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Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2023
Accounting Policies [Abstract] |
Significant Accounting Policies | SIGNIFICANT ACCOUNTING POLICIES Other Income The following is a summary of DTE Energy's Other income:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
| (In millions)
Allowance for equity funds used during construction | $ | 9 |  |  | $ | 6 |  |  | $ | 18 |  |  | $ | 14 |
Contract services | 7 |  |  | 7 |  |  | 13 |  |  | 14 |
Investment income(a) | 4 |  |  | — |  |  | 9 |  |  | — |
Equity earnings (losses) of equity method investees | — |  |  | (4) |  |  | 4 |  |  | (15) |
Other | 11 |  |  | 2 |  |  | 13 |  |  | 6 |
| $ | 31 |  |  | $ | 11 |  |  | $ | 57 |  |  | $ | 19 |
_______________________________________ (a)Investment losses are recorded separately to Other expenses on the Consolidated Statements of Operations. The following is a summary of DTE Electric's Other income:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
| (In millions)
Allowance for equity funds used during construction | $ | 8 |  |  | $ | 5 |  |  | $ | 17 |  |  | $ | 12 |
Contract services | 6 |  |  | 7 |  |  | 12 |  |  | 14 |
Investment income(a) | 3 |  |  | — |  |  | 6 |  |  | — |
Other | 3 |  |  | 3 |  |  | 5 |  |  | 5 |
| $ | 20 |  |  | $ | 15 |  |  | $ | 40 |  |  | $ | 31 |
_______________________________________ (a)Investment losses are recorded separately to Other expenses on the Consolidated Statements of Operations. Changes in Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) is the change in common shareholders' equity during a period from transactions and events from non-owner sources, including Net Income. The amounts recorded to Accumulated other comprehensive income (loss) for DTE Energy include changes in benefit obligations, consisting of deferred actuarial losses and prior service costs, unrealized gains and losses from derivatives accounted for as cash flow hedges, and foreign currency translation adjustments, if any. DTE Energy releases income tax effects from accumulated other comprehensive income when the circumstances upon which they are premised cease to exist. Changes in Accumulated other comprehensive income (loss) are presented in DTE Energy's Consolidated Statements of Changes in Equity and DTE Electric's Consolidated Statements of Changes in Shareholder's Equity, if any. For the three and six months ended June 30, 2023 and 2022, reclassifications out of Accumulated other comprehensive income (loss) were not material. Income Taxes Tax rates are affected by estimated annual permanent items, production and investment tax credits, regulatory adjustments, and discrete items that may occur in any given period, but are not consistent from period to period. For the second quarter 2022, the impact of these adjustments at DTE Energy was significantly affected by having lower pre-tax income, driven primarily by losses in the Energy Trading segment. The tables below summarize how the Registrants' effective income tax rates have varied from the statutory federal income tax rate:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
DTE Energy |  |  |  |  |  |  |
Statutory federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) due to: |  |  |  |  |  |  |
State and local income taxes, net of federal benefit | 4.4 |  |  | 11.0 |  |  | 4.4 |  |  | 4.6 |
Production tax credits | (4.4) |  |  | (67.3) |  |  | (5.6) |  |  | (9.6) |
TCJA amortization | (3.1) |  |  | (110.4) |  |  | (3.8) |  |  | (15.8) |
Investment tax credits | (1.4) |  |  | (1.6) |  |  | (2.0) |  |  | (0.2) |
Enactment of West Virginia income tax legislation, net of federal benefit | — |  |  | — |  |  | (0.8) |  |  | — |
State tax audit settlement, net of federal benefit | (1.8) |  |  | — |  |  | (0.6) |  |  | — |
Other | (0.3) |  |  | 0.8 |  |  | (1.1) |  |  | (1.5) |
Effective income tax rate | 14.4 | % |  | (146.5) | % |  | 11.5 | % |  | (1.5) | %
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
DTE Electric |  |  |  |  |  |  |
Statutory federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) due to: |  |  |  |  |  |  |
State and local income taxes, net of federal benefit | 5.7 |  |  | 5.8 |  |  | 5.7 |  |  | 5.8 |
Production tax credits | (8.2) |  |  | (9.0) |  |  | (7.8) |  |  | (9.0) |
TCJA amortization | (5.3) |  |  | (15.4) |  |  | (5.0) |  |  | (15.5) |
State tax audit settlement, net of federal benefit | (2.1) |  |  | — |  |  | (1.3) |  |  | — |
Other | (1.4) |  |  | (0.9) |  |  | (1.2) |  |  | (0.8) |
Effective income tax rate | 9.7 | % |  | 1.5 | % |  | 11.4 | % |  | 1.5 | %
DTE Electric had income tax receivables with DTE Energy of $2 million and $1 million at June 30, 2023 and December 31, 2022, respectively, which are primarily related to state taxes and included in Accounts Receivable - Affiliates on the DTE Electric Consolidated Statements of Financial Position. During the second quarter 2023, DTE Energy and DTE Electric unrecognized tax benefits decreased by $10 million and $13 million, respectively, as a result of an audit settlement related to state exposures. Recognition of these state tax benefits, net of federal benefit, resulted in a reduction of $8 million and $10 million to Income Tax Expense on the respective DTE Energy and DTE Electric Consolidated Statements of Operations for the three and six months ended June 30, 2023. As of December 31, 2022, DTE Energy and DTE Electric had $5 million and $8 million of accrued interest pertaining to income taxes, respectively, included in Accrued Interest on the Consolidated Statements of Financial Position. As a result of the tax audit settlement noted above, the Registrants have no remaining accrued interest pertaining to income taxes. As of June 30, 2023, DTE Energy had unrecognized tax benefits of $5 million remaining that, if recognized, would favorably impact effective tax rates. DTE Energy believes it is reasonably possible that the amount of unrecognized tax benefits may decrease within the next 12 months by $5 million due to an anticipated settlement of a federal claim. Unrecognized Compensation Costs As of June 30, 2023, DTE Energy had $91 million of total unrecognized compensation cost related to non-vested stock incentive plan arrangements. That cost is expected to be recognized over a weighted-average period of 1.6 years. Allocated Stock-Based Compensation DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation of $10 million and $9 million for the three months ended June 30, 2023 and 2022, respectively, while such allocation was $20 million and $21 million for the six months ended June 30, 2023 and 2022, respectively. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents include cash on hand, cash in banks, and temporary investments purchased with remaining maturities of three months or less. Restricted cash includes funds held in separate bank accounts and principally consists of amounts at DTE Securitization to pay for debt service and other qualified costs. Restricted cash designated for payments within one year is classified as a Current Asset. Financing Receivables Financing receivables are primarily composed of trade receivables, notes receivable, and unbilled revenue. The Registrants' financing receivables are stated at net realizable value. The Registrants monitor the credit quality of their financing receivables on a regular basis by reviewing credit quality indicators and monitoring for trigger events, such as a credit rating downgrade or bankruptcy. Credit quality indicators include, but are not limited to, ratings by credit agencies where available, collection history, collateral, counterparty financial statements and other internal metrics. Utilizing such data, the Registrants have determined three internal grades of credit quality. Internal grade 1 includes financing receivables for counterparties where credit rating agencies have ranked the counterparty as investment grade. To the extent credit ratings are not available, the Registrants utilize other credit quality indicators to determine the level of risk associated with the financing receivable. Internal grade 1 may include financing receivables for counterparties for which credit rating agencies have ranked the counterparty as below investment grade; however, due to favorable information on other credit quality indicators, the Registrants have determined the risk level to be similar to that of an investment grade counterparty. Internal grade 2 includes financing receivables for counterparties with limited credit information and those with a higher risk profile based upon credit quality indicators. Internal grade 3 reflects financing receivables for which the counterparties have the greatest level of risk, including those in bankruptcy status. The following represents the Registrants' financing receivables by year of origination, classified by internal grade of credit risk, including current year-to-date gross write-offs, if any. The related credit quality indicators and risk ratings utilized to develop the internal grades have been updated through June 30, 2023.
| DTE Energy |  | DTE Electric
| Year of Origination
| 2023 |  | 2022 |  | 2021 and Prior |  | Total |  | 2023 and Prior
| (In millions)
Notes receivable |  |  |  |  |  |  |  |  |
Internal grade 1 | $ | — |  |  | $ | — |  |  | $ | 6 |  |  | $ | 6 |  |  | $ | 2 |
Internal grade 2 | 17 |  |  | 70 |  |  | 18 |  |  | 105 |  |  | — |
Total notes receivable(a) | $ | 17 |  |  | $ | 70 |  |  | $ | 24 |  |  | $ | 111 |  |  | $ | 2 |
Net investment in leases |  |  |  |  |  |  |  |  |
Internal grade 1 | $ | — |  |  | $ | — |  |  | $ | 37 |  |  | $ | 37 |  |  | $ | — |
Internal grade 2 | — |  |  | 67 |  |  | 187 |  |  | 254 |  |  | — |
Total net investment in leases(a) | $ | — |  |  | $ | 67 |  |  | $ | 224 |  |  | $ | 291 |  |  | $ | — |
_______________________________________ (a)For DTE Energy and DTE Electric, current portion is included in Current Assets — Other on the respective Consolidated Statements of Financial Position. The allowance for doubtful accounts on accounts receivable for the utility entities is generally calculated using an aging approach that utilizes rates developed in reserve studies. DTE Electric and DTE Gas establish an allowance for uncollectible accounts based on historical losses and management's assessment of existing and future economic conditions, customer trends and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the due date, which is typically in 21 days, however, factors such as assistance programs may delay aggressive action. DTE Electric and DTE Gas generally assess late payment fees on trade receivables based on past-due terms with customers. Customer accounts are written off when collection efforts have been exhausted. The time period for write-off is 150 days after service has been terminated. The customer allowance for doubtful accounts for non-utility businesses and other receivables for both utility and non-utility businesses is generally calculated based on specific review of probable future collections based on receivable balances generally in excess of 30 days. Existing and future economic conditions, customer trends and other factors are also considered. Receivables are written off on a specific identification basis and determined based upon the specific circumstances of the associated receivable. Notes receivable for DTE Energy are primarily comprised of finance lease receivables and loans that are included in Notes Receivable and Other current assets on DTE Energy's Consolidated Statements of Financial Position. Notes receivable for DTE Electric are primarily comprised of loans. Notes receivable are typically considered delinquent when payment is not received for periods ranging from 60 to 120 days. The Registrants cease accruing interest (nonaccrual status), consider a note receivable impaired, and establish an allowance for credit loss when it is probable that principal and interest amounts due will not be collected in accordance with the contractual terms of the note receivable. In determining the allowance for credit losses for notes receivable, the Registrants consider the historical payment experience and other factors that are expected to have a specific impact on the counterparty's ability to pay including existing and future economic conditions. Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to the contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current. The following tables present a roll-forward of the activity for the Registrants' financing receivables credit loss reserves:
| DTE Energy |  | DTE Electric
| Trade accounts receivable |  | Other receivables |  |  |  |  |  | Total |  | Trade and other accounts receivable
| (In millions)
Beginning reserve balance, January 1, 2023 | $ | 78 |  |  | $ | 1 |  |  |  |  |  |  | $ | 79 |  |  | $ | 49 |
Current period provision | 34 |  |  | — |  |  |  |  |  |  | 34 |  |  | 17 |
Write-offs charged against allowance | (50) |  |  | — |  |  |  |  |  |  | (50) |  |  | (34) |
Recoveries of amounts previously written off | 20 |  |  | — |  |  |  |  |  |  | 20 |  |  | 13 |
Ending reserve balance, June 30, 2023 | $ | 82 |  |  | $ | 1 |  |  |  |  |  |  | $ | 83 |  |  | $ | 45 |
| DTE Energy |  | DTE Electric
| Trade accounts receivable |  | Other receivables |  |  |  |  |  | Total |  | Trade and other accounts receivable
| (In millions)
Beginning reserve balance, January 1, 2022 | $ | 89 |  |  | $ | 3 |  |  |  |  |  |  | $ | 92 |  |  | $ | 54 |
Current period provision | 49 |  |  | — |  |  |  |  |  |  | 49 |  |  | 33 |
Write-offs charged against allowance | (105) |  |  | (2) |  |  |  |  |  |  | (107) |  |  | (66) |
Recoveries of amounts previously written off | 45 |  |  | — |  |  |  |  |  |  | 45 |  |  | 28 |
Ending reserve balance, December 31, 2022 | $ | 78 |  |  | $ | 1 |  |  |  |  |  |  | $ | 79 |  |  | $ | 49 |
Uncollectible expense for the Registrants is primarily comprised of the current period provision for allowance for doubtful accounts and is summarized as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
| (In millions)
DTE Energy | $ | 13 |  |  | $ | 14 |  |  | $ | 35 |  |  | $ | 34 |
DTE Electric | $ | 9 |  |  | $ | 8 |  |  | $ | 17 |  |  | $ | 16 |
There are no material amounts of past due financing receivables for the Registrants as of June 30, 2023.

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