Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2011

Significant Accounting Policies (Policies) [Abstract]

Intangible Assets

Intangible Assets

The Company has certain intangible assets relating to emission allowances, renewable energy credits and non-utility contracts. Emission allowances and renewable energy credits are charged to expense as the allowances and credits are consumed in the operation of the business. The Company’s intangible assets related to emission allowances were $9 million at September 30, 2011 and December 31, 2010. The Company’s intangible assets related to renewable energy credits were $26 million and $17 million at September 30, 2011 and December 31, 2010, respectively. The gross carrying amount and accumulated amortization of contract intangible assets at September 30, 2011were $65 million and $26 million, respectively. The gross carrying amount and accumulated amortization of contract intangible assets at December 31, 2010 were $63 million and $22 million, respectively. The Company amortizes contract intangible assets on a straight-line basis over the expected period of benefit, ranging from 4 to 30 years.

Income Taxes

Income Taxes

The Company’s effective tax rate for the three months ended September 30, 2011was 35 percent as compared to 36 percent for the three months ended September 30, 2010. The Company’s effective tax rate for the nine months ended September 30, 2011 was 24 percent as compared to 34 percent for the nine months ended September 30, 2010. The decrease in the effective tax rate in 2011 is due primarily to the recognition of an $88 million income tax benefit due to the enactment of the Michigan Corporate Income Tax which is discussed below.

The Company had $4 million of unrecognized tax benefits at September 30, 2011 and $5 million at December 31, 2010, that, if recognized, would favorably impact its effective tax rate. The Company has increased its unrecognized tax benefit by $40 million in the nine months ended September 30, 2011, as a result of a change in a tax position taken during a prior period. During the next twelve months, it is reasonably possible that the Company will settle certain federal tax audits. As a result, the Company believes that it is possible that there will be a decrease in unrecognized tax benefits of up to $49 million.

Michigan Corporate Income Tax (MCIT)

On May 25, 2011, the Michigan Business Tax (MBT) was repealed and the MCIT was enacted and will become effective January 1, 2012. The MCIT subjects corporations with business activity in Michigan to a 6 percent tax rate on an apportioned income tax base and eliminates the modified gross receipts tax and nearly all credits available under the MBT. The MCIT also eliminated the future deductions allowed under MBT that enabled companies to establish a one-time deferred tax asset upon enactment of the MBT to offset deferred tax liabilities that resulted from enactment of the MBT.

Effective with the enactment of the MCIT in the second quarter of 2011, the net state deferred tax liability was remeasured to reflect the impact of the MCIT tax rate on cumulative temporary differences expected to reverse after the effective date. The net impact of this remeasurement was a decrease in deferred income tax liabilities of $41 million attributable to our regulated utilities that was offset against the regulatory asset established upon the enactment of the MBT.

Due to the elimination of the future tax deductions allowed under the MBT, the one-time MBT deferred tax asset that was established upon the enactment of the MBT has been remeasured to zero. The net impact of this remeasurement is a reduction of net deferred tax assets of $307 million, with $395 million of this decrease in deferred tax assets attributable to our regulated utilities, partially offset by an $88 million decrease in deferred tax liabilities attributable to our non-utility entities. The $395 million decrease in deferred tax assets at our regulated utilities was offset against the regulatory liabilities established upon enactment of the MBT. The $88 million is primarily due to a lower apportionment factor from inclusion of non-utility entities in DTE Energy’s unitary Michigan tax return. The $88 million was recognized as a reduction to income tax expense in the second quarter of 2011.

Consistent with the original establishment of these deferred tax liabilities (assets), no recognition of these non-cash transactions have been reflected in the Consolidated Statements of Cash Flows.

Derivatives, Offsetting Fair Value Amounts, Policy [Policy Text Block]

Offsetting Amounts Related to Certain Contracts

The Company offsets the fair value of derivative instruments with cash collateral received or paid for those derivative instruments executed with the same counterparty under a master netting agreement, which reduces both the Company’s total assets and total liabilities. As of September 30, 2011, the total cash collateral posted, net of cash collateral received, was $66 million. Derivative liabilities are shown net of collateral of $3 million. At September 30, 2011, the Company recorded cash collateral received of $1 million and cash collateral paid of $64 million not related to derivative positions. These amounts are included in accounts receivable and accounts payable and are recorded net by counterparty.