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Fair Value

9 Months Ended

Sep. 30, 2021

FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Registrants make certain assumptions they believe that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Registrants and their counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at September 30, 2021 and December 31, 2020. The Registrants believe they use valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Registrants classify fair value balances based on the fair value hierarchy defined as follows:

•Level 1 — Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Registrants have the ability to access as of the reporting date.

•Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

•Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

The following table presents assets and liabilities for DTE Energy measured and recorded at fair value on a recurring basis:


	September 30, 2021												December 31, 2020
	Level 1		Level 2		Level 3		Other(a)		Netting(b)		Net Balance		Level 1		Level 2		Level 3		Other(a)		Netting(b)		Net Balance
	(In millions)
Assets
Cash equivalents(c)	$	9	$	—	$	—	$	—	$	—	$	9	$	438	$	—	$	—	$	—	$	—	$	438
Nuclear decommissioning trusts
Equity securities	944		—		—		196		—		1,140		947		—		—		222		—		1,169
Fixed income securities	127		429		—		102		—		658		102		371		—		82		—		555
Private equity and other	—		—		—		175		—		175		—		—		—		104		—		104

Cash equivalents	34		—		—		—		—		34		27		—		—		—		—		27
Other investments(d)
Equity securities	61		—		—		—		—		61		55		—		—		—		—		55
Fixed income securities	7		—		—		—		—		7		8		—		—		—		—		8
Cash equivalents	86		—		—		—		—		86		97		—		—		—		—		97

Derivative assets
Commodity contracts(e)
Natural gas	579		146		53		—		(715)		63		99		74		60		—		(156)		77
Electricity	—		707		245		—		(627)		325		—		128		52		—		(120)		60
Environmental & Other	—		598		12		—		(570)		40		—		150		4		—		(135)		19

Total derivative assets	579		1,451		310		—		(1,912)		428		99		352		116		—		(411)		156
Total	$	1,847	$	1,880	$	310	$	473	$	(1,912)	$	2,598	$	1,773	$	723	$	116	$	408	$	(411)	$	2,609

Liabilities
Derivative liabilities
Commodity contracts(e)
Natural gas	$	(425)	$	(297)	$	(333)	$	—	$	664	$	(391)	$	(88)	$	(59)	$	(76)	$	—	$	151	$	(72)
Electricity	—		(576)		(340)		—		614		(302)		—		(126)		(42)		—		125		(43)
Environmental & Other	—		(581)		—		—		570		(11)		—		(137)		—		—		129		(8)

Foreign currency exchange contracts	—		(5)		—		—		—		(5)		—		(5)				—		—		(5)

Total	$	(425)	$	(1,459)	$	(673)	$	—	$	1,848	$	(709)	$	(88)	$	(327)	$	(118)	$	—	$	405	$	(128)
Net Assets (Liabilities) at end of period	$	1,422	$	421	$	(363)	$	473	$	(64)	$	1,889	$	1,685	$	396	$	(2)	$	408	$	(6)	$	2,481
Assets
Current	$	506	$	1,183	$	258	$	—	$	(1,591)	$	356	$	532	$	260	$	92	$	—	$	(330)	$	554
Noncurrent	1,341		697		52		473		(321)		2,242		1,241		463		24		408		(81)		2,055
Total Assets	$	1,847	$	1,880	$	310	$	473	$	(1,912)	$	2,598	$	1,773	$	723	$	116	$	408	$	(411)	$	2,609
Liabilities
Current	$	(409)	$	(1,138)	$	(464)	$	—	$	1,546	$	(465)	$	(84)	$	(223)	$	(79)	$	—	$	318	$	(68)
Noncurrent	(16)		(321)		(209)		—		302		(244)		(4)		(104)		(39)		—		87		(60)
Total Liabilities	$	(425)	$	(1,459)	$	(673)	$	—	$	1,848	$	(709)	$	(88)	$	(327)	$	(118)	$	—	$	405	$	(128)
Net Assets (Liabilities) at end of period	$	1,422	$	421	$	(363)	$	473	$	(64)	$	1,889	$	1,685	$	396	$	(2)	$	408	$	(6)	$	2,481

_______________________________________

(a)Amounts represent assets valued at NAV as a practical expedient for fair value.

(b)Amounts represent the impact of master netting agreements that allow DTE Energy to net gain and loss positions and cash collateral held or placed with the same counterparties.

(c)Amounts consisted of $1 million and $2 million of cash equivalents included in Restricted cash on DTE Energy's Consolidated Statements of Financial Position at September 30, 2021 and December 31, 2020, respectively. All other amounts are included in Cash and cash equivalents on the Consolidated Statements of Financial Position.

(d)Excludes cash surrender value of life insurance investments.

(e)For contracts with a clearing agent, DTE Energy nets all activity across commodities. This can result in some individual commodities having a contra balance.

The following table presents assets for DTE Electric measured and recorded at fair value on a recurring basis as of:


	September 30, 2021										December 31, 2020
	Level 1		Level 2		Level 3		Other(a)		Net Balance		Level 1		Level 2		Level 3		Other(a)		Net Balance
	(In millions)
Assets
Cash equivalents	$	—	$	—	$	—	$	—	$	—	$	4	$	—	$	—	$	—	$	4
Nuclear decommissioning trusts
Equity securities	944		—		—		196		1,140		947		—		—		222		1,169
Fixed income securities	127		429		—		102		658		102		371		—		82		555
Private equity and other	—		—		—		175		175		—		—		—		104		104

Cash equivalents	34		—		—		—		34		27		—		—		—		27
Other investments
Equity securities	18		—		—		—		18		16		—		—		—		16

Cash equivalents	11		—		—		—		11		11		—		—		—		11
Derivative assets — FTRs	—		—		12		—		12		—		—		4		—		4
Total	$	1,134	$	429	$	12	$	473	$	2,048	$	1,107	$	371	$	4	$	408	$	1,890

Assets
Current	$	—	$	—	$	12	$	—	$	12	$	4	$	—	$	4	$	—	$	8
Noncurrent	1,134		429		—		473		2,036		1,103		371		—		408		1,882
Total Assets	$	1,134	$	429	$	12	$	473	$	2,048	$	1,107	$	371	$	4	$	408	$	1,890

_______________________________________

(a)Amounts represent assets valued at NAV as a practical expedient for fair value.

Cash Equivalents

Cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value table are comprised of short-term investments and money market funds.

Nuclear Decommissioning Trusts and Other Investments

The nuclear decommissioning trusts and other investments hold debt and equity securities directly and indirectly through commingled funds. Exchange-traded debt and equity securities held directly, as well as publicly-traded commingled funds, are valued using quoted market prices in actively traded markets. Non-exchange traded fixed income securities are valued based upon quotations available from brokers or pricing services.

Non-publicly traded commingled funds holding exchange-traded equity or debt securities are valued based on stated NAVs. There are no significant restrictions for these funds and investments may be redeemed with 7 to 65 days notice depending on the fund. There is no intention to sell the investment in these commingled funds.

Private equity and other assets include a diversified group of funds that are classified as NAV assets. These funds primarily invest in limited partnerships, including private equity, private real estate and private credit. Distributions are received through the liquidation of the underlying fund assets over the life of the funds. There are generally no redemption rights. The limited partner must hold the fund for its life or find a third-party buyer, which may need to be approved by the general partner. The funds are established with varied contractual durations generally in the range of 7 years to 12 years. The fund life can often be extended by several years by the general partner, and further extended with the approval of the limited partners. Unfunded commitments related to these investments totaled $155 million and $183 million as of September 30, 2021 and December 31, 2020, respectively.

For pricing the nuclear decommissioning trusts and other investments, a primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary source of a given security if the trustee determines that another price source is considered preferable. The Registrants have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices.

Derivative Assets and Liabilities

Derivative assets and liabilities are comprised of physical and financial derivative contracts, including futures, forwards, options, and swaps that are both exchange-traded and over-the-counter traded contracts. Various inputs are used to value derivatives depending on the type of contract and availability of market data. Exchange-traded derivative contracts are valued using quoted prices in active markets. The Registrants consider the following criteria in determining whether a market is considered active: frequency in which pricing information is updated, variability in pricing between sources or over time, and the availability of public information. Other derivative contracts are valued based upon a variety of inputs including commodity market prices, broker quotes, interest rates, credit ratings, default rates, market-based seasonality, and basis differential factors. The Registrants monitor the prices that are supplied by brokers and pricing services and may use a supplemental price source or change the primary price source of an index if prices become unavailable or another price source is determined to be more representative of fair value. The Registrants have obtained an understanding of how these prices are derived. Additionally, the Registrants selectively corroborate the fair value of their transactions by comparison of market-based price sources. Mathematical valuation models are used for derivatives for which external market data is not readily observable, such as contracts which extend beyond the actively traded reporting period. The Registrants have established a Risk Management Committee whose responsibilities include directly or indirectly ensuring all valuation methods are applied in accordance with predefined policies. The development and maintenance of the Registrants' forward price curves has been assigned to DTE Energy's Risk Management Department, which is separate and distinct from the trading functions within DTE Energy.

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Energy:


	Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
	Natural Gas		Electricity		Other		Total		Natural Gas		Electricity		Other		Total
	(In millions)
Net Assets (Liabilities) as of June 30	$	(181)	$	(49)	$	15	$	(215)	$	20	$	16	$	10	$	46

Transfers from Level 3 into Level 2	—		—		—		—		(1)		—		—		(1)
Total gains (losses)
Included in earnings(a)	(162)		(21)		—		(183)		(80)		37		1		(42)
Recorded in Regulatory liabilities	—		—		(1)		(1)		—		—		9		9
Purchases, issuances, and settlements


Settlements	63		(25)		(2)		36		22		(48)		(13)		(39)
Net Assets (Liabilities) as of September 30	$	(280)	$	(95)	$	12	$	(363)	$	(39)	$	5	$	7	$	(27)
Total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30(a)	$	(109)	$	(30)	$	(2)	$	(141)	$	(57)	$	11	$	(1)	$	(47)

_______________________________________

(a)Amounts are reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, gas, and other — non-utility in DTE Energy's Consolidated Statements of Operations.



	Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
	Natural Gas		Electricity		Other		Total		Natural Gas		Electricity		Other		Total
	(In millions)
Net Assets (Liabilities) as of December 31	$	(16)	$	10	$	4	$	(2)	$	(15)	$	16	$	3	$	4

Transfers from Level 3 into Level 2	—		—		—		—		(5)		—		—		(5)
Total gains (losses)
Included in earnings(a)	(356)		(5)		—		(361)		(44)		90		(7)		39
Recorded in Regulatory liabilities	—		—		14		14		—		—		21		21
Purchases, issuances, and settlements


Settlements	92		(100)		(6)		(14)		25		(101)		(10)		(86)
Net Assets (Liabilities) as of September 30	$	(280)	$	(95)	$	12	$	(363)	$	(39)	$	5	$	7	$	(27)
Total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30(a)	$	(301)	$	(54)	$	(17)	$	(372)	$	(20)	$	53	$	(17)	$	16
Total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30	$	—	$	—	$	12	$	12	$	—	$	—	$	7	$	7

_______________________________________

(a)Amounts are reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, gas, and other — non-utility in DTE Energy's Consolidated Statements of Operations.

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Electric:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In millions)
Net Assets as of beginning of period	$	15	$	10	$	4	$	3
Change in fair value recorded in Regulatory liabilities	(1)		9		14		21
Purchases, issuances, and settlements
Settlements	(2)		(12)		(6)		(17)
Net Assets as of September 30	$	12	$	7	$	12	$	7
Total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30	$	—	$	—	$	12	$	7

Derivatives are transferred between levels primarily due to changes in the source data used to construct price curves as a result of changes in market liquidity. Transfers in and transfers out are reflected as if they had occurred at the beginning of the period. There were no transfers from or into Level 3 for DTE Electric during the three and nine months ended September 30, 2021 and 2020.

The following tables present the unobservable inputs related to DTE Energy's Level 3 assets and liabilities:


	September 30, 2021
Commodity Contracts	Derivative Assets		Derivative Liabilities		Valuation Techniques	Unobservable Input	Range						Weighted Average
	(In millions)
Natural Gas	$	53	$	(333)	Discounted Cash Flow	Forward basis price (per MMBtu)	$	(1.33)	—	$	3.53	/MMBtu	$	(0.04)	/MMBtu
Electricity	$	245	$	(340)	Discounted Cash Flow	Forward basis price (per MWh)	$	(8)	—	$	10	/MWh	$	(1)	/MWh


	December 31, 2020
Commodity Contracts	Derivative Assets		Derivative Liabilities		Valuation Techniques	Unobservable Input	Range						Weighted Average
	(In millions)
Natural Gas	$	60	$	(76)	Discounted Cash Flow	Forward basis price (per MMBtu)	$	(0.86)	—	$	2.50	/MMBtu	$	(0.07)	/MMBtu
Electricity	$	52	$	(42)	Discounted Cash Flow	Forward basis price (per MWh)	$	(9)	—	$	6	/MWh	$	—	/MWh

The unobservable inputs used in the fair value measurement of the electricity and natural gas commodity types consist of inputs that are less observable due in part to lack of available broker quotes, supported by little, if any, market activity at the measurement date or are based on internally developed models. Certain basis prices (i.e., the difference in pricing between two locations) included in the valuation of natural gas and electricity contracts were deemed unobservable. The weighted average price for unobservable inputs was calculated using the average of forward price curves for natural gas and electricity and the absolute value of monthly volumes.

The inputs listed above would have had a direct impact on the fair values of the above security types if they were adjusted. A significant increase (decrease) in the basis price would have resulted in a higher (lower) fair value for long positions, with offsetting impacts to short positions.

Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments for DTE Energy:


	September 30, 2021								December 31, 2020
	Carrying		Fair Value						Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
	(In millions)
Notes receivable(a), excluding lessor finance leases	$	142	$	—	$	—	$	142	$	141	$	—	$	—	$	141
Short-term borrowings	$	361	$	—	$	361	$	—	$	38	$	—	$	38	$	—
Notes payable(b)	$	5	$	—	$	—	$	5	$	19	$	—	$	—	$	19
Long-term debt(c)	$	17,222	$	2,241	$	15,486	$	1,104	$	19,439	$	2,547	$	18,230	$	1,397

_______________________________________

(a)Current portion included in Current Assets — Other on DTE Energy's Consolidated Statements of Financial Position.

(b)Included in Current Liabilities — Other and Other Liabilities — Other on DTE Energy's Consolidated Statements of Financial Position.

(c)Includes debt due within one year and excludes finance lease obligations. Carrying value also includes unamortized debt discounts and issuance costs.

The following table presents the carrying amount and fair value of financial instruments for DTE Electric:


	September 30, 2021								December 31, 2020
	Carrying		Fair Value						Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
	(In millions)
Notes receivable(a)	$	17	$	—	$	—	$	17	$	16	$	—	$	—	$	16

Short-term borrowings — affiliates	$	32	$	—	$	—	$	32	$	101	$	—	$	—	$	101
Short-term borrowings — other	$	159	$	—	$	159	$	—	$	—	$	—	$	—	$	—
Notes payable(b)	$	4	$	—	$	—	$	4	$	17	$	—	$	—	$	17
Long-term debt(c)	$	8,906	$	—	$	9,952	$	150	$	8,236	$	—	$	9,579	$	379

_______________________________________

(a)Included in Current Assets — Other on DTE Electric's Consolidated Statements of Financial Position.

(b)Included in Current Liabilities — Other and Other Liabilities — Other on DTE Electric's Consolidated Statements of Financial Position.

(c)Includes debt due within one year and excludes finance lease obligations. Carrying value also includes unamortized debt discounts and issuance costs.

For further fair value information on financial and derivative instruments, see Note 9 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments."

Nuclear Decommissioning Trust Funds

DTE Electric has a legal obligation to decommission its nuclear power plants following the expiration of its operating licenses. This obligation is reflected as an Asset retirement obligation on DTE Electric's Consolidated Statements of Financial Position. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 and the disposal of low-level radioactive waste.

The following table summarizes DTE Electric's fair value of the nuclear decommissioning trust fund assets:


	September 30, 2021		December 31, 2020
	(In millions)
Fermi 2	$	1,989	$	1,841
Fermi 1	3		3
Low-level radioactive waste	15		11
	$	2,007	$	1,855

The costs of securities sold are determined on the basis of specific identification. The following table sets forth DTE Electric's gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In millions)
Realized gains	$	21	$	38	$	80	$	172
Realized losses	$	(1)	$	(11)	$	(9)	$	(103)
Proceeds from sale of securities	$	217	$	816	$	854	$	2,054

Realized gains and losses from the sale of securities and unrealized gains and losses incurred by the Fermi 2 trust are recorded to Regulatory assets and the Nuclear decommissioning liability. Realized gains and losses from the sale of securities and unrealized gains and losses on the low-level radioactive waste funds are recorded to the Nuclear decommissioning liability.

The following table sets forth DTE Electric's fair value and unrealized gains and losses for the nuclear decommissioning trust funds:


	September 30, 2021						December 31, 2020
	Fair Value		Unrealized Gains		Unrealized Losses		Fair Value		Unrealized Gains		Unrealized Losses
	(In millions)
Equity securities	$	1,140	$	507	$	(8)	$	1,169	$	481	$	(6)
Fixed income securities	658		24		(5)		555		20		(1)
Private equity and other	175		41		(2)		104		—		—

Cash equivalents	34		—		—		27		—		—
	$	2,007	$	572	$	(15)	$	1,855	$	501	$	(7)

The following table summarizes the fair value of the fixed income securities held in nuclear decommissioning trust funds by contractual maturity:


	September 30, 2021
	(In millions)
Due within one year	$	11
Due after one through five years	138
Due after five through ten years	112
Due after ten years	295
	$	556

Fixed income securities held in nuclear decommissioning trust funds include $102 million of non-publicly traded commingled funds that do not have a contractual maturity date.

Other Securities

At September 30, 2021 and December 31, 2020, the Registrants' securities included in Other investments on the Consolidated Statements of Financial Position were comprised primarily of investments within DTE Energy's rabbi trust. The rabbi trust was established to fund certain non-qualified pension benefits, and therefore changes in market value are recognized in earnings. Gains and losses are allocated from DTE Energy to DTE Electric and are included in Other Income or Other Expense, respectively, in the Registrants' Consolidated Statements of Operations. The following table summarizes the Registrant's gains (losses) related to the trust:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In millions)
Gains (losses) related to equity securities	$	(1)	$	2	$	3	$	(4)
Gains (losses) related to fixed income securities	—		—		—		(3)
	$	(1)	$	2	$	3	$	(7)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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