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Significant Accounting Policies
 12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies SIGNIFICANT ACCOUNTING POLICIES
Other Income
Other income for the Registrants is recognized for non-operating income such as equity earnings of equity method investees, allowance for equity funds used during construction, contract services, and gains from trading securities, primarily from those held in DTE Energy's rabbi trust. 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 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 related to fixed non-refundable cash payments received from investors for which the earnings process is not contingent upon production of refined coal is recognized on a straight-line basis over the non-cancelable contract term as the economic benefit from the ownership of the facility is transferred to investors. Other income related to cash payments that is contingent upon production of refined coal is considered earned and recognized when the contingency regarding the timing and amount of payment is resolved, generally as refined coal is produced and tax credits are generated.
The following is a summary of DTE Energy's Other income:
202020192018
(In millions)
Income from REF entities$139 $130 $98 
Equity earnings of equity method investees132 111 132 
Gains from rabbi trust securities(a)
28 37 6 
Contract services28 29 51 
Allowance for equity funds used during construction25 24 28 
Gas Storage and Pipelines post-acquisition settlement20 — — 
Other16 19 18 
$388 $350 $333 
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(a)Losses from rabbi trust securities are recorded separately to Other expenses on the Consolidated Statements of Operations.
The following is a summary of DTE Electric's Other income:
202020192018
(In millions)
Gains from rabbi trust securities allocated from DTE Energy(a)
$28 $37 $6 
Contract services28 32 51 
Allowance for equity funds used during construction23 22 19 
Other8 16 7 
$87 $107 $83 
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(a)Losses from rabbi trust securities are recorded separately to Other expenses on the Consolidated Statements of Operations.
For information on equity earnings of equity method investees by segment, see Note 23 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. In any single hour, transactions in each of the MISO energy markets are netted based on MWh to determine if DTE Electric is in a net sale or purchase position. Net purchases are recorded in Fuel, purchased power, and gas — utility and net sales are recorded in Operating Revenues — Utility operations on the Registrants' Consolidated Statements of Operations.
The Energy Trading segment participates in the energy markets through various 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 RTOs. 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, gas, and other — 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.
Derivatives
Energy Trading classifies derivative transactions as revenue or expense based on the intent of the transaction (buy or sell). Revenues are recorded on a gross or net basis within the income statement depending upon whether it represents a non-trading activity or trading activity, respectively. For additional information, refer to Note 14 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments".
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 DTE Energy include changes in benefit obligations, consisting of deferred actuarial losses and prior service costs, unrealized gains and losses from derivatives accounted for as cash flow hedges, and foreign currency translation adjustments. DTE Energy releases income tax effects from accumulated other comprehensive income when the circumstances upon which they are premised cease to exist.
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 the year ended December 31, 2020, reclassifications out of Accumulated other comprehensive income (loss) were not material.
On January 1, 2019, DTE Energy reclassified $25 million of stranded tax effects resulting from the TCJA from Accumulated other comprehensive income (loss) to Retained Earnings. The reclassification was recorded upon adoption of ASU No. 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. For the year ended December 31, 2019, reclassifications out of Accumulated other comprehensive income (loss) not relating to the adoption of this standard were not material.
The following table summarizes the changes in DTE Energy's Accumulated other comprehensive income (loss) by component(a) for the years ended December 31, 2020 and 2019:
Net Unrealized Gain (Loss) on Derivatives
Benefit Obligations(b)
Foreign Currency TranslationTotal
(In millions)
Balance, December 31, 2018$(11)$(102)$(7)$(120)
Other comprehensive income (loss) before reclassifications(14)(7)1 (20)
Amounts reclassified from Accumulated other comprehensive income (loss)2 15 — 17 
Net current-period Other comprehensive income (loss)(12)8 1 (3)
Implementation of ASU 2018-02(2)(23)— (25)
Balance, December 31, 2019$(25)$(117)$(6)$(148)
Other comprehensive income (loss) before reclassifications(3)(2)1 (4)
Amounts reclassified from Accumulated other comprehensive income (loss)5 10 — 15 
Net current-period Other comprehensive income2 8 1 11 
Balance, December 31, 2020$(23)$(109)$(5)$(137)
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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 21 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 in separate bank accounts to satisfy contractual obligations and guarantee performance. Restricted cash designated for payments within one year is classified as a Current Asset.
Financing Receivables
Financing receivables are primarily composed of trade receivables, notes receivable, and unbilled revenue. The Registrant's financing receivables are stated at net realizable value.
DTE Energy unbilled revenues of $944 million and $855 million at December 31, 2020 and 2019, respectively, include $260 million and $263 million of DTE Electric unbilled revenues, respectively, included in Customer Accounts receivable.
The Registrants monitor the credit quality of their financing receivables on a regular basis by reviewing credit quality indicators and monitoring for trigger events, such as a credit rating downgrade or bankruptcy. Credit quality indicators include, but are not limited to, ratings by credit agencies where available, collection history, collateral, counterparty financial statements and other internal metrics. Utilizing such data, the Registrants have determined three internal grades of credit quality. Internal grade 1 includes financing receivables for counterparties where credit rating agencies have ranked the counterparty as investment grade. To the extent credit ratings are not available, the Registrants utilize other credit quality indicators to determine the level of risk associated with the financing receivable. Internal grade 1 may include financing receivables for counterparties for which credit rating agencies have ranked the counterparty as below investment grade, however, due to favorable information on other credit quality indicators, the Registrants have determined the risk level to be similar to that of an investment grade counterparty. Internal grade 2 includes financing receivables for counterparties with limited credit information and those with a higher risk profile based upon credit quality indicators. Internal grade 3 reflects financing receivables for which the counterparties have the greatest level of risk, including those in bankruptcy status.
The following represents the Registrants' financing receivables by year of origination, classified by internal grade of credit risk. The related credit quality indicators and risk ratings utilized to develop the internal grades have been updated through December 31, 2020.
DTE EnergyDTE Electric
Year of origination
202020192018 and priorTotal2020 and prior
(In millions)
Notes receivable
Internal grade 1$— $14 $10 $24 $14 
Internal grade 268 43 6 117 2 
Total notes receivable(a)
$68 $57 $16 $141 $16 
Net investment in leases
Net investment in leases, internal grade 1$6 $— $39 $45 $— 
Net investment in leases, internal grade 2131 — 1 132 — 
Total net investment in leases(a)
$137 $— $40 $177 $— 
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(a)For DTE Energy, included in Current Assets — Other and Other Assets — Notes Receivable on the Consolidated Statements of Financial Position. For DTE Electric, included in Current Assets — Other and Other Assets — Other on the Consolidated Statements of Financial Position.
The allowance for doubtful accounts on accounts receivable for the utility entities is generally calculated using an 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 and future 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 generally 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 non-utility businesses and other receivables for both utility and non-utility businesses is generally calculated based on specific review of probable future collections based on receivable balances generally in excess of 30 days. Existing and future economic conditions, customer trends and other factors are also considered. Receivables are written off on a specific identification basis and determined based upon the specific circumstances of the associated receivable.
Notes receivable for DTE Energy are primarily comprised of finance lease receivables and loans that are included in Notes Receivable and Other current assets on DTE Energy's Consolidated Statements of Financial Position. Notes receivable 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. 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 including existing and future economic conditions.
DTE Energy has off balance sheet exposure in the form of a revolving credit facility. Refer to Note 19, "Commitments and Contingencies," for additional information. In determining the level of credit reserve needed, DTE considers the likelihood of funding in addition to the other factors noted above. A reserve may be established when it is likely that funding will occur. Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to the contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current.
The following table presents a roll-forward of the activity for the Registrants' financing receivables credit loss reserves as of December 31, 2020.
DTE EnergyDTE Electric
Trade accounts receivableOther receivablesTotalTrade and other accounts receivable
(In millions)
Beginning reserve balance, January 1, 2020$87 $4 $91 $46 
Current period provision100 3 103 61 
Write-offs charged against allowance(136)(4)(140)(80)
Recoveries of amounts previously written off50 — 50 30 
Ending reserve balance, December 31, 2020$101 $3 $104 $57 
The Registrants have been monitoring the impacts from the COVID-19 pandemic on our customers and various counterparties. For DTE Electric and DTE Gas, the allowance for doubtful accounts has been increased to account for additional risk related to the pandemic. As of December 31, 2020, the impact of these increases has not been material.
In April 2020, the MPSC issued an order in response to the COVID-19 pandemic and authorized the deferral of certain uncollectible expense that is in excess of the amount used to set current rates. As a result of the order, the Registrants began deferring uncollectible expense as Regulatory assets, including $2 million at DTE Gas for the year ended December 31, 2020. For DTE Electric, deferrals recorded throughout the year were reversed and recorded to expense as a result of the MPSC approval of DTE Electric's one-time accounting application in December 2020. Refer to Note 10 to the Consolidated Financial Statements, "Regulatory Matters," for further information.
For DTE Energy, uncollectible expense was $103 million, $111 million, and $140 million for the years ended December 31, 2020, 2019, and 2018, respectively, which is primarily comprised of the current period provision for allowance for doubtful accounts adjusted for regulatory deferrals at DTE Gas.
For DTE Electric, uncollectible expense was $62 million, $65 million, and $85 million for the years ended December 31, 2020, 2019, and 2018, respectively, which is primarily comprised of the current period provision for allowance for doubtful accounts.
There are no material amounts of past due financing receivables for the Registrants as of December 31, 2020.
Inventories
Inventory related to utility and non-utility operations is valued at the lower of cost or net realizable value, where cost is generally valued using average cost.
DTE Gas' natural gas inventory of $40 million as of December 31, 2020 and 2019 is determined using the last-in, first-out (LIFO) method. The replacement cost of gas in inventory exceeded the LIFO cost by $62 million and $49 million at December 31, 2020 and 2019, 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.
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.
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.
See Note 7 to the Consolidated Financial Statements, "Property, Plant, and Equipment."
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 undiscounted 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
The Registrants have certain Intangible assets as shown below:
December 31, 2020December 31, 2019
Useful LivesGross Carrying ValueAccumulated AmortizationNet Carrying ValueGross Carrying ValueAccumulated AmortizationNet Carrying Value
(In millions)
Intangible assets subject to amortization
Customer relationships
25 to 40 years(a)
$2,252 $(121)$2,131 $2,252 $(66)$2,186 
Contract intangibles
6 to 26 years
289 (92)197 268 (76)192 
2,541 (213)2,328 2,520 (142)2,378 
DTE Electric renewable energy credits(b)8 — 8 15 — 15 
DTE Electric zonal resource credits(c)3 — 3 — — — 
DTE Electric Long-term intangible assets11 — 11 15 — 15 
DTE Energy Long-term intangible assets$2,552 $(213)$2,339 $2,535 $(142)$2,393 
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(a)The useful lives of the customer relationship intangible assets are based on the number of years in which the assets are expected to economically contribute to the business. The expected economic benefit incorporates existing customer contracts and expected renewal rates based on the estimated volume and production lives of gas resources in the region.
(b)Renewable energy credits are charged to expense, using average cost, as the credits are consumed in the operation of the business.
(c)Zonal resource credits are amortized on a straight-line basis over the period that they are in effect.
The following table summarizes DTE Energy's estimated customer relationship and contract intangible amortization expense expected to be recognized during each year through 2025:
20212022202320242025
(In millions)
Estimated amortization expense$73 $73 $73 $73 $73 
DTE Energy amortizes customer relationship and contract intangible assets on a straight-line basis over the expected period of benefit. DTE Energy's Intangible assets amortization expense was $71 million in 2020, $33 million in 2019, and $27 million in 2018.
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 as a direct deduction from the carrying amount of each debt issue in Mortgage bonds, notes, and other and Junior subordinated debentures on DTE Energy's Consolidated Statements of Financial Position and in Mortgage bonds, notes, and other on DTE Electric'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 record investments in debt and equity securities at market value with unrealized gains or losses included in earnings. 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 an impairment exists, a loss is recognized resulting in the equity investment being written down to its estimated fair value. See Note 13 of the Consolidated Financial Statements, "Fair Value."
DTE Energy Foundation
DTE Energy's contributions to the DTE Energy Foundation were $20 million and $22 million for the years ended December 31, 2020 and December 31, 2018, respectively. There were no charitable contributions made to the DTE Energy Foundation for the year ended December 31, 2019. 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:
NoteTitle
5Revenue
7Property, Plant, and Equipment
9Asset Retirement Obligations
10Regulatory Matters
11Income Taxes
13Fair Value
14Financial and Other Derivative Instruments
18Leases
21Retirement Benefits and Trusteed Assets
22Stock-Based Compensation