DTE Energy(DTE) - 2022 Q3 - Quarterly Report

Definitions This section provides a glossary of key terms and acronyms, defining entities like DTE Electric, DTE Energy, DTE Gas, and regulatory bodies such as MPSC, EPA, and FERC - This section provides a glossary of key terms and acronyms, defining entities like DTE Electric, DTE Energy, DTE Gas, and regulatory bodies such as MPSC, EPA, and FERC, along with financial and environmental terms[11][16] Filing Format This Form 10-Q is a combined filing by DTE Energy and DTE Electric, with each registrant filing information solely on its own behalf, disclaiming responsibility for information related exclusively to the other - This Form 10-Q is a combined filing by DTE Energy and DTE Electric, with each registrant filing information solely on its own behalf, and should be read in conjunction with the 2021 Annual Report on Form 10-K[19] Forward-Looking Statements The report contains forward-looking statements subject to assumptions, risks, and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks including the COVID-19 pandemic, regulatory actions (EPA, EGLE, FERC, MPSC, NRC, CFTC, CARB), economic conditions, commodity price volatility, and cybersecurity risks[21][23] - The Registrants do not undertake any obligation to update forward-looking statements after their initial publication date[24] PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for DTE Energy and DTE Electric, including statements of operations, financial position, cash flows, and detailed notes DTE Energy Consolidated Financial Statements (Unaudited) This subsection provides the unaudited consolidated statements of operations, financial position, and cash flows for DTE Energy Company DTE Energy Company Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2022 (millions) | Three Months Ended Sep 30, 2021 (millions) | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---|:---|:---| | Operating Revenues | $5,251 | $3,715 | $14,752 | $10,317 | | Operating Income | $545 | $405 | $1,286 | $1,080 | | Net Income | $387 | $22 | $818 | $598 | | Net Income Attributable to DTE Energy Company | $387 | $25 | $818 | $601 | | Basic EPS | $2.00 | $0.13 | $4.22 | $3.10 | | Diluted EPS | $1.99 | $0.13 | $4.21 | $3.10 | DTE Energy Company Consolidated Statements of Financial Position (Unaudited) | Metric | Sep 30, 2022 (millions) | Dec 31, 2021 (millions) | |:---|:---|:---| | Total Assets | $41,954 | $39,719 | | Total Liabilities | $32,968 | $31,008 | | Total Equity | $8,986 | $8,713 | DTE Energy Company Consolidated Statements of Cash Flows (Unaudited) | Metric | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---| | Net cash from operating activities | $1,412 | $2,372 | | Net cash used for investing activities | $(2,453) | $(2,780) | | Net cash from (used for) financing activities | $1,057 | $(52) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $16 | $(460) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $51 | $56 | DTE Electric Consolidated Financial Statements (Unaudited) This subsection presents the unaudited consolidated statements of operations, financial position, and cash flows for DTE Electric Company DTE Electric Company Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2022 (millions) | Three Months Ended Sep 30, 2021 (millions) | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---|:---|:---|\ | Operating Revenues — Utility operations | $1,844 | $1,700 | $4,896 | $4,468 | | Operating Income | $457 | $467 | $1,022 | $1,106 | | Net Income | $363 | $344 | $750 | $790 | DTE Electric Company Consolidated Statements of Financial Position (Unaudited) | Metric | Sep 30, 2022 (millions) | Dec 31, 2021 (millions) | |:---|:---|:---| | Total Assets | $29,767 | $28,405 | | Total Liabilities | $20,418 | $19,502 | | Total Shareholder's Equity | $9,349 | $8,903 | DTE Electric Company Consolidated Statements of Cash Flows (Unaudited) | Metric | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---| | Net cash from operating activities | $1,102 | $1,606 | | Net cash used for investing activities | $(1,894) | $(2,173) | | Net cash from financing activities | $814 | $569 | | Net Increase in Cash, Cash Equivalents, and Restricted Cash | $22 | $2 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $31 | $18 | Combined Notes to Consolidated Financial Statements (Unaudited) Note 1 — Organization and Basis of Presentation This note details DTE Energy's corporate structure, regulatory oversight, and the basis of presentation for its unaudited consolidated financial statements - DTE Energy's businesses include DTE Electric (electricity), DTE Gas (natural gas), and Other businesses (DTE Vantage, energy marketing/trading)[55] - DTE Electric and DTE Gas are regulated by the MPSC, with certain activities also regulated by FERC, NRC, EPA, EGLE, CFTC, and CARB[56] - DTE Electric consolidated DTE Securitization, a Variable Interest Entity (VIE), in Q1 2022 after financing regulatory assets through bond sales[70] Consolidated VIEs Financial Position (DTE Energy) | Metric | Sep 30, 2022 (millions) | Dec 31, 2021 (millions) | |:---|:---|:---| | Total Assets | $341 | $95 | | Total Liabilities | $328 | $80 | Consolidated VIEs Financial Position (DTE Electric) | Metric | Sep 30, 2022 (millions) | |:---|:---|\ | Total Assets | $239 | | Total Liabilities | $243 | Note 2 — Significant Accounting Policies This note details significant accounting policies, including 'Other Income' components, changes in AOCI, interim effective tax rates, and financing receivables DTE Energy Other Income Summary | Component | Three Months Ended Sep 30, 2022 (millions) | Three Months Ended Sep 30, 2021 (millions) | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---|:---|:---|\ | Contract services | $7 | $6 | $21 | $21 | | Allowance for equity funds used during construction | $6 | $7 | $20 | $20 | | Income from REF entities | $0 | $57 | $0 | $102 | | Equity earnings (losses) of equity method investees | $0 | $17 | $(15) | $31 | | Total Other Income | $16 | $90 | $35 | $187 | Interim Effective Tax Rates | Registrant | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | DTE Energy | 2% | 186% | 0% | (34)% | | DTE Electric | 2% | 12% | 2% | 10% | - DTE Energy's effective tax rate decreased by 184% for the three months ended September 30, 2022, primarily due to a deferred tax remeasurement and production tax credits in 2021[81] - DTE Electric's effective tax rate decreased by 10% and 8% for the three and nine months ended September 30, 2022, respectively, mainly due to higher amortization of the TCJA regulatory liability[83] DTE Energy Financing Receivables Credit Loss Reserves Roll-Forward | Metric | Jan 1, 2022 (millions) | Current Period Provision (millions) | Write-offs (millions) | Recoveries (millions) | Sep 30, 2022 (millions) | |:---|:---|:---|:---|:---|:---|\ | Trade accounts receivable | $89 | $41 | $(72) | $34 | $92 | | Other receivables | $3 | $0 | $0 | $0 | $3 | | Total | $92 | $41 | $(72) | $34 | $95 | Note 3 — New Accounting Pronouncements This note details recently adopted and issued accounting pronouncements, including ASUs on leases, business combinations, credit losses, and fair value measurement - ASU No. 2021-05 (Leases) and ASU No. 2021-08 (Business Combinations) were adopted effective January 1, 2022, with no significant financial statement impact[104][105] - ASU No. 2022-02 (Financial Instruments – Credit Losses) is effective for fiscal years beginning after December 15, 2022, and ASU No. 2022-03 (Fair Value Measurement) is effective for fiscal years beginning after December 15, 2023[106][107] Note 4 — Discontinued Operations This note provides financial results for DT Midstream, DTE Energy's former natural gas pipeline business, now presented as discontinued operations - DTE Energy completed the separation of DT Midstream on July 1, 2021; its financial results are now reported as discontinued operations[109] DT Midstream Financial Results (Discontinued Operations) | Metric | Three Months Ended Sep 30, 2021 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---|\ | Operating Revenues — Non-utility operations | $0 | $405 | | Operating Income (Loss) | $(30) | $154 | | Net Income (Loss) from Discontinued Operations, Net of Taxes | $(33) | $112 | | Net Income (Loss) from Discontinued Operations | $(33) | $106 | Significant Non-Cash Items and Capital Expenditures of Discontinued Operations (Nine Months Ended Sep 30, 2021) | Category | Amount (millions) | |:---|:---|\ | Operating Activities - Depreciation and amortization | $82 | | Operating Activities - Deferred income taxes | $57 | | Investing Activities - Plant and equipment expenditures — non-utility | $(60) | Note 5 — Revenue This note disaggregates DTE Energy's revenue by segment and customer type, detailing deferred revenue and remaining performance obligations DTE Energy Operating Revenues by Segment | Segment | Three Months Ended Sep 30, 2022 (millions) | Three Months Ended Sep 30, 2021 (millions) | Nine Months Ended Sep 30, 2022 (millions) | Nine Months Ended Sep 30, 2021 (millions) | |:---|:---|:---|:---|:---|\ | Electric | $1,847 | $1,702 | $4,907 | $4,477 | | Gas | $230 | $193 | $1,358 | $1,070 | | DTE Vantage | $227 | $372 | $626 | $1,132 | | Energy Trading | $3,024 | $1,602 | $8,059 | $4,208 | | Total Operating Revenues | $5,251 | $3,715 | $14,752 | $10,317 | DTE Energy Deferred Revenue Activity (millions) | Metric | Amount | |:---|:---|\ | Beginning Balance, January 1, 2022 | $78 | | Increases due to cash received or receivable | $86 | | Revenue recognized from beginning balance | $(54) | | Ending Balance, September 30, 2022 | $110 | DTE Energy Expected Revenue Recognition from Remaining Performance Obligations (millions) | Year | DTE Energy | DTE Electric | |:---|:---|:---|\ | 2022 | $43 | $2 | | 2023 | $292 | $7 | | 2024 | $192 | $7 | | 2025 | $118 | $1 | | 2026 | $67 | $0 | | 2027 and thereafter | $355 | $0 | | Total | $1,067 | $17 | Note 6 — Regulatory Matters This note details DTE Electric's 2021 securitization filing and the 2022 Electric Rate Case, requesting a $388 million rate increase - DTE Electric issued $236 million in Securitization bonds in March 2022 to recover costs for the River Rouge generation plant and tree trimming program[123][124] - DTE Electric filed a rate case on January 21, 2022, requesting a $388 million increase in base rates and a higher return on equity from 9.9% to 10.25%[125] Note 7 — Earnings Per Share This note explains the calculation of basic and diluted earnings per share for DTE Energy, including adjustments for participating securities - Basic EPS is calculated by dividing net income (adjusted for participating securities) by weighted average common shares outstanding; diluted EPS reflects potential dilution[127] DTE Energy Basic and Diluted EPS Reconciliation | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Net Income Attributable to DTE Energy Company — continuing operations | $387 | $58 | $818 | $495 | | Net income available to common shareholders — basic | $386 | $25 | $816 | $600 | | Basic Earnings per Common Share | $2.00 | $0.13 | $4.22 | $3.10 | | Diluted Earnings per Common Share | $1.99 | $0.13 | $4.21 | $3.10 | | Weighted Average Common Shares Outstanding - Basic | 193 million | 193 million | 193 million | 193 million | | Weighted Average Common Shares Outstanding - Diluted | 194 million | 194 million | 194 million | 194 million | Note 8 — Fair Value This note defines fair value and its three-level hierarchy, presenting assets and liabilities measured at fair value on a recurring basis - Fair value is the price to sell an asset or transfer a liability, categorized into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[130][131][132][133] DTE Energy Assets and Liabilities Measured at Fair Value (Sep 30, 2022, millions) | Category | Level 1 | Level 2 | Level 3 | Other (NAV) | Netting | Net Balance | |:---|:---|:---|:---|:---|:---|:---|\ | Assets: | | | | | | | | Cash equivalents | $26 | $0 | $0 | $0 | $0 | $26 | | Nuclear decommissioning trusts | $855 | $398 | $0 | $505 | $0 | $1,758 | | Other investments | $130 | $0 | $0 | $0 | $0 | $130 | | Derivative assets | $554 | $1,643 | $557 | $0 | $(2,236) | $518 | | Liabilities: | | | | | | | | Derivative liabilities | $(293) | $(1,772) | $(931) | $0 | $2,242 | $(754) | DTE Electric Assets Measured at Fair Value (Sep 30, 2022, millions) | Category | Level 1 | Level 2 | Level 3 | Other (NAV) | Net Balance | |:---|:---|:---|:---|:---|:---|\ | Cash equivalents | $23 | $0 | $0 | $0 | $23 | | Nuclear decommissioning trusts | $855 | $398 | $0 | $505 | $1,758 | | Other investments | $26 | $0 | $0 | $0 | $26 | | Derivative assets — FTRs | $0 | $0 | $16 | $0 | $16 | | Total Assets | $910 | $398 | $16 | $505 | $1,829 | DTE Energy Level 3 Derivative Assets (Liabilities) Reconciliation (Nine Months Ended Sep 30, 2022, millions) | Metric | Natural Gas | Electricity | Other | Total | |:---|:---|:---|:---|:---|\ | Net Assets (Liabilities) as of Dec 31, 2021 | $(179) | $(45) | $9 | $(215) | | Total gains (losses) included in earnings | $(382) | $22 | $1 | $(359) | | Total gains (losses) included in Regulatory liabilities | $0 | $0 | $20 | $20 | | Settlements | $243 | $(53) | $(15) | $175 | | Net Assets (Liabilities) as of Sep 30, 2022 | $(313) | $(76) | $15 | $(374) | Note 9 — Financial and Other Derivative Instruments This note details the Registrants' use of derivative instruments to manage market risks related to commodity prices, credit, and interest rates - DTE Energy uses derivative instruments for trading and risk management, including electricity, natural gas, oil, environmental contracts, forwards, futures, options, swaps, and foreign currency exchange contracts[161] - DTE Electric uses forward contracts for electricity and fuel, mostly qualifying for normal purchases/sales exception, with other derivatives marked-to-market and recoverable via the PSCR mechanism[162] - Energy Trading's derivative activities are categorized into Asset Optimization, Marketing and Origination, and Fundamentals Based Trading, with fair value changes generally recognized in earnings[170][171] DTE Energy Fair Value of Derivative Instruments (Sep 30, 2022, millions) | Category | Derivative Assets | Derivative Liabilities | |:---|:---|:---|\ | Derivatives designated as hedging instruments (Foreign currency exchange contracts) | $0 | $(1) | | Derivatives not designated as hedging instruments: | | | | Commodity contracts (Natural gas) | $891 | $(1,193) | | Commodity contracts (Electricity) | $1,622 | $(1,577) | | Commodity contracts (Environmental & Other) | $238 | $(225) | | Foreign currency exchange contracts | $3 | $0 | | Total derivatives | $2,754 | $(2,996) | | Current | $2,209 | $(2,282) | | Noncurrent | $545 | $(714) | Effect of Derivatives Not Designated as Hedging Instruments on DTE Energy's Consolidated Statements of Operations (Three Months Ended Sep 30, 2022, millions) | Location of Gain (Loss) | Natural Gas | Electricity | Environmental & Other | Foreign Currency Exchange | Total | |:---|:---|:---|:---|:---|:---|\ | Operating Revenues — Non-utility operations | $(52) | $61 | $(3) | $5 | $11 | | Fuel, purchased power, gas, and other — non-utility | $108 | $0 | $0 | $0 | $108 | | Total | $56 | $61 | $(3) | $5 | $119 | Note 10 — Long-Term Debt This note details DTE Energy's and DTE Electric's debt issuances and redemptions in 2022, including mortgage bonds, securitization bonds, and a term loan 2022 Debt Issuances (millions) | Company | Month | Type | Interest Rate | Maturity Date | Amount | |:---|:---|:---|:---|:---|:---|\ | DTE Electric | February | Mortgage bonds | 3.00% | 2032 | $500 | | DTE Electric | February | Mortgage bonds (Green Bonds) | 3.65% | 2052 | $400 | | DTE Electric | March | Securitization bonds | 2.64% | 2027 | $184 | | DTE Electric | March | Securitization bonds | 3.11% | 2036 | $52 | | DTE Energy | August | Term loan facility | Variable | 2023 | $400 | | DTE Gas | September | Mortgage bonds | 4.76% | 2032 | $130 | | DTE Gas | September | Mortgage bonds | 5.05% | 2052 | $130 | | Total | | | | | $1,796 | - DTE Electric used proceeds from securitization bonds to retire existing debt and issued a $115 million special dividend to DTE Energy[187] 2022 Debt Redemptions (millions) | Company | Month | Type | Interest Rate | Maturity Date | Amount | |:---|:---|:---|:---|:---|:---|\ | DTE Electric | March | Mortgage bonds | 2.65% | 2022 | $250 | | DTE Electric | September | Mortgage Bonds | 6.95% | 2022 | $66 | | Total | | | | | $316 | - DTE Energy remarketed $1.3 billion of 2019 Series F 2.25% RSNs in August 2022, resetting the interest rate to 4.22% and pulling forward maturity to November 1, 2024[193][194] Note 11 — Short-Term Credit Arrangements and Borrowings This note details unsecured revolving credit agreements and other facilities used by DTE Energy, DTE Electric, and DTE Gas for corporate borrowings and liquidity - DTE Energy, DTE Electric, and DTE Gas maintain unsecured revolving credit agreements for corporate borrowings and commercial paper liquidity support[195] - As of September 30, 2022, DTE Energy, DTE Electric, and DTE Gas were in compliance with their total funded debt to capitalization ratios (0.68:1, 0.52:1, and 0.50:1, respectively)[197] Availability Under Credit Facilities (Sep 30, 2022, millions) | Facility | DTE Energy | DTE Electric | DTE Gas | Total | |:---|:---|:---|:---|:---|\ | Unsecured revolving credit facility, expiring April 2026 | $1,500 | $500 | $300 | $2,300 | | Unsecured Canadian revolving credit facility, expiring May 2023 | $79 | $0 | $0 | $79 | | Unsecured letter of credit facility, expiring February 2023 | $150 | $0 | $0 | $150 | | Unsecured letter of credit facility, expiring June 2023 | $375 | $0 | $0 | $375 | | Unsecured letter of credit facility | $50 | $0 | $0 | $50 | | Total Availability | $2,154 | $500 | $300 | $2,954 | | Amounts outstanding at September 30, 2022 | $743 | $459 | $130 | $1,332 | | Net availability at September 30, 2022 | $1,411 | $41 | $170 | $1,622 | - In October 2022, unsecured revolving credit agreements were amended, extending maturity to October 2027 and increasing DTE Energy's total availability from $2.3 billion to $2.6 billion[200] Note 12 — Leases This note details DTE Energy's lease arrangements, including new finance leases for energy infrastructure assets and recognized operating lease income - DTE Energy completed construction and began operating energy infrastructure assets for industrial customers under long-term agreements, accounting for portions as finance leases[202][203] DTE Energy Net Investment in Finance Leases (Sep 30, 2022, millions) | Metric | Amount | |:---|:---|\ | Total minimum future lease receipts | $595 | | Residual value of leased pipeline | $17 | | Less unearned income | $(321) | | Net investment in finance lease | $291 | | Less current portion | $(7) | | Net investment in finance lease (non-current) | $284 | DTE Energy Lease Income from Operating Leases (millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Fixed payments | $3 | $13 | $11 | $42 | | Variable payments | $21 | $55 | $52 | $90 | | Total Lease Income | $24 | $68 | $63 | $132 | Note 13 — Commitments and Contingencies This note outlines DTE Electric's and DTE Gas's environmental commitments, including air and water pollution regulations, contaminated sites, and CCR/ELG rules - DTE Electric is subject to EPA and Michigan regulations for air pollution (ozone, particulate, GHGs) and water pollution (cooling water intake, thermal discharge), having spent $2.4 billion on air pollution compliance[207][208][209][212][213][214] - DTE Electric and DTE Gas are remediating contaminated sites, with DTE Electric accruing $10 million and DTE Gas accruing $23 million for remediation[215][226] - DTE Electric estimates $560 million in capital expenditures for CCR and ELG rules compliance, with $455 million planned for 2022-2026[224] - DTE Energy provided guarantees for REF facilities with a maximum potential liability of $605 million, considered remote; total performance bonds outstanding were $384 million[232][234] - DTE Electric and Consumers Energy Company filed a complaint against Toshiba America Energy Systems (TAES) in April 2022 due to unsatisfactory performance and delays at the Ludington Hydroelectric Pumped Storage plant[237] Note 14 — Retirement Benefits and Trusteed Assets This note details net periodic benefit costs for pension and other postretirement benefits for DTE Energy and DTE Electric, including expected contributions DTE Energy Net Periodic Benefit Cost (Credit) for Pension Benefits (millions) | Component | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Service cost | $25 | $27 | $72 | $81 | | Interest cost | $41 | $39 | $124 | $118 | | Expected return on plan assets | $(87) | $(84) | $(260) | $(254) | | Amortization of net actuarial loss | $29 | $49 | $86 | $147 | | Net periodic benefit cost (credit) | $8 | $31 | $22 | $92 | DTE Energy Net Periodic Benefit Cost (Credit) for Other Postretirement Benefits (millions) | Component | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Service cost | $6 | $8 | $20 | $23 | | Interest cost | $12 | $12 | $36 | $35 | | Expected return on plan assets | $(32) | $(33) | $(95) | $(97) | | Amortization of net actuarial loss | $1 | $3 | $3 | $10 | | Net periodic benefit cost (credit) | $(17) | $(15) | $(50) | $(44) | - DTE Electric participates in DTE Energy's pension and postretirement benefit plans, applying multiemployer and multiple-employer accounting, respectively[244] - DTE Energy expects no contributions to qualified pension or postretirement benefit plans in 2022 but anticipates a transfer of up to $50 million from DTE Gas to DTE Electric in Q4 2022[247] Note 15 — Segment and Related Information This note outlines DTE Energy's strategic segments: Electric, Gas, DTE Vantage, Energy Trading, and Corporate and Other, providing financial data for each - DTE Energy's segments include Electric, Gas, DTE Vantage (renewable energy, industrial services), Energy Trading, and Corporate and Other (holding company activities)[249][250][251][252] - DT Midstream was separated on July 1, 2021, and its amounts are classified as discontinued operations[253] DTE Energy Operating Revenues by Segment (millions) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Electric | $1,844 | $1,700 | $4,896 | $4,468 | | Gas | $230 | $193 | $1,358 | $1,070 | | DTE Vantage | $227 | $372 | $626 | $1,132 | | Energy Trading | $3,024 | $1,602 | $8,059 | $4,208 | | Corporate and Other | $0 | $1 | $0 | $2 | | Total | $5,251 | $3,715 | $14,752 | $10,317 | Net Income (Loss) Attributable to DTE Energy by Segment (millions) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Electric | $363 | $342 | $750 | $788 | | Gas | $(23) | $(30) | $179 | $146 | | DTE Vantage | $26 | $73 | $68 | $115 | | Energy Trading | $56 | $(52) | $(80) | $(173) | | Corporate and Other | $(35) | $(275) | $(99) | $(381) | | Income from Continuing Operations | $387 | $58 | $818 | $495 | | Discontinued Operations | $0 | $(33) | $0 | $106 | | Net Income Attributable to DTE Energy Company | $387 | $25 | $818 | $601 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on DTE Energy's financial condition, operational results, and future outlook, focusing on continuing operations Executive Overview DTE Energy is a diversified energy company with regulated utilities and non-utility segments, showing increased net income from continuing operations - DTE Energy is a diversified energy company with regulated electric and natural gas utilities and non-utility segments[261] - The separation of DT Midstream in July 2021 resulted in its financial results being presented as discontinued operations[262] DTE Energy Financial Results (Continuing Operations) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Net Income Attributable to DTE Energy Company | $387 million | $58 million | $818 million | $495 million | | Diluted Earnings per Common Share | $1.99 | $0.30 | $4.21 | $2.55 | - The increase in Net Income was primarily due to lower losses in the Corporate and Other segment and higher earnings in the Electric and Energy Trading segments[263] Strategy DTE Energy's strategy focuses on long-term earnings growth, a strong balance sheet, attractive dividends, and achieving net-zero carbon emissions by 2050 - DTE Energy aims for long-term earnings growth, a strong balance sheet, and attractive dividends[264] - The company is investing in a modern, reliable grid and cleaner, affordable energy, driven by increasing demand and weather events[264] - Commitments include reducing electric utility carbon emissions by 32% by 2023, 50% by 2028, 80% by 2040 (from 2005 levels), and achieving net-zero carbon emissions by 2050[265][266] - DTE Energy employs disciplined investment criteria for non-utility growth opportunities, leveraging assets, skills, and expertise[269] Capital Investments DTE Energy plans substantial capital investments in utility infrastructure, environmental compliance, and renewable energy, totaling billions for 2022-2026 - DTE Electric's capital investments for 2022-2026 are estimated at $15 billion, allocated to distribution infrastructure ($8 billion), base infrastructure ($4 billion), and cleaner generation/renewables ($3 billion)[272] - DTE Electric has retired all eleven coal-fired units at Trenton Channel, River Rouge, and St. Clair facilities, with plans to retire remaining six units by 2040[272] - DTE Gas' capital investments for 2022-2026 are estimated at $3.1 billion, primarily for base infrastructure ($1.5 billion) and gas main renewal/pipeline integrity programs ($1.6 billion)[273] - DTE Energy's non-utility businesses, mainly DTE Vantage, plan $1 billion to $1.5 billion in capital investments for renewable energy and industrial energy services projects from 2022-2026[274] Environmental Matters DTE Energy is subject to extensive environmental regulations, expecting to recover utility-related costs through rates and potentially creating new business opportunities - DTE Energy is subject to extensive environmental regulations, including climate change initiatives, and expects to recover utility-related environmental costs through customer rates[275] - Regulatory initiatives increasing costs for coal-based energy could boost the economic viability of renewable, natural gas, and nuclear sources, potentially creating new business opportunities[276] Outlook DTE Energy anticipates long-term growth, focusing on customer satisfaction, reliability, carbon reduction, rate competitiveness, and financial strength - DTE Energy expects long-term growth driven by its strong utility base and integrated non-utility operations[278] - Key focus areas include customer satisfaction, electric and gas system reliability, carbon emission reduction, regulatory stability, and maintaining financial strength[279] Results of Operations This section discusses DTE Energy's operational performance using GAAP and non-GAAP measures like Utility Margin and Non-utility Margin to assess segment performance - DTE Energy uses non-GAAP measures, Utility Margin and Non-utility Margin, to assess segment performance by excluding the revenue effect of fluctuations in fuel, purchased power, and natural gas expenses[282][283][284] Net Income (Loss) Attributable to DTE Energy by Segment (millions) | Segment | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Electric | $363 | $342 | $750 | $788 | | Gas | $(23) | $(30) | $179 | $146 | | DTE Vantage | $26 | $73 | $68 | $115 | | Energy Trading | $56 | $(52) | $(80) | $(173) | | Corporate and Other | $(35) | $(275) | $(99) | $(381) | | Income from Continuing Operations | $387 | $58 | $818 | $495 | | Discontinued Operations | $0 | $(33) | $0 | $106 | | Net Income Attributable to DTE Energy Company | $387 | $25 | $818 | $601 | ELECTRIC Segment The Electric segment saw its Utility Margin increase due to regulatory mechanisms, while O&M and depreciation rose, and Income Tax Expense decreased significantly Electric Segment Financial Highlights (millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Operating Revenues — Utility operations | $1,844 | $1,700 | $4,896 | $4,468 | | Utility Margin | $1,251 | $1,238 | $3,353 | $3,290 | | Operation and maintenance | $409 | $408 | $1,188 | $1,116 | | Depreciation and amortization | $307 | $281 | $909 | $820 | | Income Tax Expense | $5 | $45 | $11 | $92 | | Net Income Attributable to DTE Energy Company | $363 | $342 | $750 | $788 | - Utility Margin increased by $13 million (three months) and $63 million (nine months) primarily due to regulatory mechanisms (RPS, COVID-19 refund amortization, DTE Securitization, EWR)[291][293] - Operation and maintenance expense increased by $1 million (three months) and $72 million (nine months), driven by higher EWR, RPS, and distribution operations costs[294] - Income Tax Expense decreased by $40 million (three months) and $81 million (nine months) due to higher amortization of the TCJA regulatory liability and higher production tax credits[298] - DTE Electric expects earnings growth from significant capital investments and aims to increase reliability and customer satisfaction, with a rate case requesting a $388 million increase in base rates[299][300] GAS Segment The Gas segment's Utility Margin increased due to new rates and favorable weather, while O&M expenses rose, and Income Tax Expense increased for the nine-month period Gas Segment Financial Highlights (millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Operating Revenues — Utility operations | $230 | $193 | $1,358 | $1,070 | | Utility Margin | $191 | $170 | $922 | $807 | | Operation and maintenance | $130 | $123 | $405 | $380 | | Income Tax Expense (Benefit) | $(6) | $(6) | $57 | $25 | | Net Income (Loss) Attributable to DTE Energy Company | $(23) | $(30) | $179 | $146 | - Utility Margin increased by $21 million (three months) and $115 million (nine months), primarily driven by new rates, favorable weather, and base sales[301][302] - Operation and maintenance expense increased by $7 million (three months) and $25 million (nine months), mainly due to higher gas operations expense and corporate support costs[304] - Income Tax Expense (Benefit) increased by $32 million for the nine months ended September 30, 2022, due to higher earnings and lower amortization of the TCJA regulatory liability[307] - DTE Gas expects earnings growth from significant infrastructure capital investments, focusing on operational excellence and authorized return on equity[308] DTE VANTAGE Segment The DTE Vantage segment saw decreased operating revenues due to the REF business closure, with non-utility margin decreasing for three months but increasing for nine months DTE Vantage Segment Financial Highlights (millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Operating Revenues — Non-utility operations | $227 | $372 | $626 | $1,132 | | Non-utility Margin | $103 | $105 | $309 | $281 | | Operation and maintenance | $64 | $77 | $194 | $226 | | Depreciation and amortization | $13 | $18 | $39 | $55 | | Net Income Attributable to DTE Energy Company | $26 | $73 | $68 | $115 | - Operating Revenues decreased by $145 million (three months) and $506 million (nine months), primarily due to the closure of the REF business[310] - Non-utility Margin decreased by $2 million (three months) but increased by $28 million (nine months), influenced by new contracts in Renewables and demand/prices in the Steel business[312] - Operation and maintenance, and depreciation and amortization expenses decreased due to the closure of the REF business[313][314] - DTE Vantage expects lower earnings in 2022 due to REF business closure but anticipates long-term growth from renewable energy and industrial energy services projects[318] ENERGY TRADING Segment The Energy Trading segment experienced significant revenue and non-utility margin increases due to higher gas prices and favorable margins in gas strategies Energy Trading Segment Financial Highlights (millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Operating Revenues — Non-utility operations | $3,024 | $1,602 | $8,059 | $4,208 | | Non-utility Margin | $96 | $(28) | $(28) | $(139) | | Net Income (Loss) Attributable to DTE Energy Company | $56 | $(52) | $(80) | $(173) | - Operating Revenues increased by $1,422 million (three months) and $3,851 million (nine months), primarily due to higher gas prices in gas structured and transportation strategies[320] - Non-utility Margin increased by $124 million (three months) and $111 million (nine months), driven by favorable unrealized and realized margins in gas strategies and environmental trading[321][325] - Energy Trading expects challenging market conditions and earnings volatility due to mark-to-market accounting for derivatives versus accrual for non-derivative contracts[327] CORPORATE AND OTHER Segment The Corporate and Other segment reported significantly reduced net losses compared to 2021, primarily due to the absence of a large debt extinguishment loss - The Corporate and Other segment's net loss decreased by $240 million (three months) and $282 million (nine months) compared to 2021[329] - Lower losses were primarily due to the absence of a $286 million (three months) and $292 million (nine months) loss on debt extinguishment incurred in 2021[330] - These improvements were partially offset by equity investment losses in 2022 and tax impacts from the DT Midstream separation in Q3 2021[330] Capital Resources and Liquidity DTE Energy expects sufficient capital to fund operations and investments, with cash from operations decreasing and financing activities increasing compared to 2021 - DTE Energy expects $2.1 billion in cash from operations and $3.5 billion in capital investments in 2022, believing it has sufficient capital resources[332] DTE Energy Cash Flow Summary (Nine Months Ended Sep 30, millions) | Metric | 2022 | 2021 | |:---|:---|:---|\ | Net cash from operating activities | $1,412 | $2,370 | | Net cash used for investing activities | $(2,453) | $(2,780) | | Net cash from (used for) financing activities | $1,057 | $(52) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $16 | $(460) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $51 | $56 | - Net cash from operations decreased by $960 million in 2022, primarily due to lower cash from working capital items and changes in Net Income[336] - Net cash from financing activities increased by $1.1 billion in 2022, mainly due to decreases in debt redemptions and prepayment costs compared to 2021[345] - DTE Energy has approximately $2.4 billion of available liquidity as of September 30, 2022, primarily from cash and credit facilities[355] New Accounting Pronouncements This section refers to Note 3 of the Consolidated Financial Statements for details on new accounting pronouncements Fair Value This section discusses fair value accounting for derivatives, potential earnings volatility, the fair value hierarchy, and DTE Energy's MTM net asset position - Derivatives are generally recorded at fair value, but accounting differences can lead to earnings volatility that reverses upon physical delivery or settlement[358][359] DTE Energy Mark-to-Market (MTM) Net Asset (Liability) Position (millions) | Metric | Amount | |:---|:---|\ | MTM at December 31, 2021 | $(159) | | Reclassified to realized upon settlement | $(33) | | Changes in fair value recorded to income | $(114) | | Changes in fair value recorded in Regulatory liabilities | $20 | | Amounts recorded in other comprehensive income, pre-tax | $2 | | Change in collateral | $48 | | MTM at September 30, 2022 | $(236) | Maturity of DTE Energy's MTM Positions (Sep 30, 2022, millions) | Source of Fair Value | 2022 | 2023 | 2024 | 2025 and Beyond | Total Fair Value | |:---|:---|:---|:---|:---|:---|\ | Level 1 | $66 | $130 | $50 | $15 | $261 | | Level 2 | $(10) | $(33) | $(55) | $(31) | $(129) | | Level 3 | $(68) | $(151) | $(64) | $(91) | $(374) | | MTM before collateral adjustments | $(12) | $(54) | $(69) | $(107) | $(242) | | Collateral adjustments | | | | | $6 | | MTM at September 30, 2022 | | | | | $(236) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Registrants' exposure to market price, credit, interest rate, and foreign currency exchange risks, and their management strategies - The Electric and Gas businesses manage commodity price risk primarily through PSCR and GCR regulatory rate-recovery mechanisms, limiting earnings exposure[363] - DTE Vantage is subject to price risk for electricity, natural gas, coal products, and environmental attributes, managed via long-term contracts and hedging[364] - DTE Energy's Energy Trading segment is exposed to electricity, natural gas, environmental, crude oil, heating oil, and foreign currency exchange price fluctuations, managed within predetermined risk parameters[365] DTE Energy Trading Counterparty Credit Quality (Sep 30, 2022, millions) | Credit Quality | Credit Exposure Before Cash Collateral | Cash Collateral | Net Credit Exposure | |:---|:---|:---|:---|\ | Investment Grade (A- and Greater) | $1,017 | $(206) | $811 | | Investment Grade (BBB+ and BBB) | $471 | $0 | $471 | | Investment Grade (BBB-) | $77 | $0 | $77 | | Non-investment grade | $26 | $0 | $26 | | Internally Rated — investment grade | $883 | $(3) | $880 | | Internally Rated — non-investment grade | $33 | $(2) | $31 | | Total | $2,507 | $(211) | $2,296 | - DTE Energy had floating rate debt of $1.4 billion and a floating rate debt-to-total debt ratio of 7.1% as of September 30, 2022, managing interest rate risk with treasury locks and interest rate swap agreements[372] Summary of Sensitivity Analyses (Hypothetical 10% Change, millions) | Activity | Increase in Fair Value | Decrease in Fair Value | |:---|:---|:---|\ | Environmental contracts | $8 | $(8) | | Gas contracts | $19 | $(19) | | Power contracts | $13 | $(13) | | Oil contracts | $2 | $(2) | | Interest rate risk — DTE Energy (Long-term debt) | $718 | $(667) | | Interest rate risk — DTE Electric (Long-term debt) | $466 | $(426) | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures for DTE Energy and DTE Electric were effective as of September 30, 2022, with no material changes - DTE Energy's CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022, for timely and accurate reporting[377] - DTE Electric's CEO and CFO also concluded that their disclosure controls and procedures were effective as of September 30, 2022[379] - No material changes in internal control over financial reporting occurred for either DTE Energy or DTE Electric during the quarter ended September 30, 2022[378][380] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Notes 6 and 13 for legal proceedings and regulatory matters, disclosing environmental proceedings with sanctions of $1 million or greater - Information on legal proceedings and regulatory matters is detailed in Notes 6 and 13 of the Consolidated Financial Statements[382] - Environmental proceedings with government involvement are disclosed if expected sanctions are $1 million or greater[382] Item 1A. Risk Factors This section directs readers to the 2021 Annual Report on Form 10-K for comprehensive risk factors, acknowledging the potential for unforeseen risks - Significant risk factors are discussed in Part 1, Item 1A. Risk Factors of the combined 2021 Annual Report on Form 10-K[383] - The Registrants acknowledge that other risk factors not currently identified could emerge in the future[383] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on DTE Energy's purchases of its own equity securities for the quarter ended September 30, 2022 DTE Energy Purchases of Equity Securities by the Issuer (Quarter Ended Sep 30, 2022) | Period | Number of Shares Purchased | Average Price Paid per Share | |:---|:---|:---|\ | 07/01/22 - 07/31/22 | 5,035 | $106.01 | | 08/01/22 - 08/31/22 | 1,264 | $117.14 | | 09/01/22 - 09/30/22 | 565 | $119.44 | | Total | 6,864 | | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including supplemental indentures, credit agreements, CEO/CFO certifications, and XBRL documents - Exhibits include supplemental indentures for DTE Energy and DTE Gas, amended credit agreements, and CEO/CFO certifications (Section 302 and 906)[386] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Database, Label Linkbase, and Presentation Linkbase are also filed[386] Signatures This section contains the duly authorized signatures for DTE Energy Company and DTE Electric Company, confirming the report's filing - The report is signed by Tracy J. Myrick, Chief Accounting Officer, on behalf of both DTE Energy Company and DTE Electric Company[389][390]