Regulatory Matters

6 Months Ended

Jun. 30, 2023

Public Utilities, General Disclosures [Abstract]

Regulatory Matters

REGULATORY MATTERS

Ludington Accounting Application

During April 2022, DTE Electric and Consumers Energy Company (“Consumers”) filed a complaint against Toshiba America Energy Systems (“TAES”) and its parent corporation for defective and non-conforming work relating to the overhaul and upgrade of the Ludington Hydroelectric Pumped Storage Plant (“Ludington”). Refer to the Ludington Plant Contract Dispute section of Note 12 to the Consolidated Financial Statements, “Commitments and Contingencies,” for additional information regarding the complaint and ongoing legal proceedings.

DTE Electric and Consumers, joint owners of Ludington, believe that certain costs must be incurred in the near term for repairing and/or replacing defective work performed by TAES in order to ensure the continued safe and reliable operation of the plant. In November 2022, DTE Electric and Consumers filed an accounting application with the MPSC for authority to defer these costs as a regulatory asset. DTE Electric and Consumers requested the regulatory asset for their respective 49% and 51% shares of these costs, to be offset by any potential litigation proceeds. The parties also requested that appropriate recovery and ratemaking treatment be granted in a future rate case or other proceeding. In May 2023, the MPSC approved the accounting application as requested. Costs incurred and deferred as regulatory assets will be reviewed in future rate proceedings for cost recovery.

2023 Electric Rate Case Filing

DTE Electric filed a rate case with the MPSC on February 10, 2023 requesting an increase in base rates of $622 million based on a projected twelve-month period ending November 30, 2024, and an increase in return on equity from 9.9% to 10.25%. The requested increase in base rates is primarily due to increased investments in plant involving generation and the electric distribution system, as well as related increases to depreciation and property tax expenses. These investments will support DTE Energy's goals to reduce carbon emissions and improve power reliability. The requested increase in base rates is also due to a projected sales decline from the level included in current rates and inflationary impacts on operating and interest costs. A final MPSC order in this case is expected in December 2023.

2023 Securitization Filing

On April 3, 2023, DTE Electric filed an application with the MPSC requesting a financing order to approve the securitization of $496 million of qualified costs related to the net book value of the St. Clair and Trenton Channel generation plants. The filing requested recovery of these qualifying costs from DTE Electric's customers.

The MPSC issued a financing order on June 22, 2023 authorizing DTE Electric to proceed with the issuance of Securitization bonds for qualified costs up to $602 million, increased for the inclusion of deferred income taxes. The financing order further authorized customer charges for the timely recovery of debt service costs on the Securitization bonds and other ongoing qualified costs. Securitization financing is expected to occur in the fourth quarter 2023.

Integrated Resource Plan

In November 2022, DTE Electric filed an Integrated Resource Plan (IRP) with the MPSC, a comprehensive plan to meet the electricity needs of customers over the next 20 years. The IRP included details on planned coal plant retirements and replacement generation, including investments in renewables and battery storage, with a focus on providing increasingly clean, reliable, and affordable electricity to customers.

On July 12, 2023, DTE Energy announced that DTE Electric reached a settlement agreement with the various stakeholders involved in the IRP. The MPSC issued an order approving the settlement agreement on July 26, 2023. DTE Electric is currently assessing the impacts from the settlement agreement on the consolidated financial statements for the third quarter 2023, including regulatory treatment for the recovery of plant-related costs at the Belle River and Monroe power plants. As a result of the settlement agreement, DTE Electric is also expecting to securitize a portion of these plant-related costs in future periods.