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Cover and table of contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2019
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-11607
DTE Energy Co****mpany
| Michigan | 38-3217752 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) |
Commission File Number: 1-2198
DTE Electric Co****mpany
| Michigan | 38-0478650 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) |
Registrants address of principal executive offices: One Energy Plaza**,** Detroit**,** Michigan 48226-1279
Registrants telephone number, including area code: (313) 235-4000
Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of Each Class | Trading Symbol(s) | Name of Exchange on which Registered | |||
| DTE Energy Company (DTE Energy) | Common stock, without par value | DTE | New York Stock Exchange | |||
| DTE Energy | 2012 Series C 5.25% Junior Subordinated Debentures due 2062 | DTQ | New York Stock Exchange | |||
| DTE Energy | 2016 Series B 5.375% Junior Subordinated Debentures due 2076 | DTJ | New York Stock Exchange | |||
| DTE Energy | 2016 Series F 6.00% Junior Subordinated Debentures due 2076 | DTY | New York Stock Exchange | |||
| DTE Energy | 2017 Series E 5.25% Junior Subordinated Debentures due 2077 | DTW | New York Stock Exchange | |||
| DTE Energy | 2019 6.25% Corporate Units | DTP | New York Stock Exchange | |||
| DTE Electric Company (DTE Electric) | None | None |
Securities registered pursuant to Section 12(g) of the Act:
| DTE Energy | None | DTE Electric | None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
| DTE Energy | Yes | ☒ | No | ☐ | DTE Electric | Yes | ☒ | No | ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
| DTE Energy | Yes | ☐ | No | ☒ | DTE Electric | Yes | ☐ | No | ☒ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| DTE Energy | Yes | ☒ | No | ☐ | DTE Electric | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| DTE Energy | Yes | ☒ | No | ☐ | DTE Electric | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| DTE Energy | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
| ☒ | ☐ | ☐ | ☐ | ☐ | |
| DTE Electric | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
| ☐ | ☐ | ☒ | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| DTE Energy | Yes | ☐ | No | ☒ | DTE Electric | Yes | ☐ | No | ☒ |
On June 28, 2019, the aggregate market value of DTE Energy's voting and non voting common equity held by non-affiliates was approximately $23.1 billion (based on the New York Stock Exchange closing price on such date).
Number of shares of Common Stock outstanding at January 24, 2020:
| Registrant | Description | Shares | |||
| DTE Energy | Common Stock, without par value | 192,234,700 | |||
| DTE Electric | Common Stock, $10 par value, indirectly-owned by DTE Energy | 138,632,324 |
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in DTE Energy's definitive Proxy Statement for its 2020 Annual Meeting of Common Shareholders to be held May 7, 2020, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the registrant’s fiscal year covered by this report on Form 10-K, is incorporated herein by reference to Part III (Items 10, 11, 12, 13, and 14) of this Form 10-K.
This combined Form 10-K is filed separately by two registrants: DTE Energy and DTE Electric. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. DTE Electric makes no representation as to information relating exclusively to DTE Energy.
DTE Electric, a wholly-owned subsidiary of DTE Energy, meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format specified in General Instruction I(2) of Form 10-K.
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TABLE OF CONTENTS
DEFINITIONS
| ACE | Affordable Clean Energy | |
| AFUDC | Allowance for Funds Used During Construction | |
| AGS | Appalachia Gathering System is a midstream natural gas asset located in Pennsylvania and West Virginia. DTE Energy purchased 100% of AGS in October 2016, and this asset is part of DTE Energy's Gas Storage and Pipelines segment | |
| AMV | Applicable Market Value | |
| ARO | Asset Retirement Obligation | |
| ASU | Accounting Standards Update issued by the FASB | |
| Blue Union | Blue Union gathering system is a midstream natural gas asset located in the Haynesville shale formation of Louisiana. DTE Energy purchased 100% of Blue Union in December 2019 and this asset is part of DTE Energy's Gas Storage and Pipelines segment | |
| CAD | Canadian Dollar (C$) | |
| CCR | Coal Combustion Residuals | |
| CFTC | U.S. Commodity Futures Trading Commission | |
| DOE | U.S. Department of Energy | |
| DTE Electric | DTE Electric Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | |
| DTE Energy | DTE Energy Company, directly or indirectly the parent of DTE Electric, DTE Gas, and numerous non-utility subsidiaries | |
| DTE Gas | DTE Gas Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | |
| DTE Sustainable Generation | DTE Sustainable Generation Holdings, LLC (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies | |
| EGLE | Michigan Department of Environment, Great Lakes, and Energy, formerly known as Michigan Department of Environmental Quality | |
| EGU | Electric Generating Unit | |
| ELG | Effluent Limitations Guidelines | |
| EPA | U.S. Environmental Protection Agency | |
| Equity units | DTE Energy's equity units issued in October 2016 and November 2019, which were used to finance the respective Gas Storage and Pipelines acquisitions on October 1, 2016 and December 4, 2019 | |
| FASB | Financial Accounting Standards Board | |
| FERC | Federal Energy Regulatory Commission | |
| FOV | Finding of Violation | |
| FTRs | Financial Transmission Rights are financial instruments that entitle the holder to receive payments related to costs incurred for congestion on the transmission grid | |
| GCR | A Gas Cost Recovery mechanism authorized by the MPSC that allows DTE Gas to recover through rates its natural gas costs | |
| GHGs | Greenhouse gases | |
| Green Bonds | A financing option to fund projects that have a positive environmental impact based upon a specified set of criteria. The proceeds are required to be used for eligible green expenditures | |
| IRS | Internal Revenue Service | |
| ISO | Independent System Operator | |
DEFINITIONS
| LEAP | Louisiana Energy Access Project gathering pipeline is a midstream natural gas asset located in the Haynesville shale formation of Louisiana. DTE Energy purchased 100% of LEAP in December 2019 and this asset is part of DTE Energy's Gas Storage and Pipelines segment | |
| LIBOR | London Inter-Bank Offered Rates | |
| LLC | DTE Energy Corporate Services, LLC, a subsidiary of DTE Energy | |
| MGP | Manufactured Gas Plant | |
| MISO | Midcontinent Independent System Operator, Inc. | |
| MPSC | Michigan Public Service Commission | |
| MTM | Mark-to-market | |
| NAV | Net Asset Value | |
| NEIL | Nuclear Electric Insurance Limited | |
| NEXUS | NEXUS Gas Transmission, LLC, a joint venture in which DTE Energy owns a 50% partnership interest | |
| Non-utility | An entity that is not a public utility. Its conditions of service, prices of goods and services, and other operating related matters are not directly regulated by the MPSC | |
| NOV | Notice of Violation | |
| NOX | Nitrogen Oxides | |
| NRC | U.S. Nuclear Regulatory Commission | |
| PG&E | Pacific Gas and Electric Corporation | |
| PLD | City of Detroit's Public Lighting Department | |
| Production tax credits | Tax credits as authorized under Sections 45K and 45 of the Internal Revenue Code that are designed to stimulate investment in and development of alternate fuel sources. The amount of a production tax credit can vary each year as determined by the IRS | |
| PSCR | A Power Supply Cost Recovery mechanism authorized by the MPSC that allows DTE Electric to recover through rates its fuel, fuel-related, and purchased power costs | |
| RDM | A Revenue Decoupling Mechanism authorized by the MPSC that is designed to minimize the impact on revenues of changes in average customer usage | |
| REC | Renewable Energy Credit | |
| REF | Reduced Emissions Fuel | |
| Registrants | DTE Energy and DTE Electric | |
| Retail access | Michigan legislation provided customers the option of access to alternative suppliers for electricity and natural gas | |
| RNG | Renewable Natural Gas | |
| RPS | A Renewable Portfolio Standards mechanism authorized by the MPSC that allows DTE Electric to recover through rates its renewable energy costs | |
| RSN | Remarketable Senior Notes | |
| RTO | Regional Transmission Organization | |
| SEC | Securities and Exchange Commission | |
| SGG | Stonewall Gas Gathering is a midstream natural gas asset located in West Virginia. DTE Energy purchased 55% of SGG in October 2016 and an additional 30% in May 2019, bringing its ownership to 85%. SGG is part of DTE Energy's Gas Storage and Pipelines segment |
DEFINITIONS
| SO2 | Sulfur Dioxide | |
| TCJA | Tax Cuts and Jobs Act of 2017 | |
| TCJA rate reduction liability | Due to the change in the corporate tax rate, from January 1, 2018 to June 30, 2018 for DTE Gas and from January 1, 2018 to July 31, 2018 for DTE Electric, the utilities have reduced revenue and recorded an offsetting regulatory liability | |
| Topic 606 | FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as amended | |
| Topic 840 | FASB issued ASC 840, Leases | |
| Topic 842 | FASB issued ASU No, 2016-02, Leases, as amended, which replaced Topic 840 | |
| TRIA | Terrorism Risk Insurance Program Reauthorization Act of 2015 | |
| TRM | A Transitional Reconciliation Mechanism authorized by the MPSC that allows DTE Electric to recover through rates the deferred net incremental revenue requirement associated with the transition of PLD customers to DTE Electric's distribution system | |
| USD | United States Dollar ($) | |
| VEBA | Voluntary Employees Beneficiary Association | |
| VIE | Variable Interest Entity |
| Units of Measurement | ||
| Bcf | Billion cubic feet of natural gas | |
| BTU | British thermal unit, heat value (energy content) of fuel | |
| kWh | Kilowatthour of electricity | |
| MDth/d | Million dekatherms per day | |
| MMBtu | One million BTU | |
| MW | Megawatt of electricity | |
| MWh | Megawatt-hour of electricity |
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FILING FORMAT
This combined Form 10-K is separately filed by DTE Energy and DTE Electric. Information in this combined Form 10-K relating to each individual Registrant is filed by such Registrant on its own behalf. DTE Electric makes no representation regarding information relating to any other companies affiliated with DTE Energy other than its own subsidiaries. Neither DTE Energy, nor any of DTE Energy’s other subsidiaries (other than DTE Electric), has any obligation in respect of DTE Electric's debt securities, and holders of such debt securities should not consider the financial resources or results of operations of DTE Energy nor any of DTE Energy’s other subsidiaries (other than DTE Electric and its own subsidiaries (in relevant circumstances)) in making a decision with respect to DTE Electric's debt securities. Similarly, none of DTE Electric nor any other subsidiary of DTE Energy has any obligation with respect to debt securities of DTE Energy. This combined Form 10-K should be read in its entirety. No one section of this combined Form 10-K deals with all aspects of the subject matter of this combined Form 10-K.
FORWARD-LOOKING STATEMENTS
Certain information presented herein includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, and businesses of the Registrants. Words such as "anticipate," "believe," "expect," "may," "could," "projected," "aspiration," "plans," and "goals" signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to numerous assumptions, risks, and uncertainties that may cause actual future results to be materially different from those contemplated, projected, estimated, or budgeted. Many factors may impact forward-looking statements of the Registrants including, but not limited to, the following:
| • | impact of regulation by the EPA, the FERC, the MPSC, the NRC, and for DTE Energy, the CFTC, as well as other applicable governmental proceedings and regulations, including any associated impact on rate structures; |
| • | the amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals, or new legislation, including legislative amendments and retail access programs; |
| • | economic conditions and population changes in the Registrants' geographic area resulting in changes in demand, customer conservation, and thefts of electricity and, for DTE Energy, natural gas; |
| • | the operational failure of electric or gas distribution systems or infrastructure; |
| • | impact of volatility of prices in the oil and gas markets on DTE Energy's gas storage and pipelines operations; |
| • | impact of volatility in prices in the international steel markets on DTE Energy's power and industrial projects operations; |
| • | the risk of a major safety incident; |
| • | environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements; |
| • | the cost of protecting assets against, or damage due to, cyber incidents and terrorism; |
| • | health, safety, financial, environmental, and regulatory risks associated with ownership and operation of nuclear facilities; |
| • | volatility in the short-term natural gas storage markets impacting third-party storage revenues related to DTE Energy; |
| • | volatility in commodity markets, deviations in weather, and related risks impacting the results of DTE Energy's energy trading operations; |
| • | changes in the cost and availability of coal and other raw materials, purchased power, and natural gas; |
| • | advances in technology that produce power, store power, or reduce power consumption; |
| • | changes in the financial condition of significant customers and strategic partners; |
| • | the potential for losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions; |
| • | access to capital markets and the results of other financing efforts which can be affected by credit agency ratings; |
| • | instability in capital markets which could impact availability of short and long-term financing; |
| • | the timing and extent of changes in interest rates; |
| • | the level of borrowings; |
| • | the potential for increased costs or delays in completion of significant capital projects; |
| • | changes in, and application of, federal, state, and local tax laws and their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings, and audits; |
| • | the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers; |
| • | unplanned outages; |
| • | employee relations and the impact of collective bargaining agreements; |
| • | the availability, cost, coverage, and terms of insurance and stability of insurance providers; |
| • | cost reduction efforts and the maximization of plant and distribution system performance; |
| • | the effects of competition; |
| • | changes in and application of accounting standards and financial reporting regulations; |
| • | changes in federal or state laws and their interpretation with respect to regulation, energy policy, and other business issues; |
| • | contract disputes, binding arbitration, litigation, and related appeals; and |
| • | the risks discussed in the Registrants' public filings with the Securities and Exchange Commission. |
New factors emerge from time to time. The Registrants cannot predict what factors may arise or how such factors may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak only as of the date on which such statements are made. The Registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.
Part I
Items 1. and 2. Business and Properties
General
In 1995, DTE Energy incorporated in the State of Michigan. DTE Energy's utility operations consist primarily of DTE Electric and DTE Gas. DTE Energy also has three other segments that are engaged in a variety of energy-related businesses.
DTE Electric is a Michigan corporation organized in 1903 and is a wholly-owned subsidiary of DTE Energy. DTE Electric is a public utility engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million customers in southeastern Michigan.
DTE Gas is a Michigan corporation organized in 1898 and is a wholly-owned subsidiary of DTE Energy. DTE Gas is a public utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million customers throughout Michigan and the sale of storage and transportation capacity.
DTE Energy's other businesses are involved in 1) natural gas pipelines, gathering, and storage; 2) power and industrial projects; and 3) energy marketing and trading operations.
DTE Electric and DTE Gas are regulated by the MPSC. Certain activities of DTE Electric and DTE Gas, as well as various other aspects of businesses under DTE Energy are regulated by the FERC. In addition, the Registrants are regulated by other federal and state regulatory agencies including the NRC, the EPA, EGLE, and for DTE Energy, the CFTC.
The Registrants' annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and all amendments to such reports are available free of charge through the Investor Relations Reports and Filings page of DTE Energy's website: www.dteenergy.com, as soon as reasonably practicable after they are filed with or furnished to the SEC.
The DTE Energy Code of Ethics and Standards of Behavior, Board of Directors’ Mission and Guidelines, Board Committee Charters, and Categorical Standards for Director Independence are also posted on the DTE Energy website. The information on DTE Energy’s website is not part of this report or any other report that DTE Energy files with, or furnishes to, the SEC.
Additionally, the public may read and copy any materials the Registrants file electronically with the SEC at www.sec.gov.
Corporate Structure
DTE Energy sets strategic goals, allocates resources, and evaluates performance based on the following structure. For financial information by segment for the last three years, see Note 23 to the Consolidated Financial Statements in Item 8 of this Report, "Segment and Related Information."
Electric
| • | The Electric segment consists principally of DTE Electric, which is engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million residential, commercial, and industrial customers in southeastern Michigan. |
Gas
| • | The Gas segment consists principally of DTE Gas, which is engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers throughout Michigan and the sale of storage and transportation capacity. |
Non-utility Operations
| • | Gas Storage and Pipelines consists of natural gas pipeline, gathering, transportation, and storage businesses. |
| • | Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and pipeline-quality gas from renewable energy projects. |
| • | Energy Trading consists of energy marketing and trading operations. |
Corporate and Other
| • | Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments. |
Refer to Management’s Discussion and Analysis in Item 7 of this Report for an in-depth analysis of each segment’s financial results. A description of each business unit follows.
ELECTRIC
Description
DTE Energy's Electric segment consists principally of DTE Electric, an electric utility engaged in the generation, purchase, distribution, and sale of electricity to approximately 2.2 million customers in southeastern Michigan. DTE Electric is regulated by numerous federal and state governmental agencies, including, but not limited to, the MPSC, the FERC, the NRC, the EPA, and EGLE. Electricity is generated from fossil-fuel plants, a hydroelectric pumped storage plant, a nuclear plant, wind and other renewable assets and is supplemented with purchased power. The electricity is sold, or distributed through the retail access program, to three major classes of customers: residential, commercial, and industrial, throughout southeastern Michigan.
Weather, economic factors, competition, energy waste reduction initiatives, and electricity prices affect sales levels to customers. DTE Electric's peak load and highest total system sales generally occur during the third quarter of the year, driven by air conditioning and other cooling-related demands. DTE Electric's operations are not dependent upon a limited number of customers, and the loss of any one or a few customers would not have a material adverse effect on the results of DTE Electric.
The Electric segment also consists of non-utility operations relating to renewable energy projects at DTE Sustainable Generation. These projects have been acquired in support of DTE Energy's renewable energy goals.
See Note 5 to the Consolidated Financial Statements in Item 8 of the Report, "Revenue."
Fuel Supply and Purchased Power
DTE Electric's power is generated from a variety of fuels and is supplemented with purchased power. DTE Electric expects to have an adequate supply of fuel and purchased power to meet its obligation to serve customers. DTE Electric's generating capability is heavily dependent upon the availability of coal. Coal is purchased from various sources in different geographic areas under agreements that vary in both pricing and terms. DTE Electric expects to obtain the majority of its coal requirements through long-term contracts, with the balance to be obtained through short-term agreements and spot purchases. DTE Electric has long-term and short-term contracts for the purchase of approximately 22 million tons of low-sulfur western coal and approximately 2 million tons of Appalachian coal to be delivered from 2020 to 2021. All of these contracts have pricing schedules. DTE Electric has approximately 99% of the expected coal requirements for 2020 under contract. Given the geographic diversity of supply, DTE Electric believes it can meet its expected generation requirements. DTE Electric leases a fleet of rail cars and has the expected western and eastern coal rail requirements under multi-year contracts. The Company expects to cover all of its vessel transportation requirements for delivery of purchased coal to electric generating facilities through new agreements.
DTE Electric participates in the energy market through MISO. DTE Electric offers its generation in the market on a day-ahead and real-time basis and bids for power in the market to serve its load. DTE Electric is a net purchaser of power that supplements its generation capability to meet customer demand during peak cycles or during major plant outages.
Properties
DTE Electric owns generating facilities that are located in the State of Michigan. Substantially all of DTE Electric's property is subject to the lien of a mortgage.
Generating facilities owned and in service as of December 31, 2019 for the electric segment are shown in the following table:
| Location by Michigan County | Net Generation Capacity**(a)** | ||||||
| Facility | Year in Service | (MW) | |||||
| Fossil-fueled Steam-Electric | |||||||
| Belle River(b) | St. Clair | 1984 and 1985 | 1,034 | ||||
| Greenwood | St. Clair | 1979 | 785 | ||||
| Monroe(c) | Monroe | 1971, 1973, and 1974 | 3,066 | ||||
| River Rouge | Wayne | 1958 | 272 | ||||
| St. Clair(d) | St. Clair | 1953, 1954, 1961, and 1969 | 1,065 | ||||
| Trenton Channel | Wayne | 1968 | 495 | ||||
| 6,717 | |||||||
| Natural gas and Oil-fueled Peaking Units(e) | Various | 1966-1971, 1981, 1999, 2002, and 2003 | 2,033 | ||||
| Nuclear-fueled Steam-Electric Fermi 2 | Monroe | 1988 | 1,141 | ||||
| Hydroelectric Pumped Storage Ludington(f) | Mason | 1973 | 1,088 | ||||
| Renewables(g) | |||||||
| Wind Utility | Various | 2011-2016 | 612 | ||||
| Wind Non-Utility | Various | 2019 | 88 | ||||
| Solar | Various | 2010-2017 | 64 | ||||
| 764 | |||||||
| 11,743 |
| (a) | Represents summer net rating for all units with the exception of renewable facilities. The summer net rating is based on operating experience, the physical condition of units, environmental control limitations, and customer requirements for steam, which would otherwise be used for electric generation. Wind and solar facilities reflect name plate capacity measured in alternating current. |
| (b) | Represents DTE Electric's 81% interest in Belle River with a total capability of 1,270 MW. See Note 8 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." |
| (c) | The Monroe generating plant provided 39% of DTE Electric’s total 2019 power plant generation. |
| (d) | St. Clair unit 1 retired on March 27, 2019. |
| (e) | Two Peaking Units were retired (Hancock 11-2 and 11-4) on December 22, 2019, Dearborn Energy Center became commercial on December 30, 2019. |
| (f) | Represents DTE Electric’s 49% interest in Ludington with a total capability of 2,220 MW. See Note 8 to the Consolidated Financial Statements in Item 8 of this Report, "Jointly-Owned Utility Plant." |
| (g) | In addition to the owned renewable facilities described above, DTE Electric has long-term contracts for 481 MW of renewable power generated from wind, solar, and biomass facilities. Of the 481 MW, currently 32 MW are a PPA with the Non-Utility owned wind. |
See "Capital Investments" in Management's Discussion and Analysis in Item 7 of this Report for information regarding plant retirements and future capital expenditures.
DTE Electric owns and operates 700 distribution substations with a capacity of approximately 37,025,000 kilovolt-amperes (kVA) and approximately 445,200 line transformers with a capacity of approximately 32,392,000 kVA.
Circuit miles of electric distribution lines owned and in service as of December 31, 2019 are shown in the following table:
| Circuit Miles | ||||||
| Operating Voltage-Kilovolts (kV) | Overhead | Underground | ||||
| 4.8 kV to 13.2 kV | 28,509 | 15,389 | ||||
| 24 kV | 181 | 681 | ||||
| 40 kV | 2,303 | 381 | ||||
| 120 kV | 61 | 8 | ||||
| 31,054 | 16,459 |
There are numerous interconnections that allow the interchange of electricity between DTE Electric and electricity providers external to the DTE Electric service area. These interconnections are generally owned and operated by ITC Transmission, an unrelated company, and connect to neighboring energy companies.
Regulation
DTE Electric is subject to the regulatory jurisdiction of various agencies, including, but not limited to, the MPSC, the FERC, and the NRC. The MPSC issues orders pertaining to rates, recovery of certain costs, including the costs of generating facilities and regulatory assets, conditions of service, accounting, and operating-related matters. DTE Electric's MPSC-approved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on investments. The FERC regulates DTE Electric with respect to financing authorization and wholesale electric activities. The NRC has regulatory jurisdiction over all phases of the operation, construction, licensing, and decommissioning of DTE Electric's nuclear plant operations. DTE Electric is subject to the requirements of other regulatory agencies with respect to safety, the environment, and health.
See Notes 9, 10, 13, and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," "Fair Value," and "Commitments and Contingencies."
Energy Assistance Programs
Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to DTE Electric’s ability to control its uncollectible accounts receivable and collections expenses. DTE Electric’s uncollectible accounts receivable expense is directly affected by the level of government-funded assistance that qualifying customers receive. DTE Electric works continuously with the State of Michigan and others to determine whether the share of funding allocated to customers is representative of the number of low-income individuals in the service territory. DTE Electric also partners with federal, state, and local officials to attempt to increase the share of low-income funding allocated to customers.
Strategy and Competition
DTE Electric's electrical generation operations seek to provide the energy needs of customers in a cost effective manner. With potential capacity constraints in the MISO region, there will be increased dependency on DTE Electric's generation to provide reliable service and price stability for customers. This generation will require continuing investments in DTE Electric's primary coal generating units, nuclear generating plant, a natural gas fueled combined cycle generation facility, and renewables.
DTE Electric's distribution operations focus is on distributing energy in a safe, cost effective, and reliable manner to customers. DTE Electric seeks to increase operational efficiencies to increase customer satisfaction at an affordable rate.
The electric retail access program in Michigan gives electric customers the option of retail access to alternative electric suppliers, subject to limits. Customers with retail access to alternative electric suppliers represented approximately 10% of retail sales in 2019, 2018, and 2017 and consisted primarily of industrial and commercial customers. MPSC rate orders and 2008 energy legislation enacted by the State of Michigan have placed a 10% cap on the total retail access related migration, mitigating some of the unfavorable effects of electric retail access on DTE Electric's financial performance and full service customer rates. Energy legislation passed in 2016 retained the 10% retail access cap with some revisions. DTE Electric expects that customers with retail access to alternative electric suppliers will represent approximately 10% of retail sales in 2020.
Competition in the regulated electric distribution business is primarily from the on-site generation of industrial customers and from distributed generation applications by industrial and commercial customers. DTE Electric does not expect significant competition for distribution to any group of customers in the near term.
Revenues from year to year will vary due to weather conditions, economic factors, regulatory events, and other risk factors as discussed in the "Risk Factors" in Item 1A. of this Report.
GAS
Description
DTE Energy's Gas segment consists principally of DTE Gas, a natural gas utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers throughout Michigan, and the sale of storage and transportation capacity.
DTE Gas' natural gas sales, end-user transportation, and intermediate transportation volumes, revenues, and Net Income, are impacted by weather. Given the seasonal nature of the business, revenues and Net Income are concentrated in the first and fourth quarters of the calendar year. By the end of the first quarter, the heating season is largely over, and DTE Gas typically realizes substantially reduced revenues and earnings in the second quarter, and losses in the third quarter. The impacts of changes in annual average customer usage are minimized by the RDM.
DTE Gas operations are not dependent upon a limited number of customers, and the loss of any one or a few customers would not have a material adverse effect on the results of DTE Gas.
See Note 5 to the Consolidated Financial Statements in Item 8 of the Report, "Revenue."
Natural Gas Supply
DTE Gas' gas distribution system has a planned maximum daily send-out capacity of 2.5 Bcf, with approximately 68% of the volume coming from underground storage for 2019. Peak-use requirements are met through utilization of storage facilities, pipeline transportation capacity, and purchased gas supplies. Because of the geographic diversity of supply and its pipeline transportation and storage capacity, DTE Gas is able to reliably meet supply requirements. DTE Gas believes natural gas supply and pipeline capacity will be sufficiently available to meet market demands in the foreseeable future.
DTE Gas purchases natural gas supplies in the open market by contracting with producers and marketers and maintains a diversified portfolio of natural gas supply contracts. Supplier, producing region, quantity, and available transportation diversify DTE Gas' natural gas supply base. Natural gas supply is obtained from various sources in different geographic areas (Appalachian, Gulf Coast, Mid-Continent, Canada, and Michigan) under agreements that vary in both pricing and terms. Gas supply pricing is generally tied to the New York Mercantile Exchange and published price indices to approximate current market prices combined with MPSC-approved fixed price supplies with varying terms and volumes through 2022.
DTE Gas is directly connected to interstate pipelines, providing access to most of the major natural gas supply producing regions in the Appalachian, Gulf Coast, Mid-Continent, and Canadian regions. The primary long-term transportation supply contracts at December 31, 2019 are listed below.
| Availability (MDth/d) | Contract Expiration | ||
| Great Lakes Gas Transmission L.P. | 30 | 2023 | |
| Viking Gas Transmission Company | 21 | 2022 | |
| Vector Pipeline L.P. (an affiliate) | 20 | 2022 | |
| ANR Pipeline Company | 129 | 2028 | |
| Panhandle Eastern Pipeline Company | 125 | 2029 | |
| NEXUS Pipeline (an affiliate) | 75 | 2033 |
Properties
DTE Gas owns distribution, storage, and transportation properties that are located in the State of Michigan. The distribution system includes approximately 20,000 miles of distribution mains, approximately 1,305,000 service pipelines, and approximately 1,285,000 active meters, and DTE Gas owns approximately 2,000 miles of transmission pipelines that deliver natural gas to the distribution districts and interconnect DTE Gas storage fields with the sources of supply and the market areas.
DTE Gas owns storage properties relating to four underground natural gas storage fields with an aggregate working gas storage capacity of approximately 139 Bcf. These facilities are important in providing reliable and cost-effective service to DTE Gas customers. In addition, DTE Gas sells storage services to third parties.
Most of DTE Gas' distribution and transportation property is located on property owned by others and used by DTE Gas through easements, permits, or licenses. Substantially all of DTE Gas' property is subject to the lien of a mortgage.
DTE Gas leases a portion of its pipeline system to the Vector Pipeline Partnership (an affiliate) through a finance lease arrangement. See Note 18 to the Consolidated Financial Statements in Item 8 of the Report, "Leases."
Regulation
DTE Gas is subject to the regulatory jurisdiction of the MPSC, which issues orders pertaining to rates, recovery of certain costs, including the costs of regulatory assets, conditions of service, accounting, and operating-related matters. DTE Gas' MPSC-approved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on investments. DTE Gas operates natural gas storage and transportation facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and transportation services pursuant to a MPSC-approved tariff.
DTE Gas also provides interstate storage and transportation services in accordance with an Operating Statement on file with the FERC. The FERC's jurisdiction is limited and extends to the rates, non-discriminatory requirements, and the terms and conditions applicable to storage and transportation provided by DTE Gas in interstate markets. FERC granted DTE Gas authority to provide storage and related services in interstate commerce at market-based rates. DTE Gas provides transportation services in interstate commerce at cost-based rates approved by the MPSC and filed with the FERC.
DTE Gas is subject to the requirements of other regulatory agencies with respect to safety, the environment, and health.
See Notes 10 and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Regulatory Matters" and "Commitments and Contingencies."
Energy Assistance Program
Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to DTE Gas' ability to control its uncollectible accounts receivable and collections expenses. DTE Gas' uncollectible accounts receivable expense is directly affected by the level of government-funded assistance its qualifying customers receive. DTE Gas works continuously with the State of Michigan and others to determine whether the share of funding allocated to customers is representative of the number of low-income individuals in the service territory. DTE Gas also partners with federal, state, and local officials to attempt to increase the share of low-income funding allocated to DTE Gas customers.
Strategy and Competition
DTE Gas' strategy is to ensure the safe, reliable, and cost effective delivery of natural gas service within its franchised markets in Michigan. In addition, DTE Gas is promoting the extension of its distribution system to underserved markets and the increased use of natural gas furnaces, water heaters, and appliances within its current customer base. DTE Gas continues to focus on the reduction of operating costs and the delivery of energy waste reduction products and services to its customers, making natural gas service the preferred fuel and even more affordable for its customers.
Competition in the gas business primarily involves other natural gas transportation providers, as well as providers of alternative fuels and energy sources. The primary focus of competition for end-user transportation is cost and reliability. Some large commercial and industrial customers have the ability to switch to alternative fuel sources such as coal, electricity, oil, and steam. If these customers were to choose an alternative fuel source, they would not have a need for DTE Gas' end-user transportation service. DTE Gas competes against alternative fuel sources by providing competitive pricing and reliable service, supported by its storage capacity.
Having an extensive transportation pipeline system has enabled marketing of DTE Gas' storage and transportation services to gas producers, marketers, distribution companies, end-user customers, and other pipeline companies. The business operates in a central geographic location with connections to major Midwestern interstate pipelines that extend throughout the Midwest, eastern United States, and eastern Canada.
DTE Gas' storage capacity is used to store natural gas for delivery to its customers and is also sold to third parties under a variety of arrangements. Prices for storage arrangements for shorter periods are generally higher, but more volatile, than for longer periods. Prices are influenced primarily by market conditions, weather, and natural gas pricing.
GAS STORAGE AND PIPELINES
Description
Gas Storage and Pipelines owns natural gas storage fields, lateral and gathering pipeline systems, compression and surface facilities, and has ownership interests in interstate pipelines serving the Gulf Coast, Midwest, Ontario, and Northeast markets. The pipeline and storage assets are primarily supported by long-term, fixed-price revenue contracts.
Properties
Gas Storage and Pipelines holds the following properties:
| Property Classification | % Owned | Description | Location | |||
| Pipelines | ||||||
| Appalachia Gathering System | 100% | 129-mile pipeline delivering Marcellus Shale gas to Texas Eastern Pipeline and Stonewall Gas Gathering system | PA and WV | |||
| Birdsboro Pipeline | 100% | 14-mile pipeline delivering gas supply to the Birdsboro Power Plant | PA | |||
| Bluestone Pipeline | 100% | 65-mile pipeline delivering Marcellus Shale gas to Millennium Pipeline and Tennessee Pipeline | PA and NY | |||
| Blue Union / LEAP(a) | 100% | 338-mile gathering system delivering Haynesville Shale gas production to markets in Gulf Coast Region | LA and TX | |||
| Generation Pipeline | 50% | 23-mile pipeline regulated as gas utility by the Public Utilities Commission of Ohio | OH | |||
| Michigan gathering systems | 100% | 590-mile pipeline system in northern Michigan | MI | |||
| Millennium Pipeline | 26% | 263-mile pipeline serving markets in the Northeast | NY | |||
| NEXUS Pipeline | 50% | 256-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan, and Ontario market centers | OH and MI | |||
| Stonewall Gas Gathering | 85% | 68-mile pipeline connecting Appalachia Gathering System to Columbia Pipeline | WV | |||
| Susquehanna gathering system | 100% | 197-mile pipeline delivering Southwestern Energy's Marcellus Shale gas production to Bluestone Pipeline | PA | |||
| Tioga Gas Gathering | 100% | 3-mile pipeline delivering production gas to Dominion Transmission interconnect | PA | |||
| Vector Pipeline | 40% | 348-mile pipeline connecting Chicago, Michigan, and Ontario market centers | IL, IN, MI, and Ontario | |||
| Storage | ||||||
| Washington 10 | 100% | 75 Bcf of storage capacity | MI | |||
| Washington 28 | 50% | 16 Bcf of storage capacity | MI |
| (a) | LEAP, a 150-mile pipeline in Louisiana, is currently under construction. DTE Energy is targeting completion in second half of 2020. |
The assets of these businesses are well integrated with other DTE Energy operations. Pursuant to an operating agreement, DTE Gas provides physical operations, maintenance, and technical support for the Washington 10 and 28 storage facilities and for the Michigan gathering systems.
Regulation
Gas Storage and Pipelines operates natural gas storage facilities in Michigan as intrastate facilities regulated by the MPSC and provides intrastate storage and related services pursuant to an MPSC-approved tariff. Gas Storage and Pipelines also provides interstate services in accordance with an Operating Statement on file with the FERC. Vector, Millennium, Birdsboro, and NEXUS Pipelines provide interstate transportation services in accordance with their FERC-approved tariffs. In addition, NEXUS and Vector are subject to applicable laws, rules, and regulations in Canada. Gas Storage and Pipelines' gathering and pipeline assets are subject to the rules and regulations of various state utility commissions.
Strategy and Competition
Gas Storage and Pipelines expects to continue its steady growth plan by expanding existing assets and developing new assets that are typically supported with long-term customer commitments, particularly in the following regions:
Midwest to Northeast Region
Gas Storage and Pipelines will focus on opportunities to supply natural gas to meet growing demand and displace less attractive supply from certain regions in North America. Much of the growth in midstream services demand for natural gas is expected to occur in the eastern Canada and the northeast U.S. regions. Gas Storage and Pipelines believes that the Vector, Millennium, and NEXUS Pipelines are well-positioned to provide access routes and low-cost expansion options to these markets due to growth in production from the Marcellus/Utica Shales in Pennsylvania and West Virginia. Gas Storage and Pipelines has agreements with key producers that support its Bluestone Pipeline, Susquehanna gathering, Tioga gathering, AGS,
and SGG businesses. Gas Storage and Pipelines is evaluating new pipeline and storage investment opportunities that could include additional pipeline and gathering expansions, laterals, compression, and other Marcellus/Utica shale midstream development or partnering opportunities.
Gulf Coast Region
In December 2019, Gas Storage and Pipelines completed the acquisition of the Blue Union gathering system and LEAP gathering pipeline in the Haynesville shale formation of Louisiana which provide access to growing Gulf Coast markets. The assets serve multiple markets, including Louisiana, the nation's third largest natural gas consumer, and the Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. Through this acquisition, Gas Storage and Pipeline invested in economically strong and strategically situated assets that are supported by long-term contracts. Strong credit provisions are also incorporated into the contract with the system's largest customer.
Gas Storage and Pipelines has competition from other pipelines and storage providers. Operations are dependent upon a limited number of customers, and the loss of any one or a few customers could have a material adverse effect on the results of Gas Storage and Pipelines.
POWER AND INDUSTRIAL PROJECTS
Description
Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial, and institutional customers, produce reduced emissions fuel, and sell electricity and gas from renewable energy projects. This business segment provides services using project assets usually located on or near the customers' premises in the steel, automotive, pulp and paper, airport, chemical, and other industries as follows:
Industrial Energy Services
| • | Steel and Petroleum Coke — Power and Industrial Projects produces metallurgical coke from a coke battery with a capacity of 1.0 million tons per year and has an investment in a second coke battery with a capacity of 1.2 million tons per year. Power and Industrial Projects also provides pulverized coal and petroleum coke to the steel, pulp and paper, and other industries. |
| • | On-Site Energy — Power and Industrial Projects provides power generation, steam production, chilled water production, wastewater treatment, and compressed air supply to industrial customers. Power and Industrial Projects also provides utility-type services using project assets usually located on or near the customers' premises in the automotive, airport, chemical, and other industries. |
Renewable Energy
| • | Wholesale Power and Renewables — Power and Industrial Projects holds ownership interests in, and operates, five renewable generating plants with a capacity of 217 MWs. The electric output is sold under long-term power purchase agreements. |
| • | Renewable Gas Recovery — Power and Industrial Projects has ownership interests in, and operates, twenty-three gas recovery sites in nine different states. The sites recover methane from landfills and agricultural businesses and convert the gas to generate electricity, replace fossil fuels in industrial and manufacturing operations, or refine to pipeline-quality gas, which can then be used as vehicle fuel. |
Reduced Emissions Fuel
| • | Reduced Emissions Fuel — Power and Industrial Projects has constructed and placed in service REF facilities at ten sites including facilities located at seven third-party owned coal-fired power plants. DTE Energy has sold membership interests in five of the facilities and entered into lease arrangements in two of the facilities. The facilities blend a proprietary additive with coal used in coal-fired power plants, resulting in reduced emissions of nitrogen oxide and mercury. Qualifying facilities are eligible to generate tax credits for ten years upon achieving certain criteria. The value of a tax credit is adjusted annually by an inflation factor published by the IRS. The value of the tax credit is reduced if the reference price of coal exceeds certain thresholds. The economic benefit of the REF facilities is dependent upon the generation of production tax credits. |
Properties and Other
The following are significant properties operated by Power and Industrial Projects:
| Business Areas | Location | Service Type | ||
| Industrial Energy Services | ||||
| Steel and Petroleum Coke | ||||
| Pulverized Coal Operations | MI | Pulverized Coal | ||
| Coke Production | MI | Metallurgical Coke Supply | ||
| Other Investment in Coke Production and Petroleum Coke | IN and MS | Metallurgical Coke Supply and Pulverized Petroleum Coke | ||
| On-Site Energy | ||||
| Automotive | IN, MI, NY, and OH | Electric Distribution, Chilled Water, Wastewater, Steam, Cooling Tower Water, Reverse Osmosis Water, Compressed Air, Mist, and Dust Collectors | ||
| Airports | MI and PA | Electricity and Hot and Chilled Water | ||
| Chemical Manufacturing | KY and OH | Electricity, Steam, Natural Gas, Compressed Air, and Wastewater | ||
| Consumer Manufacturing | OH | Electricity, Steam, Wastewater, and Sewer | ||
| Business Park | PA | Electricity | ||
| Hospital and University | CA and IL | Electricity, Steam, and Chilled Water | ||
| Renewable Energy | ||||
| Renewables | CA and MN | Electric Generation | ||
| Renewable Gas Recovery | AZ, CA, MI, NC, NY, OH, TX, UT, and WI | Electric Generation and Renewable Natural Gas | ||
| Reduced Emissions Fuel | MI, OH, IL, PA, TX, and WI | REF Supply |
| 2019 | 2018 | 2017 | |||||||||
| (In millions) | |||||||||||
| Production Tax Credits Generated (Allocated to DTE Energy) | |||||||||||
| REF | $ | 72 | $ | 178 | $ | 144 | |||||
| Renewables | 8 | 7 | 6 | ||||||||
| Renewable Gas Recovery | 3 | 3 | 3 | ||||||||
| $ | 83 | $ | 188 | $ | 153 |
Regulation
Certain electric generating facilities within Power and Industrial Projects have market-based rate authority from the FERC to sell power. The facilities are subject to FERC reporting requirements and market behavior rules. Certain projects of Power and Industrial Projects are also subject to the applicable laws, rules, and regulations related to the EPA, U.S. Department of Homeland Security, DOE, and various state utility commissions.
Strategy and Competition
Power and Industrial Projects will continue leveraging its energy-related operating experience and project management capability to develop and grow its steel, on-site energy, and renewable energy businesses, and optimize the REF businesses. Power and Industrial Projects will also continue to pursue opportunities to provide asset management and operations services to third parties. There are limited competitors for Power and Industrial Projects' existing disparate businesses who provide similar products and services. Power and Industrial Projects' operations are dependent upon a limited number of customers, and the loss of any one or a few customers could have a material adverse effect on the results of Power and Industrial Projects.
Power and Industrial Projects anticipates building around its core strengths in the markets where it operates. In determining the markets in which to compete, Power and Industrial Projects examines closely the regulatory and competitive environment, new and pending legislation, the number of competitors, and its ability to achieve sustainable margins. Power and Industrial Projects plans to maximize the effectiveness of its related businesses as it expands.
Power and Industrial Projects intends to focus on the following areas for growth:
| • | Providing energy and utility-type services to commercial and industrial customers |
| • | Acquiring and developing renewable energy projects and other energy projects. |
ENERGY TRADING
Description
Energy Trading focuses on physical and financial power, natural gas and environmental marketing and trading, structured transactions, enhancement of returns from its asset portfolio, and optimization of contracted natural gas pipeline transportation and storage positions. Energy Trading also provides natural gas, power, environmental and related services which may include the management of associated storage and transportation contracts on the customers’ behalf and the supply or purchase of environmental attributes to various customers. Energy Trading's customer base is predominantly utilities, local distribution companies, pipelines, producers and generators, and other marketing and trading companies. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy.
Energy Trading enters into derivative financial instruments as part of its marketing and hedging activities. These financial instruments are generally accounted for under the MTM method, which results in the recognition in earnings of unrealized gains and losses from changes in the fair value of the derivatives. Energy Trading utilizes forwards, futures, swaps, and option contracts to mitigate risk associated with marketing and trading activity, as well as for proprietary trading within defined risk guidelines.
Significant portions of the Energy Trading portfolio are economically hedged. Most financial instruments, physical power and natural gas contracts, and certain environmental contracts are deemed derivatives; whereas, natural gas and environmental inventory, contracts for pipeline transportation, storage assets, and some environmental contracts are not derivatives. As a result, this segment will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. The business’ strategy is to economically manage the price risk of these underlying non-derivative contracts and assets with futures, forwards, swaps, and options. This results in gains and losses that are recognized in different interim and annual accounting periods.
Regulation
Energy Trading has market-based rate authority from the FERC to sell power and blanket authority from the FERC to sell natural gas at market prices. Energy Trading is subject to FERC reporting requirements and market behavior rules. Energy Trading is also subject to the applicable laws, rules, and regulations related to the CFTC, U.S. Department of Homeland Security, and DOE. In addition, Energy Trading is subject to applicable laws, rules, and regulations in Canada.
Strategy and Competition
DTE Energy's strategy for the Energy Trading business is to deliver value-added services to DTE Energy customers. DTE Energy seeks to manage this business in a manner complementary to the growth of DTE Energy's other business segments. Energy Trading focuses on physical marketing and the optimization of its portfolio of energy assets. The segment competes with electric and gas marketers, financial institutions, traders, utilities, and other energy providers. The Energy Trading business is dependent upon the availability of capital and an investment grade credit rating. DTE Energy believes it has ample available capital capacity to support Energy Trading activities. DTE Energy monitors its use of capital closely to ensure that its commitments do not exceed capacity. A material credit restriction would negatively impact Energy Trading's financial performance. Competitors with greater access to capital, or at a lower cost, may have a competitive advantage. DTE Energy has risk management and credit processes to monitor and mitigate risk.
CORPORATE AND OTHER
Description
Corporate and Other includes various holding company activities, holds certain non-utility debt, and holds energy-related investments.
ENVIRONMENTAL MATTERS
The Registrants are subject to extensive environmental regulation and expect to continue recovering environmental costs related to utility operations through rates charged to customers. The following table summarizes DTE Energy's, including DTE Electric's, estimated significant future environmental expenditures based upon current regulations. Pending or future reconsiderations of current regulations may impact the estimated expenditures summarized in the table below. Actual costs to comply could vary substantially. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented.
| DTE Electric | DTE Gas | Non-utility | Total | ||||||||||||
| (In millions) | |||||||||||||||
| Water | $ | 81 | $ | — | $ | — | $ | 81 | |||||||
| Contaminated and other sites | 7 | 15 | — | 22 | |||||||||||
| Coal combustion residuals and effluent limitations guidelines | 608 | — | — | 608 | |||||||||||
| Estimated total future expenditures through 2026 | $ | 696 | $ | 15 | $ | — | $ | 711 | |||||||
| Estimated 2020 expenditures | $ | 35 | $ | 6 | $ | — | $ | 41 | |||||||
| Estimated 2021 expenditures | $ | 62 | $ | 4 | $ | — | $ | 66 |
Water — The EPA finalized regulations on cooling water intake in August 2014. DTE Electric is conducting studies to determine the best technology for reducing the environmental impacts of the cooling water intake structures at each of its facilities. DTE Electric may be required to install technologies to reduce the impacts of the cooling water intakes.
Contaminated and Other Sites — Prior to the construction of major interstate natural gas pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke, or oil. The facilities, which produced gas, have been designated as MGP sites. DTE Gas owns, or previously owned, 14 such former MGP sites. DTE Electric owns, or previously owned, three former MGP sites. DTE Energy anticipates the cost amortization methodology approved by the MPSC for DTE Gas, which allows DTE Gas to amortize the MGP costs over a ten-year period beginning with the subsequent year the MGP costs were incurred, will prevent the associated investigation and remediation costs from having a material adverse effect on DTE Energy's operations. DTE Electric believes the likelihood of a material change to the accrued amount is remote based on current knowledge of the conditions at each site.
The Registrants are also in the process of cleaning up other sites where contamination is present as a result of historical and ongoing utility operations. These other sites include an engineered ash storage facility, electric distribution substations, gas pipelines, electric generating power plants, and underground and aboveground storage tank locations. Cleanup activities associated with these sites will be conducted over the next several years. Any significant change in assumptions, such as remediation techniques, nature and extent of contamination, and regulatory requirements, could impact the estimate of remedial action costs for these sites and affect the Registrants' financial position and cash flows and the rates charged to their customers.
Coal Combustion Residuals and Effluent Limitations Guidelines — A final EPA rule for the disposal of coal combustion residuals, commonly known as coal ash, became effective in October 2015, and was revised in October 2016 and July 2018. The rule is based on the continued listing of coal ash as a non-hazardous waste and relies on various self-implementation design and performance standards. DTE Electric owns and operates three permitted engineered coal ash storage facilities to dispose of coal ash from coal-fired power plants and operates a number of smaller impoundments at its power plants subject to certain provisions in the CCR rule. At certain facilities, the rule currently requires the installation of monitoring wells, compliance with groundwater standards, and the closure of basins at the end of the useful life of the associated power plant. At other facilities, the rule requires ash laden waters be moved from earthen basins to steel and concrete tanks. DTE Electric has estimated the impact of the current rule to be $608 million.
On December 2, 2019, a proposed revision to the CCR Rule was published in the Federal Register to address the D.C. Circuit’s 2018 decision regarding CCR impoundments that are not lined with an engineered liner system. The rule proposes that all CCR impoundments that do not meet the engineered liner requirements must close by specific dates, and it further confirms that all clay lined impoundments are viewed as unlined. The EPA is also preparing a rule making that is expected to be proposed early in 2020 that will provide mechanisms to determine if certain alternative liner systems may be as protective as the current liners specified in the CCR rule. DTE Electric is currently evaluating options based on the range of outcomes of the current proposed rule and the anticipated proposed rule to determine any changes to DTE Electric's plans in the operation and closure of coal ash impoundments.
In November 2015, the EPA finalized effluent limitations guidelines for the steam electric power generating industry which requires additional controls to be installed between 2018 and 2023. The initial costs to comply with this rule are under development and estimates are included in the Coal Combustion Residual and Effluent Limitations Guidelines amount in the above table.
On April 12, 2017, the EPA granted a petition for reconsideration of the ELG Rule. The EPA also signed an administrative stay of the ELG Rule’s compliance deadlines for fly ash transport water, bottom ash transport water, and flue gas desulfurization (FGD) wastewater, among others. On June 6, 2017, the EPA published in the Federal Register a proposed rule to postpone certain applicable deadlines within the ELG rule. The final rule was published on September 18, 2017. The final rule nullified the administrative stay but also extended the earliest compliance deadlines for the FGD wastewater and bottom ash transport water until November 1, 2020 in order for the EPA to propose and finalize a new ruling. On November 22, 2019, the EPA issued a proposed rule to revise the technology-based effluent limitations guidelines and standards applicable to flue gas desulfurization wastewater and bottom ash transport water. The ELG compliance requirements and final deadlines for bottom ash transport water and FGD wastewater, and total ELG related compliance costs will not be known until the EPA completes its reconsideration of the ELG Rule.
Air — DTE Electric is subject to the EPA ozone and fine particulate transport, and acid rain regulations that limit power plant emissions of SO2 and NOX. The EPA and the State of Michigan have also issued emission reduction regulations relating to ozone, fine particulate, regional haze, mercury, and other air pollution. These rules have led to emission controls on fossil-fueled power plants to reduce SO2, NOX, mercury, and other emissions. These rulemakings could require additional controls for SO2, NOX, and other hazardous air pollutants over the next few years. DTE Electric does not anticipate additional capital expenditures will be necessary to comply with air pollution requirements through 2026, subject to the results of future rulemakings.
The EPA has implemented regulatory actions under the Clean Air Act to address emissions of GHGs from the utility sector and other sectors of the economy. Among these actions, the EPA has finalized performance standards for emissions of carbon dioxide from new and existing fossil-fuel EGUs. In 2019 the performance standards for existing EGUs (also known as the Clean Power Plan) were officially repealed and replaced by the ACE Rule. The ACE Rule requires the state of Michigan to submit a plan in 2022 that includes GHG standards for existing coal-fired power plant units in Michigan. These final rules do not impact DTE Energy's revised commitment to reduce carbon emissions 32% by the early 2020s, 50% by 2030, and 80% by 2040, or its goal of net zero emissions by 2050 for DTE Electric, from the 2005 carbon emissions levels.
Pending or future legislation or other regulatory actions could have a material impact on DTE Electric's operations and financial position and the rates charged to its customers. Impacts include expenditures for environmental equipment beyond what is currently planned, financing costs related to additional capital expenditures, the purchase of emission credits from market sources, higher costs of purchased power, and the retirement of facilities where control equipment is not economical. DTE Electric would seek to recover these incremental costs through increased rates charged to its utility customers, as authorized by the MPSC.
See Management’s Discussion and Analysis in Item 7 of this Report and Notes 9, 10, and 19 to the Consolidated Financial Statements in Item 8 of this Report, "Asset Retirement Obligations," "Regulatory Matters," and "Commitments and Contingencies."
EMPLOYEES
DTE Energy and its subsidiaries had approximately 10,700 employees as of December 31, 2019, of which approximately 5,300 were represented by unions. DTE Electric had approximately 4,900 employees as of December 31, 2019, of which approximately 2,800 were represented by unions. There are several bargaining units for DTE Energy subsidiaries' represented employees. The majority of represented employees for both DTE Energy and DTE Electric are under contracts that expire in 2021 and 2022.