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Financial and Other Derivative Instruments | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial and Other Derivative Instruments | FINANCIAL AND OTHER DERIVATIVE INSTRUMENTSThe Registrants recognize all derivatives at their fair value as Derivative assets or liabilities on their respective Consolidated Statements of Financial Position unless they qualify for certain scope exceptions, including the normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge); or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the derivative gain or loss is deferred in Accumulated other comprehensive income (loss) and later reclassified into earnings when the underlying transaction occurs. For fair value hedges, changes in fair values for the derivative and hedged item are recognized in earnings each period. For derivatives that do not qualify or are not designated for hedge accounting, changes in fair value are recognized in earnings each period. The Registrants' primary market risk exposure is associated with commodity prices, credit, and interest rates. The Registrants have risk management policies to monitor and manage market risks. The Registrants use derivative instruments to manage some of the exposure. DTE Energy uses derivative instruments for trading purposes in its Energy Trading segment. Contracts classified as derivative instruments include electricity, natural gas, oil, certain environmental contracts, forwards, futures, options, swaps, and foreign currency exchange contracts. Items not classified as derivatives include natural gas and environmental inventory, pipeline transportation contracts, certain environmental contracts, and natural gas storage assets. DTE Electric — DTE Electric generates, purchases, distributes, and sells electricity. DTE Electric uses forward contracts to manage changes in the price of electricity and fuel. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Other derivative contracts are MTM and recoverable through the PSCR mechanism when settled. This results in the deferral of unrealized gains and losses as Regulatory assets or liabilities until realized. DTE Gas — DTE Gas purchases, stores, transports, distributes, and sells natural gas, and buys and sells transportation and storage capacity. DTE Gas has fixed-priced contracts for portions of its expected natural gas supply requirements through March 2026. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Forward transportation and storage contracts are generally not derivatives and are therefore accounted for under the accrual method. DTE Vantage — This segment manages and operates renewable gas recovery projects, power generation assets, and other customer specific energy solutions. Long-term contracts and hedging instruments are used in the marketing and management of the segment assets. These contracts and hedging instruments are generally not derivatives and are therefore accounted for under the accrual method. Energy Trading — Commodity Price Risk — Energy Trading markets and trades electricity, natural gas physical products, and energy financial instruments, and provides energy and asset management services utilizing energy commodity derivative instruments. Forwards, futures, options, and swap agreements are used to manage exposure to the risk of market price and volume fluctuations in its operations. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met. Energy Trading — Foreign Currency Exchange Risk — Energy Trading has foreign currency exchange forward contracts to economically hedge fixed Canadian dollar commitments existing under natural gas and power purchase and sale contracts and natural gas transportation contracts. Energy Trading enters into these contracts to mitigate price volatility with respect to fluctuations of the Canadian dollar relative to the U.S. dollar. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met. Corporate and Other — Interest Rate Risk — DTE Energy may use interest rate swaps, treasury locks, and other derivatives to hedge the risk associated with interest rate market volatility. Credit Risk — DTE Energy maintains credit policies that significantly minimize overall credit risk. These policies include an evaluation of potential customers’ and counterparties’ financial condition, including the viability of underlying productive assets, credit rating, collateral requirements, or other credit enhancements such as letters of credit or guarantees. DTE Energy generally uses standardized agreements that allow the netting of positive and negative transactions associated with a single counterparty. DTE Energy maintains a provision for credit losses based on factors surrounding the credit risk of its customers, historical trends, and other information. Based on DTE Energy's credit policies and its September 30, 2023 provision for credit losses, DTE Energy’s exposure to counterparty nonperformance is not expected to have a material adverse effect on DTE Energy's Consolidated Financial Statements. Derivative Activities DTE Energy manages its MTM risk on a portfolio basis based upon the delivery period of its contracts and the individual components of the risks within each contract. Accordingly, it records and manages the energy purchase and sale obligations under its contracts in separate components based on the commodity (e.g. electricity or natural gas), the product (e.g. electricity for delivery during peak or off-peak hours), the delivery location (e.g. by region), the risk profile (e.g. forward or option), and the delivery period (e.g. by month and year). The following describes the categories of activities represented by their operating characteristics and key risks: •Asset Optimization — Represents derivative activity associated with assets owned and contracted by DTE Energy, including forward natural gas purchases and sales, natural gas transportation, and storage capacity. Changes in the value of derivatives in this category typically economically offset changes in the value of underlying non-derivative positions, which do not qualify for fair value accounting. The difference in accounting treatment of derivatives in this category and the underlying non-derivative positions can result in significant earnings volatility. •Marketing and Origination — Represents derivative activity transacted by originating substantially hedged positions with wholesale energy marketers, producers, end-users, utilities, retail aggregators, and alternative energy suppliers. •Fundamentals Based Trading — Represents derivative activity transacted with the intent of taking a view, capturing market price changes, or putting capital at risk. This activity is speculative in nature as opposed to hedging an existing exposure. •Other — Includes derivative activity at DTE Electric related to FTRs. Changes in the value of derivative contracts at DTE Electric are recorded as Derivative assets or liabilities, with an offset to Regulatory assets or liabilities as the settlement value of these contracts will be included in the PSCR mechanism when realized. The following table presents the fair value of derivative instruments for DTE Energy:
| September 30, 2023 |  | December 31, 2022
| Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities
| (In millions)
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Interest rate contracts | $ | 22 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |
Foreign currency exchange contracts | — |  |  | (1) |  |  | — |  |  | (2) |
Total derivatives designated as hedging instruments | $ | 22 |  |  | $ | (1) |  |  | $ | 1 |  |  | $ | (2) |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Commodity contracts |  |  |  |  |  |  |
Natural gas | $ | 441 |  |  | $ | (476) |  |  | $ | 744 |  |  | $ | (1,018) |
Electricity | 333 |  |  | (318) |  |  | 963 |  |  | (935) |
Environmental & Other | 171 |  |  | (175) |  |  | 213 |  |  | (214) |
Foreign currency exchange contracts | 1 |  |  | — |  |  | 1 |  |  | — |
Total derivatives not designated as hedging instruments | $ | 946 |  |  | $ | (969) |  |  | $ | 1,921 |  |  | $ | (2,167) |
Current | $ | 733 |  |  | $ | (657) |  |  | $ | 1,517 |  |  | $ | (1,535) |
Noncurrent | 235 |  |  | (313) |  |  | 405 |  |  | (634) |
Total derivatives | $ | 968 |  |  | $ | (970) |  |  | $ | 1,922 |  |  | $ | (2,169) |
The fair value of derivative instruments at DTE Electric was $10 million and $11 million at September 30, 2023 and December 31, 2022, respectively, comprised of FTRs recorded to Current Assets - Other on the Consolidated Statements of Financial Position and not designated as hedging instruments. Certain of DTE Energy's derivative positions are subject to netting arrangements which provide for offsetting of asset and liability positions as well as related cash collateral. Such netting arrangements generally do not have restrictions. Under such netting arrangements, DTE Energy offsets the fair value of derivative instruments with cash collateral received or paid for those contracts executed with the same counterparty, which reduces DTE Energy's Total Assets and Liabilities. Cash collateral is allocated between the fair value of derivative instruments and customer accounts receivable and payable with the same counterparty on a pro-rata basis to the extent there is exposure. Any cash collateral remaining, after the exposure is netted to zero, is reflected in Accounts receivable and Accounts payable as collateral paid or received, respectively. DTE Energy also provides and receives collateral in the form of letters of credit which can be offset against net Derivative assets and liabilities as well as Accounts receivable and payable. DTE Energy had $1 million of letters of credit issued and outstanding at September 30, 2023 and $81 million at December 31, 2022, which could be used to offset net Derivative liabilities. Letters of credit received from third parties which could be used to offset net Derivative assets were $18 million and $82 million at September 30, 2023 and December 31, 2022, respectively. Such balances of letters of credit are excluded from the tables below and are not netted with the recognized assets and liabilities in DTE Energy's Consolidated Statements of Financial Position. For contracts with certain clearing agents, the fair value of derivative instruments is netted against realized positions with the net balance reflected as either 1) a Derivative asset or liability or 2) an Account receivable or payable. Other than certain clearing agents, Accounts receivable and Accounts payable that are subject to netting arrangements have not been offset against the fair value of Derivative assets and liabilities. The following table presents net cash collateral offsetting arrangements for DTE Energy:
| September 30, 2023 |  | December 31, 2022
| (In millions)
Cash collateral netted against Derivative assets | $ | — |  |  | $ | (90) |
Cash collateral netted against Derivative liabilities | 12 |  |  | 113 |
Cash collateral recorded in Accounts receivable(a) | 52 |  |  | 77 |
Cash collateral recorded in Accounts payable(a) | (15) |  |  | (27) |
Total net cash collateral posted (received) | $ | 49 |  |  | $ | 73 |
_______________________________________ (a)Amounts are recorded net by counterparty. The following table presents the netting offsets of Derivative assets and liabilities for DTE Energy:
| September 30, 2023 |  | December 31, 2022
| Gross Amounts of Recognized Assets (Liabilities) |  | Gross Amounts Offset in the Consolidated Statements of Financial Position |  | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position |  | Gross Amounts of Recognized Assets (Liabilities) |  | Gross Amounts Offset in the Consolidated Statements of Financial Position |  | Net Amounts of Assets (Liabilities) Presented in the Consolidated Statements of Financial Position
| (In millions)
Derivative assets |  |  |  |  |  |  |  |  |  |  |
Commodity contracts(a) |  |  |  |  |  |  |  |  |  |  |
Natural gas | $ | 441 |  |  | $ | (299) |  |  | $ | 142 |  |  | $ | 744 |  |  | $ | (649) |  |  | $ | 95 |
Electricity | 333 |  |  | (198) |  |  | 135 |  |  | 963 |  |  | (643) |  |  | 320 |
Environmental & Other | 171 |  |  | (162) |  |  | 9 |  |  | 213 |  |  | (196) |  |  | 17 |
Interest rate contracts | 22 |  |  | — |  |  | 22 |  |  | 1 |  |  | — |  |  | 1 |
Foreign currency exchange contracts | 1 |  |  | — |  |  | 1 |  |  | 1 |  |  | (1) |  |  | — |
Total derivative assets | $ | 968 |  |  | $ | (659) |  |  | $ | 309 |  |  | $ | 1,922 |  |  | $ | (1,489) |  |  | $ | 433 |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |
Commodity contracts(a) |  |  |  |  |  |  |  |  |  |  |
Natural gas | $ | (476) |  |  | $ | 301 |  |  | $ | (175) |  |  | $ | (1,018) |  |  | $ | 645 |  |  | $ | (373) |
Electricity | (318) |  |  | 208 |  |  | (110) |  |  | (935) |  |  | 665 |  |  | (270) |
Environmental & Other | (175) |  |  | 162 |  |  | (13) |  |  | (214) |  |  | 201 |  |  | (13) |
Foreign currency exchange contracts | (1) |  |  | — |  |  | (1) |  |  | (2) |  |  | 1 |  |  | (1) |
Total derivative liabilities | $ | (970) |  |  | $ | 671 |  |  | $ | (299) |  |  | $ | (2,169) |  |  | $ | 1,512 |  |  | $ | (657) |
_______________________________________ (a)For contracts with a clearing agent, DTE Energy nets all activity across commodities. This can result in some individual commodities having a contra balance. The following table presents the netting offsets of Derivative assets and liabilities showing the reconciliation of derivative instruments to DTE Energy's Consolidated Statements of Financial Position:
| September 30, 2023 |  | December 31, 2022
| Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities
| Current |  | Noncurrent |  | Current |  | Noncurrent |  | Current |  | Noncurrent |  | Current |  | Noncurrent
| (In millions)
Total fair value of derivatives | $ | 733 |  |  | $ | 235 |  |  | $ | (657) |  |  | $ | (313) |  |  | $ | 1,517 |  |  | $ | 405 |  |  | $ | (1,535) |  |  | $ | (634) |
Counterparty netting | (505) |  |  | (154) |  |  | 505 |  |  | 154 |  |  | (1,127) |  |  | (272) |  |  | 1,127 |  |  | 272 |
Collateral adjustment | — |  |  | — |  |  | 7 |  |  | 5 |  |  | (62) |  |  | (28) |  |  | 66 |  |  | 47 |
Total derivatives as reported | $ | 228 |  |  | $ | 81 |  |  | $ | (145) |  |  | $ | (154) |  |  | $ | 328 |  |  | $ | 105 |  |  | $ | (342) |  |  | $ | (315) |
The effect of derivatives not designated as hedging instruments on DTE Energy's Consolidated Statements of Operations is as follows:
|  | Location of Gain (Loss) Recognized in Income on Derivatives |  | Gain (Loss) Recognized in Income on Derivatives for the Three Months Ended September 30, |  | Gain (Loss) Recognized in Income on Derivatives for the Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
|  |  |  | (In millions)
Commodity contracts |  |  |  |  |  |  |  |
Natural gas |  | Operating Revenues — Non-utility operations |  | $ | (41) |  |  | $ | (52) |  |  | $ | 89 |  |  | $ | (315) |
Natural gas |  | Fuel, purchased power, gas, and other — non-utility |  | 37 |  |  | 108 |  |  | 120 |  |  | 8 |
Electricity |  | Operating Revenues — Non-utility operations |  | 85 |  |  | 61 |  |  | 30 |  |  | 173 |
Environmental & Other |  | Operating Revenues — Non-utility operations |  | (4) |  |  | (3) |  |  | (5) |  |  | 15 |
Foreign currency exchange contracts |  | Operating Revenues — Non-utility operations |  | 1 |  |  | 5 |  |  | — |  |  | 5 |
Total |  |  |  | $ | 78 |  |  | $ | 119 |  |  | $ | 234 |  |  | $ | (114) |
Revenues and energy costs related to trading contracts are presented on a net basis in DTE Energy's Consolidated Statements of Operations. Commodity derivatives used for trading purposes, and financial non-trading commodity derivatives, are accounted for using the MTM method with unrealized and realized gains and losses recorded in Operating Revenues — Non-utility operations. Non-trading physical commodity sale and purchase derivative contracts are generally accounted for using the MTM method with unrealized and realized gains and losses for sales recorded in Operating Revenues — Non-utility operations and purchases recorded in Fuel, purchased power, gas, and other — non-utility. The following represents the cumulative gross volume of DTE Energy's derivative contracts outstanding as of September 30, 2023:
Commodity |  | Number of Units
Natural gas (MMBtu) |  | 2,208,451,991 |
Electricity (MWh) |  | 37,535,900 |
Oil (Gallons) |  | 4,740,000 |
Foreign currency exchange ($ CAD) |  | 150,049,286 |
FTR (MWh) |  | 98,119 |
Renewable Energy Certificates (MWh) |  | 10,856,311 |
Carbon emissions (Metric Tons) |  | 1,652,108 |
Interest rate contracts ($ USD) |  | 500,000,000 |
Various subsidiaries of DTE Energy have entered into derivative and non-derivative contracts which contain ratings triggers and are guaranteed by DTE Energy. These contracts contain provisions which allow the counterparties to require that DTE Energy post cash or letters of credit as collateral in the event that DTE Energy’s credit rating is downgraded below investment grade. Certain of these provisions (known as "hard triggers") state specific circumstances under which DTE Energy can be required to post collateral upon the occurrence of a credit downgrade, while other provisions (known as "soft triggers") are not as specific. For contracts with soft triggers, it is difficult to estimate the amount of collateral which may be requested by counterparties and/or which DTE Energy may ultimately be required to post. The amount of such collateral which could be requested fluctuates based on commodity prices (primarily natural gas, power, and environmental) and the provisions and maturities of the underlying transactions. As of September 30, 2023, DTE Energy's contractual obligation to post collateral in the form of cash or letters of credit in the event of a downgrade to below investment grade, under both hard trigger and soft trigger provisions, was $437 million. As of September 30, 2023, DTE Energy had $761 million of derivatives in net liability positions, for which hard triggers exist. There is $12 million of collateral that has been posted against such liabilities, including cash and letters of credit. Associated derivative net asset positions for which contractual offset exists were $632 million. The net remaining amount of $117 million is derived from the $437 million noted above.

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