11 million and $10 million for the three months ended September 30, 2018 and 2017, respectively, while such allocation was $27 million and $28 million for the nine months ended September 30, 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:



	September 30,		December 31,
	2018		2017
	(In millions)
Cash and cash equivalents	$	84	$	66
Restricted cash	20		23
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	104	$	89