Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2008
 
Commission file number 1-11607
 
DTE ENERGY COMPANY
(Exact name of registrant as specified in its charter)
 
     
Michigan
(State or other jurisdiction of
incorporation or organization)
  38-3217752
(I.R.S. Employer
Identification No.)
One Energy Plaza, Detroit, Michigan
(Address of principal executive offices)
  48226-1279
(Zip Code)
 
313-235-4000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
     
Title of Each Class
 
Name of Each Exchange on Which Registered
 
Common Stock, without par value
  New York Stock Exchange
7.8% Trust Preferred Securities*
  New York Stock Exchange
7.50% Trust Originated Preferred Securities**
  New York Stock Exchange
 
 * Issued by DTE Energy Trust I. DTE Energy fully and unconditionally guarantees the payments of all amounts due on these securities to the extent DTE Energy Trust I has funds available for payment of such distributions.
 
** Issued by DTE Energy Trust II. DTE Energy fully and unconditionally guarantees the payments of all amounts due on these securities to the extent DTE Energy Trust II has funds available for payment of such distributions.
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ      No  o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o      No  þ
 
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.  Yes  þ      No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  þ Accelerated filer  o Non-accelerated filer  o Smaller reporting company  o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o      No  þ
 
On June 30, 2008, the aggregate market value of the Registrant’s voting and non-voting common equity held by non-affiliates was approximately $6.9 billion (based on the New York Stock Exchange closing price on such date). There were 163,256,618 shares of common stock outstanding at January 31, 2009.
 
Certain information in DTE Energy Company’s definitive Proxy Statement for its 2009 Annual Meeting of Common Shareholders to be held April 30, 2009, 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.
 


 

 
DTE Energy Company
Annual Report on Form 10-K
Year Ended December 31, 2008

TABLE OF CONTENTS
 
                 
        PAGE
 
    2  
    4  
 
PART I
      Business, Risk Factors, Unresolved Staff Comments and Properties     6  
      Legal Proceedings     25  
      Submission of Matters to a Vote of Security Holders     26  
 
PART II
      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     27  
      Selected Financial Data     29  
      Management’s Discussion And Analysis of Financial Condition and Results of Operations     29  
      Quantitative and Qualitative Disclosures About Market Risk     63  
      Financial Statements and Supplementary Data     67  
      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     144  
      Controls and Procedures     144  
      Other Information     144  
 
PART III
      Directors, Executive Officers and Corporate Governance     144  
      Executive Compensation     144  
      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     144  
      Certain Relationships and Related Transactions, and Director Independence     144  
      Principal Accountant Fees and Services     144  
 
PART IV
      Exhibits and Financial Statement Schedules     144  
    155  
  Ninth Supplemental Indenture, dated as of December 1, 2008
  Forty-second Supplemental Indenture, dated as of December 1, 2008
  DTE Energy Company Executive Supplemental Retirement Plan as Amended and Restated
  DTE Energy Company Supplemental Retirement Plan as Amended and Restated
  DTE Energy Company Supplemental Savings Plan as Amended and Restated
  DTE Energy Company Executive Compensation Plan as Amended and Restated
  DTE Energy Company Plan for Deferring the Payment of Directors' Fees as Amended and Restated
  DTE Energy Company Deferred Stock Compensation Plan for Non-Employee Directors as Amended and Restated
  Computation of Ratio of Earnings to Fixed Charges
  Subsidiaries of the Company
  Consent of Deloitte & Touche LLP
  Chief Executive Officer Section 302 Form 10-K Certification of Periodic Report
  Chief Financial Officer Section 302 Form 10-K Certification of Periodic Report
  Chief Executive Officer Section 906 Form 10-K Certification of Periodic Report
  Chief Financial Officer Section 906 Form 10-K Certification of Periodic Report
  Twentieth Amendment to Master Trust


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DEFINITIONS
 
Company DTE Energy Company and any subsidiary companies
 
CTA Costs to achieve, consisting of project management, consultant support and employee severance, related to the Performance Excellence Process
 
Customer Choice Statewide initiatives giving customers in Michigan the option to choose alternative suppliers for electricity and gas.
 
Detroit Edison The Detroit Edison Company (a direct wholly owned subsidiary of DTE Energy Company) and subsidiary companies
 
DTE Energy DTE Energy Company, directly or indirectly the parent of Detroit Edison, MichCon and numerous non-utility subsidiaries
 
EPA United States Environmental Protection Agency
 
FASB Financial Accounting Standards Board
 
FERC Federal Energy Regulatory Commission
 
GCR A gas cost recovery mechanism authorized by the MPSC, permitting MichCon to pass the cost of natural gas to its customers.
 
MDEQ Michigan Department of Environmental Quality
 
MichCon Michigan Consolidated Gas Company (an indirect wholly owned subsidiary of DTE Energy) and subsidiary companies
 
MISO Midwest Independent System Operator, a Regional Transmission Organization
 
MPSC Michigan Public Service Commission
 
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 or the FERC.
 
NRC Nuclear Regulatory Commission
 
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 Internal Revenue Service.
 
Proved reserves Estimated quantities of natural gas, natural gas liquids and crude oil which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reserves under existing economic and operating conditions.
 
PSCR A power supply cost recovery mechanism authorized by the MPSC that allows Detroit Edison to recover through rates its fuel, fuel-related and purchased power expenses.
 
Securitization Detroit Edison financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, the Detroit Edison Securitization Funding LLC.
 
SFAS Statement of Financial Accounting Standards
 
Subsidiaries The direct and indirect subsidiaries of DTE Energy Company


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Synfuels The fuel produced through a process involving chemically modifying and binding particles of coal. Synfuels are used for power generation and coke production. Synfuel production through December 31, 2007 generated production tax credits.
 
Unconventional Gas Includes those oil and gas deposits that originated and are stored in coal bed, tight sandstone and shale formations.
 
Units of Measurement
 
Bcf Billion cubic feet of gas
 
Bcfe Conversion metric of natural gas, the ratio of 6 Mcf of gas to 1 barrel of oil.
 
GWh Gigawatthour of electricity
 
kWh Kilowatthour of electricity
 
Mcf Thousand cubic feet of gas
 
MMcf Million cubic feet of gas
 
MW Megawatt of electricity
 
MWh Megawatthour of electricity


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Forward-Looking Statements
 
Certain information presented herein includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain risks and uncertainties that may cause actual future results to differ materially from those presently contemplated, projected, estimated or budgeted. Many factors may impact forward-looking statements including, but not limited to, the following:
 
  •  access to capital markets and capital market conditions 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;
 
  •  potential for continued loss on cash equivalents and investments, including nuclear decommissioning and benefit plan assets;
 
  •  the length and severity of ongoing economic decline;
 
  •  the timing and extent of changes in interest rates;
 
  •  the level of borrowings;
 
  •  the availability, cost, coverage and terms of insurance and stability of insurance providers;
 
  •  changes in the economic and financial viability of our customers, suppliers, and trading counterparties, and the continued ability of such parties to perform their obligations to the Company;
 
  •  the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;
 
  •  economic climate and population growth or decline in the geographic areas where we do business;
 
  •  environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements that could include carbon and more stringent mercury emission controls, a renewable portfolio standard and energy efficiency mandates;
 
  •  nuclear regulations and operations associated with nuclear facilities;
 
  •  impact of electric and gas utility restructuring in Michigan, including legislative amendments and Customer Choice programs;
 
  •  employee relations and the impact of collective bargaining agreements;
 
  •  unplanned outages;
 
  •  changes in the cost and availability of coal and other raw materials, purchased power and natural gas;
 
  •  the effects of competition;
 
  •  the uncertainties of successful exploration of gas shale resources and inability to estimate gas reserves with certainty;
 
  •  impact of regulation by the FERC, MPSC, NRC and other applicable governmental proceedings and regulations, including any associated impact on rate structures;
 
  •  contributions to earnings by non-utility subsidiaries;
 
  •  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 ability to recover costs through rate increases;
 
  •  the cost of protecting assets against, or damage due to, terrorism;
 
  •  changes in and application of accounting standards and financial reporting regulations;


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  •  changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues;
 
  •  amounts of uncollectible accounts receivable; and
 
  •  binding arbitration, litigation and related appeals.
 
New factors emerge from time to time. We cannot predict what factors may arise or how such factors may cause our results to differ materially from those contained in any forward-looking statement. Any forward-looking statements refer only as of the date on which such statements are made. We 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.


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Part I
 
Items 1. and 2. Business and Properties
 
General
 
In 1995, DTE Energy incorporated in the State of Michigan. Our utility operations consist primarily of Detroit Edison and MichCon. We also have four non-utility segments that are engaged in a variety of energy-related businesses.
 
Detroit Edison is a Michigan corporation organized in 1903 and is a public utility subject to regulation by the MPSC and the FERC. Detroit Edison is engaged in the generation, purchase, distribution and sale of electricity to approximately 2.2 million customers in southeastern Michigan.
 
MichCon is a Michigan corporation organized in 1898 and is a public utility subject to regulation by the MPSC. MichCon is engaged in the purchase, storage, transmission, distribution and sale of natural gas to approximately 1.2 million customers throughout Michigan.
 
Our four non-utility segments are involved in 1) gas pipelines and storage; 2) unconventional gas exploration, development, and production; 3) power and industrial projects and coal transportation and marketing; and 4) energy marketing and trading operations.
 
Our 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 page of our website: www.dteenergy.com , as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (SEC). Our previously filed reports and statements are also available at the SEC’s website: www.sec.gov .
 
The Company’s Code of Ethics and Standards of Behavior, Board of Directors Mission and Guidelines, Board Committee Charters, and Categorical Standards of Director Independence are also posted on its website. The information on the Company’s website is not part of this or any other report that the Company files with, or furnishes to, the SEC.
 
Additionally, the public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov .
 
References in this Report to “we,” “us,” “our,” “Company” or “DTE” are to DTE Energy and its subsidiaries, collectively.
 
Corporate Structure
 
Based on the following structure, we set strategic goals, allocate resources, and evaluate performance. See Note 20 of the Notes to Consolidated Financial Statements in Item 8 of this Report for financial information by segment for the last three years.
 
Electric Utility
 
  •  Consists of Detroit Edison, our electric utility whose operations include the power generation and electric distribution facilities that service approximately 2.2 million residential, commercial, industrial and wholesale customers throughout southeastern Michigan.
 
Gas Utility
 
  •  Consists of the gas distribution services provided by MichCon, a gas utility that purchases, stores, transports and distributes natural gas throughout Michigan to approximately 1.2 million residential,


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  commercial and industrial customers, and Citizens Gas Fuel Company (Citizens), a gas utility that distributes natural gas in Adrian, Michigan to approximately 17,000 customers.
 
Non-Utility Operations
 
  •  Gas Midstream , primarily consisting of natural gas pipelines and storage;
 
  •  Unconventional Gas Production, primarily consisting of unconventional gas exploration, development and production;
 
  •  Power and Industrial Projects , primarily consisting of on-site energy services, steel-related projects, power generation and coal transportation and marketing; and
 
  •  Energy Trading, primarily consisting of energy marketing and trading operations.
 
Corporate & Other, includes various holding company activities, holds certain non-utility debt and energy-related investments.
 
(ORGANIZATIONAL CHART)
 
Refer to our 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 UTILITY
 
Description
 
Our Electric Utility segment consists of Detroit Edison. Our generating plants are regulated by numerous federal and state governmental agencies, including, but not limited to, the MPSC, the FERC, the NRC, the EPA and the MDEQ. Electricity is generated from our several fossil plants, a hydroelectric pumped storage plant and a nuclear plant, and is purchased from electricity generators, suppliers and wholesalers. The electricity we produce and purchase is sold to four major classes of customers: residential, commercial, industrial, and wholesale, principally throughout southeastern Michigan.


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Revenue by Service
 
                         
    2008     2007     2006  
    (In millions)  
 
Residential
  $ 1,726     $ 1,739     $ 1,671  
Commercial
    1,753       1,723       1,603  
Industrial
    894       854       835  
Wholesale
    119       125       109  
Other
    170       259       350  
                         
Subtotal
    4,662       4,700       4,568  
Interconnection sales(1)
    212       200       169  
                         
Total Revenue
  $ 4,874     $ 4,900     $ 4,737  
                         
 
 
(1) Represents power that is not distributed by Detroit Edison.
 
Weather, economic factors, competition and electricity prices affect sales levels to customers. Our 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. We occasionally experience various types of storms that damage our electric distribution infrastructure resulting in power outages. Restoration and other costs associated with storm-related power outages can negatively impact earnings. In the December 23, 2008 MPSC rate order for Detroit Edison, a tracking mechanism was approved that provides for an annual reconciliation for restoration costs (storm and non-storm) using a base expense level of $110 million per year. Our 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 Detroit Edison.
 
Fuel Supply and Purchased Power
 
Our power is generated from a variety of fuels and is supplemented with purchased power. We expect to have an adequate supply of fuel and purchased power to meet our obligation to serve customers. Our 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. We expect to obtain the majority of our coal requirements through long-term contracts, with the balance to be obtained through short-term agreements and spot purchases. We have eight long-term and two short-term contracts for a total purchase of approximately 26 million tons of low-sulfur western coal to be delivered in 2009 and 2010. We also have eight contracts for the purchase of approximately 6 million tons of Appalachian coal to be delivered from 2009 through 2011. All of these contracts have fixed prices. We have approximately 84% of our 2009 expected coal requirements under contract. Given the geographic diversity of supply, we believe we can meet our expected generation requirements. We lease a fleet of rail cars and have long-term transportation contracts with companies to provide rail and vessel services for delivery of purchased coal to our generating facilities.
 
Detroit Edison participates in the energy market through MISO. We offer our generation in the market on a day-ahead and real-time basis and bid for power in the market to serve our load. We are a net purchaser of power that supplements our generation capability to meet customer demand during peak cycles.
 
Properties
 
Detroit Edison owns generating plants and facilities that are located in the State of Michigan. Substantially all of our property is subject to the lien of a mortgage.


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Generating plants owned and in service as of December 31, 2008 are as follows:
 
                         
    Location by
  Summer Net
   
    Michigan
  Rated Capability(1)(2)    
Plant Name
  County   (MW)    (%)   Year in Service
 
Fossil-fueled Steam-Electric
                       
Belle River(3)
  St. Clair     1,026       9.2     1984 and 1985
Conners Creek
  Wayne     230       2.1     1951
Greenwood
  St. Clair     785       7.1     1979
Harbor Beach
  Huron     103       0.9     1968
Marysville
  St. Clair     84       0.8     1943 and 1947
Monroe(4)
  Monroe     3,115       28.0     1971, 1973 and 1974
River Rouge
  Wayne     523       4.7     1957 and 1958
St. Clair
  St. Clair     1,368       12.3     1953, 1954, 1959, 1961 and 1969
Trenton Channel
  Wayne     730       6.6     1949 and 1968
                         
          7,964       71.7      
Oil or Gas-fueled Peaking Units
  Various     1,101       9.9     1966-1971, 1981 and 1999
Nuclear-fueled Steam-Electric Fermi 2(5)
  Monroe     1,122       10.1     1988
Hydroelectric Pumped Storage Ludington(6)
  Mason     917       8.3     1973
                         
          11,104       100.0      
                         
 
 
(1) Summer net rated capabilities of generating plants in service are based on periodic load tests and are changed depending on operating experience, the physical condition of units, environmental control limitations and customer requirements for steam, which otherwise would be used for electric generation.
 
(2) Excludes one oil-fueled unit, St. Clair Unit No. 5 (250 MW) in cold standby status.
 
(3) The Belle River capability represents Detroit Edison’s entitlement to 81.39% of the capacity and energy of the plant. See Note 7 of the Notes to the Consolidated Financial Statements in Item 8 of this Report.
 
(4) The Monroe Power Plant provided 38% of Detroit Edison’s total 2008 power plant generation.
 
(5) Fermi 2 has a design electrical rating (net) of 1,150 MW.
 
(6) Represents Detroit Edison’s 49% interest in Ludington with a total capability of 1,872 MW. See Note 7 of the Notes to the Consolidated Financial Statements in Item 8 of this Report.
 
Detroit Edison owns and operates 678 distribution substations with a capacity of approximately 33,436,000 kilovolt-amperes (kVA) and approximately 419,600 line transformers with a capacity of approximately 21,634,000 kVA.


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Circuit miles of distribution lines owned and in service as of December 31, 2008:
 
Electric Distribution
 
                 
    Circuit Miles
Operating Voltage-Kilovolts (kV)
  Overhead   Underground
 
4.8 kV to 13.2 kV
    28,114       13,875  
24 kV
    102       690  
40 kV
    2,324       335  
120 kV
    72       13  
                 
      30,612       14,913  
                 
 
There are numerous interconnections that allow the interchange of electricity between Detroit Edison and electricity providers external to our service area. These interconnections are generally owned and operated by ITC Transmission and connect to neighboring energy companies.
 
Regulation
 
Detroit Edison’s business 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. Detroit Edison’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 our investments. The FERC regulates Detroit Edison 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 Detroit Edison’s nuclear plant operations. We are subject to the requirements of other regulatory agencies with respect to safety, the environment and health.
 
See Note 5 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Energy Assistance Programs
 
Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to Detroit Edison’s ability to control its uncollectible accounts receivable and collections expenses. Detroit Edison’s uncollectible accounts receivable expense is directly affected by the level of government-funded assistance its qualifying customers receive. We work continuously with the State of Michigan and others to determine whether the share of funding allocated to our customers is representative of the number of low-income individuals in our service territory.
 
Strategy and Competition
 
We strive to be the preferred supplier of electrical generation in southeast Michigan. We can accomplish this goal by working with our customers, communities and regulatory agencies to be a reliable, low-cost supplier of electricity. To ensure generation reliability, we continue to invest in our generating plants, which will improve both plant availability and operating efficiencies. We also are making capital investments in areas that have a positive impact on reliability and environmental compliance with the goal of high customer satisfaction.
 
Our distribution operations focus on improving reliability, restoration time and the quality of customer service. We seek to lower our operating costs by improving operating efficiencies. 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.
 
The electric Customer Choice program in Michigan allows all of our electric customers to purchase their electricity from alternative electric suppliers of generation services. Customers choosing to purchase power from alternative electric suppliers represented approximately 3% of retail sales in 2008, 4% in 2007 and 6% of


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such sales in 2006. Customers participating in the electric Customer Choice program consist primarily of industrial and commercial customers whose MPSC-authorized full service rates exceed their cost of service. MPSC rate orders and recent energy legislation enacted by the State of Michigan are phasing out the pricing disparity over five years and have placed a 10 percent cap on the total potential Customer Choice related migration, mitigating some of the unfavorable effects of electric Customer Choice on our financial performance. Recent higher wholesale electric prices have also resulted in many former electric Customer Choice customers migrating back to Detroit Edison for electric generation service. When market conditions are favorable, we sell power into the wholesale market, in order to lower costs to full-service customers.
 
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. We do not expect significant competition for distribution to any group of customers in the near term. In 2008, the Michigan legislature passed a comprehensive reform package that requires Michigan utilities to serve ten percent of their retail sales from renewable energy sources by 2015. In December 2008, Detroit Edison issued a request for proposal to purchase Michigan-based renewable energy credits.
 
GAS UTILITY
 
Description
 
Our Gas Utility segment consists of MichCon and Citizens.
 
Revenue is generated by providing the following major classes of service: gas sales, end user transportation, intermediate transportation, and gas storage.
 
Revenue by Service
 
                         
    2008     2007     2006  
    (In millions)  
 
Gas sales
  $ 1,824     $ 1,536     $ 1,541  
End user transportation
    143       140       135  
Intermediate transportation
    73       59       69  
Storage and other
    112       140       104  
                         
Total Revenue
  $ 2,152     $ 1,875     $ 1,849  
                         
 
  •  Gas sales — Includes the sale and delivery of natural gas primarily to residential and small-volume commercial and industrial customers.
 
  •  End user transportation — Gas delivery service provided primarily to large-volume commercial and industrial customers. Additionally, the service is provided to residential customers, and small-volume commercial and industrial customers who have elected to participate in our Customer Choice program. End user transportation customers purchase natural gas directly from producers or brokers and utilize our pipeline network to transport the gas to their facilities or homes.
 
  •  Intermediate transportation — Gas delivery service provided to producers, brokers and other gas companies that own the natural gas, but are not the ultimate consumers. Intermediate transportation customers utilize our gathering and high-pressure transmission system to transport the gas to storage fields, processing plants, pipeline interconnections or other locations.
 
  •  Storage and other — Includes revenues from gas storage, appliance maintenance, facility development and other energy-related services.
 
Our gas sales, end user transportation and intermediate transportation volumes, revenues and net income are impacted by weather. Given the seasonal nature of our 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


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largely over, and we typically realize substantially reduced revenues and earnings in the second quarter and losses in the third quarter.
 
Our 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 our Gas Utility segment.
 
Natural Gas Supply
 
Our gas distribution system has a planned maximum daily send-out capacity of 2.8 Bcf, with approximately 68% of the volume coming from underground storage for 2008. Peak-use requirements are met through utilization of our storage facilities, pipeline transportation capacity, and purchased gas supplies. Because of our geographic diversity of supply and our pipeline transportation and storage capacity, we are able to reliably meet our supply requirements. We believe natural gas supply and pipeline capacity will be sufficiently available to meet market demands in the foreseeable future.
 
We purchase natural gas supplies in the open market by contracting with producers and marketers, and we maintain a diversified portfolio of natural gas supply contracts. Supplier, producing region, quantity, and available transportation diversify our natural gas supply base. We obtain our natural gas supply from various sources in different geographic areas (Gulf Coast, Mid-Continent, Canada and Michigan) under agreements that vary in both pricing and terms. Gas supply pricing is generally tied to NYMEX and published price indices to approximate current market prices.
 
Properties
 
We own distribution, transmission and storage properties that are located in the State of Michigan. Our distribution system includes approximately 19,000 miles of distribution mains, approximately 1,181,000 service lines and approximately 1,324,000 active meters. We own approximately 2,000 miles of transmission lines that deliver natural gas to the distribution districts and interconnect our storage fields with the sources of supply and the market areas. We also own four carbon dioxide processing facilities.
 
We own properties relating to four underground natural gas storage fields with an aggregate working gas storage capacity of approximately 132 Bcf. These facilities are important in providing reliable and cost-effective service to our customers. In addition, we sell storage services to third parties. Most of our distribution and transmission property is located on property owned by others and used by us through easements, permits or licenses. Substantially all of our property is subject to the lien of a mortgage.
 
We are directly connected to interstate pipelines, providing access to most of the major natural gas producing regions in the Gulf Coast, Mid-Continent and Canadian regions.
 
Our primary long-term transportation contracts are as follows:
 
                 
    Availability (MMcf/d)   Contract Expiration
 
Trunkline Gas Company
    10       2009  
Viking Gas Transmission Company
    51       2010  
TransCanada PipeLines Limited
    53       2010  
Great Lakes Gas Transmission L.P. 
    30       2011  
ANR Pipeline Company
    245       2011  
Vector Pipeline L.P. 
    50       2012  
Panhandle Eastern Pipeline Company
    75       2029  
 
We own 830 miles of transportation and gathering (non-utility) pipelines in the northern lower peninsula of Michigan. Our Hawes pipeline project is currently under construction and will add an additional 10 miles of pipeline when completed in early 2009. We lease a portion of our pipeline system to the Vector Pipeline Partnership (an affiliate) through a capital-lease arrangement. See Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this Report.


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Regulation
 
We are 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. MichCon’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 our investments. We are subject to the requirements of other regulatory agencies with respect to safety, the environment and health.
 
See Note 5 of the Notes to the Consolidated Financial Statements in Item 8 of this Report.
 
Energy Assistance Program
 
Energy assistance programs, funded by the federal government and the State of Michigan, remain critical to MichCon’s ability to control its uncollectible accounts receivable and collections expenses. MichCon’s uncollectible accounts receivable expense is directly affected by the level of government-funded assistance its qualifying customers receive. We work continuously with the State of Michigan and others to determine whether the share of funding allocated to our customers is representative of the number of low-income individuals in our service territory.
 
Strategy and Competition
 
Our strategy is to be the preferred provider of natural gas in Michigan. As a result of more efficient furnaces and appliances, and customer conservation due to high natural gas prices and economic conditions, we expect future sales volumes to decline. We continue to provide energy-related services that capitalize on our expertise, capabilities and efficient systems. We continue to focus on lowering our operating costs by improving operating efficiencies.
 
Competition in the gas business primarily involves other natural gas 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 our end-user transportation service. In addition, some of these customers could bypass our pipeline system and have their gas delivered directly from an interstate pipeline. We compete against alternative fuel sources by providing competitive pricing and reliable service, supported by our storage capacity.
 
Our extensive transmission pipeline system has enabled us to market 400 to 500 Bcf annually for intermediate transportation services and storage services for Michigan gas producers, marketers, distribution companies and other pipeline companies. We operate in a central geographic location with connections to major Mid-western interstate pipelines that extend throughout the Midwest, eastern United States and eastern Canada.
 
MichCon’s storage capacity is used to store natural gas for delivery to MichCon’s customers as well as sold to third parties, under a variety of arrangements for periods up to three years. Prices for storage arrangements for shorter periods are generally higher, but more volatile than for longer periods. Prices are influenced primarily by market conditions and natural gas pricing.
 
NON-UTILITY OPERATIONS
 
Gas Midstream
 
Description
 
Gas Midstream owns partnership interests in two interstate transmission pipelines and two natural gas storage fields. The pipeline and storage assets are primarily supported by long-term, fixed-price revenue contracts. We have a partnership interest in Vector Pipeline (Vector), an interstate transmission pipeline, which connects Michigan to Chicago and Ontario. We also hold partnership interests in Millennium Pipeline Company which indirectly connects southern New York State to Upper Midwest/Canadian supply, while


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providing transportation service into the New York City markets. We have storage assets in Michigan capable of storing up to 87 Bcf in natural gas storage fields located in Southeast Michigan. The Washington 10 and 28 storage facilities are high deliverability storage fields having bi-directional interconnections with Vector Pipeline and MichCon providing our customers access to the Chicago, Michigan, other Midwest and Ontario market centers.
 
Our customers include various utilities, pipelines, and producers and marketers.
 
Properties
 
The Gas Midstream business holds the following property:
 
                 
Property Classification
  % Owned     Description   Location
 
Pipelines
               
Vector Pipeline
    40%     348-mile pipeline with 1,200 MMcf per day capacity   Midwest
Millennium Pipeline (in service December 2008)
    26%     182-mile pipeline with 525 MMcf per day capacity   New York
Storage
               
Washington 10 (includes Shelby 2 Storage)
    100%     71 Bcf of storage capacity   Macomb Co, MI
Washington 28
    50%     16 Bcf of storage capacity   Macomb Co, MI
 
The assets of these businesses are well integrated with other DTE Energy operations. Pursuant to an operating agreement, MichCon provides physical operations, maintenance, and technical support for the Washington 28 and Washington 10 storage facilities.
 
Strategy and Competition
 
Our Gas Midstream business expects to continue its steady growth plan. The Gas Midstream business focuses on asset development opportunities in the Midwest-to-Northeast region to supply natural gas to meet growing demand. We expect much of the growth in the demand for natural gas in the U.S. to occur within the Mid-Atlantic and New England regions. We forecast these regions will require incremental pipeline and gas storage infrastructure necessary to deliver gas volumes to meet growing demand. Vector is an interstate pipeline that is filling a large portion of that need, and is complemented by our Michigan storage facilities. We will complete the Shelby 2 storage field at our Washington 10 storage complex by 2010 with an additional 3 Bcf of capacity additions. Once completed the combined capacity for Washington 10 and Washington 28 will be approximately 90 Bcf. Vector Pipeline received FERC approval in June 2008 to build an additional compressor station in Michigan and to expand the Vector Pipeline by approximately 100 MMcf/d to 1.3 Bcf/d, with a proposed in-service date of November 1, 2009. Gas Midstream has a 26 percent ownership interest in Millennium Pipeline which is capable of transporting 525,000 dth/d of natural gas across the southern tier of New York towards New York City. Millennium was placed in-service December 2008. We plan to expand existing assets and develop new assets that are typically supported with long-term customer commitments.
 
Unconventional Gas Production
 
Description
 
Our Unconventional Gas Production business is engaged in natural gas exploration, development and production within the Barnett shale in north Texas. In June 2007, we sold our Antrim shale gas exploration and production business in the northern lower peninsula of Michigan for gross proceeds of $1.262 billion. In January 2008, we sold a portion of our Barnett shale properties for gross proceeds of approximately $260 million. The properties in the 2008 sale include 75 Bcfe of proved reserves on approximately 11,000 net acres in the core area of the Barnett shale.


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In 2008, we added proved reserves of 23 Bcfe in the Barnett shale resulting in year-end total proved reserves of 167 Bcfe. The Barnett shale wells yielded 5 Bcfe of production in 2008. Barnett shale leasehold acres increased to 62,395 gross acres (60,435 net of interest of others) excluding impairments. We drilled a total of 37 wells in the Barnett shale acreage.
 
Our Barnett Shale gas production requires processing to extract natural gas liquids. Therefore, our wells are dedicated to various gathering and processing companies in the Fort Worth Basin. The revenues received for all products are sold at prevailing market based prices.
 
Properties
 
Unconventional Gas Production owns interests in the following producing wells and acreage in the Barnett shale as of December 31:
 
                                                 
    2008   2007   2006
    Gross   Net(1)   Gross   Net(1)   Gross   Net(1)
 
Producing Wells (2)
                                               
Barnett shale(3)
    156       155       120       120       83       83  
Held for sale
                53       33       41       27  
                                                 
      156       155       173       153       124       110  
                                                 
Developed Lease Acreage (4)
                                               
Barnett shale(3)
    14,322       14,248       9,922       9,880       10,759       10,693  
Held for sale
                7,379       4,987       5,679       3,977  
                                                 
      14,322       14,248       17,301       14,867       16,438       14,670  
                                                 
Undeveloped Lease Acreage (5)
                                               
Barnett shale(3)
    48,073       46,187       38,793       38,066       30,649       27,613  
Held for sale
                7,447       5,809       7,073       6,164  
                                                 
      48,073       46,187       46,240       43,875       37,722       33,777  
                                                 
 
 
(1) Excludes the interest of others.
 
(2) Producing wells are the number of wells that are found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.
 
(3) Excludes sold and impaired properties.
 
(4) Developed lease acreage is the number of acres that are allocated or assignable to productive wells or wells capable of production.
 
(5) Undeveloped lease acreage is the number of acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.
 
Strategy and Competition
 
We manage and operate our Barnett shale gas properties to maximize returns on investment and increase earnings with the overriding goal of optimizing the cost of producing reserves and adding additional proved reserves. We will consider potential periodic monetizations where market conditions are appropriate.


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From time to time, we use financial derivative contracts to manage a portion of our exposure to changes in the price of natural gas on our forecasted natural gas sales. The following is a summary of the financial contracts in place at December 31, 2008 related to Barnett shale production:
 
                 
    2009   2010
 
Long-term fixed price obligations
               
Volume- Bcf
    2.0       1.2  
Price- $/Mcf
  $ 7.42     $ 7.16  
 
We continue to invest in our holdings in the Western portion of the Barnett shale and anticipate significant opportunities to develop our current position while accumulating additional acreage in and around our existing assets. Current economic conditions and depressed commodity prices have created challenges and opportunities in the Barnett shale. While operating margins are expected to be lower than 2008, opportunities exist to reduce operating, drilling and completion costs primarily due to the increased availability of drilling rigs and oil field service companies.
 
In 2009, we expect to drill approximately 15 to 25 wells in the Barnett shale. Investment for the area is expected to be approximately $25 million during 2009.
 
Power and Industrial Projects
 
Description
 
Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type services to steel, automotive and other industrial, commercial and institutional customers; provide coal transportation and marketing; and develop biomass energy projects. This business segment provides utility-type services using project assets usually located on or near the customers’ premises in the steel, automotive, pulp and paper, airport and other industries.
 
These services include pulverized coal, petroleum coke and metallurgical coke supply, power generation, steam production, chilled water production, wastewater treatment and compressed air supply. We own and operate one gas-fired peaking electric generating plant, two biomass-fired electric generating plants and operate one coal-fired power plant under contract. A third biomass-fired electric generating plant is currently under development pending certain regulatory and management approvals with an expected in-service date of January 2010. Production tax credits related to two of the coke battery facilities were reinstated for the years 2006 through 2009. The coke battery facilities produce coke that is used in blast furnaces within the steel industry. Detroit Edison provides operations and maintenance services for the pulverized coal facility located at Detroit Edison’s River Rouge power plant.
 
We also provide coal transportation services including fuel, transportation, storage, blending and rail equipment management services. Our external customers include electric utilities, merchant power producers, integrated steel mills and large industrial companies with significant energy requirements. Additionally, we participate in coal marketing and the purchase and sale of emissions credits. We own and operate a coal transloading terminal in South Chicago, Illinois.
 
We develop, own and operate landfill gas recovery systems throughout the United States. Landfill gas, a byproduct of solid waste decomposition, is composed of approximately equal portions of methane and carbon dioxide. We develop landfill gas recovery systems that capture the gas and provide local utilities, industry and consumers with an opportunity to use a competitive, renewable source of energy, in addition to providing environmental benefits by reducing greenhouse gas emissions. This business segment performs coal mine methane extraction, in which we recover methane gas from mine voids for processing and delivery to natural gas pipelines, industrial users or for small power generation projects. We own a coal mine methane gathering system and gas processing facility.
 
Discontinuance of Planned Monetization of a Portion of our Power and Industrial Projects Business — During the third quarter of 2007, we announced our plans to sell a 50% interest in a portfolio of select Power and Industrial Projects. During 2008, the United States asset sale market weakened and challenges in


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the debt market persisted. As a result of these developments, our work on this planned monetization was discontinued.
 
Properties
 
The following are significant properties operated by the Power and Industrial projects segment:
 
                 
Facility
  Location   % Owned   Service Type
 
Steel
               
DTE PCI Enterprises Company
  River Rouge, MI     100%     Pulverized Coal
DTE Sparrows Point
  Sparrows Point, MD     100%     Pulverized Coal
EES Coke Battery
  River Rouge, MI     100%     Metallurgical Coke Supply
DTE Shenango
  Pittsburgh, PA     100%     Metallurgical Coke Supply
Indiana Harbor Coke Co.,
  East Chicago, IN     14.8%     Metallurgical Coke Supply
Automotive
               
DTE Energy Center
  Various sites in     50%     Electric Distribution, Chilled
    MI, IN, OH           Water, Waste Water, Compressed Air, Mist and Dust Collectors
DTE Northwind
  Detroit, MI     100%     Steam and Chilled Water
DTE Moraine
  Moraine, OH     100%     Compressed Air
DTE Tonawanda
  Tonawanda, NY     100%     Chilled and Waste Water
DTE Defiance
  Defiance, OH     100%     Steam, Cooling Tower Water, Chilled Water, Compressed Air
DTE Heritage
  Dearborn, MI     100%     Electric Distribution
DTE Dearborn
  Dearborn, MI     100%     Steam, Chilled Water, Compressed Air, Waste Water
DTE Pontiac North
  Pontiac, MI     100%     Electric Generation and Steam
DTE Lordstown
  Lordstown, OH     100%     Steam, Chilled Water, Compressed Air, and Reverse Osmosis Water
Pulp and Paper
               
Mobile Energy Services
  Mobile, AL     50%     Electric Generation and Steam
Airport
               
Metro Energy
  Romulus, MI     100%     Electricity, Hot and Chilled Water
DTE Pittsburgh
  Pittsburgh, PA     100%     Hot and Chilled Water
Other Industries
               
DTE PetCoke
  Vicksburg, MS     100%     Pulverized Petroleum Coke
Power Generation
               
DTE East China (320MW)
  East China Twp, MI     100%     Natural Gas Generating Plant
Woodland Biomass (25MW)
  Woodland, CA     99%     Wood Fired Power Plant
DTE Stoneman (40MW)
  Cassville, WI     100%     Biomass Power Plant
Coal Transportation and Marketing
               
DTE Chicago Fuels Terminal
  Chicago, IL     100%     Coal Terminal and Blending Plant


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Landfill Gas Recovery
 
                         
    2008   2007   2006
 
Landfill Sites
    23       28       26  
Gas Produced (in Bcf)
    18.6       23.5       22.9  
 
Coal Transportation and Marketing
 
                         
    2008   2007   2006
    (In millions)
 
Tons of Coal Shipped(1)
    18       35       34  
 
 
(1) Includes intercompany transactions of 2 million, 19 million, and 14 million tons in 2008, 2007, and 2006, respectively, primarily related to synfuel operations in 2007 and 2006.
 
                                 
Production Tax Credits Generated (Allocated to DTE Energy)
  2008   2007   2006    
    (In millions)    
 
Coke Battery
  $ 5     $ 5     $ 6          
Power Generation
    2       2       1          
Landfill Gas Recovery
          3       5          
 
Strategy and Competition
 
Power and Industrial Projects will continue leveraging its energy-related operating experience and project management capability to develop and grow our steel; renewable power; on-site energy; coal transportation, marketing, storage and blending; and landfill gas recovery businesses. We also will continue to pursue opportunities to provide asset management and operations services to third parties.
 
We anticipate building around our core strengths in the markets where we operate. In determining the markets in which to compete, we examine closely the regulatory and competitive environment, the number of competitors and our ability to achieve sustainable margins. We plan to maximize the effectiveness of our inter-related businesses as we expand from our current regional focus. As we pursue growth opportunities, our first priority will be to achieve value-added returns.
 
We intend to focus on the following areas for growth:
 
  •  Providing operating services to owners of industrial and power plants; and
 
  •  Acquiring and developing solid fuel-fired power plants, landfill gas recovery facilities, renewable energy projects, and other energy projects qualifying for tax credits.
 
Due to a weakened U.S. economy including constricted capital and credit markets, we expect significantly lower demand for steel in 2009 impacting the financial performance of our coke battery and pulverized coal operations. In addition, the automotive sector has been severely impacted by the current economic situation and has resulted in curtailment of production and plant closings. We will continue to monitor the steel and automotive industries closely during 2009.
 
Our Coal Transportation and Marketing business is one of the leading North American coal marketers. Trends such as railroad and mining consolidation and the lack of certainty in developing new mines by many mining firms could have an impact on how we compete in the future. In 2011, our existing long-term rail transportation contract which gives us a competitive advantage will expire. We will continue to work with suppliers and the railroads to promote secure and competitive access to coal to meet the energy requirements of our customers. We will seek to build our capacity to transport, store and blend greater amounts of coal and expect to continue to grow our business in a manner consistent with, and complementary to, the growth of our other business segments.


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Energy Trading
 
Description
 
Energy Trading focuses on physical power and gas marketing and trading, structured transactions, enhancement of returns from DTE Energy’s asset portfolio, optimization of contracted natural gas pipeline transportation and storage, and power transmission and generating capacity positions. Our customer base is predominantly utilities, local distribution companies, pipelines, and other marketing and trading companies. We enter into derivative financial instruments as part of our marketing and hedging activities. Most of the derivative financial instruments are accounted for under the mark-to-market method, which results in the recognition of unrealized gains and losses from changes in the fair value of the derivatives. We utilize forwards, futures, swaps and option contracts to mitigate risk associated with our marketing and trading activity as well as for proprietary trading within defined risk guidelines. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy.
 
Significant portions of the electric and gas marketing and trading portfolio are economically hedged. The portfolio includes financial instruments and gas inventory, as well as contracted natural gas pipelines and storage and power generation capacity positions. Most financial instruments are deemed derivatives, however gas inventory, power transmission, pipelines and certain storage assets are not derivatives. As a result, this segment may experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. This results in gains and losses that are recognized in different accounting periods. We may incur mark-to-market gains or losses in one period that could reverse in subsequent periods.
 
Strategy and Competition
 
Our strategy for the energy trading business is to deliver value-added services to our customers. We seek to manage this business in a manner consistent with and complementary to the growth of our other business segments. We focus on physical marketing and the optimization of our portfolio of energy assets. We compete with electric and gas marketers, traders, utilities and other energy providers. The trading business is dependent upon the availability of capital and an investment grade credit rating. A material credit restriction would negatively impact our financial performance. Competitors with greater access to capital or at a lower cost may have a competitive advantage. We have risk management and credit processes to monitor and mitigate risk.
 
CORPORATE & OTHER
 
Description
 
Corporate & Other includes various holding company activities and holds certain non-utility debt and energy-related investments.
 
DISCONTINUED OPERATIONS
 
Synthetic Fuel
 
Description
 
The Synthetic Fuel business was presented as a non-utility segment through the third quarter of 2007. Due to the expiration of synfuel production tax credits at the end of 2007, the Synthetic Fuel business ceased operations and was classified as a discontinued operation as of December 31, 2007. Synfuel plants chemically changed coal and waste coal into a synthetic fuel as determined under the Internal Revenue Code. Production tax credits were provided for the production and sale of solid synthetic fuel produced from coal and were available through December 31, 2007. To optimize income and cash flow from the synfuel operations, we sold interests in all nine of the facilities, representing 91% of the total production capacity. The synthetic fuel plants generated operating losses that were offset by production tax credits.


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The value of a production tax credit was adjusted annually by an inflation factor and published annually by the Internal Revenue Service (IRS). The value of production tax credits for synthetic fuel was reduced when the Reference Price of a barrel of oil exceeded certain thresholds.
 
                 
    2007     2006  
    (In millions)  
 
Production Tax Credits Generated
               
Allocated to DTE Energy
  $ 21     $ 23  
Allocated to partners
    186       260  
                 
    $ 207     $ 283  
                 
 
ENVIRONMENTAL MATTERS
 
We are subject to extensive environmental regulation. Additional costs may result as the effects of various substances on the environment are studied and governmental regulations are developed and implemented. Actual costs to comply could vary substantially. We expect to continue recovering environmental costs related to utility operations through rates charged to our customers. The following table summarizes our estimated significant future environmental expenditures based upon current regulations:
 
                                 
    Electric     Gas     Non-Utility     Total  
    (In millions)  
 
Air
  $ 2,800     $     $     $ 2,800  
Water
    55             1       53  
MGP sites
    3       38             41  
Other sites
    9       1             10  
                                 
Estimated total future expenditures through 2018
  $ 2,867     $ 39     $ 1     $ 2,904  
                                 
Estimated 2009 expenditures
  $ 100     $ 3     $ 1     $ 104  
                                 
 
Air — Detroit Edison is subject to the EPA ozone transport and acid rain regulations that limit power plant emissions of sulfur dioxide and nitrogen oxides. Since 2005, EPA and the State of Michigan have issued additional emission reduction regulations relating to ozone, fine particulate, regional haze and mercury air pollution. The new rules will lead to additional controls on fossil-fueled power plants to reduce nitrogen oxide, sulfur dioxide and mercury emissions.
 
Water — In response to an EPA regulation, Detroit Edison is required to examine alternatives for reducing the environmental impacts of the cooling water intake structures at several of its facilities. Based on the results of studies to be conducted over the next several years, Detroit Edison may be required to perform some mitigation activities, including the possible installation of additional control technologies to reduce the environmental impact of the intake structures. However, a January 2007 circuit court decision remanded back to the EPA several provisions of the federal regulation, resulting in a delay in complying with the regulation. In 2008, the U.S. Supreme Court agreed to review the remanded cost-benefit analysis provision of the rule. A decision is expected in the first quarter of 2009. Concurrently, the EPA continues to develop a revised rule, which is expected to be published in early 2009.
 
Manufactured Gas Plant (MGP) 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 for heating and other uses, have been designated as MGP sites. Gas Utility owns, or previously owned, fifteen such former MGP sites. In addition to the MGP sites, we are also in the process of cleaning up other contaminated sites. Detroit Edison conducted remedial investigations at contaminated sites, including three MGP sites, the area surrounding an ash landfill and several underground and aboveground storage tank locations. As a result of these determinations, we have recorded liabilities related to these sites. Cleanup activities associated with these sites will be conducted over the next several years.


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Non-utility — Our non-utility affiliates are subject to a number of environmental laws and regulations dealing with the protection of the environment from various pollutants. We are in the process of installing new environmental equipment at our coke battery facility in Michigan. We expect the project to be completed in the first half of 2009. Our non-utility affiliates are substantially in compliance with all environmental requirements.
 
Global Climate Change — Proposals for voluntary initiatives and mandatory controls are being discussed in the United States to reduce greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels. There may be legislative and or regulatory action to address the issue of changes in climate that may result from the build up of greenhouse gases, including carbon dioxide, in the atmosphere. We cannot predict the impact any legislative or regulatory action may have on our operations and financial position.
 
See Notes 5 and 17 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
EMPLOYEES
 
We had 10,471 employees as of December 31, 2008, of which 5,331 were represented by unions. The majority of our union employees are under contracts that expire in June and October 2010 and August 2012.
 
EXECUTIVE OFFICERS OF DTE ENERGY
                 
            Present
            Position
Name
 
Age(1)
 
Present Position
 
Held Since
 
Anthony F. Earley, Jr. 
    59     Chairman of the Board and Chief Executive Officer   8-1-98
Gerard M. Anderson(2)
    50     Chief Operating Officer and   10-31-05
            President   6-23-04
David E. Meador(2)
    51     Executive Vice President and Chief Financial Officer   6-23-04
Lynne Ellyn
    57     Senior Vice President and Chief Information Officer   12-31-01
Paul C. Hillegonds(3)
    59     Senior Vice President   5-16-05
Steve E. Kurmas(2)
    52     President and Chief Operating Officer, Detroit Edison   12-08-08
            and Group President, DTE Energy   12-08-08
Bruce D. Peterson
    52     Senior Vice President and General Counsel   6-25-02
Gerardo Norcia(2)
    45     President and Chief Operating Officer, MichCon and   6-28-07
            Group President, DTE Energy   6-28-07
Larry E. Steward
    56     Vice President   1-15-01
Peter B. Oleksiak(2)
    42     Vice President and Controller   2-07-07
Sandra K. Ennis(2)
    52     Corporate Secretary   8-4-05
 
 
(1) As of December 31, 2008.
 
(2) These executive officers held various positions at DTE Energy for at least five or more years.
 
(3) For eight years prior to joining DTE Energy, Mr. Hillegonds was president of Detroit Renaissance, a private, non-profit executive leadership organization dedicated to the growth of the southeast Michigan economy.
 
Under our Bylaws, the officers of DTE Energy are elected annually by the Board of Directors at a meeting held for such purpose, each to serve until the next annual meeting of directors or until their respective successors are chosen and qualified.
 
Pursuant to Article VI of our Articles of Incorporation, directors of DTE Energy will not be personally liable to us or our shareholders in the performance of their duties to the full extent permitted by law.


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Article VII of our Articles of Incorporation provides that each current or former director or officer of DTE Energy, or each current and former employee or agent of the Company or a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by us to the full extent permitted by the Michigan Business Corporation Act or any other applicable laws as presently or hereafter in effect. In addition, we have entered into indemnification agreements with all of our officers and directors; these agreements set forth procedures for claims for indemnification as well as contractually obligating us to provide indemnification to the maximum extent permitted by law.
 
We and our directors and officers in their capacities as such are insured against liability for alleged wrongful acts (to the extent defined) under eight insurance policies providing aggregate coverage in the amount of $185 million.
 
Item 1A.    Risk Factors
 
There are various risks associated with the operations of DTE Energy’s utility and non-utility businesses. To provide a framework to understand the operating environment of DTE Energy, we are providing a brief explanation of the more significant risks associated with our businesses. Although we have tried to identify and discuss key risk factors, others could emerge in the future. Each of the following risks could affect our performance.
 
Regional and national economic conditions can have an unfavorable impact on us.   Our utility and non-utility businesses follow the economic cycles of the customers we serve. Our utilities and certain non-utility businesses provide services to the domestic automotive industry which is under considerable financial distress, exacerbating the decline in regional economic conditions. Should national or regional economic conditions further decline, reduced volumes of electricity and gas, and demand for energy services we supply, collections of accounts receivable and potentially higher levels of lost or stolen gas will result in decreased earnings and cash flow.
 
Adverse changes in our credit ratings may negatively affect us.   Regional and national economic condition s , increased scrutiny of the energy industry and regulatory changes, as well as changes in our economic performance, could result in credit agencies reexamining our credit rating. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in our credit rating could restrict or discontinue our ability to access capital markets and could result in an increase in our borrowing costs, a reduced level of capital expenditures and could impact future earnings and cash flows. In addition, a reduction in credit rating may require us to post collateral related to various physical or financially settled contracts for the purchase of energy-related commodities, products and services, which would impact our liquidity.
 
Our ability to access capital markets at attractive interest rates is important.   Our ability to access capital markets is important to operate our businesses. In recent months, the global financial markets have experienced unprecedented instability. This systemic marketplace distress is impacting our access to capital and cost of capital. This recent turmoil in credit markets has constrained, and may again in the future constrain, our ability as well as the ability of our subsidiaries to issue new debt, including commercial paper, and refinance existing debt. We cannot predict the length of time the current worldwide credit situation will continue or the impact on our future operations and our ability to issue debt at reasonable interest rates. In addition, the level of borrowing by other energy companies and the market as a whole could limit our access to capital markets. We have substantial amounts of short-term credit facilities that expire in 2009. We intend to seek to renew the facilities on or before the expiration dates. However, we cannot predict the outcome of these efforts, which could result in a decrease in amounts available and/ or an increase in our borrowing costs and negatively impact our financial performance.
 
Poor investment performance of pension and other postretirement benefit plan holdings and other factors impacting benefit plan costs could unfavorably impact our liquidity and results of operations.   Our costs of providing non-contributory defined benefit pension plans and other postretirement benefit plans are dependent upon a number of factors, such as the rates of return on plan assets, the level of interest rates used to measure


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the required minimum funding levels of the plans, future government regulation, and our required or voluntary contributions made to the plans. The performance of the capital markets affects the value of assets that are held in trust to satisfy future obligations under our plans. We have significant benefit obligations and hold significant assets in trust to satisfy these obligations. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates. A decline in the market value of the pension and postretirement benefit plan assets, as was experienced in 2008, will increase the funding requirements under our pension and postretirement benefit plans if the actual asset returns do not recover these declines in the foreseeable future. Additionally, our pension and postretirement benefit plan liabilities are sensitive to changes in interest rates. As interest rates decrease, the liabilities increase, potentially increasing benefit expense and funding requirements. Also, if future increases in pension and postretirement benefit costs as a result of reduced plan assets are not recoverable from Detroit Edison or MichCon customers, the results of operations and financial position of our company could be negatively affected. Without sustained growth in the plan investments over time to increase the value of our plan assets, we could be required to fund our plans with significant amounts of cash. Such cash funding obligations could have a material impact on our cash flows, financial position, or results of operations.
 
If our goodwill becomes impaired, we may be required to record a charge to earnings.   We annually review the carrying value of goodwill associated with acquisitions made by the Company for impairment. Factors that may be considered for purposes of this analysis include any change in circumstances indicating that the carrying value of our goodwill may not be recoverable such as a decline in stock price and market capitalization, future cash flows, and slower growth rates in our industry. We cannot predict the timing, strength or duration of any economic slowdown or subsequent recovery, worldwide or in the economy or markets in which we operate, however, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable, the Company may take a non-cash impairment charge, which could potentially materially impact our results of operations and financial position.
 
Our participation in energy trading markets subjects us to risk.   Events in the energy trading industry have increased the level of scrutiny on the energy trading business and the energy industry as a whole. In certain situations we may be required to post collateral to support trading operations, which could be substantial. If access to liquidity to support trading activities is curtailed, we could experience decreased earnings potential and cash flows.
 
We are exposed to credit risk of counterparties with whom we do business.   Adverse economic conditions affecting, or financial difficulties of, counterparties with whom we do business could impair the ability of these counterparties to pay for our services or fulfill their contractual obligations, or cause them to delay such payments or obligations. We depend on these counterparties to remit payments on a timely basis. Any delay or default in payment could adversely affect our cash flows, financial position, or results of operations.
 
We may not be fully covered by insurance.   We have a comprehensive insurance program in place to provide coverage for various types of risks, catastrophic damage as a result of acts of God, terrorism, war or a combination of other significant unforeseen events that could impact our operations. Economic losses might not be covered in full by insurance or our insurers may be unable to meet contractual obligations.
 
We are subject to rate regulation.   Electric and gas rates for our utilities are set by the MPSC and the FERC and cannot be increased without regulatory authorization. We may be negatively impacted by new regulations or interpretations by the MPSC, the FERC or other regulatory bodies. Our ability to recover costs may be impacted by the time lag between the incurrence of costs and the recovery of the costs in customers’ rates. New legislation, regulations or interpretations could change how our business operates, impact our ability to recover costs through rate increases or require us to incur additional expenses.
 
Michigan’s electric Customer Choice program could negatively impact our financial performance.   The electric Customer Choice program, as originally contemplated in Michigan, anticipated an eventual transition to a totally deregulated and competitive environment where customers would be charged market-based rates for their electricity. The State of Michigan currently experiences a hybrid market, where the MPSC continues to regulate electric rates for our customers, while alternative electric suppliers charge market-based rates. In addition, such regulated electric rates for certain groups of our customers exceed the cost of service to those


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customers. Due to distorted pricing mechanisms during the initial implementation period of electric Customer Choice, many commercial customers chose alternative electric suppliers. MPSC rate orders and recent energy legislation enacted by the State of Michigan are phasing out the pricing disparity over five years and have placed a cap on the total potential Customer Choice related migration. Recent higher wholesale electric prices have also resulted in some former electric Customer Choice customers migrating back to Detroit Edison for electric generation service. However, even with the electric Customer Choice-related relief received in recent Detroit Edison rate orders and the legislated 10 percent cap on participation in the electric Customer Choice program, there continues to be financial risk associated with the electric Customer Choice program. Electric Customer Choice migration is sensitive to market price and bundled electric service price increases.
 
Weather significantly affects operations.   Deviations from normal hot and cold weather conditions affect our earnings and cash flow. Mild temperatures can result in decreased utilization of our assets, lowering income and cash flow. Ice storms, tornadoes, or high winds can damage the electric distribution system infrastructure and require us to perform emergency repairs and incur material unplanned expenses. The expenses of storm restoration efforts may not be fully recoverable through the regulatory process.
 
Operation of a nuclear facility subjects us to risk.   Ownership of an operating nuclear generating plant subjects us to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, and operational factors that can significantly impact the performance and cost of operating a nuclear facility. While we maintain insurance for various nuclear-related risks, there can be no assurances that such insurance will be sufficient to cover our costs in the event of an accident or business interruption at our nuclear generating plant, which may affect our financial performance.
 
The supply and price of fuel and other commodities and related transportation costs may impact our financial results.   We are dependent on coal for much of our electrical generating capacity. Price fluctuations, fuel supply disruptions and increases in transportation costs could have a negative impact on our ability to profitably generate electricity. Our access to natural gas supplies is critical to ensure reliability of service for our utility gas customers. We have hedging strategies and regulatory recovery mechanisms in place to mitigate negative fluctuations in commodity supply prices, but there can be no assurances that our financial performance will not be negatively impacted by price fluctuations. The price of natural gas also impacts the market for our non-utility businesses that compete with utilities and alternative electric suppliers. Increased transportation costs could also impact our non-utility businesses.
 
Unplanned power plant outages may be costly.   Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. As a result of unforeseen maintenance, we may be required to make spot market purchases of electricity that exceed our costs of generation. Our financial performance may be negatively affected if we are unable to recover such increased costs.
 
Our estimates of gas reserves are subject to change.   While we cannot provide absolute assurance that our estimates of our Barnett gas reserves are accurate, great care is exercised in utilizing historical information and assumptions to develop reasonable estimates of future production and cash flow. We estimate proved gas reserves and the future net cash flows attributable to those reserves. There are numerous uncertainties inherent in estimating quantities of proved gas reserves and cash flows attributable to such reserves, including factors beyond our control. Reserve engineering is a subjective process of estimating underground accumulations of gas that cannot be measured in an exact manner. The accuracy of an estimate of quantities of reserves, or of cash flows attributable to such reserves, is a function of the available data, assumptions regarding expenditures for future development and exploration activities, and of engineering and geological interpretation and judgment. Additionally, reserves and future cash flows may be subject to material downward or upward revisions, based upon production history, development and exploration activities and prices of gas. Actual future production, revenue, taxes, development expenditures, operating expenses, quantities of recoverable reserves and the value of cash flows from such reserves may vary significantly from the assumptions and underlying information we used.
 
Our ability to utilize production tax credits may be limited.   To reduce U.S. dependence on imported oil, the Internal Revenue Code provides production tax credits as an incentive for taxpayers to produce fuels and electricity from alternative sources. We have generated production tax credits from the synfuel, coke


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production, landfill gas recovery, biomass fired electric generation and gas production operations. We have received favorable private letter rulings on all of the synfuel facilities. All production tax credits taken after 2003 are subject to audit by the Internal Revenue Service (IRS). If our production tax credits were disallowed in whole or in part as a result of an IRS audit, there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact our earnings and cash flows. We have also provided certain guarantees and indemnities in conjunction with the sales of interests in the synfuel facilities.
 
We rely on cash flows from subsidiaries.   DTE Energy is a holding company. Cash flows from our utility and non-utility subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, our ability to pay interest and dividends would be restricted.
 
Environmental laws and liability may be costly.   We are subject to numerous environmental regulations. These regulations govern air emissions, water quality, wastewater discharge, and disposal of solid and hazardous waste. Compliance with these regulations can significantly increase capital spending, operating expenses and plant down times. These laws and regulations require us to seek a variety of environmental licenses, permits, inspections and other regulatory approvals. Additionally, we may become a responsible party for environmental clean up at sites identified by a regulatory body. We cannot predict with certainty the amount and timing of future expenditures related to environmental matters because of the difficulty of estimating clean up costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on potentially responsible parties.
 
We may also incur liabilities as a result of potential future requirements to address climate change issues. Proposals for voluntary initiatives and mandatory controls are being discussed both in the United States and worldwide to reduce greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels. If increased regulation of greenhouse gas emissions are implemented, the operations of our fossil-fuel generation assets may be significantly impacted.
 
Since there can be no assurances that environmental costs may be recovered through the regulatory process, our financial performance may be negatively impacted as a result of environmental matters.
 
Terrorism could affect our business.   Damage to downstream infrastructure or our own assets by terrorism would impact our operations. We have increased security as a result of past events and further security increases are possible.
 
Benefits of continuous improvement initiatives could be less than we expect.   We have a continuous improvement program that is expected to result in significant cost savings. Actual results achieved through this program could be less than our expectations.
 
A work interruption may adversely affect us.   Unions represent approximately 5,000 of our employees. A union choosing to strike would have an impact on our business. We are unable to predict the effect a work stoppage would have on our costs of operation and financial performance.
 
Failure to retain and attract key executive officers and other skilled professional and technical employees could have an adverse effect on our operations.   Our business is dependent on our ability to recruit, retain, and motivate employees. Competition for skilled employees in some areas is high and the inability to retain and attract these employees could adversely affect our business and future operating results.
 
Item 1B.    Unresolved Staff Comments
 
None.
 
Item 3.    Legal Proceedings
 
We are involved in certain legal, regulatory, administrative and environmental proceedings before various courts, arbitration panels and governmental agencies concerning matters arising in the ordinary course of business. These proceedings include certain contract disputes, environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. We cannot predict the final disposition of such


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proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss. The resolution of pending proceedings is not expected to have a material effect on our operations or financial statements in the period they are resolved.
 
We are aware of attempts by an environmental organization known as the Waterkeeper Alliance to initiate a criminal action in Canada against the Company for alleged violations of the Canadian Fisheries Act. Fines under the relevant Canadian statute could potentially be significant. To date, the Company has not been properly served process in this matter. Nevertheless, as a result of a decision by a Canadian court, a trial schedule has been initiated. The Company believes the claims of the Waterkeeper Alliance in this matter are without legal merit and has appealed the court’s decision. We are not able to predict or assess the outcome of this action at this time.
 
In February 2008, DTE Energy was named as one of approximately 24 defendant oil, power and coal companies in a lawsuit filed in a United States District Court. DTE Energy was served with process in March 2008. The plaintiffs, the Native Village of Kivalina and City of Kivalina, which are home to approximately 400 people in Alaska, claim that the defendants’ business activities have contributed to global warming and, as a result, higher temperatures are damaging the local economy and leaving the island more vulnerable to storm activity in the fall and winter. As a result, the plaintiffs are seeking damages of up to $400 million for relocation costs associated with moving the village to a safer location, as well as unspecified attorney’s fees and expenses. The defendants filed motions to dismiss. The motions are pending before the court. DTE Energy believes this claim is without merit, but is not able to predict or assess the outcome of this lawsuit at this time.
 
The City of Detroit Water and Sewer Department (DWSD) has a suit pending in U.S. District Court for the Eastern District of Michigan against EES Coke Battery, LLC (EES Coke), which is an indirect wholly owned subsidiary of the Company, alleging that certain constituents of waste water discharged by EES Coke into DWSD’s sewer system exceeded the permitted amounts. DWSD has requested that EES Coke be required to obtain a new permit and to pay fines for past excess amounts. DWSD and EES Coke have negotiated a consent order to settle this matter that is expected to require EES Coke to pay fines in excess of $100,000. The consent order is subject to final approval of the court. EES Coke is making capital improvements that are intended to prevent exceedances of the permitted amounts in the future.
 
For additional discussion on legal matters, see Notes 5 and 17 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Item 4.    Submission of Matters to a Vote of Security Holders
 
We did not submit any matters to a vote of security holders in the fourth quarter of 2008.


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Part II
 
Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Our common stock is listed on the New York Stock Exchange, which is the principal market for such stock. The following table indicates the reported high and low sales prices of our common stock on the Composite Tape of the New York Stock Exchange and dividends paid per share for each quarterly period during the past two years:
 
                                 
                Dividends
                Paid
Year
  Quarter   High   Low   Per Share
 
  2008                              
        First   $ 45.34     $ 37.87     $ 0.530  
        Second   $ 44.82     $ 38.95     $ 0.530  
        Third   $ 44.97     $ 38.78     $ 0.530  
        Fourth   $ 40.92     $ 27.82     $ 0.530  
  2007                              
        First   $ 49.42     $ 45.14     $ 0.530  
        Second   $ 54.74     $ 47.22     $ 0.530  
        Third   $ 51.74     $ 45.26     $ 0.530  
        Fourth   $ 51.19     $ 43.96     $ 0.530  
 
At December 31, 2008, there were 163,019,596 shares of our common stock outstanding. These shares were held by a total of 82,706 shareholders of record.
 
Our Bylaws nullify Chapter 7B of the Michigan Business Corporation Act (Act). This Act regulates shareholder rights when an individual’s stock ownership reaches 20% of a Michigan corporation’s outstanding shares. A shareholder seeking control of the Company cannot require our Board of Directors to call a meeting to vote on issues related to corporate control within 10 days, as stipulated by the Act.
 
We paid cash dividends on our common stock of $344 million in 2008, $364 million in 2007, and $365 million in 2006. The amount of future dividends will depend on our earnings, cash flows, financial condition and other factors that are periodically reviewed by our Board of Directors. Although there can be no assurances, we anticipate paying dividends for the foreseeable future.
 
See Note 9 of the Notes to Consolidated Financial Statements in Item 8 of this Report for information on dividend restrictions.
 
All of our equity compensation plans that provide for the annual awarding of stock-based compensation have been approved by shareholders. See Note 19 of the Notes to Consolidated Financial Statements in Item 8 of this Report for additional detail.
 
See the following table for information as of December 31, 2008.
 
                         
    Number of Securities
      Number of Securities
    to be Issued Upon
  Weighted-Average
  Remaining Available For
    Exercise of
  Exercise Price of
  Future Issuance Under Equity
    Outstanding Options   Outstanding Options   Compensation Plans
 
Plans approved by shareholders
    5,013,699     $ 42.45       4,822,431  


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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
The following table provides information about our purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act for the year ended December 31, 2008:
 
                                         
            Number
       
            of Shares
      Maximum Dollar
            Purchased as
      Value that May
    Number of
  Average
  Part of Publicly
  Average
  Yet Be
    Shares
  Price
  Announced
  Price Paid
  Purchased Under
    Purchased
  Paid Per
  Plans or
  Per Share
  the Plans or
    (1)   Share (1)   Programs (2)   (2)   Programs (2)
 
01/01/08 — 01/31/08
    34,300     $ 43.96                 $ 822,895,623  
02/01/08 — 02/29/08
    203,670       41.24                   822,895,623  
03/01/08 — 03/31/08
    83,760       38.92                   822,895,623  
04/01/08 — 04/30/08
    22,220       41.46                   822,895,623  
05/01/08 — 05/31/08
    32,000       43.13                   822,895,623  
06/01/08 — 06/30/08
    35,000       43.72                   822,895,623  
07/01/08 — 07/31/08
    1,200       43.07                   822,895,623  
08/01/08 — 08/31/08
    20,000       42.25                   822,895,623  
09/01/08 — 09/30/08
                            822,895,623  
10/01/08 — 10/31/08
    9,455       34.95                   822,895,623  
11/01/08 — 11/30/08
    37,464       36.91                   822,895,623  
12/01/08 — 12/31/08
                            822,895,623  
                                         
Total
    479,069                                  
                                         
 
 
(1) Represents shares of common stock purchased on the open market to provide shares to participants under various employee compensation and incentive programs. These purchases were not made pursuant to a publicly announced plan or program.
 
(2) In January 2005, the DTE Energy Board of Directors authorized the repurchase of up to $700 million of common stock through 2008. In May 2007, the DTE Energy Board of Directors authorized the repurchase of up to an additional $850 million of common stock through 2009. Through December 31, 2008, repurchases of approximately $725 million of common stock were made under these authorizations. These authorizations provide management with flexibility to pursue share repurchases from time to time and will depend on actual and future asset monetizations, cash flows and investment opportunities.


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Item 6.    Selected Financial Data
 
The following selected financial data should be read in conjunction with the accompanying Management’s Discussion and Analysis in Item 7 of this Report and Notes to the Consolidated Financial Statements in Item 8 of this Report.
 
                                         
    2008     2007     2006     2005     2004  
    (In millions, except per share amounts)  
 
Operating Revenues
  $ 9,329     $ 8,475     $ 8,157     $ 8,094     $ 6,419  
                                         
Net Income (Loss)
                                       
Income from continuing operations(1)
  $ 526     $ 787     $ 389     $ 272     $ 265  
Discontinued operations
    20       184       43       268       166  
Cumulative effect of accounting changes
                1       (3 )      
                                         
Net Income
  $ 546     $ 971     $ 433     $ 537     $ 431  
                                         
Diluted Earnings Per Common Share
                                       
Income from continuing operations
  $ 3.23     $ 4.62     $ 2.18     $ 1.55     $ 1.53  
Discontinued operations
    .13       1.08       .24       1.52       .96  
Cumulative effect of accounting changes
                .01       (.02 )      
                                         
Diluted Earnings Per Common Share
  $ 3.36     $ 5.70     $ 2.43     $ 3.05     $ 2.49  
                                         
Financial Information
                                       
Dividends declared per share of common stock
  $ 2.12     $ 2.12     $ 2.075     $ 2.06     $ 2.06  
Total assets
  $ 24,590     $ 23,742     $ 23,785     $ 23,335     $ 21,297  
Long-term debt, including capital leases
  $ 7,741     $ 6,971     $ 7,474     $ 7,080     $ 7,606  
Shareholders’ equity
  $ 5,995     $ 5,853     $ 5,849     $ 5,769     $ 5,548  
 
 
(1) 2007 amounts include $580 million after-tax gain on the Antrim sale transaction and $210 million after-tax losses on hedge contracts associated with the Antrim sale. 2008 amounts include $81 million after-tax gain on the sale of a portion of the Barnett shale properties. See Note 3 of Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
OVERVIEW
 
DTE Energy is a diversified energy company with 2008 operating revenues in excess of $9 billion and over $24 billion in assets. We are the parent company of Detroit Edison and MichCon, regulated electric and gas utilities engaged primarily in the business of providing electricity and natural gas sales, distribution and storage services throughout southeastern Michigan. We operate four energy-related non-utility segments with operations throughout the United States.
 
The following table summarizes our financial results:
 
                         
    2008   2007   2006
    (In millions, except earnings per share)
 
Income from continuing operations
  $ 526     $ 787     $ 389  
Diluted earnings per common share from continuing operations
  $ 3.23     $ 4.62     $ 2.18  
Net income
  $ 546     $ 971     $ 433  
Diluted earnings per common share
  $ 3.36     $ 5.70     $ 2.43  
 
The decrease in 2008 from 2007 was primarily due to approximately $370 million in net income resulting from the 2007 gain on the sale of the Antrim shale gas exploration and production business of $900 million ($580 million after-tax), partially offset by losses recognized on related hedges of $323 million ($210 million


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after-tax), including recognition of amounts previously recorded in accumulated other comprehensive income during 2007. Net income in 2008 was also impacted by a gain of $128 million ($81 million after-tax) on the sale of a portion of the Barnett shale properties.
 
The items discussed below influenced our current financial performance and may affect future results:
 
  •  Impacts of national and regional economic conditions on utility operations;
 
  •  Effects of weather on utility operations;
 
  •  Collectibility of accounts receivable on utility operations;
 
  •  Impact of regulatory decisions on utility operations;
 
  •  Impact of legislation on utility operations;
 
  •  Fluctuations in market demand on coal supply;
 
  •  Challenges associated with nuclear fuel;
 
  •  Monetization of portions of our Unconventional Gas Production business;
 
  •  Discontinuance of planned monetization of a portion of our Power and Industrial Projects business;
 
  •  Results in our Energy Trading business;
 
  •  Discontinuance of the Synthetic Fuel business; and
 
  •  Required environmental and reliability-related capital investments.
 
UTILITY OPERATIONS
 
Our Electric Utility segment consists of Detroit Edison, which is engaged in the generation, purchase, distribution and sale of electricity to approximately 2.2 million customers in southeastern Michigan.
 
Our Gas Utility segment consists of MichCon and Citizens. MichCon is engaged in the purchase, storage, transmission, distribution and sale of natural gas to approximately 1.2 million residential, commercial and industrial customers throughout Michigan. MichCon also has subsidiaries involved in the gathering, processing and transmission of natural gas in northern Michigan. Citizens distributes natural gas in Adrian, Michigan to approximately 17,000 customers.
 
Impact of national and regional economic conditions on our utility operations  — Revenues from our utility operations follow the economic cycles of the customers we serve. Our utilities provide services to the domestic automotive industry which is under considerable financial distress, exacerbating the decline in regional conditions. In 2008, Detroit Edison experienced a decline in sales in its service territory as compared to 2007. We expect this decline to continue in 2009. As discussed further below, deteriorating economic conditions impact our ability to collect amounts due from our customers of our electric and gas utilities and drive higher levels of lost and stolen natural gas at MichCon. In the face of the economic conditions, we are actively managing our cash, capital expenditures, cost structure and liquidity to maintain our financial strength.
 
Effects of Weather on Utility Operations  — Earnings from our utility operations are seasonal and very sensitive to weather. Electric utility earnings are primarily dependent on hot summer weather, while the gas utility’s results are primarily dependent on cold winter weather. During the year ended December 31, 2008 we experienced colder weather than the year ended December 31, 2007.
 
Additionally, we frequently experience various types of storms that damage our electric distribution infrastructure, resulting in power outages. Restoration and other costs associated with storm-related power outages lowered pre-tax earnings by $61 million in 2008, $68 million in 2007 and $46 million in 2006.
 
Collectibility of Accounts Receivable on Utility Operations  — Both utilities continue to experience high levels of past due receivables, which is primarily attributable to economic conditions including high levels of


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unemployment and home foreclosures. High energy prices and a lack of adequate levels of assistance for low-income customers have also impacted our accounts receivable.
 
We have taken actions to manage the level of past due receivables, including customer disconnections, contracting with collection agencies and working with Michigan officials and others to increase the share of low-income funding allocated to our customers.
 
Our uncollectible accounts expense for the two utilities increased to $213 million in 2008 from $135 million in 2007 and from $123 million in 2006.
 
The April 2005 MPSC gas rate order provided for an uncollectible true-up mechanism for MichCon. The uncollectible true-up mechanism enables MichCon to recover ninety percent of the difference between the actual uncollectible expense for each year and $37 million after an annual reconciliation proceeding before the MPSC. The MPSC approved the 2005 annual reconciliation in December 2006, allowing MichCon to surcharge $11 million beginning in January 2007. The MPSC approved the 2006 annual reconciliation in December 2007, allowing MichCon to surcharge $33 million beginning in January 2008. In December 2008, MichCon received authorization to surcharge $34 million, including a $1 million uncollected balance from the 2005 surcharge, beginning in January 2009. We accrue interest income on the outstanding balances.
 
Impact of Regulatory Decisions on Utility Operations  — On December 23, 2008, the MPSC issued an order in Detroit Edison’s February 20, 2008 updated rate case filing. The MPSC approved an annual revenue increase of $84 million effective January 14, 2009 or a 2.0% average increase in Detroit Edison’s annual revenue requirement for 2009. Included in the approved $84 million increase in revenues was a return on equity of 11% on an expected 49% equity and 51% debt capital structure.
 
Other key aspects of the MPSC order include the following:
 
  •  In order to more accurately reflect the actual cost of providing service to business customers, the MPSC adopted an immediate 39% phase out of the residential rate subsidy, with the remaining amount to be eliminated in equal installments over the next five years, every October 1.
 
  •  Accepted Detroit Edison’s proposal to reinstate and modify the tracking mechanism on Electric Choice sales (CIM) with a base level of 1,561 GWh. The modified mechanism will not have a cap on the amount recoverable.
 
  •  Terminated the Pension Equalization Mechanism.
 
  •  Approved an annual reconciliation mechanism to track expenses associated with restoration costs (storm and non-storm related expenses) and line clearance expenses. Annual reconciliations will be required using a base expense level of $110 million and $51 million, respectively.
 
  •  Approved Detroit Edison’s proposal to recover a return on $15 million in working capital associated with the preparation of an application for a new nuclear generation facility at its current Fermi 2 site.
 
The MPSC issued an order on August 31, 2006 approving a settlement agreement providing for an annualized rate reduction of $53 million for 2006 for Detroit Edison, effective September 5, 2006. Beginning January 1, 2007, and continuing until April 13, 2008, rates were reduced by an additional $26 million, for a total reduction of $79 million annually. Detroit Edison experienced a rate reduction of approximately $76 million in 2007 and approximately $25 million during the period the rate reduction was in effect for 2008, as a result of this order. The revenue reduction was net of the recovery of costs associated with the Performance Excellence Process. The settlement agreement provided for some level of realignment of the existing rate structure by allocating a larger percentage of the rate reduction to the commercial and industrial customer classes than to the residential customer classes.
 
In August 2006, MichCon filed an application with the MPSC requesting permission to sell base gas that would become accessible with storage facilities upgrades. In December 2006, MichCon filed its 2007-2008 GCR plan case proposing a maximum GCR factor of $8.49 per Mcf. In August 2007, a settlement agreement in this proceeding was approved by the MPSC that provides for a sharing with customers of the proceeds from the sale of base gas. In addition, the agreement provides for a rate case filing moratorium until January 1, 2009,


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unless certain unanticipated changes occur that impact income by more than $5 million. MichCon’s gas storage enhancement projects, the main subject of the aforementioned settlement, have enabled 17 billion cubic feet (Bcf) of gas to become available for cycling. Under the settlement terms, MichCon delivered 13.4 Bcf of this gas to its customers through 2007 at a savings to market-priced supplies of approximately $41 million. This settlement also provided for MichCon to retain the proceeds from the sale of 3.6 Bcf of base gas, of which MichCon sold 0.75 Bcf of base gas in 2007 at a pre-tax gain of $5 million and 2.84 Bcf in December 2008 at a pre-tax gain of $22 million. In July 2008, MichCon filed an application with the MPSC requesting permission to sell an additional 4 Bcf of base gas that will become available for sale as a result of better than expected operations at its storage fields. MichCon proposed to sell 1.3 Bcf of the base gas to GCR customers during the 2009-2010 GCR period at cost and to sell the remaining 2.7 Bcf to non-system supply customers in 2009 at market prices. MichCon requested that the MPSC treat the proceeds from the sale of the 2.7 Bcf of base gas to non-system supply customers as a one-time increase in MichCon’s net income and not include the proceeds in the calculation of MichCon’s revenue requirements in future rate cases.
 
Impact of Legislation on Utility Operations  — On September 18, 2008, the Michigan House of Representatives and Michigan Senate passed a package of bills to establish a comprehensive, sustainable, long-term energy plan for Michigan. The Governor of Michigan signed the bills on October 6, 2008.
 
The package of bills includes:
 
  •  2008 Public Act (PA) 286 that reforms Michigan’s utility regulatory framework, including the electric Customer Choice program,
 
  •  2008 PA 295 that establishes a renewable portfolio / energy optimization standard and provides a funding mechanism, and
 
  •  2008 PA 287 that provides for an income tax credit for the purchase of energy efficient appliances and a credit to offset a portion of the renewable charge.
 
2008 PA 286 makes the following changes in the regulatory framework for Michigan utilities.
 
  •  Electric Customer Choice reform — The bill establishes a 10 percent limit on participation in the electric Customer Choice program. In general, customers representing 10 percent of a utility’s load may receive electric generation from an electric supplier that is not a utility. After that threshold is met, the remaining customers will remain on full, bundled utility service. As of December 31, 2008, approximately 3 percent of Detroit Edison’s load was on the electric Customer Choice program. The bill also allows continuation of prior MPSC policies for customers to return to full utility service.
 
  •  Cost-of-service based electric rates (deskewing) — The bill requires the MPSC to set rates based on cost-of-service for all customer classes, eliminating over a five-year period the current subsidy by businesses of residential customer rates. This provision does not change total revenue for Detroit Edison. It lowers rates for most commercial and industrial customers and increases rates for residential and certain other industrial customers to match the actual cost of service for each customer class. Rate changes will be phased in over five years, with a 2.5% annual cap on residential rate increases due to deskewing beginning January 1, 2009. Rates for schools and other qualified educational institutions will be set at their cost of service sooner.
 
  •  File and use ratemaking — The bill establishes a 12 month deadline for the MPSC to complete a rate case and allows a utility to self-implement rate changes six months after a rate filing, subject to certain limitations. If the final case order leads to lower rates than the utility had self-implemented, the utility will refund with interest, the difference. In addition, utility rate cases may be based on a forward test year. The bill also has provisions designed to help the MPSC obtain increased funding for additional staff.
 
  •  Certificate of Need process for major capital investments — The bill establishes a certificate of need process for capital projects costing more than $500 million. The process requires the MPSC to review for prudence, prior to construction, proposed investments in new generating assets, acquisitions of existing power plants, major upgrades of power plants, and long-term power purchase agreements. The


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  bill increases the certainty for utilities to recover the cost of projects approved by the MPSC and provides for the utilities to recover interest expenses during construction.
 
  •  Merger & Acquisition approval — The bill grants the MPSC the authority to review and approve proposed utility mergers and acquisitions in Michigan and sets out evaluation criteria.
 
2008 PA 295 establishes renewable energy and energy optimization (energy efficiency, energy conservation or load management) programs in Michigan and provides for a separate funding surcharge to pay the cost of those programs. In accordance with the new law, the MPSC issued a temporary order on December 4, 2008 implementing this act. Within 90 days following the issuance of the temporary order, Detroit Edison is required to file a Renewable Portfolio Standard (RPS) plan with the MPSC. In addition, Detroit Edison and MichCon are required to file Energy Optimization plans with the MPSC.
 
Renewable Energy Standard
 
  •  The bill requires electric providers to source 10% of electricity sold to retail customers from renewable energy resources by 2015.
 
  •  Qualifying renewable energy resources include wind, biomass, solar, hydro, and geothermal, among others.
 
  •  Detroit Edison will be required to have a renewable energy capacity portfolio of 300MW by December 31, 2013 and 600MW by December 31, 2015.
 
  •  The MPSC will establish a per meter surcharge to fund the renewable energy requirements. The recovery mechanism starts prior to actual construction in order to smooth the rate impact for customers.
 
  •  The bill allows for the lowering of compliance if RPS costs exceed the surcharge/cost cap or if other specified factors adversely affect the availability of renewable energy.
 
  •  The bill specifies that a utility can build or have others build and later sell to the utility up to 50 percent of the generation required to meet the RPS. The other 50 percent would be contracted through power purchase agreements.
 
  •  The bill also provides for a net metering program to be established by MPSC order for on-site customer-owned renewable generation up to 1% of an electric utility’s load.
 
Energy Optimization Standard
 
  •  Requires utilities to create electric and natural gas energy optimization plans for each customer class and includes funding surcharges as well as the potential for incentives for exceeding performance goals.
 
  •  For electric sales, the program targets 0.3 percent annual savings in 2009, ramping up to 1 percent annual savings by 2012. Savings percentages are based on prior year retail sales.
 
  •  For natural gas sales, the targeted annual savings start at 0.1 percent in 2009 and ramp up to 0.75 percent by 2012.
 
  •  The MPSC will allow utilities to capitalize certain costs of their energy optimization program. The costs which can be capitalized include equipment, materials, installation costs and customer incentives.
 
  •  Incentives are potentially available for exceeding annual program targets. The financial incentive could be the lesser of 25% of the net cost reduction to our customers or 15% of total program spend, subject to MPSC approval.
 
  •  The bill would also allow a natural gas utility that spends at least 0.5 percent of its revenues on energy efficiency programs to implement a symmetrical decoupling true-up mechanism that adjusts for sales volumes that are above or below the level reflected in its gas distribution rates.
 
  •  By March 2016, the MPSC may suspend the program if it determines the program is no longer cost-effective.


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Impact of Increased Market Demand on Coal Supply  — Our generating fleet produces approximately 79% of its electricity from coal. Increasing coal demand from domestic and international markets has resulted in volatility and higher prices which are passed to our customers through the PSCR mechanism. The demand and price volatility have been dampened by the recent economic downturn, but are expected to increase as the economy improves. In addition, difficulty in recruiting workers, obtaining environmental permits and finding economically recoverable amounts of new coal have resulted in decreasing coal output from the central Appalachian region. Furthermore, as a result of environmental regulation and declining eastern coal stocks, demand for cleaner burning western coal has increased.
 
Challenges Associated with Nuclear Fuel  — We operate one nuclear facility (Fermi 2) that undergoes a periodic refueling outage approximately every eighteen months. Uranium prices have been rising due to supply concerns. In the future, there may be additional nuclear facilities constructed in the industry that may place additional pressure on uranium supplies and prices. We have a contract with the U.S. Department of Energy (DOE) for the future storage and disposal of spent nuclear fuel from Fermi 2. We are obligated to pay the DOE a fee of 1 mill per kWh of Fermi 2 electricity generated and sold; this fee is a component of nuclear fuel expense. Delays have occurred in the DOE’s program for the acceptance and disposal of spent nuclear fuel at a permanent repository. We are a party in litigation against the DOE for both past and future costs associated with the DOE’s failure to accept spent nuclear fuel under the timetable set forth in the Federal Nuclear Waste Policy Act of 1982. Until the DOE is able to fulfill its obligation under the contract, we are responsible for the spent nuclear fuel storage and have begun work on an on-site dry cask storage facility.
 
NON-UTILITY OPERATIONS
 
We have made significant investments in non-utility asset-intensive businesses. We employ disciplined investment criteria when assessing opportunities that leverage our assets, skills and expertise. Specifically, we invest in targeted energy markets with attractive competitive dynamics where meaningful scale is in alignment with our risk profile. As part of a strategic review of our non-utility operations, we have taken various actions including the sale of certain non-utility businesses.
 
Gas Midstream
 
Gas Midstream owns partnership interests in two interstate transmission pipelines and two natural gas storage fields. The pipeline and storage assets are primarily supported by long-term, fixed-price revenue contracts. We have a partnership interest in Vector Pipeline (Vector), an interstate transmission pipeline, which connects Michigan to Chicago and Ontario. We also hold partnership interests in Millennium Pipeline Company which indirectly connects southern New York State to Upper Midwest/Canadian supply, while providing transportation service into the New York City markets. We have storage assets in Michigan capable of storing up to 87 Bcf in natural gas storage fields located in Southeast Michigan. The Washington 10 and 28 storage facilities are high deliverability storage fields having bi-directional interconnections with Vector Pipeline and MichCon providing our customers access to the Chicago, Michigan, other Midwest and Ontario market centers. The pipeline business is expanding and building new pipeline capacity to serve markets in Northeast United States.
 
Unconventional Gas Production
 
Our Unconventional Gas Production business is engaged in natural gas exploration, development and production within the Barnett shale in north Texas. We continue to develop our position here, with total leasehold acreage of 62,395 (60,435 acres, net of interest of others). We continue to acquire select positions in active development areas in the Barnett shale to optimize our existing portfolio.
 
Monetization of Portions of our Unconventional Gas Production Business  — In 2008, we sold a portion of our Barnett shale properties for gross proceeds of approximately $260 million. The properties sold included 75 Bcfe of proved reserves on approximately 11,000 net acres in the core area of the Barnett shale. The Company recognized a cumulative pre-tax gain of $128 million ($81 million after-tax) on the sale during 2008.


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We plan to continue to develop our holdings in the western portion of the Barnett shale and to seek opportunities for additional monetization of select properties within our Barnett shale holdings, when conditions are appropriate. We invested approximately $96 million in the Barnett shale in 2008 and expect to invest approximately $25 million in 2009. During 2009, we expect to drill 15 to 25 new wells and achieve Barnett shale production of approximately 5-6 Bcfe of natural gas, compared with approximately 5 Bcfe in 2008.
 
As a component of our risk management strategy for our Barnett shale reserves, we hedged a portion of anticipated production from our reserves to secure an attractive investment return. As of December 31, 2008, we have a series of cash flow hedges for approximately 3.2 Bcf of anticipated Barnett gas production through 2010 at an average price of $7.33 per Mcf.
 
Texas — Barnett Shale
 
                         
    2008     2007     2006  
 
Net Producing Wells
                       
Held for sale
          33       27  
Held for use
    155       120       83  
                         
Total
    155       153       110  
Production Volume (Bcfe)
                       
Held for sale
          4.7       2.8  
Held for use
    5.0       3.0       1.3  
                         
Total
    5.0       7.7       4.1  
Proved Reserves (Bcfe)(1)
                       
Held for sale
          75       60  
Held for use
    167       144       111  
                         
Total
    167       219       171  
Net Developed Acreage(1)
                       
Held for sale
          4,987       3,977  
Held for use(2)
    14,248       9,880       10,693  
                         
Total
    14,248       14,867       14,670  
Net Undeveloped Acreage(1)
                       
Held for sale
          5,809       6,164  
Held for use(2)
    46,187       38,066       27,613  
                         
Total
    46,187       43,875       33,777  
Capital Expenditures (in Millions)(3)
                       
Held for sale
  $     $ 45     $ 67  
Held for use
    96       95       61  
                         
Total
  $ 96     $ 140     $ 128  
Future Undiscounted Net Cash Flows (in Millions)(4)
                       
Held for sale
  $     $ 282     $ 167  
Held for use
    324       521       305  
                         
Total
  $ 324     $ 803     $ 472  
Average gas price (per Mcf)
  $ 8.69     $ 6.29     $ 5.66  
 
 
(1) Due to the impairment of acreage and wells in the southern expansion area of the Barnett shale during 2007, the proved reserves and acreage numbers above do not include the southern area. Total net acreage related to impaired leases in the southern expansion area was 23,659 acres and 32,083 acres for the years


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2007 and 2006, respectively. In 2008, an impairment was recorded on approximately 5,600 acres within the western expansion of the Barnett Shale. Impaired acreage and wells are not included in the table above.
 
(2) Developed acreage for continuing operations shows a decrease from 2006 to 2007, which reflects the Company’s experience that spacing of wells in the Barnett shale has been reduced over the years. This reduced spacing estimate drives a shift from developed to undeveloped acreage counts. We continue to expand our total position in the western expansion area of the Barnett shale.
 
(3) Excludes sold and impaired assets in southern expansion area of the Barnett shale.
 
(4) Represents the standardized measure of undiscounted future net cash flows utilizing extensive estimates. The estimated future net cash flow computations should not be considered to represent our estimate of the expected revenues or the current value of existing proved reserves and do not include the impact of hedge contracts.
 
Power and Industrial Projects
 
Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers; provide coal transportation and marketing; and sell electricity from biomass-fired energy projects. This business segment provides utility-type services using project assets usually located on or near the customers’ premises in the steel, automotive, pulp and paper, airport and other industries.
 
Services provided include pulverized coal, petroleum coke and metallurgical coke supply, power generation, steam production, chilled water production, wastewater treatment and compressed air supply. We own and operate one gas-fired peaking electric generating plant, two biomass-fired electric generating plants and operate one coal-fired power plant. A third biomass-fired electric generating plant is currently under development pending certain regulatory and management approvals with an expected in-service date of January 2010. This business segment also develops, owns and operates landfill gas recovery systems throughout the United States and produces metallurgical coke from three coke batteries. The production of coke from two of the coke batteries generates production tax credits. The business provides coal transportation — related services including fuel, transportation, storage, blending and rail equipment management services. We specialize in minimizing fuel costs and maximizing reliability of supply for energy-intensive customers. Additionally, we participate in coal marketing and the purchase and sale of emissions credits. This business segment performs coal mine methane extraction, in which we recover methane gas from mine voids for processing and delivery to natural gas pipelines, industrial users or for small power generation projects.
 
Discontinuance of Planned Monetization of our Power and Industrial Projects Business — During the third quarter of 2007, we announced our plans to sell a 50% interest in a portfolio of select Power and Industrial Projects. As a result, the assets and liabilities of the Projects were classified as held for sale at that time. During 2008, the United States asset sale market weakened and challenges in the debt market persisted. As a result of these developments, our work on this planned monetization was discontinued. As of June 30, 2008, the assets and liabilities of the Projects are no longer classified as held for sale.
 
Energy Trading
 
Energy Trading focuses on physical power and gas marketing and trading, structured transactions, enhancement of returns from DTE Energy’s asset portfolio and the optimization of contracted natural gas pipeline transportation and storage, and power transmission and generating capacity positions. Our customer base is predominantly utilities, local distribution companies, pipelines, and other marketing and trading companies. We enter into derivative financial instruments as part of our marketing and hedging activities. Most of the derivative financial instruments are accounted for under the mark-to-market method, which results in the recognition of unrealized gains and losses from changes in the fair value of the derivatives. We utilize forwards, futures, swaps and option contracts to mitigate risk associated with our marketing and trading activity as well as for proprietary trading within defined risk guidelines. Energy Trading also provides commodity risk management services to the other businesses within DTE Energy.


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Significant portions of the electric and gas marketing and trading portfolio are economically hedged. The portfolio includes financial instruments and gas inventory, as well as contracted natural gas pipeline transportation and storage and power generation capacity positions. Most financial instruments are deemed derivatives, whereas proprietary gas inventory, power transmission, pipelines and certain storage assets are not derivatives. As a result, this segment may experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. This results in gains and losses that are recognized in different accounting periods. We may incur mark-to-market accounting gains or losses in one period that could reverse in subsequent periods.
 
DISCONTINUED OPERATIONS
 
Synthetic Fuel
 
The Synthetic Fuel business was presented as a non-utility segment through the third quarter of 2007. Due to the expiration of synfuel production tax credits at the end of 2007, the Synthetic Fuel business ceased operations and
 
was classified as a discontinued operation as of December 31, 2007. Synfuel plants chemically changed coal and waste coal into a synthetic fuel as determined under the Internal Revenue Code. Production tax credits were provided for the production and sale of solid synthetic fuel produced from coal and were available through December 31, 2007. To optimize income and cash flow from synfuel operations, we sold interests in all nine of the facilities, representing 91% of the total production capacity. The synthetic fuel plants generated operating losses that were offset by production tax credits.
 
The value of a production tax credit was adjusted annually by an inflation factor and published annually by the IRS. The value of production tax credits for synthetic fuel was reduced when the Reference Price of a barrel of oil exceeded certain thresholds. The actual tax credit phase-out for 2007 was approximately 67%.
 
CAPITAL INVESTMENT
 
We anticipate significant capital investment across all of our business segments. Most of our capital expenditures will be concentrated within our utility segments. Our electric utility segment currently expects to invest approximately $6 billion (excluding investments in new generation capacity, if any), including increased environmental requirements and reliability enhancement projects during the period of 2009 through 2013. Our gas utility segment currently expects to invest approximately $750 million to $800 million on system expansion, pipeline safety and reliability enhancement projects through the same period. We plan to seek regulatory approval to include these capital expenditures within our regulatory rate base consistent with prior treatment. Due to the economy and credit market conditions, we are continually reviewing our capital expenditure commitments for potential reductions and deferrals and plan to adjust spending as appropriate.
 
OUTLOOK
 
The next few years will be a period of rapid change for DTE Energy and for the energy industry. Our strong utility base, combined with our integrated non-utility operations, position us well for long-term growth.
 
Looking forward, we will focus on several areas that we expect will improve future performance:
 
  •  continuing to pursue regulatory stability and investment recovery for our utilities;
 
  •  managing the growth of our utility asset base;
 
  •  enhancing our cost structure across all business segments;
 
  •  managing cash, capital and liquidity to maintain or improve our financial strength;
 
  •  improving Electric and Gas Utility customer satisfaction; and
 
  •  investing in businesses that integrate our assets and leverage our skills and expertise.


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We will continue to pursue opportunities to grow our businesses in a disciplined manner if we can secure opportunities that meet our strategic, financial and risk criteria.
 
RESULTS OF OPERATIONS
 
Segments realigned — Beginning in the second quarter of 2008, we have realigned our Coal Transportation and Marketing business from the Coal and Gas Midstream segment (now the Gas Midstream segment) to the Power and Industrial Projects segment due to changes in how financial information is evaluated and resources allocated to segments by senior management. The Company’s segment information reflects this change for all periods presented. See Note 20 of the Notes to Consolidated Financial Statements in Item 8 of this Report for further information on this realignment. The following sections provide a detailed discussion of the operating performance and future outlook of our segments.
 
                         
    2008     2007     2006  
    (In millions)  
 
Net Income by Segment:
                       
Electric Utility
  $ 331     $ 317     $ 325  
Gas Utility
    85       70       50  
Non-utility Operations:
                       
Gas Midstream
    38       34       28  
Unconventional Gas Production(1)
    84       (217 )     9  
Power and Industrial Projects
    40       49       (58 )
Energy Trading
    42       32       96  
Corporate & Other(1)
    (94 )     502       (61 )
Income (Loss) from Continuing Operations:
                       
Utility
    416       387       375  
Non-utility
    204       (102 )     75  
Corporate & Other
    (94 )     502       (61 )
                         
      526       787       389  
Discontinued Operations
    20       184       43  
Cumulative Effect of Accounting Changes
                1  
                         
Net Income
  $ 546     $ 971     $ 433  
                         
 
 
(1) 2008 net income of the Unconventional Gas Production segment resulted principally from the gain on the sale of a portion of our Barnett shale properties. 2007 net loss resulted principally from the recognition of losses on hedge contracts associated with the Antrim sale transaction. 2007 net income of the Corporate & Other segment resulted principally from the gain recognized on the Antrim sale transaction. See Note 3 of the Notes to the Consolidated Financial Statements in Item 8 of this Report.
 
ELECTRIC UTILITY
 
Our Electric Utility segment consists of Detroit Edison.
 
Factors impacting income:   Net income increased $14 million in 2008 and decreased $8 million in 2007. The 2008 increase was primarily due to lower expenses for operation and maintenance, depreciation and amortization, and taxes other than income, partly offset by lower gross margins and higher income tax expense. The 2007 decrease reflects higher operation and maintenance expenses, partially offset by higher gross margins and lower depreciation and amortization expenses.
 


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    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 4,874     $ 4,900     $ 4,737  
Fuel and Purchased Power
    1,778       1,686       1,566  
                         
Gross Margin
    3,096       3,214       3,171  
Operation and Maintenance
    1,322       1,422       1,336  
Depreciation and Amortization
    743       764       809  
Taxes Other Than Income
    232       277       252  
Asset (Gains) Losses and Reserves, Net
    (1 )     8       (6 )
                         
Operating Income
    800       743       780  
Other (Income) and Deductions
    283       277       294  
Income Tax Provision
    186       149       161  
                         
Net Income
  $ 331     $ 317     $ 325  
                         
Operating Income as a Percent of Operating Revenues
    16 %     15 %     16 %
 
Gross margin decreased $118 million during 2008 and increased $43 million in 2007. The 2008 decrease was due to the unfavorable impacts of weather and service territory performance and the absence of the favorable impact of a May 2007 MPSC order related to the 2005 PSCR reconciliation. These decreases were partially offset by higher rates attributable to the April 2008 expiration of a rate reduction related to the MPSC show cause proceeding and higher margins due to customers returning from the electric Customer Choice program. The increase in 2007 was attributed to higher margins due to returning sales from electric Customer Choice, the favorable impact of a May 2007 MPSC order related to the 2005 PSCR reconciliation and weather related impacts, partially offset by lower rates resulting primarily from the August 2006 settlement in the MPSC show cause proceeding and the unfavorable impact of a September 2006 MPSC order related to the 2004 PSCR reconciliation. Revenues include a component for the cost of power sold that is recoverable through the PSCR mechanism.
 
The following table displays changes in various gross margin components relative to the comparable prior period:
 
                 
Increase (Decrease) in Gross Margin Components Compared to Prior Year
  2008     2007  
    (In millions)  
 
Weather-related impacts
  $ (37 )   $ 31  
Return of customers from electric Customer Choice
    35       43  
Service territory performance
    (100 )     28  
Refundable pension cost
    (30 )      
April 2008 expiration of show cause rate decrease
    46        
Impact of 2006 MPSC show cause order
          (64 )
Impact of 2005 MPSC PSCR reconciliation order
    (38 )     38  
Impact of 2004 MPSC PSCR reconciliation order
          (39 )
Other, net
    6       6  
                 
Increase (decrease) in gross margin
  $ (118 )   $ 43  
                 
 

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Power Generated and Purchased
  2008     2007     2006  
    (In thousands of MWh)  
 
Power Plant Generation
                                               
Fossil
    41,254       71 %     42,359       72 %     39,686       70 %
Nuclear
    9,613       17       8,314       14       7,477       13  
                                                 
      50,867       88       50,673       86       47,163       83  
Purchased Power
    6,877       12       8,422       14       9,861       17  
                                                 
System Output
    57,744       100 %     59,095       100 %     57,024       100 %
Less Line Loss and Internal Use
    (3,445 )             (3,391 )             (3,603 )        
                                                 
Net System Output
    54,299               55,704               53,421          
                                                 
Average Unit Cost ($/MWh)
                                               
Generation(1)
  $ 17.93             $ 15.83             $ 15.61          
                                                 
Purchased Power
  $ 69.50             $ 62.40             $ 53.71          
                                                 
Overall Average Unit Cost
  $ 24.07             $ 22.47             $ 22.20          
                                                 
 
 
(1) Represents fuel costs associated with power plants.
 
                         
    2008     2007     2006  
    (In thousands of MWh)  
 
Electric Sales
                       
Residential
    15,492       16,147       15,769  
Commercial
    18,920       19,332       17,948  
Industrial
    13,086       13,338       13,235  
Wholesale
    2,825       2,902       2,826  
Other
    393       398       402  
                         
      50,716       52,117       50,180  
Interconnection sales(1)
    3,583       3,587       3,241  
                         
Total Electric Sales
    54,299       55,704       53,421  
                         
Electric Deliveries
                       
Retail and Wholesale
    50,716       52,117       50,180  
Electric Customer Choice
    1,382       1,690       2,694  
Electric Customer Choice — Self Generators(2)
    75       549       909  
                         
Total Electric Sales and Deliveries
    52,173       54,356       53,783  
                         
 
 
(1) Represents power that is not distributed by Detroit Edison.
 
(2) Represents deliveries for self generators who have purchased power from alternative energy suppliers to supplement their power requirements.
 
Operation and maintenance expense decreased $100 million in 2008 and increased $86 million in 2007. The decrease in 2008 was due primarily to lower information systems implementation costs of $60 million, lower benefit expense of $45 million and lower corporate support expenses of $29 million, partially offset by higher uncollectible expenses of $22 million. The increase in 2007 is primarily due to higher information systems implementation costs of $30 million, higher storm expenses of $22 million, increased uncollectible expense of $22 million and higher corporate support expenses of $20 million.

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Depreciation and amortization expense decreased $21 million in 2008 and $45 million in 2007. The 2008 decrease was due primarily to decreased amortization of regulatory assets. The 2007 decrease was due primarily to a 2006 net stranded cost write-off of $112 million related to the September 2006 MPSC order regarding stranded costs and a $13 million decrease in our asset retirement obligation at our Fermi 1 nuclear facility, partially offset by $58 million of increased amortization of regulatory assets and $13 million of higher depreciation expense due to increased levels of depreciable plant assets.
 
Taxes other than income decreased $45 million in 2008 due to the Michigan Single Business Tax (SBT) expense in 2007, which was replaced with the Michigan Business Tax (MBT) in 2008. The MBT is accounted for in the Income Tax provision.
 
Asset (gains) losses and reserves, net decreased $9 million in 2008 and increased $14 million in 2007 due to a 2007 $13 million reserve for a loan guaranty related to Detroit Edison’s former ownership of a steam heating business now owned by Thermal Ventures II, LP (Thermal).
 
Other (income) and deductions expense increased $6 million in 2008 and decreased $17 million in 2007. The 2008 increase is attributable to $15 million of investment losses in a trust utilized for retirement benefits and $3 million of miscellaneous expenses offset by higher capitalized interest of $12 million. The 2007 decrease is attributable to a $10 million contribution to the DTE Energy Foundation in 2006 that did not recur in 2007, $3 million of higher interest income and $17 million of increased miscellaneous utility related services, partially offset by $16 million of higher interest expense.
 
Outlook  — We will move forward in our efforts to continue to improve the operating performance and cash flow of Detroit Edison. We continue to resolve outstanding regulatory issues by pursuing regulatory and/or legislative solutions. Many of these issues and problems have been addressed by the legislation signed by the Governor of Michigan in October 2008, discussed more fully in the Overview section. Looking forward, additional issues, such as volatility in prices for coal and other commodities, investment returns and changes in discount rate assumptions in benefit plans, health care costs and higher levels of capital spending, will result in us taking meaningful action to address our costs while continuing to provide quality customer service. We will continue to seek opportunities to improve productivity, remove waste and decrease our costs while improving customer satisfaction.
 
Unfavorable national and regional economic trends have resulted in reduced demand for electricity in our service territory and increases in our uncollectible accounts receivable. The magnitude of these trends will be driven by the impacts of the challenges in the domestic automotive industry and the timing and level of recovery in the national and regional economies.
 
Due to the economy and credit market conditions, in the near term, we are reviewing our capital expenditure commitments for potential reductions and deferrals and plan to adjust the timing of projects as appropriate. Long term, we will be required to invest an estimated $2.8 billion on emission controls through 2018. We intend to seek recovery of these investments in future rate cases.
 
Additionally, our service territory may require additional generation capacity. A new base-load generating plant has not been built within the State of Michigan in over 20 years. Should our economic and regulatory environment be conducive to such a significant capital expenditure, we may build, upgrade or co-invest in a base-load coal facility or a new nuclear plant.
 
On September 18, 2008, Detroit Edison submitted a Combined Operating License Application with the NRC for construction and operation of a possible 1,500 MW nuclear power plant at the site of the company’s existing Fermi 2 nuclear plant. We have not decided on construction of a new base-load nuclear plant; however, by completing the license application before the end of 2008, we may qualify for financial incentives under the Federal Energy Policy Act of 2005. In addition, Detroit Edison is also moving ahead with plans for renewable energy resources and an aggressive energy efficiency program.
 
The following variables, either individually or in combination, could impact our future results:
 
  •  Access to capital markets and capital market conditions and the results of other financing efforts which can be affected by credit agency ratings;


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  •  Instability in capital markets which could impact availability of short and long-term financing or the potential for loss on cash equivalents and investments;
 
  •  Economic conditions within Michigan and corresponding impacts on demand for electricity;
 
  •  Collectibility of accounts receivable;
 
  •  Increases in future expense and contributions to pension and other postretirement plans due to declines in value resulting from market conditions;
 
  •  The amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals or new legislation;
 
  •  Our ability to reduce costs and maximize plant and distribution system performance;
 
  •  Variations in market prices of power, coal and gas;
 
  •  Weather, including the severity and frequency of storms;
 
  •  The level of customer participation in the electric Customer Choice program; and
 
  •  Any potential new federal and state environmental, renewable energy and energy efficiency requirements.
 
GAS UTILITY
 
Our Gas Utility segment consists of MichCon and Citizens.
 
Factors impacting income:   Gas Utility’s net income increased $15 million in 2008 and $20 million in 2007. The 2008 and 2007 increases were due primarily to higher gross margins.
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 2,152     $ 1,875     $ 1,849  
Cost of Gas
    1,378       1,164       1,157  
                         
Gross Margin
    774       711       692  
Operation and Maintenance
    464       429       431  
Depreciation and Amortization
    102       93       94  
Taxes Other Than Income
    48       56       53  
Asset (Gains) and Losses, Net
    (26 )     (3 )      
                         
Operating Income
    186       136       114  
Other (Income) and Deductions
    60       43       53  
Income Tax Provision (Benefit)
    41       23       11  
                         
Net Income
  $ 85     $ 70     $ 50  
                         
Operating Income as a Percent of Operating Revenues
    9 %     7 %     6 %
 
Gross margin increased $63 million and $19 million in 2008 and 2007, respectively. The increase in 2008 reflects $49 million from the uncollectible tracking mechanism, $15 million related to the impacts of colder weather, $10 million favorable result of lower lost gas recognized and higher valued gas received as compensation for transportation of third party customer gas, $7 million of 2007 GCR disallowances, and $6 million of appliance repair revenue. The 2008 improvement was partially offset by $19 million of lower storage services revenue and $12 million from customer conservation and lower volumes. The increase in 2007 is primarily due to $21 million from the favorable effects of weather in 2007 and $28 million related to an increase in midstream services including storage and transportation, partially offset by a $26 million unfavorable impact in lost gas recognized and $7 million in GCR disallowances. Revenues include a component for the cost of gas sold that is recoverable through the GCR mechanism.
 


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    2008     2007     2006  
 
Gas Markets (in Millions)
                       
Gas sales
  $ 1,824     $ 1,536     $ 1,541  
End user transportation
    143       140       135  
                         
      1,967       1,676       1,676  
Intermediate transportation
    73       70       69  
Storage and other
    112       129       104  
                         
    $ 2,152     $ 1,875     $ 1,849  
                         
Gas Markets (in Bcf)
                       
Gas sales
    148       148       138  
End user transportation
    123       132       136  
                         
      271       280       274  
Intermediate transportation
    438       399       373  
                         
      709       679       647  
                         
 
Operation and maintenance expense increased $35 million in 2008 and decreased $2 million in 2007. The 2008 increase is primarily attributable to $56 million of higher uncollectible expenses, partially offset by $14 million of lower corporate support expenses and $14 million of reduced pension and retiree health benefit costs. The increase in uncollectible expense is partially offset by increased revenues from the uncollectible tracking mechanism included in the gross margin discussion. The 2007 decrease was attributed to $4 million of lower uncollectible expense and $4 million of reduced corporate support expenses, partially offset by $5 million in increased information systems implementation costs.
 
Other Asset (gains) losses, net increased $23 million in 2008 and $3 million in 2007. Both increases are primarily attributable to the sale of base gas.
 
Outlook — Higher gas prices and deteriorating economic conditions have resulted in continued pressure on receivables and working capital requirements that are partially mitigated by the MPSC’s GCR and uncollectible true-up mechanisms. We will continue to seek opportunities to improve productivity, minimize lost gas, remove waste and decrease our costs while improving customer satisfaction.
 
Unfavorable national and regional economic trends have resulted in negative customer growth in our service territory and increases in our uncollectible accounts receivable. The magnitude of these trends will be driven by the impacts of the challenges in the domestic automotive industry and the timing and level of recovery in the national and regional economies.
 
The following variables, either individually or in combination, could impact our future results:
 
  •  Access to capital markets and capital market conditions 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 or the potential for loss on cash equivalents and investments;
 
  •  Economic conditions within Michigan and corresponding impacts on demand for gas and levels of lost or stolen gas;
 
  •  Collectibility of accounts receivable;
 
  •  Increases in future expense and contributions to pension and other postretirement plans due to declines in value resulting from market conditions;
 
  •  The amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals or new legislation;

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  •  Our ability to reduce costs and maximize distribution system performance;
 
  •  Variations in market prices of gas;
 
  •  Weather;
 
  •  Customer conservation;
 
  •  Volatility in the short-term storage markets which impact third-party storage revenues;
 
  •  Extent and timing of any base gas sales;
 
  •  Any potential new federal and state environmental, renewable energy and energy efficiency requirements.
 
NON-UTILITY OPERATIONS
 
Gas Midstream
 
Our Gas Midstream segment consists of our non-utility gas pipelines and storage businesses.
 
Factors impacting income:   Net income increased $4 million and $6 million in 2008 and 2007, respectively. The 2008 increase is due to higher storage revenues related to expansion of capacity and higher other income primarily driven by higher equity earnings from our investments in the Vector and Millennium Pipelines, partially offset by a higher tax provision due to the MBT in 2008. Net income was higher in 2007 due to higher storage revenues and lower expenses due to the Washington 10 restructuring during 2006.
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 71     $ 66     $ 63  
Operation and Maintenance
    12       13       22  
Depreciation and Amortization
    5       6       3  
Taxes Other Than Income
    3       3       4  
Asset (Gains) and Losses, Net
    1       (1 )     (1 )
                         
Operating Income
    50       45       35  
Other (Income) and Deductions
    (12 )     (7 )     (8 )
Income Tax Provision
    24       18       15  
                         
Net Income
  $ 38     $ 34     $ 28  
                         
 
Outlook  — Our Gas Midstream business expects to continue its steady growth plan. In April 2008, an additional 7 Bcf of storage capacity was placed in service. Future additions to storage capacity of approximately 3 Bcf will occur over the next few months. Vector Pipeline placed into service its Phase 1 expansion for approximately 200 MMcf/d in November 2007. In addition, Vector Pipeline received FERC approval in June 2008 to build one additional compressor station, which will expand the Vector Pipeline by approximately 100 MMcf/d, with a proposed in-service date of November 2009. Adding another compressor station will bring the system from its current capacity of about 1.2 Bcf/d up to 1.3 Bcf/d in 2009. Both the 2007 and 2009 expansion projects are supported by customers under long-term contracts. Millennium Pipeline was placed in service in December 2008 and currently has nearly 85% of its capacity sold to customers under long-term contracts.
 
Unconventional Gas Production
 
Our Unconventional Gas Production business is engaged in natural gas exploration, development and production within the Barnett shale in northern Texas. In June 2007, we sold our Antrim shale gas exploration and production business in northern Michigan for gross proceeds of $1.262 billion.


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In January 2008, we sold a portion of our Barnett shale properties for gross proceeds of approximately $260 million. The properties sold included 75 Bcf of proved reserves on approximately 11,000 net acres in the core area of the Barnett shale. We recognized a gain of $128 million ($81 million after-tax) on the sale in 2008.
 
Factors impacting income:   The 2008 results include the gain recognized on the sale of our Barnett shale property described above. In addition, lower gas sales volumes were offset by higher commodity prices and higher gas and oil production from retained wells in 2008 compared to 2007. The 2007 results reflect the recording of $323 million of losses on financial contracts related to expected Antrim gas production and sales through 2013.
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 48     $ (228 )   $ 99  
Operation and Maintenance
    22       36       37  
Depreciation, Depletion and Amortization
    12       22       27  
Taxes Other Than Income
    1       8       11  
Asset (Gains) and Losses, Net
    (120 )     27       (3 )
                         
Operating Income (Loss)
    133       (321 )     27  
Other (Income) and Deductions
    2       13       13  
Income Tax Provision (Benefit)
    47       (117 )     5  
                         
Net Income (Loss)
  $ 84     $ (217 )   $ 9  
                         
 
Operating revenues increased $276 million in 2008 and decreased $327 million in 2007. The 2007 decrease reflects the recording of $323 million of losses during 2007 on financial contracts that hedged our price risk exposure related to expected Antrim gas production and sales through 2013. These financial contracts were accounted for as cash flow hedges, with changes in estimated fair value of the contracts reflected in other comprehensive income. Upon the sale of Antrim, the financial contracts no longer qualified as cash flow hedges. In conjunction with the Antrim sale, Antrim reclassified amounts held in accumulated other comprehensive income, reducing operating revenues in the 2007 period by $323 million. Excluding the impact of the losses on the Antrim hedges, operating revenues decreased $47 million in 2008 as compared to 2007. The decreases were principally due to lower natural gas sales volumes as a result of our monetization initiatives, partially offset by higher commodity prices and higher gas and oil production on retained wells.
 
Other assets (gains) losses, net increased $147 million in 2008 due to the gain on sale of Barnett shale core properties offset by $8 million of impairment losses primarily related to leases on unproved acreage that expire in 2009 that we do not anticipate developing due to current economic conditions. The $30 million decrease in 2007 was primarily due to the recording of impairment losses of $27 million in 2007 related to the write-off of unproved properties and the expiration of leases in the southern expansion area of the Barnett shale.
 
Outlook — We plan to continue to develop our holdings in the western portion of the Barnett shale and to seek opportunities for additional monetization of select properties within our Barnett shale holdings, when conditions are appropriate. We invested approximately $96 million in the Barnett shale in 2008. During 2009, we expect to invest approximately $25 million to drill 15 to 25 new wells and achieve Barnett shale production of approximately 5 to 6 Bcfe of natural gas from our remaining properties, compared with approximately 5 Bcfe in 2008.
 
Power and Industrial Projects
 
Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers; provide coal transportation services and marketing; and sell electricity from biomass-fired energy projects.


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During the third quarter of 2007, we announced plans to sell a 50% interest in a portfolio of select Power and Industrial Projects. As a result, the assets and liabilities of the Projects were classified as held for sale at that time and the Company ceased recording depreciation and amortization expense related to these assets. During the second quarter of 2008, the United States asset sale market weakened and challenges in the debt market persisted. As a result of these developments, our work on this planned monetization was discontinued. As of June 30, 2008, the assets and liabilities of the Projects were no longer classified as held for sale. Depreciation and amortization resumed in June 2008 when the assets were reclassified as held and used.
 
Factors impacting income:   Net income decreased $9 million in 2008 and increased $107 million in 2007.
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 987     $ 1,244     $ 1,053  
Operation and Maintenance
    899       1,143       972  
Depreciation and Amortization
    34       41       49  
Taxes other than Income
    12       13       13  
Other Asset (Gains) and Losses, Reserves and Impairments, Net
    6             76  
                         
Operating Income (Loss)
    36       47       (57 )
Other (Income) and Deductions
    (20 )     (11 )     43  
Minority Interest
    5       2       1  
Income Taxes
                       
Provision (Benefit)
    18       18       (31 )
Production Tax Credits
    (7 )     (11 )     (12 )
                         
      11       7       (43 )
                         
Net Income (Loss)
  $ 40     $ 49     $ (58 )
                         
 
Operating revenues decreased $257 million in 2008.  This was primarily attributable to $177 million of reductions in coal transportation and trading volumes and $28 million for the impact of a customer electing to purchase coal directly from the supplier. Revenues in 2007 increased $191 million reflecting a new long-term utility services contract with a large automotive company, higher coke prices and sales volumes in addition to higher volumes at several other projects. Additionally, revenue was earned for a one-time fee from the sale of an asset we operated for a third party. In 2007, revenues were impacted by higher synfuel related volumes and increases in trading volumes related to both coal and emissions.
 
Operation and maintenance expense decreased $244 million in 2008 and increased $171 million in 2007. The 2008 decrease mostly reflects $174 million of lower coal transportation costs driven by reduced sales combined with a reduction in coal trading results. The 2007 increase was due to higher synfuel related production and higher trading volumes related to coal and emissions.
 
Depreciation and amortization expense decreased $7 million in 2008 and $8 million in 2007 due primarily to the suspension of $6 million of depreciation expense in the fourth quarter of 2007 related to the assets held for sale, the sale of a generation facility during the year and reduced depreciation expense as a result of asset impairments at several biomass landfill sites in 2006.
 
Other assets (gains) losses, reserves and impairments, net expense decreased $6 million in 2008 and decreased $76 million in 2007. The 2008 decrease is primarily attributable to a loss of approximately $19 million related to the valuation adjustment for the cumulative depreciation and amortization upon reclassification of certain project assets as held and used. Partially offsetting the 2008 loss were gains attributable to the sale of one of our coke battery projects where the proceeds were dependent on future production. The 2007 decrease is due to impairments recognized in 2006 at natural gas- fired generating plants, long-lived assets at several landfill gas recovery sites and fixed assets and patents at our waste coal recovery business


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Other (income) and deductions were higher by $9 million in 2008 due primarily to higher inter-company interest. The 2007 decrease was due primarily to a realized gain of $8 million on the sale of a 50 percent equity interest in a natural gas-fired generating plant and a $4 million gain recognized in 2007 on an installment sale of a coke battery facility.
 
Outlook  — The deterioration in the U.S. economy is expected to continue to negatively impact our customers in the steel industry and we expect a corresponding reduction in demand for metallurgical coke and pulverized coal supplied to these customers in 2009. We supply onsite energy services to the domestic automotive manufacturers who have also been negatively affected by the economic downturn and constriction in the capital and credit markets. Our onsite energy services are delivered in accordance with the terms of long-term contracts which include termination payments in the event of plant closures or other events of default and have not been significantly impacted by the financial distress experienced by the automotive manufacturers. Further plant closures, bankruptcies or a federal government mandated restructuring program could have a significant impact on the results of our onsite energy projects. We continue to monitor developments in this sector. In 2009, we expect our coal transportation and marketing business to positively contribute to the results of this segment as our coal transportation, storage and blending services continue to grow. In 2011, our existing long-term rail transportation contract which gives us a competitive advantage will expire. We will continue to work with suppliers and the railroads to promote secure and competitive access to coal to meet the energy requirements of our customers.
 
Power and Industrial Projects will continue to leverage its extensive energy-related operating experience and project management capability to develop additional on-site energy projects to serve energy intensive industrial customers that are experiencing capital constraints due to the economic downturn. We will also continue to look for opportunities to acquire on-site energy projects and biomass fired generating projects for advantageous prices.
 
Energy Trading
 
Our Energy Trading segment focuses on physical power and gas marketing, structured transactions, enhancement of returns from DTE Energy’s asset portfolio, optimization of contracted natural gas pipeline transportation and storage, and power transmission and generating capacity positions.
 
Factors impacting income:   Net income increased $10 million in 2008 and decreased $64 million in 2007.
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 1,388     $ 924     $ 828  
Fuel, Purchased Power and Gas
    1,235       806       607  
                         
Gross Margin
    153       118       221  
Operation and Maintenance
    68       58       65  
Depreciation and Amortization
    5       5       6  
Taxes Other Than Income
    2       1       1  
                         
Operating Income (Loss)
    78       54       149  
Other (Income) and Deductions
    5       5       4  
Income Tax Provision (Benefit)
    31       17       49  
                         
Net Income (Loss)
  $ 42     $ 32     $ 96  
                         
 
Gross margin increased $35 million in 2008 and decreased $103 million in 2007. The 2008 increase is due to higher unrealized margin of $66 million offset by a decrease in realized margin of $31 million. The increase in unrealized margins includes $18 million in improved gains in the gas trading strategy, $26 million gains on economic hedges of storage positions due to falling gas prices, and the absence of $30 million in mark-to-market losses in June 2007 reflecting revisions of valuation estimates for natural gas contracts, offset by $10 million in losses on economic hedges in our gas transportation strategy. The decrease in realized


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margin is due to unfavorability of $28 million primarily from our power marketing and transmission optimization strategies, $34 million of unfavorability in our gas storage and full requirements strategies due to falling prices in 2008, offset by $31 million of improvement in our gas trading strategy. The 2007 decrease is attributable to approximately $30 million of unrealized losses for gas contracts related to revisions of valuation estimates for the long-dated portion of our energy contracts and $32 million due to absence of unrealized gains on economic storage hedges and positions in our full requirements strategy. Timing differences from 2005 that largely reversed and favorably impacted 2006 margin resulted in $11 million of realized unfavorability in 2007. Additionally, margins were unfavorably impacted by $13 million of lower realized gains from reduced merchant storage capacity in 2007 and $12 million of unfavorability in realized power positions.
 
Operation and maintenance expense increased $10 million in 2008 and decreased $7 million in 2007. The 2008 increase is due to higher payroll and incentive costs and allocated corporate costs. The 2007 decrease was due primarily to lower incentive expenses.
 
Outlook  — Significant portions of the Energy Trading portfolio are economically hedged. The portfolio includes financial instruments and gas inventory, as well as contracted natural gas pipeline transportation and storage, and power generation capacity positions. Most financial instruments are deemed derivatives, whereas proprietary gas inventory, power transmission, pipeline transportation and certain storage assets are not derivatives. As a result, we will experience earnings volatility as derivatives are marked-to-market without revaluing the underlying non-derivative contracts and assets. A source of such earnings volatility is associated with the natural gas storage cycle, which does not coincide with the calendar year, but runs annually from April of one year to March of the next year. Our strategy is to economically manage the price risk of storage with futures, forwards and swaps. This results in gains and losses that are recognized in different interim and annual accounting periods.
 
See Capital Resources and Liquidity and Fair Value sections that follow for additional discussion of our trading activities.
 
CORPORATE & OTHER
 
Corporate & Other includes various holding company activities and holds certain non-utility debt and energy-related investments.
 
Factors impacting income:   Corporate & Other results decreased by $597 million in 2008 and increased by $563 million in 2007. This is mostly attributable to the 2007 gain on the sale of the Antrim shale gas exploration and production business for approximately $900 million ($580 million after-tax) and variations in inter-company interest.
 
DISCONTINUED OPERATIONS
 
Synthetic Fuel
 
The Company discontinued the operations of our synthetic fuel production facilities as of December 31, 2007. Synfuel plants chemically changed coal and waste coal into a synthetic fuel as determined under the Internal Revenue Code. Production tax credits were provided for the production and sale of solid synthetic fuel produced from coal and were available through December 31, 2007. The synthetic fuel business generated operating losses that were offset by production tax credits.
 
Factors impacting income:   Synthetic Fuel net income decreased $185 million in 2008 and increased $157 million in 2007. The decrease in 2008 was due to the cessation of operations of our synfuel facilities at December 31, 2007 and the final determination of the 2007 IRS reference price and inflation factor in 2008. The increase in 2007 was due to synfuel production occurring throughout the year in comparison to 2006 when production was idled at all nine of our synfuel facilities from May to October 2006 and higher income from oil price hedges, partially offset by a higher phase-out of production tax credits due to high oil prices.
 


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    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 7     $ 1,069     $ 863  
Operation and Maintenance
    9       1,265       1,019  
Depreciation and Amortization
    (2 )     (6 )     24  
Taxes other than Income
    (1 )     5       12  
Asset (Gains) and Losses, Reserves and Impairments, Net(1)
    (31 )     (280 )     40  
                         
Operating Income (Loss)
    32       85       (232 )
Other (Income) and Deductions
    (2 )     (9 )     (20 )
Minority Interest
    2       (188 )     (251 )
Income Taxes
                       
Provision (Benefit)
    13       98       14  
Production Tax Credits
    (1 )     (21 )     (23 )
                         
      12       77       (9 )
                         
Net Income(1)
  $ 20     $ 205     $ 48  
                         
 
 
(1) Includes intercompany pre-tax gain of $32 million ($21 million after-tax) for 2007.
 
Operating revenues decreased $1,062 million in 2008 and increased $206 million in 2007. The 2008 drop is due to the cessation of operations of our synfuel facilities at December 31, 2007. The 2008 activity reflects the increased value of 2007 synfuel production as a result of final determination of the IRS Reference Price and inflation factor. Synfuel production was higher in 2007 in comparison to 2006 when production was idled at all nine of our synfuel facilities from May to October 2006.
 
Operation and maintenance expense decreased $1,256 million in 2008 and increased $246 million in 2007. The 2008 reduction is due to the cessation of operations of our synfuel facilities at December 31, 2007. Activity for 2008 reflects adjustments to 2007 contractually defined cost sharing mechanisms with suppliers, as determined by applying the actual phase-out percentage. The 2007 increase reflects synfuel production occurring throughout 2007 in comparison to 2006 when production was idled at all nine of our synfuel facilities from May to October 2006.
 
Depreciation and amortization expense was lower by $30 million in 2007 as a result of reductions in asset retirement obligations in 2007 and the impairment of fixed assets at all nine synfuel projects in 2006.
 
Asset (gains) and losses, reserves and impairments, net decreased $249 million in 2008 and increased $320 million in 2007. The 2008 decrease was due to the cessation of operations of our synfuel facilities at December 31, 2007 and reflects the impact of reserve adjustments for the final phase-out percentage and true-ups of final payments and distributions to partners.
 
The increase in gains in 2007 reflects the annual partner payment adjustment, recognition of certain fixed gains that were reserved during the comparable 2006 period, higher hedge gains and the impact of one-time impairment charges and fixed note reserves recorded in 2006. In 2007 and 2006, we deferred gains from the sale of the synfuel facilities, including a portion of gains related to fixed payments. Due to the increase in oil prices, we recorded accruals for contractual partners’ obligations of $130 million in 2007 and $79 million in 2006 reflecting the probable refund of amounts equal to our partners’ capital contributions or for operating losses that would normally be paid by our partners. In 2007, we reversed $3 million of other synfuel-related reserves and impairments and in 2006 recorded $78 million of other synfuel-related reserves and impairments. To economically hedge our exposure to the risk of an increase in oil prices and the resulting reduction in synfuel sales proceeds, we entered into derivative and other contracts. The derivative contracts are marked-to-market with changes in their fair value recorded as an adjustment to synfuel gains. We recorded net 2007 synfuel hedge mark-to-market gains of $196 million compared with net 2006 synfuel hedge mark-to-market gains of $60 million.

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The following table displays the various pre-tax components that comprise the determination of synfuel gains and losses in 2008, 2007 and 2006.
 
                         
Components of Asset (Gains) Losses, Reserves and
                 
Impairments, Net
  2008     2007     2006  
    (In millions)  
 
Gains recognized associated with fixed payments
  $     $ (172 )   $ (43 )
Gains recognized associated with variable payments
    (32 )     (39 )     (14 )
Reserves recorded for contractual partners’ obligations
          130       79  
Other reserves and impairments, including partners’ share(1)
    (1 )     (3 )     78  
Hedge (gains) losses:
                       
Hedges for 2006 exposure
                (66 )
Hedges for 2007 exposure
            (196 )     6  
                         
    $ (33 )   $ (280 )   $ 40  
                         
 
 
(1) Includes $70 million in 2006, representing our partners’ share of the asset impairment, included in Minority Interest.
 
Minority interest decreased by $190 million and $63 million in 2008 and 2007, respectively. The 2008 reduction is due to the cessation of operations of our synfuel facilities at December 31, 2007. The 2007 decrease reflects the lower net operating losses in 2007 due to the asset impairment charge we incurred in 2006, partially offset by an increased discount on higher sales levels for 2007.
 
See Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
 
Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements . The cumulative effect adjustment upon adoption of SFAS No. 157 represented a $4 million increase to the January 1, 2008 balance of retained earnings. As permitted by FASB Staff Position FAS 157-2, we have deferred the effective date of SFAS No. 157 as it pertains to non-financial assets and liabilities to January 1, 2009. See also the “Fair Value” section.
 
Effective January 1, 2007, we adopted FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 . The cumulative effect of the adoption of FIN 48 represented a $5 million reduction to the January 1, 2007 balance of retained earnings.
 
Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective transition method. The cumulative effect of the adoption of SFAS 123(R) was an increase in net income of $1 million as a result of estimating forfeitures for previously granted stock awards and performance shares.
 
CAPITAL RESOURCES AND LIQUIDITY
 
Cash Requirements
 
We use cash to maintain and expand our electric and gas utilities and to grow our non-utility businesses, retire and pay interest on long-term debt and pay dividends. During 2008, our cash requirements were met primarily through operations and from our non-utility monetization program.
 
Our strategic direction anticipates base level capital investments and expenditures for existing businesses in 2009 of up to $1.1 billion. The capital needs of our utilities will increase due primarily to environmental related expenditures. We incurred environmental expenditures of approximately $270 million in 2008 and we expect over $2.9 billion of future capital expenditures through 2018 to satisfy both existing and proposed new requirements. We plan to seek regulatory approval to include these capital expenditures within our regulatory rate base consistent with prior treatment.


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We expect non-utility capital spending will approximate $175 million to $300 million annually for the next several years. Capital spending for growth of existing or new businesses will depend on the existence of opportunities that meet our strict risk-return and value creation criteria.
 
Due to the economy and credit market conditions, we are continually reviewing our capital expenditure commitments for potential reductions and deferrals and plan to adjust spending as appropriate.
 
Long-term debt maturing or remarketing in 2009 totals approximately $350 million.
 
                         
    2008     2007     2006  
    (In millions)  
 
Cash and Cash Equivalents
                       
Cash Flow From (Used For)
                       
Operating activities:
                       
Net income
  $ 546     $ 971     $ 433  
Depreciation, depletion and amortization
    899       926       1,014  
Deferred income taxes
    348       144       28  
Gain on sale of non-utility business
    (128 )     (900 )      
Gain on sale of synfuel and other assets, net and synfuel impairment
    (35 )     (253 )     28  
Working capital and other
    (71 )     237       (47 )
                         
      1,559       1,125       1,456  
                         
Investing activities:
                       
Plant and equipment expenditures — utility
    (1,183 )     (1,035 )     (1,126 )
Plant and equipment expenditures — non-utility
    (190 )     (264 )     (277 )
Acquisitions, net of cash acquired
                (42 )
Proceeds from sale of non-utility business
    253       1,262        
Proceeds (refunds) from sale of synfuels and other assets
    (278 )     417       313  
Restricted cash and other investments
    (125 )     (50 )     (62 )
                         
      (1,523 )     330       (1,194 )
                         
Financing activities:
                       
Issuance of long-term debt and common stock
    1,310       50       629  
Redemption of long-term debt
    (446 )     (393 )     (687 )
Repurchase of long-term debt
    (238 )            
Short-term borrowings, net
    (340 )     (47 )     291  
Repurchase of common stock
    (16 )     (708 )     (61 )
Dividends on common stock and other
    (354 )     (370 )     (375 )
                         
      (84 )     (1,468 )     (203 )
                         
Net Increase (Decrease) in Cash and Cash Equivalents
  $ (48 )   $ (13 )   $ 59  
                         
 
Cash from Operating Activities
 
A majority of our operating cash flow is provided by our electric and gas utilities, which are significantly influenced by factors such as weather, electric Customer Choice, regulatory deferrals, regulatory outcomes, economic conditions and operating costs.
 
Cash from operations totaling $1.6 billion in 2008, increased $434 million from the comparable 2007 period. The operating cash flow comparison primarily reflects higher net income, after adjusting for non-cash and non-operating items (depreciation, depletion and amortization, deferred taxes and gains on sales of assets), and cash payments received related to our synfuel program hedges.


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Cash from operations totaling $1.1 billion in 2007 decreased $331 million from the comparable 2006 period. The operating cash flow comparison primarily reflects a decrease in net income after adjusting for non-cash items (depreciation, depletion and amortization and deferred taxes) and gains on sales of businesses. The decrease was mostly driven by taxes attributable to our non-utility monetization program.
 
Cash from Investing Activities
 
Cash inflows associated with investing activities are primarily generated from the sale of assets, while cash outflows are primarily generated from plant and equipment expenditures. In any given year, we will look to realize cash from under-performing or non-strategic assets or matured fully valued assets. Capital spending within the utility business is primarily to maintain our generation and distribution infrastructure, comply with environmental regulations and gas pipeline replacements. Capital spending within our non-utility businesses is for ongoing maintenance and expansion. The balance of non-utility spending is for growth, which we manage very carefully. We look to make investments that meet strict criteria in terms of strategy, management skills, risks and returns. All new investments are analyzed for their rates of return and cash payback on a risk adjusted basis. We have been disciplined in how we deploy capital and will not make investments unless they meet our criteria. For new business lines, we initially invest based on research and analysis. We start with a limited investment, we evaluate results and either expand or exit the business based on those results. In any given year, the amount of growth capital will be determined by the underlying cash flows of the Company with a clear understanding of any potential impact on our credit ratings.
 
Net cash used for investing activities was approximately $1.5 billion in 2008, compared with cash from investing activities of $330 million in 2007. The change was primarily driven by our non-utility monetization program and final refund payments to our synfuel partners in 2008.
 
Net cash from investing activities increased $1.5 billion in 2007, due primarily to the sale of our Antrim shale gas exploration and production business and lower capital expenditures.
 
Cash from Financing Activities
 
We rely on both short-term borrowing and long-term financing as a source of funding for our capital requirements not satisfied by our operations.
 
Our strategy is to have a targeted debt portfolio blend of fixed and variable interest rates and maturity. We continually evaluate our leverage target, which is currently 50% to 52%, to ensure it is consistent with our objective to have a strong investment grade debt rating. We have completed a number of refinancings with the effect of extending the average maturity of our long-term debt and strengthening our balance sheet.
 
Net cash used for financing activities was $84 million in 2008, compared to net cash used of approximately $1.5 billion for the same period in 2007. The change was primarily attributable to increased proceeds from the issuance of long-term debt, net of debt redemptions and repurchases, and lower repurchases of common stock.
 
Net cash used for financing activities increased $1.3 billion in 2007 primarily related to the repurchase of common stock, a decrease in short-term borrowings and a lower level of long-term debt issuances, partially offset by lower debt redemptions.
 
Outlook
 
We expect cash flow from operations to increase over the long-term primarily due to improvements from higher earnings at our utilities. We may be impacted by the delayed collection of underrecoveries of our PSCR and GCR costs and electric and gas accounts receivable as a result of MPSC orders. Energy prices are likely to be a source of volatility with regard to working capital requirements for the foreseeable future. We are continuing our efforts to identify opportunities to improve cash flow through working capital initiatives and maintaining flexibility in the timing and extent of our long-term capital projects.


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Recent distress in the financial markets has had an adverse impact on financial market activities, including extreme volatility in security prices and severely diminished liquidity and credit availability. Pursuant to the failures of large financial institutions, the credit situation rapidly evolved into a global crisis resulting in a number of international bank failures and declines in various stock indexes, and large reductions in the market value of equities and commodities worldwide. The crisis has led to increased volatility in the markets for both financial and physical assets, as the failures of large financial institutions resulted in sharply reduced trading volumes and activity. The effects of the credit situation will continue to be monitored.
 
We have experienced difficulties in accessing the commercial paper markets for short-term financing needs and an extended period of distress in the capital markets could have a negative impact on our liquidity in the future. Short-term borrowings, principally in the form of commercial paper, provide us with the liquidity needed on a daily basis. Our commercial paper program is supported by our unsecured credit facilities. Beginning late in the third quarter of 2008, access to the commercial paper markets was sharply reduced and, as a result, we drew against our unsecured credit lines to supplement other sources of funds to meet our short-term liquidity needs. We continue to access the long-term bond markets as evidenced by certain financings completed in the fourth quarter of 2008. Since December 31, 2008, we have benefited from substantially improved liquidity and pricing in the commercial paper market. As a result, we anticipate repayment of our credit facility draws during the first quarter of 2009.
 
Approximately $1.2 billion of our total short-term credit arrangements of $2.1 billion expire between June and December 2009, with the remainder expiring in October 2010. In anticipation of a significantly more challenging credit market, we expect to pursue the renewal of $975 million of our syndicated revolving credit facilities before their expiration in October. Given current conditions in the credit markets, we anticipate that the new facilities will vary significantly from our current facilities with respect to such items as bank participation, allocation levels, pricing and covenants. We are currently in discussions with our existing bank group and actively pursuing potential new candidates for inclusion, as we anticipate that a number of banks in our current bank group will elect not to participate in the renewal or will alter their commitment level. Initial indications are that pricing is likely to be significantly higher due to market-wide re-pricing of risk. Multi-year agreements are still possible, however, the recent trend in the marketplace is toward 364 day facilities. Several bi-lateral credit facilities totaling approximately $200 million will also expire in 2009 and we are evaluating the need for replacement.
 
Our benefit plans have not experienced any direct significant impact on liquidity or counterparty risk due to the turmoil in the financial markets. As a result of losses experienced in the financial markets, our benefit plan assets experienced negative returns for 2008, which will result in increased benefit costs and higher contributions in 2009 and future years than in the recent past or than originally planned.
 
We have assessed the implications of these factors on our current business and determined that there has not been a significant impact to our financial position and results of operations in 2008. While the impact of continued market volatility and turmoil in the credit markets cannot be predicted, we believe we have sufficient operating flexibility, cash resources and funding sources to maintain adequate amounts of liquidity and to meet our future operating cash and capital expenditure needs. However, virtually all of our businesses are capital intensive, or require access to capital, and the inability to access adequate capital could adversely impact earnings and cash flows.
 
See Notes 11 and 13 of the Notes to Consolidated Financial Statements in Item 8 of this Report.


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Contractual Obligations
 
The following table details our contractual obligations for debt redemptions, leases, purchase obligations and other long-term obligations as of December 31, 2008:
 
                                         
                            2014
 
Contractual Obligations
  Total     2009     2010-2011     2012-2013     and Beyond  
    (In millions)  
 
Long-term debt:
                                       
Mortgage bonds, notes and other
  $ 6,687     $ 220     $ 1,294     $ 671     $ 4,502  
Securitization bonds
    1,064       132       290       341       301  
Trust preferred-linked securities
    289                         289  
Capital lease obligations
    91       15       26       18       32  
Interest
    6,104       484       884       722       4,014  
Operating leases
    238       36       57       46       99  
Electric, gas, fuel, transportation and storage purchase obligations(1)
    5,665       2,972       1,813       160       720  
Other long-term obligations(2)(3)(4)
    201       41       94       25       41  
                                         
Total obligations
  $ 20,339     $ 3,900     $ 4,458     $ 1,983     $ 9,998  
                                         
 
 
(1) Excludes amounts associated with full requirements contracts where no stated minimum purchase volume is required.
 
(2) Includes liabilities for unrecognized tax benefits of $72 million.
 
(3) Excludes other long-term liabilities of $182 million not directly derived from contracts or other agreements.
 
(4) At December 31, 2008, we met the minimum pension funding levels required under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 for our defined benefit pension plans. We may contribute more than the minimum funding requirements for our pension plans and may also make contributions to our benefit plans and our postretirement benefit plans; however, these amounts are not included in the table above as such amounts are discretionary. Planned funding levels are disclosed in the Critical Accounting Estimates section of MD&A and in Note 18 of the Notes to Consolidated Financial Statements.
 
Credit Ratings
 
Credit ratings are intended to provide banks and capital market participants with a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold securities. Management believes that our current credit ratings provide sufficient access to the capital markets. However, disruptions in the banking and capital markets not specifically related to us may affect our ability to access these funding sources or cause an increase in the return required by investors.
 
As part of the normal course of business, Detroit Edison, MichCon and various non-utility subsidiaries of the Company routinely enter into physical or financially settled contracts for the purchase and sale of electricity, natural gas, coal, capacity, storage and other energy-related products and services. Certain of these contracts contain provisions which allow the counterparties to request that the Company post cash or letters of credit in the event that the credit rating of DTE Energy is downgraded below investment grade. Certain of these contracts for Detroit Edison and MichCon contain similar provisions in the event that the credit rating of the particular utility is downgraded below investment grade. The amount of such collateral which could be requested fluctuates based upon commodity prices and the provisions and maturities of the underlying transactions and could be substantial. Also, upon a downgrade below investment grade, we could have restricted access to the commercial paper market and if the parent is downgraded below investment grade our non-utility businesses, especially the Energy Trading and Power and Industrial Projects segments, could be required to restrict operations due to a lack of available liquidity. While we currently do not anticipate such a


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downgrade, we cannot predict the outcome of current or future credit rating agency reviews. The following table shows our credit rating as determined by three nationally recognized credit rating agencies. All ratings are considered investment grade and affect the value of the related securities.
 
                 
        Credit Rating Agency
        Standard &
  Moody’s
  Fitch
Entity
  Description   Poor’s   Investors Service   Ratings
 
DTE Energy
  Senior Unsecured Debt   BBB-   Baa2   BBB
    Commercial Paper   A-2   P-2   F2
Detroit Edison
  Senior Secured Debt   A-   A3   A-
    Commercial Paper   A-2   P-2   F2
MichCon
  Senior Secured Debt   BBB+   A3   BBB+
    Commercial Paper   A-2   P-2   F2
 
CRITICAL ACCOUNTING ESTIMATES
 
The preparation of financial statements in conformity with generally accepted accounting principles require that management apply accounting policies and make estimates and assumptions that affect results of operations and the amounts of assets and liabilities reported in the financial statements. Management believes that the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions in matters that are inherently uncertain and that may change in subsequent periods. Additional discussion of these accounting policies can be found in the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Regulation
 
A significant portion of our business is subject to regulation. Detroit Edison and MichCon currently meet the criteria of SFAS No. 71, Accounting for the Effects of Certain Types of Regulation . Application of this standard results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS No. 71 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue or expense in non-regulated businesses. Future regulatory changes or changes in the competitive environment could result in discontinuing the application of SFAS No. 71 for some or all of our businesses. Management believes that currently available facts support the continued application of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable in the current rate environment. See Note 5 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Derivatives and Hedging Activities
 
Risk management and trading activities are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. All derivatives are recorded at fair value and shown as Derivative Assets or Liabilities in the Consolidated Statements of Financial Position. Derivatives are measured at fair value, and changes in the fair value of the derivative instruments are recognized in earnings in the period of change, unless the derivative meets certain defined conditions and qualifies as an effective hedge. SFAS No. 133 also provides a scope exception for contracts that meet the normal purchases and normal sales criteria specified in the standard. The normal purchases and normal sales exception requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that are designated as normal purchases and normal sales are not recorded at fair value. Essentially all of the commodity contracts entered into by Detroit Edison and MichCon meet the criteria specified for this exception.
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of derivative contracts is


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determined from a combination of active quotes, published indexes and mathematical valuation models. We generally derive the pricing for our contracts from active quotes or external resources. Actively quoted indexes include exchange-traded positions such as the New York Mercantile Exchange and the Intercontinental Exchange, and over-the-counter positions for which broker quotes are available. For periods in which external market data is not readily observable, we estimate value using mathematical valuation models. Valuation models require various inputs and assumptions, including forward prices, volatility, interest rates, and exercise periods. For those inputs which are not observable, we use model-based extrapolation, proxy techniques or historical analysis to derive the required valuation inputs. We periodically update our policy and valuation methodologies for changes in market liquidity and other assumptions which may impact the estimated fair value of our derivative contracts. Liquidity and transparency in energy markets where fair value is evidenced by market quotes, current market transactions or other observable market information may require us to record gains or losses at inception of new derivative contracts.
 
The fair values we calculate for our derivatives may change significantly as inputs and assumptions are updated for new information. Actual cash returns realized on our derivatives may be different from the results we estimate using models. As fair value calculations are estimates based largely on commodity prices, we perform sensitivity analysis on the fair values of our forward contracts. See sensitivity analysis in the Fair Value section. See Notes 15 and 16 of the Notes to Consolidated Financial Statements in Item 8 of this report.
 
Allowance for Doubtful Accounts
 
We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, economic conditions, age of receivables and other information. Higher customer bills due to increased electricity and gas prices, the lack of adequate levels of assistance for low-income customers and economic conditions have also contributed to the increase in past due receivables. As a result of these factors, our allowance for doubtful accounts increased in 2008 and 2007. We believe the allowance for doubtful accounts is based on reasonable estimates. As part of the 2005 gas rate order for MichCon, the MPSC provided for the establishment of an uncollectible accounts tracking mechanism that partially mitigates the impact associated with MichCon uncollectible expenses. Detroit Edison has requested a similar tracking mechanism in its rate request filed January 26, 2009. However, failure to make continued progress in collecting our past due receivables in light of volatile energy prices and deteriorating economic conditions would unfavorably affect operating results and cash flow.
 
Asset Impairments
 
Goodwill
 
Certain of our business units have goodwill resulting from purchase business combinations. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, each of our reporting units with goodwill is required to perform impairment tests annually or whenever events or circumstances indicate that the value of goodwill may be impaired. In performing these impairment tests, we estimate the reporting unit’s fair value using standard valuation techniques, including techniques which use estimates of projected future results and cash flows to be generated by the reporting unit. Such techniques generally include a terminal value that utilizes an earnings multiple approach, which incorporates the current market values of comparable entities. These cash flow valuations involve a number of estimates that require broad assumptions and significant judgment by management regarding future performance. To the extent projected results or cash flows are revised downward, the reporting unit may be required to write down all or a portion of its goodwill, which would adversely impact our earnings.
 
As of December 31, 2008, our goodwill totaled $2 billion with 97 percent of this amount allocated to our utility reporting units. The value of the utility reporting units may be significantly impacted by rate orders and the regulatory environment.
 
We performed our annual impairment test on October 1, 2008 and determined that the estimated fair value of our reporting units exceeded their carrying value and no impairment existed. During the fourth quarter of 2008, the closing price of DTE Energy’s stock declined by approximately 11% and at December 31, 2008


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was approximately 3 percent below its book value per share. The market price of an individual equity security (and therefore the market capitalization of an entity with publicly traded equity securities) may not be representative of the fair value of the entity as a whole. Substantial value may arise from the ability to take advantage of synergies and other benefits that flow from control over an entity. An acquirer is often willing to pay more for equity securities that give it a controlling interest (i.e. a control premium) than an investor would pay for a number of equity securities representing less than a controlling interest. That control premium may cause the fair value of the entity to exceed its market capitalization. In assessing whether the recent modest decline in the trading price of DTE Energy’s common stock below its book value was an indication of impairment, we considered the following factors: (1) the relatively short duration and modest decline in the trading price of DTE Energy’s common stock; (2) the impact of the national and regional recession on DTE Energy’s future operating results and anticipated cash flows; (3) the favorable results of the recently performed annual impairment test and (4) a comparison of book value to the traded market price, including the impact of a control premium. The implied control premium of approximately 3 percent needed to equate DTE Energy’s market price to its book value was below the low end of the range of control premiums observed in recent transactions. As a result of this assessment, we determined that the decline in market price did not represent a trigger event at December 31, 2008 and an updated impairment test was not performed.
 
We will continue to monitor our estimates and assumptions regarding future cash flows. While we believe our assumptions are reasonable, actual results may differ from our projections.
 
Long-Lived Assets
 
We evaluate the carrying value of our long-lived assets, excluding goodwill, when circumstances indicate that the carrying value of those assets may not be recoverable. Conditions that could have an adverse impact on the cash flows and fair value of the long-lived assets are deteriorating business climate, condition of the asset, or plans to dispose of the asset before the end of its useful life. The review of long-lived assets for impairment requires significant assumptions about operating strategies and estimates of future cash flows, which require assessments of current and projected market conditions. An impairment evaluation is based on an undiscounted cash flow analysis at the lowest level for which independent cash flows of long-lived assets can be identified from other groups of assets and liabilities. Impairment may occur when the carrying value of the asset exceeds the future undiscounted cash flows. When the undiscounted cash flow analysis indicates a long-lived asset is not recoverable, the amount of the impairment loss is determined by measuring the excess of the long-lived asset over its fair value. An impairment would require us to reduce both the long-lived asset and current period earnings by the amount of the impairment, which would adversely impact our earnings. See Note 4 of Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Our Power and Industrial Projects segment has long-term contracts with General Motors Corporation (GM) and Ford Motor Company (Ford) to provide onsite energy services at certain of their facilities. At December 31, 2008, the book value of long-lived assets used in the servicing of these facilities was approximately $85 million. In addition, we have an equity investment of approximately $40 million in an entity which provides similar services to Chrysler LLC (Chrysler). These companies are in financial distress, with GM and Chrysler recently receiving loans from the U.S. Government to provide them with the working capital necessary to continue to operate in the short term. We consider the recent announcements by these companies as an indication of possible impairment due to a significant adverse change in the business climate that could affect the value of our long-lived assets as described in SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and have performed an impairment test on these assets. Based on our current undiscounted cash flow projections we have determined that we do not have an impairment as of December 31, 2008. We have also determined that we do not have an other than temporary decline in our Chrysler-related equity investment as described in APB 18, “The Equity Method of Accounting for Investments in Common Stock.” As the circumstances surrounding the long-term viability of these entities are dynamic and uncertain, we continue to monitor developments as they occur and will update our impairment analyses accordingly.


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Pension and Postretirement Costs
 
We sponsor defined benefit pension plans and postretirement benefit plans for substantially all of the employees of the Company. The measurement of the plan obligations and cost of providing benefits under these plans involve various factors, including numerous assumptions and accounting elections. When determining the various assumptions that are required, we consider historical information as well as future expectations. The benefit costs are affected by, among other things, the actual rate of return on plan assets, the long-term expected return on plan assets, the discount rate applied to benefit obligations, the incidence of mortality, the expected remaining service period of plan participants, level of compensation and rate of compensation increases, employee age, length of service, the anticipated rate of increase of health care costs and the level of benefits provided to employees and retirees. Pension and postretirement benefit costs attributed to the segments are included with labor costs and ultimately allocated to projects within the segments, some of which are capitalized.
 
We had pension costs for pension plans of $24 million in 2008, $76 million in 2007, and $134 million in 2006. Postretirement benefits costs for all plans were $142 million in 2008, $188 million in 2007 and $197 million in 2006. Pension and postretirement benefits costs for 2008 are calculated based upon a number of actuarial assumptions, including an expected long-term rate of return on our plan assets of 8.75%. In developing our expected long-term rate of return assumption, we evaluated asset class risk and return expectations, as well as inflation assumptions. Projected returns are based on broad equity, bond and other markets. Our 2009 expected long-term rate of return on plan assets is based on an asset allocation assumption utilizing active investment management of 55% in equity markets, 20% in fixed income markets, and 25% invested in other assets. Because of market volatility, we periodically review our asset allocation and rebalance our portfolio when considered appropriate. Given market conditions, we believe that 8.75% is a reasonable long-term rate of return on our plan assets for 2009. We will continue to evaluate our actuarial assumptions, including our expected rate of return, at least annually.
 
We calculate the expected return on pension and other postretirement benefit plan assets by multiplying the expected return on plan assets by the market-related value (MRV) of plan assets at the beginning of the year, taking into consideration anticipated contributions and benefit payments that are to be made during the year. SFAS No. 87, “Employers’ Accounting for Pensions” (SFAS 87) and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” allow the MRV of plan assets to be either fair value or a calculated value that recognizes changes in fair value in a systematic and rational manner over not more than five years. For our pension plans, we use a calculated value when determining the MRV of the pension plan assets and recognize changes in fair value over a three-year period. Accordingly, the future value of assets will be impacted as previously deferred gains or losses are recorded. Volatile financial markets contributed to our investment performance resulting in unrecognized net losses. As of December 31, 2008, we had $1.1 billion of cumulative losses that remain to be recognized in the calculation of the MRV of pension assets. For our postretirement benefit plans, we use fair value when determining the MRV of postretirement benefit plan assets, therefore all investment losses and gains have been recognized in the calculation of MRV for these plans.
 
The discount rate that we utilize for determining future pension and postretirement benefit obligations is based on a yield curve approach and a review of bonds that receive one of the two highest ratings given by a recognized rating agency. The yield curve approach matches projected plan pension and postretirement benefit payment streams with bond portfolios reflecting actual liability duration unique to our plans. The discount rate determined on this basis increased from 6.5% at December 31, 2007 to 6.9% at December 31, 2008. Due to the combination of recent company contributions, losses on plan assets due to negative financial market performance and higher discount rates, we estimate that our 2009 total pension costs will approximate $57 million compared to $24 million in 2008 and our 2009 postretirement benefit costs will approximate $208 million compared to $142 million in 2008. Future actual pension and postretirement benefit costs will depend on future investment performance, changes in future discount rates and various other factors related to plan design. The pension cost tracking mechanism, implemented in November 2004, that provided for recovery or refunding of pension costs above or below amounts reflected in Detroit Edison’s base rates, at the request of Detroit Edison was not reauthorized by the MPSC in its rate order effective January 1, 2009. In April 2005,


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the MPSC approved the deferral of the non-capitalized portion of MichCon’s negative pension expense. MichCon will record a regulatory liability for any negative pension costs, as determined under generally accepted accounting principles.
 
Lowering the expected long-term rate of return on our plan assets by one-percentage-point would have increased our 2008 pension costs by approximately $39 million. Lowering the discount rate and the salary increase assumptions by one-percentage-point would have increased our 2008 pension costs by approximately $37 million. Lowering the health care cost trend assumptions by one-percentage-point would have decreased our postretirement benefit service and interest costs for 2008 by approximately $26 million.
 
At December 31, 2006, we adopted SFAS No. 158 and recognized the underfunded status of our pension and other postretirement plans. The impact of the adoption of SFAS No. 158 was an increase in pension and postretirement benefit liabilities of approximately $1.3 billion in 2006. We requested and received agreement from the MPSC to record the additional liability amounts for the Detroit Edison and MichCon benefit plans on the Statement of Financial Position as a regulatory asset. As a result, regulatory assets were increased by approximately $1.2 billion. The remainder of the increase in pension and postretirement benefit liabilities is included in accumulated other comprehensive loss, net of tax. In 2008, as required by SFAS 158, we changed the measurement date of our pension and postretirement benefit plans from November 30 to December 31. As a result we recognized adjustments of $17 million ($9 million after-tax) and $4 million to retained earnings and regulatory liabilities, respectively, which represents approximately one month of pension and other postretirement benefit cost for the period from December 1, 2007 to December 31, 2008.
 
The market value of our pension and postretirement benefit plan assets has been affected in a negative manner by the financial markets. The value of our plan assets was $3.8 billion at November 30, 2007 and $2.8 billion at December 31, 2008. At December 31, 2008 our pension plans were underfunded by $877 million and our other postretirement benefit plans were underfunded by $1.4 billion, reflected in noncurrent assets, current liabilities, and noncurrent liabilities, respectively. The decline relative to 2007 funding levels results from negative investment performance returns in 2008.
 
Pension and postretirement costs and pension cash funding requirements may increase in future years without substantial returns in the financial markets. We made contributions to our pension plans of $100 million and $150 million in 2008 and 2007, respectively. Also, we contributed $50 million to our pension plans in January 2009. At the discretion of management, consistent with the Pension Protection Act of 2006, and depending upon financial market conditions, we anticipate making up to a $250 million contribution to our pension plans in 2009 and up to $1.1 billion over the next five years. We made postretirement benefit plan contributions of $116 million and $76 million in 2008 and 2007, respectively. In January 2009, we contributed $40 million to our postretirement benefit plans. We are required by orders issued by the MPSC to make postretirement benefit contributions at least equal to the amounts included in Detroit Edison’s and MichCon’s base rates. As a result, we expect to make up to a $130 million contribution to our postretirement plans in 2009 and, subject to MPSC funding requirements, up to $750 million over the next five years.
 
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act was signed into law. This Act provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by law. The effects of the subsidy on the measurement of net periodic postretirement benefit costs reduced costs by $14 million in 2008, $16 million in 2007, and $17 million in 2006.
 
See Note 18 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Legal Reserves
 
We are involved in various legal proceedings, claims and litigation arising in the ordinary course of business. We regularly assess our liabilities and contingencies in connection with asserted or potential matters, and establish reserves when appropriate. Legal reserves are based upon management’s assessment of pending and threatened legal proceedings and claims against us.


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Insured and Uninsured Risks
 
Our comprehensive insurance program provides coverage for various types of risks. Our insurance policies cover risk of loss including property damage, general liability, workers’ compensation, auto liability, and directors’ and officers’ liability. Under our risk management policy, we self-insure portions of certain risks up to specified limits, depending on the type of exposure. The maximum self-insured retention for various risks is as follows: property damage - $10 million, general liability — $7 million, workers’ compensation — $9 million, and auto liability — $7 million. We have an actuarially determined estimate of our incurred but not reported (IBNR) liability prepared annually and we adjust our reserves for self-insured risks as appropriate. As of December 31, 2008, this IBNR liability was approximately $39 million.
 
Accounting for Tax Obligations
 
We are required to make judgments regarding the potential tax effects of various financial transactions and results of operations in order to estimate our obligations to taxing authorities. We account for uncertain income tax positions using a benefit recognition model with a two-step approach, a more-likely-than-not recognition criterion and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement in accordance with FIN 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 . If the benefit does not meet the more likely than not criteria for being sustained on its technical merits, no benefit will be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. We also have non-income tax obligations related to property, sales and use and employment-related taxes and ongoing appeals related to these tax matters that are outside the scope of FIN 48 and accounted for under SFAS No. 5 and FASB Statement of Financial Accounting Concepts No. 6.
 
Accounting for tax obligations requires judgments, including assessing whether tax benefits are more likely than not to be sustained, and estimating reserves for potential adverse outcomes regarding tax positions that have been taken. We also assess our ability to utilize tax attributes, including those in the form of carryforwards, for which the benefits have already been reflected in the financial statements. We do not record valuation allowances for deferred tax assets related to capital losses that we believe will be realized in future periods. While we believe the resulting tax reserve balances as of December 31, 2008 and December 31, 2007 are appropriately accounted for in accordance with FIN 48, SFAS No. 5, SFAS No. 109 and FASB Statement of Financial Accounting Concepts No. 6, as applicable, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our consolidated financial statements and such adjustments could be material. See Note 8 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
ENVIRONMENTAL MATTERS
 
Environmental investigation and remediation liabilities are based upon estimates with respect to the number of sites for which DTE or its subsidiaries, including Detroit Edison and MichCon are responsible, the scope and cost of work to be performed at each site, the portion of costs that will be shared with other parties, the time of the remediation work, changes in technology, regulations and the requirements of local governmental authorities. These matters, if resolved in a manner different from the estimates, could have a material effect on our results of operation and financial position, to the extent the costs are not recovered through the base rates set for our utilities. See Note 17 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
See Note 2 of the Notes to Consolidated Financial Statements in Item 8 of this Report.


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FAIR VALUE
 
SFAS No. 157 — Fair Value Measurements
 
Effective January 1, 2008, we adopted SFAS No. 157.   The cumulative effect adjustment upon adoption of SFAS No. 157 represented a $4 million increase to the January 1, 2008 balance of retained earnings. As permitted by FASB Staff Position FAS 157-2, we have deferred the effective date of SFAS No. 157 as it pertains to non-financial assets and liabilities to January 1, 2009. See Note 15 of the Notes to Consolidated Financial Statements in Item 8 of this Report.
 
Derivative Accounting
 
The accounting standards for determining whether a contract meets the criteria for derivative accounting are numerous and complex. Moreover, significant judgment is required to determine whether a contract requires derivative accounting, and similar contracts can sometimes be accounted for differently. If a contract is accounted for as a derivative instrument, it is recorded in the financial statements as Derivative assets or liabilities, at the fair value of the contract. The recorded fair value of the contract is then adjusted at each reporting date, in the Consolidated Statements of Operations, to reflect any change in the fair value of the contract, a practice known as mark-to-market (MTM) accounting. Changes in the fair value of a designated derivative that is highly effective as a cash flow hedge are recorded as a component of Accumulated other comprehensive income, net of taxes, until the hedged item affects income. These amounts are subsequently reclassified into earnings as a component of the value of the forecasted transaction, in the same period as the forecasted transaction affects earnings. The ineffective portion of the fair value changes is recognized in the Consolidated Statements of Operations immediately.
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of derivative contracts are determined from a combination of quoted market prices, published indexes and mathematical valuation models. Where possible, we derive the pricing for our contracts from active quotes or external resources. Actively quoted indexes include exchange-traded positions such as the New York Mercantile Exchange and the Intercontinental Exchange, and over-the-counter positions for which broker quotes are available. For periods or locations in which external market data is not readily observable, we estimate value using mathematical valuation models. Valuation models require various inputs, including forward prices, volatility, interest rates and exercise periods. For those inputs which are not observable, we use model-based extrapolation, proxy techniques or historical analysis to derive the required valuation inputs. We periodically update our policy and valuation methodologies for changes in market liquidity and other assumptions which may impact the estimated fair value of our derivative contracts. Liquidity and transparency in energy markets where fair value is evidenced by market quotes, current market transactions or other observable market information may require us to record gains or losses at inception of new derivative contracts. Our credit risk and the credit risk of our counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which is immaterial for the year ended December 31, 2008.
 
Contracts we typically classify as derivative instruments include power, gas, certain coal and oil forwards, futures, options and swaps, and foreign currency contracts. Items we do not generally account for as derivatives include proprietary gas inventory, certain gas storage and transportation arrangements, and gas and oil reserves.
 
We manage our MTM risk on a portfolio basis based upon the delivery period of our contracts and the individual components of the risks within each contract. Accordingly, we record and manage the energy purchase and sale obligations under our contracts in separate components based on the commodity (e.g. electricity or 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).


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The subsequent tables contain the following four categories represented by their operating characteristics and key risks:
 
  •  Economic Hedges — Represents derivative activity associated with assets owned and contracted by DTE Energy, including forward sales of gas production and trades associated with owned transportation and storage capacity. Changes in the value of derivatives in this category 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.
 
  •  Structured Contracts — Represents derivative activity transacted by originating substantially hedged positions with wholesale energy marketers, producers, end users, utilities, retail aggregators and alternative energy suppliers.
 
  •  Proprietary 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 — Primarily represents derivative activity associated with our Unconventional Gas reserves. A portion of the price risk associated with anticipated production from the Barnett natural gas reserves has been mitigated through 2010. Changes in the value of the hedges are recorded as Derivative assets or liabilities, with an offset in Other comprehensive income to the extent that the hedges are deemed effective. The amounts shown in the following tables exclude the value of the underlying gas reserves including changes therein.
 
As a result of adherence to generally accepted accounting principles, the tables below do not include the expected earnings impacts of certain non-derivative gas storage, transportation and power contracts. Consequently, gains and losses from these positions may not match with the related physical and financial hedging instruments in some reporting periods, resulting in volatility in DTE Energy’s reported period-by-period earnings; however, the financial impact of this timing difference will reverse at the time of physical delivery and/or settlement.
 
The following tables provide details on changes in our MTM net asset (or liability) position during 2008:
 
                                         
    Economic
    Structured
    Proprietary
             
    Hedges     Contracts     Trading     Other     Total  
    (In millions)  
 
MTM at December 31, 2007
  $ 4     $ (365 )   $ 8     $ 2     $ (351 )
                                         
Reclassify to realized upon settlement
    (17 )     47       11       (2 )     39  
Changes in fair value recorded to income
    34       89       20       1       144  
Changes in fair value recorded in regulatory liabilities
                      2       2  
Amortization of option premiums
          (1 )     (1 )           (2 )
                                         
Amounts recorded to income
    17       135       30       1       183  
Cumulative effect adjustment to initially apply SFAS No. 157, pre-tax
          7                   7  
Amounts recorded in other comprehensive income
                      6       6  
Change in collateral held by (for) others
    (3 )     (7 )     (6 )           (16 )
Option premiums paid and other
          8       (10 )           (2 )
                                         
MTM at December 31, 2008
  $ 18     $ (222 )   $ 22     $ 9     $ (173 )
                                         
 
A substantial portion of the Company’s price risk related to its Antrim shale gas exploration and production business was mitigated by financial contracts that hedged our price risk exposure through 2013. The contracts were retained when the Antrim business was sold and offsetting financial contracts were put into place to effectively settle these positions. The contracts will require payments through 2013. These contracts represent a significant portion of the above net mark-to-market liability.


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The following table provides a current and noncurrent analysis of Derivative assets and liabilities, as reflected on the Consolidated Statements of Financial Position as of December 31, 2008. Amounts that relate to contracts that become due within twelve months are classified as current and all remaining amounts are classified as noncurrent.
 
                                                 
    Economic
    Structured
    Proprietary
                Assets
 
    Hedges     Contracts     Trading     Eliminations     Other     (Liabilities)  
    (In millions)  
 
Current assets
  $ 36     $ 165     $ 116     $ (9 )   $ 8     $ 316  
Noncurrent assets
    8       129       3       (1 )     1       140  
                                                 
Total MTM assets
    44       294       119       (10 )     9       456  
                                                 
Current liabilities
    (15 )     (209 )     (70 )     9             (285 )
Noncurrent liabilities
    (11 )     (307 )     (27 )     1             (344 )
                                                 
Total MTM liabilities
    (26 )     (516 )     (97 )     10             (629 )
                                                 
Total MTM net assets (liabilities)
  $ 18     $ (222 )   $ 22     $     $ 9     $ (173 )
                                                 
 
The table below shows the maturity of our MTM positions:
 
                                         
                      2012
       
                      and
    Total Fair
 
Source of Fair Value
  2009     2010     2011     Beyond     Value  
    (In millions)  
 
Economic Hedges
  $ 21     $ (7 )   $ (2 )   $ 6     $ 18  
Structured Contracts
    (45 )     (64 )     (44 )     (69 )     (222 )
Proprietary Trading
    46       (24 )                 22  
Other
    9                         9  
                                         
Total
  $ 31     $ (95 )   $ (46 )   $ (63 )   $ (173 )
                                         
 
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
 
Market Price Risk
 
DTE Energy has commodity price risk in both utility and non-utility businesses arising from market price fluctuations.
 
The Electric and Gas utility businesses have risks in conjunction with the anticipated purchases of coal, natural gas, uranium, electricity, and base metals to meet their service obligations. Further, changes in the price of electricity can impact the level of exposure of Customer Choice programs and uncollectible expenses at the Electric Utility. In addition, changes in the price of natural gas can impact the valuation of lost gas, storage sales revenue and uncollectible expenses at the Gas Utility. However, the Company does not bear significant exposure to earnings risk as such changes are included in regulatory rate-recovery mechanisms. Regulatory rate-recovery occurs in the form of PSCR and GCR mechanisms (see Note 1 of the Notes to Consolidated Financial Statements in Item 8 of this Report) and tracking mechanisms to mitigate some losses from customer migration due to electric Customer Choice programs and uncollectible accounts receivable at MichCon. The Company is exposed to short-term cash flow or liquidity risk as a result of the time differential between actual cash settlements and regulatory rate recovery.
 
Our Power and Industrial Projects business segment is subject to crude oil, electricity, natural gas, coal and coal-based product price risk and other risks associated with the weakened U.S. economy including constricted capital and credit markets. To the extent that commodity price risk has not been mitigated through the use of long-term contracts, we manage this exposure using forward energy, capacity and futures contracts.


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Our Unconventional Gas Production business segment has exposure to natural gas and, to a lesser extent, crude oil price fluctuations. These commodity price fluctuations can impact both current year earnings and reserve valuations. To manage this exposure we may use forward energy and futures contracts.
 
Our Energy Trading business segment has exposure to electricity, natural gas, crude oil, heating oil, and foreign currency price fluctuations. These risks are managed by our energy marketing and trading operations through the use of forward energy, capacity, storage, options and futures contracts, within pre-determined risk parameters.
 
Our Gas Midstream business segment has limited exposure to natural gas price fluctuations. The Gas Midstream business unit manages its exposure through the sale of long-term storage and transportation contracts.
 
Credit Risk
 
Bankruptcies
 
We purchase and sell electricity, gas, coal, coke and other energy products from and to numerous companies operating in the steel, automotive, energy, retail and other industries. Certain of our customers have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. We regularly review contingent matters relating to these customers and our purchase and sale contracts and we record provisions for amounts considered at risk of probable loss. We believe our previously accrued amounts are adequate for probable loss. The final resolution of these matters may have a material effect on our financial statements.
 
Our utilities and certain non-utility businesses provide services to the domestic automotive industry, including GM, Ford and Chrysler and many of their vendors and suppliers. GM and Chrysler have recently received loans from the U.S. Government to provide them with the working capital necessary to continue to operate in the short term. In February 2009, GM and Chrysler submitted viability plans to the U.S. Government indicating that additional loans were necessary to continue operations in the short term. Further plant closures, bankruptcies or a federal government mandated restructuring program could have a significant impact on our results, particularly in our Electric Utility and Power and Industrial Projects segments. As the circumstances surrounding the viability of these entities are dynamic and uncertain, we continue to monitor developments as they occur.
 
Other
 
We engage in business with customers that are non-investment grade. We closely monitor the credit ratings of these customers and, when deemed necessary, we request collateral or guarantees from such customers to secure their obligations.
 
Trading Activities
 
We are exposed to credit risk through trading activities. Credit risk is the potential loss that may result if our trading counterparties fail to meet their contractual obligations. We utilize both external and internally


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generated credit assessments when determining the credit quality of our trading counterparties. The following table displays the credit quality of our trading counterparties as of December 31, 2008:
 
                         
    Credit Exposure
             
    before Cash
    Cash
    Net Credit
 
    Collateral     Collateral     Exposure  
    (In millions)  
 
Investment Grade(1)
                       
A- and Greater
  $ 314     $ (14 )   $ 300  
BBB+ and BBB
    253             253  
BBB-
    47             47  
                         
Total Investment Grade
    614       (14 )     600  
Non-investment grade(2)
    25       (1 )     24  
Internally Rated — investment grade(3)
    206       (2 )     204  
Internally Rated — non-investment grade(4)
    28       (4 )     24  
                         
Total
  $ 873     $ (21 )   $ 852  
                         
 
 
(1) This category includes counterparties with minimum credit ratings of Baa3 assigned by Moody’s Investor Service (Moody’s) and BBB- assigned by Standard & Poor’s Rating Group (Standard & Poor’s). The five largest counterparty exposures combined for this category represented approximately 22 percent of the total gross credit exposure.
 
(2) This category includes counterparties with credit ratings that are below investment grade. The five largest counterparty exposures combined for this category represented approximately two percent of the total gross credit exposure.
 
(3) This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s, but are considered investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures combined for this category represented approximately 17 percent of the total gross credit exposure.
 
(4) This category includes counterparties that have not been rated by Moody’s or Standard & Poor’s, and are considered non-investment grade based on DTE Energy’s evaluation of the counterparty’s creditworthiness. The five largest counterparty exposures combined for this category represented approximately three percent of the total gross credit exposure.
 
Interest Rate Risk
 
DTE Energy is subject to interest rate risk in connection with the issuance of debt and preferred securities. In order to manage interest costs, we may use treasury locks and interest rate swap agreements. Our exposure to interest rate risk arises primarily from changes in U.S. Treasury rates, commercial paper rates and London Inter-Bank Offered Rates (LIBOR). As of December 31, 2008, we had a floating rate debt-to-total debt ratio of approximately 12% (excluding securitized debt).
 
Foreign Currency Risk
 
We have foreign currency exchange risk arising from market price fluctuations associated with fixed priced contracts. These contracts are denominated in Canadian dollars and are primarily for the purchase and sale of power as well as for long-term transportation capacity. To limit our exposure to foreign currency fluctuations, we have entered into a series of currency forward contracts through January 2013. Additionally, we may enter into fair value currency hedges to mitigate changes in the value of contracts or loans.
 
Summary of Sensitivity Analysis
 
We performed a sensitivity analysis on the fair values of our commodity contracts, long-term debt instruments and foreign currency forward contracts. The sensitivity analysis involved increasing and decreasing


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forward rates at December 31, 2008 by a hypothetical 10% and calculating the resulting change in the fair values.
 
The results of the sensitivity analysis calculations follow:
 
                     
    Assuming a 10%
  Assuming a 10%
   
Activity
  increase in rates   decrease in rates   Change in the fair value of
    (In millions)
 
Coal Contracts
  $ 1     $ (1 )   Commodity contracts
Gas Contracts
  $ (13 )   $ 13     Commodity contracts
Oil Contracts
  $ 1     $ (1 )   Commodity contracts
Power Contracts
  $ 3     $ (2 )   Commodity contracts
Interest Rate Risk
  $ (317 )   $ 346     Long-term debt
Foreign Currency Risk
  $ 5     $ (5 )   Forward contracts
Discount Rates
  $ 1     $ (1 )   Commodity contracts


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Item 8.    Financial Statements and Supplementary Data
 
The following consolidated financial statements and schedules are included herein.
 
         
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Controls and Procedures
 
(a)   Evaluation of disclosure controls and procedures
 
Management of the Company carried out an evaluation, under the supervision and with the participation of DTE Energy’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008, which is the end of the period covered by this report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations in the effectiveness of any disclosure controls and procedures, management cannot provide absolute assurance that the objectives of its disclosure controls and procedures will be attained.
 
(b)   Management’s report on internal control over financial reporting
 
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
 
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of the effectiveness to future periods are subject to the risks that a control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment, management believes that, as of December 31, 2008, the Company’s internal control over financial reporting was effective based on those criteria.
 
The Company’s independent registered public accounting firm that audited the financial statements included in this annual report has issued an attestation report on the Company’s internal control over financial reporting.
 
(c)   Changes in internal control over financial reporting
 
There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of DTE Energy Company:
 
We have audited the consolidated statements of financial position of DTE Energy Company and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, cash flows, and changes in shareholders’ equity and comprehensive income for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of DTE Energy Company and subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements of the Company taken as a whole, present fairly, in all material respects, the information set forth therein.
 
As discussed in Note 8 to the consolidated financial statements, in connection with the required adoption of a new accounting standard, the Company changed its method of accounting for uncertainty in income taxes on January 1, 2007. As discussed in Notes 18 and 19 to the consolidated financial statements, in connection with the required adoption of new accounting standards, in 2006 the Company changed its method of accounting for defined benefit pension and other postretirement plans and share based payments, respectively.
 
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.
 
/s/   DELOITTE & TOUCHE LLP
 
Detroit, Michigan
February 27, 2009


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of DTE Energy Company:
 
We have audited the internal control over financial reporting of DTE Energy Company and subsidiaries (the “Company”) as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2008 of the Company and our report dated February 27, 2009 expressed an unqualified opinion on those consolidated financial statements and financial statement schedules.
 
/s/   DELOITTE & TOUCHE LLP
 
Detroit, Michigan
February 27, 2009


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DTE Energy Company
Consolidated Statements of Operations
 
                         
    Year Ended December 31  
    2008     2007     2006  
    (In millions, Except per share amounts)  
 
Operating Revenues
  $ 9,329     $ 8,475     $ 8,157  
                         
Operating Expenses
                       
Fuel, purchased power and gas
    4,306       3,552       3,047  
Operation and maintenance
    2,694       2,892       2,677  
Depreciation, depletion and amortization
    901       932       990  
Taxes other than income
    304       357       309  
Gain on sale of non-utility business
    (128 )     (900 )      
Other asset (gains) and losses, reserves and impairments, net
    (11 )     37       67  
                         
      8,066       6,870       7,090  
                         
Operating Income
    1,263       1,605       1,067  
                         
Other (Income) and Deductions
                       
Interest expense
    503       533       525  
Interest income
    (19 )     (25 )     (26 )
Other income
    (104 )     (93 )     (61 )
Other expenses
    64       35       93  
                         
      444       450       531  
                         
Income Before Income Taxes and Minority Interest
    819       1,155       536  
Income Tax Provision
    288       364       146  
Minority Interest
    5       4       1  
                         
Income from Continuing Operations
    526       787       389  
Discontinued Operations
                       
Income (Loss) from discontinued operations, net of tax
    22       (4 )     (208 )
Minority interest in discontinued operations
    2       (188 )     (251 )
                         
      20       184       43  
Cumulative Effect of Accounting Changes, net of tax
                1  
                         
Net Income
  $ 546     $ 971     $ 433  
                         
Basic Earnings per Common Share
                       
Income from continuing operations
  $ 3.24     $ 4.64     $ 2.19  
Discontinued operations
    .13       1.09       .24  
Cumulative effect of accounting changes
                .01  
                         
Total
  $ 3.37     $ 5.73     $ 2.44  
                         
Diluted Earnings per Common Share
                       
Income from continuing operations
  $ 3.23     $ 4.62     $ 2.18  
Discontinued operations
    .13       1.08       .24  
Cumulative effect of accounting changes
                .01  
                         
Total
  $ 3.36     $ 5.70     $ 2.43  
                         
Weighted Average Common Shares Outstanding
                       
Basic
    162       169       177  
Diluted
    163       170       178  
Dividends Declared per Common Share
  $ 2.12     $ 2.12     $ 2.075  
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
Consolidated Statements of Financial Position
 
                 
    December 31  
    2008     2007  
    (In millions)  
 
ASSETS
Current Assets
               
Cash and cash equivalents
  $ 86     $ 123  
Restricted cash
    86       140  
Accounts receivable (less allowance for doubtful accounts of $265 and $182, respectively)
               
Customer
    1,666       1,658  
Other
    166       514  
Accrued power and gas supply cost recovery revenue
    22       76  
Inventories
               
Fuel and gas
    333       429  
Materials and supplies
    206       204  
Deferred income taxes
    227       387  
Derivative assets
    316       181  
Other
    220       196  
Current assets held for sale
          83  
                 
      3,328       3,991  
                 
Investments
               
Nuclear decommissioning trust funds
    685       824  
Other
    595       446  
                 
      1,280       1,270  
                 
Property
               
Property, plant and equipment
    20,065       18,809  
Less accumulated depreciation and depletion
    (7,834 )     (7,401 )
                 
      12,231       11,408  
                 
Other Assets
               
Goodwill
    2,037       2,037  
Regulatory assets
    4,231       2,786  
Securitized regulatory assets
    1,001       1,124  
Intangible assets
    70       25  
Notes receivable
    115       87  
Derivative assets
    140       199  
Prepaid pension assets
          152  
Other
    157       116  
Noncurrent assets held for sale
          547  
                 
      7,751       7,073  
                 
Total Assets
  $ 24,590     $ 23,742  
                 
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
Consolidated Statements of Financial Position
 
                 
    December 31  
    2008     2007  
    (In millions, except shares)  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities
               
Accounts payable
  $ 899     $ 1,189  
Accrued interest
    119       112  
Dividends payable
    86       87  
Short-term borrowings
    744       1,084  
Current portion long-term debt, including capital leases
    362       454  
Derivative liabilities
    285       281  
Deferred gains and reserves
    3       400  
Other
    515       566  
Current liabilities associated with assets held for sale
          48  
                 
      3,013       4,221  
                 
Long-Term Debt (net of current portion)
               
Mortgage bonds, notes and other
    6,458       5,576  
Securitization bonds
    932       1,065  
Trust preferred-linked securities
    289       289  
Capital lease obligations
    62       41  
                 
      7,741       6,971  
                 
Other Liabilities
               
Deferred income taxes
    1,958       1,824  
Regulatory liabilities
    1,202       1,168  
Asset retirement obligations
    1,340       1,277  
Unamortized investment tax credit
    96       108  
Derivative liabilities
    344       450  
Liabilities from transportation and storage contracts
    111       126  
Accrued pension liability
    871       68  
Accrued postretirement liability
    1,434       1,094  
Nuclear decommissioning
    114       134  
Other
    328       318  
Noncurrent liabilities associated with assets held for sale
          82  
                 
      7,798       6,649  
                 
Commitments and Contingencies (Notes 5, 6, and 17)
               
                 
Minority Interest
    43       48  
                 
                 
Shareholders’ Equity
               
Common stock, without par value, 400,000,000 shares authorized, 163,019,596 and 163,232,095 shares issued and outstanding, respectively
    3,175       3,176  
Retained earnings
    2,985       2,790  
Accumulated other comprehensive loss
    (165 )     (113 )
                 
      5,995       5,853  
                 
Total Liabilities and Shareholders’ Equity
  $ 24,590     $ 23,742  
                 
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
Consolidated Statements of Cash Flows
 
                         
    Year Ended December 31  
    2008     2007     2006  
    (In millions)  
 
Operating Activities
                       
Net income
  $ 546     $ 971     $ 433  
Adjustments to reconcile net income to net cash from operating activities:
                       
Depreciation, depletion and amortization
    899       926       1,014  
Deferred income taxes
    348       144       28  
Gain on sale of non-utility business
    (128 )     (900 )      
Other asset (gains), losses and reserves, net
    (4 )     (9 )     (11 )
Gain on sale of interests in synfuel projects
    (31 )     (248 )     (38 )
Impairment of synfuel projects
          4       77  
Partners’ share of synfuel project gains (losses)
    2       (188 )     (251 )
Contributions from synfuel partners
    14       229       197  
Cumulative effect of accounting changes
                (1 )
Changes in assets and liabilities, exclusive of changes shown separately (Note 1)
    (87 )     196       8  
                         
Net cash from operating activities
    1,559       1,125       1,456  
                         
Investing Activities
                       
Plant and equipment expenditures — utility
    (1,183 )     (1,035 )     (1,126 )
Plant and equipment expenditures — non-utility
    (190 )     (264 )     (277 )
Acquisitions, net of cash acquired
                (42 )
Proceeds from sale of interests in synfuel projects
    84       447       246  
Refunds to synfuel partners
    (387 )     (115 )      
Proceeds from sale of non-utility business
    253       1,262        
Proceeds from sale of other assets, net
    25       85       67  
Restricted cash
    54       6       (21 )
Proceeds from sale of nuclear decommissioning trust fund assets
    232       286       253  
Investment in nuclear decommissioning trust funds
    (255 )     (323 )     (284 )
Other investments
    (156 )     (19 )     (10 )
                         
Net cash from (used) for investing activities
    (1,523 )     330       (1,194 )
                         
Financing Activities
                       
Issuance of long-term debt
    1,310       50       612  
Redemption of long-term debt
    (446 )     (393 )     (687 )
Repurchase of long-term debt
    (238 )            
Short-term borrowings, net
    (340 )     (47 )     291  
Issuance of common stock
                17  
Repurchase of common stock
    (16 )     (708 )     (61 )
Dividends on common stock
    (344 )     (364 )     (365 )
Other
    (10 )     (6 )     (10 )
                         
Net cash used for financing activities
    (84 )     (1,468 )     (203 )
                         
Net Increase (Decrease) in Cash and Cash Equivalents
    (48 )     (13 )     59  
Cash and Cash Equivalents Reclassified (to) from Assets Held for Sale
    11       (11 )      
Cash and Cash Equivalents at Beginning of Period
    123       147       88  
                         
Cash and Cash Equivalents at End of Period
  $ 86     $ 123     $ 147  
                         
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
Consolidated Statements of Changes in Shareholders’ Equity
 
                                         
                      Accumulated
       
    Common Stock     Retained
    Other Comprehensive
       
    Shares     Amount     Earnings     Loss     Total  
    (Dollars in millions, shares in thousands)  
 
Balance, December 31, 2005
    177,814     $ 3,483     $ 2,557     $ (271 )   $ 5,769  
                                         
Net income
                433             433  
Issuance of new shares
    411       17                   17  
Dividends declared on common stock
                (368 )           (368 )
Repurchase and retirement of common stock
    (1,283 )     (32 )     (29 )           (61 )
Adjustment to initially apply SFAS No. 158, net of tax
                      (38 )     (38 )
Benefit obligations, net of tax
                      3       3  
Net change in unrealized losses on derivatives, net of tax
                      102       102  
Net change in unrealized losses on investments, net of tax
                      (7 )     (7 )
Stock-based compensation and other
    196       (1 )                 (1 )
                                         
Balance, December 31, 2006
    177,138       3,467       2,593       (211 )     5,849  
                                         
Net income
                971             971  
Implementation of FIN 48
                (5 )           (5 )
Dividends declared on common stock
                (358 )           (358 )
Repurchase and retirement of common stock
    (14,440 )     (297 )     (411 )           (708 )
Benefit obligations, net of tax
                      6       6  
Net change in unrealized losses on derivatives, net of tax
                      91       91  
Net change in unrealized losses on investments, net of tax
                      1       1  
Stock-based compensation and other
    534       6                   6  
                                         
Balance, December 31, 2007
    163,232       3,176       2,790       (113 )     5,853  
                                         
Net income
                546             546  
Implementation of SFAS No. 157, net of tax
                4             4  
Implementation of SFAS No. 158 measurement date provision, net of tax
                (9 )           (9 )
Dividends declared on common stock
                (346 )           (346 )
Repurchase and retirement of common stock
    (479 )     (16 )                 (16 )
Benefit obligations, net of tax
                      (22 )     (22 )
Foreign exchange translation, net of tax
                      (2 )     (2 )
Net change in unrealized losses on derivatives, net of tax
                      6       6  
Net change in unrealized losses on investments, net of tax
                      (34 )     (34 )
Stock-based compensation and other
    267       15                   15  
                                         
Balance, December 31, 2008
    163,020     $ 3,175     $ 2,985     $ (165 )   $ 5,995  
                                         
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
Consolidated Statements of Comprehensive Income
 
The following table displays comprehensive income:
 
                         
    2008     2007     2006  
    (In millions)  
 
Net income
  $ 546     $ 971     $ 433  
                         
Other comprehensive income (loss), net of tax:
                       
Foreign currency translation, net of taxes of $(1), $- and $-
    (2 )            
Benefit obligations, net of taxes of $(12), $3 and $2
    (22 )     6       3  
Net unrealized gains (losses) on derivatives:
                       
Gains (losses) arising during the period, net of taxes of $2, $(76) and $3
    4       (141 )     6  
Amounts reclassified to income, net of taxes of $1, $125 and $52
    2       232       96  
                         
      6       91       102  
                         
Net unrealized gains (losses) on investments:
                       
Gains (losses) arising during the period, net of taxes of $(19), $2 and $(4)
    (34 )     4       (7 )
Amounts reclassified to income, net of taxes of $-, $(2)and $-
          (3 )      
                         
      (34 )     1       (7 )
                         
Comprehensive income
  $ 494     $ 1,069     $ 531  
                         
 
See Notes to Consolidated Financial Statements


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DTE Energy Company
 
Notes to Consolidated Financial Statements
 
Note 1 — SIGNIFICANT ACCOUNTING POLICIES
 
Corporate Structure
 
DTE Energy owns the following businesses:
 
  •  Detroit Edison, an electric utility engaged in the generation, purchase, distribution and sale of electric energy to approximately 2.2 million customers in southeast Michigan;
 
  •  MichCon, a natural gas utility engaged in the purchase, storage, transmission, distribution and sale of natural gas to approximately 1.2 million customers throughout Michigan; and
 
  •  Our four non-utility segments are involved in 1) gas pipelines and storage; 2) unconventional gas exploration, development and production; 3) power and industrial projects and coal transportation and marketing; and 4) energy marketing and trading operations.
 
Detroit Edison and MichCon are regulated by the MPSC. The FERC regulates certain activities of Detroit Edison’s business as well as various other aspects of businesses under DTE Energy. In addition, the Company is regulated by other federal and state regulatory agencies including the NRC, the EPA and MDEQ.
 
References in this report to “Company” or “DTE” are to DTE Energy and its subsidiaries, collectively.
 
Basis of Presentation
 
The accompanying Consolidated Financial Statements are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the Company’s estimates.
 
Certain prior year balances were reclassified to match the current year’s financial statement presentation.
 
Principles of Consolidation
 
The Company consolidates all majority owned subsidiaries and investments in entities in which it has controlling influence. Non-majority owned investments are accounted for using the equity method when the Company is able to influence the operating policies of the investee. Non-majority owned investments include investments in limited liability companies, partnerships or joint ventures. When the Company does not influence the operating policies of an investee, the cost method is used. These consolidated financial statements also reflect the Company’s proportionate interests in certain jointly owned utility plant. The Company eliminates all intercompany balances and transactions.
 
For entities that are considered variable interest entities, the Company applies the provisions of FIN 46(R), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. We consolidate variable interest entities(VIEs) for which we are the primary beneficiary in accordance with FIN 46(R). In general, we determine whether we are the primary beneficiary of a VIE through a qualitative analysis of risk which indentifies which variable interest holder absorbs the majority of the financial risk or rewards and variability of the VIE. In performing this analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the identification of variable interest holders including equity owners, customers, suppliers and debt holders and which parties participated significantly in the design of the entity. If the qualitative analysis is inconclusive, a specific quantitative analysis is performed in accordance with FIN 46(R).
 
Legal entities within the Company’s Power and Industrial Projects segments enter into long-term contractual arrangements with customers to supply energy-related products or services. The entities are designed to pass-through the commodity risk associated with these contracts to the customers, with the


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Company retaining operational and customer default risk and generally are VIEs. These arrangements are assessed on a qualitative and, if necessary, quantitative basis, in accordance with the requirements of FIN 46(R) to determine who is the primary beneficiary. If the Company is the primary beneficiary, the VIE is consolidated. If the Company is not the primary beneficiary, the VIE is accounted for under the equity method of accounting. The VIEs are reviewed for reconsideration events each quarter, and the assessment of the primary beneficiary updated, if necessary.
 
DTE Energy has interests in various unconsolidated trusts that were formed for the sole purpose of issuing preferred securities and lending the gross proceeds to the Company. The sole assets of the trusts are debt securities of DTE Energy with terms similar to those of the related preferred securities. Payments the Company makes are used by the trusts to make cash distributions on the preferred securities it has issued. We have reviewed these interests in accordance with FIN 46(R) and have determined they are VIEs, but the Company is not the primary beneficiary.
 
The maximum risk exposure for consolidated VIEs is reflected on our Consolidated Statements of Financial Position. For non-consolidated VIEs, the maximum risk exposure is generally the extent of our investment.
 
The following table summarizes the amounts for the Company’s variable interest entities as of December 31, 2008 and 2007:
 
                 
    2008   2007
    (In millions)
 
Variable Interest Entities — Consolidated
               
Total Assets
  $ 47     $ 113  
Total Liabilities
    39       81  
Shareholders’ Equity
    (4 )     51  
Variable Interest Entities — Non-consolidated
               
Other Investments
  $ 191     $ 54  
Trust preferred — linked securities
    289       289  
 
Revenues
 
Revenues from the sale and delivery of electricity, and the sale, delivery and storage of natural gas are recognized as services are provided. Detroit Edison and MichCon record revenues for electric and gas provided but unbilled at the end of each month.
 
Detroit Edison’s accrued revenues include a component for the cost of power sold that is recoverable through the PSCR mechanism. MichCon’s accrued revenues include a component for the cost of gas sold that is recoverable through the GCR mechanism. Annual PSCR and GCR proceedings before the MPSC permit Detroit Edison and MichCon to recover prudent and reasonable supply costs. Any overcollection or undercollection of costs, including interest, will be reflected in future rates. See Note 5.
 
Non-utility businesses recognize revenues as services are provided and products are delivered. Trading activities are accounted for under the provisions of EITF Issue No. 02-3, “Accounting for Contracts Involved in Energy Trading and Risk Management Activites”, which requires revenues and energy costs related to energy trading contracts to be presented on a net basis in the Consolidated Statement of Operations. Commodity derivatives used for trading purposes are accounted for using the mark-to-market method with unrealized gains and losses in operating revenues.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Comprehensive Income
 
Comprehensive income is the change in common shareholders’ equity during a period from transactions and events from non-owner sources, including net income. As shown in the following table, amounts recorded to other comprehensive income for the year ended December 31, 2008 include unrealized gains and losses from derivatives accounted for as cash flow hedges, unrealized gains and losses on available for sale securities, and changes in benefit obligations, consisting of deferred actuarial losses, prior service costs and transition amounts related to pension and other postretirement benefit plans, pursuant to SFAS No. 158, and foreign currency translation adjustments.
 
                                         
    Net
    Net
                Accumulated
 
    Unrealized
    Unrealized
                Other
 
    Gains on
    Losses on
    Benefit
    Foreign Currency
    Comprehensive
 
    Derivatives     Investments     Obligations     Translation     Loss  
    (In millions)  
 
Beginning balances
  $ (13 )   $ 16     $ (116 )   $     $ (113 )
Current period change
    6       (34 )     (22 )     (2 )     (52 )
                                         
Ending balance
  $ (7 )   $ (18 )   $ (138 )   $ (2 )   $ (165 )
                                         
 
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 consists of funds held to satisfy requirements of certain debt and partnership operating agreements. Restricted cash designated for interest and principal payments within one year is classified as a current asset.
 
Receivables
 
Accounts receivable are primarily composed of trade receivables and unbilled revenue. Our accounts receivable are stated at net realizable value. Customer accounts are written off based upon approved regulatory and legislative requirements.
 
The allowance for doubtful accounts for our two utilities is calculated using the aging approach that utilizes rates developed in reserve studies. We establish an allowance for uncollectible accounts based on historical losses and management’s assessment of existing economic conditions, customer trends, and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the time the next bill is issued, typically monthly, however, factors such as assistance programs may delay aggressive action. We assess late payment fees on trade receivables based on contractual past-due terms established with customers.
 
For our Energy Trading, non-regulated segment, the customer allowance for doubtful accounts is calculated based on specific review of probable future collectibles based on receivable balances in excess of 90 days.
 
Unbilled revenues of $812 million and $843 million are included in customer accounts receivable at December 31, 2008 and 2007, respectively.
 
Inventories
 
The Company values fuel inventory, including gas inventory in the Energy Trading segment, and materials and supplies at average cost.
 
Gas inventory at MichCon is determined using the last-in, first-out (LIFO) method. At December 31, 2008, the replacement cost of gas remaining in storage exceeded the $14 million LIFO cost by $232 million. During 2008, MichCon liquidated 4.2 billion cubic feet of prior years’ LIFO layers. The liquidation reduced


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
2008 cost of gas by approximately $21 million, but had no impact on earnings as a result of the GCR mechanism. At December 31, 2007, the replacement cost of gas remaining in storage exceeded the $32 million LIFO cost by $288 million. During 2007, MichCon liquidated 9.5 billion cubic feet of prior years’ LIFO layers. The liquidation reduced 2007 cost of gas by approximately $30 million, but had no impact on earnings as a result of the GCR mechanism.
 
Property, Retirement and Maintenance, and Depreciation and Depletion
 
Summary of property by classification as of December 31:
 
                 
    2008     2007  
    (In millions)  
 
Property, Plant and Equipment
               
Electric Utility
               
Generation
  $ 8,544     $ 8,100  
Distribution
    6,433       6,272  
                 
Total Electric Utility
    14,977       14,372  
                 
Gas Utility
               
Distribution
    2,327       2,392  
Storage
    378       273  
Other
    1,090       953  
                 
Total Gas Utility
    3,795       3,618  
                 
Non-utility and other
    1,293       1,423  
Assets held for sale
          (604 )
                 
Total Property, Plant and Equipment
    20,065       18,809  
                 
Less Accumulated Depreciation and Depletion
               
Electric Utility
               
Generation
    (3,690 )     (3,539 )
Distribution
    (2,138 )     (2,101 )
                 
Total Electric Utility
    (5,828 )     (5,640 )
                 
Gas Utility
               
Distribution
    (955 )     (970 )
Storage
    (107 )     (100 )
Other
    (603 )     (538 )
                 
Total Gas Utility
    (1,665 )     (1,608 )
                 
Non-utility and other
    (341 )     (350 )
Assets held for sale
          197  
                 
Total Accumulated Depreciation and Depletion
    (7,834 )     (7,401 )
                 
Net Property, Plant and Equipment
  $ 12,231     $ 11,408  
                 
 
Property is stated at cost and includes construction-related labor, materials, overheads and an allowance for funds used during construction (AFUDC). AFUDC capitalized during 2008 and 2007 was approximately $50 million and $32 million, respectively. The cost of properties retired, less salvage value, at Detroit Edison and MichCon is charged to accumulated depreciation.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Expenditures for maintenance and repairs are charged to expense when incurred, except for Fermi 2. Approximately $25 million and $4 million of expenses related to the anticipated Fermi 2 refueling outage scheduled for 2009 were accrued at December 31, 2008 and December 31, 2007, respectively. Amounts are being accrued on a pro-rata basis over an 18-month period that began in November 2007. This accrual of outage costs matches the regulatory recovery of these costs in rates set by the MPSC.
 
The Company bases depreciation provisions for utility property at Detroit Edison and MichCon on straight-line and units-of-production rates approved by the MPSC. The composite depreciation rate for Detroit Edison was 3.3% in 2008, 2007 and 2006. The composite depreciation rate for MichCon was 3.2% in 2008, 3.1% in 2007 and 2.8% in 2006.
 
The average estimated useful life for each major class of utility property, plant and equipment as of December 31, 2008 follows:
 
                         
    Estimated Useful Lives in Years
Utility
  Generation   Distribution   Transmission
 
Electric
    40       37       N/A  
Gas
    N/A       40       38  
 
Non-utility property is depreciated over its estimated useful life using straight-line, declining-balance or units-of-production methods. The estimated useful lives for major classes of non-utility assets and facilities ranges from 5 to 50 years.
 
The Company credits depreciation, depletion and amortization expense when it establishes regulatory assets for plant-related costs such as depreciation or plant-related financing costs. The Company charges depreciation, depletion and amortization expense when it amortizes these regulatory assets. The Company credits interest expense to reflect the accretion income on certain regulatory assets.
 
Intangible assets relating to capitalized software are classified as Property, plant and equipment and the related amortization is included in Accumulated depreciation and depletion on the Consolidated Statements of Financial Position. The Company capitalizes the costs associated with computer software it develops or obtains for use in its business. The Company amortizes intangible assets on a straight-line basis over the expected period of benefit, ranging from 3 to 15 years. Intangible assets amortization expense was $54 million in 2008, $42 million in 2007 and $37 million in 2006. The gross carrying amount and accumulated amortization of intangible assets at December 31, 2008 were $576 million and $192 million, respectively. The gross carrying amount and accumulated amortization of intangible assets at December 31, 2007 were $493 million and $141 million, respectively. Amortization expense of intangible assets is estimated to be $54 million annually for 2009 through 2013.
 
Asset Retirement Obligations
 
The Company records asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations and FIN 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 . The Company has a legal retirement obligation for the decommissioning costs for its Fermi 1 and Fermi 2 nuclear plants. To a lesser extent, the Company has legal retirement obligations for gas production facilities, gas gathering facilities and various other operations. The Company has conditional retirement obligations for gas pipeline retirement costs and disposal of asbestos at certain of its power plants. To a lesser extent, the Company has conditional retirement obligations at certain service centers, compressor and gate stations, and disposal costs for PCB contained within transformers and circuit breakers. The Company recognizes such obligations as liabilities at fair market value at the time the associated assets are placed in service. Fair value is measured using expected future cash outflows discounted at our credit-adjusted risk-free rate.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
For the Company’s regulated operations, timing differences arise in the expense recognition of legal asset retirement costs that the Company is currently recovering in rates. The Company defers such differences under SFAS No. 71, Accounting for the Effects of Certain Types of Regulation .
 
No liability has been recorded with respect to lead-based paint, as the quantities of lead-based paint in the Company’s facilities are unknown. In addition, there is no incremental cost to demolitions of lead-based paint facilities vs. non-lead-based paint facilities and no regulations currently exist requiring any type of special disposal of items containing lead-based paint.
 
The Ludington Hydroelectric Power Plant (a jointly owned plant) has an indeterminate life and no legal obligation currently exists to decommission the plant at some future date. Substations, manholes and certain other distribution assets within Detroit Edison have an indeterminate life. Therefore, no liability has been recorded for these assets.
 
A reconciliation of the asset retirement obligations for 2008 follows:
 
         
    (In millions)  
 
Asset retirement obligations at January 1, 2008
  $ 1,293  
Accretion
    84  
Liabilities incurred
    2  
Liabilities settled
    (18 )
Transfers from Assets held for sale
    14  
Revision in estimated cash flows
    (14 )
         
Asset retirement obligations at December 31, 2008
    1,361  
Less amount included in current liabilities
    (21 )
         
    $ 1,340  
         
 
Approximately $1.2 billion of the asset retirement obligations represent nuclear decommissioning liabilities that are funded through a surcharge to electric customers over the life of the Fermi 2 nuclear plant.
 
Unconventional Gas Production
 
The Company follows the successful efforts method of accounting for investments in gas properties. Under this method of accounting, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has found proved reserves. If an exploratory well has not found proved reserves, the costs of drilling the well are expensed. The costs of development wells are capitalized, whether productive or nonproductive. Geological and geophysical costs on exploratory prospects and the costs of carrying and retaining unproved properties are expensed as incurred. An impairment loss is recorded if the net capitalized costs of proved gas properties exceed the aggregate related undiscounted future net revenues. An impairment loss is recorded to the extent that capitalized costs of unproved properties, on a property-by-property basis, are considered not to be realizable. Depreciation, depletion and amortization of proved gas properties are determined using the units-of-production method.
 
Long-Lived Assets
 
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds the expected future cash flows generated by the asset, an impairment loss is recognized resulting in the asset being written down to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Our Power and Industrial Projects segment has long-term contracts with General Motors Corporation (GM) and Ford Motor Company (Ford) to provide onsite energy services at certain of their facilities. At December 31, 2008, the book value of long-lived assets used in the servicing of these facilities was approximately $85 million. In addition, we have an equity investment of approximately $40 million in an entity which provides similar services to Chrysler LLC (Chrysler). These companies are in financial distress, with GM and Chrysler recently receiving loans from the U.S. Government to provide them with the working capital necessary to continue to operate in the short term. We consider the recent announcements by these companies as an indication of possible impairment due to a significant adverse change in the business climate that could affect the value of our long-lived assets as described in SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and have performed an impairment test on these assets. Based on our current undiscounted cash flow projections we have determined that we do not have an impairment as of December 31, 2008. We have also determined that we do not have an other than temporary decline in our Chrysler-related equity investment as described in APB 18, “The Equity Method of Accounting for Investments in Common Stock.” We will continue to assess these matters in future periods for possible asset impairments.
 
Goodwill
 
The Company has goodwill resulting from purchase business combinations.
 
The change in the carrying amount of goodwill for the fiscal years ended December 31, 2008 and December 31, 2007 is as follows:
 
         
    Total  
    (In millions)  
 
Balance at December 31, 2006
  $ 2,057  
Synthetic fuels impairment
    (4 )
Sale of non-utility businesses and other
    (16 )
         
Balance at December 31, 2007
  $ 2,037  
         
Balance at December 31, 2008
  $ 2,037  
         
 
We performed our annual impairment test on October 1, 2008 and determined that the estimated fair value of our reporting units exceeded their carrying value and no impairment existed. During the fourth quarter of 2008, the closing price of DTE Energy’s stock declined by approximately 11% and at December 31, 2008 was approximately 3 percent below its book value per share. In assessing whether the recent modest decline in the trading price of DTE Energy’s common stock below its book value was an indication of impairment, we considered the following factors: (1) the relatively short duration and modest decline in the trading price of DTE Energy’s common stock; (2) the anticipated impact of the national and regional recession on DTE Energy’s future operating results and cash flows; (3) the favorable results of the recently performed annual impairment test and (4) a comparison of book value to the traded market price, including the impact of a control premium. As a result of this assessment, we determined that the decline in market price did not represent a triggering event at December 31, 2008 requiring an update to the October 1, 2008 impairment test. We will continue to assess these matters in future periods for possible impairments.
 
Intangible Assets
 
The Company has certain intangible assets relating to non-utility contracts and emission allowances. The Company amortizes intangible assets on a straight-line basis over the expected period of benefit, ranging from 4 to 30 years. Intangible assets amortization expense was $7 million in 2008, $2 million in 2007 and $5 million in 2006. The gross carrying amount and accumulated amortization of intangible assets at December 31, 2008


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
were $85 million and $15 million, respectively. The gross carrying amount and accumulated amortization of intangible assets at December 31, 2007 were $31 million and $6 million, respectively. Our intangible assets related to emission allowances increased to $19 million at December 31, 2008 from $9 million at December 31, 2007. Net intangible assets reclassified to Assets held for sale totaled $38 million at December 31, 2007. Amortization expense of intangible assets is estimated to be $7 million annually for 2009 through 2013.
 
Excise and Sales Taxes
 
The Company records the billing of excise and sales taxes as a receivable with an offsetting payable to the applicable taxing authority, with no impact on the Consolidated Statements of Operations.
 
Deferred Debt Costs
 
The costs related to the issuance of long-term debt are deferred and amortized over the life of each debt issue. In accordance with MPSC regulations applicable to the Company’s electric and gas utilities, the unamortized discount, premium and expense related to debt redeemed with a refinancing are amortized over the life of the replacement issue. Discount, premium and expense on early redemptions of debt associated with non-utility operations are charged to earnings.
 
Investments in Debt and Equity Securities
 
The Company generally classifies investments in debt and equity securities as either trading or available-for-sale and has recorded such investments at market value with unrealized gains or losses included in earnings or in other comprehensive income or loss, respectively. Changes in the fair value of Fermi 2 nuclear decommissioning investments are recorded as adjustments to regulatory assets or liabilities, due to a recovery mechanism from customers. The Company’s investments are reviewed for impairment each reporting period. If the assessment indicates that the impairment is other than temporary, a loss is recognized resulting in the investment being written down to its estimated fair value. See Note 15.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Consolidated Statement of Cash Flows
 
A detailed analysis of the changes in assets and liabilities that are reported in the Consolidated Statement of Cash Flows follows:
 
                         
    2008     2007     2006  
    (In millions)  
 
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately
                       
Accounts receivable, net
  $ 328     $ (163 )   $ 385  
Accrued GCR revenue
    (71 )     (10 )     120  
Inventories
    96       80       (49 )
Recoverable pension and postretirement costs
    (1,324 )     738       (1,184 )
Accrued/prepaid pensions
    944       (401 )     218  
Accounts payable
    (286 )     5       (10 )
Accrued PSCR refund
    82       41       (101 )
Income taxes payable
    (22 )     (19 )     46  
Derivative assets and liabilities
    (178 )     222       (520 )
Postretirement obligation
    340       (320 )     1,008  
Other assets
    (51 )     (430 )     (134 )
Other liabilities
    55       453       229  
                         
    $ (87 )   $ 196     $ 8  
                         
 
Supplementary cash and non-cash information for the years ended December 31, were as follows:
 
                         
    2008   2007   2006
    (In millions)
 
Cash paid (received) for:
                       
Interest (net of interest capitalized)
  $ 496     $ 537     $ 526  
Income taxes
  $ (59 )   $ 326     $ 89  
 
In connection with maintaining certain traded risk management positions, the Company may be required to post cash collateral with its clearing agent. As a result, the Company entered into a demand financing agreement for up to $50 million with its clearing agent in lieu of posting additional cash collateral (a non-cash transaction). The amounts outstanding under this facility were $26 million and $13 million at December 31, 2008 and 2007, respectively.
 
See the following notes for other accounting policies impacting the Company’s consolidated financial statements:
 
         
Note
  Title
 
 
2
    New Accounting Pronouncements
 
5
    Regulatory Matters
 
8
    Income Taxes
 
15
    Fair Value
 
16
    Financial and Other Derivative Instruments
 
18
    Retirement Benefits and Trusteed Assets
 
19
    Stock-based Compensation


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS
 
Fair Value Accounting
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements . SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. Effective January 1, 2008, the Company adopted SFAS No. 157. As permitted by FASB Staff Position FAS No. 157-2, the Company has elected to defer the effective date of SFAS No. 157 as it pertains to non-financial assets and liabilities to January 1, 2009. The cumulative effect adjustment upon adoption of SFAS No. 157 represented a $4 million increase to the January 1, 2008 balance of retained earnings. See also Note 15.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 . This Statement permits an entity to choose to measure many financial instruments and certain other items at fair value. The fair value option established by SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. An entity will report in earnings unrealized gains and losses on items, for which the fair value option has been elected, at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. At January 1, 2008, the Company elected not to use the fair value option for financial assets and liabilities held at that date.
 
In October 2008, the FASB issued FASB Staff Position (FSP) 157-3, Determining the Fair Value of a Financial Asset in a Market That is Not Active . The FSP clarifies the application of SFAS No. 157, Fair Value Measurements, in an inactive market, and provides an illustrative example to demonstrate how the fair value of a financial asset is determined when the market for that financial asset is inactive. The FSP was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of the FSP did not have a material impact on the Company’s consolidated financial statements.
 
Business Combinations
 
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish this, SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141(R) is applied prospectively to business combinations entered into by the Company after January 1, 2009, with earlier adoption prohibited. The Company will apply the requirements of SFAS No. 141(R) to business combinations consummated after January 1, 2009.
 
GAAP Hierarchy
 
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements under GAAP. SFAS No. 162 is effective 60 days following the approval of the Public Company Accounting Oversight Board amendments to AU section 411, The Meaning of Present Fairly


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
in Conformity with Generally Accepted Accounting Principles . The Company will adopt SFAS No. 162 once effective. The adoption is not expected to have a material impact on its consolidated financial statements.
 
Useful Life of Intangible Assets
 
In May 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets . For a recognized intangible asset, an entity shall disclose information that enables users to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. This FSP is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The FSP will not have a material impact on the Company’s consolidated financial statements.
 
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities
 
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of SFAS No. 128, Earnings Per Share. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. Stock awards granted by the Company under its stock-based compensation plan qualify as a participating security. This FSP is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008 and will be applied retrospectively. Adoption of this FSP is expected to result in a reduction of Basic and Diluted EPS of $0.02 and $0.01 or less, respectively. See Note 10 for further disclosure.
 
Disclosures about Derivative Instruments and Guarantees
 
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 . This Statement requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative disclosures for earlier periods at initial adoption are encouraged but not required. The Company will adopt SFAS No. 161 on January 1, 2009.
 
In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. This FSP also requires additional disclosures about the current status of the payment/performance risk of a guarantee. The provisions of the FSP that amend SFAS No. 133 and FIN 45 are effective for reporting periods ending after November 15, 2008. The FSP also clarifies that the disclosures required by SFAS No. 161 should be provided for any reporting period (annual or interim) beginning after November 15, 2008. The Company has adopted these pronouncements as of December 31, 2008. See Note 16 for further disclosures.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Noncontrolling Interests in Consolidated Financial Statements
 
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51. This Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2008. Earlier adoption is prohibited. This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements which shall be applied retrospectively for all periods presented. The Company will adopt SFAS No. 160 as of January 1, 2009. Adoption of SFAS No. 160 will not have a material effect on the Company’s consolidated financial statements.
 
Offsetting Amounts Related to Certain Contracts
 
In April 2007, the FASB issued FSP FIN 39-1, Amendment of FASB Interpretation No. 39 . This FSP permits the Company to offset the fair value of derivative instruments with cash collateral received or paid for those derivative instruments executed with the same counterparty under a master netting arrangement. As a result, the Company is permitted to record one net asset or liability that represents the total net exposure of all derivative positions under a master netting arrangement. The decision to offset derivative positions under master netting arrangements remains an accounting policy choice. The guidance in this FSP is effective for fiscal years beginning after November 15, 2007. It is applied retrospectively by adjusting the financial statements for all periods presented. The Company adopted FSP FIN 39-1 as of January 1, 2008. At adoption, the Company chose to offset the collateral amounts against the fair value of derivative assets and liabilities, reducing both the Company’s total assets and total liabilities. The Company retrospectively reclassified certain assets and liabilities on the Consolidated Statement of Financial Position at December 31, 2007 as follows:
 
                         
    As Previously
  FSP FIN 39-1
   
    Reported   Adjustments   As Adjusted
    (In millions)
 
Current Assets
                       
Accounts receivable-other
  $ 504     $ 10     $ 514  
Derivative assets
    195       (14 )     181  
Other Assets
                       
Derivative assets
    207       (8 )     199  
Current Liabilities
                       
Accounts payable
    1,198       (9 )     1,189  
Derivative liabilities
    282       (1 )     281  
Other Liabilities
                       
Derivative liabilities
    452       (2 )     450  
 
The total cash collateral received, net of cash collateral posted was $30 million at December 31, 2008. In accordance with FSP FIN 39-1, derivative assets and derivative liabilities are shown net of collateral of $31 million and $17 million, respectively. At December 31, 2008, amounts not related to unrealized derivative positions totaling $7 million and $23 million were included in accounts receivable and accounts payable, respectively.
 
Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities
 
In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN 46(R)-8, Disclosures about Transfers of Financial Assets and Interest in Variable Interest Entities. The purpose of the FSP is to promptly improve disclosures by public entities and enterprises until the pending amendments to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities , and FASB


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities , are finalized and approved by the Board. Effective for reporting periods ending after December 15, 2008, the FSP amends Statement 140 to require public entities to provide additional disclosures about transfers of financial assets and variable interests in qualifying special-purpose entities. It also amends FIN 46(R) to require public enterprises to provide additional disclosures about their involvement with variable interest entities. The adoption of this FSP did not have a material impact on the Company’s consolidated financial statements. See Note 1.
 
Employers’ Disclosures about Postretirement Benefit Plan Assets
 
On December 30, 2008, the FASB issued FASB Staff Position (FSP) FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. This FSP amends SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosure requirements required by this FSP are effective for fiscal years ending after December 15, 2009. The Company will adopt this FSP on December 31, 2009.
 
NOTE 3 — DISPOSALS AND DISCONTINUED OPERATIONS
 
Sale of Antrim Shale Gas Exploration and Production Business
 
In 2007, the Company sold its Antrim shale gas exploration and production business (Antrim) for gross proceeds of $1.3 billion. The pre-tax gain recognized on this sale amounted to $900 million ($580 million after-tax) and is reported on the Consolidated Statements of Operations under the line item, “Gain on sale of non-utility business,” and included in the Corporate & Other segment. Prior to the sale, the operating results of Antrim were reflected in the Unconventional Gas Production segment.
 
The Antrim business is not presented as a discontinued operation due to continuation of cash flows related to the sale of a portion of Antrim’s natural gas production to Energy Trading under the terms of natural gas sales contracts that expire in 2010 and 2012. These continuing cash flows, while not significant to DTE Energy, are significant to Antrim and therefore meet the definition of continuing cash flows as described in EITF 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations .
 
Prior to the sale, a substantial portion of the Company’s price risk related to expected gas production from its Antrim shale business had been hedged through 2013. These financial contracts were accounted for as cash flow hedges, with changes in estimated fair value of the contracts reflected in other comprehensive income. Upon the sale of Antrim, the financial contracts no longer qualified as cash flow hedges. In conjunction with the Antrim sale, the Company reclassified amounts held in accumulated other comprehensive income and recorded the effective settlements, reducing operating revenues in 2007 by $323 million.
 
Plan to Sell Interest in Certain Power and Industrial Projects
 
During the third quarter of 2007, the Company announced its plans to sell a 50% interest in a portfolio of select Power and Industrial Projects. As a result, the assets and liabilities of the Projects were classified as held for sale at that time and the Company ceased recording depreciation and amortization expense related to these assets. During 2008, the United States asset sale market weakened and challenges in the debt market persisted. As a result of these developments, the Company’s work on this planned monetization was discontinued. As of June 30, 2008, the assets and liabilities of the Projects were no longer classified as held for sale. Depreciation and amortization resumed in June 2008 when the assets were reclassified as held and used. During the second quarter of 2008, the Company recorded a loss of $19 million related to the valuation adjustment for the cumulative depreciation and amortization not recorded during the held for sale period. The


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Consolidated Statements of Financial Position included $28 million of minority interests in the Projects classified as held for sale as of December 31, 2007.
 
The following table presents the major classes of assets and liabilities of the Projects classified as held for sale at December 31, 2007:
 
         
    (In millions)  
 
Cash and cash equivalents
  $ 11  
Accounts receivable (less allowance for doubtful accounts of $4)
    65  
Inventories
    4  
Other current assets
    3  
         
Total current assets held for sale
    83  
         
Investments
    55  
Property, plant and equipment, net of accumulated depreciation of $183
    285  
Intangible assets
    38  
Long-term notes receivable
    46  
Other noncurrent assets
    1  
         
Total noncurrent assets held for sale
    425  
         
Total assets held for sale
  $ 508  
         
Accounts payable
  $ 38  
Other current liabilities
    10  
         
Total current liabilities associated with assets held for sale
    48  
         
Long-term debt (including capital lease obligations of $31)
    53  
Asset retirement obligations
    16  
Other liabilities
    13  
         
Total noncurrent liabilities associated with assets held for sale
    82  
         
Total liabilities related to assets held for sale
  $ 130  
         
 
Sale of Interest in Barnett Shale Properties
 
In 2008, the Company sold a portion of its Barnett shale properties for gross proceeds of approximately $260 million. As of December 31, 2007, property, plant and equipment of approximately $122 million, net of approximately $14 million of accumulated depreciation and depletion, was classified as held for sale. The Company recognized a gain of $128 million ($81 million after-tax) on the sale during 2008.
 
Synthetic Fuel Business
 
The Company discontinued the operations of its synthetic fuel production facilities throughout the United States as of December 31, 2007. Synfuel plants chemically changed coal and waste coal into a synthetic fuel as determined under the Internal Revenue Code. Production tax credits were provided for the production and sale of solid synthetic fuel produced from coal and were available through December 31, 2007. The synthetic fuel business generated operating losses that were substantially offset by production tax credits.
 
The Company has provided certain guarantees and indemnities in conjunction with the sales of interests in its synfuel facilities. The guarantees cover potential commercial, environmental, oil price and tax-related obligations and will survive until 90 days after expiration of all applicable statutes of limitations. The


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Company estimates that its maximum potential liability under these guarantees at December 31, 2008 is $2.9 billion.
 
As shown in the following table, the Company has reported the business activity of the synthetic fuel business as a discontinued operation. The amounts exclude general corporate overhead costs:
 
                         
    2008     2007     2006  
    (In millions)  
 
Operating Revenues
  $ 7     $ 1,069     $ 863  
Operation and Maintenance
    9       1,265       1,019  
Depreciation and Amortization
    (2 )     (6 )     24  
Taxes other than Income
    (1 )     5       12  
Asset (Gains) and Losses, Reserves and Impairments, Net(1)
    (31 )     (280 )     40  
                         
Operating Income (Loss)
    32       85       (232 )
Other (Income) and Deductions
    (2 )     (9 )     (20 )
Minority Interest
    2       (188 )     (251 )
Income Taxes
                       
Provision
    13       98       14  
Production Tax Credits
    (1 )     (21 )     (23 )
                         
      12       77       (9 )
                         
Net Income(1)
  $ 20     $ 205     $ 48  
                         
 
 
(1) Includes intercompany pre-tax gain of $32 million ($21 million after-tax) for 2007.
 
NOTE 4 — OTHER IMPAIRMENTS AND RESTRUCTURING
 
Other Impairments
 
Barnett shale
 
Our Unconventional Gas Production segment recorded pre-tax impairment losses of $8 million and $27 million in 2008 and 2007, respectively. The 2008 impairment related primarily to the write-off of leases that expired or will expire within the next twelve months and are not expected to be developed under current economic conditions. The 2007 impairment consisted of expired leases in Bosque County, which is located in the southern expansion area of the Barnett shale in North Texas. The properties were impaired due to the lack of economic and operating viability of the properties. Impairment losses were recorded within the Other asset (gains) and losses, reserves, and impairments, net line in the Consolidated Statements of Operations.
 
Landfill Gas Recovery
 
In 2006, the Company’s Power and Industrial Projects segment recorded a pre-tax impairment loss of $14 million at its landfill gas recovery unit relating to the write down of assets at several landfill sites. The fixed assets were impaired due to continued operating losses and the oil price-related phase-out of production tax credits. The impairment was recorded within the Other asset (gains) and losses, reserves and impairments, net line in the Consolidated Statements of Operations. The Company calculated the expected undiscounted cash flows from the use and eventual disposition of the assets, which indicated that the carrying amount of certain assets was not recoverable. The Company determined the fair value of the assets utilizing a discounted cash flow technique.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Non-Utility Power Generation
 
In 2006, the Power and Industrial Projects segment recorded a pre-tax impairment loss totaling $74 million for its investments in two natural gas-fired electric generating plants.
 
A loss of $42 million related to a 100% owned plant is recorded within the Other asset (gains) and losses, reserves and impairments, net line in the Consolidated Statements of Operations. The generating plant was impaired due to continued operating losses and the September 2006 delisting by MISO, resulting in the plant no longer providing capacity for the power grid. The Company calculated the expected undiscounted cash flows from the use and eventual disposition of the plant, which indicated that the carrying amount of the plant was not recoverable. The Company determined the fair value of the plant utilizing a discounted cash flow technique.
 
A loss of $32 million related to a 50% equity interest in a gas-fired peaking electric generating plant is recorded within the Other (income) and deductions, Other expenses line in the Consolidated Statements of Operations. The investment was impaired due to continued operating losses and the expected sale of the investment. The Company determined the fair value of the plant utilizing a discounted cash flow technique, which indicated that the carrying amount of the investment exceeded its fair value.
 
Waste Coal Recovery
 
In 2006, our Power and Industrial Projects segment recorded a pre-tax impairment loss of $19 million related to its investment in proprietary technology used to refine waste coal. The fixed assets at our development operation were impaired due to continued operating losses and negative cash flow. In addition, the Company impaired all of its patents related to waste coal technology. The Company calculated the expected undiscounted cash flows from the use and eventual disposition of the assets, which indicated that the carrying amount of the assets was not recoverable. The Company determined the fair value of the assets utilizing a discounted cash flow technique. The impairment loss was recorded within the Other asset (gains) and losses, reserves and impairments, net line in the Consolidated Statements of Operations.
 
Restructuring Costs
 
In 2005, the Company initiated a company-wide review of its operations called the Performance Excellence Process. Specifically, the Company began a series of focused improvement initiatives within Detroit Edison and MichCon, and associated corporate support functions. The Company incurred costs to achieve (CTA) restructuring expense for employee severance and other costs. Other costs include project management and consultant support. In September 2006, the MPSC issued an order approving a settlement agreement that allows Detroit Edison and MichCon, commencing in 2006, to defer the incremental CTA. Further, the order provides for Detroit Edison and MichCon to amortize the CTA deferrals over a ten-year period beginning with the year subsequent to the year the CTA was deferred. Detroit Edison deferred approximately $24 million, $54 million and $102 million of CTA in 2008, 2007 and 2006 as a regulatory asset. The recovery of these costs was provided for by the MPSC in the order approving the settlement in the show cause proceeding and in the December 23, 2008 MPSC rate order. Amortization of prior year deferred CTA costs amounted to $16 million in 2008 and $10 million in 2007. MichCon cannot defer CTA costs at this time because a regulatory recovery mechanism has not been established by the MPSC. MichCon expects to seek a recovery mechanism in its next rate case expected to be filed in 2009.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Amounts expensed are recorded in the Operation and maintenance line on the Consolidated Statements of Operations. Deferred amounts are recorded in the Regulatory asset line on the Consolidated Statements of Financial Position. Costs incurred in 2008, 2007 and 2006 are as follows:
 
                                                                         
    Employee
             
    Severance Costs     Other Costs     Total Cost  
    2008     2007     2006     2008     2007     2006     2008     2007     2006  
    (In millions)  
 
Costs incurred:
                                                                       
Electric Utility
  $     $ 15     $ 51     $ 26     $ 50     $ 56     $ 26     $ 65     $ 107  
Gas Utility
          3       17       7       6       7       7       9       24  
Other
          1       2       3       1       1       3       2       3  
                                                                         
Total costs
          19       70       36       57       64       36       76       134  
Less amounts deferred or capitalized:
                                                                       
Electric Utility
          15       51       26       50       56       26       65       107  
                                                                         
Amount expensed
  $     $ 4     $ 19     $ 10       7     $ 8     $ 10     $ 11     $ 27  
                                                                         
 
NOTE 5 — REGULATORY MATTERS
 
Regulation
 
Detroit Edison and MichCon are subject to the regulatory jurisdiction of the MPSC, which 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. Detroit Edison is also regulated by the FERC with respect to financing authorization and wholesale electric activities.
 
Regulatory Assets and Liabilities
 
Detroit Edison and MichCon apply the provisions of SFAS No. 71, Accounting for the Effects of Certain Types of Regulation, to their regulated operations. SFAS No. 71 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in non-regulated businesses. Continued applicability of SFAS No. 71 requires that rates be designed to recover specific costs of providing regulated services and be charged to and collected from customers. Future regulatory changes or changes in the competitive environment could result in the Company discontinuing the application of SFAS No. 71 for some or all of its utility businesses and may require the write-off of the portion of any regulatory asset or liability that was no longer probable of recovery through regulated rates. Management believes that currently available facts support the continued application of SFAS No. 71 to Detroit Edison and MichCon.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The following are balances and a brief description of the regulatory assets and liabilities at December 31:
 
                 
    2008     2007  
    (In millions)  
 
Assets
               
Securitized regulatory assets
  $ 1,001     $ 1,124  
                 
Recoverable income taxes related to securitized regulatory assets
  $ 549     $ 616  
Recoverable pension and postretirement costs
               
Pension
    1,505       495  
Postretirement costs
    787       496  
Asset retirement obligation
    452       266  
Other recoverable income taxes
    89       94  
Recoverable costs under PA 141
               
Excess capital expenditures
    4       11  
Deferred Clean Air Act expenditures
    10       28  
Midwest Independent System Operator charges
    8       23  
Electric Customer Choice implementation costs
    37       58  
Enhanced security costs
    6       10  
Unamortized loss on reacquired debt
    73       67  
Deferred environmental costs
    43       41  
Accrued PSCR/GCR revenue
    22       76  
Recoverable uncollectibles expense
    122       42  
Cost to achieve Performance Excellence Process
    154       146  
Enterprise Business Systems costs
    26       26  
Deferred income taxes — Michigan Business Tax
    394       364  
Other
    2       3  
                 
      4,283       2,862  
Less amount included in current assets
    (52 )     (76 )
                 
    $ 4,231     $ 2,786  
                 


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                 
    2008     2007  
    (In millions)  
 
Liabilities
               
Asset removal costs
  $ 534     $ 581  
Accrued pension
               
Pension equalization mechanism
    72       44  
Negative pension offset
    110       71  
Accrued PSCR/GCR refund
    11       70  
Refundable costs under PA 141
    16        
Refundable income taxes
    93       104  
Fermi 2 refueling outage
    25       4  
Deferred income taxes — Michigan Business Tax
    388       364  
Other
    5       5  
                 
      1,254       1,243  
Less amount included in current liabilities
    (52 )     (75 )
                 
    $ 1,202     $ 1,168  
                 
 
As noted below, regulatory assets for which costs have been incurred have been included (or are expected to be included, for costs incurred subsequent to the most recently approved rate case) in Detroit Edison or MichCon’s rate base, thereby providing a return on invested costs. Certain regulatory assets do not result from cash expenditures and therefore do not represent investments included in rate base or have offsetting liabilities that reduce rate base.
 
ASSETS
 
  •  Securitized regulatory assets — The net book balance of the Fermi 2 nuclear plant was written off in 1998 and an equivalent regulatory asset was established. In 2001, the Fermi 2 regulatory asset and certain other regulatory assets were securitized pursuant to PA 142 and an MPSC order. A non-bypassable securitization bond surcharge recovers the securitized regulatory asset over a fourteen-year period ending in 2015.
 
  •  Recoverable income taxes related to securitized regulatory assets  — Receivable for the recovery of income taxes to be paid on the non-bypassable securitization bond surcharge. A non-bypassable securitization tax surcharge recovers the income tax over a fourteen-year period ending 2015.
 
  •  Recoverable pension and postretirement costs — In 2007, the Company adopted SFAS No. 158 which required, among other things, the recognition in other comprehensive income of the actuarial gains or losses and the prior service costs that arise during the period but that are not immediately recognized as components of net periodic benefit costs. The Company received approval from the MPSC to record the charge related to the additional liability as a regulatory asset since the traditional rate setting process allows for the recovery of pension and postretirement costs. The asset will reverse as the deferred items are recognized as benefit expenses in net income. (1)
 
  •  Asset retirement obligation — Asset retirement obligations were recorded pursuant to adoption of SFAS No. 143 and FIN 47. These obligations are primarily for Fermi 2 decommissioning costs. The asset captures the timing differences between expense recognition and current recovery in rates and will reverse over the remaining life of the related plant. (1)

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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
  •  Other recoverable income taxes — Income taxes receivable from Detroit Edison’s customers representing the difference in property-related deferred income taxes receivable and amounts previously reflected in Detroit Edison’s rates. This asset will reverse over the remaining life of the related plant. (1)
 
  •  Excess capital expenditures — PA 141 permits, after MPSC authorization, the recovery of and a return on capital expenditures that exceed a base level of depreciation expense.
 
  •  Deferred Clean Air Act expenditures — PA 141 permits, after MPSC authorization, the recovery of and a return on Clean Air Act expenditures.
 
  •  Midwest Independent System Operator charges — PA 141 permits, after MPSC authorization, the recovery of and a return on charges from a regional transmission operator such as the Midwest Independent System Operator.
 
  •  Electric Customer Choice implementation costs — PA 141 permits, after MPSC authorization, the recovery of and a return on costs incurred associated with the implementation of the electric Customer Choice program.
 
  •  Enhanced security costs — PA 609 of 2002 permits, after MPSC authorization, the recovery of enhanced security costs for an electric generating facility.
 
  •  Unamortized loss on reacquired debt — The unamortized discount, premium and expense related to debt redeemed with a refinancing are deferred, amortized and recovered over the life of the replacement issue.
 
  •  Deferred environmental costs — The MPSC approved the deferral and recovery of investigation and remediation costs associated with Gas Utility’s former MGP sites. This asset is offset in working capital by an environmental liability reserve. The amortization of the regulatory asset is not included in MichCon’s current rates because it is offset by the recognition of insurance proceeds. MichCon will request recovery of the remaining asset balance in future rate filings after the recognition of insurance proceeds is complete. (1)
 
  •  Accrued PSCR revenue — Receivable for the temporary under-recovery of and a return on fuel and purchased power costs incurred by Detroit Edison which are recoverable through the PSCR mechanism.
 
  •  Accrued GCR revenue — Receivable for the temporary under-recovery of and a return on gas costs incurred by MichCon which are recoverable through the GCR mechanism.
 
  •  Recoverable uncollectibles expense — MichCon receivable for the MPSC approved uncollectible expense true-up mechanism that tracks the difference in the fluctuation in uncollectible accounts and amounts recognized pursuant to the MPSC authorization.
 
  •  Cost to achieve Performance Excellence Process (PEP) — The MPSC authorized the deferral of costs to implement the PEP. These costs consist of employee severance, project management and consultant support. These costs will be amortized over a ten-year period beginning with the year subsequent to the year the costs were deferred.
 
  •  Enterprise Business Systems (EBS) costs — The MPSC approved the deferral and amortization over 10 years beginning in January 2009 of EBS costs that would otherwise be expensed. (1)
 
  •  Deferred income taxes — Michigan Business Tax (MBT) - In July 2007, the MBT was enacted by the State of Michigan. State deferred tax liabilities were established for the Company’s utilities, and offsetting regulatory assets were recorded as the impacts of the deferred tax liabilities will be reflected in rates as the related taxable temporary differences reverse and flow through current income tax expense. (1)


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
      ­ ­
 
  (1)  Regulatory assets not earning a return.
 
LIABILITIES
 
  •  Asset removal costs — The amount collected from customers for the funding of future asset removal activities.
 
  •  Pension equalization mechanism — Pension expense refundable to customers representing the difference created from volatility in the pension obligation and amounts recognized pursuant to MPSC authorization.
 
  •  Negative pension offset — MichCon’s negative pension costs are not included as a reduction to its authorized rates; therefore, the Company is accruing a regulatory liability to eliminate the impact on earnings of the negative pension expense accrued. This regulatory liability will reverse to the extent MichCon’s pension expense is positive in future years.
 
  •  Accrued PSCR refund — Payable for the temporary over-recovery of and a return on power supply costs and transmission costs incurred by Detroit Edison which are recoverable through the PSCR mechanism.
 
  •  Accrued GCR refund — Liability for the temporary over-recovery of and a return on gas costs incurred by MichCon which are recoverable through the GCR mechanism.
 
  •  Refundable costs under PA 141 — Detroit Edison’s 2007 Choice Incentive Mechanism (CIM) reconciliation and allocation resulted in the elimination of Regulatory Asset Recovery Surcharge (RARS) balances for commercial and industrial customers. RARS revenues received in 2008 that exceed the regulatory asset balances are required to be refunded to the affected classes.
 
  •  Refundable income taxes — Income taxes refundable to MichCon’s customers representing the difference in property-related deferred income taxes payable and amounts recognized pursuant to MPSC authorization.
 
  •  Fermi 2 refueling outage — Accrued liability for refueling outage at Fermi 2 pursuant to MPSC authorization.
 
  •  Deferred income taxes — Michigan Business Tax — In July 2007, the MBT was enacted by the State of Michigan. State deferred tax assets were established for the Company’s utilities, and offsetting regulatory liabilities were recorded as the impacts of the deferred tax assets will be reflected in rates.
 
MPSC Show Cause Order
 
In March 2006, the MPSC issued an order directing Detroit Edison to show cause by June 1, 2006 why its rates should not be reduced in 2007. Subsequently, Detroit Edison filed its response to this order and the MPSC issued an order approving a settlement agreement in this proceeding on August 31, 2006. The order provided for an annualized rate reduction of $53 million for 2006, effective September 5, 2006. Beginning January 1, 2007, and continuing until April 13, 2008, one year from the filing of the general rate case on April 13, 2007, rates were reduced by an additional $26 million, for a total reduction of $79 million annually. The revenue reduction is net of the recovery of the amortization of the costs associated with the implementation of the Performance Excellence Process. The settlement agreement provided for some level of realignment of the existing rate structure by allocating a larger percentage share of the rate reduction to the commercial and industrial customer classes than to the residential customer classes.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
As part of the settlement agreement, a CIM was established with a base level of electric choice sales set at 3,400 GWh. The CIM prescribes regulatory treatment of changes in non-fuel revenue attributed to increases or decreases in electric Customer Choice sales. If electric Customer Choice sales exceed 3,600 GWh, Detroit Edison will be able to recover 90% of its reduction in non-fuel revenue from full service customers, up to $71 million. If electric Customer Choice sales fall below 3,200 GWh, Detroit Edison will credit 100% of the increase in non-fuel revenue to the unrecovered regulatory asset balance. In March 2008, Detroit Edison filed a reconciliation of its CIM for the year 2007. Detroit Edison’s annual Electric Choice sales for 2007 were 2,239 GWh which was below the base level of sales of 3,200 GWh. Accordingly, the Company used the resulting additional non-fuel revenue to reduce unrecovered regulatory asset balances related to the RARS mechanism. This reconciliation did not result in any rate increase.
 
In November 2008, a settlement was filed in the 2007 CIM reconciliation. In the settlement, the parties agreed that the Detroit Edison 2007 CIM reconciliation and allocation filing was correct. All RARS revenues received in 2008 that exceed the regulatory asset balances will be refunded to the affected customer classes, and the only remaining classes to be reconciled in the RARS reconciliation case are the Residential and Special Manufacturing Contract classes. On January 13, 2009, the MPSC issued an order approving the settlement agreement.
 
2007 Electric Rate Case Filing
 
Pursuant to the February 2006 MPSC order in Detroit Edison’s rate restructuring case and the August 2006 MPSC order in the settlement of the show cause case, Detroit Edison filed a general rate case on April 13, 2007 based on a 2006 historical test year. Supplements and updates were filed on August 31, 2007 and February 20, 2008.
 
On December 23, 2008, the MPSC issued an order in Detroit Edison’s February 20, 2008 updated rate case filing. The MPSC approved an annual revenue increase of $84 million effective January 14, 2009 or 2.0% average increase in Detroit Edison’s annual revenue requirement for 2009. Included in the approved $84 million increase in revenues is a return on equity of 11% on an expected 49% equity and 51% debt capital structure.
 
Other key aspects of the MPSC order include the following:
 
  •  In order to more accurately reflect the actual cost of providing service to business customers, the MPSC adopted an immediate 39% phase out of the residential rate subsidy, with the remaining amount to be eliminated in equal installments over the next five years, every October 1.
 
  •  Accepted Detroit Edison’s proposal to reinstate and modify the tracking mechanism on Electric Choice sales (CIM) with a base level of 1,561 GWh. The modified mechanism will not have a cap on the amount recoverable.
 
  •  Accepted Detroit Edison’s proposal to terminate the Pension Equalization Mechanism.
 
  •  Approved an annual reconciliation mechanism to track expenses associated with restoration costs (storm and non-storm related expenses) and line clearance expenses. Annual reconciliations will be required using a base expense level of $110 million and $51 million, respectively.
 
  •  Approved Detroit Edison’s proposal to recover a return on $15 million of costs in working capital associated with expenses associated with preparation of an application for a new nuclear generation facility at its current Fermi 2 site.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
2009 Electric Rate Case Filing
 
Detroit Edison filed a general rate case on January 26, 2009 based on a twelve months ended June 2008 historical test year. The filing with the MPSC requested a $378 million, or 8.1% average increase in Detroit Edison’s annual revenue requirement for the twelve months ended June 30, 2010 projected test year.
 
The requested $378 million increase in revenues is required to recover the increased costs associated with environmental compliance, operation and maintenance of the Company’s electric distribution system and generation plants, customer uncollectible accounts, inflation, the capital costs of plant additions and the reduction in territory sales.
 
In addition, Detroit Edison’s filing made, among other requests, the following proposals:
 
  •  Continued progress toward correcting the existing rate structure to more accurately reflect the actual cost of providing service to business customers;
 
  •  Continued application of an adjustment mechanism to enable the Company to address the costs associated with retail electric customers migrating to and from Detroit Edison’s full service retail electric tariff service;
 
  •  Application of an uncollectible expense true-up mechanism based on the $87 million expense level of uncollectible expenses that occurred during the 12 month period ended June 2008;
 
  •  Continued application of the storm restoration expense recovery mechanism and modification to the line clearance expense recovery mechanism; and
 
  •  Implementation of a revenue decoupling mechanism.
 
Cost-Based Tariffs for Schools
 
In January 2009, Detroit Edison filed a required application that included two new cost-based tariffs for schools, universities and community colleges. The filing is in compliance with Public Act 286 which required utilities to file tariffs that ensure that eligible educational institutions are charged retail electric rates that reflect the actual cost of providing service to those customers. In February 2009, an MPSC order consolidated this proceeding with the January 26, 2009 electric rate case filing.
 
Accounting for Costs Related to Enterprise Business Systems
 
In July 2004, Detroit Edison filed an accounting application with the MPSC requesting authority to capitalize and amortize costs related to EBS, consisting of computer equipment, software and development costs, as well as related training, maintenance and overhead costs. In April 2005, the MPSC approved a settlement agreement providing for the deferral of certain EBS costs, which would otherwise be expensed, as a regulatory asset for future rate recovery starting January 1, 2006. At December 31, 2008, approximately $26 million of EBS costs have been deferred as a regulatory asset. In the MPSC’s December 2008 order in the 2007 Detroit Edison rate case, the Commission approved the recovery of deferred EBS costs over a 10-year period beginning in January 2009.
 
Fermi 2 Enhanced Security Costs Settlement
 
The Customer Choice and Electricity Reliability Act, as amended in 2003, allows for the recovery of reasonable and prudent costs of new and enhanced security measures required by state or federal law, including providing for reasonable security from an act of terrorism. In April 2007, the MPSC approved a settlement agreement that authorizes Detroit Edison to recover Fermi 2 Enhanced Security Costs (ESC) incurred during the period of September 11, 2001 through December 31, 2005. The settlement defined Detroit Edison’s ESC, discounted back to September 11, 2001, as $9.1 million plus carrying charges. A total of


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
$13 million, including carrying charges, has been deferred as a regulatory asset. Detroit Edison is authorized to incorporate into its rates an enhanced security factor over a period not to exceed five years. Amortization expense related to this regulatory asset was approximately $4 million and $3 million for the years ended December 31, 2008, and 2007, respectively.
 
Reconciliation of Regulatory Asset Recovery Surcharge
 
In December 2006, Detroit Edison filed a reconciliation of costs underlying its existing RARS. This true-up filing was made to maximize the remaining time for recovery of significant cost increases prior to expiration of the RARS 5-year recovery limit under PA 141. Detroit Edison requested a reconciliation of the regulatory asset surcharge to ensure proper recovery by the end of the 5-year period of: (1) Clean Air Act Expenditures, (2) Capital in Excess of Base Depreciation, (3) MISO Costs and (4) the regulatory liability for the 1997 Storm Charge. In July 2007, the MPSC approved a negotiated RARS deficiency settlement that resulted in a $10 million write-down of RARS-related costs in 2007. As discussed above, the CIM in the MPSC Show-Cause Order will reduce the regulatory asset. Approximately $11 million and $28 million was credited to the unrecovered regulatory asset balance during the years ended December 31, 2008 and 2007, respectively. The CIM expired in April 2008.
 
Power Supply Cost Recovery Proceedings
 
2005 Plan Year  — In March 2006, Detroit Edison filed its 2005 PSCR reconciliation that sought approval for recovery of an under-collection of approximately $144 million at December 31, 2005 from its commercial and industrial customers. In addition to the 2005 PSCR plan year reconciliation, the filing included reconciliation for the Pension Equalization Mechanism (PEM) for the periods from November 24, 2004 through December 31, 2004 and from January 1, 2005 through December 31, 2005. The PEM reconciliation seeks to allocate and refund approximately $12 million to customers based on their contributions to pension expense during the subject periods. An order was issued on May 22, 2007 approving a 2005 PSCR under-collection amount of $94 million and the recovery of this amount through a surcharge for 12 months beginning in June 2007. In addition, the order approved Detroit Edison’s proposed PEM reconciliation that was refunded to customers on a bills-rendered basis during June 2007. The surcharge will be reconciled in the Company’s 2008 PSCR reconciliation.
 
2006 Plan Year — In March 2007, Detroit Edison filed its 2006 PSCR reconciliation that sought approval for recovery of an under-collection of approximately $51 million. Included in the 2006 PSCR reconciliation filing was the Company’s PEM reconciliation that reflects a $21 million over-collection which is subject to refund to customers. An MPSC order was issued on April 22, 2008 approving the 2006 PSCR under-collection amount of $51 million and the recovery of this amount as part of the 2007 PSCR factor. In addition, the order approved Detroit Edison’s PEM reconciliation and authorized the Company to refund the $22 million over-recovery, including interest, to customers in May 2008. The refund will be reconciled in the Company’s 2008 PEM reconciliation.
 
2007 Plan Year — In September 2006, Detroit Edison filed its 2007 PSCR plan case seeking approval of a levelized PSCR factor of 6.98 mills per kWh above the amount included in base rates for all PSCR customers. The Company’s PSCR plan filing included $130 million for the recovery of its projected 2006 PSCR under-collection, bringing the total requested PSCR factor to 9.73 mills/kWh. The Company filed supplemental testimony and briefs in December 2006 supporting its updated request to include approximately $81 million for the recovery of its projected 2006 PSCR under-collection. The MPSC issued a temporary order in December 2006 approving the Company’s request. In addition, Detroit Edison was granted the authority to include all PSCR over/(under) collections in future PSCR plans, thereby reducing the time between refund or recovery of PSCR reconciliation amounts. The Company began to collect its 2007 power supply costs, including the 2006 rollover amount, through a PSCR factor of 8.69 mills/kWh on January 1, 2007. In


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
August 2007, the MPSC approved Detroit Edison’s 2007 PSCR plan case and authorized the Company to charge a maximum power supply cost recovery factor of 8.69 mills/kWh in 2007. The Company filed its 2007 PSCR reconciliation case in March 2008 and updated the filing in December 2008. The updated filing requests recovery of a $41 million PSCR under-collection through its 2008 PSCR plan. Included in the 2007 PSCR reconciliation filing was the Company’s 2007 PEM reconciliation that reflects a $21 million over-collection, including interest and prior year refunds. The Company expects an order in this proceeding in the second quarter of 2009.
 
2008 Plan Year — In September 2007, Detroit Edison filed its 2008 PSCR plan case seeking approval of a levelized PSCR factor of 9.23 mills/kWh above the amount included in base rates for all PSCR customers. Also included in the filing was a request for approval of the Company’s emission compliance strategy which included pre-purchases of emission allowances as well as a request for pre-approval of a contract for capacity and energy associated with a renewable (wind) energy project. On January 31, 2008, Detroit Edison filed a revised PSCR plan case seeking approval of a levelized PSCR factor of 11.22 mills/kWh above the amount included in base rates for all PSCR customers. The revised filing supports a 2008 power supply expense forecast of $1.4 billion and includes $43 million for the recovery of a projected 2007 PSCR under-collection. On July 29, 2008, the MPSC issued a temporary order approving Detroit Edison’s request to increase the PSCR factor to 11.22 mills/kWh. In January 2009, the MPSC approved the Company’s 2008 PSCR plan and authorized the Company to charge a maximum PSCR factor of 11.22 mills/kWh for 2008.
 
2009 Plan Year  — In September 2008, Detroit Edison filed its 2009 PSCR plan case seeking approval of a levelized PSCR factor of 17.67 mills/kWh above the amount included in base rates for residential customers and a levelized PSCR factor of 17.29 mills/kWh above the amount included in base rates for commercial and industrial customers. The Company is supporting a total power supply expense forecast of $1.73 billion. The plan also includes approximately $69 million for the recovery of its projected 2008 PSCR under-collection from all customers and approximately $12 million for the refund of its 2005 PSCR reconciliation surcharge over-collection to commercial and industrial customers only. Also included in the filing is a request for approval of the Company’s expense associated with the use of urea in the selective catalytic reduction units at Monroe power plant as well as a request for approval of a contract for capacity and energy associated with a renewable (wind) energy project. The Company’s PSCR Plan will allow the Company to recover its reasonably and prudently incurred power supply expense including, fuel costs, purchased and net interchange power costs, nitrogen oxide and sulfur dioxide emission allowance costs, transmission costs and MISO costs. The Company self-implemented a PSCR factor of 11.64 mills/kWh above the amount included in base rates for residential customers and a PSCR factor of 11.22 mills/kWh above the amount included in base rates for commercial and industrial customers on bills rendered in January 2009. Subsequently, as a result of the December 23, 2008 MPSC order in the 2007 Detroit Edison Rate case, the Company implemented a PSCR factor of 3.18 mills/kWh below the amount included in base rates for residential customers and a PSCR factor of 3.60 mills/kWh below the amount included in base rates for commercial and industrial customers for bills rendered effective January 14, 2009.
 
2009 MichCon Depreciation Filing
 
Depreciation Filing — On June 26, 2007, the MPSC issued its final order in the generic hearings on depreciation for Michigan electric and gas utilities. The MPSC ordered Michigan utilities to file depreciation studies using the current method, a FAS 143 approach that considers the time value of money and an inflation adjusted method proposed by the Company that removes excess escalation. In compliance with the MPSC order MichCon filed its ordered depreciation studies on November 3, 2008. The various required depreciation studies indicate composite depreciation rates from 2.07% to 2.55%. The Company has proposed no change to its current composite depreciation rate of 2.97%. The Company expects an order in this proceeding in the fourth quarter of 2009.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Uncollectible Expense True-Up Mechanism (UETM) and Report of Safety and Training-Related Expenditures
 
2005 UETM — In March 2006, MichCon filed an application with the MPSC for approval of its UETM for 2005. MichCon’s 2005 base rates included $37 million for anticipated uncollectible expenses. Actual 2005 uncollectible expenses totaled $60 million. The true-up mechanism allowed MichCon to recover 90% of uncollectibles that exceeded the $37 million base. Under the formula prescribed by the MPSC, MichCon recorded an under-recovery of approximately $11 million for uncollectible expenses from May 2005 (when the mechanism took effect) through the end of 2005. In December 2006, the MPSC issued an order authorizing MichCon to implement the UETM monthly surcharge for service rendered on and after January 1, 2007.
 
As part of the March 2006 application with the MPSC, MichCon filed a review of its 2005 annual safety and training-related expenditures. MichCon reported that actual safety and training-related expenditures for the initial period exceeded the pro-rata amounts included in base rates and, based on the under-recovered position, recommended no refund at that time. In the December 2006 order, the MPSC also approved MichCon’s 2005 safety and training report. On October 14, 2008, the State of Michigan Court of Appeals rejected the appeal of the Attorney General of the State of Michigan upholding the right of the MPSC to authorize MichCon to charge the 2005 UETM.
 
2006 UETM — In March 2007, MichCon filed an application with the MPSC for approval of its UETM for 2006 requesting $33 million of under-recovery plus applicable carrying costs of $3 million. The March 2007 application included a report of MichCon’s 2006 annual safety and training-related expenditures, which showed a $2 million over-recovery. In August 2007, MichCon filed revised exhibits reflecting an agreement with the MPSC Staff to net the $2 million over-recovery and associated interest related to the 2006 safety and training-related expenditures against the 2006 UETM under-recovery. An MPSC order was issued in December 2007 approving the collection of $33 million requested in the August 2007 revised filing. MichCon was authorized to implement the new UETM monthly surcharge for service rendered on and after January 1, 2008.
 
2007 UETM  — In March 2008, MichCon filed an application with the MPSC for approval of its UETM for 2007 requesting approximately $34 million consisting of $33 million of costs related to 2007 uncollectible expense and associated carrying charges and $1 million of under-collections for the 2005 UETM. The March 2008 application included a report of MichCon’s 2007 annual safety and training-related expenses, which showed no refund was necessary because actual expenditures exceeded the amount included in base rates. An MPSC order was issued in December 2008 approving the collection of $34 million requested in the March 2008 filing. MichCon was authorized to implement the new UETM monthly surcharge for service rendered on and after January 1, 2009.
 
Gas Cost Recovery Proceedings
 
2005-2006 Plan Year — In June 2006, MichCon filed its GCR reconciliation for the 2005-2006 GCR year. The filing supported a total over-recovery, including interest through March 2006, of $13 million. MPSC Staff and other intervenors filed testimony regarding the reconciliation in which they recommended disallowances related to MichCon’s implementation of its dollar cost averaging fixed price program. In January 2007, MichCon filed testimony rebutting these recommendations. In December 2007, the MPSC issued an order adopting the adjustments proposed by the MPSC Staff, resulting in an $8 million disallowance. Expense related to the disallowance was recorded in 2007. The MPSC authorized MichCon to roll a net over-recovery, inclusive of interest, of $20 million into its 2006-2007 GCR reconciliation. In December 2007, MichCon filed an appeal of the case with the Michigan Court of Appeals. MichCon is currently unable to predict the outcome of the appeal.
 
2006-2007 Plan Year — In June 2007, MichCon filed its GCR reconciliation for the 2006-2007 GCR year. The filing supported a total under-recovery, including interest through March 2007, of $18 million. In


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
March 2008, the parties reached a settlement agreement that allowed for full recovery of MichCon’s GCR costs during the 2006-2007 GCR year. The under-recovery, including interest through March 2007, agreed to under the settlement is $9 million and was included in the 2007-2008 GCR reconciliation. An MPSC order was issued on April 22, 2008 approving the settlement.
 
2007-2008 Plan Year / Base Gas Sale Consolidated  — In August 2006, MichCon filed an application with the MPSC requesting permission to sell base gas that would become accessible with storage facilities upgrades. In December 2006, MichCon filed its 2007-2008 GCR plan case proposing a maximum GCR factor of $8.49 per Mcf. In August 2007, a settlement agreement in this proceeding was reached by all intervening parties that provided for a sharing with customers of the proceeds from the sale of base gas. In addition, the agreement provided for a rate case filing moratorium until January 1, 2009, unless certain unanticipated changes occur that impact income by more than $5 million. The settlement agreement was approved by the MPSC in August 2007. Under the settlement terms, MichCon delivered 13.4 Bcf of this gas to its customers through 2007 at a savings to market-priced supplies of approximately $41 million. This settlement also provided for MichCon to retain the proceeds from the sale of 3.6 Bcf of base gas, of which MichCon sold 0.75 Bcf of base gas in 2007 at a pre-tax gain of $5 million and 2.84 Bcf in December 2008 at a pre-tax gain of $22 million. In June 2008, MichCon filed its GCR reconciliation for the 2007-2008 GCR year. The filing supported a total under-recovery, including interest through March 2008, of $10 million.
 
2008-2009 Plan Year — In December 2007, MichCon filed its GCR plan case for the 2008-2009 GCR Plan year. MichCon filed for a maximum GCR factor of $8.36 per Mcf, adjustable by a contingent mechanism. In June 2008, MichCon made an informational filing documenting the increase in market prices for gas since its December 2007 filing and calculating its new maximum factor of $10.76 per Mcf based on its contingent mechanism. On August 26, 2008, the MPSC approved a partial settlement agreement which includes the establishment of a new maximum base GCR factor of $11.36 per Mcf that will not be subject to adjustment by contingent GCR factors for the remainder of the 2008-2009 GCR plan year. An MPSC order addressing the remaining issues in this case is expected in 2009.
 
2009-2010 Plan Year — In December 2008, MichCon filed its GCR plan case for the 2009-2010 GCR Plan year. MichCon filed for a maximum GCR factor of $8.46 per Mcf, adjustable by a contingent mechanism. An MPSC order in this case is expected in 2009.
 
2009 Proposed Base Gas Sale  — In July 2008, MichCon filed an application with the MPSC requesting permission to sell an additional 4 Bcf of base gas that will become available for sale as a result of better than expected operations at its storage fields. MichCon proposed to sell 1.3 Bcf of the base gas to GCR customers during the 2009-2010 GCR period at cost and to sell the remaining 2.7 Bcf to non-system supply customers in 2009 at market prices. MichCon requested that the MPSC treat the proceeds from the sale of the 2.7 Bcf of base gas to non-system supply customers as a one-time increase in MichCon’s net income and not include the proceeds in the calculation of MichCon’s revenue requirements in future rate cases.
 
Other
 
In July 2007, the State of Michigan Court of Appeals published its decision with respect to an appeal by Detroit Edison and others of certain provisions of a November 2004 MPSC order, including reversing the MPSC’s denial of recovery of merger control premium costs. In its published decision, the Court of Appeals held that Detroit Edison is entitled to recover its allocated share of the merger control premium and remanded this matter to the MPSC for further proceedings to establish the precise amount and timing of this recovery. Detroit Edison has filed a supplement to its April 2007 rate case to address the recovery of the merger control premium costs. In September 2007, the Court of Appeals remanded to the MPSC, for reconsideration, the MichCon recovery of merger control premium costs. Other parties filed requests for leave to appeal to the Michigan Supreme Court from the Court of Appeals decision and in September 2008, the Michigan Supreme Court granted the requests to address the merger control premium as well as the recovery of transmission costs


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
through the PSCR. The Company is unable to predict the financial or other outcome of any legal or regulatory proceeding at this time.
 
The Company is unable to predict the outcome of the regulatory matters discussed herein. Resolution of these matters is dependent upon future MPSC orders and appeals, which may materially impact the financial position, results of operations and cash flows of the Company.
 
NOTE 6 — NUCLEAR OPERATIONS
 
General
 
Fermi 2, the Company’s nuclear generating plant, began commercial operation in 1988. Fermi 2 has a design electrical rating (net) of 1,150 MW. This plant represents approximately 10% of Detroit Edison’s summer net rated capability. The net book balance of the Fermi 2 plant was written off at December 31, 1998, and an equivalent regulatory asset was established. In 2001, the Fermi 2 regulatory asset was securitized. Detroit Edison also owns Fermi 1, a nuclear plant that was shut down in 1972 and is currently being decommissioned. The NRC has jurisdiction over the licensing and operation of Fermi 2 and the decommissioning of Fermi 1.
 
Property Insurance
 
Detroit Edison maintains several different types of property insurance policies specifically for the Fermi 2 plant. These policies cover such items as replacement power and property damage. The Nuclear Electric Insurance Limited (NEIL) is the primary supplier of the insurance policies.
 
Detroit Edison maintains a policy for extra expenses, including replacement power costs necessitated by Fermi 2’s unavailability due to an insured event. This policy has a 12-week waiting period and provides an aggregate $490 million of coverage over a three-year period.
 
Detroit Edison has $500 million in primary coverage and $2.25 billion of excess coverage for stabilization, decontamination, debris removal, repair and/or replacement of property and decommissioning. The combined coverage limit for total property damage is $2.75 billion.
 
In 2007, the Terrorism Risk Insurance Extension Act of 2005 (TRIA) was extended through December 31, 2014. A major change in the extension is the inclusion of “domestic” acts of terrorism in the definition of covered or “certified” acts. For multiple terrorism losses caused by acts of terrorism not covered under the TRIA occurring within one year after the first loss from terrorism, the NEIL policies would make available to all insured entities up to $3.2 billion, plus any amounts recovered from reinsurance, government indemnity, or other sources to cover losses.
 
Under the NEIL policies, Detroit Edison could be liable for maximum assessments of up to approximately $30 million per event if the loss associated with any one event at any nuclear plant in the United States should exceed the accumulated funds available to NEIL.
 
Public Liability Insurance
 
As required by federal law, Detroit Edison maintains $300 million of public liability insurance for a nuclear incident. For liabilities arising from a terrorist act outside the scope of TRIA, the policy is subject to one industry aggregate limit of $300 million. Further, under the Price-Anderson Amendments Act of 2005, deferred premium charges up to $117.5 million could be levied against each licensed nuclear facility, but not more than $17.5 million per year per facility. Thus, deferred premium charges could be levied against all owners of licensed nuclear facilities in the event of a nuclear incident at any of these facilities.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Decommissioning
 
Detroit Edison has a legal obligation to decommission its nuclear power plants following the expiration of their operating licenses. This obligation is reflected as an asset retirement obligation on the Consolidated Statements of Financial Position. Based on the actual or anticipated extended life of the nuclear plant, decommissioning expenditures for Fermi 2 are expected to be incurred primarily during the period of 2025 through 2050. It is estimated that the cost of decommissioning Fermi 2, when its license expires in 2025, will be $1.3 billion in 2008 dollars and $3.4 billion in 2025 dollars, using a 6% inflation rate. In 2001, Detroit Edison began the decommissioning of Fermi 1, with the goal of removing the radioactive material and terminating the Fermi 1 license. The decommissioning of Fermi 1 is expected to be completed by 2012.
 
The NRC has jurisdiction over the decommissioning of nuclear power plants and requires decommissioning funding based upon a formula. The MPSC and FERC regulate the recovery of costs of decommissioning nuclear power plants and both require the use of external trust funds to finance the decommissioning of Fermi 2. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 and the disposal of low-level radioactive waste. Detroit Edison is continuing to fund FERC jurisdictional amounts for decommissioning even though explicit provisions are not included in FERC rates. The Company believes the MPSC and FERC collections will be adequate to fund the estimated cost of decommissioning using the NRC formula. The decommissioning assets, anticipated earnings thereon and future revenues from decommissioning collections will be used to decommission Fermi 2. The Company expects the liabilities to be reduced to zero at the conclusion of the decommissioning activities. If amounts remain in the trust funds for Fermi 2 following the completion of the decommissioning activities, those amounts will be disbursed based on rulings by the MPSC and FERC.
 
A portion of the funds recovered through the Fermi 2 decommissioning surcharge and deposited in external trust accounts is designated for the removal of non-radioactive assets and the clean-up of the Fermi site. This removal and clean-up is not considered a legal liability. Therefore, it is not included in the asset retirement obligation, but is reflected as the nuclear decommissioning regulatory liability.
 
The decommissioning of Fermi 1 is funded by Detroit Edison. Contributions to the Fermi 1 trust are discretionary.
 
The following table summarizes the fair value of the nuclear decommissioning trust fund assets.
 
                 
    As of December 31  
    2008     2007  
    (In millions)  
 
Fermi 2
  $ 649     $ 778  
Fermi 1
    3       13  
Low level radioactive waste
    33       33  
                 
Total
  $ 685     $ 824  
                 
 
At December 31, 2008, investments in the external nuclear decommissioning trust funds consisted of approximately 42% in publicly traded equity securities, 57% in fixed debt instruments and 1% in cash equivalents. The debt securities had an average maturity of approximately 5 years. At December 31, 2007, investments in the external nuclear decommissioning trust funds consisted of approximately 54% in publicly traded equity securities, 45% in fixed income and 1% in cash equivalents. The debt securities had an average maturity of approximately 5.3 years.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The costs of securities sold are determined on the basis of specific identification. The following table sets forth the gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds:
 
                         
    Year Ended December 31
    2008   2007   2006
    (In millions)
 
Realized gains
  $ 34     $ 25     $ 21  
Realized losses
  $ (49 )   $ (17 )   $ (9 )
Proceeds from sales of securities
  $ 232     $ 286     $ 253  
 
Realized gains and losses and proceeds from sales of securities for the Fermi 2 and the low level Radioactive Waste funds are recorded to the asset retirement obligation regulatory asset and nuclear decommissioning regulatory liability, respectively. The following table sets forth the fair value and unrealized gains for the nuclear decommissioning trust funds:
 
                 
    Fair
    Unrealized
 
    Value     Gains  
    (In millions)  
 
As of December 31, 2008
               
Equity Securities
  $ 288     $ 65  
Debt Securities
    388       17  
Cash and Cash Equivalents
    9        
                 
    $ 685     $ 82  
                 
As of December 31, 2007
               
Equity Securities
  $ 443     $ 170  
Debt Securities
    373       9  
Cash and Cash Equivalents
    8        
                 
    $ 824     $ 179  
                 
 
Securities held in the nuclear decommissioning trust funds are classified as available-for-sale. As Detroit Edison does not have the ability to hold impaired investments for a period of time sufficient to allow for the anticipated recovery of market value, all unrealized losses are considered to be other than temporary impairments.
 
Impairment charges for unrealized losses incurred by the Fermi 2 trust are recognized as a regulatory asset. Detroit Edison recognized $92 million and $22 million of unrealized losses as regulatory assets for the years ended December 31, 2008 and 2007, respectively. Since the decommissioning of Fermi 1 is funded by Detroit Edison rather than through a regulatory recovery mechanism, there is no corresponding regulatory asset treatment. Therefore, impairment charges for unrealized losses incurred by the Fermi 1 trust are recognized in earnings immediately. For the year ended December 31, 2008 no impairment charges were recognized by Detroit Edison for unrealized losses incurred by the Fermi 1 trust. For the year ended December 31, 2007, Detroit Edison recognized impairment charges of $0.2 million, for unrealized losses incurred by the Fermi 1 trust.
 
Nuclear Fuel Disposal Costs
 
In accordance with the Federal Nuclear Waste Policy Act of 1982, Detroit Edison has a contract with the U.S. Department of Energy (DOE) for the future storage and disposal of spent nuclear fuel from Fermi 2. Detroit Edison is obligated to pay the DOE a fee of 1 mill per kWh of Fermi 2 electricity generated and sold. The fee is a component of nuclear fuel expense. Delays have occurred in the DOE’s program for the


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
acceptance and disposal of spent nuclear fuel at a permanent repository. Detroit Edison is a party in the litigation against the DOE for both past and future costs associated with the DOE’s failure to accept spent nuclear fuel under the timetable set forth in the Federal Nuclear Waste Policy Act of 1982. Detroit Edison currently employs a used nuclear fuel storage strategy utilizing a spent fuel pool. We have begun work on an on-site dry cask storage facility which is expected to provide sufficient storage capability for the life of the plant as defined by the original operating license.
 
NOTE 7 — JOINTLY OWNED UTILITY PLANT
 
Detroit Edison has joint ownership interest in two power plants, Belle River and Ludington Hydroelectric Pumped Storage. Ownership information of the two utility plants as of December 31, 2008 was as follows:
 
                 
        Ludington
        Hydroelectric
    Belle River   Pumped Storage
 
In-service date
    1984-1985       1973  
Total plant capacity
    1,260MW       1,872MW  
Ownership interest
    *     49 %
Investment (in Millions)
  $ 1,588     $ 165  
Accumulated depreciation (in Millions)
  $ 853     $ 106  
 
 
* Detroit Edison’s ownership interest is 63% in Unit No. 1, 81% of the facilities applicable to Belle River used jointly by the Belle River and St. Clair Power Plants and 75% in common facilities used at Unit No. 2.
 
Belle River
 
The Michigan Public Power Agency (MPPA) has an ownership interest in Belle River Unit No. 1 and other related facilities. The MPPA is entitled to 19% of the total capacity and energy of the plant and is responsible for the same percentage of the plant’s operation, maintenance and capital improvement costs.
 
Ludington Hydroelectric Pumped Storage
 
Consumers Energy Company has an ownership interest in the Ludington Hydroelectric Pumped Storage Plant. Consumers Energy is entitled to 51% of the total capacity and energy of the plant and is responsible for the same percentage of the plant’s operation, maintenance and capital improvement costs.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 8 — INCOME TAXES
 
Income Tax Summary
 
The Company files a consolidated federal income tax return. Total income tax expense varied from the statutory federal income tax rate for the following reasons:
 
                         
    2008     2007     2006  
    (In millions)  
 
Income before income taxes and minority interest
  $ 819     $ 1,155     $ 536  
Less minority interest
    5       4       1  
                         
Income from continuing operations before tax
  $ 814     $ 1,151     $ 535  
                         
Income tax expense at 35% statutory rate
  $ 285     $ 403     $ 187  
Production tax credits
    (7 )     (11 )     (12 )
Investment tax credits
    (7 )     (8 )     (8 )
Depreciation
    (4 )     (4 )     (4 )
Employee Stock Ownership Plan dividends
    (4 )     (5 )     (5 )
Medicare part D subsidy
    (5 )     (6 )     (6 )
State and local income taxes, net of federal benefit
    23       2       5  
Other, net
    7       (7 )     (11 )
                         
Income tax expense from continuing operations
  $ 288     $ 364     $ 146  
                         
Effective income tax rate
    35.4 %     31.6 %     27.3 %
                         
 
The minority interest allocation reflects the adjustment to earnings to allocate partnership losses to third party owners. The tax impact of partnership earnings and losses are attributable to the partners instead of the partnerships. The minority interest allocation is therefore removed in computing income taxes associated with continuing operations.
 
Components of income tax expense were as follows:
 
                         
    2008     2007     2006  
    (In millions)  
 
Continuing operations
                       
Current income taxes
                       
Federal
  $ 130     $ 276     $ 90  
State and other income tax expense
    17       1       (2 )
                         
Total current income taxes
    147       277       88  
Deferred income taxes
                       
Federal
    121       85       48  
State and other income tax expense
    20       2       10  
                         
Total deferred income taxes
    141       87       58  
                         
Total income taxes from continuing operations
    288       364       146  
Discontinued operations
    12       66       (11 )
Cumulative effect of accounting changes
                1  
                         
Total
  $ 300     $ 430     $ 136  
                         


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Production tax credits earned in prior years but not utilized totaled $224 million and are carried forward indefinitely as alternative minimum tax credits. The majority of the production tax credits earned, including all of those from our synfuel projects, were generated from projects that had received a private letter ruling (PLR) from the Internal Revenue Service (IRS). These PLRs provide assurance as to the appropriateness of using these credits to offset taxable income, however, these tax credits are subject to IRS audit and adjustment.
 
Investment tax credits are deferred and amortized to income over the average life of the related property.
 
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts in the financial statements. Deferred tax assets and liabilities are classified as current or noncurrent according to the classification of the related assets or liabilities. Deferred tax assets and liabilities not related to assets or liabilities are classified according to the expected reversal date of the temporary differences. Consistent with rate making treatment, deferred taxes are offset in the table below for temporary differences which have related regulatory assets and liabilities.
 
Deferred tax assets (liabilities) were comprised of the following at December 31:
 
                 
    2008     2007  
    (In millions)  
 
Property, plant and equipment
  $ (1,734 )   $ (1,384 )
Securitized regulatory assets
    (545 )     (621 )
Alternative minimum tax credit carry-forwards
    224       186  
Merger basis differences
    51       57  
Pension and benefits
    33       28  
Other comprehensive income
    81       62  
Derivative assets and liabilities
    109       142  
State net operating loss and credit carry-forwards
    42       28  
Other
    50       93  
                 
      (1,689 )     (1,409 )
Less valuation allowance
    (42 )     (28 )
                 
    $ (1,731 )   $ (1,437 )
                 
Current deferred income tax assets
  $ 227     $ 387  
Long-term deferred income tax liabilities
    (1,958 )     (1,824 )
                 
    $ (1,731 )   $ (1,437 )
                 
Deferred income tax assets
  $ 1,406     $ 1,771  
Deferred income tax liabilities
    (3,137 )     (3,208 )
                 
    $ (1,731 )   $ (1,437 )
                 
 
The above table excludes deferred tax liabilities associated with unamortized investment tax credits that are shown separately on the Consolidated Statements of Financial Position.
 
The Company has state deferred tax assets related to net operating loss and credit carry-forwards of $42 million and $28 million at December 31, 2008 and 2007, respectively. The state net operating loss and credit carry-forwards expire from 2009 through 2029. The Company has recorded valuation allowances at December 31, 2008 and 2007 of approximately $42 million and $28 million, respectively, a change of $14 million, with respect to these deferred tax assets. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of those deductible differences, net of the existing valuation allowance as of December 31, 2008.
 
Uncertain Tax Positions
 
The Company adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (FIN 48)  on January 1, 2007. This interpretation prescribes a more-likely-than-not recognition threshold and a measurement attribute for the financial statement reporting of tax positions taken or expected to be taken on a tax return. As a result of the implementation of FIN 48, the Company recognized a $5 million increase in liabilities that was accounted for as a reduction to the January 1, 2007 balance of retained earnings.
 
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
                 
    2008     2007  
    (In millions)  
 
Balance at January 1
  $ 22     $ 45  
Additions for tax positions of prior years
    12       4  
Reductions for tax positions of prior years
    (5 )     (8 )
Additions for tax positions related to the current year
    47        
Settlements
    (1 )     (15 )
Lapse of statute of limitations
    (3 )     (4 )
                 
Balance at December 31
  $ 72     $ 22  
                 
 
The Company has $18 million of unrecognized tax benefits at December 31, 2008, that, if recognized, would favorably impact our effective tax rate. During the next 12 months it is reasonably possible that the Company will settle certain federal and state tax examinations and audits. Furthermore, during the next 12 months, statutes of limitations will expire for the Company’s tax returns in various states. Therefore, as of December 31, 2008, the Company believes that it is reasonably possible that there will be a decrease in unrecognized tax benefits of $5 million to $9 million within the next twelve months.
 
The Company recognizes interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on its Consolidated Statements of Operations. Accrued interest pertaining to income taxes totaled $8 million and $7 million at December 31, 2008 and December 31, 2007, respectively. The Company had no accrued penalties pertaining to income taxes. The Company recognized interest expense related to income taxes of $2 million during 2008 and $1 million during 2007.
 
The Company’s U.S. federal income tax returns for years 2004 and subsequent years remain subject to examination by the IRS. The Company’s Michigan Business Tax for the year 2008 is subject to examination by the State of Michigan. The Company also files tax returns in numerous state and local jurisdictions with varying statutes of limitation.
 
Michigan Business Tax
 
In July 2007, the Michigan Business Tax (MBT) was enacted by the State of Michigan to replace the Michigan Single Business Tax (MSBT) effective January 1, 2008. The MBT is comprised of an apportioned modified gross receipts tax of 0.8 percent; and an apportioned business income tax of 4.95 percent. The MBT


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
provides credits for Michigan business investment, compensation, and research and development. The MBT is accounted for as an income tax.
 
In 2007, a state deferred tax liability of $224 million was recognized by the Company for cumulative differences between book and tax assets and liabilities for the consolidated group. Effective September 30, 2007, legislation was adopted by the State of Michigan creating a deduction for businesses that realize an increase in their deferred tax liability due to the enactment of the MBT. Therefore, a deferred tax asset of $224 million was established related to the future deduction. The deduction will be claimed during the period of 2015 through 2029. The recognition of the enactment of the MBT did not have an impact on our income tax provision for 2007.
 
The 2007 state consolidated deferred tax liability was increased in 2008 by $19 million to $243 million to reflect changes in federal income tax temporary differences primarily due to an approved IRS change in accounting method for our utilities for tax year 2007. The related one-time deferred tax asset for the tax deduction created for businesses that realize an increase in their deferred tax liability due to enactment of the MBT was also increased by $19 million to $243 million. The deferred tax liabilities of our regulatory utilities were increased by $24 million to $388 million and the corresponding regulatory assets and liabilities were also increased by $24 million to $388 million in accordance with SFAS No. 71, Accounting for the Effects of Certain Types of Regulation, as the impacts of the deferred tax liabilities and assets recognized upon enactment and amendment of the MBT will be reflected in our rates.
 
In 2008, the state consolidated deferred tax liability increased by $25 million to $268 million as of December 31, 2008 with $20 million of the increase charged to state deferred tax expense and $5 million charged to the related regulatory assets at the utilities. The regulatory asset at the utilities increased to $394 million as of December 31, 2008.
 
NOTE 9 — COMMON STOCK
 
Common Stock
 
The DTE Energy Board of Directors has authorized the repurchase of up to $1.55 billion of common stock through 2009. Through December 31, 2008, repurchases of approximately $725 million of common stock were made.
 
Under the DTE Energy Company Long-Term Incentive Plan, the Company grants non-vested stock awards to key employees, primarily management. As a result of a stock award, a settlement of an award of performance shares, or by exercise of a participant’s stock option, the Company may deliver common stock from the Company’s authorized but unissued common stock and/or from outstanding common stock acquired by or on behalf of the Company in the name of the participant. The number of non-vested restricted stock awards is included in the number of common shares outstanding; however, for purposes of computing basic earnings per share, non-vested restricted stock awards are excluded.
 
Dividends
 
Certain of the Company’s credit facilities contain a provision requiring the Company to maintain a ratio of consolidated debt to capitalization equal to or less than 0.65:1, which has the effect of limiting the amount of dividends the Company can pay in order to maintain compliance with this provision. The effect of this provision as of December 31, 2008 was to restrict approximately $555 million as payments for dividends of total retained earnings of approximately $3 billion. There are no other effective limitations with respect to the Company’s ability to pay dividends.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 10 — EARNINGS PER SHARE
 
The Company reports both basic and diluted earnings per share. Basic earnings per share is computed by dividing income from continuing operations by the weighted average number of common shares outstanding during the period. The calculation of diluted earnings per share assumes the issuance of potentially dilutive common shares outstanding during the period and the repurchase of common shares that would have occurred with proceeds from the assumed issuance. Diluted earnings per share assume the exercise of stock options. Non-vested restricted stock awards are included in the number of common shares outstanding; however, for purposes of computing basic earnings per share, non-vested restricted stock awards are excluded. A reconciliation of both calculations is presented in the following table:
 
                         
    2008     2007     2006  
    (In millions, except per share amounts)  
 
Basic Earnings per Share
                       
Income from continuing operations
  $ 526     $ 787     $ 389  
                         
Average number of common shares outstanding
    162       169       177  
                         
Income per share of common stock based on weighted average number of shares outstanding
  $ 3.24     $ 4.64     $ 2.19  
                         
Diluted Earnings per Share
                       
Income from continuing operations
  $ 526     $ 787     $ 389  
                         
Average number of common shares outstanding
    162       169       177  
Incremental shares from stock-based awards
    1       1       1  
                         
Average number of dilutive shares outstanding
    163       170       178  
                         
Income per share of common stock assuming issuance of incremental shares
  $ 3.23     $ 4.62     $ 2.18  
                         
 
Options to purchase approximately 5 million shares, 2,100 shares, and 100,000 shares of common stock in 2008, 2007 and 2006, respectively, were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares, thus making these options anti-dilutive.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 11 — LONG-TERM DEBT
 
Long-Term Debt
 
The Company’s long-term debt outstanding and weighted average interest rates(1) of debt outstanding at December 31 were:
 
                 
    2008     2007  
    (In millions)  
 
Mortgage bonds, notes, and other
               
DTE Energy Debt, Unsecured
               
6.7% due 2009 to 2033
  $ 1,497     $ 1,496  
Detroit Edison Taxable Debt, Principally Secured
               
5.9% due 2010 to 2038
    2,841       2,305  
Detroit Edison Tax-Exempt Revenue Bonds(2)
               
5.2% due 2011 to 2036
    1,263       1,213  
MichCon Taxable Debt, Principally Secured
               
6.1% due 2012 to 2033
    889       715  
Other Long-Term Debt, Including Non-Recourse Debt
    188       196  
                 
      6,678       5,925  
Less debt associated with assets held for sale
          (22 )
Less amount due within one year
    (220 )     (327 )
                 
    $ 6,458     $ 5,576  
                 
Securitization bonds
               
6.4% due 2009 to 2015
  $ 1,064     $ 1,185  
Less amount due within one year
    (132 )     (120 )
                 
    $ 932     $ 1,065  
                 
Trust preferred — linked securities
               
7.8% due 2032
  $ 186     $ 186  
7.5% due 2044
    103       103  
                 
    $ 289     $ 289  
                 
 
 
(1) Weighted average interest rates as of December 31, 2008 are shown below the description of each category of debt.
 
(2) Detroit Edison Tax Exempt Revenue Bonds are issued by a public body that loans the proceeds to Detroit Edison on terms substantially mirroring the Revenue Bonds.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
Debt Issuances
 
In 2008, the Company has issued or remarketed the following long-term debt:
 
                         
Company
  Month Issued   Type   Interest Rate   Maturity   Amount  
(In millions)  
 
MichCon
  April   Senior Notes(1)   5.26%   2013   $ 60  
MichCon
  April   Senior Notes(1)   6.04%   2018     100  
MichCon
  April   Senior Notes(1)   6.44%   2023     25  
Detroit Edison
  April   Tax-Exempt Revenue Bonds(2)   Variable   2036     69  
Detroit Edison
  May   Tax-Exempt Revenue Bonds(2)   Variable   2029     118  
Detroit Edison
  May   Tax-Exempt Revenue Bonds(3)   5.30%   2030     51  
MichCon
  June   Senior Notes(4)   6.78%   2028     75  
Detroit Edison
  June   Senior Notes(1)   5.60%   2018     300  
Detroit Edison
  July   Tax-Exempt Revenue Bonds(5)   Variable   2020     32  
MichCon
  August   Senior Notes(6)   5.94%   2015     140  
MichCon
  August   Senior Notes(6)   6.36%   2020     50  
Detroit Edison
  October   Senior Notes(1)   6.40%   2013     250  
Detroit Edison
  December   Tax-Exempt Revenue Bonds(7)   6.75%   2038     50  
                         
                    $ 1,320  
                         
 
 
(1) Proceeds were used to pay down short-term debt and for general corporate purposes.
 
(2) Proceeds were used to refinance auction rate Tax-Exempt Revenue Bonds.
 
(3) These Tax-Exempt Revenue Bonds were converted from an auction rate mode and remarketed in a fixed rate mode to maturity.
 
(4) Proceeds were used to repay the 6.45% Remarketable Securities due 2038 subject to mandatory or optional tender on June 30, 2008.
 
(5) Proceeds were used to refinance Tax-Exempt Revenue Bonds that matured July 2008.
 
(6) Proceeds were used to repay a portion of the $200 million MichCon 6.125% Senior Notes due September 2008.
 
(7) Proceeds to be used to finance the construction, acquisition, improvement and installation of certain solid waste disposal facilities at Detroit Edison’s Monroe Power Plant.
 
Debt Retirements and Redemptions
 
In 2008, the following debt has been retired, through optional redemption or payment at maturity:
 
                         
Company
  Month Retired   Type   Interest Rate   Maturity   Amount  
(In millions)  
 
Detroit Edison
  April   Tax-Exempt Revenue Bonds(1)   Variable   2036   $ 69  
Detroit Edison
  May   Tax-Exempt Revenue Bonds(1)   Variable   2029     118  
MichCon
  June   Remarketable Securities(2)   6.45%   2038     75  
Detroit Edison
  July   Tax-Exempt Revenue Bonds(3)   7.00%   2008     32  
MichCon
  September   Senior Notes(4)   6.125%   2008     200  
                         
                    $ 494  
                         


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
(1) These Tax-Exempt Revenue Bonds were converted from auction rate mode and subsequently redeemed with proceeds from the issuance of new Detroit Edison Tax-Exempt Revenue Bonds.
 
(2) These Remarketable Securities were optionally redeemed by MichCon with proceeds from the issuance of new MichCon Senior Notes.
 
(3) These Tax-Exempt Revenue Bonds were redeemed with the proceeds from the issuance of new Detroit Edison Tax-Exempt Revenue Bonds.
 
(4) These Senior Notes were redeemed with the proceeds from the issuance of new MichCon Senior Notes and short-term debt.
 
The following table shows the scheduled debt maturities, excluding any unamortized discount or premium on debt:
 
                                                         
                        2014 and
   
    2009   2010   2011   2012   2013   Thereafter   Total
    (In millions)
 
Amount to mature
  $ 352     $ 670     $ 914     $ 452     $ 560     $ 5,092     $ 8,040  
 
Trust Preferred-Linked Securities
 
DTE Energy has interests in various unconsolidated trusts that were formed for the sole purpose of issuing preferred securities and lending the gross proceeds to the Company. The sole assets of the trusts are debt securities of DTE Energy with terms similar to those of the related preferred securities. Payments the Company makes are used by the trusts to make cash distributions on the preferred securities it has issued.
 
The Company has the right to extend interest payment periods on the debt securities. Should the Company exercise this right, it cannot declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock during the deferral period.
 
DTE Energy has issued certain guarantees with respect to payments on the preferred securities. These guarantees, when taken together with the Company’s obligations under the debt securities and related indenture, provide full and unconditional guarantees of the trusts’ obligations under the preferred securities.
 
Financing costs for these issuances were paid for and deferred by DTE Energy. These costs are being amortized using the straight-line method over the estimated lives of the related securities.
 
Cross Default Provisions
 
Substantially all of the net utility properties of Detroit Edison and MichCon are subject to the lien of mortgages. Should Detroit Edison or MichCon fail to timely pay their indebtedness under these mortgages, such failure may create cross defaults in the indebtedness of DTE Energy.
 
NOTE 12 — PREFERRED SECURITIES
 
Preferred and Preference Securities — Authorized and Unissued
 
As of December 31, 2008, the amount of authorized and unissued stock is as follows:
 
                 
Company
  Type of Stock   Par Value   Shares Authorized
 
DTE Energy
  Preferred   None     5,000,000  
Detroit Edison
  Preferred   $100     6,747,484  
Detroit Edison
  Preference   $1     30,000,000  
MichCon
  Preferred   $1     7,000,000  
MichCon
  Preference   $1     4,000,000  


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 13 — SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
 
DTE Energy and its wholly-owned subsidiaries, Detroit Edison and MichCon, have entered into revolving credit facilities with similar terms. The five-year credit facilities are with a syndicate of banks and may be used for general corporate borrowings, but are intended to provide liquidity support for each of the companies’ commercial paper programs. Borrowings under the facilities are available at prevailing short-term interest rates. Additionally, at December 31, 2008, Detroit Edison and MichCon had short-term unsecured bank loans of $75 million and $50 million, respectively. Also in 2008, DTE Energy entered into two supplemental $30 million facilities to support the issuance of letters of credit. The above agreements require the Company to maintain a debt to total capitalization ratio of no more than 0.65 to 1. DTE Energy, Detroit Edison and MichCon are in compliance with this financial covenant. In December 2008, MichCon issued a $20 million secured short-term note, due in September 2009. The availability under these combined facilities is shown in the following table:
 
                                 
    DTE Energy     Detroit Edison     MichCon     Total  
    (In millions)  
 
Five-year unsecured revolving facility, expiring October 2010
  $ 675     $ 69     $ 181     $ 925  
Five-year unsecured revolving facility, expiring October 2009
    525       206       244       975  
Unsecured bank loan facility, expiring July 2009
          75             75  
Unsecured bank loan facility, expiring June 2009
                50       50  
Secured floating rate note, maturing September 2009
                20       20  
One-year unsecured letter of credit facility, expiring November 2009
    30                   30  
One-year unsecured letter of credit facility, expiring December 2009
    30                   30  
                                 
Total credit facilities at December 31, 2008
    1,260       350       495       2,105  
                                 
Amounts outstanding at December 31, 2008:
                               
Commercial paper issuances
    (77 )           (272 )     (349 )
Borrowings
    (100 )     (75 )     (220 )     (395 )
Letters of credit
    (275 )                 (275 )
                                 
      (452 )     (75 )     (492 )     (1,019 )
                                 
Net availability at December 31, 2008
  $ 808     $ 275     $ 3     $ 1,086  
                                 
 
We have other outstanding letters of credit which are not included in the above described facilities totaling approximately $16 million which are used for various corporate purposes.
 
The weighted average interest rate for short-term borrowings was 3.9% and 5.4% at December 31, 2008 and 2007, respectively.
 
In conjunction with maintaining certain exchange traded risk management positions, the Company may be required to post cash collateral with its clearing agent. The Company has a demand financing agreement for up to $50 million with its clearing agent. The amount outstanding under this agreement was $26 million and $13 million at December 31, 2008 and 2007, respectively.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Detroit Edison terminated a $200 million short-term financing agreement secured by customer accounts receivable in 2008.
 
NOTE 14 — CAPITAL AND OPERATING LEASES
 
Lessee  — The Company leases various assets under capital and operating leases, including coal cars, office buildings, a warehouse, computers, vehicles and other equipment. The lease arrangements expire at various dates through 2031. Future minimum lease payments under non-cancelable leases at December 31, 2008 were:
 
                 
    Capital
    Operating
 
    Leases     Leases  
    (In millions)  
 
2009
  $ 15     $ 36  
2010
    14       30  
2011
    12       27  
2012
    9       25  
2013
    9       21  
Thereafter
    32       99  
                 
Total minimum lease payments
    91     $ 238  
                 
Less imputed interest
    19          
                 
Present value of net minimum lease payments
    72          
Less current portion
    10          
                 
Non-current portion
  $ 62          
                 
 
Rental expense for operating leases was $49 million in 2008, $60 million in 2007, and $72 million in 2006.
 
Lessor  — MichCon leases a portion of its pipeline system to the Vector Pipeline Partnership through a capital lease contract that expires in 2020, with renewal options extending for five years. The components of the net investment in the capital lease at December 31, 2008, were as follows:
 
         
    (In millions)  
 
2009
  $ 9  
2010
    9  
2011
    9  
2012
    9  
2013
    9  
Thereafter
    62  
         
Total minimum future lease receipts
    107  
Residual value of leased pipeline
    40  
Less unearned income
    (70 )
         
Net investment in capital lease
    77  
Less current portion
    2  
         
    $ 75  
         


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 15 — FAIR VALUE
 
Effective January 1, 2008, the Company adopted SFAS No. 157. This Statement defines fair value, establishes a framework for measuring fair value and expands the disclosures about fair value measurements. The Company has elected the option to defer the effective date of SFAS No. 157 as it pertains to non-financial assets and liabilities to January 1, 2009.
 
SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company makes certain assumptions it believes that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Company and its counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which is immaterial for the year ended December 31, 2008. The Company believes it uses valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.
 
SFAS No. 157 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. SFAS No. 157 requires that assets and liabilities be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Company classifies fair value balances based on the fair value hierarchy defined by SFAS No. 157 as follows:
 
  •  Level 1 — Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date.
 
  •  Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
 
  •  Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
 
The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2008:
 
                                         
                            Net Balance at
 
                      Netting
    December 31,
 
    Level 1     Level 2     Level 3     Adjustments(2)     2008  
    (In millions)  
 
Assets:
                                       
Cash equivalents
  $ 36     $     $     $     $ 36  
Nuclear decommissioning trusts and Other investments(1)
    492     $ 310     $ 1     $     $ 803  
Derivative assets
    2,051       1,118       677       (3,390 )     456  
                                         
Total
  $ 2,579     $ 1,428     $ 678     $ (3,390 )   $ 1,295  
                                         
Liabilities:
                                       
Derivative liabilities
    (2,026 )     (1,118 )     (861 )     3,376       (629 )
                                         
Total
  $ (2,026 )   $ (1,118 )   $ (861 )   $ 3,376     $ (629 )
                                         
Net assets (liabilities) at December 31, 2008
  $ 553     $ 310     $ (183 )   $ (14 )   $ 666  
                                         
 
 
(1) Excludes cash surrender value of life insurance investments.
 
(2) Amounts represent the impact of master netting agreements that allow the Company to net gain and loss positions and cash collateral held or placed with the same counterparties.
 
The following table presents the fair value reconciliation of Level 3 derivative assets and liabilities and purchase of Other investments of $1 million measured at fair value on a recurring basis for the year ended December 31, 2008:
 
         
    (In millions)  
 
Liability balance as of January 1, 2008(1)
  $ (366 )
Changes in fair value recorded in income
    (10 )
Changes in fair value recorded in regulatory liabilities
    2  
Changes in fair value recorded in other comprehensive income
    6  
Purchases, issuances and settlements
    195  
Transfers in/out of Level 3
    (10 )
         
Liability balance as of December 31, 2008
  $ (183 )
         
The amount of total gains included in net income attributed to the change in unrealized gains (losses) related to assets and liabilities held at December 31, 2008
  $ 129  
         
 
 
(1) Balance as of January 1, 2008 includes a cumulative effect adjustment which represents an increase to beginning retained earnings related to Level 3 derivatives upon adoption of SFAS No. 157.
 
Net losses of $10 million related to Level 3 derivative assets and liabilities are reported in Operating Revenues for the year ended December 31, 2008 consistent with the Company’s accounting policy. Net gains of $154 million related to Level 1 and Level 2 derivative assets and liabilities, and the impact of netting, are also reported in Operating Revenues for the year ended December 31, 2008. Transfers in/out of Level 3 represent existing assets or liabilities that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
which the lowest significant input became observable during the period. Transfers in/out of Level 3 are reflected as if they had occurred at the beginning of the period.
 
SFAS No. 157 provides for limited retrospective application, the net of which is recorded as an adjustment to beginning retained earnings in the period of adoption. As a result, the Company recorded a cumulative effect adjustment of $4 million, net of taxes, as an increase to beginning retained earnings as of January 1, 2008.
 
Cash Equivalents
 
Cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value table are comprised of investments in money market funds. The fair values of the shares of these funds are based on observable market prices and, therefore, have been categorized as Level 1 in the fair value hierarchy.
 
Nuclear Decommissioning Trusts and Other Investments
 
The nuclear decommissioning trust fund investments have been established to satisfy Detroit Edison’s nuclear decommissioning obligations. The nuclear decommissioning trusts and other fund investments hold debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices on actively traded markets. The commingled funds and institutional mutual funds which hold exchange-traded equity or debt securities are valued using quoted prices in actively traded markets. Non-exchange-traded fixed income securities are valued based upon quotations available from brokers or pricing services. For non-exchange traded fixed income securities, the trustees receive prices from pricing services. A primary price source is identified by asset type, class or issue for each security. The trustees monitor prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustees challenge an assigned price and determine that another price source is considered to be preferable. DTE Energy has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, DTE Energy selectively corroborates the fair values of securities by comparison of market-based price sources.
 
Derivative Assets and Liabilities
 
Derivative assets and liabilities are comprised of physical and financial derivative contracts, including futures, forwards, options and swaps that are both exchange-traded and over-the-counter traded contracts. Various inputs are used to value derivatives depending on the type of contract and availability of market data. Exchange-traded derivative contracts are valued using quoted prices in active markets. Other derivative contracts are valued based upon a variety of inputs including commodity market prices, interest rates, credit ratings, default rates, market-based seasonality and basis differential factors. Mathematical valuation models are used for derivatives for which external market data is not readily observable, such as contracts which extend beyond the actively traded reporting period. Derivative instruments are principally used in the Company’s Energy Trading segment.
 
Fair Value of Financial Instruments
 
The fair value of financial instruments is determined by using various market data and other valuation techniques. The table below shows the fair value relative to the carrying value for long-term debt securities. The carrying value of certain other financial instruments, such as notes payable, customer deposits and notes receivable approximate fair value and are not shown as carrying value approximates fair value. As of December 31, 2008, the Company had approximately $747 million of tax exempt securities and $120 million of taxable securities insured by insurers. Overall credit market conditions have resulted in credit rating


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
downgrades and may result in future credit rating downgrades for these insurers. The Company does not expect the impact on interest rates or fair value to be material.
 
                                 
    2008   2007
    Fair Value   Carrying Value   Fair Value   Carrying Value
 
Long-Term Debt
  $ 7.7 billion     $ 8.0 billion     $ 7.6 billion     $ 7.4 billion  
 
NOTE 16 — FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS
 
The Company complies with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended and interpreted. Under SFAS No. 133, all derivatives are recognized on the Consolidated Statement of Financial Position at their fair value unless they qualify for certain scope exceptions, including 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 portion of the derivative gain or loss that is effective in offsetting the change in the value of the underlying exposure is deferred in Accumulated other comprehensive income and later reclassified into earnings when the underlying transaction occurs. For fair value hedges, changes in fair values for both the derivative and the underlying hedged exposure are recognized in earnings each period. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately. For derivatives that do not qualify or are not designated for hedge accounting, changes in the fair value are recognized in earnings each period.
 
The Company’s primary market risk exposure is associated with commodity prices, credit, interest rates and foreign currency. The Company has risk management policies to monitor and decrease market risks. The Company uses derivative instruments to manage some of the exposure. The Company uses derivative instruments for trading purposes in its Energy Trading segment and the coal marketing activities of its Power and Industrial Projects segment. The fair value of all derivatives is included in Derivative assets or liabilities on the Consolidated Statements of Financial Position.
 
Commodity Price Risk and Foreign Currency Risk
 
Utility Operations
 
Detroit Edison  — Detroit Edison generates, purchases, distributes and sells electricity. Detroit Edison uses forward energy and capacity contracts to manage changes in the price of electricity and fuel. Contracts that are derivatives and meet the normal purchases and sales exemption are accounted for under the accrual method. Other derivative contracts are recoverable through the PSCR mechanism when realized. This results in the deferral of unrealized gains and losses or regulatory assets or liabilities, until realized.
 
MichCon  — MichCon purchases, stores, transmits and distributes natural gas and sells storage and transportation capacity. MichCon has fixed-priced contracts for portions of its expected gas supply requirements through 2012. These gas-supply contracts are designated and qualify for the normal purchases and sales exemption and are therefore accounted for under the accrual method. MichCon may also sell forward storage and transportation capacity contracts. Forward firm transportation and storage contracts are not derivatives and are therefore accounted for under the accrual method.
 
Non-Utility Operations
 
Power and Industrial Projects  — These business segments manage and operate on-site energy and steel related projects, coke batteries, landfill gas recovery and power generation assets. These businesses utilize fixed-priced contracts in the marketing and management of their assets. These contracts are generally not derivatives and are therefore accounted for under the accrual method. The business unit also engages in coal


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
marketing which includes the marketing and trading of physical coal and coal financial instruments, and forward contracts for the purchase and sale of emissions allowances. Certain of the physical coal contracts meet the normal purchase and sales exemption and are accounted for using the accrual method. Financial and other physical coal contracts are derivatives and are accounted for by recording changes in fair value to earnings.
 
Unconventional Gas Production  — The Unconventional Gas Production business is engaged in unconventional gas project development and production. The Company uses derivative contracts to manage changes in the price of natural gas. These derivatives are designated as cash flow hedges. Amounts recorded in other comprehensive income/ (loss) will be reclassified to earnings, as the related production affects earnings through 2010. In 2008 and 2007, $0.5 million of after-tax gains and $222 million of after-tax losses, respectively, were reclassified to earnings. The 2007 amounts principally related to the sale of the Antrim business. See Note 3 for further discussion of the discontinuance of a portion of cash flow hedge accounting upon sale of the Antrim business. In 2009, management estimates reclassifying an after-tax gain of approximately $3 million to earnings.
 
Energy Trading — Commodity Price Risk — Energy Trading markets and trades wholesale electricity and natural gas physical products and energy financial instruments, and provides risk 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 certain hedge accounting criteria are met.
 
Energy Trading — Foreign Currency Risk — Energy Trading has foreign currency forward contracts to economically hedge fixed Canadian dollar commitments existing under power purchase and sale contracts and gas transportation contracts. The Company entered into these contracts to mitigate price volatility with respect to fluctuations of the Canadian dollar relative to the U.S. dollar. Certain of these contracts were previously designated as cash flow hedges. Amounts were recorded to Other comprehensive income and reclassified to Operating revenues or Fuel, purchased power and gas expense when the related hedged item impacted earnings.
 
In 2008 and 2007, $1 million and $7 million, respectively, of after-tax losses were reclassified to earnings. The foreign currency hedge has been fully realized as of December 31, 2008 and therefore, no further earnings impact is expected.
 
Gas Midstream — These business units are primarily engaged in services related to the transportation, processing and storage of natural gas. These businesses utilize fixed-priced contracts in their marketing and management of their businesses. Generally these contracts are not derivatives and are therefore accounted for under the accrual method.
 
Credit Risk
 
The utility and non-utility businesses are exposed to credit risk if customers or counterparties do not comply with their contractual obligations. The Company maintains credit policies that significantly minimize overall credit risk. These policies include an evaluation of potential customers’ and counterparties’ financial condition, credit rating, collateral requirements or other credit enhancements such as letters of credit or guarantees. The Company generally uses standardized agreements that allow the netting of positive and negative transactions associated with a single counterparty.
 
The Company maintains a provision for credit losses based on factors surrounding the credit risk of its customers, historical trends, and other information. Based on the Company’s credit policies and its December 31, 2008 provision for credit losses, the Company’s exposure to counterparty nonperformance is not expected to result in material effects on the Company’s financial statements.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Interest Rate Risk
 
The Company uses interest rate swaps, treasury locks and other derivatives to hedge the risk associated with interest rate market volatility. In 2004 and 2000, the Company entered into a series of interest rate derivatives to limit its sensitivity to market interest rate risk associated with the issuance of long-term debt. Such instruments were designated as cash flow hedges. The Company subsequently issued long-term debt and terminated these hedges at a cost that is included in other comprehensive loss. Amounts recorded in other comprehensive loss will be reclassified to Interest expense as the related interest affects earnings through 2033. In 2009, the Company estimates reclassifying $4 million of losses to earnings.
 
NOTE 17 — COMMITMENTS AND CONTINGENCIES
 
Environmental
 
Electric Utility
 
Air  — Detroit Edison is subject to EPA ozone transport and acid rain regulations that limit power plant emissions of sulfur dioxide and nitrogen oxides. Since 2005, EPA and the State of Michigan have issued additional emission reduction regulations relating to ozone, fine particulate, regional haze and mercury air pollution. The new rules will lead to additional controls on fossil-fueled power plants to reduce nitrogen oxide, sulfur dioxide and mercury emissions. To comply with these requirements, Detroit Edison has spent approximately $1.4 billion through 2008. The Company estimates Detroit Edison future undiscounted capital expenditures at up to $100 million in 2009 and up to $2.8 billion of additional capital expenditures through 2018 based on current regulations.
 
Water  — In response to an EPA regulation, Detroit Edison is required to examine alternatives for reducing the environmental impacts of the cooling water intake structures at several of its facilities. Based on the results of the studies to be conducted over the next several years, Detroit Edison may be required to install additional control technologies to reduce the impacts of the water intakes. Initially, it was estimated that Detroit Edison could incur up to approximately $55 million over the four to six years subsequent to 2008 in additional capital expenditures to comply with these requirements. However, a January 2007 circuit court decision remanded back to the EPA several provisions of the federal regulation that may result in a delay in compliance dates. The decision also raised the possibility that Detroit Edison may have to install cooling towers at some facilities at a cost substantially greater than was initially estimated for other mitigative technologies. In 2008, the Supreme Court agreed to review the remanded cost-benefit analysis provision of the rule. A decision is expected in the first quarter of 2009. Concurrently, the EPA continues to develop a revised rule, which is expected to be published in early 2009.
 
Contaminated Sites  — Detroit Edison conducted remedial investigations at contaminated sites, including three former manufactured gas plant (MGP) sites, the area surrounding an ash landfill and several underground and aboveground storage tank locations. The findings of these investigations indicated that the estimated cost to remediate these sites is expected to be incurred over the next several years. At December 31, 2008 and 2007, the Company had $12 million and $15 million, respectively, accrued for remediation.
 
Gas Utility
 
Contaminated 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. Gas Utility owns, or previously owned, 15 such former MGP sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. In addition to the MGP sites, the Company is also in the process of cleaning up other contaminated sites. Cleanup activities associated with these sites will be conducted over the next several years.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The MPSC has established a cost deferral and rate recovery mechanism for investigation and remediation costs incurred at former MGP sites. Accordingly, Gas Utility recognizes a liability and corresponding regulatory asset for estimated investigation and remediation costs at former MGP sites. During 2008, the Company spent approximately $2 million investigating and remediating these former MGP sites. As of December 31, 2008 and 2007, the Company had $38 million and $40 million, respectively, accrued for remediation.
 
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 the sites and affect the Company’s financial position and cash flows. However, the Company anticipates the cost deferral and rate recovery mechanism approved by the MPSC will prevent environmental costs from having a material adverse impact on our results of operations.
 
Non-Utility
 
The Company’s non-utility affiliates are subject to a number of environmental laws and regulations dealing with the protection of the environment from various pollutants. The Company is in the process of installing new environmental equipment at our coke battery facility in Michigan. The Company expects the projects to be completed by the first half of 2009. The Michigan coke battery facility received and responded to information requests from the EPA resulting in the issuance of a notice of violation regarding potential maximum achievable control technologies and new source review violations. The EPA is in the process of reviewing the Company’s position of demonstrated compliance and has not initiated escalated enforcement. At this time, the Company cannot predict the impact of this issue. Furthermore, the Company is in the process of settling historical air violations at its coke battery facility located in Pennsylvania. At this time, we cannot predict the impact of this settlement. The Company is investigating wastewater treatment technologies for the coke battery facility located in Pennsylvania. This investigation may result in capital expenditures to meet regulatory requirements. The Company’s non-utility affiliates are substantially in compliance with all environmental requirements, other than as noted above.
 
Guarantees
 
In certain limited circumstances, the Company enters into contractual guarantees. The Company may guarantee another entity’s obligation in the event it fails to perform. The Company may provide guarantees in certain indemnification agreements. Finally, the Company may provide indirect guarantees for the indebtedness of others. Below are the details of specific material guarantees the Company currently provides.
 
Millennium Pipeline Project Guarantee
 
The Company owns a 26% equity interest in the Millennium Pipeline Project (Millennium). Millennium is accounted for under the equity method. Millennium began commercial operations in December 2008.
 
On August 29, 2007, Millennium entered into a borrowing facility to finance the construction costs of the project. The total facility amounts to $800 million and is guaranteed by the project partners, based upon their respective ownership percentages. The facility expires on August 29, 2010 and was fully drawn as of December 31, 2008. Proceeds of the facility are being used to fund project costs and expenses relating to the development, construction and commercial start up and testing of the pipeline project and for general corporate purposes. In addition, the facility has been utilized to reimburse the project partners for costs and expenses incurred in connection with the project for the period subsequent to June 1, 2004 through immediately prior to the closing of the facility. The Company received approximately $23.5 million in September 2007 as reimbursement for costs and expenses incurred by it during the above-mentioned period. The Company accounted for this reimbursement as a return of capital.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The Company has agreed to guarantee 26% of the borrowing facility and in the event of default by Millennium the maximum potential amount of future payments under this guarantee is approximately $210 million. The guarantee includes DTE Energy’s revolving credit facility’s covenant and default provisions by reference. Related to this facility, the Company has also agreed to guarantee 26% of Millennium’s forward-starting interest rate swaps with a notional amount of $420 million. The Company’s exposure on the forward-starting interest rate swaps varies with changes in Treasury rates and credit swap spreads and was approximately $27 million at December 31, 2008. Because we are unable to forecast changes in Treasury rates and credit swap spreads, we are unable to estimate our maximum exposure under our share of Millennium’s forward-starting interest rate swaps. An incremental .25% decrease in the forward interest rate swap rates will increase our exposure by approximately $4 million. There are no recourse provisions or collateral that would enable us to recover any amounts paid under the guarantees, other than our share of project assets.
 
Parent Company Guarantee of Subsidiary Obligations
 
Various non-utility subsidiaries of the Company have entered into contracts which contain ratings triggers and are guaranteed by DTE Energy. These contracts contain provisions which allow the counterparties to request that the Company 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 the Company can be asked 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 the Company may ultimately be required to post.
 
The amount of such collateral which could be requested fluctuates based on commodity prices (primarily gas, power and coal) and the provisions and maturities of the underlying transactions. As of December 31, 2008, the value of the transactions for which the Company would have been exposed to collateral requests had the Company’s credit rating been below investment grade on such date was approximately $430 million. In circumstances where an entity is downgraded below investment grade and collateral requrests are made as a result, the requesting parties often agree to accept less than the full amount of their exposure to the downgraded entity.
 
Other Guarantees
 
The Company’s other guarantees are not individually material with maximum potential payments totaling $10 million at December 31, 2008.
 
The Company is often required to obtain performance surety bonds in support of obligations to various governmental entities and other companies in connection with its operations. As of December 31, 2008, the Company had approximately $11 million of performance bonds outstanding. In the event that such bonds are called for nonperformance, the Company would be obligated to reimburse the issuer of the performance bond. The Company is released from the performance bonds as the contractual performance is completed and does not believe that a material amount of any currently outstanding performance bonds will be called.
 
Labor Contracts
 
There are several bargaining units for our union employees. The majority of our union employees are under contracts that expire in June and October 2010 and August 2012.
 
Purchase Commitments
 
Detroit Edison has an Energy Purchase Agreement to purchase electricity from the Greater Detroit Resource Recovery Authority (GDRRA). Under the Agreement, Detroit Edison purchased steam through 2008.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The term of the Energy Purchase Agreement for the purchase of electricity runs through June 2024. We purchased approximately $42 million of steam and electricity in each of 2008, 2007 and 2006. We estimate electric purchase commitments from 2009 through 2024 will not exceed $300 million in the aggregate.
 
In January 2003, the Company sold the steam heating business of Detroit Edison to Thermal Ventures II, LP. Under the terms of sale, Detroit Edison guaranteed bank loans of $13 million that Thermal Ventures II, LP used for capital improvements to the steam heating system. At December 31, 2008 and 2007, the Company had reserves of $13 million related to the bank loan guarantee.
 
As of December 31, 2008, the Company was party to numerous long-term purchase commitments relating to a variety of goods and services required for the Company’s business. These agreements primarily consist of fuel supply commitments and energy trading contracts. The Company estimates that these commitments will be approximately $5.9 billion from 2009 through 2051. The Company also estimates that 2009 capital expenditures will be approximately $1.1 billion. The Company has made certain commitments in connection with expected capital expenditures.
 
Bankruptcies
 
The Company purchases and sells electricity, gas, coal, coke and other energy products from and to numerous companies operating in the steel, automotive, energy, retail and other industries. Certain of the Company’s customers have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The Company regularly reviews contingent matters relating to these customers and its purchase and sale contracts and it records provisions for amounts considered at risk of probable loss. Management believes the Company’s previously accrued amounts are adequate for probable losses. The final resolution of these matters may have a material effect on the Company’s consolidated financial statements.
 
Our utilities and certain non-utility businesses provide services to the domestic automotive industry, including GM, Ford and Chrysler and many of their vendors and suppliers. GM and Chrysler have recently received loans from the U.S. Government to provide them with the working capital necessary to continue to operate in the short term. In February 2009, GM and Chrysler submitted viability plans to the U.S. Government indicating that additional loans were necessary to continue operations in the short term. Further plant closures, bankruptcies or a federal government mandated restructuring program could have a significant impact on our results, particularly in our Electric Utility and Power and Industrial Projects segments. As the circumstances surrounding the viability of these entities are dynamic and uncertain, we continue to monitor developments as they occur.
 
Other Contingencies
 
The Company is involved in certain legal, regulatory, administrative and environmental proceedings before various courts, arbitration panels and governmental agencies concerning claims arising in the ordinary course of business. These proceedings include certain contract disputes, additional environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. The Company cannot predict the final disposition of such proceedings. The Company regularly reviews legal matters and records provisions for claims it can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Company’s operations or financial statements in the periods they are resolved.
 
See Note 5 for a discussion of contingencies related to Regulatory Matters.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
NOTE 18 — RETIREMENT BENEFITS AND TRUSTEED ASSETS
 
Adoption of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans
 
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an Amendment of FASB Statements No. 87, 88, 106, and 132(R) . SFAS No. 158 requires companies to (1) recognize the over funded or under funded status of defined benefit pension and other postretirement plans in its financial statements, (2) recognize as a component of other comprehensive income, net of tax, the actuarial gains or losses and the prior service costs or credits that arise during the period but are not immediately recognized as components of net periodic benefit cost, (3) recognize adjustments to other comprehensive income when the actuarial gains or losses, prior service costs or credits, and transition assets or obligations are recognized as components of net periodic benefit cost, (4) measure postretirement benefit plan assets and plan obligations as of the date of the employer’s statement of financial position, and (5) disclose additional information in the notes to financial statements about certain effects on net periodic benefit cost in the upcoming fiscal year that arise from delayed recognition of the actuarial gains and losses and the prior service cost and credits.
 
The requirement to recognize the funded status of a postretirement benefit plan and the related disclosure requirements is effective for fiscal years ending after December 15, 2006. The Company adopted this requirement as of December 31, 2006. In 2008, as required by SFAS 158, we changed the measurement date of our pension and postretirement benefit plans from November 30 to December 31. As a result, we recognized adjustments of $17 million ($9 million after-tax) and $4 million to retained earnings and regulatory liabilities, respectively, which represents approximately one month of pension and other postretirement benefit costs for the period from December 1, 2007 to December 31, 2008. Retrospective application of the changes required by SFAS No. 158 is prohibited; therefore certain disclosures below are not comparable.
 
Detroit Edison and MichCon received approval from the MPSC to record the impact of the adoption of the SFAS 158 provisions related to funded status as a regulatory asset or liability since the traditional rate setting process allows for the recovery of pension and other postretirement plan costs.
 
Measurement Date
 
All amounts and balances reported in the following tables as of December 31, 2008 and December 31, 2007 are based on measurement dates of December 31, 2008 and November 30, 2007, respectively.
 
Pension Plan Benefits
 
The Company has qualified defined benefit retirement plans for eligible represented and non-represented employees. The plans are noncontributory and cover substantially all employees. The plans provide traditional retirement benefits based on the employees’ years of benefit service, average final compensation and age at retirement. In addition, certain represented and non-represented employees are covered under cash balance provisions that determine benefits on annual employer contributions and interest credits. The Company also maintains supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. These plans provide for benefits that supplement those provided by DTE Energy’s other retirement plans.
 
The Company’s policy is to fund pension costs by contributing amounts consistent with the Pension Protection Act of 2006 provisions and additional amounts when it deems appropriate. In December 2008, the Company contributed $100 million to the pension plans. Also, the Company contributed $50 million to the pension plans in January 2009. The Company anticipates making up to a $250 million contribution to its pension plans in 2009.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Net pension cost includes the following components:
 
                         
    Pension Plans  
    2008     2007     2006  
    (In millions)  
 
Service cost
  $ 55     $ 62     $ 64  
Interest cost
    190       178       176  
Expected return on plan assets
    (259 )     (237 )     (222 )
Amortization of:
                       
Net actuarial loss
    32       59       59  
Prior service cost
    6       6       8  
Special termination benefits
          8       49  
                         
Net pension cost
  $ 24     $ 76     $ 134  
                         
 
Special termination benefits in the above tables represent costs associated with our Performance Excellence Process.
 
                 
    Pension Plans  
    2008     2007  
    (In millions)  
 
Other changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets
               
Net actuarial loss (gain)
  $ 1,061     $ (255 )
Amortization of net actuarial gain
    (32 )     (59 )
Prior service cost
    13       1  
Amortization of prior service cost
    (6 )     (6 )
                 
Total recognized in other comprehensive income and regulatory assets
  $ 1,036     $ (319 )
                 
Total recognized in net periodic pension cost, Other comprehensive income and regulatory assets
  $ 1,060     $ (243 )
Estimated amounts to be amortized from accumulated other comprehensive income and regulatory assets into net periodic benefit cost during next fiscal year
               
Net actuarial loss
  $ 52     $ 34  
Prior service cost
    5       6  


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The following table reconciles the obligations, assets and funded status of the plans as well as the amounts recognized as prepaid pension cost or pension liability in the Consolidated Statement of Financial Position at December 31:
 
                 
    Pension Plans  
    2008     2007  
    (In millions)  
 
Accumulated benefit obligation, end of year
  $ 2,828     $ 2,836  
                 
Change in projected benefit obligation
               
Projected benefit obligation, beginning of year
  $ 3,050     $ 3,246  
December 2007 benefit payments
    (19 )      
Service cost
    55       62  
Interest cost
    191       178  
Actuarial (gain) loss
    (79 )     (212 )
Benefits paid
    (201 )     (233 )
Measurement date change
    22        
Special termination benefits
          8  
Plan amendments
    13       1  
                 
Projected benefit obligation, end of year
  $ 3,032     $ 3,050  
                 
Change in plan assets
               
Plan assets at fair value, beginning of year
  $ 2,980     $ 2,744  
December 2007 contributions
    150        
December 2007 payments
    (18 )      
Actual return on plan assets
    (884 )     280  
Company contributions
    106       189  
Measurement date change
    22        
Benefits paid
    (201 )     (233 )
                 
Plan assets at fair value, end of year
  $ 2,155     $ 2,980  
                 
Funded status of the plans
  $ (877 )   $ (70 )
December contribution
          151  
                 
Funded status, end of year
  $ (877 )   $ 81  
                 
Amount recorded as:
               
Noncurrent assets
  $     $ 152  
Current liabilities
    (6 )     (4 )
Noncurrent liabilities
    (871 )     (67 )
                 
    $ (877 )   $ 81  
                 


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                 
    Pension Plans  
    2008     2007  
    (In millions)  
 
Amounts recognized in Accumulated other comprehensive loss, pre-tax
               
Net actuarial loss
  $ 204     $ 180  
Prior service (credit)
    (6 )     (8 )
                 
    $ 198     $ 172  
                 
Amounts recognized in regulatory assets
               
Net actuarial loss
  $ 1,482     $ 477  
Prior service cost
    23       18  
                 
    $ 1,505     $ 495  
                 
 
The aggregate accumulated benefit obligation, projected benefit obligation and fair value of plan assets as of December 31, 2008 for plans with benefit obligations in excess of plan assets was $2.8 billion, $3 billion and $2.2 billion, respectively.
 
The aggregate accumulated benefit obligation and projected benefit obligation of plan assets as of December 31, 2007 for plans with benefit obligations in excess of plan assets was $69 million and $72 million, respectively. There was no fair value related to plans with benefit obligations in excess of plan assets as of December 31, 2007.
 
The aggregate accumulated benefit obligation, projected benefit obligation and fair value of plan assets as of December 31, 2007 for plans with plan assets in excess of benefit obligations was $2.8 billion, $3 billion and $3 billion, respectively.
 
Assumptions used in determining the projected benefit obligation and net pension costs are listed below:
 
                         
    2008   2007   2006
 
Projected benefit obligation
                       
Discount rate
    6.9%       6.5%       5.7%  
Rate of compensation increase
    4.0%       4.0%       4.0%  
Net pension costs
                       
Discount rate
    6.5%       5.7%       5.9%  
Rate of compensation increase
    4.0%       4.0%       4.0%  
Expected long-term rate of return on plan assets
    8.75%       8.75%       8.75%  
 
At December 31, 2008, the benefits related to the Company’s qualified and nonqualified pension plans expected to be paid in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows:
 
         
    (In millions)  
 
2009
  $ 199  
2010
    202  
2011
    206  
2012
    213  
2013
    217  
2014 - 2018
    1,186  
         
Total
  $ 2,223  
         

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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The Company employs a formal process in determining the long-term rate of return for various asset classes. Management reviews historic financial market risks and returns and long-term historic relationships between the asset classes of equities, fixed income and other assets, consistent with the widely accepted capital market principle that asset classes with higher volatility generate a greater return over the long-term. Current market factors such as inflation, interest rates, asset class risks and asset class returns are evaluated and considered before long-term capital market assumptions are determined. The long-term portfolio return is also established employing a consistent formal process, with due consideration of diversification, active investment management and rebalancing. Peer data is reviewed to check for reasonableness.
 
The Company employs a total return investment approach whereby a mix of equities, fixed income and other investments are used to maximize the long-term return on plan assets consistent with prudent levels of risk. The intent of this strategy is to minimize plan expenses over the long-term. Risk tolerance is established through consideration of future plan cash flows, plan funded status, and corporate financial considerations. The investment portfolio contains a diversified blend of equity, fixed income and other investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, growth and value investment styles, and large and small market capitalizations. Other assets such as private equity and hedge funds are used to enhance long-term returns while improving portfolio diversification. Derivatives may be utilized in a risk controlled manner, to potentially increase the portfolio beyond the market value of invested assets and reduce portfolio investment risk. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews.
 
The Company’s plans’ weighted-average asset allocations by asset category at December 31 were as follows:
 
                 
    2008     2007  
 
U.S. Equity securities
    31 %     48 %
Non U.S. Equity securities
    16       18  
Debt securities
    24       19  
Hedge Funds and Similar Investments
    22       12  
Private Equity and Other
    7       3  
                 
      100 %     100 %
                 
 
The Company’s plans’ weighted-average asset target allocations by asset category at December 31, 2008 were as follows:
 
         
U.S. Equity securities
    35 %
Non U.S. Equity securities
    20  
Debt securities
    20  
Hedge Funds and Similar Investments
    20  
Private Equity and Other
    5  
         
      100 %
         
 
The Company also sponsors defined contribution retirement savings plans. Participation in one of these plans is available to substantially all represented and non-represented employees. The Company matches employee contributions up to certain predefined limits based upon eligible compensation, the employee’s contribution rate and, in some cases, years of credited service. The cost of these plans was $33 million in 2008 and $29 million in each of the years 2007 and 2006.


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Table of Contents

 
DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Other Postretirement Benefits
 
The Company provides certain postretirement health care and life insurance benefits for employees who are eligible for these benefits. The Company’s policy is to fund certain trusts to meet its postretirement benefit obligations. Separate qualified Voluntary Employees Beneficiary Association (VEBA) trusts exist for represented and non-represented employees. In December 2008, the Company made cash contributions of $116 million to its postretirement benefit plans. In January 2009, the Company made cash contributions of $40 million to its postretirement benefit plans. At the discretion of management, the Company may make up to an additional $130 million contribution to its VEBA trusts in 2009.
 
Net postretirement cost includes the following components:
 
                         
    2008     2007     2006  
    (In millions)  
 
Service cost
  $ 62     $ 62     $ 59  
Interest cost
    121       118       115  
Expected return on plan assets
    (75 )     (67 )     (61 )
Amortization of
                       
Net loss
    38       69       72  
Prior service (credit)
    (6 )     (3 )     (3 )
Net transition obligation
    2       7       7  
Special termination benefits
          2       8  
                         
Net postretirement cost
  $ 142     $ 188     $ 197  
                         
 
Special termination benefits in the above tables represent costs associated with our Performance Excellence Process.
 
                 
    2008     2007  
    (In millions)  
 
Other changes in plan assets and APBO recognized in other comprehensive income and regulatory assets
               
Net actuarial loss (gain)
  $ 334     $ (299 )
Amortization of net actuarial (gain)
    (39 )     (69 )
Prior service (credit)
    (1 )     (55 )
Amortization of prior service credit
    6       2  
Amortization of transition (asset)
    (2 )     (6 )
                 
Total recognized in other comprehensive income and regulatory assets
  $ 298     $ (427 )
                 
Total recognized in net periodic pension cost, other comprehensive income and regulatory assets
  $ 440     $ (239 )
                 
 
                 
    (In millions)
 
Estimated amounts to be amortized from accumulated other comprehensive income and regulatory assets into net periodic benefit cost during next fiscal year
               
Net actuarial loss
  $ 69     $ 38  
Prior service (credit)
  $ (6 )   $ (6 )
Net transition obligation
  $ 2     $ 2  


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Table of Contents

 
DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The following table reconciles the obligations, assets and funded status of the plans including amounts recorded as accrued postretirement cost in the Consolidated Statement of Financial Position at December 31:
 
                 
    2008     2007  
    (In millions)  
 
Change in accumulated postretirement benefit obligation
               
Accumulated postretirement benefit obligation, beginning of year
  $ 1,922     $ 2,184  
December 2007 cash flow
    (6 )      
Service cost
    62       62  
Interest cost
    121       118  
Actuarial (gain) loss
    10       (297 )
Plan amendments
    (1 )     (55 )
Medicare Part D subsidy
    7       7  
Special termination benefits
          2  
Measurement date change
    15        
Benefits paid
    (98 )     (99 )
                 
Accumulated postretirement benefit obligation, end of year
  $ 2,032     $ 1,922  
                 
Change in plan assets
               
Plan assets at fair value, beginning of year
  $ 835     $ 794  
December 2007 VEBA cash flow
    (13 )      
Actual return on plan assets
    (251 )     69  
Measurement date change
    6        
Company contributions
    116       56  
Benefits paid
    (95 )     (84 )
                 
Plan assets at fair value, end of year
  $ 598     $ 835  
                 
Funded status of the plans, as of November 30
  $     $ (1,087 )
December adjustment
          (7 )
                 
Funded status, as of December 31
  $ (1,434 )   $ (1,094 )
                 
Noncurrent liabilities
  $ (1,434 )   $ (1,094 )
Amounts recognized in Accumulated other comprehensive loss, pre-tax
               
Net actuarial loss
  $ 68     $ 75  
Prior service (credit)
    (36 )     (48 )
Net transition (asset)
    (15 )     (18 )
                 
    $ 17     $ 9  
                 
Amounts recognized in regulatory assets
               
Net actuarial loss
  $ 760     $ 458  
Prior service cost
    3       9  
Net transition obligation
    24       29  
                 
    $ 787     $ 496  
                 


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Table of Contents

 
DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
Assumptions used in determining the projected benefit obligation and net benefit costs are listed below:
 
                         
    2008   2007   2006
 
Projected benefit obligation
                       
Discount rate
    6.90%       6.50%       5.70%  
Net benefit costs
                       
Discount rate
    6.50%       5.70%       5.90%  
Expected long-term rate of return on plan assets
    8.75%       8.75%       8.75%  
Health care trend rate pre-65
    7.00%       8.00%       9.00%  
Health care trend rate post-65
    6.00%       7.00%       8.00%  
Ultimate health care trend rate
    5.00%       5.00%       5.00%  
Year in which ultimate reached
    2011       2011       2011  
 
A one-percentage-point increase in health care cost trend rates would have increased the total service cost and interest cost components of benefit costs by $29 million and increased the accumulated benefit obligation by $241 million at December 31, 2008. A one-percentage-point decrease in the health care cost trend rates would have decreased the total service and interest cost components of benefit costs by $26 million and would have decreased the accumulated benefit obligation by $238 million at December 31, 2008.
 
At December 31, 2008, the benefits expected to be paid, including prescription drug benefits, in each of the next five years and in the aggregate for the five fiscal years thereafter are as follows:
 
         
    (In millions)  
 
2009
  $ 127  
2010
    133  
2011
    138  
2012
    140  
2013
    144  
2014 - 2018
    769  
         
Total
  $ 1,451  
         
 
In December 2003, the Medicare Act was signed into law which provides for a non-taxable federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least “actuarially equivalent” to the benefit established by law. The effects of the subsidy reduced net periodic postretirement benefit costs by $14 million in 2008, $16 million in 2007, and $17 million in 2006.
 
At December 31, 2008, the gross amount of federal subsidies expected to be received in each of the next five years and in the aggregate for the five fiscal years thereafter was as follows:
 
         
    (In millions)  
 
2009
  $ 5  
2010
    4  
2011
    6  
2012
    7  
2013
    7  
2014 - 2018
    35  
         
Total
  $ 64  
         


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Table of Contents

 
DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The process used in determining the long-term rate of return for assets and the investment approach for the Company’s other postretirement benefits plans is similar to those previously described for its pension plans.
 
The Company’s plans’ weighted-average asset allocations by asset category at December 31 were as follows:
 
                 
    2008   2007
 
U.S. Equity securities
    39 %     50 %
Non U.S. Equity securities
    17       18  
Debt securities
    26       20  
Hedge Funds and Similar Investments
    13       11  
Private Equity and Other
    5       1  
                 
      100 %     100 %
                 
 
The Company’s plans’ weighted-average asset target allocations by asset category at December 31, 2008 were as follows:
 
         
U.S. Equity securities
    27 %
Non U.S. Equity securities
    24  
Debt securities
    16  
Hedge Funds and Similar Investments
    28  
Private Equity and Other
    5  
         
      100 %
         
 
Grantor Trust
 
MichCon maintains a Grantor Trust to fund other postretirement benefit obligations that invests in life insurance contracts and income securities. Employees and retirees have no right, title or interest in the assets of the Grantor Trust, and MichCon can revoke the trust subject to providing the MPSC with prior notification. The Company accounts for its investment at fair value with unrealized gains and losses recorded to earnings.
 
NOTE 19 — STOCK-BASED COMPENSATION
 
The Company’s stock incentive program permits the grant of incentive stock options, non-qualifying stock options, stock awards, performance shares and performance units to employees and members of its Board of Directors. Key provisions of the stock incentive program are:
 
  •  Authorized limit is 9,000,000 shares of common stock;
 
  •  Prohibits the grant of a stock option with an exercise price that is less than the fair market value of the Company’s stock on the date of the grant; and
 
  •  Imposes the following award limits to a single participant in a single calendar year, (1) options for more than 500,000 shares of common stock; (2) stock awards for more than 150,000 shares of common stock; (3) performance share awards for more than 300,000 shares of common stock (based on the maximum payout under the award); or (4) more than 1,000,000 performance units, which have a face amount of $1.00 each.
 
Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective transition method. Under this method, the Company records compensation expense at fair


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
value over the vesting period for all awards it grants after the date it adopted the standard. In addition, the Company is required to record compensation expense at fair value (as previous awards continue to vest) for the unvested portion of previously granted stock option awards that were outstanding as of the date of adoption. Pre-adoption grants of stock awards and performance shares will continue to be expensed. DTE Energy did not make the one-time election to adopt the alternative transition method described in FSP SFAS No. 123(R)-3, Transition Election Related to Accounting for the Tax Effect of Share-Based Payment Awards, but has chosen instead to follow the original guidance provided by SFAS No. 123(R) in accounting for the tax effects of stock based compensation awards.
 
Stock-based compensation for the reporting periods is as follows:
 
                         
    2008   2007   2006
    (In millions)
 
Stock-based compensation expense
  $ 38     $ 28     $ 24  
Tax benefit of compensation expense
  $ 13     $ 10     $ 8  
 
The cumulative effect of the adoption of SFAS No. 123(R) in 2006 was an increase in net income of $1 million as a result of estimating forfeitures for previously granted stock awards and performance shares. The Company generally purchases shares on the open market for options that are exercised or it may settle in cash other stock-based compensation.
 
Options
 
Options are exercisable according to the terms of the individual stock option award agreements and expire 10 years after the date of the grant. The option exercise price equals the fair value of the stock on the date that the option was granted. Stock options vest ratably over a three-year period.
 
Stock option activity was as follows:
 
                         
          Weighted
    Aggregate
 
    Number of
    Average
    Intrinsic
 
    Options     Exercise Price     Value  
                (In millions)  
 
Options outstanding at January 1, 2008
    4,394,809     $ 42.37          
Granted
    811,300     $ 41.77          
Exercised
    (104,261 )   $ 32.13          
Forfeited or expired
    (88,149 )   $ 44.02          
                         
Options outstanding at December 31, 2008
    5,013,699     $ 42.45     $  
                         
Options exercisable at December 31, 2008
    3,766,477     $ 42.17     $  
                         
 
As of December 31, 2008, the weighted average remaining contractual life for the exercisable shares is 4.46 years. As of December 31, 2008, 1,247,222 options were non-vested. During 2008, 610,440 options vested.
 
The weighted average grant date fair value of options granted during 2008, 2007, and 2006 was $4.76, $6.46, and $6.12, respectively. The intrinsic value of options exercised for the years ended December 31, 2008, 2007 and 2006 was $1 million, $16 million, and $6 million, respectively. Total option expense recognized during 2008, 2007 and 2006 was $3 million, $4 million and $6 million, respectively.


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The number, weighted average exercise price and weighted average remaining contractual life of options outstanding were as follows:
 
                         
            Weighted
        Weighted
  Average
Range of
  Number of
  Average
  Remaining
Exercise Prices
  Options   Exercise Price   Contractual Life (Years)
 
$27.00-$38.00
    108,117     $ 31.75       1.07  
$38.01-$42.00
    2,759,759     $ 40.97       5.35  
$42.01-$45.00
    1,398,488     $ 43.91       5.98  
$45.01-$50.00
    747,335     $ 46.76       5.69  
                         
      5,013,699     $ 42.45       5.49  
                         
 
The Company determined the fair value for these options at the date of grant using a Black-Scholes based option pricing model and the following assumptions:
 
                         
    December 31
  December 31
  December 31
    2008   2007   2006
 
Risk-free interest rate
    3.05%       4.71%       4.58%  
Dividend yield
    5.20%       4.38%       4.75%  
Expected volatility
    20.45%       17.99%       19.79%  
Expected life
    6 years       6 years       6 years  
 
In connection with the adoption of SFAS No. 123(R), the Company reviewed and updated its forfeiture, expected term and volatility assumptions. The Company modified option volatility to include both historical and implied share-price volatility. Implied volatility is derived from exchange traded options on DTE Energy common stock. The Company’s expected life estimate is based on industry standards.
 
Stock Awards
 
Stock awards granted under the plan are restricted for varying periods, generally for three years. Participants have all rights of a shareholder with respect to a stock award, including the right to receive dividends and vote the shares. Prior to vesting in stock awards, the participant: (i) may not sell, transfer, pledge, exchange or otherwise dispose of shares; (ii) shall not retain custody of the share certificates; and (iii) will deliver to the Company a stock power with respect to each stock award.
 
The stock awards are recorded at cost that approximates fair value on the date of grant. The cost is amortized to compensation expense over the vesting period.
 
Stock award activity for the periods ended December 31 was:
 
                         
    2008   2007   2006
 
Fair value of awards vested (in Millions)
  $ 18     $ 10     $ 5  
Restricted common shares awarded
    389,055       620,125       282,555  
Weighted average market price of shares awarded
  $ 41.96     $ 49.48     $ 43.64  
Compensation cost charged against income (in Millions)
  $ 20     $ 16     $ 10  


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The following table summarizes the Company’s stock awards activity for the period ended December 31, 2008:
 
                 
        Weighted Average
    Restricted
  Grant Date
    Stock   Fair Value
 
Balance at January 1, 2008
    984,310     $ 47.36  
Grants
    389,055     $ 41.96  
Forfeitures
    (67,165 )   $ 45.45  
Vested
    (374,478 )   $ 46.90  
                 
Balance at December 31, 2008
    931,722     $ 45.31  
                 
 
Performance Share Awards
 
Performance shares awarded under the plan are for a specified number of shares of common stock that entitle the holder to receive a cash payment, shares of common stock or a combination thereof. The final value of the award is determined by the achievement of certain performance objectives and market conditions. The awards vest at the end of a specified period, usually three years. The Company accounts for performance share awards by accruing compensation expense over the vesting period based on: (i) the number of shares expected to be paid which is based on the probable achievement of performance objectives; and (ii) the closing stock price market value. The settlement of the award is at based on the closing price at the settlement date.
 
The Company recorded compensation expense as follows:
 
                         
    2008   2007   2006
    (In millions)
 
Compensation expense
  $ 15     $ 7     $ 8  
Cash settlements(1)
  $ 3     $ 5     $ 4  
 
 
(1) Approximates the intrinsic value of the liability.
 
During the vesting period, the recipient of a performance share award has no shareholder rights. However, recipients will be paid an amount equal to the dividend equivalent on such shares. Performance share awards are nontransferable and are subject to risk of forfeiture.
 
The following table summarizes the Company’s performance share activity for the period ended December 31, 2008:
 
         
    Performance Shares
 
Balance at January 1, 2008
    1,174,153  
Grants
    534,965  
Forfeitures
    (74,970 )
Payouts
    (312,647 )
         
Balance at December 31, 2008
    1,321,501  
         
 
Unrecognized Compensation Costs
 
As of December 31, 2008, there was $33 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 1.33 years.
 


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                 
    Unrecognized
   
    Compensation
  Weighted Average
    Cost   to be Recognized
    (In millions)   (In Years)
 
Stock awards
  $ 16       1.10  
Performance shares
    15       1.53  
Options
    2       1.62  
                 
    $ 33       1.33  
                 
 
The tax benefit realized for tax deductions related to the Company’s stock incentive plan totaled $13 million for the period ended December 31, 2008. Approximately $1.6 million, $1.4 million, and $1.6 million of compensation cost was capitalized as part of fixed assets during 2008, 2007, and 2006, respectively.
 
NOTE 20 — SEGMENT AND RELATED INFORMATION
 
Beginning in the second quarter of 2008, the Company realigned its Coal Transportation and Marketing business from the Coal and Gas Midstream segment (now the Gas Midstream segment) to the Power and Industrial Projects segment, due to changes in how financial information is evaluated and resources are allocated to segments by senior management. The Company’s segment information reflects this change for all periods presented. The Company sets strategic goals, allocates resources and evaluates performance based on the following structure:
 
Electric Utility
 
  •  The Company’s Electric Utility segment consists of Detroit Edison, 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 Utility
 
  •  The Gas Utility segment consists of MichCon and Citizens. MichCon is engaged in the purchase, storage, transmission, distribution and sale of natural gas to approximately 1.2 million residential, commercial and industrial customers throughout Michigan. MichCon also has subsidiaries involved in the gathering, processing and transmission of natural gas in northern Michigan. Citizens distributes natural gas in Adrian, Michigan to approximately 17,000 customers.
 
Non-Utility Operations
 
  •  Gas Midstream consists of gas pipelines and storage businesses;
 
  •  Unconventional Gas Production is engaged in unconventional gas project development and production;
 
  •  Power and Industrial Projects is comprised primarily of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers, biomass energy projects and coal transportation and marketing; and
 
  •  Energy Trading primarily consists of energy marketing and trading operations.
 
Corporate & Other, includes various holding company activities, holds certain non-utility debt and energy-related investments.

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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
The income tax provisions or benefits of DTE Energy’s subsidiaries are determined on an individual company basis and recognize the tax benefit of production tax credits and net operating losses. The subsidiaries record income tax payable to or receivable from DTE Energy resulting from the inclusion of its taxable income or loss in DTE Energy’s consolidated federal tax return.
 
Inter-segment billing for goods and services exchanged between segments is based upon tariffed or market-based prices of the provider and primarily consists of power sales, gas sales and coal transportation services in the following segments:
 
                         
    2008     2007     2006  
    (In millions)  
 
Electric Utility
  $ 16     $ 36     $ 59  
Gas Utility
    7       5       16  
Gas Midstream
    10       17       17  
Unconventional Gas Production
          64       134  
Power and Industrial Projects
    80       197       169  
Energy Trading
    145       7       75  
Corporate & Other
    (80 )     (35 )     7  
                         
    $ 178     $ 291     $ 477  
                         
 
Financial data of the business segments follows:
 
                                                                         
          Depreciation,
                                           
    Operating
    Depletion &
    Interest
    Interest
    Income
    Net
    Total
          Capital
 
    Revenue     Amortization     Income     Expense     Taxes     Income     Assets     Goodwill     Expenditures  
    (In millions)  
 
2008
                                                                       
Electric Utility
  $ 4,874     $ 743     $ (6 )   $ 293     $ 186     $ 331     $ 15,798     $ 1,206     $ 944  
Gas Utility
    2,152       102       (8 )     66       41       85       3,884       772       239  
Non-utility Operations:
                                                                       
Gas Midstream
    71       5       (1 )     7       24       38       316       9       19  
Unconventional Gas Production(1)
    48       12             2       47       84       314       2       101  
Power and Industrial Projects
    987       34       (7 )     20       11       40       1,126       31       65  
Energy Trading
    1,388       5       (5 )     10       31       42       787       17       5  
                                                                         
      2,494       56       (13 )     39       113       204       2,543       59       190  
Corporate & Other
    (13 )           (41 )     154       (52 )     (94 )     2,365              
Reconciliation and Eliminations
    (178 )           49       (49 )                              
                                                                         
Total from Continuing Operations
  $ 9,329     $ 901     $ (19 )   $ 503     $ 288       526       24,590       2,037       1,373  
                                                                         
Discontinued Operations (Note 3)
                                            20                    
                                                                         
Total
                                          $ 546     $ 24,590     $ 2,037     $ 1,373  
                                                                         
 


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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                                                                         
          Depreciation,
                                           
    Operating
    Depletion &
    Interest
    Interest
    Income
    Net
    Total
          Capital
 
    Revenue     Amortization     Income     Expense     Taxes     Income     Assets     Goodwill     Expenditures  
    (In millions)  
 
2007
                                                                       
Electric Utility
  $ 4,900     $ 764     $ (7 )   $ 294     $ 149     $ 317     $ 14,854     $ 1,206     $ 809  
Gas Utility
    1,875       93       (10 )     61       23       70       3,266       772       226  
Non-utility Operations:
                                                                       
Gas Midstream
    66       6       (2 )     11       18       34       258       9       35  
Unconventional Gas Production(1)
    (228 )     22             13       (117 )     (217 )     355       2       161  
Power and Industrial Projects
    1,244       41       (9 )     28       7       49       753       31       66  
Energy Trading
    924       5       (5 )     11       17       32       1,113       17       2  
                                                                         
      2,006       74       (16 )     63       (75 )     (102 )     2,479       59       264  
Corporate & Other(1)
    (15 )     1       (51 )     174       267       502       2,369              
Reconciliation and Eliminations
    (291 )           59       (59 )                              
                                                                         
Total from Continuing Operations
  $ 8,475     $ 932     $ (25 )   $ 533     $ 364       787       22,968       2,037       1,299  
                                                                         
Discontinued Operations (Note 3)
                                            205       774              
Reconciliation and Eliminations
                                            (21 )                  
                                                                         
Total from Discontinued Operations
                                            184       774              
                                                                         
Total
                                          $ 971     $ 23,742     $ 2,037     $ 1,299  
                                                                         
 
 
(1) Net income of the Unconventional Gas production segment in 2008 reflects the gain recognized on the sale of Barnett shale properties. Operating revenues and net loss of the Unconventional Gas Production segment in 2007 reflect the recognition of losses on hedge contracts associated with the Antrim sale transaction. Net Income of the Corporate & Other segment in 2007 results principally from the gain recognized on the Antrim sale transaction. See Note 3.
 

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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                                                                         
          Depreciation,
                                           
    Operating
    Depletion &
    Interest
    Interest
    Income
    Net
    Total
          Capital
 
    Revenue     Amortization     Income     Expense     Taxes     Income     Assets     Goodwill     Expenditures  
    (In millions)  
 
2006
                                                                       
Electric Utility
  $ 4,737     $ 809     $ (4 )   $ 278     $ 161     $ 325     $ 14,540     $ 1,206     $ 972  
Gas Utility
    1,849       94       (9 )     67       11       50       3,123       773       155  
Non-utility Operations:
                                                                       
Gas Midstream
    63       3       (2 )     8       15       28       290       9       37  
Unconventional Gas Production
    99       27             13       5       9       611       8       186  
Power and Industrial Projects
    1,053       49       (9 )     31       (43 )     (58 )     1,009       40       51  
Energy Trading
    828       6       (12 )     15       49       96       1,114       17       2  
                                                                         
      2,043       85       (23 )     67       26       75       3,024       74       276  
                                                                         
Corporate & Other
    5       2       (52 )     174       (52 )     (61 )     2,307              
Reconciliation and Eliminations
    (477 )           62       (61 )                              
                                                                         
Total from Continuing Operations
  $ 8,157     $ 990     $ (26 )   $ 525     $ 146       389       22,994       2,053       1,403  
                                                                         
Discontinued Operations (Note 3)
                                            43       685       4        
Cumulative Effect of Accounting Change
                                            1                    
                                                                         
Total
                                          $ 433     $ 23,679     $ 2,057     $ 1,403  
                                                                         
 
NOTE 21 — SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
Quarterly earnings per share may not total for the years, since quarterly computations are based on weighted average common shares outstanding during each quarter.
 

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DTE Energy Company
 
Notes to Consolidated Financial Statements — (Continued)
 
                                         
    First
    Second
    Third
    Fourth
       
    Quarter     Quarter(1)     Quarter     Quarter(2)     Year  
    (In millions, except per share amounts)  
 
2008
                                       
Operating Revenues
  $ 2,570     $ 2,251     $ 2,338     $ 2,170     $ 9,329  
Operating Income
  $ 429     $ 157     $ 375     $ 302     $ 1,263  
Net Income
                                       
From continuing operations
  $ 200     $ 28     $ 169     $ 129     $ 526  
Discontinued operations
    12             8             20  
                                         
Total
  $ 212     $ 28     $ 177     $ 129     $ 546  
                                         
Basic Earnings per Share
                                       
From continuing operations
  $ 1.23     $ .17     $ 1.04     $ .80     $ 3.24  
Discontinued operations
    .08             .05             .13  
                                         
Total
  $ 1.31     $ .17     $ 1.09     $ .80     $ 3.37  
                                         
Diluted Earnings per Share
                                       
From continuing operations
  $ 1.23     $ .17     $ 1.03     $ .80     $ 3.23  
Discontinued operations
    .07             .05             .13  
                                         
Total
  $ 1.30     $ .17     $ 1.08     $ .80     $ 3.36  
                                         
2007
                                       
Operating Revenues
  $ 2,462     $ 1,676     $ 2,127     $ 2,210     $ 8,475  
Operating Income
  $ 269     $ 721     $ 286     $ 329     $ 1,605  
Net Income (Loss)
                                       
From continuing operations
  $ 96     $ 348     $ 152     $ 191     $ 787  
Discontinued operations
    38       37       45       64       184  
                                         
Total
  $ 134     $ 385     $ 197     $ 255     $ 971  
                                         
Basic Earnings (Loss) per Share
                                       
From continuing operations
  $ .54     $ 2.00     $ .93     $ 1.17     $ 4.64  
Discontinued operations
    .22       .21       .27       .40       1.09  
                                         
Total
  $ .76     $ 2.21     $ 1.20     $ 1.57     $ 5.73  
                                         
Diluted Earnings (Loss) per Share
                                       
From continuing operations
  $ .54     $ 1.99     $ .92     $ 1.17     $ 4.62  
Discontinued operations
    .22       .21       .27       .39       1.08  
                                         
Total
  $ .76     $ 2.20     $ 1.19     $ 1.56     $ 5.70  
                                         
 
 
(1) In the second quarter of 2007, the Company recorded a $900 million ($580 million after-tax) gain on the Antrim sale transaction and $323 million ($210 million after-tax) of losses on hedge contracts associated with the Antrim sale. See Note 3.
 
(2) In the fourth quarter of 2007, the Company recorded adjustments that increased operating income by $20 million ($13 million after-tax) to correct prior amounts. These adjustments were primarily to record property, plant and equipment and deferred CTA costs at Detroit Edison for expenditures that had been expensed in earlier quarters of 2007.

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Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
Item 9A.    Controls and Procedures
 
See Item 8. Financial Statements and Supplementary Data for management’s evaluation of disclosure controls and procedures, its report on internal control over financial reporting, and its conclusion on changes in internal control over financial reporting.
 
Item 9B.    Other Information
 
Part III
 
Item 10.    Directors, Executive Officers and Corporate Governance
 
Item 11.    Executive Compensation
 
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
Item 13.    Certain Relationships and Related Transactions, and Director Independence
 
Item 14.    Principal Accountant Fees and Services
 
Other than the information provided under Executive Officers of DTE Energy in Part I, information required by Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K is incorporated by reference from DTE Energy’s definitive Proxy Statement for its 2009 Annual Meeting of Common Shareholders to be held April 30, 2009. The Proxy Statement will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report on Form 10-K, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K, except that the information required by Item 10 with respect to executive officers of the Registrant is included in Part I of this Report.
 
Part IV
 
Item 15.    Exhibits and Financial Statement Schedules
 
     
(a)
  The following documents are filed as part of this Annual Report on Form 10-K.
(1)
  Consolidated financial statements. See “Item 8 — Financial Statements and Supplementary Data.”
(2)
  Financial statement schedules. See “Item 8 — Financial Statements and Supplementary Data.”
(3)
  Exhibits.
    (i) Exhibits filed herewith.
4-252
  Ninth Supplemental Indenture, dated as of December 1, 2008 to Supplemental to Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., Trustee, establishing the Floating Rate Senior Notes, 2008 Series M due 2009.
4-253
  Forty-second Supplemental Indenture, dated as of December 1, 2008 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., Trustee establishing the 2008 Series M Collateral Bonds.
10-75
  DTE Energy Company Executive Supplemental Retirement Plan as Amended and Restated, effective as of January 1, 2005.
10-76
  DTE Energy Company Supplemental Retirement Plan as Amended and Restated, effective as of January 1, 2005.
10-77
  DTE Energy Company Supplemental Savings Plan as Amended and Restated, effective as of January 1, 2005.


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10-78
  DTE Energy Company Executive Deferred Compensation Plan as Amended and Restated, effective as of January 1, 2005.
10-79
  DTE Energy Company Plan for Deferring the Payment of Directors’ Fees as Amended and Restated, effective as of January 1, 2005.
10-80
  DTE Energy Company Deferred Stock Compensation Plan for Non-Employee Directors as Amended and Restated, effective January 1, 2005.
12-41
  Computation of Ratio of Earnings to Fixed Charges.
21-4
  Subsidiaries of the Company.
23-21
  Consent of Deloitte & Touche LLP.
31-45
  Chief Executive Officer Section 302 Form 10-K Certification of Periodic Report.
31-46
  Chief Financial Officer Section 302 Form 10-K Certification of Periodic Report.
99-48
  Twentieth Amendment, dated as of April 30, 2008, to Master Trust.
    (ii) Exhibits incorporated herein by reference.
3(a)
  Amended and Restated Articles of Incorporation of DTE Energy Company, dated December 13, 1995 (Exhibit 3-5 to Form 10-Q for the quarter ended September 30, 1997).
3(b)
  Certificate of Designation of Series A Junior Participating Preferred Stock of DTE Energy Company, dated September 23, 1997 (Exhibit 3-6 to Form 10-Q for the quarter ended September 30, 1997).
3(c)
  Bylaws of DTE Energy Company, as amended through February 24, 2005 (Exhibit 3.1 to Form 8-K dated February 24, 2005).
4(a)
  Amended and Restated Indenture, dated as of April 9, 2001, between DTE Energy Company and Bank of New York, as trustee (Exhibit 4.1 to Registration Statement on Form S-3 (File No. 333-58834)).
4(b)
  Supplemental Indenture, dated as of May 30, 2001, between DTE Energy Company and Bank of New York, as trustee (Exhibit 4-226 to Form 10-Q for the quarter ended June 30, 2001). (7.05% Senior Notes due 2011).
4(c)
  Supplemental Indenture, dated as of April 5, 2002 between DTE Energy Company and Bank of New York, as trustee (Exhibit 4-230 to Form 10-Q for the quarter ended March 31, 2002). (2002 Series A 6.65% Senior Notes due 2009).
4(d)
  Supplemental Indenture, dated as of April 1, 2003, between DTE Energy Company and Bank of New York, as trustee, creating 2003 Series A 6 3 / 8 % Senior Notes due 2033 (Exhibit 4(o) to Form 10-Q for the quarter ended March 31, 2003). (2003 Series A 6 3 / 8 % Senior Notes due 2033).
4(e)
  Supplemental Indenture, dated as of May 15, 2006, between DTE Energy Company and Bank of New York, as trustee (Exhibit 4-239 to Form 10-Q for the quarter ended June 30, 2006). (2006 Series B 6.35% Senior Notes due 2016).
4(f)
  Amended and Restated Trust Agreement of DTE Energy Trust I, dated as of January 15, 2002 (Exhibit 4-229 to Form 10-K for the year ended December 31, 2001).
4(g)
  Amended and Restated Trust Agreement of DTE Energy Trust II, dated as of June 1, 2004 (Exhibit 4(q) to Form 10-Q for the quarter ended June 30, 2004).
4(h)
  Trust Agreement of DTE Energy Trust III (Exhibit 4-21 to Registration Statement on Form S-3 (File No. 333-99955).
4(i)
  Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-1 to Detroit Edison’s Registration Statement on Form A-2 (File No. 2-1630)) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below:
    Supplemental Indenture, dated as of December 1, 1940, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-14 to Detroit Edison’s Registration Statement on Form A-2 (File No. 2-4609)). (amendment)
    Supplemental Indenture, dated as of September 1, 1947, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-20 to Detroit Edison’s Registration Statement on Form S-1 (File No. 2-7136)). (amendment)

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    Supplemental Indenture, dated as of March 1, 1950, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-22 to Detroit Edison’s Registration Statement on Form S-1 (File No. 2-8290)). (amendment)
    Supplemental Indenture, dated as of November 15, 1951, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit B-23 to Detroit Edison’s Registration Statement on Form S-1 (File No. 2-9226)). (amendment)
    Supplemental Indenture, dated as of August 15, 1957, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 3-B-30 to Detroit Edison’s Form 8-K dated September 11, 1957). (amendment)
    Supplemental Indenture, dated as of December 1, 1966, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 2-B-32 to Detroit Edison’s Registration Statement on Form S-9 (File No. 2-25664)). (amendment)
    Supplemental Indenture, dated as of February 15, 1990, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-212 to Detroit Edison’s Form 10-K for the year ended December 31, 2000). (1990 Series B, C, E and F)
    Supplemental Indenture, dated as of May 1, 1991, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-178 to Detroit Edison’s Form 10-K for the year ended December 31, 1996). (1991 Series BP and CP)
    Supplemental Indenture, dated as of May 15, 1991, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-179 to Detroit Edison’s Form 10-K for the year ended December 31, 1996). (1991 Series DP)
    Supplemental Indenture, dated as of February 29, 1992, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-187 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 1998). (1992 Series AP)
    Supplemental Indenture, dated as of April 26, 1993, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-215 to Detroit Edison’s Form 10-K for the year ended December 31, 2000). (amendment)
    Supplemental Indenture, dated as of June 30, 1993, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-216 to Detroit Edison’s Form 10-K for the year ended December 31, 2000). (1993 Series AP)
    Supplemental Indenture, dated as of August 1, 1999, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-204 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 1999). (1999 Series AP, BP and CP)
    Supplemental Indenture, dated as of August 1, 2000, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-210 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2000). (2000 Series BP)
    Supplemental Indenture, dated as of March 15, 2001, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-222 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 2001). (2001 Series AP)

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    Supplemental Indenture, dated as of May 1, 2001, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-226 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2001). (2001 Series BP)
    Supplemental Indenture, dated as of August 15, 2001, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-227 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2001). (2001 Series CP)
    Supplemental Indenture, dated as of September 15, 2001, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-228 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2001). (2001 Series D and E)
    Supplemental Indenture, dated as of September 17, 2002, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.1 to Detroit Edison’s Registration Statement on Form S-3 (File No. 333-100000)). (amendment and successor trustee)
    Supplemental Indenture, dated as of October 15, 2002, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-230 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2002). (2002 Series A and B)
    Supplemental Indenture, dated as of December 1, 2002, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-232 to Detroit Edison’s Form 10-K for the year ended December 31, 2002). (2002 Series C and D)
    Supplemental Indenture, dated as of August 1, 2003, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-235 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2003). (2003 Series A)
    Supplemental Indenture, dated as of March 15, 2004, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-238 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 2004). (2004 Series A and B)
    Supplemental Indenture, dated as of July 1, 2004, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-240 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2004). (2004 Series D)
    Supplemental Indenture, dated as of April 1, 2005, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.3 to Detroit Edison’s Registration Statement on Form S-4 (File No. 333-123926)). (2005 Series AR and BR)
    Supplemental Indenture, dated as of September 15, 2005, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.2 to Detroit Edison’s Form 8-K dated September 29, 2005). (2005 Series C)
    Supplemental Indenture, dated as of September 30, 2005, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-248 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2005). (2005 Series E)
    Supplemental Indenture, dated as of May 15, 2006, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-250 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2006). (2006 Series A)

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    Supplemental Indenture, dated as of December 1, 2007, to the Mortgage and Deed of Trust, dated as of October 1, 1924, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.2 to Detroit Edison’s Form 8-K dated December 18, 2007). (2007 Series A)
    Supplemental Indenture, dated as of April 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between the Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-251 to the Detroit Edison’s Form 10-Q for the quarter ended March 31, 2008). (2008 Series DT)
    Supplemental Indenture, dated as of May 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-253 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series ET)
    Supplemental Indenture, dated as of June 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-255 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series G)
    Supplemental Indenture, dated as of July 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-257 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series KT)
    Supplemental Indenture, dated as of October 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between The Detroit Edison Company and The Bank of New York Mellon Trust Company N.A. as successor trustee (Exhibit 4-259 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2008). (2008 Series J)
    Supplemental Indenture, dated as of December 1, 2008 to Mortgage and Deed of Trust dated as of October 1, 1924 between The Detroit Edison Company and The Bank of New York Mellon Trust Company N.A., as successor trustee (Exhibit 4-261 to Detroit Edison’s Form 10-K for the year ended December 31, 2008). (2008 Series LT)
4(j)
  Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-152 to Detroit Edison’s Registration Statement (File No. 33-50325)) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below:
    Ninth Supplemental Indenture, dated as of October 10, 2001, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-229 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2001). (6.125% Senior Notes due 2010)
    Tenth Supplemental Indenture, dated as of October 23, 2002, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-231 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2002). (5.20% Senior Notes due 2012 and 6.35% Senior Notes due 2032)
    Eleventh Supplemental Indenture, dated as of December 1, 2002, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-233 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 2003). (5.45% Senior Notes due 2032 and 5.25% Senior Notes due 2032)
    Twelfth Supplemental Indenture, dated as of August 1, 2003, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-236 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2003). (5 1 / 2 % Senior Notes due 2030)
    Thirteenth Supplemental Indenture, dated as of April 1, 2004, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-237 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 2004). (4.875% Senior Notes Due 2029 and 4.65% Senior Notes due 2028)

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    Fourteenth Supplemental Indenture, dated as of July 15, 2004, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-239 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2004). (2004 Series D 5.40% Senior Notes due 2014)
    Sixteenth Supplemental Indenture, dated as of April 1, 2005, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.1 to Detroit Edison’s Registration Statement on Form S-4 (File No. 333-123926)). (2005 Series AR 4.80% Senior Notes due 2015 and 2005 Series BR 5.45% Senior Notes due 2035)
    Eighteenth Supplemental Indenture, dated as of September 15, 2005, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.1 to Detroit Edison’s Form 8-K dated September 29, 2005). (2005 Series C 5.19% Senior Notes due October 1, 2023)
    Nineteenth Supplemental Indenture, dated as of September 30, 2005, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-247 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2005). (2005 Series E 5.70% Senior Notes due 2037)
    Twentieth Supplemental Indenture, dated as of May 15, 2006, to the Collateral Trust Indenture dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-249 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2006). (2006 Series A Senior Notes due 2036)
    Twenty-second Supplemental Indenture, dated as of December 1, 2007, to the Collateral Trust Indenture, dated as of June 30, 1993, between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4.1 to Detroit Edison’s Form 8-K dated December 18, 2007). (2007 Series A Senior Notes due 2038)
    Twenty-third Supplemental Indenture, dated as of April 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-252 to Detroit Edison’s Form 10-Q for the quarter ended March 31, 2008). (2008 Series DT Variable Rate Senior Notes due 2036)
    Twenty-fourth Supplemental Indenture, dated as of May 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-254 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series ET Variable Rate Senior Notes due 2029)
    Twenty-fifth Supplemental Indenture, dated as of June 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-256 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series G 5.60% Senior Notes due 2018)
    Twenty-sixth Supplemental Indenture, dated as of July 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-258 to Detroit Edison’s Form 10-Q for the quarter ended June 30, 2008). (2008 Series KT Variable Rate Senior Notes due 2020)
    Twenty-seventh Supplemental Indenture, dated as of October 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-260 to Detroit Edison’s Form 10-Q for the quarter ended September 30, 2008). (2008 Series J 6.40% Senior Notes due 2013)
    Twenty-eighth Supplemental Indenture, dated as of December 1, 2008 to the Collateral Trust Indenture, dated as of June 30, 1993 between The Detroit Edison Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee (Exhibit 4-262 to Detroit Edison’s Form 10-K for the year ended December 31, 2008). (2008 Series LT 6.75% Senior Notes due 2038)
4(k)
  Trust Agreement of Detroit Edison Trust I. (Exhibit 4.9 to Registration Statement on Form S-3 (File No. 333-100000))
4(l)
  Trust Agreement of Detroit Edison Trust II. (Exhibit 4.10 to Registration Statement on Form S-3 (File No. 333-100000))

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4(m)
  Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., as trustee, related to Senior Debt Securities (Exhibit 4-1 to Michigan Consolidated Gas Company Registration Statement on Form S-3 (File No. 333-63370)) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below:
    Fourth Supplemental Indenture dated as of February 15, 2003, to the Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-3 to Michigan Consolidated Gas Company Form 10-Q for the quarter ended March 31, 2003). (5.70% Senior Notes, 2003 Series A due 2033)
    Fifth Supplemental Indenture dated as of October 1, 2004, to the Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-6 to Michigan Consolidated Gas Company Form 10-Q for the quarter ended September 31, 2004). (5.00% Senior Notes, 2004 Series E due 2019)
    Sixth Supplemental Indenture dated as of April 1, 2008, to the Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-241 to Form 10-Q for the quarter ended March 31, 2008). (5.26% Senior Notes, 2008 Series ‘A’ due 2013, 6.04% Senior Notes, 2008 Series ‘B’ due 2018 and 6.44% Senior Notes, 2008 Series ‘C’ due 2023)
    Seventh Supplemental Indenture, dated as of June 1, 2008 to Supplement to Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-243 to Form 10-Q for the quarter ended June 30, 2008). (6.78% Senior Notes, 2008 Series F due 2028)
    Eighth Supplemental Indenture, dated as of August 1, 2008 to Supplemental to Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-251 to Form 10-Q for the quarter ended September 30, 2008). (5.94% Senior Notes, 2008 Series H due 2015 and 6.36% Senior Notes, 2008 Series I due 2020)
4(n)
  Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (Exhibit 7-D to Michigan Consolidated Gas Company Registration Statement No. 2-5252) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings set forth below:
    Twenty-ninth Supplemental Indenture dated as of July 15, 1989, among Michigan Consolidated Gas Company and Citibank, N.A. and Robert T. Kirchner, as trustees, creating an issue of first mortgage bonds and providing for the modification and restatement of the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (Exhibit 4-2 to Michigan Consolidated Gas Company Registration Statement on Form S-3 (File No. 333-63370))
    Thirty-second Supplemental Indenture dated as of January 5, 1993 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-1 to Michigan Consolidated Gas Company Form 10-K for the year ended December 31, 1992). (First Mortgage Bonds Designated Secured Term Notes, Series B)
    Thirty-third Supplemental Indenture dated as of May 1, 1995 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-2 to Michigan Consolidated Gas Company Registration Statement on Form S-3 (File No. 33-59093)). (First Mortgage Bonds Designated Secured Medium Term Notes, Series B)
    Thirty-fourth Supplemental Indenture dated as of November 1, 1996 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-2 to Michigan Consolidated Gas Company Registration Statement on Form S-3 (File No. 333-16285)). (First Mortgage Bonds Designated Secured Medium Term Notes, Series C)
    Thirty-fifth Supplemental Indenture dated as of June 18, 1998 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee, creating an issue of first mortgage bonds designated as collateral bonds (Exhibit 4-2 to Michigan Consolidated Gas Company Form 8-K dated June 18, 1998)
    Thirty-seventh Supplemental Indenture dated as of February 15, 2003 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-4 to Michigan Consolidated Gas Company Form 10-Q for the quarter ended March 31, 2003). (5.70% collateral bonds due 2033)

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    Thirty-eighth Supplemental Indenture dated as of October 1, 2004 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-5 to Michigan Consolidated Gas Company Form 10-Q for the quarter ended September 31, 2004). (2004 Series E collateral bonds)
    Thirty-ninth Supplemental Indenture, dated as of April 1, 2008 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-240 to Form 10-Q for the quarter ended March 31, 2008). (2008 Series A, B and C Collateral Bonds)
    Fortieth Supplemental Indenture, dated as of June 1, 2008 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-242 to Form 10-Q for the quarter ended June 30, 2008). (2008 Series F Collateral Bonds)
    Forty-first Supplemental Indenture, dated as of August 1, 2008 to Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A., trustee (Exhibit 4-250 to Form 10-Q for the quarter ended September 30, 2008). (2008 Series H and I Collateral Bonds)
10(a)
  Form of Indemnification Agreement between DTE Energy Company and each of Anthony F. Earley, Jr., Gerard M. Anderson, Robert J. Buckler, David E. Meador, Gerardo Norcia, Bruce D. Peterson, and non-employee Directors. (Exhibit 10-1 to Form 8-K dated December 6, 2007).
10(b)
  Certain arrangements pertaining to the employment of Anthony F. Earley, Jr. with The Detroit Edison Company, dated April 25, 1994 (Exhibit 10-53 to The Detroit Edison Company’s Form 10-Q for the quarter ended March 31, 1994).
10(c)
  Certain arrangements pertaining to the employment of Gerard M. Anderson with The Detroit Edison Company, dated October 6, 1993 (Exhibit 10-48 to The Detroit Edison Company’s Form 10-K for the year ended December 31, 1993).
10(d)
  Certain arrangements pertaining to the employment of David E. Meador with The Detroit Edison Company, dated January 14, 1997 (Exhibit 10-5 to Form 10-K for the year ended December 31, 1996).
10(e)
  Certain arrangements pertaining to the employment of Bruce D. Peterson, dated May 22, 2002 (Exhibit 10-48 to Form 10-Q for the quarter ended June 30, 2002).
10(f)
  Termination and Consulting Agreement, dated as of October 4, 1999, among DTE Energy Company, MCN Energy Group Inc., DTE Enterprises Inc. and A.R. Glancy, III (Exhibit 10-41 to Form 10-K for the year ended December 31, 2001).
10(g)
  Amended and Restated Post-Employment Income Agreement, dated March 23, 1998, between The Detroit Edison Company and Anthony F. Earley, Jr. (Exhibit 10-21 to Form 10-Q for the quarter ended March 31, 1998).
10(h)
  DTE Energy Company Annual Incentive Plan (Exhibit 10-44 to Form 10-Q for the quarter ended March 31, 2001).
10(i)
  DTE Energy Company 2001 Stock Incentive Plan (Exhibit 10-43 to Form 10-Q for the quarter ended March 31, 2001).
10(j)
  DTE Energy Company 2006 Long-Term Incentive Plan (Annex A to DTE Energy’s Definitive Proxy Statement dated March 24, 2006).
10(k)
  First Amendment, dated February 8, 2007 to the DTE Energy Company 2006 Long-Term Incentive Plan. (Exhibit 10-73 to Form 10-K for the year ended December 31, 2007).
10(l)
  Second Amendment, dated March 8, 2007 to the DTE Energy Company 2006 Long-Term Incentive Plan. (Exhibit 10-74 to Form 10-K for the year ended December 31, 2007).
10(m)
  DTE Energy Company Retirement Plan for Non-Employee Directors’ Fees (as amended and restated effective as of December 31, 1998) (Exhibit 10-31 to Form 10-K for the year ended December 31, 1998).
10(n)
  The Detroit Edison Company Supplemental Long-Term Disability Plan, dated January 27, 1997 (Exhibit 10-4 to Form 10-K for the year ended December 31, 1996).
10(o)
  Description of Executive Life Insurance Plan (Exhibit 10-47 to Form 10-Q for the quarter ended June 30, 2002).
10(p)
  Executive Vehicle Plan of The Detroit Edison Company, dated as of September 1, 1999 (Exhibit 10-41 to Form 10-Q for the quarter ended March 31, 2001).

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10(q)
  DTE Energy Affiliates Nonqualified Plans Master Trust, effective as of May 1, 2003 (Exhibit 10-49 to Form 10-Q for the quarter ended March 31, 2003).
10(r)
  Form of DTE Energy Five-Year Credit Agreement, dated as of October 17, 2005, by and among DTE Energy, the lenders party thereto, Citibank, N.A., as Administrative Agent, and Barclays Bank PLC and JPMorgan Chase Bank, N. A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated October 17, 2005).
10(s)
  Form of Amendment No. 1 to The Detroit Edison Company’s Five-Year Credit Agreement, dated as of January 10, 2007, by and among The Detroit Edison Company, the lenders party thereto, Barclays Bank PLC, as Administrative Agent, and Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated January 10, 2007).
10(t)
  Amendment No. 1 to Five-Year Credit Agreement, dated as of January 10, 2007, by and among, DTE Energy Company, the lenders party thereto, Citibank, N.A., as Administrative Agent, and Barclays Bank PLC and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated January 10, 2007).
10(u)
  Form of Second Amended and Restated Five-Year Credit Agreement, dated as of October 17, 2005, by and among DTE Energy, the lenders party thereto, Citibank, N.A., as Administrative Agent, and Barclays Bank PLC and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated October 17, 2005).
10(v)
  Amendment No. 1 to Second Amended and Restated Five-Year Credit Agreement, dated as of January 10, 2007 by and among DTE Energy Company, the lenders party thereto, and Citibank, N.A., as Administrative Agent and Barclays Bank PLC and JP Morgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated January 10, 2007).
10(w)
  Form of Director Restricted Stock Agreement (Exhibit 10.1 to Form 8-K dated June 23, 2005).
10(x)
  Form of Director Restricted Stock Agreement pursuant to the DTE Energy Company Long-Term Incentive Plan (Exhibit 10.1 to Form 8-K dated June 29, 2006).
10(y)
  Form of Change-in-Control Severance Agreement, dated as of November 8, 2007, between DTE Energy Company and each of Anthony F Earley, Jr., Gerard M. Anderson, Robert J. Buckler, David E. Meador, Gerardo Norcia and Bruce D. Peterson (Exhibit 10-71 to Form 10-Q for the quarter ended September 30, 2007).
10(z)
  Form of The Detroit Edison Company’s Five-Year Credit Agreement, dated as of October 17, 2005, by and among The Detroit Edison Company, the lenders party thereto, Barclays Bank PLC, as Administrative Agent, and Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated October 17, 2005).
10(aa)
  Form of Second Amended and Restated Five-Year Credit Agreement, dated as of October 17, 2005, by and among The Detroit Edison Company, the lenders party thereto, Barclays Bank PLC, as Administrative Agent, and Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated October 17, 2005).
10(bb)
  Form of Amendment No. 1 to Second Amended and Restated Five-Year Credit Agreement dated as of January 10, 2007, by and among The Detroit Edison Company, the lenders party thereto, Barclays Bank PLC, as Administrative Agent, and Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated January 10, 2007).
10(cc)
  Form of Second Amended and Restated Five-Year Credit Agreement dated as of October 17, 2005, by and among Michigan Consolidated Gas Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Barclays Bank PLC and Citibank, N.A. as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated October 17, 2005).
10(dd)
  Form of Amendment No. 1 to Five-Year Credit Agreement dated as of January 10, 2007, by and among Michigan Consolidated Gas Company, the lenders party thereto, JPMorgan Chase Bank, N. A., as Administrative Agent, and Barclays Bank PLC and Citibank, N.A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated January 10, 2007).
10(ff)
  Form of Five-Year Credit Agreement dated as of October 17, 2005, by and among Michigan Consolidated Gas Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Barclays Bank PLC and Citibank, N.A., as Co-Syndication Agents (Exhibit 10.1 to Form 8-K dated October 17, 2005).

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10(ee)
  Form of Amendment No. 1 to Second Amended and Restated Five-Year Credit Arrangement dated as of January 10, 2007, by and among Michigan Consolidated Gas Company, the lenders party thereto JPMorgan Chase Bank, N.A., as Administrative Agent, and Barclays Bank PLC and Citibank, N.A., as Co-Syndication Agents (Exhibit 10.2 to Form 8-K dated January 10, 2007).
99(a)
  Master Trust Agreement (“Master Trust”), dated as of June 30, 1994, between DTE Energy Company, as successor, and Fidelity Management Trust Company relating to the Savings and Investment Plans (Exhibit 4-167 to Form 10-Q for the quarter ended June 30, 1994).
99(b)
  First Amendment, dated as of February 1, 1995, to Master Trust (Exhibit 4-10 to Registration No. 333-00023).
99(c)
  Second Amendment, dated as of February 1, 1995, to Master Trust (Exhibit 4-11 to Registration No. 333-00023).
99(d)
  Third Amendment, effective January 1, 1996, to Master Trust (Exhibit 4-12 to Registration No. 333-00023).
99(e)
  Fourth Amendment, dated as of August 1, 1996, to Master Trust (Exhibit 4-185 to Form 10-K for the year ended December 31, 1997).
99(f)
  Fifth Amendment, dated as of January 1, 1998, to Master Trust (Exhibit 4-186 to Form 10-K for the year ended December 31, 1997).
99(g)
  Sixth Amendment, dated as of September 1, 1998, to Master Trust (Exhibit 99-15 to Form 10-K for the year ended December 31, 2004).
99(h)
  Seventh Amendment, dated as of December 15, 1999, to Master Trust (Exhibit 99-16 to Form 10-K for the year ended December 31, 2004).
99(i)
  Eighth Amendment, dated as of February 1, 2000, to Master Trust (Exhibit 99-17 to Form 10-K for the year ended December 31, 2004).
99(j)
  Ninth Amendment, dated as of April 1, 2000, to Master Trust (Exhibit 99-18 to Form 10-K for the year ended December 31, 2004).
99(k)
  Tenth Amendment, dated as of May 1, 2000, to Master Trust (Exhibit 99-19 to Form 10-K for the year ended December 31, 2004).
99(l)
  Eleventh Amendment, dated as of July 1, 2000, to Master Trust (Exhibit 99-20 to Form 10-K for the year ended December 31, 2004).
99(m)
  Twelfth Amendment, dated as of August 1, 2000, to Master Trust (Exhibit 99-21 to Form 10-K for the year ended December 31, 2004).
99(n)
  Thirteenth Amendment, dated as of December 21, 2001, to Master Trust (Exhibit 99-22 to Form 10-K for the year ended December 31, 2004).
99(o)
  Fourteenth Amendment, dated as of March 1, 2002, to Master Trust (Exhibit 99-23 to Form 10-K for the year ended December 31, 2004).
99(p)
  Fifteenth Amendment, dated as of January 1, 2002, to Master Trust (Exhibit 99-24 to Form 10-K for the year ended December 31, 2004).
99(q)
  Sixteenth Amendment, to Master Trust, dated as of July 30, 2004, to Master Trust (Exhibit 99-25 to Form 10-K for the year ended December 31, 2007).
99(r)
  Eighteenth Amendment, dated as of June 1, 2006, to Master Trust (Exhibit 99-26 to Form 10-K for the year ended December 31, 2007).
99(s)
  Nineteenth Amendment, dated as of July 31, 2007, to Master Trust (Exhibit 99-27 to Form 10-K for the year ended December 31, 2007).
    (iii) Exhibits furnished herewith:
32-45
  Chief Executive Officer Section 906 Form 10-K Certification of Periodic Report.
32-46
  Chief Financial Officer Section 906 Form 10-K Certification of Periodic Report.

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DTE Energy Company
Schedule II — Valuation and Qualifying Accounts
 
                         
    Year Ending December 31,  
    2008     2007     2006  
    (In millions)  
 
Allowance for Doubtful Accounts (shown as deduction from Accounts Receivable in the Consolidated Statement of Financial Position)
                       
Balance at Beginning of Period
  $ 182     $ 170     $ 136  
Additions:
                       
Charged to costs and expenses
    198       133       120  
Charged to other accounts(1)
    18       12       7  
Deductions(2)
    (133 )     (133 )     (93 )
                         
Balance at End of Period
  $ 265     $ 182     $ 170  
                         
 
 
(1) Collection of accounts previously written off and balances previously held for sale of $4 million.
 
(2) Uncollectible accounts written off.
 
                         
    Year Ending December 31,  
    2008     2007     2006  
    (In millions)  
 
Note Receivable Reserve
                       
Balance at Beginning of Period
  $ 4     $ 65     $  
Additions:
                       
Charged to costs and expenses — shown as deduction in the Consolidated Statement of Financial Position from:
                       
Other Current Assets
                50  
Notes Receivable
                15  
Deductions
    (4 )     (61 )      
                         
Balance at End of Period
  $     $ 4     $ 65  
                         


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Signatures
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: February 27, 2009
DTE ENERGY COMPANY
(Registrant)
 
  By 
/s/   ANTHONY F. EARLEY, JR.
Anthony F. Earley, Jr.
Chairman of the Board and
Chief Executive Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
 
 
     
     
By  
/s/   ANTHONY F. EARLEY, JR.

Anthony F. Earley, Jr.
Chairman of the Board and
Chief Executive Officer
     
By  
/s/   PETER B. OLEKSIAK

Peter B. Oleksiak
Vice President and Controller, and
Chief Accounting Officer
     
By  
/s/   LILLIAN BAUDER

Lillian Bauder, Director
     
By  
/s/   W. FRANK FOUNTAIN, JR.

W. Frank Fountain, Jr., Director
     
By  
/s/   ALLAN D. GILMOUR

Allan D. Gilmour, Director
     
By  
/s/   ALFRED R. GLANCY III

Alfred R. Glancy III, Director
     
By  
/s/   FRANK M. HENNESSEY

Frank M. Hennessey, Director
     
     
By  
/s/   JOHN E. LOBBIA

John E. Lobbia, Director
     
By  
/s/   GAIL J. McGOVERN

Gail J. McGovern, Director
     
By  
/s/   EUGENE A. MILLER

Eugene A. Miller, Director
     
By  
/s/   ALLAN D. GILMOUR

Allan D. Gilmour, Director
     
By  
/s/   CHARLES W. PRYOR, JR.

Charles W. Pryor, Jr., Director
     
By  
/s/   ALFRED R. GLANCY III

Alfred R. Glancy III, Director
     
By  
/s/   JOSUE ROBLES, JR.

Josue Robles, Jr., Director
     
By  
/s/   RUTH G. SHAW

Ruth G. Shaw, Director
     
By  
/s/   JAMES H. VANDENBERGHE

James H. Vandenberghe, Director

 
Date: February 27, 2009


155

EXHIBIT 4-252
     
 
NINTH SUPPLEMENTAL INDENTURE
FROM
MICHIGAN CONSOLIDATED GAS COMPANY
TO
CITIBANK, N.A.
TRUSTEE
 
Dated as of December 1, 2008
SUPPLEMENT TO INDENTURE
Dated as of December 1, 1998
Providing for
Floating Rate Senior Notes, 2008 Series M due 2009
     
 

 


 

     This NINTH SUPPLEMENTAL INDENTURE is made as of the 1st day of December, 2008, by and between MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under the laws of the State of Michigan (the “Company”), and CITIBANK, N.A., a national banking association incorporated and existing under and by virtue of the laws of the United States of America, as trustee (the “Trustee”).
RECITALS OF THE COMPANY:
     WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of June 1, 1998 (the “Original Indenture”), as amended, supplemented and modified (as so amended, supplemented and modified, the “Indenture”), providing for the issuance by the Company from time to time of its senior debt securities (the “Securities”); and
     WHEREAS, the Company desires to provide for the issuance of a series of its Securities pursuant to the Indenture; and
      WHEREAS , the Company, in the exercise of the power and authority conferred upon and reserved to it under the provisions of the Original Indenture, including Section 10.1 thereof, and pursuant to appropriate resolutions of the Board of Directors, has duly determined to make, execute and deliver to the Trustee this Supplemental Indenture to the Original Indenture as permitted by Section 2.1 and Section 3.1 of the Original Indenture in order to establish the form or terms of, and to provide for the creation and issue of a series of its Securities under the Original Indenture, which shall be known as the “Floating Rate Senior Notes, 2008 Series M due 2009”; and
      WHEREAS , all things necessary to make such Securities, when executed by the Company and authenticated and delivered by the Trustee or any Authenticating Agent and issued upon the terms and subject to the conditions hereinafter and in the Original Indenture set forth against payment therefor, the valid, binding and legal obligations of the Company and to make this Supplemental Indenture a valid, binding and legal agreement of the Company, have been done;
      NOW, THEREFORE, in order to establish the terms of a series of Securities, and for and in consideration of the premises and of the covenants contained in the Original Indenture and in this Supplemental Indenture and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, it is mutually covenanted and agreed as follows:
Article I
RELATION TO INDENTURE; DEFINITIONS
     Section 1.01.
     This Supplemental Indenture constitutes an integral part of the Indenture.
     Section 1.02.

2


 

     For all purposes of this Supplemental Indenture:
     (a) Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Indenture;
     (b) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture; and
     (c) The terms “hereof,” “herein,” “hereby,” “hereto,” “hereunder,” and “herewith” refer to this Supplemental Indenture.
     (d) The following terms shall have the meaning set forth below:
     “Closing” means December 18, 2008.
     “Institutional Investor” has the meaning set forth in the Purchase Agreement.“
     “Original Issue Date” means December 18, 2008.
“Purchase Agreement” means the Note Purchase Agreement dated as of December 18, 2008, among the Company and the initial purchasers named therein.
     “Restricted Securities Legend” means the legend set forth in Section 2.03(b) herein.
     “Securities Act” means the Securities Act of 1933, as amended.
Article II
THE SECURITIES
     Section 2.01. Title of the Securities; Stated Maturity.
     This Supplemental Indenture hereby establishes a series of Securities, known as and entitled “Floating Rate Senior Notes, 2008 Series M due 2009” (the “Senior Notes”). The aggregate principal amount of the Senior Notes shall be limited initially to Twenty million Dollars ($20,000,000)(except, in each case, for Senior Notes authenticated and delivered upon transfer of, or in exchange for, or in lieu of, other Senior Notes).
     The Senior Notes issued on the Original Issue Date will be sold by the Company pursuant to the Purchase Agreement.
     The Senior Notes are not subject to repayment at the option of Holders thereof and are not subject to any sinking fund or other redemption prior to the Stated Maturity.

3


 

     The Senior Notes shall have such other terms and provisions as are set forth in the form of the Senior Notes attached hereto as Appendix I (which is incorporated by reference in and made a part of this Supplemental Indenture as if set forth in full at this place).
     Section 2.02. Amount and Denominations
     The Senior Notes shall be issuable only in fully registered form and, as permitted by Section 3.1 and Section 3.2 of the Original Indenture, in denominations of $1,000 and integral multiples thereof.
     Section 2.03. Transfer and Exchange.
     (a) Transfer and Exchange of Definitive Securities. When Securities evidencing the Senior Notes are presented to the Security Registrar with a request:
     (i) to register the transfer of such Securities; or
     (ii) to exchange such Securities for Securities of the same series of any authorized denominations of the same aggregate principal amount and Stated Maturity, the Security Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Securities surrendered for transfer or exchange:
     (A) shall be duly endorsed or be accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and
     (B) are accompanied by the following additional information and documents, as applicable:
     (x) if such Securities are being delivered to the Security Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Transfer Restricted Security); or
     (y) if such Securities are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Transfer Restricted Security); or
     (z) if such Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (i) a certification to that effect (in the form set forth on the reverse side of the Transfer Restricted Security) and (ii) if the Company so

4


 

requests, other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.03(b).
     (b) Legends for Securities. Each Security certificate evidencing the Senior Notes (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):
     THE SENIOR NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Article III
DELIVERY AND TRANSFER OF 2008 SERIES M COLLATERAL BONDS
     The Company hereby delivers and transfers to the Trustee in connection with the issuance of the Senior Notes, Twenty million Dollars ($20,000,000) aggregate principal amount of a related issue of Collateral Bonds of the Company designated “2008 Series M Collateral Bonds” (the ““Series M Bonds” and, together with all other First Mortgage Bonds issued under the First Mortgage Indenture as security for Securities issued under the Indenture, “Collateral Bonds”), which has been fully registered in the name of the Trustee in such capacity, to be held in trust for the benefit of the Holders from time to time of the Senior Notes as security for any and all obligations of the Company in respect of the Senior Notes under the Indenture, this Supplemental Indenture and the Senior Notes, including but not limited to (1) the full and prompt payment of the interest on and principal of, and LIBOR Breakage Amount, if any, on the Senior Notes when and as the same shall become due and payable in accordance with the terms and provisions of the Indenture and this Supplemental Indenture and the Senior Notes, either at the Stated Maturity or upon acceleration of the maturity of the Senior Notes, and (2) the full and prompt payment of any interest on the Senior Notes when and as the same shall become due and payable in accordance with the terms and provisions of the Indenture and this Supplemental Indenture and the Senior Notes. The Trustee shall enforce all of its rights under the First Mortgage Indenture as a holder of the Series M Bonds transferred to it as provided in this Article III for the benefit of the Holders of the Senior Notes and the proceeds of the enforcement of such rights shall be applied by the Trustee to satisfy the Company’s obligations under the Indenture, this Supplemental Indenture and the Senior Notes. The Series M Bonds are the “Related Issue of Collateral Bonds” with respect to the Senior Notes within the meaning of the Indenture.

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     The Company shall make payments of the principal of, and LIBOR Breakage Amount or interest on, the Series M Bonds to the Trustee, which payments shall be applied by the Trustee in satisfaction of all obligations then due on the Senior Notes.
     The Series M Bonds shall not be sold or transferred by the Trustee until the earlier of the Release Date or the prior retirement of the Senior Notes through repurchase or otherwise. The “Release Date” shall be the date that all First Mortgage Bonds of the Company issued and outstanding under the First Mortgage Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise, provided that no Default or Event of Default has occurred and, at such time, is continuing under the Indenture.
Article IV
COVENANTS
     Section 4.01. Limitation on Liens
     The covenant set forth in Section 11.10 of the Original Indenture shall apply to the Senior Notes only from and after the Release Date (unless Substituted Collateral Bonds are issued to secure the Senior Notes from and after the Release Date in which case such covenant shall not apply); provided, that, in any case, the Company may issue, assume or guarantee Indebtedness secured by a Lien not otherwise permitted under Section 11.10 so long as it effectively secures the Senior Notes equally and ratably with such Indebtedness.
     Section 4.02. Limitation on Sale and Leaseback Transactions
     The covenant set forth in Section 11.11 of the Original Indenture shall apply to the Senior Notes only from and after the Release Date (unless Substituted Collateral Bonds are issued to secure the Senior Notes from and after the Release Date in which case such covenant shall not apply).
     Section 4.03. Substituted Collateral Bonds
     The Company covenants and agrees that:
     (a) It shall notify the Trustee not less than 90 days prior to the anticipated Release Date that on the Release Date the Company will cause Substituted Collateral Bonds and an associated supplemental indenture to be delivered to the Trustee in accordance with Section 4.9 of the Original Indenture as security for the Securities issued under the Indenture.
     (b) On or prior to the Release Date,

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         (i) the Company shall have delivered to the Trustee as security for the Securities then Outstanding under the Indenture, including the Senior Notes, Substituted Collateral Bonds complying with the provisions of Section 4.9 of the Original Indenture, such Substituted Collateral Bonds being issued
     (A) in an aggregate principal amount at least equal to the aggregate principal amount of Securities then Outstanding under the Indenture, and
     (B) in series corresponding to the Series of Securities then Outstanding under the Indenture, and each such series of Substituted Collateral Bonds shall be issued (1) in an aggregate principal amount equal to the aggregate principal amount of the corresponding series of Securities then Outstanding, (2) bearing interest at a rate equal to the interest rate borne by the corresponding series of Securities, (3) having interest payment dates that are the same as the Interest Payment Dates of the corresponding series of Securities, (4) with a stated maturity that is the same as the Stated Maturity of the corresponding series of Securities, (5) containing the same redemption and LIBOR Breakage Amount and other payment provisions as the corresponding series of Securities and provisions providing for the mandatory redemption thereof upon an acceleration of the maturity of any Outstanding Securities of the corresponding series following an Event of Default, and (6) meeting the other requirements of Section 4.9 of the Original Indenture; it being expressly understood that each such series of Substituted Collateral Bonds shall be held by the Trustee for the benefit of the Holders of the corresponding series of Securities from time to time Outstanding subject to such terms and conditions relating to surrender to the Company, transfer restrictions, voting, application of payments of principal and interest and other matters as shall be set forth in an indenture supplemental hereto specifically providing for the delivery to the Trustee of such Substituted Collateral Bonds;
     (ii) such Substituted Collateral Bonds shall have been issued under and shall be secured by a Substituted Mortgage Indenture
  (A)   on which the Company shall be the obligor, and
 
  (B)   which shall be qualified, or shall meet the requirements for qualification, under the Trust Indenture Act;
     (iii) the Company shall have delivered to the Trustee:
      (A) an indenture supplemental hereto providing for the delivery to the Trustee of Substituted Collateral Bonds in accordance with Section 4.9 of the Original Indenture and Section 4.03(b)(i) above, together with such Substituted Collateral Bonds;
      (B) an Officer’s Certificate (1) stating that, to the knowledge of the signer, (A) no Event of Default has occurred and is continuing and (B) no event has occurred and is continuing which entitles the secured party under the Substituted Mortgage Indenture to accelerate the maturity of the indebtedness outstanding thereunder

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and (2) stating the aggregate principal amount of indebtedness issuable, and then proposed to be issued, under and secured by the lien of the Substituted Mortgage Indenture; and
     (C) an Opinion of Counsel to the effect that such Substituted Collateral Bonds have been duly issued under such Substituted Mortgage Indenture and constitute valid obligations, entitled to the benefit of the lien of the Substituted Mortgage Indenture equally and ratably with all other indebtedness then outstanding secured by such lien; and
     (iv) the Company shall have been advised in writing, within not more than 30 days prior to such substitution of the Substituted Collateral Bonds for the Collateral Bonds, by at least two credit rating agencies qualifying as “nationally recognized statistical rating organizations” (as defined by the Securities Exchange Act of 1934, as amended) then maintaining a securities rating on the Senior Notes that the substitution of such Substituted Collateral Bonds for the Collateral Bonds will not result in a reduction of the securities rating assigned to the Senior Notes by that credit rating agency immediately prior to the substitution or the suspension or withdrawal of its rating and the Company shall have provided the Trustee with written evidence of such advice; provided that, in the event such Senior Notes are not rated by at least two such credit rating agencies as described above immediately prior to any proposed substitution, the Company shall cause the Senior Notes to be so rated prior to such substitution (and without giving effect to any substitution) by at least two such credit rating agencies described above.
     (c) in the event that the Company cannot obtain assurance of at least two credit rating agencies as described in Section 4.03(b)(iv) above, the Company will take such actions as are necessary to cause the Release Date not to occur.
     (d) Notwithstanding any other provision of the Indenture, including Section 4.9(d) of the Original Indenture, the requirements of this Section 4.03 shall constitute covenants, agreements and obligations of the Company under the Indenture.
     Section 4.04. Additional Event of Default.
     Failure by the Company to deliver Substituted Mortgage Bonds in accordance with the provisions of Section 4.03 of this Supplemental Indenture and Section 4.9 of the Original Indenture on or prior to the Release Date shall be an “Event of Default” with respect to the Senior Notes as contemplated by Section 6.1(9) of the Original Indenture.
Article V
MISCELLANEOUS
     Section 5.01. Limitation of Trustee Liability
     The Trustee has accepted the amendment of the Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities

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of the Trustee, and without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect of any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Company, or for or with respect to (a) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (b) the proper authorization hereof by the Company by corporate action or otherwise, and (c) the due execution hereof by the Company.
     Section 5.02. Applicable Law
     This Supplemental Indenture and the Senior Notes shall be construed in connection with and as a part of the Indenture and shall be governed by the laws (other than the choice of law provisions) of the State of New York.
     Section 5.03. Survivability of Certain Provisions
     (a) If any provision of this Supplemental Indenture conflicts with another provision of the Indenture required to be included in indentures qualified under the Trust Indenture Act of 1939, as amended (as enacted prior to the date of this Supplemental Indenture), by any of the provisions of Section 310 to 317, inclusive, of said act, such required provision shall control.
     (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the Senior Notes issued hereunder should be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby.
     Section 5.04. Successors and Assigns
     Whenever in this Supplemental Indenture either of the parties hereto is named or referred to, such name or reference shall be deemed to include the successors or assigns of such party, and all the covenants and agreements contained in this Supplemental Indenture by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not.
     Section 5.05. Counterpart Signatures and Descriptive Headings
     (a) This Supplemental Indenture may be simultaneously executed in several counterparts, and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.
     (b) The descriptive headings of the several Articles of this Supplemental Indenture were formulated, used and inserted in this Supplemental Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

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     IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this Supplemental Indenture to be executed by its duly authorized Officer and its corporate seal to be hereunto affixed, and CITIBANK, N.A., as Trustee as aforesaid, has caused this Supplemental Indenture to be executed by one of its authorized signatories, as of December 1, 2008.
             
    MICHIGAN CONSOLIDATED GAS COMPANY    
 
           
[Corporate Seal]
  By:   /s/ Edward J. Solomon
 
Edward J. Solomon
   
 
      Assistant Treasurer    
 
           
    CITIBANK, N.A., as Trustee    
 
           
 
  By:   /s/ Wafaa M. Orfy    
 
           
 
      Wafaa M. Orfy    
 
      Vice President    

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PPN:                     
  APPENDIX I
 
   
No.R-                     
  $                     
     THE SENIOR NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
MICHIGAN CONSOLIDATED GAS COMPANY
Floating Rate Senior Notes
2008 Series M due 2009
Principal Amount: $                     
Authorized Denomination: $1,000
Regular Record Date: close of business on the 15 th calendar day (whether or not a Business Day) prior to the relevant Interest Payment Date
Original Issue Date: December 18, 2008
Stated Maturity: September 18, 2009
Interest Payment Dates: January 18, 2009, February 18, 2009, March 18, 2009, April 18, 2009, May 18, 2009, June 18, 2009, July 18, 2009, August 18, 2009 and September 18, 2009.
Interest Rate: Adjusted LIBOR Rate (as defined below)
     MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under the laws of the State of Michigan (the “Company”, which term includes any successor corporation under the Senior Indenture hereinafter referred to), for value received, hereby promises to pay to                                           or registered assigns, at the office or agency of the Company in the City of New York, New York, the principal sum of                                           MILLION DOLLARS ($ ) on September 18, 2009 (the “Stated Maturity”), in the coin or currency of the United States, and to pay interest thereon from the Original Issue Date shown above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, in arrears on each Interest Payment Date as specified above, commencing on

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January 18, 2009 and on the Stated Maturity at the floating rates equal to the Adjusted LIBOR Rate (as defined below) in effect from time to time until the principal hereof is paid or made available for payment and on any overdue principal and LIBOR Breakage Amount and on any overdue installment of interest at the Adjusted LIBOR Rate until paid. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Senior Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date as specified above next preceding such Interest Payment Date; provided that any interest payable at Stated Maturity will be paid to the Person to whom principal is payable. Except as otherwise provided in the Senior Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Senior Note is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Senior Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the Securities of this series shall be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Senior Indenture.
     “Adjusted LIBOR Rate” shall be equal to 4.38375% for the initial period, and for each subsequent Interest Period shall be the rate per annum equal to LIBOR for such Interest Period plus 3.50%. For purposes of determining Adjusted LIBOR Rate, the following terms have the following meanings:
     “LIBOR” means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a 1-month period that appears on the Bloomberg Financial Markets Service Page BBAM-1 (or if such page is not available, the Reuters Screen LIBO Page) as of 11:00 a.m. (London, England time) on the date two Business Days before the commencement of such Interest Period.
     “Reuters Screen LIBO Page” means the display designated as the “LIBO” page on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service) or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits.
      Determination of the Adjusted LIBOR Rate . The Adjusted LIBOR Rate shall be determined by the Company, and notice thereof shall be given to the holders of the Senior Notes, two Business Days before the beginning of each Interest Period, together with (i) a copy of the relevant screen used for the determination of LIBOR, (ii) a calculation of the Adjusted LIBOR Rate for such Interest Period, (iii) the number of days in such Interest Period, (iv) the date on which interest for such Interest Period will be paid and (v) the amount of interest to be paid to each holder of Senior Notes on such date. If the holders of a majority in principal amount of the Senior Notes outstanding do not concur with such determination by the Company, as evidenced by a single written

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notice delivered to the Company within 10 Business Days after receipt by such holders of the notice delivered by the Company pursuant to the immediately preceding sentence, the determination of the Adjusted LIBOR Rate shall be made by such holders of the Senior Notes, and any such determination made in accordance with the provisions of this Senior Note shall be conclusive and binding absent manifest error.
     “Interest Period” means the period commencing on an interest payment date or on the date of Closing in the case of the first such period, and continuing up to, but not including, the next interest payment date. The interest payment dates for the Senior Notes are January 18, 2009, February 18, 2009, March 18, 2009, April 18, 2009, May 18, 2009, June 18, 2009, July 18, 2009, August 18, 2009 and September 18, 2009.
     All percentages resulting from any calculation of the interest rate with respect to the Notes will be rounded, if necessary to the nearest one-hundred thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards, and all dollar amounts in or resulting from any such calculation will be rounded to the nearest cent (with one-half cent being rounded upwards).
     The interest rate on this Senior Note will in no event be higher than the maximum rate permitted by New York law as the same may be modified by United States law of general application.
     Payments of interest on this Senior Note will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for this Senior Note shall be computed and paid on the basis of a 360-day year and actual days elapsed. The Company shall pay interest on overdue principal and LIBOR Breakage Amount, if any, and, to the extent lawful, on overdue installments of interest at the rate per annum borne by this Senior Note. In the event that any Interest Payment Date or Maturity Date is not a Business Day, then the required payment of principal, LIBOR Breakage Amount, if any, and interest will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay except that if the Maturity Date is a date other than a Business Day, the payment otherwise due on such Maturity Date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.). “Business Day” means any day other than a day on which banking institutions in the State of New York or the State of Michigan are authorized or obligated pursuant to law or executive order to close.
     Payment of principal of, LIBOR Breakage Amount, if any, and interest on the Securities of this series shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, LIBOR Breakage Amount, if any, and interest due at the Stated Maturity of such Securities shall be made at the office of the Paying Agent upon surrender of such Securities to the Paying Agent, and (ii) payments of interest shall be made, at the option of the Company, subject to such surrender where applicable, (A) by check mailed to the address of the Person entitled thereto as such address shall appear

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in the Security Register or (B) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Senior Trustee at least fourteen (14) days prior to the date for payment by the Person entitled thereto. Notwithstanding the foregoing, so long as any Senior Note is held by an Institutional Investor, payment of principal, LIBOR Breakage Amount, if any, and interest on the Senior Notes held by such Holder shall be made in the manner specified in the Purchase Agreement.
     The Senior Notes shall not be subject to redemption prior to Stated Maturity.
     UNTIL THE RELEASE DATE (AS DEFINED ON THE REVERSE HEREOF), THIS SENIOR NOTE SHALL BE SECURED BY FIRST MORTGAGE BONDS (THE “FIRST MORTGAGE BONDS”) ISSUED AND DELIVERED BY THE COMPANY TO THE SENIOR TRUSTEE (AS DEFINED ON THE REVERSE HEREOF) UNDER THE COMPANY’S TWENTY-NINTH SUPPLEMENTAL INDENTURE DATED AS OF JULY 15, 1989, PROVIDING FOR THE RESTATEMENT OF THE INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 1, 1944 BETWEEN THE COMPANY AND CITIBANK, N.A. (THE “MORTGAGE TRUSTEE”) WHICH BECAME EFFECTIVE APRIL 1, 1994, AS PREVIOUSLY SUPPLEMENTED INCLUDING AS SUPPLEMENTED BY THE FORTY-SECOND SUPPLEMENTAL INDENTURE (AS SO SUPPLEMENTED, THE “MORTGAGE INDENTURE”). ON THE RELEASE DATE, THE SENIOR NOTES SHALL CEASE TO BE SECURED BY SUCH FIRST MORTGAGE BONDS AND INSTEAD SHALL BE SECURED BY SUBSTITUTED COLLATERAL BONDS PURSUANT TO SECTION 4.03 OF THE NINTH SUPPLEMENTAL INDENTURE DATED AS OF DECEMBER 1, 2008 TO THE INDENTURE DESCRIBED ON THE REVERSE HEREOF.
     Reference is made to the further provisions of this Senior Note set forth herein. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
     This Senior Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Senior Trustee under the Senior Indenture referred to on the reverse hereof.
     IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this instrument to be duly executed under its corporate seal.
Dated: December 18, 2008
         
  MICHIGAN CONSOLIDATED GAS COMPANY
 
 
  By:      
    N.A. Khouri   
    Vice President and Treasurer   
 

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Attest:
   
 
       
By:
       
 
 
 
Sandra Kay Ennis
   
 
  Corporate Secretary    
CERTIFICATION OF AUTHENTICATION
Dated: December 18, 2008
     This is one of the Securities of the series designated therein referred to in the within-mentioned Senior Indenture.
         
  CITIBANK, N.A., as Trustee
 
 
  By:      
    Authorized Officer   
       
 

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[REVERSE]
MICHIGAN CONSOLIDATED GAS COMPANY
Floating Rate Senior Notes
2008 Series due 2009
          1. Senior Indenture . (a) This Senior Note is one of the duly authorized issue of Securities of the Company (hereinafter called the “Securities”) of the series hereinafter specified, all issued or to be issued under and pursuant to an Indenture, dated as of June 1, 1998, as supplemented by the First Supplemental Indenture, dated as of June 18, 1998, the Second Supplemental Indenture, dated as of June 9, 1999, the Third Supplemental Indenture, dated as of August 15, 2001, the Fourth Supplemental Indenture dated as of February 15, 2003, the Fifth Supplemental Indenture dated as of October 1, 2004, the Sixth Supplemental Indenture dated as of April 1, 2008, the Seventh Supplemental Indenture dated as of June 1, 2008, the Eighth Supplemental Indenture dated as of August 1, 2008 and the Ninth Supplemental Indenture dated as of December 1, 2008 between the Company and the Trustee (as so supplemented, the “Senior Indenture”), duly executed and delivered by the Company to Citibank, N.A., as Trustee (herein called the “Senior Trustee,” which term includes any successor trustee under the Senior Indenture), to which Senior Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Senior Trustee, the Company and the Holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates and may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as provided in the Senior Indenture. This Security is one of the series designated as the “Floating Rate Senior Notes, 2008 Series M due 2009 (the “Senior Notes”) of the Company.
               (b) The Senior Indenture contains provisions for defeasance at any time of the entire indebtedness of the Senior Notes or certain covenants with respect thereto upon compliance by the Company with certain conditions set forth therein.
          2. Defined Terms . Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Senior Indenture.
          3. Transfer . No service charge will be made for any transfer or exchange of Senior Notes, but payment will be required of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith.
          4. Security; Release Date . Prior to the Release Date (as hereinafter defined), the Senior Notes shall be secured by First Mortgage Bonds designated as 2008 Series M Collateral Bonds (the “Collateral Bonds”), delivered by the Company to the Senior Trustee for the benefit of the Holders of the Senior Notes. Prior to the Release Date, the Company shall make payments of the principal of, and LIBOR Breakage Amount, if any, and or interest on, the Collateral Bonds to the Senior Trustee,

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which payments shall be applied by the Senior Trustee to satisfaction of all obligations then due on the Senior Notes. Reference is made to the Mortgage Indenture and the Senior Indenture for a description of the rights of the Senior Trustee as holder of the Collateral Bonds, the property mortgaged and pledged under the Mortgage Indenture and the rights of the Company and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee and the terms and conditions upon which the Collateral Bonds are secured and the circumstances under which additional First Mortgage Bonds or Substituted Collateral Bonds may be issued.
     FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN COLLATERAL BONDS) ISSUED UNDER THE MORTGAGE INDENTURE HAVE BEEN RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE AT, BEFORE OR AFTER THE MATURITY THEREOF (THE “RELEASE DATE”), THE COLLATERAL BONDS SHALL CEASE TO SECURE THE SENIOR NOTES IN ANY MANNER PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND AT SUCH TIME IS CONTINUING UNDER THE SENIOR INDENTURE. IN CERTAIN CIRCUMSTANCES PRIOR TO THE RELEASE DATE AS PROVIDED IN THE SENIOR INDENTURE, THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF COLLATERAL BONDS HELD BY THE SENIOR TRUSTEE, BUT IN NO EVENT PRIOR TO THE RELEASE DATE TO AN AMOUNT LESS THAN THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE SERIES OF SENIOR NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH COLLATERAL BONDS. ON THE RELEASE DATE, THE SENIOR NOTES SHALL CEASE TO BE SECURED BY SUCH FIRST MORTGAGE BONDS AND INSTEAD SHALL BE SECURED BY SUBSTITUTED COLLATERAL BONDS PURSUANT TO SECTION 4.03 OF THE NINTH SUPPLEMENTAL INDENTURE DATED AS OF DECEMBER 1, 2008 TO THE INDENTURE DESCRIBED ABOVE.
     5.  Effect of Event of Default . In case an Event of Default with respect to the Senior Notes shall occur and be continuing, the unpaid principal of the Senior Notes may be declared due and payable, in the manner, with the effect and subject to the conditions provided in the Senior Indenture. Upon any such declaration, the Company shall also pay to the Holders of the Senior Notes the LIBOR Breakage Amount (as defined below) on the Senior Notes, if any, determined as of the date the Senior Notes shall have been declared due and payable.
     “LIBOR Breakage Amount” means any loss, cost or expense (other than lost profits) reasonably and actually incurred by any holder of a Senior Note as a result of any required payment or prepayment of such Senior Note by reason of acceleration on a day other than an Interest Payment Date or Stated Maturity thereof, arising from the liquidation or reemployment of funds obtained by such holder or from fees payable to terminate the deposits from which such funds were obtained. Any such loss, cost or expense shall be limited to the time period from the date of such payment through the earlier of the next Interest Payment Date or the Stated Maturity of such Senior Note. Each holder of a Senior Note shall determine the LIBOR Breakage Amount with respect

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to the principal amount of its Senior Notes then being paid (or required to be paid) by written notice to the Company setting forth such determination in reasonable detail not less than two Business Days prior to the date of the payment. Each such determination shall be conclusive absent manifest error.
     6.  Amendments and Waivers . The Senior Indenture may be modified by the Company and the Senior Trustee without consent of any Holder with respect to certain matters as described in the Indenture. In addition, the Senior Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Senior Indenture at any time by the Company and the Senior Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Senior Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Senior Indenture and certain past defaults under the Senior Indenture and their consequences. Any such consent or waiver by the Holder of this Senior Note shall bind such Holder and all future Holders of this Senior Note and of any note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Senior Note.
     7.  Obligations of Company . No reference herein to the Senior Indenture and no provision of this Senior Note or of the Senior Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any LIBOR Breakage Amount, if any, and interest on this Senior Note at the time, place, and rate and in the coin or currency herein prescribed.
     8.  Denominations, Transfer and Exchange .
          (a) The Senior Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Senior Indenture and subject to certain limitations therein set forth, Senior Notes of this series are exchangeable for a like aggregate principal amount of Senior Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same.
          (b) As provided in the Senior Indenture and subject to certain limitations therein set forth, the transfer of this Senior Note is registrable in the Security Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Company in any place where the principal of (and LIBOR Breakage Amount, if any) and interest on this Senior Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Senior Notes of this series, and of like tenor, of

III-8


 

authorized denominations and for the same maturity and aggregate principal amount, shall be issued to the designated transferee or transferees.
          (c) No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Senior Note for registration of transfer, the Company, the Senior Trustee and any agent of the Company or the Senior Trustee may treat the Person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Company, the Senior Trustee nor any such agent shall be affected by notice to the contrary.
     9.  No Liability of Certain Persons . A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under this Senior Note or the Senior Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder, by accepting a Senior Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Senior Note.
     10.  Governing Law . The Senior Indenture and this Senior Note shall for all purposes be governed by, and construed in accordance with, the internal laws of the State of New York.

III-9


 

     THE FOLLOWING ABBREVIATIONS SHALL BE CONSTRUED AS THOUGH THE WORDS SET FORTH BELOW OPPOSITE EACH ABBREVIATION WERE WRITTEN OUT IN FULL WHERE SUCH ABBREVIATION APPEARS:
             
TEN COM
  - as tenants in common   (Name) CUST (Name)   (Name) as Custodian
TEN ENT
  - as tenants by the entirety   UNIF GIFT MIN ACT   for (name) under
JF TEN
  - as joint tenants with   (state) —   the (State) Uniform
 
    right of survivorship and not as       Gifts to Minors Act
 
    tenants in common        
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
To assign this Senior Note, fill in the form below: (I) or (we) assign and transfer this Senior Note to:
 
(Print or type assignee’s name, address and zip code)
 
(Insert assignee’s social security or tax I.D. number)
and irrevocably appoint                                           agent to transfer this Senior Note on the books of the Company. The agent may substitute another to act for him.
         
Dated:                                          
  Your Signature:    
 
       
 
      (Sign exactly as your name appears on the other side of this Senior Note)
     
Signature Guarantee:
   
 
   
(Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Transfer Agent, which requirements will include membership or participation in STAMP or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act.)
     
Social Security Number or Taxpayer Identification Number:
   
 
   

III-10


 

CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
     This Certificate relates to $                                           principal amount of Senior Notes held in definitive form by                                           (the “Transferor”). The Transferor has requested the Trustee by written order to exchange or register the transfer of a Security or Securities.
     In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act of 1933, the undersigned confirms that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW:
                 
      (1 )  
o
  to the Company; or
           
 
   
      (2 )  
o
  inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
           
 
   
      (3 )  
o
  pursuant to another available exemption from registration under the Securities Act of 1933.
     Prior to the expiration of the period referred to in Rule 144(k), unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered holder thereof; provided, however, that if box (3) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such certifications and other information satisfactory to the Company and the Trustee to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
     
 
   
 
  [INSERT NAME OF TRANSFEROR]
 
   
 
   
 
  [SIGNATURE GUARANTEE]
     Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

III-11

EXHIBIT 4-253
 
FORTY-SECOND
SUPPLEMENTAL INDENTURE
TO
INDENTURE OF MORTGAGE AND
DEED OF TRUST
DATED AS OF MARCH 1, 1944
 
AS RESTATED IN
PART II OF THE TWENTY-NINTH
SUPPLEMENTAL INDENTURE DATED AS OF JULY 15, 1989
WHICH BECAME EFFECTIVE ON APRIL 1, 1994
 
MICHIGAN CONSOLIDATED GAS COMPANY
TO
CITIBANK, N.A.,
TRUSTEE
DATED AS OF DECEMBER 1, 2008
 
CREATING AN ISSUE OF FIRST MORTGAGE BONDS,
DESIGNATED AS
2008 SERIES M COLLATERAL BONDS
 

 


 

MICHIGAN CONSOLIDATED GAS COMPANY
FORTY-SECOND SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 2008
SUPPLEMENTAL TO INDENTURE OF MORTGAGE
AND DEED OF TRUST
DATED AS OF MARCH 1, 1944
TABLE OF CONTENTS
         
    PAGE
ARTICLE I ESTABLISHMENT OF AN ISSUE OF FIRST MORTGAGE BONDS, OF THE SERIES DESIGNATED AND DISTINGUISHED AS “2008 SERIES M BONDS”
    4  
 
       
SECTION 1
    4  
SECTION 2
    10  
SECTION 3
    10  
SECTION 4
    10  
SECTION 5
    11  
 
       
ARTICLE II ISSUE OF COLLATERAL BONDS
    11  
 
       
ARTICLE III THE TRUSTEE
    11  
 
       
ARTICLE IV RECORDING AND FILING OF SUPPLEMENTAL INDENTURE DATED AS OF JUNE 1, 2008
    11  
 
       
ARTICLE V MISCELLANEOUS PROVISIONS
    13  

2


 

     THIS FORTY-SECOND SUPPLEMENTAL INDENTURE, dated as of the 1 st day of December, 2008, between MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Michigan (hereinafter called the “Company”), having its principal place of business at One Energy Plaza, Detroit, Michigan, and CITIBANK, N.A., a national banking association incorporated and existing under and by virtue of the laws of the United States of America, having an office at 388 Greenwich Street in the Borough of Manhattan, the City of New York, New York, as successor trustee (hereinafter with its predecessors as trustee called the “Mortgage Trustee” or the “Trustee”):
     WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture of Mortgage and Deed of Trust (the “Original Indenture”), dated as of March 1, 1944;
     WHEREAS, the Company has heretofore executed and delivered to the Trustee the Twenty-ninth Supplemental Indenture, which became effective April 1, 1994, to provide for the modification and restatement of the Original Indenture as previously amended (as so amended, supplemented and modified the “Indenture”), and to secure the Company’s First Mortgage Bonds, unlimited in aggregate principal amount except as therein otherwise provided, issued pursuant to the:
Thirtieth Supplemental Indenture, dated as of September 1, 1991;
Thirty-first Supplemental Indenture, dated as of December 15, 1991;
Thirty-second Supplemental Indenture, dated as of January 5, 1993;
Thirty-third Supplemental Indenture, dated as of May 1, 1995;
Thirty-fourth Supplemental Indenture, dated as of November 1, 1996;
Thirty-fifth Supplemental Indenture, dated as of June 18, 1998;
Thirty-sixth Supplemental Indenture, dated as of August 15, 2001;
Thirty-seventh Supplemental Indenture, dated as of February 15, 2003;
Thirty-eighth Supplemental Indenture, dated as of October 1, 2004;
Thirty-ninth Supplemental Indenture, dated as of April 1, 2008;
Fortieth Supplemental Indenture, dated as of June 1, 2008; and
Forty-first Supplemental Indenture, dated as of August 1, 2008;
     WHEREAS, at the date hereof there were outstanding First Mortgage Bonds of the Company issued under the Indenture, of 10 series in the principal amounts set forth below (including Collateral Bonds):
                 
    Amount   Amount
Designation of Series   Initially Issued   Outstanding
First Mortgage Bonds
               
(Secured Term Notes, Series B)
               
8 1 / 4 % Series due 2014
  $ 80,000,000     $ 80,000,000  
 
               
First Mortgage Bonds
               
(Secured Medium-Term Notes, Series B)
               
7.06% Series due 2012
  $ 40,000,000     $ 40,000,000  
 
               
Collateral Bonds
               

3


 

                 
    Amount   Amount
Designation of Series   Initially Issued   Outstanding
 
               
(Senior Notes)
               
 
               
5.70% Collateral Bonds due 2033
  $ 200,000,000     $ 200,000,000  
2004 Series E Collateral Bonds
  $ 120,000,000     $ 120,000,000  
2008 Series A Collateral Bonds
  $ 60,000,000     $ 60,000,000  
2008 Series B Collateral Bonds
  $ 100,000,000     $ 100,000,000  
2008 Series C Collateral Bonds
  $ 25,000,000     $ 25,000,000  
2008 Series F Collateral Bonds
  $ 75,000,000     $ 75,000,000  
2008 Series H Collateral Bonds
  $ 140,000,000     $ 140,000,000  
2008 Series I Collateral Bonds
  $ 50,000,000     $ 50,000,000  
     WHEREAS, the Company desires in and by this Supplemental Indenture to establish an issue of bonds to be issued under the Indenture of the series established under the Thirty-fifth Supplemental Indenture, to designate the terms thereof, to specify the particulars necessary to describe and define the same and to specify such other provisions and agreements in respect thereof as are in the Indenture provided or permitted; and
     WHEREAS, all the conditions and requirements necessary to make this Supplemental Indenture, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Supplemental Indenture in the form and with the terms hereof have been in all respects duly authorized;
     NOW, THEREFORE, in consideration of the premises and in further consideration of the sum of One Dollar in lawful money of the United States of America paid to the Company by the Trustee at or before the execution and delivery of this Forty-second Supplemental Indenture, the receipt whereof is hereby acknowledged, and of other good and valuable consideration, it is agreed by and between the Company and the Trustee as follows:
ARTICLE I
ESTABLISHMENT OF AN ISSUE OF
FIRST MORTGAGE BONDS, OF THE SERIES
DESIGNATED AND DISTINGUISHED AS “COLLATERAL BONDS”
     SECTION 1. There is hereby established an issue of bonds to be issued under and secured by the Indenture, to be known as “First Mortgage Bonds,” designated and distinguished as “Collateral Bonds” of the Company (herein collectively sometimes called the “Collateral Bonds”) of the series established under the Thirty-fifth Supplemental Indenture. The Collateral Bonds may be issued without limitation as to aggregate principal amount except as provided in the Indenture (including the Thirty-fifth Supplemental Indenture) and in this Supplemental Indenture. The Collateral Bonds shall be registered bonds without coupons and shall be dated as of the date of the authentication thereof by the Mortgage Trustee.

4


 

     A separate issue of Collateral Bonds, designated “2008 Series M Collateral Bonds,” (the “Series M Bonds”) is being issued by the Company hereunder contemporaneously with the issuance of a separate series of senior debt securities of the Company designated as the Company’s “Floating Rate Senior Notes, 2008 Series M due 2009” (the “Series M Notes”) and is being issued and assigned and delivered to Citibank, N.A., as trustee (in such capacity, together with any successor trustee(s), the “Senior Trustee”) under the Indenture, dated as of June 1, 1998, as amended, supplemented and modified, governing such senior debt securities (as so amended, supplemented and modified, the “Senior Indenture”), in such capacity, as collateral for the benefit of the holders of the Series M Notes. The series of such senior debt securities collateralized by the Series M Bonds issued hereunder shall be referred to as the “Series M Notes” with respect to such Series M Bonds.
     The issue of the Series M Bonds established hereby shall bear interest at such rate or rates and be payable on such date or dates, shall mature and be subject to mandatory redemption on such date or dates and shall have such other terms and provisions not inconsistent with the Indenture as are set forth in the form of Series M Bonds, and the form of Trustee’s Certificate to be endorsed on such bonds, as are set forth substantially in the following forms respectively (herein sometimes called the “Series M Bond Form”):
     
No. R-1   Principal Amount
$20,000,000
MICHIGAN CONSOLIDATED GAS COMPANY
FIRST MORTGAGE BONDS, 2008 SERIES M COLLATERAL BONDS
being a series of
FIRST MORTGAGE BONDS
ORIGINAL ISSUE DATE: DECEMBER 18, 2008
MATURITY DATE: SEPTEMBER 18, 2009
THE FIRST MORTGAGE BONDS, 2008 SERIES M COLLATERAL BONDS (HEREINAFTER, “SERIES M BONDS”), REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED AND DELIVERED BY THE COMPANY TO CITIBANK, N.A., AS TRUSTEE (IN SUCH CAPACITY, THE “SENIOR TRUSTEE”) UNDER AN INDENTURE, DATED AS OF JUNE 1, 1998, BETWEEN THE COMPANY AND THE SENIOR TRUSTEE, AS AMENDED, SUPPLEMENTED AND MODIFIED FROM TIME TO TIME AND AS SUPPLEMENTED BY THE SUPPLEMENTAL INDENTURE THERETO DATED AS OF DECEMBER 1, 2008 (THE “NOTE INDENTURE”) (AS SO AMENDED, SUPPLEMENTED AND MODIFIED, THE “SENIOR INDENTURE”). THE SERIES M BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $20,000,000 AGGREGATE PRINCIPAL AMOUNT OF FLOATING RATE SENIOR NOTES, 2008 SERIES M DUE 2009 (THE “SERIES M NOTES”) ISSUED PURSUANT TO THE SENIOR INDENTURE. THE SERIES M NOTES ARE THE “RELATED NOTES” WITH RESPECT TO THE SERIES M BONDS WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

5


 

THE SERIES M BONDS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED (EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE SENIOR INDENTURE OR, SUBJECT TO COMPLIANCE WITH APPLICABLE LAW, AS MAY BE INVOLVED IN THE COURSE OF THE EXERCISE OF RIGHTS AND REMEDIES CONSEQUENT UPON AN EVENT OF DEFAULT UNDER THE SENIOR INDENTURE) UNTIL THE EARLIER OF THE RELEASE DATE (AS DEFINED BELOW) OR THE PRIOR RETIREMENT OF THE RELATED NOTES THROUGH REDEMPTION, REPURCHASE OR OTHERWISE.
THE INTEREST RATE ON THE SERIES M BONDS SHALL AT ALL TIMES BE IDENTICAL TO THAT OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE SERIES M NOTES.
THE INTEREST PAYMENT DATES IN RESPECT OF THE SERIES M BONDS SHALL AT ALL TIMES BE IDENTICAL TO THOSE OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE SERIES M NOTES.
THE COMPANY SHALL MAKE PAYMENTS OF THE PRINCIPAL OF, AND LIBOR BREAKAGE AMOUNT (AS DEFINED IN THE SENIOR INDENTURE), IF ANY, AND INTEREST ON, THE SERIES M BONDS, TO THE SENIOR TRUSTEE, WHICH PAYMENTS SHALL BE APPLIED BY THE SENIOR TRUSTEE TO THE SATISFACTION OF OBLIGATIONS ON THE SERIES M NOTES.
IN ADDITION TO THE PAYMENT OF PRINCIPAL AND INTEREST ON THE SERIES M BONDS IN THE EVENT ANY LIBOR BREAKAGE AMOUNT (AS DEFINED IN THE SENIOR INDENTURE) SHALL BE REQUIRED TO BE PAID BY THE COMPANY ON THE SENIOR NOTES, THERE SHALL BE DUE AND PAYABLE ON THE SERIES M BONDS AN ADDITIONAL AMOUNT EQUAL TO SUCH LIBOR BREAKAGE AMOUNT WHICH SHALL BE PAID BY THE COMPANY IN THE AMOUNTS AND ON THE DATES REQUIRED FOR THE PAYMENT OF ANY SUCH AMOUNTS UNDER THE SENIOR INDENTURE.
THE MATURITY DATE SPECIFIED ABOVE IS ALSO THE MATURITY DATE OF THE SERIES M NOTES.
     MICHIGAN CONSOLIDATED GAS COMPANY (hereinafter called the “Company”), a corporation of the State of Michigan, for value received, hereby promises to pay to CITIBANK, N.A., as trustee for the benefit of the holders of the Series M Notes, or registered assigns (in such capacity, the “Senior Trustee”), the sum of Twenty million Dollars ($20,000,000) on the Maturity Date specified above, at the corporate trust office of the Mortgage Trustee hereinafter named in the Borough of Manhattan, the City of New York, New York, or at the principal office of any successor in trust, in lawful money of the United States of America, and to pay interest thereon at the Interest Rate(s) from time to time specified in or determined pursuant to the Series M Notes, in like lawful money payable at the office or agency of the Company in the Borough of Manhattan, the City of New York, New York on such interest payment date(s) and on the Maturity Date (each an “Interest Payment Date”) as provided in the Series M Notes, from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid, commencing on January 18, 2009, until the Company’s obligation with respect to the payment of such principal sum shall be discharged as provided in the Indenture hereinafter mentioned and the Senior Indenture. If the date of the Series M Bonds represented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to such Interest Payment Date, then payment of interest shall commence on the second Interest Payment

6


 

Date succeeding such date. If the Company shall default in the payment of interest due on any Interest Payment Date, then interest shall be payable from the next preceding Interest Payment Date to which interest has been paid, or, if no such interest has been paid on the Series M Bonds represented by this certificate, from the Original Issue Date. So long as there is no existing default in the payment of interest, the person in whose name the Series M Bonds represented by this certificate were registered at the close of business on the relevant Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date, except that if the Company shall default in the payment of interest due on such Interest Payment Date, such defaulted interest shall be paid to the person in whose name the Series M Bonds represented by this Certificate are registered on the Record Date for the Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Series M Bonds. The term “Record Date” as used herein with respect to any Interest Payment Date otherwise shall mean the fifteenth calendar day (whether or not a Business Day) prior to such Interest Payment Date.
     “Business Day” means any day other than a day on which banking institutions in the State of New York or the State of Michigan are authorized or obligated pursuant to law or executive order to close. In the event that any Interest Payment Date, redemption date or maturity date is not a Business Day, then the required payment of principal, LIBOR Breakage Amount, if any, and interest will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay).
     The bonds represented by this certificate, of the series hereinafter specified, are bonds of the Company (herein called the “bonds”) known as its “First Mortgage Bonds,” issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust dated as of March 1, 1944, duly executed by the Company to Citibank, N.A., successor trustee (“Mortgage Trustee”) as restated in Part II of the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, which became effective on April 1, 1994, to which indenture and all indentures supplemental thereto executed on and after July 15, 1989 reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the bonds are, and are to be, issued and secured, and the rights of the holders of the bonds and of the Mortgage Trustee in respect of such security (which indenture and all indentures supplemental thereto, including the Forty-second Supplemental Indenture dated as of December 1, 2008, are hereinafter collectively called the “Indenture”). As provided in the Indenture, the bonds may be for various principal sums and are issuable in series, which may mature at different times, may bear interest at different rates and may otherwise vary as therein provided. The bonds represented by this certificate are part of a Series designated “Collateral Bonds,” herein called Collateral Bonds, created by the Thirty-fifth Supplemental Indenture, dated as of June 18, 1998, as supplemented by the Forty-second Supplemental Indenture dated as of December 1, 2008, as provided for in the Indenture.
     With the consent of the Company and to the extent permitted by and as provided in the Indenture and the Senior Indenture, the rights and obligations of the Company and/or the rights of the holders of the Series M Bonds and/or the terms and provisions of the Indenture may be modified or altered by such affirmative vote or votes of the holders of the Series M Notes then outstanding as are specified in the Senior Indenture.

7


 

     The Series M Bonds shall be redeemed upon demand of the Senior Trustee as provided in Section 6.2 of the Senior Indenture with respect to the Series M Notes.
     In case an Event of Default as defined in the Indenture or the Senior Indenture shall occur, the principal of the Series M Bonds may become or be declared due and payable in the manner, with the effect, and subject to the conditions provided in the Indenture and the Senior Indenture.
     The Senior Trustee has agreed pursuant to the Senior Indenture to hold the Series M Bonds as collateral for the benefit of the holders of the Series N Notes under all circumstances and not to transfer (except to a successor trustee or, subject to compliance with applicable law, as may be involved in the course of exercise of rights and remedies consequent upon an Event of Default under the Senior Indenture) such Series M Bonds until the earlier of the Release Date or the prior retirement of the Series M Notes through payment, redemption, repurchase or otherwise. “Release Date” means the date on which all First Mortgage Bonds of the Company issued and outstanding under the Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no default or event of default has occurred and, at such time, is continuing under the Senior Indenture. On the Release Date, the Senior Trustee shall deliver to the Company for cancellation all Series M Bonds, and the Company shall cause the Senior Trustee to provide notice to all holders of Series M Notes of the occurrence of the Release Date. As a result, on the Release Date, the Series M Bonds shall cease to secure the Series M Notes and the Series M Notes instead will be secured by substituted Collateral Bonds. Following the Release Date, the Company shall cause the Indenture to be closed, and the Company shall not issue any additional Collateral Bonds thereunder. From and after the Release Date, the Company’s obligations in respect of the Series M Bonds shall be satisfied and discharged.
     No recourse shall be had for the payment of the principal of, LIBOR Breakage Amount, if any, or the interest on, the Series M Bonds, or for any claim based hereon or otherwise in respect of the Series M Bonds or the Indenture, the Senior Indenture or any indenture supplemental to either thereof, against any incorporator, stockholder, director or officer, past, present or future, of the Company, as such, or any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, directors or officers being waived and released by the owner hereof and every owner of any Series M Note by the acceptance of the Series M Bonds or such Series M Note, as the case may be, and as part of the consideration for the issue thereof, and being likewise waived and released pursuant to the Indenture and the Senior Indenture.
     This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually executed by the Mortgage Trustee or its successor in trust under the Indenture.
     IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this certificate to be executed under its name with the signature of its duly authorized Officer, under its corporate seal, which may be a facsimile, attested with the signature of its Corporate Secretary.
Dated:

8


 

         
  MICHIGAN CONSOLIDATED GAS COMPANY  
     
  By:      
    N.A. Khouri   
    Vice President and Treasurer   
Attest:
         
By:
       
 
 
 
Sandra Kay Ennis
   
 
  Corporate Secretary    
     The bonds represented by this certificate constitute Collateral Bonds of the series designated and described in the within-mentioned Indenture.
         
  CITIBANK, N.A., as Mortgage Trustee
 
 
  By:      
    Authorized Officer   
[End of Bond Form]
     So long as there is no existing default in the payment of interest on the Series M Bonds, all Series M Bonds authenticated by the Trustee after the Record Date specified for any Interest Payment Date, and prior to such Interest Payment Date (unless the issue date hereinafter specified is after such Record Date) shall be dated the date of authentication, but shall bear interest from such Interest Payment Date, and the person in whose name any Series M Bonds is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding any transfer or exchange of such Series M Bonds subsequent to the Record Date and on or prior to such Interest Payment Date, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case such defaulted interest shall be paid to the person in whose name such Series M Bonds is registered on the Record Date for the special Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Series M Bonds; and provided that interest payable on a maturity date shall be payable to the person to whom the principal thereof is payable. If the issue date of any Series M Bonds is after such Record Date, such Series M Bonds shall bear interest from the issue date but payment of interest shall commence on the second Interest Payment Date next succeeding the issue date. Any notice which is mailed as herein provided shall be conclusively presumed to have been properly and sufficiently given on the date of such mailing, whether or not the holder receives notice.

9


 

     The terms “Interest Payment Date”, “Record Date” and “Business Day” as used herein are defined in the Series M Bond Form.
     The term “issue date” as used herein with respect to the issue of Series M Bonds established hereby shall mean the date of first authentication of such Series M Bonds.
     As used in this Section 1, the term “default in the payment of interest” means failure to pay interest on the applicable Interest Payment Date disregarding any period of grace permitted by Section 9.01 of the Indenture.
     The Company shall make payments of the principal of, and LIBOR Breakage Amount or interest on, the Series M Bonds to the Senior Trustee, which payments shall be applied by the Senior Trustee in satisfaction of obligations on the Series M Notes in respect of such Series M Bonds.
     SECTION 2. The issue of Series M Bonds established hereby shall be redeemed if and to the extent the Series M Notes have been declared due and payable upon the occurrence and continuation of an Event of Default and upon demand of the Senior Trustee, as provided in the Senior Indenture and in such Series M Notes. The redemption price in respect of any Series M Bonds shall be the principal amount due and payable on the Series M Notes together with the LIBOR Breakage Amount, if any, and interest thereon. Any payment made by the Company on the Series M Notes (whether for principal, LIBOR Breakage Amount, if any, or interest) shall be applied by the Senior Trustee as payment of the corresponding amount due in respect of the Series M Bonds.
     SECTION 3. The Series M Bonds shall be registered bonds without coupons. The Mortgage Trustee shall be the registrar and paying agent for the Series M Bonds, which duties it hereby accepts. Series M Bonds may be issued in the denomination of $1,000 or any integral multiple thereof.
     SECTION 4. As further provided in the Series M Bond Form, the Series M Bonds shall not be assignable or transferable except as may be set forth under Article IV of the Senior Indenture, or, subject to compliance with applicable law, as may be involved in the course of the exercise of rights and remedies consequent upon an Event of Default under the Senior Indenture. Subject to the foregoing, the Series M Bonds shall be exchangeable upon surrender thereof at the corporate trust office of the Trustee in the Borough of Manhattan, the City of New York, New York, for registered bonds of the same aggregate principal amount and other terms, but of different authorized denomination or denominations, such exchanges to be made without service charge (except for any stamp tax or other governmental charge).
     Every bond so surrendered shall be accompanied by a proper transfer power duly executed by the registered owner or by duly authorized attorney transferring such bond to the Company, and the signature to such transfer power shall be guaranteed to the satisfaction of the Trustee. All bonds so surrendered shall be forthwith canceled and delivered to or upon the order of the Company. All bonds executed, authenticated and delivered in exchange for bonds so surrendered shall be valid obligations of the Company, evidencing the same debt as the bonds surrendered, and shall be secured by the same lien and be entitled to the same benefits and protection as the bonds in exchange for which they are executed, authenticated and delivered.

10


 

     The Company shall not be required to make any such exchange or any registration of transfer (1) during a period of fifteen days next preceding any Interest Payment Date, but only if there is an existing default in the payment of interest on the Series M Bonds on which such payment is due or (2) after the bond so presented for exchange or registration of transfer, or any portion thereof, has been called for redemption and notice thereof given to the registered owner.
     SECTION 5. Pending the preparation of definitive Series M Bonds, the Company may from time to time execute, and upon its written order, the Trustee shall authenticate and deliver, in lieu of such definitive bonds and subject to the same provisions, limitations and conditions, one or more temporary bonds, in registered form, of any denomination specified in the written order of the Company for the authentication and delivery thereof, and with such omissions, insertions and variations as may be determined by the Board of Directors of the Company. Such temporary bonds shall be substantially of the tenor of the bonds to be issued as herein before recited.
     If any such temporary Series M Bonds shall at any time be so authenticated and delivered in lieu of definitive bonds, the Company shall upon request at its own expense prepare, execute and deliver to the Trustee and thereupon, upon the presentation and surrender of temporary bonds, the Trustee shall authenticate and deliver in exchange therefor, without charge to the holder, definitive bonds of the same series and other terms, if any, and for the same principal sum in the aggregate as the temporary bonds surrendered. All temporary bonds so surrendered shall be forthwith canceled by the Trustee and delivered to or upon the order of the Company. Until exchanged for definitive bonds the temporary bonds shall in all respects be entitled to the lien and security of the Indenture and all supplemental indentures.
ARTICLE II
ISSUE OF COLLATERAL BONDS
     The Series M Bonds in the aggregate principal amount of $20,000,000 in respect of the Series M Notes may be executed, authenticated and delivered from time to time as permitted by the provisions of the Indenture, including with respect to exchange and replacement of bonds.
ARTICLE III
THE TRUSTEE
     The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company, or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company.
     Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture other than as set forth in the Indenture and this Supplemental Indenture is executed and accepted on behalf of the Trustee, subject to all the terms and conditions set forth in the Indenture, as fully to all intents as if the same were herein set forth at length.
ARTICLE IV
RECORDING AND FILING OF SUPPLEMENTAL INDENTURE
DATED AS OF AUGUST 1, 2008

11


 

     Pursuant to the terms and provisions of the Original Indenture, a Supplemental Indenture dated as of August 1, 2008 providing for the terms of Collateral Bonds to be issued thereunder designated as 2008 Series H Collateral Bonds and 2008 Series I Collateral Bonds has heretofore been entered into between the Company and the Trustee and has been filed in the Office of the Secretary of State of Michigan as a financing statement on August 20, 2008 (Filing No. 2008131442-2) and has been recorded as a real estate mortgage in the offices of the respective Register of Deeds of certain counties in the State of Michigan, as follows:
             
        Liber/    
County   Recorded   Instrument no.   Page
Alcona
  8/20/08   455   52
Alger
  8/20/08   200801775   N/A
Alpena
  8/20/08   467   59
Antrim
  8/20/08   783   1471
Arenac
  8/20/08   535   840
Barry
  8/20/08   20080820-0008410   N/A
Benzie
  8/20/08   2008R-04247   N/A
Charlevoix
  8/20/08   859   112
Cheboygan
  8/20/08   1105   371
Chippewa
  8/20/08   1056   838
Clare
  8/20/08   1086   866
Clinton
  8/20/08   5134496   N/A
Crawford
  8/20/08   692   739
Delta
  8/20/08   925   614
Dickinson
  8/20/08   659   409
Emmet
  8/21/08   1105   338
Gladwin
  8/20/08   873   284
Grand Traverse
  8/20/08   2008R-14712   N/A
Gratiot
  8/20/08   854   160
Ionia
  8/20/08   609   2533
Iosco
  8/20/08   957   439
Iron
  8/20/08   520   313
Isabella
  8/20/08   1448   810
Jackson
  8/20/08   1905   612
Kalkaska
  8/20/08   3086889   N/A
Kent
  8/20/08   20080820-0076463   N/A
Lake
  8/20/08   328   125
Leelanau
  8/20/08   985   839
Lenawee
  8/20/08   2370   582
Livingston
  8/20/08   2008R-024563   N/A
Macomb
  8/25/08   19462   721
Manistee
  8/20/08   2008R005106   N/A
Marquette
  8/20/08   2008R-09124   N/A
Mason
  8/20/08   2008R04532   N/A
Mecosta
  8/20/08   779   1645
Menominee
  8/21/08   640   62
Missaukee
  8/20/08   2008-02871   N/A
Monroe
  8/20/08   2008R15899   N/A
Montcalm
  8/20/08   1416   5

12


 

             
        Liber/    
County   Recorded   Instrument no.   Page
Montmorency
  8/20/08   303   391
Muskegon
  8/20/08   3788   884
Newaygo
  8/20/08   432   2917
Oakland
  8/22/08   40545   822
Oceana
  8/21/08   GR 2008   17094
Ogemaw
  8/20/08   3081344   N/A
Osceola
  8/20/08   864   406
Oscoda
  8/20/08   208-02218   N/A
Otsego
  8/20/08   1179   196
Ottawa
  8/20/08   5706   472
Presque Isle
  8/20/08   466   474
Roscommon
  8/20/08   1074   2652
St. Clair
  8/20/08   3870   981
Saginaw
  8/20/08   2504   2450
Shiawassee
  8/20/08   1125   0871
Washtenaw
  9/25/08   4700   295
Wayne
  8/20/08   47425   515
Wexford
  8/20/08   613   2822
ARTICLE V
MISCELLANEOUS PROVISIONS
     Except insofar as herein otherwise expressly provided, all the provisions, terms and conditions of the Indenture shall be deemed to be incorporated in, and made a part of, this Forty-second Supplemental Indenture, and the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, as supplemented by the Thirtieth Supplemental Indenture dated as of September 1, 1991, by the Thirty-first Supplemental Indenture dated as of December 15, 1991, by the Thirty-second Supplemental Indenture dated as of January 5, 1993, by the Thirty-third Supplemental Indenture dated as of May 1, 1995, by the Thirty-fourth Supplemental Indenture dated as of November 1, 1996, by the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, by the Thirty-sixth Supplemental Indenture dated as of August 15, 2001, by the Thirty-seventh Supplemental Indenture dated as of February 15, 2003, by the Thirty-eighth Supplemental Indenture dated as of October 1, 2004, by the Thirty-ninth Supplemental Indenture dated as of April 1, 2008, by the Fortieth Supplemental Indenture dated as of June 1, 2008, by the Forty-first Supplemental Indenture dated as of August 1, 2008 and by this Supplemental Indenture is in all respects ratified and confirmed; and the Indenture and said Supplemental Indentures shall be read, taken and construed as one and the same instrument.
     Except to the extent specifically provided therein, no provision of this Supplemental Indenture or any future supplemental indenture is intended to modify, and the parties do hereby adopt and confirm, the provisions of Section 318(c) of the Trust Indenture Act, which amend and supersede provisions of the Indenture in effect prior to November 15, 1990.
     Nothing in this Supplemental Indenture is intended, or shall be construed, to give to any person or corporation, other than the parties hereto and the holders of Collateral Bonds issued and to be issued under and secured by the Indenture, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture, or under any covenant, condition or

13


 

provision herein contained, all the covenants, conditions and provisions of this Supplemental Indenture being intended to be, and being, for the sole and exclusive benefit of the parties hereto and of the holders of bonds issued and to be issued under the Indenture and secured thereby.
     All covenants, promises and agreements in this Supplemental Indenture contained by or on behalf of the Company shall bind its successors and assigns whether so expressed or not.
     This Supplemental Indenture may be executed in any number of counterparts, and each of such counterparts when so executed shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument.

14


 

     IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this Supplemental Indenture to be executed by its duly authorized Officer, and its corporate seal to be hereunto affixed, and Citibank, N.A., as Mortgage Trustee as aforesaid, has caused the same to be executed by one of its authorized signatories and its corporate seal to be hereunto affixed, on the respective dates of their acknowledgments hereinafter set forth, as of the date and year first above written.
MICHIGAN CONSOLIDATED GAS COMPANY
         
By:
  /s/ Edward Solomon
 
Edward Solomon
   
 
  Assistant Treasurer    
Signed, sealed, acknowledged and
delivered by MICHIGAN CONSOLIDATED
GAS COMPANY in the presence of:
     
/s/ Anthony G. Morrow
 
Anthony G. Morrow
   
 
   
/s/ Timothy J. Maloche
 
Timothy J. Maloche
   
         
State of Michigan
  }    
 
  }   ss.
County of Wayne
  }    
     The foregoing instrument was acknowledged before me this 12 th day of December, 2008, by Edward Solomon, as Assistant Treasurer, of Michigan Consolidated Gas Company, a Michigan corporation, on behalf of the corporation.
     
/s/ Stephanie V. Washio
 
Stephanie V. Washio
   
Notary Public, Wayne County, MI
   
Acting in Wayne County, MI
   
My Commission Expires: May 18, 2012
   

15


 

CITIBANK, N.A., as Mortgage Trustee
         
By:
  /s/ Wafaa Orfy
 
Wafaa Orfy
   
 
  Vice President    
Signed, sealed, acknowledged and
delivered by CITIBANK, N.A.
in the presence of:
     
/s/ John Hannon
 
Name: John Hannon
            Vice President
   
     
/s/ Louis Piscitelli
 
Name: Louis Piscitelli
            Vice President
   
         
State of New York
  }    
 
  }   ss.
County of New York
  }    
     The foregoing instrument was acknowledged before me this 15 th day of December, 2008, by Wafaa Orfy, as Vice President of Citibank, N.A., a national banking association, on behalf of the association, as Trustee, as in said instrument described.
     
/s/ Zenaida Santiago
 
Notary Public, State of New York
   
No. 01SA6152564
   
Qualified in Kings County
   
Acting in New York County
   
Commission Expires: 9-18-2010
   

16


 

This instrument was drafted by:
Timothy J. Maloche
One Energy Plaza, 688WCB
Detroit, MI 48226
When recorded return to:
Stephanie V. Washio
One Energy Plaza, 688WCB
Detroit, MI 48226

17

Exhibit 10-75
DTE ENERGY COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
Amended and Restated Effective January 1, 2005

 


 

TABLE OF CONTENTS
         
Section
  Page  
PREAMBLE
    1  
 
       
SECTION 1. TITLE, PURPOSE AND EFFECTIVE DATE
    1  
1.01. Title
    1  
1.02. Purpose.
    2  
1.03. Effective Date
    2  
1.04 Compliance with Code Section 409A
    2  
 
       
SECTION 2. DEFINITIONS
    2  
2.01. Account
    2  
2.02. Affiliated Company
    2  
2.03. Anniversary Year
    3  
2.04. Annual Cash Bonus
    3  
2.05. Base Salary
    3  
2.06. Beneficiary
    3  
2.07. Board
    3  
2.08. Cash Balance Plan
    3  
2.09. Code
    3  
2.10. Committee
    3  
2.11. Company
    3  
2.12. Company’s Accountants
    3  
2.13. Company’s Actuaries
    3  
2.14. Compensation
    3  
2.15. Compensation Credit
    4  
2.16. DTE
    4  
2.17. ERISA
    4  
2.17A Executive Group
    5  
2.18. FICA
    5  
2.19. Frozen MSBP Participant
    5  
2.20. Frozen MSBP Participant’s Benefit
    5  
2.21. Grandfathered MSBP Participant
    5  
2.22. Grandfathered MSBP Retiree
    5  
2.23. Grandfathered SDRIP Participant
    5  
2.24. Grandfathered SDRIP Nonactive Participant
    5  
2.25. Investment Credit
    5  
2.26. Opening Balance
    5  
2.27. Participant
    6  
2.28. Plan
    6  
2.29. Plan Year
    6  
2.29A Post-2004 Benefit
    6  
2.29B Pre-2005 Benefit
    6  
2.30. Spouse
    7  

i


 

         
Section
  Page  
2.31. Vested Account
    7  
 
       
SECTION 3. ELIGIBILITY AND PARTICIPATION
    7  
3.01. Designation by Committee
    7  
3.02. Effective Date of Participation
    7  
3.03. Revocation of Designation
    7  
 
       
SECTION 4. ACCOUNTS AND EARNINGS
    8  
4.01. Establishment of Accounts
    8  
4.02. Election of Investment Options
    8  
4.03. No Requirement to Fund
    8  
 
       
SECTION 5. GRANDFATHERED AND FROZEN MSBP BENEFITS
    8  
5.01. Grandfathered and Frozen MSBP Participant’s MSBP Benefit
    8  
5.02. Election for Grandfathered MSBP Participants
    9  
5.03. No Election for Frozen MSBP Participants
    10  
 
       
SECTION 6. FORM AND TIMING OF PAYMENT
    10  
6.01. Distribution of Account
    10  
6.02. Timing of Distributions
    11  
6.03 Form of Distributions
    12  
6.04 Change In Distribution Option
    13  
6.05. Unscheduled Withdrawals
    14  
 
       
SECTION 7. VESTING OF BENEFITS
    14  
7.01. General
    14  
7.02. Rehired Participants
    14  
7.03. Redesignated Participants
    15  
 
       
SECTION 8. SELECTION OF AND PAYMENTS TO A BENEFICIARY
    15  
8.01. Beneficiary Designation
    15  
8.02. Change in Beneficiary
    15  
8.03. Survivor Benefit
    16  
 
       
SECTION 9. TAX WITHHOLDING
    16  
 
       
SECTION 10. ADMINISTRATION OF THE PLAN
    16  
10.01. Duties and Power
    16  
10.02. Benefit Statements
    16  
10.03. Right to Accelerate
    16  
 
       
SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION
    17  
11.01. Right to Amend or Terminate
    17  
11.02. Right to Suspend
    17  
11.03. Partial ERISA Exemption
    17  

ii


 

         
Section
  Page  
SECTION 12. MISCELLANEOUS
    17  
12.01. Unfunded Plan
    17  
12.02. No Right to Continued Employment
    18  
12.03. Prohibition Against Alienation
    18  
12.04. Savings Clause
    18  
12.05. Payment of Benefit of Incompetent
    18  
12.06. Spouse’s Interest
    18  
12.07. Successors
    18  
12.08. Gender, Number and Heading
    18  
12.09. Legal Fees and Expenses
    19  
12.10. Choice of Law
    19  
12.11. Affiliated Employees
    19  
12.12. Plan Document
    19  
 
       
SECTION 13. ARBITRATION
    19  
 
       
SECTION 14. CHANGE IN CONTROL PROVISIONS
    20  
14.01. General
    20  
14.02. Immediate Vesting
    20  
14.03. Transfer to Rabbi Trust
    20  
14.04. Lump Sum Payments
    21  
14.05. Joint and Several Liability
    21  
14.06. Dispute Procedures
    21  
14.07. Definition of Change in Control
    21  
Appendix A — MSBP Document
Appendix B — Frozen MSBP Participants
Appendix C — Grandfathered MSBP Participants
Appendix D — Grandfathered SDRIP Participants
Appendix E — Grandfathered SDRIP Participants — 100% Vested as of June 1, 2002
Appendix F — Key Employe Deferred Compensation Plan Document

iii


 

DTE ENERGY COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
Amended and Restated Effective January 1, 2005
PREAMBLE
     Benefits under the DTE Energy Company Executive Supplemental Retirement Plan (“Plan”) are available to designated executives and key management employees of DTE Energy Company and its Affiliated Companies. DTE Energy Company has established this Plan to benefit executives of DTE Energy Company and its Affiliated Companies in a manner that will be in the best interest of DTE Energy Company and its shareholders.
     The Plan replaced The Detroit Edison Company Management Supplemental Benefit Plan (“MSBP”), and all benefits under the MSBP were transferred to the Plan as of January 1, 2001. The Plan provides executives who are Grandfathered MSBP Participants (other than Frozen MSBP Participants) as of January 1, 2001, the opportunity upon termination to choose to have their benefit from the Plan calculated under the provisions of the MSBP, as modified by this Plan, or the provisions of this Plan. The MSBP is included as Appendix A. The provisions set forth in Appendix A continue to apply unless specifically modified under the provisions of the Plan.
     The Plan also replaced the MCN Energy Group Supplemental Death Benefit and Retirement Income Plan (“SDRIP”), and all benefits under the SDRIP for active Grandfathered SDRIP Participants were transferred to the Plan as of June 1, 2002.
     The Plan also replaced the Key Employee Deferred Compensation Plan (“KEDC”) which is attached as Appendix F.
     Any employee who was a participant in the MSBP, SDRIP or KEDC and:
  (1)   Was receiving benefits under such prior plan as of December 31, 2000 (May 31, 2002 for the SDRIP), or
 
  (2)   Had terminated employment with the Company on or before December 31, 2000 (May 31, 2002 for the SDRIP) and was due a benefit at a later date
shall continue to be paid (or shall be paid) benefits under the provisions of such prior plan.
SECTION 1.
TITLE, PURPOSE AND EFFECTIVE DATE
     1.01. Title . The title of this Plan shall be the “DTE Energy Company Executive Supplemental Retirement Plan” and shall be referred to in this document as the “Plan.”

1


 

     1.02. Purpose . The purpose of the Plan is to promote the success of DTE Energy Company (hereinafter referred to as “DTE”) by providing the ability to attract and retain certain executives by providing such designated executives with additional retirement benefits.
          It is intended that this Plan provide deferred compensation for “a select group of management or highly compensated employees” within the meaning of sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended (hereinafter referred to as “ERISA”) and, therefore, to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
     1.03. Effective Date . The Plan was originally effective January 1, 2001. This amendment and restatement of the Plan is effective January 1, 2005, unless a different effective date is specified for a particular provision.
     1.04 Compliance with Code Section 409A . The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A solely with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this Section 1.04.
          As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
SECTION 2.
DEFINITIONS
     The following words and terms, as used in this Plan, shall have the meanings set forth below, unless a clearly different meaning is required by the context in which the word or phrase is used.
     2.01. “Account” means, except as to a Frozen MSBP Participant’s Benefit, the hypothetical record or bookkeeping entry maintained by the Company reflecting each Participant’s Opening Balance (if any), Compensation Credits, Discretionary Contributions (effective October 30, 2006), credited earnings and losses, and distributions under the Plan. The term “Account” should not be construed as an actual segregation of assets for the benefit of any particular Participant.
     2.02. “Affiliated Company” means any corporation while such corporation is a member of the same controlled group of corporations (within the meaning of Code section 414(b)) as DTE or any other employing entity while such entity is under common control (within the meaning of Code section 414(c)) with DTE.

2


 

     2.03. “Anniversary Year” means the 12-month period of active service beginning with the date an employee is originally designated a Participant. For purposes of a Grandfathered MSBP Participant, an Anniversary Year means the 12-month period beginning with the date an employee was named a Group I or II participant in the MSBP.
     2.04. “Annual Cash Bonus” means the compensation payable in the Plan Year under the DTE Energy Company Annual Incentive Plan, any similar annual incentive plan of an Affiliated Company, or any successor plans thereto.
     2.05. “Base Salary” means base salary payable prior to reduction for any pre-tax deferrals under Code sections 125, 129 or 401(k) and prior to reduction for any payroll deduction for taxes or any other purpose. “Base Salary” shall exclude any bonus, long-term awards, fringe benefit or other form of remuneration.
     2.06. “Beneficiary” means the person, persons or entity designated in writing by the Participant, on forms provided by the Company, to receive distribution of certain death benefits payable under the Plan in the event of the Participant’s death.
     2.07. “Board” means the Board of Directors of DTE Energy Company.
     2.08. “Cash Balance Plan” means any cash balance defined benefit plan maintained by the Company or an Affiliated Company which is intended to be qualified under Code section 401(a).
     2.09. “Code” means the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder. References to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection.
     2.10. “Committee” means the Organization and Compensation Committee of the Board. The Committee is responsible for the administration of the Plan and may delegate such administrative responsibilities under this Plan.
     2.11. “Company” means DTE Energy Company or its successors and assigns.
     2.12. “Company’s Accountants” means the independent accountant or accountants engaged by the Company and, if selected or changed following a Change in Control, approved by the trustee of the trust established in accordance with Section 14.
     2.13. “Company’s Actuaries” means the independent actuary or actuaries engaged by the Company and, if selected or changed following a Change in Control, approved by the trustee of the trust established in accordance with Section 14.
     2.14. “Compensation” means a Participant’s Base Salary plus Annual Cash Bonus.

3


 

     2.15. Before January 1, 2006, “Compensation Credit” means an amount equal to 9% of the Participant’s Compensation. Such credit shall be computed and credited to the Participant’s Account on a monthly basis as of the last business day of each month. In order to receive a Compensation Credit for a given month, the Participant must be actively employed by the Company or Affiliated Company on such last business day of the month.
     Effective January 1, 2006, “Compensation Credit” means:
          (a) an amount equal to 10% of the Participant’s Compensation for a Participant who is the DTE Chief Executive Officer, the DTE Chief Operating Officer, or in Executive Group 1 or 2;
          (b) an amount equal to 9% of the Participant’s Compensation for a Participant who is in Executive Group 3;
          (c) an amount equal to 9% of the Participant’s Compensation for a Participant who is in Executive Group 4 and who was a Participant as of December 31, 2005;
          (d) an amount equal to 7% of the Participant’s Compensation for a Participant who is in Executive Group 4 and who first became a Participant after December 31, 2005; and
          (e) an amount equal to 5% of the Participant’s Compensation for a Participant who is in Executive Group 5.
     Before April 1, 2007, the credit will be computed and credited to the Participant’s Account on a monthly basis as of the last business day of each month. In order to receive a Compensation Credit for a given month, the Participant must be actively employed by the Company or Affiliated Company on the last business day of that month.
     Effective April 1, 2007, the credit will be computed and credited to the Participant’s Account at the end of each payroll period.
     2.15A Effective October 30, 2006, “Discretionary Contribution” means a credit to a Participant’s Account in addition to Compensation Credits. A Discretionary Contribution will be stated as a percentage of a Participant’s Compensation or as a lump sum amount. All Discretionary Contributions must be approved by the Committee.
     2.16. “DTE” means DTE Energy Company or its successors and assigns.
     2.17. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any regulations issued thereunder. References to any section or subsection of ERISA includes references to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

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     2.17A Effective January 1, 2006, “Executive Group” is the grouping of executives to which a Participant is assigned by the Company for purposes of determining the Participant’s compensation level, incentive targets, and executive benefit eligibility.
     2.18. “FICA” means the tax applied under the Federal Insurance Contributions Act as set forth in Chapter 21, Subtitle C, of the Code, and any regulations issued thereunder.
     2.19. “Frozen MSBP Participant” means an employee of DTE on December 31, 2000 who was participating in the MSBP on December 31, 2000 and is included in Appendix B.
     2.20. “Frozen MSBP Participant’s Benefit” means the value of the Participant’s MSBP benefit. Such benefit shall be calculated in accordance with section 5.01. In order to receive this benefit, the Participant must have attained age 55 and have completed at least 10 years of Company service upon termination, retirement, disability or death.
     2.21. “Grandfathered MSBP Participant” means an active employee of DTE on December 31, 2000 who was participating in the MSBP on December 31, 2000 and is included in Appendix C.
     2.22. “Grandfathered MSBP Retiree” means a former employee of DTE or an Affiliated Company who, on December 31, 2000, was a retired participant receiving benefits from the MSBP. The benefits payable to a Grandfathered MSBP Retiree shall be identical in all respects to the participant’s benefit under the MSBP.
     2.23. “ Grandfathered SDRIP Participant” means an active executive who was participating in the SDBRIP on May 31, 2002 and is included in Appendix D or E.
     2.24. “Grandfathered SDRIP Nonactive Participant” means a former employee of DTE or MCN Energy Group who, on May 31, 2002, was a terminated participant receiving or eligible to receive benefits from the SDRIP. The benefits payable to a Grandfathered SDBRIP Retiree shall be identical in all respects to the participant’s benefit under the provisions of the SDRIP.
     2.25. “Investment Credit” means the hypothetical earnings, gains or losses posted to the Participant’s Account as if the Participant’s Account was invested in specific investment funds, as directed by the Participant, that reflect the funds offered under the DTE Energy Company Savings and Stock Ownership Plan, or its successor thereto. Prior to January 1, 2001, the Investment Credit will be equal to 7% per year, compounded monthly. From January 1, 2001 through November 1, 2002 or the conversion to a third-party administrator, the Investment Credit will be equal to 9.5% per year, compounded monthly.
     2.26. “Opening Balance” means:
          (a) With respect to a Grandfathered MSBP Participant, the hypothetical value that would have accumulated if the ESRP had been in effect for such participant from the date he/she was named a Group I or II participant in the MSBP through January 1, 2001 (“Transition

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Period”). For purposes of the Compensation Credits during such Transition Period only, the term Compensation shall mean base pay, lump sums in lieu of annual base pay increases, and amounts awarded under the Shareholder Value Improvement Plan (‘SVIP’) and the Executive Incentive Plan (‘EIP’). SVIP and EIP awards for years before 1994 will be treated as paid in full on the date the first payment was made; otherwise, SVIP and EIP awards will be included on the date of payment. Compensation includes amounts deferred under any qualified or nonqualified deferred compensation plan sponsored by DTE or any Affiliated Company. An Investment Credit equal to 7% per year, compounded monthly, shall be applied until December 31, 2000 and 9.5% per year compounded monthly from January 1, 2001 to the later of November 1, 2002 or the conversion to a third-party administrator.
          (b) With respect to a Grandfathered SDRIP Participant, the value of such participant’s SDRIP account as of May 31, 2002 under Option A of the SDRIP present valued at a 7% discount rate, plus Compensation Credits and Investment Credits from June 1, 2002 until the later of November 1, 2002 or the conversion to a third-party administrator.
          (c) With respect to a Participant who is not a Grandfathered MSBP or SDRIP Participant hired prior to the later of November 1, 2002 or the date of conversion to a third-party administrator, an amount equal to Compensation Credits and Investment Credits until the later of November 1, 2002 or the conversion to a third-party administrator.
     2.27. “Participant” means an executive of DTE or an Affiliated Company who has been designated by the Committee as eligible to participate in the Plan.
     2.28. “Plan” means the DTE Energy Company Executive Supplemental Retirement Plan, as described herein and as amended.
     2.29. “Plan Year” means the period beginning January 1 and ending December 31 of each year.
     2.29A “Post-2004 Benefit” means:
          (a) With respect to a Frozen MSBP Participant or a Grandfathered MSBP Participant, the portion of the MSBP benefit in excess of the Pre-2005 Benefit.
          (b) With respect to a Participant’s Account, the portion of the Account attributable to Compensation Credits and Discretionary Contributions credited to the Account after December 31, 2004 and associated Investment Credits.
     2.29B “Pre-2005 Benefit” means:
          (a) With respect to a Frozen MSBP Participant or a Grandfathered MSBP Participant, the portion of the MSBP benefit accrued and vested as of December 31, 2004, computed as if the Participant voluntarily terminated employment as of December 31, 2004, and actuarially adjusted as permitted by the Treasury Regulations under Code Section 409A.

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          (b) With respect to a Participant’s Account, the portion of the Account attributable to the Participant’s Opening Balance and Compensation Credits credited to the Account before January 1, 2005 and associated Investment Credits.
     2.30. “Spouse” means an individual who is legally married to a Participant under the laws of the State in which the Participant resides, on the day immediately preceding the Participant’s date of death.
     2.31. “Vested Account” means the amount that the Participant is entitled to receive upon termination of service for any reason with the Company or an Affiliated Company. Vesting in a Participant’s Account is governed by Section 7 herein.
SECTION 3.
PARTICIPATION
     3.01. Designation By Committee . An employee may only become a Participant by designation by the Committee. Such employee must be an individual who is included within a “select group of management or highly compensated employees,” within the meaning of Title I of ERISA. In addition, an employee who is a Grandfathered MSBP Participant, a Frozen MSBP Participant or a Grandfathered SDBRIP Participant shall also be a participant in the Plan.
     3.02. Effective Date of Participation .
          (a) Newly Designated Participants. An Employee shall become a Participant as of the later of January 1, 2001 or the date he or she is first designated as a Participant.
          (b) Grandfathered MSBP Participants. A Grandfathered MSBP Participant shall be deemed to be a participant under the Plan as of the date he or she was named a Group I or II participant in the MSBP.
          (c) Grandfathered SDBRIP Participants. A Grandfathered SDBRIP Participant shall become a Participant as of June 1, 2002.
     3.03. Revocation of Designation. A Participant whose designation is revoked prior to the Participant’s retirement, death, termination or disability shall not receive any Compensation Credits under the Plan subsequent to the date of such revocation. However, all monies that are deemed to be in the Participant’s Account as of the date of revocation shall continue to be reflected in the Participant’s Account, including earnings, gains and losses based on the Participant’s Deemed Investment elections under section 4.02, until the Participant’s retirement, death, termination or disability.
     If a Participant whose designation has been revoked under this section is subsequently redesignated as a Participant under section 3.01, the provisions of section 7.03 shall govern.

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SECTION 4.
ACCOUNTS AND EARNINGS
     4.01. Establishment of Accounts . The Committee shall establish a hypothetical bookkeeping Account for each Participant. The initial value of a Participant’s Account shall be zero, except for a Grandfathered MSBP Participant or a Grandfathered SDBRIP Participant, whose initial Account balance shall be established as an Opening Balance. The establishment of an opening balance other than that stated in the previous sentence or awarding of additional service for purposes of vesting under Section 7 shall not be permitted under the Plan.
          Upon the conversion to a third-party administrator, a Participant’s Account balance shall be deemed to be invested in a money market investment fund unless and until the Participant makes his or her investment elections in accordance with section 4.02. Compensation Credits shall be credited to a Participant’s Account as of the last business day of each month. Effective October 30, 2006, a Discretionary Contribution will be credited to a Participant’s Account as of the date determined by the Committee when the Committee approves the Discretionary Contribution.
     4.02. Election of Investment Options . Each Participant shall, by filing an election with the Committee, in a format approved by the Committee, elect the investment options in which the Participant’s Account is deemed to be invested (“Deemed Investments”). Investment options available under the Plan and the ability to change such investment election shall mirror those available under the DTE Energy Company Savings and Stock Ownership Plan (or any successor plan thereto), however, investment options may be changed at the discretion of the Committee.
     4.03. No Requirement to Fund . The Company shall have sole discretion whether or not to invest any of the Company’s funds (whether or not in trust) in a manner that reflects the Deemed Investments or in any other manner. If and to the extent the Company chooses to invest in any Deemed Investment, assets acquired by the Company shall remain the sole property of the Company, subject to the claims of its general creditors, and shall not be deemed to form part of the Participant’s Account. Nothing herein, however, shall preclude the Company from segregating assets that are intended to be a source of payment of benefits from the Plan. The Company shall not be required to fund its obligations in any manner and shall not be required to invest in any particular investment, including any Deemed Investment fund. The Company may, without limitation, purchase life insurance or any security or other property with respect to any or all of its obligations under the Plan. Participants shall have no right, title or interest in any assets held by the Company (or any trust) by reason of a Participant’s participation in this Plan.
SECTION 5.
GRANDFATHERED AND FROZEN MSBP BENEFITS
     5.01. Grandfathered and Frozen MSBP Participant’s MSBP Benefit.
          (a) General. In computing a Grandfathered or Frozen MSBP Participant’s MSBP benefit, such benefit shall be calculated under the provisions described in Appendix A;

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however, for any years of participation after December 31, 2000, Final Average Compensation shall be computed using a hypothetical 10% bonus amount (based on the Participant’s base salary as of the end of the year of computation) in lieu of any payments actually paid under the Shareholder Value Improvement Plan (or any successor plan thereto). Such hypothetical bonus shall be deemed credited as of March 1 in the year after the year during which the bonus was earned.
          (b) Target Percent of Average Final Compensation. Participants who have been awarded service under the MSBP must certify any qualified plan retirement income that the Participant has received, is receiving or will receive from a previous employer. Payments from the MSBP to Participants with awarded service shall be reduced by the non-contributory portion of such retirement income from a previous employer.
          (c) Cash Balance Participation. If a Grandfathered or Frozen MSBP Participant participates in the cash balance portion of the DTE Energy Company Retirement Plan (or any successor plan thereto), such Participant’s MSBP benefit shall be computed in accordance with Appendix A, except that the calculation under Step 5 of the Payment Calculation shall be modified such that the Monthly Target Benefit Amount under the Guaranteed Term Plus Life payment option will be determined as one-twelfth of the following: Step 2 plus Step 4 minus the Cash Balance Benefit under the DTE Energy Retirement Plan expressed as a Straight Life Annuity option at early retirement. Under Step 2 as modified, the term “Retirement Allowance Factor” shall mean the “multiplier (or multipliers, if applicable) used in the basic formula of the DTE Energy Company Retirement Plan for Non-Cash Balance Participants.”
          (d) Promotion From Group II. If a Participant who had a designation of Group II under the MSBP as of January 1, 2001, is subsequently promoted to Group I, such Participant’s MSBP benefit at termination shall be calculated with the Group I target percentage of average final compensation and Group I service index.
          (e) Promotion From Group III. If a Frozen MSBP Participant who had a designation of Group III under the MSBP as of January 1, 2001, is subsequently promoted and designated a Group II or Group I Participant, such Participant’s MSBP benefit at termination will be calculated with the target percentage of average final compensation and service index reflective of the Participant’s Group at termination. Such Participant’s ESRP Account shall be initialized as of the date the Participant’s promotion to Group I or Group II is effective (“Promotion Date”). As of the Participant’s Promotion Date, he or she shall be treated as a Grandfathered MSBP Participant for purposes of Section 5.02.
     5.02. Election for Grandfathered MSBP Participants. A Grandfathered MSBP Participant may be eligible to elect to receive one of the following benefits of this Plan:
          (a) the value of the Participant’s Account distributed in accordance with his or her distribution election as of the Participant’s last day of active employment with the Company or Affiliated Company; or

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          (b) the value of the Participant’s MSBP benefit calculated under section 5.01. In order to elect this option (b), the Participant must have attained age 55 and have completed at least 10 years of Company service as of his or her last day of active employment with the Company or Affiliated Company.
     Such election shall be made no later than the Participant’s last day of active employment with the Company or Affiliated Company. If a Grandfathered MSBP Participant does not make a timely election under this section, such Participant shall be deemed to have made the election described in subsection (a) above as of his or her termination date.
     If a Grandfathered or Frozen MSBP Participant makes an election to have his or her benefit calculated in accordance with Section 5.02(b) and such Participant survives his or her designated beneficiary prior to full payment of the benefit, the Participant shall continue to receive the benefit as originally calculated. There shall be no pop-up feature under this Plan.
     5.03. Election for Frozen MSBP Participants .
          (a) Before October 30, 2006, a Frozen MSBP Participant shall not have an election as described in section 5.02. The benefit available to a Frozen MSBP Participant shall be calculated as described in section 5.01(a) or (b).
          Effective October 30, 2006, a Frozen MSBP Participant who has Compensation Credits or Discretionary Contributions credited to his or her Account under section 4.01 must make the election described in section 5.02. The Frozen MSBP Participant may not receive both the Participant’s MSBP benefit and the Participant’s Account.
          (b) A Frozen MSBP Participant who has not had any Compensation Credits or Discretionary Contributions credited to his or her Account under section 4.01 does not have an election as described in section 5.02. The benefit available to the Frozen MSBP Participant will be calculated as described in section 5.01(a) or (b).
SECTION 6.
FORM AND TIMING OF PAYMENT
     6.01. Distribution of Account .
          (a) The Company shall distribute each Participant’s Vested Account in accordance with the Participant’s distribution election unless the Plan provides otherwise. The distribution election shall provide for payment in either (i) annual installments over a period not less than two years and not more than 15 years, in one-year increments, or (ii) a lump sum distribution. If no distribution election is on file with the Company, the Participant’s Vested Account shall be distributed in a single lump sum.

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          (b) Distribution of the MSBP benefit to a Grandfathered MSBP Participant or a Frozen MSBP Participant who elects under
Section 5.2(b) to receive the Participant’s MSBP benefit instead of the Participant’s Account will be made as provided in Appendix A.
     6.02. Timing of Distributions .
          (a) Pre-2005 Benefit . A lump sum distribution or the first annual installment of the Participant’s Pre-2005 Benefit shall be made as of the March 1 of the plan year following the year of termination of service with the Company or an Affiliated Company. Subsequent annual installments of the Participant’s Pre-2005 Benefit shall be made each following March 1 of the installment period. Timing of a distribution of the Participant’s Pre-2005 Benefit due to a Participant’s death shall be governed by Section 8.03.
          (b) Post-2004 Benefit.
               (1) If the Participant is not a “specified employee” for purposes of Code section 409A at the time the Participant’s service terminates for any reason other than death, a lump sum distribution or the first annual installment of the Participant’s Post-2004 Benefit shall be made on:
                    (A) January 1 following the end of the Plan Year in which the Participant’s service with the Company or an Affiliated Company terminated, if the Participant did not make any election under Section 6.04(b)(2)(B); or
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under
Section 6.04(b)(2)(B), if the Participant made one or more elections under Section 6.04(b)(2)(B).
               (2) If a Participant is a “specified employee” for purposes of Code section 409A at the time the Participant’s service terminates for any reason other than death, a lump sum distribution or first annual installment of the Participant’s Post-2004 Benefit will not be made before the latest of:
                    (A) January 1 following the end of the Plan Year in which the Participant’s service terminated for a reason other than death, if the Participant did not make any election under Section 6.04(b)(2)(B); and
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under
section 6.04(b)(2)(B), if the Participant made one or more elections under Section 6.04(b)(2)(B); and
                    (C) the earlier of:
                         (i) the first day of the calendar month beginning more than 6 months after the date the Participant’s service terminated for a reason other than death; and

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                         (ii) the first day of the calendar month beginning after the Participant’s death.
     Subsequent annual installments of the Participant’s Post-2004 Benefit shall be made each following January 1 of the installment period.
Timing of a distribution of a Participant’s Post-2004 Benefit due to a Participant’s death shall be governed by Section 8.03.
     6.03. Form of Distributions .
          (a) Annual Installments .
               (1)  General Rule . The distribution to a Participant shall be paid in cash. Except as provided in Section 6.03(a)(2), the initial annual installment distribution shall be determined by dividing the value of the Participant’s Account, determined as of December 31 of the Plan Year in which the Participant’s employment terminated by the number of installment payments to be made. The amount distributed to the Participant thereafter shall be recalculated each year to reflect changes in the Participant’s Account through December 31 of such subsequent calendar year and the remaining number of installment payments to be made. Earnings and losses based on the Deemed Investments shall be credited to the Participant’s Account through December 31 of each Plan Year in which the Participant has an Account balance.
               (2)  Additional Rules for Post-2004 Benefit .
                    (A) An initial distribution delayed under Section 6.02(b)(2)(C) will be determined by dividing the value of the Participant’s Post-2004 Benefit determined as of the last day of the month preceding the payment date, by the number of installment payments to be made.
                    (B) An initial distribution delayed under Section 6.02(b)(1)(B) or 6.02(b)(2)(B) will be determined by dividing the value of the Participant’s Post-2004 Benefit as of the December 31 preceding the payment date, by the number of installment payments to be made.
          (b) Distribution of Small Amounts . Notwithstanding a Participant’s distribution election:
               (1) if a Participant’s Pre-2005 Benefit is less than or equal to $10,000 as of any December 31, the Participant’s Pre-2005 Benefit shall be paid in a single lump sum.
               (2) if a Participant’s Post-2004 Benefit is less than or equal to the dollar limit under Code Section 402(g) for the calendar year in which the Participant terminates

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service, the Participant’s Post-2004 Benefit shall be paid in one lump sum to the extent permitted by Code Section 409A and the related Treasury Regulations.
     6.04. Change In Distribution Option .
          (a) Pre-2005 Benefit . A Participant may change the distribution election previously selected for the Participant’s Pre-2005 Benefit by submitting a revised distribution election to the Committee. A change in time or manner of any distribution of the Pre-2005 Benefit, however, shall be effective only if the Committee (or its designated representative) receives the revised distribution election while the Participant is actively employed by the Company or an Affiliated Company.
          (b) Post-2004 Benefit .
               (1)  Initial Election . A Participant who first becomes eligible to participate in the Plan may elect annual installments over a period of not less than one year and not more than 15 years for the Participant’s Post-2004 Benefit by submitting a distribution election to the Committee within 30 days of the date the Participant first becomes eligible to participate.
               (2)  Subsequent Election .
                    (A) Before January 1, 2009, a Participant may change the distribution option previously selected for the Participant’s Post-2004 Benefit (or the default option if the Participant did not make an initial election) by filing a written election with the Committee (or its designated representative) before January 1, 2009 that satisfies both of the following:
                         (i) The Participant’s election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Benefit otherwise required to be made before January 1, 2009; and
                         (ii) The Participant’s election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Benefit otherwise required to be made after December 31, 2008.
                    (B) After December 31, 2008, a Participant may elect to change the distribution option previously selected for the Participant’s Post-2004 Benefit (or the default option if the Participant did not make an initial election) by filing a written election with the Committee (or its designated representative) that satisfies both of the following:
                         (i) The Participant’s election is filed with the Committee at least 12 months before the earliest date on which the distribution of the Post-2004 Benefit would begin under the Participant’s then-current distribution election; and

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                         (ii) The Participant’s election designates that distribution of the Post-2004 Benefit will begin at least 5 years after the earliest date on which distribution of the Post-2004 Benefit would begin under the Participant’s then-current distribution election.
     6.05. Unscheduled Withdrawals . A retired Participant receiving distributions in installments is permitted to make unscheduled withdrawals of the retired Participant’s Pre-2005 Benefit as described below:
          (a) Election . A retired Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the undistributed balance of the retired Participant’s Pre-2005 Benefit, which will be paid within 30 days in a single lump sum.
          (b) Withdrawal Penalty . There will be a penalty deducted from the Participant’s Pre-2005 Benefit prior to an unscheduled withdrawal equal to 10% of the Pre-2005 Benefit as of the date the unscheduled withdrawal request is received by the Vice President, Human Resources.
SECTION 7.
VESTING OF BENEFITS
     7.01. General.
          (a) A Participant, other than a Grandfathered MSBP or SDRIP Participant, shall vest 20% per Anniversary Year in his or her Account (“Vesting Service”). There is no partial vesting for a portion of an Anniversary Year. A Participant’s Vested Percentage shall equal the product of (i) 20% and (ii) the Participant’s number of Anniversary Years as of the date of his or her termination, retirement, death or disability.
          (b) Grandfathered MSBP Participant. A Grandfathered MSBP Participant shall vest 20% per Anniversary Year in his or her Account beginning with the year in which the employee was named a Group I or II participant in the MSBP. A Participant’s Vested Percentage shall equal the product of (i) 20% and (ii) the Participant’s number of Anniversary Years as of the date of his or her termination, retirement, death or disability.
          (c) Grandfathered SDRIP Participant. A Grandfathered SDRIP Participant, except for those Participants named on Appendix E, shall vest 50% in his or her Account as of June 1, 2003 and shall be 100% vested as of June 1, 2004. Participants listed on Appendix E shall be 100% vested as of June 1, 2002.
     7.02. Rehired Participants.
          (a) Vesting. If a Participant terminates employment with the Company or Affiliated Company prior to becoming 100% vested, the Participant’s Account shall be

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distributed in accordance with section 6 and the nonvested portion of the Account shall be forfeited. If such Participant is subsequently rehired by the Company or Affiliated Company and is designated a Participant in accordance with section 3, any Account value forfeited upon the prior termination shall not be reinstated.
          However, if the Participant has not incurred consecutive one-year Breaks in Service equal to or in excess of (i) 5 years, or (ii) the aggregate number of years of Vesting Service the Participant had earned before such Break in Service, the Participant’s Anniversary Date shall be adjusted to take into consideration such Participant’s prior period of active service during which he or she was considered to be a Participant in the Plan (“Adjusted Anniversary Date”). A new Account shall be established for such rehired Participant for the purpose of recording Compensation Credits, Discretionary Contributions (effective October 30, 2006) and Investment Credits beginning after such Participant’s rehire date reflective of his or her Vested Percentage which shall be recomputed to include the Participant’s Adjusted Anniversary Date.
          (b) Pay Status of Prior Benefit. If the rehired Participant is receiving annual distributions of his or her Account as it existed on the date of the Participant’s termination (“Prior Account”), such Prior Account (i) will remain separate from the Account established as described in Section 7.02(a), (ii) will retain the Vesting Percentage applied as of the Participant’s date of termination, and (iii) payments to the Participant will continue upon the Participant’s return to employment with the Company or Affiliated Company.
     7.03. Redesignated Participants . If a Participant’s designation as a Participant had been revoked under section 3.03, prior to becoming 100% vested, the Participant’s Account shall continue to be credited with earnings, gains and losses based on the deemed investment of the Account. If such Participant is subsequently redesignated as a Participant under section 3.01, such Participant’s vested status shall be determined based on the Participant’s Anniversary Years and his Account shall be adjusted to reflect the revised vested percentage.
SECTION 8.
SELECTION OF AND PAYMENTS TO A BENEFICIARY
     8.01. Beneficiary Designation . A Participant shall designate a Beneficiary on a form provided by the Vice President, Human Resources, or his or her designee, for the purpose of designating a Beneficiary. If a Participant has not designated a Beneficiary, or if a designated Beneficiary is not living or in existence at the time of a Participant’s death, any death benefits payable under the Plan shall be paid to the Participant’s Spouse, if then living, and if the Participant’s Spouse is not then living, to the Participant’s estate.
     8.02. Change in Beneficiary . A Participant may change the designated Beneficiary from time to time by filing a new written designation with the Vice President, Human Resources, or his or her designee. Such designation shall be effective upon receipt by the Vice President, Human Resources, or his or her designee.

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     8.03. Survivor Benefit . If a Participant dies with an Account balance under this Plan, his Beneficiary shall be entitled to receive a distribution of the Participant’s Account. The Beneficiary shall receive the lump sum calculated under the MSBP if the deceased Participant is a Grandfathered MSBP Participant and the Beneficiary elects to receive the benefit provided under the MSBP. Otherwise, such lump sum shall equal the deceased Participant’s Account under the Plan. The lump sum distribution shall be paid within ninety (90) days following the Participant’s death.
SECTION 9.
TAX WITHHOLDING
     Benefits hereunder shall be subject to applicable FICA withholding laws. Benefit payments hereunder shall be subject to applicable federal, state and 1ocal tax withholding laws.
SECTION 10.
ADMINISTRATION OF THE PLAN
     10.01. Duties and Power . The Committee shall be the “named fiduciary” for the Plan responsible for the general operation and administration of the Plan and the proper execution of its provisions. It shall have full discretionary authority to interpret the Plan and to determine the response to all questions arising from its provisions. It shall maintain all necessary books of accounts and records. It shall have the full discretionary power and authority to establish, interpret, enforce, amend, and revoke, from time to time, such rules and regulations for the administration of the Plan and the conduct of its business as it deems appropriate, including the right to remedy ambiguities, inconsistencies and omissions. Any action that the Committee is required or authorized to take shall be final and binding upon each and every person who is or may become a Plan Participant or Beneficiary. The Committee may delegate its authority to administer the Plan.
     10.02. Benefit Statements . The Committee, or its designee, will provide each Participant with a quarterly statement setting forth the Participant’s Account balance.
     10.03. Right to Accelerate . The Board in its sole discretion may accelerate all Pre-2005 Benefits upon termination of the Plan, and pay such benefits in a single lump sum. The Board may accelerate payment of Post-2004 Benefits upon termination of the Plan only as permitted by Code Section 409A and the related Treasury Regulations. If the Internal Revenue Service or the Committee determines that any Participants’ Pre-2005 Benefits are currently taxable, the Committee may direct immediate payment of all or some of the Pre-2005 Benefit in a single lump sum or to take any other action it deems appropriate. If the Internal Revenue Service determines that any Post-2004 Benefits are currently taxable, the Committee may direct immediate payment in a single lump sum of any Post-2004 Benefits determined to be currently taxable. In addition, Participants terminating employment with a Pre-2005 Benefit of less than $10,000 shall receive such benefits in a single lump sum regardless of the Participant’s distribution election. If a Participant’s Post-2004 Benefit is less than or equal to the dollar limit

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under Code Section 402(g) for the calendar year in which the Participant terminates employment, the Participant’s Post-2004 Benefit shall be paid in one lump sum to the extent permitted by Code Section 409A and the related Treasury Regulations.
SECTION 11.
AMENDMENT, SUSPENSION, AND TERMINATION
     11.01. Right to Amend or Terminate . The Plan may be amended, modified or terminated by the Committee at any time. Such amendment, modification or termination may modify or eliminate any benefit hereunder except that such amendment, modification or termination shall not affect the rights of Participants or Beneficiaries to the vested portion of a Participant’s Account as of the date of such amendment or termination.
     11.02. Right to Suspend . If the Committee determines that payments of Pre-2005 Benefits under the Plan would have a material adverse affect on the Company’s ability to carry on its business, the Committee may suspend payments of Pre-2005 Benefits temporarily for such time as in its sole discretion it deems advisable, but in no event for a period in excess of one year. If the Committee determines that payments under the Plan will jeopardize the Company’s ability to continue as a going concern, the Committee may suspend payments of Post-2004 Benefits until the first taxable year when payment will not have that effect. The Company shall pay such suspended payments in a lump sum immediately upon the expiration of the period of suspension.
     11.03. Partial ERISA Exemption . The Plan is intended to provide benefits for “a select group of management or highly compensated employees” within the meaning of sections 201, 301 and 401 of ERISA, and therefore to be exempt from sections 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan shall terminate and, to the extent permitted by Code Section 409A and the related Treasury Regulations with respect to Post-2004 Benefits, existing Account balances shall be paid in a single lump-sum and no further benefits, vested or non-vested, shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of section 3(2) of ERISA which is not so exempt.
SECTION 12.
MISCELLANEOUS
     12.01. Unfunded Plan . The Plan shall be unfunded within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. All benefits payable under the Plan shall be paid from the Company’s general assets. The Company shall not be required to set aside or hold in trust any funds for the benefit of a Participant or Beneficiary, each of whom shall have the status of a general unsecured creditor with respect to the Company’s obligation to make benefit payments pursuant to the Plan. Any assets of the Company available to pay Plan benefits shall be subject to the claims of the Company’s general creditors and may be used by the Company in its sole

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discretion for any purpose. A Participant shall be treated as an unsecured creditor of the Company for all benefits under the Plan.
     12.02. No Right to Continued Employment . Nothing in the Plan shall create or be construed as a contract between the Company or an Affiliated Company and employees for any matter including giving any person employed by the Company or an Affiliated Company the right to be retained in the Company’s or an Affiliated Company’s employ. The Company and each Affiliated Company expressly reserve the right to dismiss any person at any time, with or without cause, without liability for the effect that such dismissal might have upon him as a Participant in the Plan or for any other purpose.
     12.03. Prohibition Against Alienation . Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No such right or benefit shall be liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such right or benefit.
     12.04. Savings Clause . If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision and the remaining provisions hereof shall continue to be construed and enforced as if the invalid or unenforceable provision had not been included.
     12.05. Payment of Benefit of Incompetent . In the event the Committee finds that a Participant, former Participant or Beneficiary is unable to care for his affairs because of his minority, illness, accident, or other reason, any benefits payable hereunder may, unless other claim has been made therefor by a duly appointed guardian, committee or other legal representative, be paid to a spouse, child, parent, or other blood relative or dependent or to any person found by the Committee to have incurred expenses for the support and maintenance of such Participant, former Participant, or Beneficiary; and any such payments so made shall be a complete discharge of all liability therefor.
     12.06. Spouse’s Interest . The interest in the benefits hereunder of a Spouse who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such Spouse in any manner including, but not limited to, such Spouse’s will, nor shall such interest pass under the laws of intestate succession.
     12.07. Successors . In the event of any consolidation, merger, acquisition or reorganization of the Company, the obligations of the Company and Participating Affiliated Companies under this Plan shall continue and be binding upon the Company, Participating Affiliated Companies and its successors.
     12.08. Gender, Number and Heading . Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where

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they would so apply. Headings of sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan.
     12.09. Legal Fees and Expenses . The Company shall pay all reasonable legal fees and expenses that a Participant may incur as a result of the Company contesting the validity, enforceability, or the Participant’s interpretation of, or determinations under this Plan, other than tax withholding under Section 9.
     12.10. Choice of Law . This Plan shall be governed by and construed in accordance with the laws of the State of Michigan, other than its choice-of-law rules, to the extent not superseded by applicable federal statues or regulations.
     12.11. Affiliated Employees . Transfers of employment between Affiliated Companies and the Company or other Affiliated Companies will be treated as continuous and uninterrupted service under the Plan.
     12.12. Plan Document . This Plan document provides the final and exclusive statement of the terms of the Plan. Unless otherwise authorized by the Committee or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 11.01. This document legally governs the operation of the Plan, and any claim of right or entitlement under the Plan shall be determined solely in accordance with its provisions. To the extent that there are any inconsistencies between the terms of any related materials and the terms of this document, the terms of this document shall control and govern the operation of the Plan. No other evidence, whether written or oral, shall be taken into account in determining the right of an Eligible Employee, a Participant, or Beneficiary, as applicable, to any benefit of any type provided under the Plan.
SECTION 13.
ARBITRATION
     In the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between a Participant who is eligible to elect to receive the benefits provided under this Plan and the Company with respect to the payment of benefits to such Participant under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section 13.
          (a) Arbitration shall be the sole and exclusive remedy to redress any Grievance.
          (b) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
          (c) The arbitration shall be conducted by the American Arbitration Association in accordance with the Federal Arbitration Act and the Employee Benefit Plan

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Claims Arbitration Rules of the American Arbitration Association and reasonable expenses of the arbitrators and the American Arbitration Association shall be borne by the Company.
          (d) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit, Michigan Metropolitan area.
          (e) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Since arbitration is the exclusive remedy with respect to any Grievance, no Participant eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court, or administrative agency by such employee or the Company with respect to any Grievance which is arbitrable as herein set forth.
          (f) The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
SECTION 14.
CHANGE IN CONTROL PROVISIONS
     14.01. General . In the event of a Change in Control, as defined in Section 14.07, then, notwithstanding any other provision of the Plan, the provisions of this Section 14 shall be applicable and shall supersede any conflicting provisions of the Plan, including any change in control language in the MSBP, SDRIP or KEDC.
     14.02. Immediate Vesting. In the case of a Change in Control, each Participant’s Account shall immediately be 100% vested.
     14.03. Transfer to Rabbi Trust . The Company shall establish a trust (the “Rabbi Trust”) that is intended to be an unfunded arrangement and not affect the status of the Plan as an unfunded arrangement for purposes of Title I of ERISA. The terms of the Rabbi Trust shall provide that, within seven (7) days of a Change in Control, assets shall be transferred to the Rabbi Trust in (a) an amount equal to each Participant’s Account balance as of the date of the Change in Control, plus (b) an amount deemed necessary to pay estimated Rabbi Trust administrative expenses for the following five (5) years, as determined by the Company’s Accountants or the Company’s Actuaries. Assets transferred in accordance with the preceding sentence shall either be (i) in the form of shares of the Deemed Investments and/or DTE Stock equal to the number of shares of each such Deemed Investment and DTE Stock in which the Participant’s Account is deemed to be invested for bookkeeping purposes on the date of the Change in Control or (ii) in the form of in cash, in which case an additional cash transfer shall be made, prior to the initial investment of cash by the trustee of the Rabbi Trustee in DTE Stock or any Deemed Investment, in an amount sufficient to permit the trustee of the Rabbi Trust to invest in the number of shares of each Deemed Investment and DTE Stock in which the Participant’s

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Account was deemed to be invested for bookkeeping purposes on the date of the Change in Control (as adjusted for any subsequent share splits, consolidations, etc.). The Company and/or an Affiliated Company shall make all transfers of assets required by the Rabbi Trust in a timely manner and shall otherwise abide by the terms of the Rabbi Trust.
     14.04. Lump Sum Payments . In connection with a Change in Control or consummation of a transaction constituting a Change in Control, the Chairman of DTE Energy Company shall have the absolute discretion to direct that a lump sum payment be made to a Participant up to the total value of such Participant’s Pre-2005 Benefit if such payment will reduce the amount of any potential excise tax imposed by
Code section 4999.
     14.05. Joint and Several Liability . Upon and at all times after a Change in Control, the liability under the Plan of the Company and each Affiliated Employer that has adopted the Plan shall be joint and several so that the Company and each such Affiliated Employer shall each be liable for all obligations under the Plan to each employee covered by the Plan, regardless of the corporation by which such employee is employed.
     14.06. Dispute Procedures . In the event that, upon or at any time subsequent to a Change in Control, a disputed claim for benefits under the Plan is brought by a Participant or beneficiary, the following additional procedures shall be applicable:
          (a) Any amount that is not in dispute shall be paid to the Participant or beneficiary at the time or times provided herein.
          (b) The Company shall advance to such claimant from time to time such amounts as shall be required to reimburse the claimant for reasonable legal fees, costs and expenses incurred by such claimant in seeking a judicial resolution of his or her claim, including reasonable fees, costs and expenses relating to arbitration.
     14.07. Definition of Change in Control . A “Change in Control” means the occurrence of any one of the following events:
          (a) individuals who, on December 31, 2001, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to December 31, 2001, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to directors or as a result of any other actual or threatened solicitation of proxies [or consents] by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
          (b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange

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Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided , however , that the event described in this paragraph (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c)), or (E) a transaction (other than one described in (c) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approve a resolution providing expressly that the acquisition pursuant to this clause (E) does not constitute a Change in Control under this paragraph (b);
          (c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (a “Business Combination”) or sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or
          (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
     Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the

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Company which reduces the number of Company Voting Securities outstanding; provided , that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
     14.08. Additional Benefits . Effective October 30, 2007, the Account balance of any Participant who has entered into a Change in Control Severance Agreement and whose employment is terminated under circumstances entitling the Participant to Severance Benefits under Section 3(a) of the Change in Control Severance Agreement will be credited with additional Compensation Credits for the Participant’s Benefit Continuation Period as provided in Section 3(a)(4)(B) of the Change in Control Severance Agreement, based on the Participant’s Base Salary determined under Section 3(a)(1)(A) of the Change in Control Severance Agreement and the Participant’s Annual Cash Bonus determined under Section 3(a)(1)(B) of the Change in Control Severance Agreement.
IN WITNESS WHEREOF, DTE Energy Company has caused this amended and restated Plan to be executed as of this 5 th day of November 2008.
         
  DTE Energy Company
 
 
  By:   /s/ Larry E. Steward    
         Larry E. Steward   
         Vice President, Human Resources   
 

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Appendix A
     
 
  Management
 
   
 
  Supplemental
 
   
 
      Benefit
 
   
 
        Plan

 


 

SIXTH RESTATEMENT OF
THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
     The Detroit Edison Company Management Supplemental Benefit Plan (the “Plan”), established by The Detroit Edison Company (the “Company”) effective July 24, 1989, as amended and restated effective January 22, 1990, June 26, 1995, January 1, 1996, October 28, 1996, and October 27, 1997 is hereby amended and restated as of December 2, 1998, by this Sixth Restatement.
Purpose
     The Plan is designed to supplement pension benefits for eligible management employees. The Plan has the objective of making the Company’s retirement program more competitive within the electric utility industry and general industry, which will facilitate the attraction and retention of management employees.
Definition
      Average Final Compensation. Equals one-fifth of pay during the 260 weeks of Company service that results in the highest average, calculated without regard to any limitation imposed by Section 401(a)(17) of the Internal Revenue Code. In additional to normal pay, lump sum payments in lieu of April base pay increases and Shareholder Value Improvement Plan awards with no restriction on the year paid will be included when calculating the 260 weeks of benefit service which result in the highest average.
      Awarded Service. Years of service that may be imputed to an otherwise eligible Plan participant by the Organization and Compensation Committee (“Committee”) of the Board of Directors, having taken into account the value to the Company of such participant’s prior experience.
      Company. The Detroit Edison Company and any Controlled Group Member which has adopted the Plan with the approval of the Chairman of the Board of Directors and the Chairman of the board of directors of the Controlled Group Member. As a condition to participating in the Plan, such Controlled Group Member shall authorize the Chairman of the Board of Directors to act for it in all matters arising under the Plan and shall agree to comply with such other terms and conditions as may be imposed by the Chairman of the Board of Directors. Where the context requires in respect of the liability for the payment of any benefit to an eligible participant or beneficiary thereof, the term “Company” shall mean The Detroit Edison Company or such other Controlled Group Member employing or who employed such employee. Unless otherwise defined herein, all defined terms shall have the same meaning as provided under the Retirement Plan. All corporate officers and other administrative personnel referred to herein refer to officers and administrative personnel of The Detroit Edison Company.
      Company Service. All years of service with the Company calculated to the nearest month.
      Executive Post-Employment Income Arrangement. Individual arrangements that were entered into with certain executives upon initial employment with the Company, specifically excluding, however, any Change-in-Control Severance Arrangement entered into with DTE Energy Company and any offer of employment letter agreement as they may be amended from time to time. The arrangements may provide for additional benefits upon retirement.
      Key Employe Deferred Compensation Plan. The Key Employe Deferred Compensation Plan initiated in 1964 which provides a supplemental pension benefit to certain management employees. The Key Employe Deferred Compensation Plan is sponsored by Detroit Edison for eligible employees.
      Certain Management or Highly-Compensated Employees. An employee of a Company, other than The Detroit Edison Company, who is specifically designated by written order of the Committee as a member of

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management eligible to participate in the Plan, and who is a member of a select group of management or highly-compensated employees of the Company within the meaning of ERISA Section 201(2). An employee’s designation as a Certain Management or Highly Compensated Employee shall terminate, however, on the date the Committee by written order terminates such employee’s designation for participation in the Plan.
      Normal Pay. The employee’s salary from the Company for a standard forty-hour work week calculated, without regard to any limitation imposed by Section 401(a)(17) of the Internal Revenue Code including amounts deferred by the employee under the Company’s qualified and non-qualified savings plans. It does not include any bonuses, special pay, or premium for overtime work.
      Retirement Plan. The Employes’ Retirement Plan of The Detroit Edison Company (“Detroit Edison”). The Retirement Plan is a defined benefit pension plan sponsored by Detroit Edison for eligible employees.
      Retirement Allowance Factor. The multiplier used in the basic formula of the Retirement Plan.
Eligibility
     Eligibility to participate in this Plan is determined no later than the latest to occur of:
  (1)   90 days from the date hereof; or
 
  (2)   90 days subsequent to an otherwise eligible participant’s 55th birthday; or
 
  (3)   In the case of an otherwise eligible participant who does not have at least 10 years of Company service at age 55, 90 days subsequent to the otherwise eligible participant’s having 10 years of Company service.
   Participation in the Plan is limited to those management employees who
  (1)(A)   Were members of Management Council (pursuant to OR3, Management Groups) November 20, 1998; such employees being named on Exhibit D, or
  (B)   Are designated by the Chairman as key managerial employees eligible to participate in the Plan; or
 
  (C)   With respect to management employees of a Company other than The Detroit Edison Company, are Certain Management or Highly Compensated Employees, and
  (2)   Are not personally eligible to receive a benefit from the Key Employe Deferred Compensation (KEDC) Plan although a court of competent jurisdiction may have recognized spousal rights; and
 
  (3)   Do not have an effective Executive Post-Employment Income Arrangement; and
 
  (4)   At the time of termination from the Company (or death while actively employed), are at least 55 years of age and have at least 10 years of Company service.
     Employees who are eligible to receive a benefit from KEDC or who have entered into Post-Employment Income Arrangements with the Company may elect to participate in this Plan in accordance with the first paragraph of this section by filing an election to waive any rights to a benefit from KEDC and/or any rights under a Post-Employment Income Arrangement with the Vice President-Human Resources, who will provide an election form upon request, or, in the case of KEDC, will in certain circumstances be deemed to have made such elections as provided in KEDC.

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Target Percentage of Average Final Compensation
     Payments from the Plan are based upon the calculated target percentage of average final compensation. The target percentage of average final compensation is determined by years of Company service and awarded service, if any, and by the management group in which the participant is a member at the time of termination from the Company (or death while actively employed by the Company) as specified in Exhibit A.
     Participants awarded service under the Plan must certify any retirement income expected or being received from a previous employer. Payments from the Plan to participants with awarded service will be reduced by the non-contributory portion of any retirement income expected or being received from a previous employer.
     Payments from the Plan will be reduced by any KEDC spousal payments required by a court of competent jurisdiction. Payments from the Plan may also be affected by the employee’s age at termination (see Early Retirement) and the payment option selected by the employee (see Payment Options).
     Payments from the Plan are not payable until the participant terminates employment with the Company and all Controlled Group Members (by death or otherwise), and references in the following provisions of the Plan to “terminating employment” or “employment termination” or similar provisions shall mean termination of employment with the Company and all Controlled Group Members.
Early Retirement
     The Plan provides for an unreduced target percentage for those terminating employment at age 60 or older. A reduced or adjusted target percentage is provided for those terminating employment (including death) who are at least age 55 but prior to age 60. The early retirement adjustment schedule is as follows:
                 
Age At           Early Retirement
Termination           Adjustment Percentage
55
            60 %
56
            68 %
57
            76 %
58
            84 %
59
            92 %
         60 or older
            100 %
     Age at termination is calculated to the nearest whole month and the early retirement adjustment percentage is determined accordingly.
Pavment Options
      Pre-2005 Benefit . At the time of employment termination, an eligible employee must elect one of the following payment options for the eligible employee’s Pre-2005 Benefit: (a) Guaranteed Term Plus Life, (b) Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit and (c) Actuarial-Adjusted Life with a 50% Joint and Survivor Benefit. In the event that an employee dies during active employment, and at the time of death was eligible for a benefit as provided herein, the payment option is deemed to be Guaranteed Term Plus Life.
      Post-2004 Benefit .
     (a)  Initial Election . An eligible employee who first becomes eligible for MSBP benefits may elect any of the following payment options for the eligible employee’s Post-2004 Benefit by submitting a distribution election to the Committee (or its designated representative) within 30 days of the date the employee first becomes eligible to participate:

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  (1)   Guaranteed Term Plus Life;
 
  (2)   Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit; and
 
  (3)   Actuarial-Adjusted Life with 50% Joint and Survivor Benefit.
     An eligible employee who does not timely make an initial election will receive his or her MSBP benefits in the form of the Guaranteed Term Plus Life.
     (b)  Subsequent Election .
          (1) Before January 1, 2009, an eligible employee may change the distribution option previously selected for the eligible employee’s Post-2004 Benefit (or the default option if the eligible employee did not make an initial election) by filing a written election with the Committee (or its designated representative) before January 1, 2009 that satisfies both of the following:
               (A) The election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Benefit otherwise required to be made before January 1, 2009; and
               (B) The election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Benefit otherwise required to be made after December 31, 2008.
          (2) After December 31, 2008, an eligible employee may elect to change the distribution option previously selected for the eligible employee’s Post-2004 Benefit (or the default option if the eligible employee did not make an initial election) by filing a written election with the Committee (or its designated representative) that satisfies both of the following:
               (A) The election is filed with the Committee at least 12 months before the earliest date on which the distribution of the Post-2004 Benefit would begin under the then-current distribution election; and
               (B) The election designates that distribution of the Post-2004 Benefit will begin at least 5 years after the earliest date on which distribution of the Post-2004 Benefit would begin under the then-current distribution election.
Guaranteed Term Plus Life
     If the employee elects the Guaranteed Term Plus Life payment option, the employee, at the time of employment termination, must also elect a survivor benefit of either monthly payments or an adjusted lump sum payment. In the event that such an election is not made by the employee, or in the event that the employee dies during active employment and at the time of death was eligible for a Plan benefit as provided herein, the survivor benefit is assumed to be the adjusted lump sum payment.
     The Guaranteed Term Plus Life payment option provides for a minimum of 15 years of payments to the employee or, if the employee lives beyond the 15-year period, the payments continue to be made to the employee for the life of the employee.
     If the employee elects the monthly payment survivor benefit and dies prior to the end of the 15-year period, payments will continue to be made to the employee’s beneficiary or estate for the balance of the 15-year period. At the end of this 15-year period, all payments cease and liability of the Company under the Plan is terminated.
     If the employee elects the lump sum payment survivor benefit and dies Prior to the end of the 15-year period, an adjusted lump sum payment is made to the employee’s designated beneficiary or estate. The adjusted lump sum payment is determined by a standard annuity calculation where the adjusted lump sum is the present worth of the remaining monthly benefits in the 15-year period. The methodology and other relevant factors for

4


 

determining the amount of the adjusted lump sum payment are provided in Exhibit B. Upon payment of the lump sum payment, all payments cease and liability of the Company under the Plan is terminated.
Actuarial-Adjusted Life With a 100% Joint And Survivor Benefit
     This option provides for the actuarial equivalent to the benefit payment under the Guaranteed Term Plus Life option. Upon the death of the employee and the designated beneficiary, all payments cease and the liability of the Company under the Plan is terminated. The actuarial equivalent benefit is provided for the life of the employee and upon the death of the employee, 100% of the benefit is provided to the employee’s designated beneficiary for the duration of the beneficiary’s life. If the employee’s designated beneficiary should die prior to the employee, payments continue from the life of the employee and upon the death of the employee all payments cease and liability of the Company under the Plan is terminated. If the employee and designated beneficiary are the same age, the actuarial equivalent benefit equals 97.94% of the Guaranteed Term Plus Life benefit.
     If the beneficiary is younger than the employee, this percentage is reduced by 1.2% for each 12 full months of difference in age. If the beneficiary is older than the employee, this percentage is increased 1.2% for each 12 full months in difference in age up to a maximum of 100%.
Actuarial-Adjusted Life With A 50% Joint And Survivor Benefit
     This option provides for the actuarial equivalent to the benefit payable under the Guaranteed Tenn Plus Life option. Upon the death of the employee and the designated beneficiary, all payments cease and the liability of the Company under the Plan is terminated. The actuarial equivalent benefit is provided for the life of the employee and upon the death of the employee, 50% of the benefit is provided to the employee’s designated beneficiary for the duration of the beneficiary’s life. If the employee’s designated beneficiary should die prior to the employee, payments continue for the life of the employee and upon the death of the employee all payments cease and liability of the Company under the Plan is terminated. If the employee and designated beneficiary are the same age, the actuarial equivalent benefit equals 107.72% of the Guaranteed Term Plus Life benefit. If the beneficiary is younger than the employee, this percentage is reduced by 1% for each 12 full months of difference in age. If the beneficiary is older than the employee, there is no adjustment to the percentage. If the employee does not designate a beneficiary, the actuarial equivalent benefit equals 107.72% of the Guaranteed Term Plus Life benefit, and upon the death of the employee all payments cease and the liability of the Company under the Plan is terminated.
Payment Calculation
Monthly payments from the Plan are determined as follows:
Step 1. Determine Gross Target Amount
The gross target amount results from multiplying the target percentage by Average Final Compensation as defined in this Plan (see Exhibit A to determine the target percentage).
Step 2. Determine Retirement Plan Benefit
The Retirement Plan benefit results from multiplying the retirement allowance factor by average final compensation as defined under the Retirement Plan, calculated for purposes hereof, without regard to any limitations imposed by Section 401 (a)(17) or Section 415 of the Internal Revenue Code, by Company service and, if applicable, by the early retirement adjustment percentage required under the Retirement Plan.
Step 3. Determine Base Annual Target Benefit Amount

5


 

The base annual target benefit amount results from subtracting the Retirement Plan benefit that would be payable at retirement (without regard to whether the employee elects to defer receipt of the benefit) from the gross target amount.
Step 4. Determine Adjusted Annual Target Benefit Amount
The adjusted annual target benefit amount results from multiplying the base annual target benefit amount by the early retirement adjustment percentage (see page 3 to determine the early retirement adjustment percentage).
Step 5. Determine Monthly Target Benefit Amount Under The Guaranteed Term Plus Life Payment Option
The monthly target benefit amount under the Guaranteed Term Plus Life payment option is determined by dividing the adjusted annual target benefit amount by 12.
Step 6. Actuarial-Adjusted Payment Option
If an actuarial-adjusted payment option is selected, the actuarial adjustment is applied to the monthly target benefit amount under the Guaranteed Term Plus Life payment option.
Step 7. Adjustment to Payment Option
If an employee is not immediately eligible for a benefit under the Retirement Plan, the gross target amount will not be adjusted in Step 3 above. In those cases,the payment option determined in Step 6 above will be adjusted by the actuarial adjusted Retirement Plan benefit when it is paid to the employee.
The payment determined in Step 6 above for employees with awarded service will be reduced by the non-contributory portion of any retirement income from a previous employer when it is paid to the employee.
Exhibit C displays examples of the Plan payment calculation procedure.
     In the event an employee receives an assessment of income taxes from the Internal Revenue Service which treats any amount under this Plan as includible in such employee’s gross income prior to payment of such amount to such employee, the Company shall pay an amount equal to such income taxes to such employee within 30 days after receipt of written notice from such employee about such assessment. The base annual target benefit amount (Step 3) shall be reduced by an amount equal to such income taxes and Steps 4, 5 and 6 shall be reduced accordingly.
     Each payment under this Plan shall be reduced by any federal, state or local taxes which The Detroit Edison Company determines should be withheld from such payment.
Schedule of Payments
     Plan payments, if any, are made to the employee or to the designated beneficiary on a monthly basis.
     (a)  Pre-2005 Benefit . The schedule will follow the provisions for payment under the Retirement Plan. The accompanying examples show the effect of Retirement Plan benefits at different times.
     (b)  Post-2004 Benefit .
          (1) If the eligible employee terminates employment because of death, the survivor benefit of the adjusted lump sum payment under the Guaranteed Term Plus Life form of benefit will be paid to the eligible employee’s beneficiary within 90 days after the eligible employee’s death.

6


 

          (2) If the eligible employee terminates employment for any reason other than death and the eligible employee is not a “specified employee” for purposes of Code section 409A at the time the eligible employee’s employment terminates, the first monthly payment of an eligible employee’s Post-2004 Benefit shall be made on the earliest of:
               (A) the first day of the month beginning after the eligible employee’s employment terminates, if the eligible employee did not make any subsequent election after December 31, 2008 to change the form of distribution;
               (B) the first day of the month beginning after the latest date to which distribution was deferred by a subsequent election by the eligible employee after December 31, 2008 to change the form of distribution; and
               (C) the 90 th day after the date of the eligible employee’s death.
          (3) If the eligible employee terminates employment for any reason other than death and the eligible employee is a “specified employee” for purposes of Code section 409A at the time the eligible employee’s employment terminates, the first monthly payment of an eligible employee’s Post-2004 Benefit shall be made on the earlier of:
               (A) the later of:
                    (i) the first day of the month beginning six months after the date the eligible employee’s employment terminated; and
                    (ii) the first day of the month beginning after the latest date to which distribution was deferred by a subsequent election by the eligible employee after December 31, 2008 to change the form of distribution; and
               (B) the 90 th day after the date of the eligible employee’s death.
     Subsequent monthly installments of the Post-2004 Benefit shall be made as of the first day of each following month.
     The first distribution to an eligible employee subject to the 6-month delay described in (b)(3)(A)(i) above will include all payments that would have been paid to the eligible employee if the 6-month delay did not apply.
     The monthly benefit payable to an eligible employee under (b)(2)(B) or (b)(3)(A)(ii) above will be actuarially adjusted to reflect the delay in commencement of monthly benefit payments. The mortality table and interest rate applicable under the DTE Traditional Plan portion of the DTE Energy Company Retirement Plan at the time of the eligible employee’s termination of service will be used to actuarially adjust the monthly benefit.
     The monthly benefit payable to an eligible employee’s beneficiary under (b)(2)(C) or (b)(3)(B) above will be actuarially adjusted to reflect the delay in commencement of monthly benefit payments. The mortality table and interest rate applicable under the DTE Traditional Plan portion of the DTE Energy Company Retirement Plan at the time of the eligible employee’s termination of service will be used to actuarially adjust the monthly benefit.
Beneficiary Designation
     Each eligible participant may name any beneficiary to whom payments under the Plan are to be paid in case of the employee’s death. Each designation will revoke all prior designations by the employee and shall be on a form prescribed by The Detroit Edison Company and will be effective only when filed by the employee with the Treasurer. In the absence of any such designation, payments due shall be paid to the employee’s estate.

7


 

Taxation
     The Company makes no representation as to the tax consequences of individual payment options. Plan participants are urged to consult tax advisors of their choice for information and advice.
Non-Secured Promise; Amendments
     Eligible participants have the status of general unsecured creditors of the Company. This Plan constitutes a promise by the Company to make benefit payments in the future. The Company intends that this Plan be unfunded for tax purposes and for purposes of Title I of ERISA. The Company intends that this Plan be maintained primarily for a select group of management or highly compensated employees.
     Payments as they become due under the Plan to or in respect of a Company’s former employees shall be paid by such Company from its general assets; provided, however, that no provision of the Plan shall preclude a Company from segregating assets which are intended to be a source for payment of benefits under the Plan.
     The Detroit Edison Company reserves the right to amend, modify, or discontinue this Plan at any time; provided, however, that no such amendment, modification, or termination shall adversely affect the rights of participants or beneficiaries who are receiving or are immediately eligible to receive benefits from this Plan at the time of such amendment, modification, or termination, without such person’s prior written consent.
     Any Controlled Group Member which has adopted the Plan may as to itself withdraw from the Plan at any time by action of the Chairman of its board of directors. In the event of dissolution, merger, consolidation or reorganization of a Company, the Plan shall terminate as to such Company unless the Plan is continued by a successor thereto (subject to the consent of the Chairman of the Board of Directors).
     Notwithstanding the foregoing provisions of this section, no amendment, modification, termination or withdrawal may be made after the occurrence of a Change in Control, as defined in Addendum 1, that shall adversely affect the rights of any person who is receiving or upon termination would thereupon be entitled to receive benefits under the Plan, without such person’s prior written consent.
Administration, Arbitration
     The Vice President-Human Resources is responsible for the administration of the Plan. The Vice President-Human Resources has the authority to interpret the provisions of the Plan and prescribe any regulations relating to its administration. The decisions of the Vice President-Human Resources with respect thereto made prior to the occurrence of a Change in Control shall be conclusive. The Vice President-Human Resources shall review the Plan from time to time and as part of such review is hereby directed and authorized to amend such Plan to the extent necessary for ease of administration and/or to comply with applicable federal and state laws.
     The Treasurer of the Company shall be responsible for the administration of benefits under the Plan.
     Notwithstanding any provision in this Plan to the contrary, in the event of any dispute, claim or controversy (hereinafter referred to as a “Grievance”) between an employee who is eligible to receive benefits under this Plan and the Company with respect to the“payment of benefits to such employee under this Plan, the computation of benefits under this Plan, or any of the terms or conditions of this Plan, such Grievance shall be resolved by arbitration. Arbitration shall be the sole exclusive remedy to redress any Grievance. The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms. The arbitration shall be conducted by American Arbitration Association in accordance with the Federal Arbitration Act and the Employee Benefit Plan Claims Arbitration Rules of the American Arbitration Association and expenses of the arbitrator(s) and the American Arbitration Association shall be borne by the Company. Neither the Company nor such employee shall be entitled to attorneys’ fees, expert witness fees, or other expenses expended in the course of such arbitration or the enforcement of any award rendered thereunder. The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit Metropolitan area, Michigan. The arbitrator(s) shall not have the jurisdiction

8


 

or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Since arbitration is the exclusive remedy with respect to any Grievance, no employee eligible to receive benefits under this Plan has the right to resort to’any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court, or administrative agency by such employee or the Company with respect to any Grievance which is arbitrable as herein set forth. The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
Non-Alienability and Non-Transferabilitv
     The right of a participant, participant’s spouse or beneficiary to payment of any benefit hereunder shall not be alienated, assigned, transferred, pledged or encumbered and shall not be subject to execution, attachment or similar process. No account shall be subject in any manner to alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, whether voluntary or involuntary, including but not limited to any liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of any employee. Any attempted assignment, pledge, levy or similar process shall be null and void and without effect.
Change-in-Control Benefit For Certain Persons
     Notwithstanding the foregoing provisions of the Plan, a participant or other employee of a Company who has entered into a Change-in-Control Severance Agreement with DTE Energy Company (“Change-in-Control Severance Agreement”) shall receive a benefit as provided in Addendum I to the Plan upon termination of employment in certain circumstances following a Change in Control, as defined in Addendum 1. In addition, any participant or beneficiary receiving a benefit under the Plan at the time of the occurrence of a Change in Control, as defined in Addendum 1, shall receive payment as provided in Addendum I. If a benefit is payable to a participant or other employee or any beneficiary pursuant to Addendum 1, neither the participant or such employee, or any beneficiary thereof, shall be entitled to any payments or further payments, as the case may be, under the foregoing provisions of the Plan.

9


 

EXHIBIT A
TARGET PERCENTAGE
             
        Target Percentage    
    Management   of Average Final   Service
    Group   Compensation   Index
1.
  Chairman of the Board
  60%   25
 
  President
       
 
  Executive Vice President
       
 
  Participants who are Certain Management
       
 
  or Highly Compensated Employees designated
       
 
  as being in Group 1 by the Committee
       
 
           
2.
  Senior Vice President
  60%   30
 
  Vice President
       
 
  Participants who are Certain Management
       
 
  or Highly Compensated Employees designated
       
 
  as being in Group 2 by the Committee
       
 
           
3.
  Detroit Edison employees/participants
  55%   35
 
  other than those included
       
 
  in Groups 1 and 2 above and
       
 
  Participants who are Certain Management
       
 
  or Highly Compensated Employees, other
       
 
  than those included in Groups 1 and 2 above,
       
 
  designated by the Committee as eligible to
       
 
  participate in the Plan        
     If the sum of Company service and awarded service is greater than the corresponding service index, the target percentage is increased by 0.5% for each year of service above the index. If the sum of Company service and awarded service is less than the corresponding service index, the target percentage is reduced by 1% for each year of service below the index for employees in Groups I and 2 and by 1.5% for each year of service below the index for employees in Group 3.
     Company service is calculated to the nearest whole month. Awarded service is determined by the sole discretion of the Committee. The target percentage is adjusted accordingly if the service index results in fractional years.

1


 

EXHIBIT B
Table for Determining the Adjusted Lump Sum Payment Under the Guaranteed Term Plus Life Payment Option (Per $1,000 of Adjusted Annual Target Benefit Amount)
                                                         
Remaining
Years Of
Guaranteed
Term
Payment
                           
Interest Rate   6%   7%   8%   9%   10%   11%   12%
     
15
  $ 9,875     $ 9,271     $ 8,720     $ 8,216     $ 7,755     $ 7,332     $ 6,943  
14
    9,456       8,909       8,406       7,945       7,520       7,128       6,767  
13
    9,012       8,520       8,067       7,648       7,260       6,901       6,569  
12
    8,540       8,103       7,699       7,323       6,973       6,648       6,345  
11
    8,038       7,656       7,300       6,967       6,656       6,365       6,093  
10
    7,506       7,177       6,868       6,578       6,306       6,050       5,808  
9
    6,941       6,663       6,401       6,153       5,919       5,698       5,488  
8
    6,341       6,112       5,895       5,688       5,492       5,305       5,127  
7
    5,704       5,521       5,347       5,179       5,020       4,867       4,721  
6
    5,028       4,888       4,753       4,623       4,498       4,378       4,263  
5
    4,310       4,208       4,110       4,014       3,922       3,833       3,746  
4
    3,548       3,480       3,413       3,349       3,286       3,224       3,164  
3
    2,739       2,699       2,659       2,621       2,583       2,545       2,509  
2
    1,880       1,861       1,843       1,824       1,806       1,788       1,770  
1
    968       963       958       953       948       943       938  
0
    0       0       0       0       0       0       0  
NOTES:
  (1)   Interest rate is determined by the current prime interest rate of the NBD Bank less 2%.
 
  (2)   Apply linear interpolation for partial years remaining in guaranteed term period and adjustments for fractional interest rates.
 
  (3)   Exhibit B shows the information to perform a standard annuity due calculation. It is the present worth of a stream of monthly payments of $1,000/12 per month made at the end of the month and continuing for the number of months remaining.
The formula is:
     Adjusted Lump Sum = Pmt x (I -(I + i) -’)/i
    Where i is the NBD Bank Prime rate less 2% divided by 12 and n is the number of months remaining. Pmt is $1,000/12 or $83.33.
EXHIBIT C

2


 

Example I
Assumptions:
       
 
Date of Termination:
  January 31, 1998
 
Age at Termination:
  65 Years, 0 Months
 
Position:
  Vice President
 
MSBP Average Final Compensation:
  $216,000
 
Retirement Plan Average Final Compensation:
  $180,000
 
Company Service:
  25 Years, 0 Months
 
Retirement Allowance Factor:
  .014
 
Payment Option:
  Guaranteed Term Plus Life
 
 
  (Survivor benefit - monthly payment)
       
 
(Given the above, the target percentage is 55%)
 
 
Step 1:
  55% x $216,000 = $118,800
 
Step 2:
  .014 x $180,000 x 25 = $63,000
 
Step 3:
  $118,800 - $63,000 = $55,800
 
Step 4:
  $55,800 x 100% = $55,800
 
Step 5:
  $55,800/12 = $4,650
Monthly payments of $4,650 will be made for 15 years, or for the life of the employee if greater than 15 years.
Example 1A
Assumptions listed for Example I apply with the exception of the following:
       
 
Payment Option:
  Guaranteed Term Plus Life
 
 
  (Survivor benefit - lump sum payment)
 
 
   
 
NBD Bank
  9%
 
 
   
 
Prime Interest Rate:
   
 
Date of Employee’s Death:
  January 31, 2003
Monthly payments of $4,650 are made for the life of the employee (see Example 1). Upon the death of the employee (January 31, 2003), a lump sum payment of $400,476.60 is made to the beneficiary (see Exhibit B).

3


 

EXHIBIT C (continued)
Example 2
Assumptions:
       
 
Date of Termination:
  January 31, 1998
 
Age at Termination:
  58 Years, 6 Months
 
Position:
  Vice President
 
MSBP Average Final Compensation:
  $216,000
 
Retirement Plan-Average Final Compensation:
  $180,000
 
Company Service:
  25 Years, 6 Months
 
Retirement Allowance Factor:
  .014
 
Payment Option:
  Guaranteed Term Plus Life
 
 
  (Survivor benefit-monthly payments)
       
 
(Given the above, the target percentage is 55.5%)
 
 
Step 1:
  .555 x $216,000 = $119,880
 
Step 2:
  .014 x $180,000 x 25.5 x .91 = $58,477
 
Step 3:
  $119,880 - $58,477 = $61,403
 
Step 4:
  $61,403 x .88 = $54,035
 
Step 5:
  $54,035/12 = $4,503
Monthly payments of $4,503 will be made for 15 years, or for the life of the employee if greater than 15 years.
Example 2A.
Assumptions listed for Example 2 apply with the exception of the following:
       
 
Payment Option:
  Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit
 
 
   
 
Employee/Beneficiary
  Beneficiary is two years younger than the employee
 
Age Difference:
   
 
 
Step I — Step 5:
  Same as Example 2. The monthly benefit under the Guaranteed Term Plus Life option is $4,503
 
 
Step 6:
  $4,503 x.9554 = $4,302
Monthly payments of $4,302 are made for the life of the employee. Upon the death of the employee, monthly payments of $4,302 are made for the life of the designated beneficiary. Upon the death of the designated beneficiary, all payments cease.

4


 

EXHIBIT C (continued)
Example 2B
Assumptions listed for Example 2A apply with the exception of the following:
       
 
Payment Option:
  Actuarial-Adjusted Life with a 50% Joint and Survivor Benefit
 
 
   
 
Step 1 — Step 5:
  Same as Example 2. The monthly benefit under the Guaranteed
 
 
   
 
Step 6:
  Term Plus Life option is $4,503
$4,503 x 1.0572 = $4,760
Monthly payments of $4,760 are made for the life of the employee. Upon the death of the employee, monthly payments of $2,380($4,760 x 50%) are made for the life of the designated beneficiary. Upon the death of the designated beneficiary, all payments cease.
Example 3
Assumptions:
       
 
Date of Termination:
  January 31, 1998
 
Age at Termination:
  60 Years, 0 Months
 
Position:
  Vice President
 
MSBP Average Final Compensation:
  $216,000
 
Retirement Plan Average Final Compensation:
  $180,000
 
Company Service:
  14 Years, 0 Months
 
Awarded Service:
  10 Years, 0 Months
 
Retirement Allowance Factor:
  .014
 
Employee/Beneficiary Age Difference:
  Beneficiary is two years younger than the employee
 
Payment Option:
  Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit
 
Monthly Pension from Previous Employer
at age 65:
  $2,000

4


 

EXHIBIT C (continued)
       
 
(Given the above, the target percentage is 54%)
 
 
Step 1:
  54% x $216,000 = $116,640
 
 
Step 2:
  $0 (Employee is ineligible for an immediate benefit under the Retirement Plan)
 
 
Step 3:
  $116,640 - $0 = $116,640
 
 
Step 4:
  $116,640 x 100% = $116,640
 
 
Step 5:
  $116,640/12 = $9,720
 
 
Step 6:
  $9,720 x .9554 = $9,286
Monthly payments of $9,286 will be made until a benefit is payable (age 65 in Example 3) under the Retirement Plan and from the previous employer. At that time the benefit payable under the MSBP will be offset by an amount equivalent to the benefit paid under the Retirement Plan (Step 7 — Option H assumed) and the benefit paid by the previous employer.
         
 
  Step 7:   Monthly Retirement Plan Benefit:
 
      .014 x $180,000 x 14 x.88 = $31,046/12 $2,587
 
       
    Reductions to MSBP Benefit:
    Retirement Plan $9,286 - $2,587 = $6,699
    Previous Employer $6,699 - $2,000 = $4,699
Monthly payments of $4,699 are made for the life of the employee. Upon the death of the employee, monthly payments of $4,699 are made for the life of the designated beneficiary. Upon the death of the designated beneficiary, all payments cease.

6


 

EXHIBIT D
         
 
  Active:    
 
 
  Gerard M Anderson   Leslie L Loomans
 
  Joseph P Arresto   Barry Markowitz
 
  Susan M Beale   Ronnie A May
 
  Donald J Brett   David E Meador
 
  Daniel G Brudzynski   S. Snick Meyers
 
  Robert J Buckler   Sandra J Miller
 
  Michael E Champley   Steven M Nagy
 
  Frederic E Champnella H   Christopher C Nern
 
  Paul A Childs   William T O’Connor Jr
 
  James F Connelly   Evan J O’Neil
 
  Anthony F Earley Jr   David L Peterson
 
  Katherine E Fellows   A R Pierce Jr
 
  Paul Fessler   Peter J Pintar
 
  Larry G Garberding   Michael C Porter
 
  Lonnie E Gillum   Jean M Redfield
 
  Douglas R Gipson   Thomas M Roberts
 
  Paul R Gurizzian   William R Roller
 
  Lynne E Halpin   J J Roosen
 
  T M Holton   Albert J Tack
 
  Robert J Horn   S M Taylor
 
  Thomas A Hughes   Richard C Viinikainen
 
  Melinda A Jones   Morley A Wassermarm
 
  Ronald L Klinect   Joseph L Welch
 
  Gary E Lapplander   John M Wisniewski
 
  Robert S Lenart   Alan J Yonkman
 
  John E Lobbia    
 
       
 
  Retired:    
 
 
  Norman Barthlow   Willard Holland
 
  Leon Cohan   Walter McCarthy
 
  Malcolm Dade   Robert McKeon
 
  Ronald Gresens   James O’Hara
 
  Ernest Grove   Richard Thomas
 
      Saul Waldman

7


 

SIXTH RESTATEMENT OF
THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
          A change in control (“Change in Control”) for purposes of the Plan and this Addendum I shall have occurred if at any time on or after October 1, 1997 any of the following events shall occur:
(1) DTE Energy Company (“DTE”) is merged, consolidated or reorganizedinto or with another corporation or other legal person, and as a result ofsuch merger, consolidation or reorganization less than 55% of thecombined voting power of the then-outstanding securities of suchcorporation or person immediately after such transaction is held in theaggregate by the holders of the then-outstanding securities entitled to votegenerally in the election of directors (the “Voting Stock”) of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of its assets toanother corporation or other legal person, and as a result of such sale ortransfer, less 55% of the combined voting power of the then-outstandingVoting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate (directly or through ownership of Voting Stock of DTE or a Subsidiary (as hereinafter defined)) by the holders of Voting Stock of DTE immediately prior to such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding Voting Stock of DTE;
(4) DTE files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of DTE will occur in the future pursuant to a then-existing contract or transaction which when consummated would be a Change in Control determined without regard to this paragraph 4;
(5) If, during any period of two consecutive years, individuals who at the beginning ofany such period constitute the directors of DTE cease for any reason to constituteat least a majority thereof; provided, however, that for purposes of this paragraph(5) each director who is first elected, or first nominated for election, by DTE’sstockholders, by a vote of at least two-thirds of the directors of DTE (or a committee thereof) then still in office who were directors of DTE at the beginning of any such period will be deemed to have been a director of DTE at the beginning of such period; or
(6) The approval of the shareholders of DTE of a complete liquidation or dissolution of DTE.
     Notwithstanding the foregoing provisions of paragraph (3) or (4) above, unless otherwise determined in a specific case by majority vote of the Board of Directors of DTE, a “Change in Control” shall not be deemed to have occurred for purposes of paragraph (3) or (4) solely because (i) DTE, (ii) an entity in which DTE directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a “Subsidiary”), or (iii) any DTE sponsored employee stock ownership plan or any other employee benefit plan of DTE or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial

8


 

ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise or because DTE reports that a Change in Control of DTE has occurred or will occur in the future by reason of such beneficial ownership.
     In the event a Change in Control (as determined without regard to paragraph (4) above) occurs, any participant or former employee, or beneficiary thereof, who as of the date of the occurrence of the Change in Control is receiving benefits under the Plan shall be paid in cash in a lump sum an amount equal to the actuarial equivalent present value of the remaining Pre-2005 Benefits, determined as of the date of payment, that are payable to or in respect of such person under the Plan (including survivor benefits, if applicable). Payment in a cash lump sum of the actuarial equivalent present value of the remaining Post-2004 Benefits will be made only if the event satisfies the definition of a “change in control” for purposes of Code Section 409A.
     In the event a Change in Control occurs, any participant or employee of a Company who has entered into a Change-in-Control Severance Agreement and whose employment is terminated after the occurrence of the Change in Control in circumstances entitling the individual to severance compensation under Section 4 (before October 31, 2007) or Section 3(a) (effective October 30, 2007) of the Change-in-Control Severance Agreement shall be entitled to a cash lump sum payment under the Plan if (i) the participant or employee is at least age 47 and 7 months (after the application of the additional age credit as provided in paragraph (2) below) and (ii) the participant or employee otherwise meets the requirements for participation in the Plan set forth under “Eligibility” (except that the participant or employee need not be at least acre 55 and have at least 10 years of Company service and for purposes of clause (1) under the second paragraph under “Eligibility” the participant oremployee need only have been a member of Management Council or, if applicable, be a Certain Management or Highly Compensated Employee immediately prior to the occurrence of the Change in Control or at any time thereafter). The amount of such payment shall be equal to the actuarial equivalent present value of the benefit, if any, that would otherwise be payable to the participant or employee under the Plan under the Guaranteed Term Plus Life payment option determined as otherwise provided in the Plan but with the following modifications:
(1) Awarded service and the management group in which the participant or employee is a member shall be determined immediately prior to the time of termination, or the time of the occurrence of the Change in Control, if greater.
(2) The Plan benefit shall be determined by assuming the participant has two additional years each of age and Company service for purposes of the Plan, as provided in Section 4(a)(ii) (before October 30, 2007) or Section 3(a)(4)(B) (effective October 30, 2007) of the Change in-Control Severance Agreement.
(3) If the participant or employee is not eligible for-immediate payment of a benefit under the Retirement Plan, the Plan benefit to which the participant or employee is entitled shall be determined without regard to Step 2 under “Payment Calculation”, but instead the lump sum payable under this Addendum I shall be reduced by the actuarial equivalent of the Retirement Plan benefit as provided in paragraph (6) below.
(4) If the participant or employee is under age 55 (after the application of paragraph (2) above), the applicable early retirement adjustment percentage shall be determined as follows:
     
Age At   Early Retirement
Termination   Adjustment Percentage
55   60%
54   52%
53   44%
52   36%
51   28%
50   20%
49   12%
48   4%

9


 

     
Age At   Early Retirement
Termination   Adjustment Percentage
47.5   0%
(5) If the participant or employee has received awarded service under the Plan, the lump sum payable shall be reduced by the actuarialequivalent of the non-contributory portion of the retirement income expected or being received from the participant’s or employee’s previous employer.
(6) If a participant or employee is not eligible for immediate payment of a benefit under the Retirement Plan, the lump sum payable shall be reduced by the actuarial equivalent of the benefit to which the employee is entitled at age 65 under the Retirement Plan as determined without regard to any limitation imposed by Section 401(a)(17) or Section 415 of the Internal Revenue Code.
     Upon the foregoing payment, no further benefits shall be payable under the Planto such participant or employee or beneficiary thereof. Payments of Pre-2005 Benefits under this Addendum I shall be made within 30 days after the date on which the Change in Control occurs or, if later, the date the participant or employee terminates employment. Payments of Post-2004 Benefits under this Addendum I shall be made within 30 days after:
     (a) the later of the date the Change in Control occurs or the participant or employee terminates employment, if the Change in Control event satisfies the definition of a “change in control” for purposes of Code Section 409A; or
     (b) the date the participant or employee terminates employment, if the Change in Control event does not satisfy the definition of a “change in control” for purposes of Code Section 409A.
     For purposes of this Addendum 1, the interest/discount rate and mortality table used to determine actuarial equivalence shall be as follows:
(1) Interest/discount Rate — an annual rate equal to the Fed’s Fund Rate (as of the first business day of the calendar month in which the Change in Control or termination, if later, occurs) plus 1%, but in no event shall the interest/discount rate exceed 8% or be less than 5%.
(2) Mortality Table — the unisex version of the mortality table used for funding purposes of the most recent actuarial valuation for the Plan issued prior to the date of the Change in Control as defined in the DTE Change-in Control Severance Agreements.

10


 

Appendix B
Frozen MSBP Participants
As of January 1, 2001
                 
Name     ID     Awarded Service
Joseph Arresto
    46359       0  
Nazoor Baig
    45932       0  
David Broome
    47897       0  
Daniel G. Brudzynski
    54035       0  
Michael Carlen
    47431       0  
Paul Childs
    36749       0  
Donald Cobb
    53568       14  
James Connelly
    34157       0  
Vincent Dow
    47262       0  
Paul Fessler
    44362       0  
James Gessner
    40559       0  
Lonnie Gillium
    34222       0  
Edward Hansen
    33748       0  
Robert Horn
    46028       0  
John Howell, Jr.
    42191       0  
Thomas A. Hughes
    46765       0  
George Jackson, Jr.
    44416       0  
Melinda Jones
    44527       0  
Naif A. Khouri
    54788       0  
Paul Knutson
    41820       0  
Leslie Krystowiak
    46735       0  
Gary Lapplander
    44281       0  
Barry Markowitz
    52955       12  
Nancy Moody
    51767       0  
Peter Oleksiak
    54420       0  
Steve Nagy
    54520       5  
Evan O’Neil
    100301       15  
Robert A. Pierce
    44945       0  
Peter Pintar
    54132       0  
Edward Rahill
    54781       0  
Jean Redfield
    52786       0  
Thomas Roberts
    37542       0  
Randall Rutkofske
    46546       0  
Robert Sable
    55779       0  
Albert Tack
    33141       0  
Joseph Welch
    42410       0  
William Wilson
    33905       0  
John Wisniewski
    37375       0  
Alan Yonkman
    43178       0  

11


 

Appendix C
Grandfathered MSBP Participants
As of January 1, 2001
                         
            Awarded   Group I or II
Name   ID   Service   Service Date
Gerard M. Anderson
    52716       0       04/30/93  
Susan M. Beale
    49507       0       03/27/95  
Robert J. Buckler
    43514       0       12/30/90  
Michael E. Champley
    42462       0       12/29/92  
Anthony F. Earley, Jr.
    52729       15       04/01/93  
Larry Garberding
    52139       25       07/30/90  
Douglas R. Gipson
    51609       14       07/01/92  
Ronnie A. May
    49933       0       08/03/98  
David E. Meador
    53751       10       02/28/97  
S. Snick Meyers
    54007       15       01/01/97  
Sandra Miller
    37358       0       03/30/98  
William T. O’Connor, Jr.
    53210       15       05/15/00  
Eric Peterson
    55794       0       09/05/00  
Michael C. Porter
    54108       10       09/15/97  
William R. Roller
    35563       0       04/29/96  
S. Martin Taylor
    51805       19       06/30/90  
Theodore Vogel
    55426       0       03/31/00  

12


 

Appendix D
Grandfathered SDRIP Participants
H. Lee Dow III
Paul Geick
Joyce Hayes-Giles
Steven Kurmas
Sharon O’Neil
Fred Shell

13


 

Appendix E
Grandfathered SDRIP Participants
100% Vested as of June 1, 2002
Stephen E. Ewing
Harold Gardner

14

Exhibit 10-76
DTE ENERGY COMPANY
SUPPLEMENTAL RETIREMENT PLAN
Amended and Restated Effective January 1, 2005

 


 

TABLE OF CONTENTS
         
Section   Page
ARTICLE 1 - Title
    1  
 
       
ARTICLE 2 - Definitions
    1  
Section 2.1 Plan Interest Rate
    1  
Section 2.2 Post-2004 Benefit
    1  
Section 2.3 Pre-2005 Benefit
    1  
 
       
ARTICLE 3 - Purpose
    2  
 
       
ARTICLE 4 - Effective Date
    2  
 
       
ARTICLE 5 - Eligibility
    2  
Section 5.1. Participants
    2  
Section 5.2. Determination of Eligibility
    3  
 
       
ARTICLE 6 - Employers’ Obligation
    3  
Section 6.1. Qualified Plan Benefit
    3  
Section 6.2. Executive Deferred Compensation Plan Benefit
    3  
Section 6.3. Prior Plan Payments
    4  
 
       
ARTICLE 7 - Payment of Benefits
    4  
Section 7.1. Form and Timing of Payment
    4  
Section 7.2. Increase in Section 415 Limit
    7  
Section 7.3. Recomputation of Plan Benefits Upon Reemployment
    7  
Section 7.4. Change in Payment Option
    7  
Section 7.5. Payments Subject to Golden Parachute Provisions
    8  
Section 7.6. Transfer to an Affiliated Company
    8  
Section 7.7. Unscheduled Withdrawals
    8  
 
       
ARTICLE 8 - Beneficiary in the Event of Death
    9  
Section 8.1. Death After Commencement of Benefits
    9  
Section 8.2. Death Prior to Commencement of Benefits
    9  
Section 8.3. Beneficiary Designation
    9  
 
       
ARTICLE 9 - Unfunded Plan
    9  
 
       
ARTICLE 10 - Arbitration
    10  
 
       
ARTICLE 11 - Amendment and Termination
    11  
 
       
ARTICLE 12 - Miscellaneous
    11  
Section 12.1. Benefits Non-Assignable
    11  
Section 12.2. No Employment Rights
    11  
Section 12.3. Law Applicable
    11  


 

         
Section   Page
Section 12.4. Legal Fees and Expenses
    11  
Section 12.5. Successors
    11  
Section 12.6. Savings Clause
    11  
Section 12.7. Gender, Number and Heading
    12  
 
       
ARTICLE 13 - Change in Control Provisions
    12  
Section 13.1. General
    12  
Section 13.2. Transfer to Rabbi Trust
    12  
Section 13.3. Joint and Several Liability
    12  
Section 13.4. Dispute Procedures
    12  
Section 13.5. Definition of Change in Control
    13  

ii 


 

DTE ENERGY COMPANY
SUPPLEMENTAL RETIREMENT PLAN
Amended and Restated Effective January 1, 2005
      WHEREAS , Detroit Edison Company (“Edison”) previously adopted the Detroit Edison Retirement Reparation Plan and the Detroit Edison Benefit Equalization Plan, and MCN Energy Group Inc. (“MCN”) previously adopted the MCN Energy Group Supplemental Retirement Plan and the MCN Energy Group Excess Benefit Plan, which were adopted by DTE Enterprises, Inc. as of June 1, 2001 (the effective date of the merger), and DTE Energy Company (the “Company”) desires to replace these four plans (collectively, the “Prior Plans”).
      WHEREAS , effective December 31, 2001, the Prior Plans were terminated and replaced with this plan as of January 1, 2002.
      NOW, THEREFORE, effective January 1, 2005, the Plan is being amended and restated to comply with the requirements of Code section 409A solely with respect to benefits accrued and vested after December 31, 2004. The provisions of the Plan in effect as of December 31, 2004 continue to apply to benefits accrued and vested before January 1, 2005.
ARTICLE 1
Title
     The title of this plan shall be the “DTE Energy Company Supplemental Retirement Plan” and shall be referred to in this document as the “Plan”.
ARTICLE 2
Definitions
     The words and phrases used in the Plan shall have the same meanings as provided under the DTE Energy Retirement Plan (the “Qualified Plan”), unless otherwise defined in the Plan or the context clearly requires otherwise.
      Section 2.1 Plan Interest Rate . “Plan Interest Rate” means the interest rate for computing Interest Credits under the DTE Cash Balance Plan portion of the Qualified Plan.
      Section 2.2 Post-2004 Benefit . “Post-2004 Benefit” means the portion of a Participant’s Plan benefit in excess of the Participant’s Pre-2005 Benefit.
      Section 2.3 Pre-2005 Benefit . “Pre-2005 Benefit” means the portion of a Participant’s Plan benefit under Section 6.1 accrued and vested as of December 31, 2004, computed as if the Participant terminated employment as of December 31, 2004, plus: (a) the portion of the Participant’s Make-Up Account under Section 6.2(a) determined as if the Participant terminated employment on December 31, 2004; or (b) the balance of the Participant’s Make-Up Account under Section 6.2(b) determined as of December 31, 2004, whichever is applicable.

 


 

ARTICLE 3
Purpose
     The principal purpose of the Plan is to provide for the payment of certain benefits that would not otherwise be payable under the Qualified Plan. Such benefits shall be payable to a “select group of management or highly compensated employees” of the Company and any other corporation which is a Participating Employer under the Qualified Plan (a “Participant”) and also elects to participate in this Plan.
     It is intended that this Plan provide benefits for a “select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and, therefore, to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
ARTICLE 4
Effective Date
     The original effective date of the Plan for the Company was January 1, 2002 and for any Participating Employer was or is the date established by resolution of the Board of Directors of the particular Participating Employer at the time of adoption of the Plan. The effective date of this amendment and restatement of the Plan is January 1, 2005, unless a different effective date is specified for a particular Plan provision.
     The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A solely with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this Article 4.
     As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
ARTICLE 5
Eligibility
      Section 5.1. Participants .
     (a)  In General . Except as noted in Section 5.1(b), each employee of a Participating Employer who is included within the term “select group of management or highly compensated

2


 

employees” within the meaning of Title I of ERISA and whose benefits have been limited as described in Section 6.1 or 6.2, shall be eligible for benefits under the Plan.
     (b)  415 Limits . A Participant of a Participating Employer whose benefits under the Qualified Plan are limited because of the limitation on benefits and contributions under Section 415 of the Code shall be eligible for the benefits provided by this Plan.
     (c)  Qualified Plan Eligibility . Notwithstanding the foregoing, no employee shall be eligible for benefits provided by this Plan until such employee has satisfied the eligibility requirements of the Qualified Plan.
      Section 5.2. Determination of Eligibility . The Vice President, Human Resources shall designate employees as eligible for participation under Section 5.1(a). The Vice President, Human Resources may revoke such designation prior to any Plan Year with respect to the employee’s eligibility for benefits for such Plan Year, provided, however, that no such revocation shall adversely affect any amounts previously credited to such employee under the Plan.
ARTICLE 6
Employers’ Obligation
      Section 6.1. Qualified Plan Benefit . The Participating Employers shall pay under this Plan any amount that any eligible employee would have been entitled to receive under the Qualified Plan but for the limitation on compensation under Section 401(a)(17) of the Code, the limitation on benefits and contributions under Section 415 of the Code, and any other provision of the Code or other law that the Committee hereafter designates. Also, the Participating Employer shall pay under this Plan any amount that any eligible employee would have been entitled to receive under the Qualified Plan but for the exclusion of deferrals under the DTE Energy Company Supplemental Savings Plan and the DTE Energy Company Executive Deferred Compensation Plan from the definition of compensation under the option of the Qualified Plan applicable to such Participant.
      Section 6.2. Executive Deferred Compensation Plan Benefit . The Participating Employers shall credit hypothetical bookkeeping accounts (“Make-Up Account”) for each Participant with amounts intended to replace benefits (but not earnings) under any plan maintained by a Participating Employer which is intended to be qualified under Code section 401(a) which are reduced as a result of any deferrals under Sections 4.01, 4.02, or 4.03 of the DTE Energy Company Executive Deferred Compensation Plan (“EDCP”):
     (a)  Traditional Pension Plan Make-Up . The Participating Employer shall credit to the Participant’s Make-Up Account, an amount equal to the difference between (i) the present value, determined under each applicable defined benefit plan maintained by a Participating Employer which is intended to be qualified under Code section 401(a), including the MCN Traditional Option and the DTE Traditional Option of the Qualified Plan (“Pension Plan”), of the benefit that the Participant would have been entitled to receive under each such Pension Plan but for his election to defer any amount under the EDCP, and (ii) the present value, determined under each such Pension Plan, of the benefit that the Participant is entitled to receive under such Pension Plan. Such

3


 

contribution shall be determined and credited as of the Participant’s date of termination of employment.
     (b)  Cash Balance Plan Make-Up . The Participating Employer shall credit to the Participant’s Make-Up Account an amount equal to the additional increment that would have been added to the Participant’s account under a cash balance defined benefit plan maintained by any Participating Employer which is intended to be qualified under Code section 401(a), excluding the MCN Traditional Option and the DTE Traditional Option of the Qualified Plan (“Cash Balance Plan”), but for his election to defer any amount under the EDCP. Such contribution shall be determined and credited as of the last day of each calendar year.
      Section 6.3. Prior Plan Payments . If a Participant is in pay status as of December 31, 2001 under one of the Prior Plans, or has terminated employment from a Participating Employer prior to January 1, 2002, the amount and method of payment to such Participant shall continue under the provisions of the applicable Prior Plan. Such payments shall be made by the Participating Employer who last employed the Participant.
ARTICLE 7
Payment of Benefits
      Section 7.1. Form and Timing of Payment .
     (a)  Pre-2005 Benefit . On the date that a Participant becomes entitled to a distribution of his or her vested accrued benefit under the provisions of the Qualified Plan applicable to the Participant (“Termination Date”), such Participant shall be entitled to receive the Participant’s Pre-2005 Benefit provided under the Plan.
          (1) Form of Payment . As of the end of the quarter in which his or her Termination Date occurs, the Participant’s Pre-2005 Benefit shall be present-valued in accordance with the methodology set forth in the portion of the Qualified Plan in which the Participant participates. Payment of a Participant’s Pre-2005 Benefit shall be made in cash in accordance with the Participant’s selection on his or her Distribution Election Form either as (1) a joint and 100% survivor annuity, (2) a joint and 50% survivor annuity, (3) a single life annuity or (4) in annual payments over a period not less than one year and not more than 15 years as selected by the Participant. If a Participant has not elected a payment option for his or her Pre-2005 Benefit while he or she is actively employed by the Company or a Participating Employer, distribution shall be made as a joint and 50% survivor annuity for Participants who are married as of the Participant’s Termination Date and as a single life annuity for Participants who are single as of the Participant’s Termination Date.
          (2) Timing of Payment . A lump sum distribution of the Participant’s Pre-2005 Benefit shall be made as of March 1 following the Termination Date or, if earlier, March 1 following the end of the Plan Year in which the Participant’s employment terminated for any reason other than death. If a Participant whose employment has terminated for any reason other than death has elected to receive his or her distribution in the form of an annuity, the timing of the first

4


 

payment shall be consistent with the timing for annuity payments specified in the portion of the Qualified Plan in which the Participant participates. If a Participant has elected to receive his or her distribution in annual installments, the first installment shall be made as of March 1 following the Participant’s Termination Date or, if earlier, March 1 following the end of the Plan Year in which the Participant’s employment terminated for any reason other than death. All subsequent annual installments shall be made on approximately the same date each calendar year thereafter for the remainder of the distribution period. The amount of any annual payments shall be calculated to pay out over the specified period the Participant’s Pre-2005 Benefit as of his or her Termination Date with interest credited annually on the declining balance at the Plan Interest Rate. The amount of the annual payments to the Participant shall be adjusted as of each December 31 to reflect changes in the Plan Interest Rate. The distribution of a Participant’s Pre-2005 Benefit due to the Participant’s death is governed by Article 8.
          (3) Distribution of Small Amounts . Notwithstanding a Participant’s payment option, if a Participant’s Pre-2005 Benefit is less than or equal to $10,000 as of any March 1 payment date, the Participant’s Pre-2005 Benefit balance shall be paid in a single lump sum.
     (b)  Post-2004 Benefit . Payment of a Participant’s Post-2004 Benefit will be made after the Participant’s termination of employment or death.
          (1) Form of Payment . As of the date a Participant terminates employment or dies, the Participant’s Post-2004 Benefit shall be present-valued in accordance with the methodology set forth in the portion of the Qualified Plan in which the Participant participates. Payment of a Participant’s Post-2004 Benefit shall be made in cash in accordance with the Participant’s selection on his or her Distribution Election Form either as (1) a single lump sum or (2) in annual payments over a period not less than two years and not more than 15 years as selected by the Participant. If a Participant does not elect a payment option for his or her Post-2004 Benefit within the Participant’s initial election period, distribution shall be made as a single lump sum. The initial election period for a Participant who first accrues a Plan benefit after 2004 is the 30-day period beginning on the first day of the first calendar year beginning after the calendar year in which the Participant first accrues a Plan benefit.
          (2) Timing of Payment .
               (A) If the Participant is not a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminates for any reason other than death, a lump sum distribution or the first annual installment of the Participant’s Post-2004 Benefit shall be made on:
                    (i) January 1 following the end of the Plan Year in which the Participant terminates employment, if the Participant did not make any election under Section 7.4(b)(2); or
                    (ii) January 1 coincident with or next following the latest date to which distribution was deferred by an election under
Section 7.4(b)(2), if the Participant made one or more elections under Section 7.4(b)(2).

5


 

               (B) If a Participant is a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminates for any reason other than death, a lump sum distribution or first annual installment of the Participant’s Post-2004 Benefit will not be made before the latest of:
                    (i) January 1 following the end of the Plan Year in which the Participant’s employment terminated for a reason other than death, if the Participant did not make any election under Section 7.4(b)(2); and
                    (ii) January 1 coincident with or next following the latest date to which distribution was deferred by an election under section 7.4(b)(2), if the Participant made one or more elections under Section 7.4(b)(2); and
                    (iii) the earlier of:
                         (I) the first day of the calendar month beginning more than 6 months after the date the Participant’s employment terminated for a reason other than death; and
                         (II) the first day of the calendar month beginning after the Participant’s death.
          Subsequent annual installments of the Participant’s Post-2004 Benefit shall be made each following January 1 of the installment period.
          The distribution of a Participant’s Post-2004 Benefit due to the Participant’s death is governed by Article 8.
          (3) Calculation of Distribution .
               (A)  General Rule . Except as provided in Section 7.1(b)(3)(B), the amount of any annual payments shall be calculated to pay out over the specified period the Participant’s Post-2004 Benefit as of his or her termination of employment date with interest credited annually on the declining balance at the Plan Interest Rate.
               (B)  Additional Rules .
                    (i) If an initial distribution is delayed under Section 7.1(b)(2)(B)(iii), the amount of any annual payments will be calculated to pay out over the specified period the Participant’s Post-2004 Benefit as of the last day of the month preceding the payment date, with interest credited during the delay period at the Plan Interest Rate.
                    (ii) If an initial distribution is delayed under Section 7.1(b)(2)(A) (ii) or 7.1(b)(2)(B)(ii), the amount of any annual payments will be calculated to pay out over the

6


 

specified period the Participant’s Post-2004 Benefit as of the December 31 preceding the payment date, with interest credited during the delay period at the Plan Interest Rate.
               The amount of the annual payments to the Participant shall be adjusted as of each December 31 to reflect changes in the Plan Interest Rate.
          (4) Distribution of Small Amounts . Notwithstanding a Participant’s payment option, if a Participant’s Post-2004 Benefit is less than or equal to the dollar limit under Code Section 402(g) in effect for the calendar year in which the Participant terminates employment or dies, the Participant’s Post-2004 Benefit balance shall be paid in a single lump sum to the extent permitted by Code Section 409A and the related Treasury Regulations.
      Section 7.2. Increase in Section 415 Limit. If a Participant has elected to receive an Annuity under the Qualified Plan and such Annuity is increased subsequent to the Participant’s Termination Date due to an increase in the Code Section 415 limit, the Participant’s Plan Benefit shall be adjusted accordingly on a prospective basis.
      Section 7.3. Recomputation of Plan Benefits Upon Reemployment . . If a Participant entitled to a distribution under the qualified Plan receives all or part of his or her Plan benefit and is thereafter reemployed, such Participant’s Plan benefit shall be recalculated upon the Participant’s subsequent termination of employment. Plan payments shall cease upon reemployment. If a Participant’s recalculated Plan benefit results in an additional payment to the Participant, such additional payment shall be made in accordance with Section 7.1. Such recalculations shall be made in accordance with the procedures under the Qualified Plan. If such Participant’s recalculated Plan benefit shows that the Participant’s Plan benefit has been overpaid after offsetting for any Plan benefits previously received, the Participant shall be required to make restitution to the Participating Employer, within a period of twelve months of such subsequent termination, in an amount equal to such overpayment, plus interest at the Plan Interest Rate.
      Section 7.4. Change in Payment Option .
     (a)  Pre-2005 Benefit . The payment option selected by a Participant for the Participant’s Pre-2005 Benefit may be changed at any time while he or she is actively employed by the Company or a Participating Employer by the Participant submitting a new payment selection to the Committee.
     (b)  Post-2004 Benefit .
          (1) Before January 1, 2009, a Participant may change the distribution option previously selected for the Participant’s Post-2004 Benefit by filing a written election with the Committee before January 1, 2009 that satisfies both of the following:
               (A) The Participant’s election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Benefit otherwise required to be made before January 1, 2009; and

7


 

               (B) The Participant’s election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Benefit otherwise required to be made after December 31, 2008.
          (2) After December 31, 2008, a Participant may elect to change the distribution option previously selected for the Participant’s Post-2004 Benefit by filing a written election with the Committee that satisfies both of the following:
               (A) The Participant’s election is filed with the Committee at least 12 months before the earliest date on which the distribution of the Post-2004 Benefit would begin under the Participant’s then-current distribution election; and
               (B) The Participant’s election designates that distribution of the Post-2004 Benefit will begin at least 5 years after the earliest date on which distribution of the Post-2004 Account would begin under the Participant’s then-current distribution election.
     Any election by the Participant after December 31, 2008 regarding the form in which the Participant’s Post-2004 Benefit will be distributed will apply to the Participant’s entire Post-2004 Benefit.
      Section 7.5. Payments Subject to Golden Parachute Provisions . Notwithstanding the above, if payment at the time specified in the first sentence of this Article 7, Section 7.1 would subject the Participant to the excise tax under Section 4999 of the Code, at the discretion of the Company or Participating Employer, as applicable, payment of the Participant’s Pre-2005 Benefit shall be deferred until the earlier of (a) the date that would have been the Participant’s Normal Retirement Date, Early Retirement Date or Disability Retirement Date, (b) death of the Participant, or (c) total and permanent disability or legally established mental incompetency of the Participant.
      Section 7.6. Transfer to an Affiliated Company . Benefits for a Participant who transfers employment from one Employer to an Affiliated Company shall be subject to the transfer provisions of the Qualified Plan. Such a transfer of employment shall cause a transfer of the Plan benefit maintained by a Participating Employer for a Participant, if the new Employer has adopted the Plan, and the former Employer transfers cash to the new Employer equal to the amount of the benefit transferred. In all other events, a transfer of employment shall not cause a transfer of the benefit maintained by an Employer for a Participant.
      Section 7.7. Unscheduled Withdrawals . A former Participant receiving distributions in installments is permitted to make unscheduled withdrawals from the Participant’s Pre-2005 Benefit as described below.
     (a)  Election . A former Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the present value of the former Participant’s undistributed Pre-2005 Benefit, which will be paid within 3 0 days in a single lump sum.

8


 

     (b)  Withdrawal Penalty . There will be a penalty deducted from the present value of the former Participant’s undistributed Pre-2005 Benefit prior to an unscheduled withdrawal equal to 10% of the present value of the former Participant’s undistributed Pre-2005 Benefit as of the date the unscheduled withdrawal request is received by the Vice President, Human Resources.
ARTICLE 8
Beneficiary in the Event of Death
      Section 8.1. Death After Commencement of Benefits . If a Participant dies after payment of his or her Plan benefit begins in accordance with Section 7.1, the undistributed balance to which such Participant would have been entitled, if any, shall continue to be distributed to the Participant’s beneficiary (as designated under Section 8.3) in accordance with the method of distribution being used prior to the Participant’s death.
      Section 8.2. Death Prior to Commencement of Benefits .
     (a)  Pre-2005 Benefit. If a Participant dies before distribution of his or her Pre-2004 Benefit begins in accordance with Section 7.1, the Participant’s Pre-2005 Benefit, if any, shall be determined in accordance with the surviving spouse provisions of the portion of the Qualified Plan in which the Participant participated prior to his or her death.
     (b)  Post-2004 Benefit . If a Participant dies before distribution of his or her Post-2004 Benefit begins in accordance with Section 7.1, the Participant’s Post-2004 Benefit will be paid to the Participant’s beneficiary in a single lump sum within 90 days of the Participant’s death.
      Section 8.3. Beneficiary Designation . Each Participant who has elected to receive his or her Pre-2005 Benefit distribution in the form of a joint and 100% survivor annuity or joint and 50% survivor annuity shall have the right to designate a contingent annuitant to receive the survivor portion of the annuity payment upon the death of such Participant. Each Participant who has elected to receive his or her Pre-2005 Benefit distribution in the form of annual payments over a period of one to 15 years shall have the right to designate a beneficiary or beneficiaries to receive any undistributed annual payments upon the death of such Participant. Any Participant who has elected to receive his or her Pre-2005 Benefit distribution in the form of a single life annuity shall not be allowed to designate a beneficiary and benefit payments will cease upon the Participant’s death. A Participant shall have the right to designate a beneficiary or beneficiaries to receive the Participant’s Post-2004 Benefit in a single lump sum following the Participant’s death.
ARTICLE 9
Unfunded Plan
     The Plan shall be unfunded within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) ERISA. All benefits payable under the Plan shall be paid from the general assets of the Company or a Participating Employer, as applicable. The Company and any Participating Employer shall not be required to set aside or hold in trust any funds for the benefit of a Participant or beneficiary, each

9


 

of whom shall have the status of a general unsecured creditor with respect to the Company’s or Participating Employer’s obligation to make benefit payments pursuant to the Plan. Any assets of the Company or a Participating Employer available to pay Plan benefits shall be subject to the claims of the general creditors of the Company and the Participating Employer and may be used by the Company and Participating Employer in their sole discretion for any purpose.
ARTICLE 10
Arbitration
     In the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between a Participant (or beneficiary) and the Company with respect to the payment of benefits to such Participant or beneficiary under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section 10.2.
     (a) Arbitration shall be the sole and exclusive remedy to redress any Grievance.
     (b) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
     (c) The arbitration shall be conducted by the American Arbitration Association in accordance with the Federal Arbitration Act and the Employee Benefit Plan Claims Arbitration Rules of the American Arbitration Association, and reasonable expenses of the arbitrators and the American Arbitration Association shall be borne by the Company.
     (d) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit, Michigan Metropolitan area.
     (e) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Because arbitration is the exclusive remedy with respect to any Grievance, no Participant eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court, or administrative agency by such Participant or the Company with respect to any Grievance which is arbitrable as herein set forth.
     (f) The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.

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ARTICLE 11
Amendment and Termination
     The Plan shall be administered by the Committee appointed pursuant to the provisions of the Qualified Plan. The Committee shall have the same powers and duties, and shall be subject to the same limitations, as are described in the Qualified Plan.
     The Company may amend or terminate the Plan at any time and for any reason. The power to amend or modify the Plan shall rest solely with the Committee. No such amendment or termination shall affect the rights of Participants or beneficiaries to the vested portion of amounts credited to Participants’ benefits as of the date of such amendment or termination. In the event of a termination of the Plan, each Participant’s benefit shall be fully vested.
ARTICLE 12
Miscellaneous
      Section 12.1. Benefits Non-Assignable . Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No such right or benefit shall be liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such right or benefit.
      Section 12.2. No Employment Rights . Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall be construed as a contract of employment between a Participant and the Company or a Participating Employer, or as a right of any Participant to be continued in the employment of the Company or a Participating Employer, or as a limitation of the right of the Company or a Participating Employer to discharge any Participant at any time, with or without cause, or as a limitation of the right of the Participant to terminate employment at any time.
      Section 12.3. Law Applicable . To the extent not preempted by federal law, this Plan and all actions hereunder shall be governed by and construed according to the laws of the State of Michigan.
      Section 12.4. Legal Fees and Expenses . The Company shall pay all reasonable legal fees and expenses that any Participant may incur as a result of the Company contesting the validity, enforceability, or such Participant’s interpretation of, or determinations under this Plan.
      Section 12.5. Successors . In the event of any consolidation, merger, acquisition or reorganization of the Company, the obligations of the Company under this Plan shall continue and be binding upon the Company and its successors.
      Section 12.6. Savings Clause . If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall

11


 

not affect any other provision and the remaining provisions hereof shall continue to be construed and enforced as if the invalid or unenforceable provision had not been included.
      Section 12.7. Gender, Number and Heading . Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan.
ARTICLE 13
Change in Control Provisions
      Section 13.1. General . In the event of a Change in Control, as defined in Section 13.5, notwithstanding any other provision of the Plan, the provisions of this Article 13 shall be applicable and shall supersede any conflicting provisions of the Plan.
      Section 13.2. Transfer to Rabbi Trust . The Company shall establish a trust (the “Rabbi Trust”) that is intended to be an unfunded arrangement which shall not affect the status of the Plan as an unfunded arrangement for purposes of Title I of ERISA. The terms of the Rabbi Trust shall provide that, within seven (7) days of a Change in Control, assets shall be transferred to the Rabbi Trust in (i) an amount as of the date of the Change in Control equal to each Participant’s assumed benefit under the Plan as of the Participant’s Normal Retirement Date, assuming annual Base Salary increases for the Participant of 5%, all as determined by the Company Actuaries; plus (ii) an amount deemed necessary to pay estimated Rabbi Trust administrative expenses for the following five (5) years, as determined by the Company’s Accountants. Assets transferred in accordance with the preceding sentence shall be in the form of cash. The Company and/or a Participating Employer shall make all transfers of assets required by the Rabbi Trust in a timely manner and shall otherwise abide by the terms of the Rabbi Trust.
      Section 13.3. Joint and Several Liability . Upon and at all times after a Change in Control, the liability under the Plan of the Company and each Participating Employer that has adopted the Plan shall be joint and several, so that the Company and each such Participating Employer shall each be liable for all obligations under the Plan to each Participant covered by the Plan, regardless of the corporation by which such Participant is employed.
      Section 13.4. Dispute Procedures . In the event that, upon or at any time subsequent to a Change in Control, a disputed claim for benefits under the Plan is brought by a Participant or beneficiary, the following additional procedures shall be applicable:
     (a) Any amount that is not in dispute shall be paid to the Participant or beneficiary at the time or times provided herein.
     (b) The Company shall advance to such claimant from time to time such amounts as shall be required to reimburse the claimant for reasonable legal fees, costs and expenses incurred by

12


 

such claimant in seeking a resolution of his or her claim, including reasonable fees, costs and expenses relating to arbitration.
      Section 13.5. Definition of Change in Control . A “Change in Control” means the occurrence of any one of the following events:
     (a) individuals who, on December 31, 2001, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to December 31, 2001, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to directors or as a result of any other actual or threatened solicitation of proxies [or consents] by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
     (b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided , however , that the event described in this paragraph (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c)), or (E) a transaction (other than one described in (c) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approve a resolution providing expressly that the acquisition pursuant to this clause (E) does not constitute a Change in Control under this paragraph (b);
     (c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (a “Business Combination”) or sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting

13


 

power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or
     (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
     Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided , that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
      IN WITNESS WHEREOF , the undersigned official of the Company has executed this Plan as of this 24 day of November 2008.
         
  DTE ENERGY COMPANY
 
 
  By:   /s/ Larry E. Steward    
         Larry E. Steward   
         Vice President, Human Resources   
 

14

Exhibit 10-77
DTE ENERGY COMPANY
SUPPLEMENTAL SAVINGS PLAN
Amended and Restated Effective January 1, 2005

 


 

TABLE OF CONTENTS
         
PREAMBLE
    1  
 
       
SECTION 1. TITLE, PURPOSE AND EFFECTIVE DATE
    1  
1.1. Title
    1  
1.2. Purpose
    1  
1.3. Effective Date
    2  
1.4 Compliance with Code Section 409A
    2  
 
       
SECTION 2. DEFINITIONS
    2  
2.1 Post-2004 Account
    2  
2.2 Pre-2005 Account
    2  
 
       
SECTION 3. ELIGIBILITY AND PARTICIPATION
    3  
3.1. Eligibility to Participate
    3  
3.2. Election to Participate
    3  
 
       
SECTION 4. PARTICIPANTS’ ACCOUNTS
    4  
4.1. Establishment of Accounts
    4  
4.2. Credits and Debits to Participants’ Accounts
    4  
4.3. Election of Accounts
    5  
4.4. Change of Election for Accounts
    5  
4.5. Transfer Between Accounts
    5  
 
       
SECTION 5. HARDSHIP WITHDRAWALS
    5  
 
       
SECTION 6. PAYMENT OF BENEFITS
    6  
6.1. Form and Timing of Payment
    6  
6.2. Change In Payment Option
    8  
6.3. Revocation of Designation as Executive
    9  
6.4. Payments Subject to Golden Parachute Provisions
    9  
6.5. Transfer to an Affiliated Company
    9  
6.6. Unscheduled Withdrawals
    10  
 
       
SECTION 7. SELECTION OF AND PAYMENTS TO A BENEFICIARY
    10  
7.1. Beneficiary Designation
    10  
7.2. Change in Beneficiary
    10  
7.3. Survivor Benefit
    11  
 
       
SECTION 8. ADMINISTRATION
    11  
 
       
SECTION 9. ADDITIONAL PROVISIONS AFFECTING BENEFITS
    11  
 
       
SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION
    11  
10.1. Right to Amend or Terminate
    11  

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10.2. Right to Suspend
    11  
10.3. Partial ERISA Exemption
    11  
 
       
SECTION 12. MISCELLANEOUS
    12  
11.1. Unfunded Plan
    12  
11.2. No Right to Continued Employment
    12  
11.3. Prohibition Against Alienation
    12  
11.4. Savings Clause
    12  
11.5. Payment of Benefit of Incompetent
    12  
11.6. Spouse’s Interest
    13  
11.7. Successors
    13  
11.8. Gender, Number and Heading
    13  
11.9. Legal Fees and Expenses
    13  
11.10. Choice of Law
    13  
11.11. Affiliated Employees
    13  
11.12. Plan Document
    13  
 
       
SECTION 13. ARBITRATION
    14  
12.1 Arbitration Process
    14  
12.2 Effect of Plan Termination
    14  
 
       
SECTION 14. CHANGE IN CONTROL PROVISIONS
    14  
13.1. General
    14  
13.2. Transfer to Rabbi Trust
    15  
13.3. Lump Sum Payments
    15  
13.4. Joint and Several Liability
    15  
13.5. Dispute Procedures
    15  
13.6. Definition of Change in Control
    15  

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DTE ENERGY COMPANY
SUPPLEMENTAL SAVINGS PLAN
Amended and Restated Effective January 1, 2005
PREAMBLE
     Effective May 22, 1989 (and as amended periodically), Detroit Edison established The Detroit Edison Company Savings Reparation Plan and effective May 31, 1988 (and as amended periodically), MCN Energy Group established the MCN Energy Group Supplemental Savings Plan to offer a retirement savings alternative for those eligible Executives whose permissible contributions to the companies’ 401(k) plan were limited by the Internal Revenue Code (Detroit Edison plan: 401(a)(17); MCN plan: 401(a)(17), 402(g), 415 limitation on benefits and contributions). Effective December 6, 2001, DTE Energy Company (“DTE”) hereby terminates The Detroit Edison Company Savings Reparation Plan and effective January 1, 2002 hereby terminates the MCN Energy Group Supplemental Savings Plan and replaces them with the DTE Energy Company Supplemental Savings Plan (the “Plan”), as described herein. Effective December 6, 2001, all benefits under The Detroit Edison Company Savings Reparation Plan and effective January 1, 2002 all benefits under the MCN Energy Group Supplemental Savings Plan are transferred to the Plan. Benefits under the Plan are available to eligible Executives and key management employees of DTE Energy Company and its Affiliated Companies. DTE Energy Company has established this Plan to benefit Executives of DTE Energy Company and its Affiliated Companies in a manner that will be in the best interest of DTE Energy Company and its shareholders.
SECTION 1.
TITLE, PURPOSE AND EFFECTIVE DATE
     1.1. Title . The title of this Plan shall be the “DTE Energy Company Supplemental Savings Plan” and shall be referred to in this document as the “Plan.”
     1.2. Purpose . The purpose of the Plan is to promote the success of DTE Energy Company (hereinafter referred to as “DTE”) by:
          (a) providing selected Executives with the ability to defer compensation on a pre-tax basis to permit supplemental retirement savings; and
          (b) providing a mechanism for selected Executives to receive benefits that they otherwise would have received under the Qualified Plan but for Internal Revenue Code (“Code”) Sections 401(a)17, 402(g), 415 or any other provision of the Code or other law that the Committee hereafter designates.
          The principal purpose of the Plan is to provide deferred compensation for a select group of management or highly compensated Employees of DTE and any other employer that has adopted the Plan with the consent of DTE (a “Participating Employer”), and who has been

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specifically designated by the Chief Executive Officer of a Participating Employer to be eligible for Plan participation (an “Executive”). Such an employee shall remain an Executive as long as this designation is not revoked by the Committee.
          It is intended that this Plan provide benefits for “a select group of management or highly compensated employees” within the meaning of sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended (hereinafter referred to as “ERISA”) and, therefore, to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
     1.3. Effective Date . The Plan was originally effective December 6, 2001. This amendment and restatement of the Plan is effective
January 1, 2005, unless another effective date is specified for a particular Plan provision.
     1.4 Compliance with Code Section 409A . The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A solely with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this Section 1.04.
          As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
SECTION 2.
DEFINITIONS
     The words and phrases used in the Plan shall have the same meanings as provided under the DTE Energy Company Savings and Stock Ownership Plan (the “Qualified Plan”), effective January 1, 2002 and as amended from time to time, unless otherwise defined in the Plan or the context clearly requires otherwise.
     2.1 Post-2004 Account . “Post-2004 Account” means the portion of a Participant’s Account attributable to credits and debits made to the Participant’s Account under Section 4.2(a) and (b) after December 31, 2004, and earnings credited or losses debited to the Participant’s Account under Section 4.2 attributable to these Section 4.2(a) and (b) credits and debits.
     2.2 Pre-2005 Account . “Pre-2005 Account” means the portion of a Participant’s Account attributable to credits and debits made to the Participant’s Account under Section 4.2(a) and (b) before January 1, 2005, and earnings credited or losses debited to the Participant’s Account under Section 4.2 attributable to these Section 4.2(a) and (b) credits and debits.

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SECTION 3.
ELIGIBILITY AND PARTICIPATION
     3.1. Eligibility to Participate . Only the following individuals shall be eligible to participate in the Plan: (a) any Executive whose contributions under the Qualified Plan are limited because of the limitation on compensation under Section 401(a)(17) of the Code, the limitation on elective deferrals under Section 402(g) of the Code, the limitation on benefits and contributions under Section 415 of the Code, or any other provision of the Code or other law that the Committee hereafter designates; and (b) such other management or highly compensated Employees as shall be approved by the Chief Executive Officer of an Employer that has adopted the Plan.
          (a) Effective Date for Participation . Each employee of the Company and Participating Affiliated Companies who is employed at the level of Director or above (or equivalent) and who is designated as an Executive shall be eligible to participate in the Plan effective as of the later of (i) the date determined by the Vice President, Human Resources, or (ii) the date on which the employee is formally notified of his or her eligibility to participate.
          (b) Determination of Executive Status . The Vice President, Human Resources shall designate employees as Executives. The Vice President, Human Resources may revoke such designation prior to any Plan Year with respect to the Executive’s ability to defer future compensation payable by the Company or Participating Affiliated Company; provided, however, that no such revocation shall adversely affect any amounts previously deferred by such Executive under the Plan. Employees who were employed at the level of Director at MCN Energy Group Inc. or one of its subsidiaries prior to June 1, 2001, but were not appointed to a level of Director or above in the Leader Staffing and Selection process during the second quarter of 2001, shall be considered Executives for the 2002 Plan year only; unless or until they are otherwise designated as Executives.
          (c) Mid-Year Participation . For Plan Years before 2005, to the extent an employee is designated as an Executive, and formally notified of his or her eligibility to participate in the Plan during a Plan Year, the Executive may elect to participate any time thereafter.
          For Plan Years after 2004, an employee who is designated as an Executive and wishes to participate in the Plan for the Plan Year in which the employee is so designated must file a written election with the Committee within 30 days of the date the employee is formally notified of his or her eligibility to participate. Failure to file a written election before the end of this 30-day period precludes the Executive from participating in the Plan until the beginning of the next Plan Year.
     3.2. Election to Participate . An executive who is eligible to participate may become a participant in the Plan (a “Participant”) by filing a written election with the Committee on a form approved by the Committee. The Executive’s election shall authorize the Employer to defer the

3


 

amount of such Executive’s Compensation pursuant to Sections 4.2(a) and (c) hereof and shall evidence the Executive’s acceptance of and agreement to all the provisions of the Plan.
          The Executive’s election must be made no later than December 31 of the year that immediately precedes the year for which it applies. However, the first election by any Executive to participate in this Plan shall be effective for any Compensation earned after the election is received by the Committee and after contributions to the Qualified Plan are limited in accordance with Section 3.1 above. An election shall be irrevocable for the current calendar year. An election shall be irrevocable for future calendar years unless a written revocation is filed with the Committee prior to the first day of the calendar year for which the revocation is desired.
SECTION 4.
PARTICIPANTS’ ACCOUNTS
     4.1. Establishment of Accounts . The Employer shall establish accounts for each of its Executives who is a Participant in the Plan. Effective January 1, 2002, all benefits under The Detroit Edison Company Savings Reparation Plan and the MCN Energy Group Supplemental Savings Plan are transferred to this Plan. Separate hypothetical bookkeeping accounts corresponding in name to the separate funds under the Qualified Plan shall be maintained for each Participant. Credits under Sections 4.2(a) and (b) hereof shall also be maintained in separate accounts. The hypothetical bookkeeping accounts shall be maintained as unfunded general bookkeeping accounts and all amounts represented by the accounts shall remain a part of the general funds of the Employer of such Participant, subject to the claims of its general creditors. Nothing in the Plan and no action taken pursuant to the provisions of the Plan shall be deemed to create a trust or fund of any kind or to create any fiduciary relationship. The obligation to make payments under this Plan shall be and remain an unsecured, unfunded general obligation of the Employer of the particular Participant. Each Executive who is a Participant in the Plan shall be provided a quarterly statement of the unfunded accounts maintained for the Participant.
     4.2. Credits and Debits to Participants’ Accounts . As of the end of a pay period, total credits shall be made to the hypothetical bookkeeping accounts maintained for a Participant as set forth below:
          (a) An amount equal to the difference between (1) and (2) below:
               (1) the amount that such Participant would have contributed to the Qualified Plan for such pay period, assuming (x) the Participant satisfied the eligibility requirements set forth in the Qualified Plan and (y) the allotments of such Participant under the Qualified Plan were not limited by the application of any restriction set forth in Section 3.1(a) above, or any provision of the Qualified Plan relating to the limitations described in Section 5.1(a) above;

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               (2) the amount that such Participant actually contributed to the Qualified Plan for such pay period.
          (b) An amount equal to the difference between (1) and (2) below:
               (1) the amount that the Employer of such Participant would have contributed to the Qualified Plan on behalf of such Participant for such pay period if the Participant had contributed the amount set forth in (a)(1) above to the Qualified Plan during such pay period;
               (2) the amount that the Employer actually contributed to the Qualified Plan on behalf of such participant for such pay period.
          The total credits under (a) and (b) of this Section shall be allocated to the specific accounts elected by the Participant as provided under Section 4.3 hereof. Each hypothetical bookkeeping account shall be credited with an amount representing earnings or debited with an amount representing losses on a daily basis. Earnings or losses shall be calculated using the daily valuation methodology employed by the recordkeeper for each corresponding fund under the Qualified Plan.
     4.3. Election of Accounts . Subject to the sole discretion of the Committee, each Participant shall, by filing an election with the Committee in a form approved by the Committee, elect the accounts which are to be used for recording credits under Sections 4.2(a) and (b) hereof.
          A Participant may direct that credits under Sections 6.2(a) and (b) be made to any account corresponding in name to the funds under the Qualified Plan that are available to accept contributions or allotments, provided, however, that the Committee may change available investment funds or override a Participant’s investment selection at any time.
     4. 4. Change of Election for Accounts . Any election of accounts given by a Participant under the preceding Section shall be deemed to be a continuing election until changed by the Participant. A Participant may change any such election as of any normal business day of any month by giving prior notice of such change to the Plan recordkeeper in the form prescribed by the Committee.
     4.5. Transfer Between Accounts . Transfers between accounts shall be implemented on any normal business day of any month upon directions to the Plan recordkeeper in the form prescribed by the Committee.
SECTION 5.
HARDSHIP WITHDRAWALS
     A Participant may request, upon written notice to the Committee, a withdrawal from his or her accounts, if the withdrawal is on account of financial hardship as defined in the Qualified Plan with respect to amounts in the Participant’s Pre-2005 Account or on account of financial

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hardship as defined in Code Section 409A and the related Treasury Regulations with respect to amounts in the Participant’s Post-2004 Account. A financial hardship shall first be satisfied from the DTE Energy Company Executive Deferred Compensation Plan to the extent possible; then from the Plan; and finally from the Qualified Plan. The amount of such withdrawal shall be limited to the amounts deferred under Section 4.2(a) hereof and any corresponding amounts transferred from The Detroit Edison Company Savings Reparation Plan and the MCN Energy Group Supplemental Savings Plan, or the total value of the aggregate accounts maintained under Section 4.2(a) hereof and any corresponding amounts transferred from The Detroit Edison Company Savings Reparation Plan and the MCN Energy Group Supplemental Savings Plan as of the end of the prior month, whichever is smaller.
     The determination of the existence of financial hardship and the amount required to be distributed to meet the need created by the hardship shall be made by the Committee. Except as permitted under Section 6.6, no other withdrawals or loans are permitted under this Plan.
SECTION 6.
PAYMENT OF BENEFITS
     6.1. Form and Timing of Payment .
          (a) Pre-2005 Account. On the date that a Participant becomes entitled to a distribution of his or her account in the Qualified Plan (the “Termination Date”), such Participant shall be entitled to receive the amount credited to his or her Pre-2005 Account in the Plan. All Pre-2005 Accounts under this Plan are 100% vested, subject to adjustment for hypothetical earnings and losses. All distributions from a Participant’s Pre-2005 Account shall be paid out at in cash as of March 1 of the year following the year in which Participant’s Termination Date occurs.
          Payment of a Participant’s Pre-2005 Account shall be made in accordance with the Participant’s selection on his or her Deferral Election Form either in annual payments over a period of not less than two years and not more than 15 years, or in one lump sum by the Participating Employer maintaining the Pre-2004 Account. If no payment election has been made, the Participant’s Pre-2005 Account shall be paid in one lump sum.
          In addition, if a Participant’s Pre-2005 Account is less than or equal to $10,000 as of his or her Termination Date, the Participant’s Pre-2005 Account shall be paid in one lump sum.
          Payment of a Participant’s Pre-2005 Account due to a Participant’s death is governed by Section 7.3.
          (b) Post-2004 Account . On the date that a Participant terminates employment other than because of death, the Participant shall be entitled to receive the amount credited to his or her Post-2004 Account in the Plan. All Post-2004 Accounts under this Plan are 100% vested, subject to adjustment for hypothetical earnings and losses.

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               (1) If the Participant is not a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminates for any reason other than death, a lump sum distribution or the first annual installment of the Participant’s Post-2004 Account shall be made on:
                    (A) January 1 following the end of the Plan Year in which the Participant terminates employment, if the Participant did not make any election under Section 6.2(b)(2); or
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under Section 6.2(b)(2), if the Participant made one or more elections under Section 6.2(b)(2).
               (2) If a Participant is a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminates for any reason other than death, a lump sum distribution or first annual installment of the Participant’s Post-2004 Account will not be made before the latest of:
                    (A) January 1 following the end of the Plan Year in which the Participant’s employment terminated, if the Participant did not make any election under Section 6.2(b)(2); and
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under section 6.2(b)(2), if the Participant made one or more elections under Section 6.2(b)(2); and
                    (C) the earlier of:
                         (i) the first day of the calendar month beginning more than 6 months after the date the Participant’s employment terminated; and
                         (ii) the first day of the calendar month beginning after the Participant’s death.
     Subsequent annual installments of the Participant’s Post-2004 Benefit shall be made each following January 1 of the installment period.
     Payment of a Participant’s Post-2004 Account shall be made in accordance with the Participant’s selection on his or her Deferral Election Form either in annual payments over a period of not less than two years and not more than 15 years, or in one lump sum by the Participating Employer maintaining the accounts. If no payment election has been made, the Participant’s Post-2004 Account shall be paid in one lump sum. Any election by the Participant after December 31, 2008 regarding the form in which the Participant’s Post-2004 Account will be distributed will apply to the Participant’s entire Post-2004 Account and is subject to the restrictions imposed by Section 6.2 on changes to elections of timing or form of distributions.

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          In addition, if a Participant’s Post-2004 Account is less than or equal to the dollar limit under Code Section 402(g) for the calendar year in which the Participant terminates employment, the Participant’s Post-2004 Account shall be paid in one lump sum to the extent permitted by Code Section 409A and the related Treasury Regulations.
          Payment of a Participant’s Post-2004 Account due to a Participant’s death is governed by Section 7.3.
          (c) Calculation of Distribution.
               (1)  General Rule . The amount of the annual payments shall be calculated to be paid out over the specified period, based on the entire balance in the Participant’s hypothetical bookkeeping account as of his or her Termination Date. Earnings and losses based on the hypothetical bookkeeping account investments shall be credited to the Participant’s hypothetical bookkeeping account through December 31 of each Plan Year in which the Participant has a balance in such hypothetical bookkeeping account. The distribution to a Participant shall be paid in cash. Except as provided in Section 6.1(c)(2), the initial distribution shall be determined by dividing the value of the Participant’s account determined as of December 31 of the Plan Year in which the Participant’s employment terminated, by the number of installment payments to be made. The amount distributed to the Participant thereafter shall be recalculated each year to reflect changes in the hypothetical bookkeeping account balance through December 31 of such subsequent calendar year and the remaining number of installment payments to be made.
               (2)  Additional Rules for Post-2004 Account .
                    (A) An initial distribution delayed under Section 6.1(b)(2)(C) will be determined by dividing the value of the Participant’s Post-2004 Account determined as of the last day of the month preceding the payment date, by the number of installment payments to be made.
                    (B) An initial distribution delayed under Section 6.1(b)(1)(B) or 6.1(b)(2)(B) will be determined by dividing the value of the Participant’s Post-2004 Account as of the December 31 preceding the payment date, by the number of installment payments to be made.
     6.2. Change In Payment Option .
          (a) Pre-2005 Account . The payment option selected by the Participant for the Participant’s Pre-2005 Account may be changed at any time while he or she is actively employed by the Company or a Participating Employer by the Participant submitting a new payment selection to the Committee.

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          (b) Post-2004 Account .
               (1) Before January 1, 2009, a Participant may change the distribution option previously selected for the Participant’s Post-2004 Account by filing a written election with the Committee before January 1, 2009 that satisfies both of the following:
                    (A) The Participant’s election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Account otherwise required to be made before January 1, 2009; and
                    (B) The Participant’s election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Account otherwise required to be made after December 31, 2008.
               (2) After December 31, 2008, a Participant may elect to change the distribution option previously selected for the Participant’s Post-2004 Account by filing a written election with the Committee that satisfies both of the following:
                    (A) The Participant’s election is filed with the Committee at least 12 months before the earliest date on which the distribution of the Post-2004 Account would begin under the Participant’s then-current distribution election; and
                    (B) The Participant’s election designates that distribution of the Post-2004 Account will begin at least 5 years after the earliest date on which distribution of the Post-2004 Account would begin under the Participant’s then-current distribution election.
          A Participant’s election of a different form of distribution on the Participant’s election to participate in the Plan for any Plan Year after 2008 will be treated as a change to the Participant’s election of a form of distribution for the Participant’s entire Post-2004 Account.
     6.3. Revocation of Designation as Executive . Except as provided in Section 3.1(b) hereof, a Participant whose designation as an Executive is revoked prior to the Participant’s retirement, death, termination or disability shall not be permitted to make deferrals under the Plan subsequent to the date of such revocation.
     6.4. Payments Subject to Golden Parachute Provisions . Notwithstanding the above, if payment at the time specified in the first sentence of this Section would subject the Participant to the excise tax under Section 4999 of the Code, at the discretion of the applicable Employer, payment of the Participant’s Pre-2005 Account shall be deferred until the earlier of (a) the date that would have been the Participant’s Normal Retirement Date, Early Retirement Date or Disability Retirement Date, (b) death of the Participant, or (c) total and permanent disability or legally established mental incompetence of the Participant.
     6.5. Transfer to an Affiliated Company . Benefits for a Participant who transfers employment from one Employer to an Affiliated Company shall be subject to the provisions of the Qualified Plan. Such a transfer of employment shall cause a transfer of the accounts

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maintained by an Employer for a Participant, if the new Employer has adopted the Plan and the former Employer transfers cash to the new Employer equal to the amount of the accounts transferred. In all other events, a transfer of employment shall not cause a transfer of the accounts maintained by an Employer for a Participant.
     6.6. Unscheduled Withdrawals . A Participant or a former Participant receiving distributions in annual installments is permitted to make unscheduled withdrawals from the Participant’s or former Participant’s Pre-2005 Account as described below:
          (a) Election. A Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the balance in the Participant’s Pre-2005 Accounts, which will be paid within 30 days in a single lump sum. A former Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the undistributed balance of the former Participant’s Pre-2005 Accounts, which will be paid within 30 days in a single lump sum.
          (b) Withdrawal Penalty. There will be a penalty deducted from the Participant’s Pre-2005 Accounts prior to an unscheduled withdrawal equal to 10% of each Pre-2005 Account balance as of the date the unscheduled withdrawal request is received by the Vice President, Human Resources.
          (c) Suspension of Participation. If a Participant elects an unscheduled withdrawal, the Participant’s election to participate in the Plan for the current calendar year will not be revoked unless permitted by Code Section 409A. However, the Participant will not again be designated as an Executive eligible to participate in the Plan until the first day of the second calendar year following the calendar year in which the withdrawal was made.
SECTION 7.
SELECTION OF AND PAYMENTS TO A BENEFICIARY
     7.1. Beneficiary Designation . A Participant shall designate, on a form provided by the Committee, a beneficiary or beneficiaries to receive any distribution to made under Section 6 hereof upon the death of the such Participant, or, in the case of a Participant who dies subsequent to termination of his or her employment put prior to distribution of the entire amount to which the Participant is entitled under the Plan, any undistributed balance to which such Participant would have been entitled. If a Participant has not designated a beneficiary, or if a designated beneficiary is not living or in existence at the time of a Participant’s death, any death benefits payable under the Plan shall be paid to the Participant’s Spouse, if then living, and if the Participant’s Spouse is not then living, to the Participant’s estate.
     7.2. Change in Beneficiary . A Participant may change the designated beneficiary from time to time by filing a new written designation with the Committee. Such designation shall be effective upon receipt by the Committee.

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     7.3. Survivor Benefit . If a Participant dies with an account balance under this Plan, his or her beneficiary shall be entitled to receive a distribution of the Participant’s account, including distributions delayed under Section 6.1(b) and any annual payments elected by the Participant but not paid at the time of the Participant’s death. The distribution shall be paid in a lump sum within ninety (90) days following the Participant’s death.
SECTION 8.
ADMINISTRATION
     The Plan shall be administered by the Committee appointed pursuant to the provisions of the Qualified Plan. The Committee shall have the same powers and duties, and shall be subject to the same limitations, as are described in the Qualified Plan. However, unlike the limitation on the Committee’s power to amend or modify the Qualified Plan, the Committee shall have full power to amend or modify the Plan in all respects.
SECTION 9.
ADDITIONAL PROVISIONS AFFECTING BENEFITS
     Deferrals hereunder shall be subject to applicable FICA withholding laws. Benefit payments hereunder shall be subject to applicable federal, state and 1ocal tax withholding laws.
SECTION 10.
AMENDMENT, SUSPENSION, AND TERMINATION
     10.1. Right to Amend or Terminate . The Company may amend or terminate the Plan at any time and for any reason. The power to amend or modify the Plan shall rest solely with the Committee. Such amendment, modification or termination may modify or eliminate any benefit hereunder except that such amendment, modification or termination shall not affect the rights of Participants or beneficiaries to the Participant’s account as of the date of such amendment or termination.
     10.2. Right to Suspend . If the Board of Directors determines that payments under the Plan would have a material adverse affect on the Company’s ability to carry on its business, the Board of Directors may suspend payments of Pre-2005 Accounts temporarily for such time as in its sole discretion it deems advisable, but in no event for a period in excess of one year. If the Board of Directors determines that payments under the Plan will jeopardize the Company’s ability to continue as a going concern, the Board of Directors may suspend payments of Post-2004 Accounts until the first taxable year when payment will not have that effect. The Company shall pay such suspended payments in a lump sum immediately upon the expiration of the period of suspension.
     10.3. Partial ERISA Exemption . The Plan is intended to provide benefits for “a select group of management or highly compensated employees” within the meaning of sections 201,

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301 and 401 of ERISA, and therefore to be exempt from sections 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan shall terminate and existing Account balances shall be paid in a single lump-sum (to the extent permitted by Code section 409A and the related Treasury Regulations for Post-2004 Accounts) and no further benefits shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of section 3(2) of ERISA which is not so exempt.
SECTION 11.
MISCELLANEOUS
     11.1. Unfunded Plan . The Plan shall be unfunded within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) ERISA. All benefits payable under the Plan shall be paid from the Company’s general assets. The Company shall not be required to set aside or hold in trust any funds for the benefit of a Participant or Beneficiary, each of whom shall have the status of a general unsecured creditor with respect to the Company’s obligation to make benefit payments pursuant to the Plan. Any assets of the Company available to pay Plan benefits shall be subject to the claims of the Company’s general creditors and may be used by the Company in its sole discretion for any purpose.
     11.2. No Right to Continued Employment . Nothing in the Plan shall create or be construed as a contract between the Company or an Affiliated Company and employees for any matter including giving any person employed by the Company or an Affiliated Company the right to be retained in the Company’s or an Affiliated Company’s employ. The Company and each Affiliated Company expressly reserve the right to dismiss any person at any time, with or without cause, without liability for the effect that such dismissal might have upon him as a Participant in the Plan or for any other purpose.
     11.3. Prohibition Against Alienation . Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No such right or benefit shall be liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such right or benefit.
     11.4. Savings Clause . If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision and the remaining provisions hereof shall continue to be construed and enforced as if the invalid or unenforceable provision had not been included.
     11.5. Payment of Benefit of Incompetent . In the event the Committee finds that a Participant, former Participant or beneficiary is unable to care for his affairs because of his minority, illness, accident, or other reason, any benefits payable hereunder may, unless other claim has been made therefore by a duly appointed guardian, committee or other legal representative, be paid to a spouse, child, parent, or other blood relative or dependent or to any

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person found by the Committee to have incurred expenses for the support and maintenance of such Participant, former Participant, or Beneficiary; and any such payments so made shall be a complete discharge of all liability therefore.
     11.6. Spouse’s Interest . The interest in the benefits hereunder of a Spouse who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such Spouse in any manner including, but not limited to, such Spouse’s will, nor shall such interest pass under the laws of intestate succession.
     11.7. Successors . In the event of any consolidation, merger, acquisition or reorganization of the Company, the obligations of the Company and Participating Affiliated Companies under this Plan shall continue and be binding upon the Company, Participating Affiliated Companies and its successors.
     11.8. Gender, Number and Heading . Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan.
     11.9. Legal Fees and Expenses . The Company shall pay all reasonable legal fees and expenses that a Participant may incur as a result of the Company contesting the validity, enforceability, or the Participant’s interpretation of, or determinations under this Plan, other than hardship withdrawals under Section 5 and tax withholding under Section 9.
     11.10. Choice of Law . This Plan shall be governed by and construed in accordance with the laws of the State of Michigan, other than its choice-of-law rules, to the extent not superseded by applicable federal statues or regulations.
     11.11. Affiliated Employees . Transfers of employment between Affiliated Companies and the Company or other Affiliated Companies will be treated as continuous and uninterrupted service under the Plan.
     11.12. Plan Document . This Plan document provides the final and exclusive statement of the terms of the Plan. Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 8. This document legally governs the operation of the Plan, and any claim of right or entitlement under the Plan shall be determined solely in accordance with its provisions. To the extent that there are any inconsistencies between the terms of any related materials and the terms of this document, the terms of this document shall control and govern the operation of the Plan. No other evidence, whether written or oral, shall be taken into account in determining the right of an Executive, a Participant, or beneficiary, as applicable, to any benefit of any type provided under the Plan.

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SECTION 12.
ARBITRATION
     12.1 Arbitration Process. Notwithstanding Section 8 hereof, in the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between an Executive (or beneficiary) who is eligible to elect to receive the benefits provided under this Plan and the Company with respect to the payment of benefits to such Executive under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section 12.
          (a) Arbitration shall be the sole and exclusive remedy to redress any Grievance.
          (b) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
          (c) The arbitration shall be conducted by the American Arbitration Association in accordance with the Federal Arbitration Act and the Employee Benefit Plan Claims Arbitration Rules of the American Arbitration Association and reasonable expenses of the arbitrators and the American Arbitration Association shall be borne by the Company.
          (d) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit, Michigan Metropolitan area.
          (e) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms hereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Because arbitration is the exclusive remedy with respect to any Grievance, no Executive eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court, or administrative agency by such Executive or the Company with respect to any Grievance which is arbitrable as herein set forth.
     12.2 Effect of Plan Termination. The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
SECTION 13.
CHANGE IN CONTROL PROVISIONS
     13. 1. General . In the event of a Change in Control, as defined in Section 13.6, then, notwithstanding any other provision of the Plan, the provisions of this Section 13 shall be applicable and shall supersede any conflicting provisions of the Plan.

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     13.2. Transfer to Rabbi Trust The Company shall establish a trust (the “Rabbi Trust”) that is intended to be an unfunded arrangement which shall not affect the status of the Plan as an unfunded arrangement for purposes of Title I of ERISA. The terms of the Rabbi Trust shall provide that, within seven (7) days of a Change in Control, assets shall be transferred to the Rabbi Trust in (i) an amount equal to each Participant’s hypothetical account balance as of the date of the Change in Control, plus (ii) an amount deemed necessary to pay estimated Rabbi Trust administrative expenses for the following five (5) years, as determined by the Company’s Accountants. Assets transferred in accordance with the preceding sentence shall be in cash. The Company and/or an Affiliated Company shall make all transfers of assets required by the Rabbi Trust in a timely manner and shall otherwise abide by the terms of the Rabbi Trust.
     13.3. Lump Sum Payments . In connection with a Change in Control or consummation of a transaction constituting a Change in Control, the Chairman of DTE Energy Company shall have the absolute discretion to direct that a lump sum payment be made to a Participant up to the total value of such Participant’s Pre-2005 Accounts if such payment will reduce the amount of any potential excise tax imposed by Code section 4999.
     13.4. Joint and Several Liability . Upon and at all times after a Change in Control, the liability under the Plan of the Company and each Affiliated Employer that has adopted the Plan shall be joint and several so that the Company and each such Affiliated Employer shall each be liable for all obligations under the Plan to each employee covered by the Plan, regardless of the corporation by which such employee is employed.
     13.5. Dispute Procedures . In the event that, upon or at any time subsequent to a Change in Control, a disputed claim for benefits under the Plan is brought by a Participant or beneficiary, the following additional procedures shall be applicable:
          (a) Any amount that is not in dispute shall be paid to the Participant or beneficiary at the time or times provided herein.
          (b) The Participating Employer shall advance to such claimant from time to time such amounts as shall be required to reimburse the claimant for reasonable legal fees, costs and expenses incurred by such claimant in seeking a resolution of his or her claim, including reasonable fees, costs and expenses relating to arbitration.
     13.6. Definition of Change in Control . “Change in Control” means the occurrence of any one of the following events:
          (a) individuals who, on January 1, 2002, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 1, 2002, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest

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with respect to directors or as a result of any other actual or threatened solicitation of proxies [or consents] by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
          (b) any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided , however , that the event described in this paragraph (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c)), or (E) a transaction (other than one described in (c) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approve a resolution providing expressly that the acquisition pursuant to this clause (E) does not constitute a Change in Control under this paragraph (b);
          (c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (a “Business Combination”) or sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

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          (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
     Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided , that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
     IN WITNESS WHEREOF, DTE Energy Company has caused this Plan to be executed as of this 24 th day of November, 2008.
         
  DTE Energy Company
 
 
  By:   /s/ Larry E. Steward    
         Larry E. Steward   
         Vice President, Human Resources   
 

17

Exhibit 10-78
DTE ENERGY COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
Amended and Restated Effective January 1, 2005

 


 

TABLE OF CONTENTS
         
Section   Page  
PREAMBLE
    1  
 
       
SECTION 1. TITLE, PURPOSE AND EFFECTIVE DATE
    1  
1.01. Title
    1  
1.02. Purpose
    1  
1.03. Effective Date
    2  
1.04 Compliance with Code Section 409A
    2  
 
       
SECTION 2. DEFINITIONS
    2  
2.01. Account
    2  
2.02. Affiliated Company
    2  
2.03. Annual Cash Bonus
    2  
2.04. Base Salary
    2  
2.05. Beneficiary
    3  
2.06. Board
    3  
2.07. Cash Balance Plan
    3  
2.08. Cash Compensation
    3  
2.09. Code
    3  
2.10. Committee
    3  
2.11. Company
    3  
2.12. Company’s Accountants
    3  
2.13. Company’s Actuaries
    3  
2.14. Contribution Subaccount
    3  
2.15. Deferral Election
    4  
2.16. Deferral Period
    4  
2.17. Deferral Year
    4  
2.18. Deferral Year Subaccount
    4  
2.19. DTE
    4  
2.20. DTE Stock
    4  
2.21. Eligible Employee
    4  
2.22. ERISA
    4  
2.23. Fair Market Value
    4  
2.24. FICA
    4  
2.25. Participant
    4  
2.26. Participating Affiliated Company
    5  
2.27. Pension Plan
    5  
2.28. Performance Share Award
    5  
2.29. Plan
    5  
2.30. Plan Year
    5  
2.30 A Post-2004 Subaccount
    5  
2.30 B Pre-2005 Subaccount
    5  
2.31. Prior Plan
    5  

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Section   Page  
2.32. Qualified Plan
    5  
2.33. Savings Plan
    5  
2.34. SIP
    5  
2.35. Spouse
    5  
2.36. Subsidiary
    6  
 
       
SECTION 3. ELIGIBILITY AND PARTICIPATION
    6  
3.01. Voluntary Participation by Eligible Employees
    6  
3.02. Mandatory Participation by Covered Employees
    7  
 
       
SECTION 4. DEFERRALS AND CONTRIBUTIONS
    7  
4.01. Deferral of Performance Share Awards
    7  
4.03. Deferral of Annual Cash Bonus
    7  
4.04. Restoration of Qualified Plan Benefits
    8  
4.05. Mandatory Deferral
    8  
4.06. Deferral of Prior Plan Balances
    8  
 
       
SECTION 5. ACCOUNTS AND EARNINGS
    9  
5.01. Establishment of Accounts
    9  
5.02. Contribution Subaccounts
    9  
5.03. Election of Investment Options
    10  
5.04. No Requirement to Fund
    10  
 
       
SECTION 6. FORM AND TIMING OF PAYMENT
    10  
6.01. Distribution of Contribution Subaccount
    10  
6.02. Form of Distributions
    12  
6.03. Change In Distribution Option
    13  
6.04. Hardship Withdrawals
    14  
6.05. Unscheduled Withdrawals
    14  
6.06. Revocation of Designation as an Eligible Employee
    15  
6.07. Distribution of Performance-Based Compensation
    15  
 
       
SECTION 7. SELECTION OF AND PAYMENTS TO A BENEFICIARY
    15  
7.01. Beneficiary Designation
    15  
7.02. Change in Beneficiary
    15  
7.03. Survivor Benefit
    15  
 
       
SECTION 8. VESTING OF BENEFITS
    15  
 
       
SECTION 9. TAX WITHHOLDING
    16  
 
       
SECTION 10. ADMINISTRATION OF THE PLAN
    16  
10.01. Duties and Power
    16  
10.02. Benefit Statements
    16  
10.03. Right to Accelerate
    16  

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Section   Page  
SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION
    17  
11.01. Right to Amend or Terminate
    17  
11.02. Right to Suspend
    17  
11.03. Partial ERISA Exemption
    17  
 
       
SECTION 12. MISCELLANEOUS
    17  
12.01. Unfunded Plan
    17  
12.02. No Right to Continued Employment
    17  
12.03. Prohibition Against Alienation
    18  
12.04. Savings Clause
    18  
12.05. Payment of Benefit of Incompetent
    18  
12.06. Spouse’s Interest
    18  
12.07. Successors
    18  
12.08. Gender, Number and Heading
    18  
12.09. Legal Fees and Expenses
    18  
12.10. Choice of Law
    19  
12.11. Affiliated Employees
    19  
12.12. Plan Document
    19  
 
       
SECTION 13. ARBITRATION
    19  
 
       
SECTION 14. CHANGE IN CONTROL PROVISIONS
    20  
14.01. General
    20  
14.02. Transfer to Rabbi Trust
    20  
14.03. Lump Sum Payments
    21  
14.04. Joint and Several Liability
    21  
14.05. Dispute Procedures
    21  
14.06. Definition of Change in Control
    21  

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DTE ENERGY COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
Amended and Restated Effective January 1, 2005
PREAMBLE
     Benefits under the Plan are available to eligible executives and key management employees of DTE Energy Company and its Affiliated Companies. DTE Energy Company has established this Plan to benefit executives of DTE Energy Company and its Affiliated Companies in a manner that will be in the best interest of DTE Energy Company and its shareholders.
SECTION 1.
TITLE, PURPOSE AND EFFECTIVE DATE
     1.01. Title . The title of this Plan shall be the “DTE Energy Company Executive Deferred Compensation Plan” and shall be referred to in this document as the “Plan.”
     1.02. Purpose . The purpose of the Plan is to promote the success of DTE Energy Company (hereinafter referred to as “DTE”) by:
          (a) providing selected executives with the ability to defer compensation on a pre-tax basis to provide supplemental retirement savings;
          (b) providing a mechanism for selected executives to receive benefits that they otherwise would have received under certain qualified retirement plans but for their deferral elections;
          (c) providing executives participating in the DTE Energy Company 2001 Stock Incentive Plan (“SIP”) with a mechanism for deferring receipt of Performance Share Awards otherwise payable in cash under the SIP; and
          (d) permitting the Organization and Compensation Committee of the Board, or its designee, to require deferrals of compensation to the extent desirable to satisfy the deduction limitations of Code section 162(m).
          It is intended that this Plan provide deferred compensation for “a select group of management or highly compensated employees” within the meaning of sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended (hereinafter referred to as “ERISA”) and, therefore, to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.

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     1.03. Effective Date . The Plan was originally effective January 1, 2002. This amendment and restatement of the Plan is effective January 1, 2005, unless a different effective date is specified for a particular provision.
     1.04 Compliance with Code Section 409A . The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A solely with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this Section 1.04.
          As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
SECTION 2.
DEFINITIONS
     The following words and terms, as used in this Plan, shall have the meanings set forth below, unless a clearly different meaning is required by the context in which the word or phrase is used.
     2.01. Account . “Account” means the hypothetical record or bookkeeping entry maintained by the Company reflecting each Participant’s deferrals, credited earnings and losses, Company contributions, transfers from a Prior Plan and distributions under the Plan. The term “Account” should not be construed as an actual segregation of assets for the benefit of any particular Participant.
     2.02. Affiliated Company . “Affiliated Company” means any corporation while such corporation is a member of the same controlled group of corporations (within the meaning of Code section 414(b)) as DTE or any other employing entity while such entity is under common control (within the meaning of Code section 414(c)) with DTE.
     2.03. Annual Cash Bonus . “Annual Cash Bonus” means the cash compensation payable in the Plan Year under the DTE Energy Company Annual Incentive Plan, or any successor plan thereto, after reduction for (i) any pre-tax deferrals under Code section 401(k), and (ii) any payroll deduction for taxes or any other purpose.
     2.04. Base Salary . “Base Salary” means base salary payable after reduction for any pre-tax deferrals under Code sections 125, 129 or 401(k) but prior to reduction for any payroll deduction for taxes or any other purpose. “Base Salary” shall exclude any bonus, fringe benefit or other form of remuneration.

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     2.05. Beneficiary . “Beneficiary” means the person, persons or entity designated in writing by the Participant, on forms provided by the Company, to receive distribution of certain death benefits payable under the Plan in the event of the Participant’s death.
     2.06. Board . “Board” means the Board of Directors of DTE.
     2.07. Cash Balance Plan . “Cash Balance Plan” means any cash balance defined benefit plan maintained by the Company or an Affiliated Company which is intended to be qualified under Code section 401(a); provided, however, that the MCN Traditional Option and the DTE Traditional Option of the DTE Energy Company Retirement Plan shall be included in the definition of “Pension Plan,” and not in the definition of “Cash Balance Plan.”
     2.08. Cash Compensation . “Cash Compensation” means Annual Cash Bonus or other cash payments (other than Performance Share Awards payable in cash, which are defined in Section 2.28 “Performance Share Awards”) payable to a Participant.
     2.09. Code . “Code” means the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder. References to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection.
     2.10. Committee . “Committee” means the Organization and Compensation Committee of the Board. The Committee is responsible for the administration of the Plan and may delegate such administrative responsibilities under this Plan.
     2.11. Company . “Company” means DTE Energy Company or its successors and assigns.
     2.12. Company’s Accountants . “Company’s Accountants” means the independent accountant or accountants engaged by the Company and, if selected or changed following a Change in Control, approved by the trustee of the trust established in accordance with Section 14.
     2.13. Company’s Actuaries . “Company’s Actuaries” means the independent actuary or actuaries engaged by the Company and, if selected or changed following a Change in Control, approved by the trustee of the trust established in accordance with Section 14.
     2.14. Contribution Subaccount . “Contribution Subaccount” means a hypothetical bookkeeping record maintained by the Company to track the various allocations to a Participant’s account. For purposes of this Plan, the balance in each Account shall be allocated among the Annual Cash Bonus Subaccount, the Base Salary Subaccount (for Base Salary deferred prior to January 1, 2004), the Prior Plans Subaccount, and the Mandatory Deferral Subaccount (collectively, known as the Contribution Subaccounts) as defined in Section 5 herein.

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     2.15. Deferral Election . “Deferral Election” means the deferral agreement described in 3.01(c) of the Plan.
     2.16. Deferral Period . “Deferral Period” means, with respect to each Deferral Year Subaccount, the period beginning with the first day of the Deferral Year and ending upon the date the Participant elected to receive or begin receiving a distribution of his entire Deferral Year Subaccount under the Plan. The minimum length of time for a Deferral Period shall be two (2) years or the period from the first day of the Deferral Year through the date of the Participant’s termination for any reason, whichever is earlier. The Deferral Period for the Mandatory Deferral Subaccount shall be through the date on which the Participant ceases to be a “covered employee” as that term is defined in Code section 162(m)(3).
     2.17. Deferral Year . “Deferral Year” means the period during which compensation subject to a Participant’s Deferral Election would have been paid in the absence of the Deferral Election. Generally, the Deferral Year will be the Plan Year. Where a Participant first becomes eligible to participate during a Plan Year, however, the Deferral Year begins upon the effective date of the Participant’s initial Deferral Election.
     2.18. Deferral Year Subaccount . “Deferral Year Subaccount” means the bookkeeping record maintained by the Company to separately track the allocations for each Deferral Year to each of the Participant’s Contribution Subaccounts.
     2.19. DTE . “DTE” means DTE Energy Company or its successors and assigns.
     2.20. DTE Stock . “DTE Stock” means the common stock of DTE.
     2.21. Eligible Employee . “Eligible Employee” means any employee of the Company who satisfies the eligibility requirements of Section 3 of the Plan.
     2.22. ERISA . “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any regulations issued thereunder. References to any section or subsection of ERISA includes references to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection.
     2.23. Fair Market Value . “Fair Market Value” on a given date means the average of the high and low sale price for DTE Stock on that date (or, if there were no such sales on that date, on the next most recent prior date on which there were such sales) as reported on the Composite Tape if the DTE Stock is listed on the New York Stock Exchange (“NYSE”).
     2.24. FICA . “FICA” means the tax applied under the Federal Insurance Contributions Act as set forth in Chapter 21, Subtitle C, of the Code, and any regulations issued thereunder.
     2.25. Participant . “Participant” means an Eligible Employee who has made a written election on a properly executed Deferral Election to participate in the Plan.

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     2.26. Participating Affiliated Company .. “Participating Affiliated Company” means any Affiliated Company as defined in Section 2.02 who has elected to participate in the Plan.
     2.27 Pension Plan . “Pension Plan” means any defined benefit plan maintained by the Company or an Affiliated Company, which is intended to be qualified under Code section 401(a). “Pension Plan” includes the MCN Traditional Option and the DTE Traditional Option of the DTE Energy Company Retirement Plan, but cash balance defined benefit plans shall otherwise be included in the definition of “Cash Balance Plan,” and not in the definition of “Pension Plan.”
     2.28 Performance Share Award . “Performance Share Award” means the award under the SIP, which before the beginning of the Deferral Period is determined to be otherwise payable in cash.
     2.29. Plan . “Plan” means the DTE Energy Company Executive Deferred Compensation Plan, as described herein and as amended.
     2.30. Plan Year . “Plan Year” means, for the first year, the period beginning January 1, 2002, and ending December 31, 2002, and thereafter, the period beginning January 1 and ending December 31 of each year.
     2.30A Post-2004 Subaccount . “Post-2004 Subaccount” means any Deferral Year Subaccount attributable to a Deferral Year after 2004.
     2.30B Pre-2005 Subaccount . “Pre-2005 Subaccount” means any Deferral Year Subaccount attributable to a Deferral Year before 2005.
     2.31. Prior Plan . “Prior Plan” means the MCN Energy Group Executive Deferred Compensation Plan and/or the DTE Deferred Bonus Plan.
     2.32. Qualified Plan . “Qualified Plan” means any plan maintained by the Company or an Affiliated Company, which is intended to be qualified under Code section 401(a).
     2.33. Savings Plan . “Savings Plan” means any defined contribution plan maintained by the Company or an Affiliated Company, which is intended to be qualified under Code section 401(a).
     2.34. SIP . “SIP” means the DTE Energy 2001 Stock Incentive Plan as amended from time to time.
     2.35. Spouse . “Spouse” means an individual who is legally married to a Participant under the laws of the State in which the Participant resides, on the day immediately preceding the Participant’s date of death.

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     2.36. Subsidiary . “Subsidiary” means a corporation, partnership, joint venture, limited liability company, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
     3.01. Voluntary Participation by Eligible Employees . Each employee of the Company and Participating Affiliated Companies who is included within a “select group of management or highly compensated employees,” within the meaning of Title I of ERISA, may be eligible to participate in accordance with the terms of the Plan.
          (a) Effective Date for Participation . Each employee of the Company and Participating Affiliated Companies who is employed at the level of Director or above (or equivalent) and who is designated as an Eligible Employee shall be eligible to participate in the Plan and make voluntary elections to defer receipt of Cash Compensation and/or Performance Share Awards, effective as of the later of (i) the date determined by the Vice President, Human Resources, or (ii) the date on which the employee is formally notified of his eligibility to participate.
          (b) Determination of Eligible Employee Status . The Vice President, Human Resources shall designate employees as Eligible Employees. The Vice President, Human Resources may revoke such designation prior to any Plan Year with respect to the Eligible Employee’s ability to defer future compensation payable by the Company or Participating Affiliated Company, provided, however, that no such revocation shall adversely affect any amounts previously deferred by such Eligible Employee under the Plan. Employees who were employed at the level of Director at MCN Energy Group Inc. or one of its subsidiaries prior to June 1, 2001, but were not appointed to a level of Director or above in the Staffing and Selection process during the second quarter of 2001 shall be eligible to participate for the 2002 Plan year only; unless or until they are otherwise designated as Eligible Employees.
          (c) Deferral Election . The Company shall provide a Deferral Election to each Eligible Employee for each Plan Year in which deferrals are to be made, which shall set forth the Eligible Employee’s election to defer a portion of his compensation, his agreement to be bound by the terms of the Plan, and such other matters as are set forth in this Plan or deemed advisable by the Committee. For each Deferral Year Subaccount, including such subaccounts, if any, under the Qualified Plan Make-up Subaccount, the Participant shall specify in the Deferral Election a Deferral Period of at least two (2) years and the method and timing of payment as described in Section 6. Failure to submit an election for any Plan Year will preclude such Eligible Employee from deferring any Cash Compensation or Performance Share Awards until the following Plan Year.
          (d) Mid-Year Participation . To the extent an employee is designated as an Eligible Employee, and formally notified of his eligibility to participate in the Plan during a Plan Year, the Eligible Employee must elect to participate within 30 days after the Participant is

6


 

notified of his eligibility for the Plan. For Plan Years after 2004, the initial election by a new Eligible Employee only applies to the portion of any Cash Compensation or Performance Share Awards earned after the date of the initial election, determined by multiplying the Eligible Employee’s Cash Compensation or Performance Share Awards by a fraction with a numerator equal to the number of days remaining in the performance period after the date of the election and with a denominator equal to the total number of days in the performance period. Failure to submit an election during such 30-day period will preclude such Eligible Employee from deferring any Cash Compensation or Performance Share Awards until the following Plan Year.
     3.02. Mandatory Participation by Covered Employees . The Organization and Compensation Committee of the Board, or its designee, may require the deferral of compensation of any Eligible Employee who is a “covered employee” as defined in Code section 162(m)(3) and the regulations thereunder, to the extent that such compensation would not have been deductible in the year in which such compensation would have been paid.
SECTION 4.
DEFERRALS AND CONTRIBUTIONS
     4.01. Deferral of Performance Share Awards .
          (a) Election To Defer . For Plan Years before 2005, each Eligible Employee may elect, no later than October 31 of the year preceding the Plan Year in which Performance Shares would otherwise be payable, to defer receipt of all or a portion of a Performance Share Award otherwise payable in cash by filing with the Vice President, Human Resources the Deferral Election provided by the Company.
          For Plan Years after 2004, each Eligible Employee may elect, no later than June 30 of the year preceding the Plan Year in which Performance Shares would otherwise be payable, to defer receipt of all or a portion of a Performance Share Award otherwise payable in cash by filing with the Vice President, Human Resources the Deferral Election provided by the Company.
          (b) Deferral Amount . Each Eligible Employee may file a written election to defer the receipt of a portion of a Performance Share Award in an amount not (i) less than one percent (1%), nor (ii) in excess of one hundred percent (100%), less the applicable FICA on such amount, in one percent (1%) increments, of the Performance Share Award otherwise payable in cash.
          (c) No Deferrals Permitted After December 31, 2006 . No Eligible Employee may elect to defer any Performance Shares payable after December 31, 2006.
Section 4.02 — Deferral of Base Salary deleted in its entirety effective January 1, 2004.
     4.03. Deferral of Annual Cash Bonus .

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          (a) Election To Defer . For Plan Years before 2005, each Eligible Employee may file a written election with the Vice President, Human Resources, no later than October 31 of the year preceding the Plan Year in which his Annual Cash Bonus otherwise would be payable, to defer receipt of all or a portion of his Annual Cash Bonus.
          For Plan Years after 2004, each Eligible Employee may file a written election with the Vice President, Human Resources, no later than June 30 of the year preceding the Plan Year in which his Annual Cash Bonus otherwise would be payable, to defer receipt of all or a portion of his Annual Cash Bonus.
          (b) Deferral Amount . Each Eligible Employee may file a written election to defer the receipt of his Annual Cash Bonus in an amount not (i) less than one percent (1%), nor (ii) in excess of one hundred percent (100%), in one percent (1%) increments, less the applicable FICA on such amount, of the amounts payable during the Plan Year to which the election pertains.
          (d) No Deferrals Permitted After December 31, 2006 . No Eligible Employee may elect to defer any Annual Cash Bonus payable after December 31, 2006.
     4.04. Restoration of Qualified Plan Benefits . Amounts intended to replace Qualified Plan benefits (but not earnings) under the Cash Balance Plan, the Pension Plan, or the Savings Plan which are reduced as a result of deferrals under Sections 4.01, 4.02, or 4.03 of this Plan will be restored through a Qualified Plan Make-up Subaccount in the DTE Energy Company Supplemental Retirement Plan.
     4.05. Mandatory Deferral . The Company may credit to the Participant’s Mandatory Deferral Subaccount, on the date on which such compensation would otherwise have been payable, amounts which would have been nondeductible under Code section 162(m) on the date on which such compensation would otherwise be payable. The Deferral Period for the Mandatory Deferral Subaccount shall be through the date on which the Participant ceases to be a “covered employee” as that term is defined in Code section 162(m)(3). Any amounts in the Mandatory Deferral Subaccount shall be paid in the form of a lump sum.
     4.06. Deferral of Prior Plan Balances .
          (a) Automatic Transfer . The Company shall credit to each Eligible Employee’s Prior Plan Subaccount as of January 1, 2002 the amount credited to the Eligible Employee under the Prior Plan as of December 31, 2001.
          (b) Election of Deferral Period. Each Eligible Employee whose balance in a Prior Plan is transferred to this Plan pursuant to subsection (a) shall file a written election with the Vice President, Human Resources, no later than October 31, 2001, specifying a Deferral Period of at least two (2) years and the method and timing of payment as described in Section 6. If such Eligible Employee fails to submit an election on or before October 31, 2001, the Prior Plan Account shall be paid in a lump sum upon termination of employment. Amounts in pay status under the MCN Energy Group Executive Deferred Compensation Play as of December 31,

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2001, shall be payable on an annual basis, in arrears, rather than on a monthly basis, effective January 1, 2002.
SECTION 5.
ACCOUNTS AND EARNINGS
     5.01. Establishment of Accounts . The Committee shall establish a hypothetical bookkeeping Account for each Participant. Each Participant’s Account shall be divided into one or more Contribution Subaccounts:
          (a) For Participants deferring Base Salary prior to January 1, 2004, a “Base Salary Subaccount,”
          (b) For Participants deferring Annual Cash Bonus, an “Annual Cash Bonus Subaccount,”
          (c) For Participants whose Qualified Plan benefits are reduced because of their participation in this Plan, a “Qualified Plan Make-up Subaccount” in the DTE Energy Company Supplemental Retirement Plan,
          (d) For Participants deferring Performance Share Awards payable in cash, a “Performance Share Subaccount,”
          (e) For Participants whose compensation would otherwise be nondeductible under Code section 162(m), a “Mandatory Deferral Subaccount,” and
          (f) For Participants whose balance from a Prior Plan has been transferred to this Plan, a “Prior Plan Subaccount.”
In addition, each Contribution Subaccount shall be divided into one or more Deferral Year Subaccounts, based on the Deferral Year of the contributions allocated to such Contribution Subaccount. The Prior Plan Subaccount shall be deemed to consist of one Deferral Year only.
     5.02. Contribution Subaccounts .
          (a) Establishment of Contribution Subaccounts . A Participant’s Contribution Subaccount shall be denominated on a monetary basis. The Committee shall cause each separate Contribution Subaccount to be maintained in the name of each Participant with respect to whom all or a portion of Base Salary (prior to January 1, 2004), Annual Cash Bonus, or Performance Share Awards has been deferred, whose Qualified Plan benefits have been reduced because of his participation in this Plan, whose compensation has been mandatorily deferred because of Code section 162(m), or whose Prior Plan Balance has been transferred to this Plan.
          (b) Subsequent Credits . Each Participant’s Contribution Subaccount shall be credited with amounts of Cash Compensation deferred by the Participant and by the Company

9


 

contributions specified in Section 4.04, 4.05 and 4.06. Cash Compensation deferrals shall be credited on the date such amounts would have otherwise been paid to the Participant. Company contributions shall be credited on the dates specified in Section 4.04, 4.05 or 4.06.
          (c) Contribution Subaccounts Adjustments . Each Contribution Subaccount for any Participant shall be credited with earnings and debited for losses as if such amounts were invested in specific investment funds that reflect, as of a given date, the funds established under The DTE Energy Company Savings and Stock Ownership Plan (the “Deemed Investments”) in which the Participant’s new contributions are invested by percentage, taking into account changes among such Deemed Investments made by the Participant, during the Deferral Period. Notwithstanding the foregoing, the Committee may change available investment funds or override a Participant’s investment election at any time.
     5.03. Election of Investment Options . Each Participant shall, by filing an election with the Committee, in a format approved by the Committee, elect the investment options in which each deferral amount is to be invested. Investment options available under the Plan and the ability to change such investment election shall mirror those available under the Qualified Plan, however, may be changed at the discretion of the Committee.
     5.04. No Requirement to Fund . The Company shall have sole discretion whether or not to invest any of the Company’s funds (whether or not in trust) in a manner that reflects the Deemed Investments or in any other manner. If and to the extent the Company chooses to invest in any Deemed Investment, assets acquired by the Company shall remain the sole property of the Company, subject to the claims of its general creditors, and shall not be deemed to form part of the Participant’s Account. Nothing herein, however, shall preclude the Company from segregating assets that are intended to be a source of payment of benefits from the Plan. The Company shall not be required to fund its obligations in any manner and shall not be required to invest in any particular investment, including any Deemed Investment fund. The Company may, without limitation, purchase life insurance or any security or other property with respect to any or all of its obligations under the Plan. Participants shall have no right, title or interest in any assets held by the Company (or any trust) by reason of a Participant’s participation in this Plan.
SECTION 6.
FORM AND TIMING OF PAYMENT
     6.01. Distribution of Contribution Subaccount . The Company shall distribute each Participant’s Contribution Subaccount in accordance with the Participant’s Deferral Election unless the Plan provides otherwise. The distribution election with respect to each Deferral Year Subaccount under the Participant’s Contribution Subaccount shall be made in accordance with the following provisions.
          (a) Payment Election . Such Deferral Election shall provide for payment in either (i) annual installments over a period not less than two years and not more than 15 years, in one-year increments, or (ii) a lump sum distribution. If no Deferral Election is on file with

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respect to the Deferral Year Subaccount or no distribution option is indicated on the Deferral Election, the Participant’s Deferral Year Subaccount shall be distributed in a single lump sum.
          (b) Timing of Distributions — Pre-2005 Subaccounts . A lump sum distribution shall be made as of March 1 following the end of the Deferral Period or, if earlier, March 1 following the end of the Plan Year in which the Participant’s employment terminated for any reason other than death. If a Participant has elected to receive his distribution in annual installments, the first installment shall be made as of March 1 following the end of the Deferral Period or, if earlier, March 1 following the end of the Plan Year in which the Participant’s employment terminated for any reason other than death. All subsequent annual installments shall be made on approximately the same date each calendar year thereafter for the remainder of the distribution period. If no Deferral Election is on file with respect to the Deferral Year Subaccount or no distribution option is indicated on the Deferral Election, the Participant’s Deferral Year Subaccount shall be distributed as of March 1 following the end of the Plan Year in which the Participant’s employment is terminated for any reason other than death. Timing of a distribution due to a Participant’s death shall be governed by Section 7.03.
          (c) Timing of Distributions — Post-2004 Subaccounts .
               (1) If a Deferral Period ends other than because of the Participant’s termination of employment for any reason, or if the Deferral Period ends because the Participant’s employment terminated for any reason other than death and the Participant is not a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminated for any reason other than death, a lump sum distribution or the first annual installment of a Participant’s Post-2004 Subaccount shall be made on:
                    (A) January 1 following the end of the Deferral Period, if the Participant did not make any election under Section 6.03(b)(2); or
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under Section 6.03(b)(2), if the Participant made one or more elections under Section 6.03(b)(2).
               (2) If a Deferral Period ends because the Participant’s employment terminates for any reason other than death and the Participant is a “specified employee” for purposes of Code section 409A at the time the Participant’s employment terminates for any reason other than death, a lump sum distribution or first annual installment of the Participant’s Post-2004 Subaccount will not be made before the latest of:
                    (A) January 1 following the end of the Plan Year in which the Participant’s employment terminated for a reason other than death, if the Participant did not make any election under Section 6.03(b)(2); and
                    (B) January 1 coincident with or next following the latest date to which distribution was deferred by an election under section 6.03(b)(2), if the Participant made one or more elections under Section 6.03(b)(2); and

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                    (C) the earlier of:
                         (i) the first day of the calendar month beginning more than 6 months after the date the Participant’s employment terminated for a reason other than death; and
                         (ii) the first day of the calendar month beginning after the Participant’s death.
          Subsequent annual installments of the Participant’s Post-2004 Subaccount shall be made each following January 1 of the installment period.
     Timing of a distribution due to a Participant’s death shall be governed by Section 7.03.
     6.02. Form of Distributions .
          (a) Contribution Subaccounts
               (1)  General Rule . Earnings and losses based on the Deemed Investments shall be credited to each Deferral Year Subaccount under the Participant’s Contribution Subaccount through December 31 of each Plan Year in which the Participant has a balance in such Deferral Year Subaccount. The distribution to a Participant shall be paid in cash. Except as provided in Section 6.02(a)(2), the initial distribution shall be determined by dividing the value of the Participant’s Contribution Subaccount, determined as of (i) December 31 of the last Plan Year ending with or within the Deferral Period or, if earlier, on (ii) December 31 of the Plan Year in which the Participant’s employment terminated, by the number of installment payments to be made. The amount distributed to the Participant thereafter shall be recalculated each year to reflect changes in the Deferral Year Subaccount balance through December 31 of such subsequent calendar year and the remaining number of installment payments to be made.
               (2)  Additional Rules for Post-2004 Subaccounts .
                    (A) An initial distribution delayed under Section 6.01(c)(2)(C) will be determined by dividing the value of the Participant’s Post-2004 Subaccount determined as of the last day of the month preceding the payment date, by the number of installment payments to be made.
                    (B) An initial distribution delayed under Section 6.01(c)(1)(B) or 6.01(c)(2)(B) will be determined by dividing the value of the Participant’s Post-2004 Subaccount as of the December 31 preceding the payment date, by the number of installment payments to be made.
          (b) Distribution of Small Amounts — Pre-2005 Subaccounts . Notwithstanding a Participant’s payment option, if the portion of a Participant’s Contribution Subaccount attributable to Pre-2005 Subaccounts is less than or equal to $10,000 as of any March 1 payment

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date, that portion of the Participant’s Contribution Subaccount balance shall be paid in a single lump sum.
          (c) Distribution of Small Amounts — Post-2004 Subaccounts . Notwithstanding a Participant’s payment option, if the portion of a Participant’s Contribution Subaccount attributable to Post-2004 Subaccounts is less than or equal to the dollar limit under Code Section 402(g) for the calendar year in which the Participant terminates employment, that portion of the Participant’s Contribution Subaccount balance shall be paid in one lump sum to the extent permitted by Code Section 409A and the related Treasury Regulations.
     6.03. Change In Distribution Option .
          (a) Pre-2005 Subaccounts. A Participant may change the distribution option previously selected for a Pre-2005 Subaccount at any time while actively employed by submitting a revised Deferral Election applicable to the Pre-2005 Subaccount to the Committee. A change in time or manner of an in-service distribution must be made by the December 31 prior to the March 1 payment date, and if the timing of such distribution is changed, the new deferral period must be for at least two years after the then-current timing of the distribution.
          (b) Post-2004 Subaccounts.
               (1) Before January 1, 2009, a Participant may change the distribution option previously selected for a Post-2004 Subaccount by filing a written election with the Committee before January 1, 2009 that satisfies both of the following:
                    (A) The Participant’s election does not defer to a date after December 31, 2008 any distribution of a Post-2004 Subaccount otherwise required to be made before January 1, 2009; and
                    (B) The Participant’s election does not accelerate to a date before January 1, 2009 any distribution of a Post-2004 Subaccount otherwise required to be made after December 31, 2008.
               (2) After December 31, 2008, a Participant may elect to change the distribution option previously selected for a Post-2004 Subaccount by filing a written election with the Committee that satisfies both of the following:
                    (A) The Participant’s election is filed with the Committee at least 12 months before the earliest date on which the distribution of the Post-2004 Subaccount would begin under the Participant’s then-current distribution election; and
                    (B) The Participant’s election designates that distribution of the Post-2004 Subaccount will begin at least 5 years after the earliest date on which distribution of the Post-2004 Subaccount would begin under the Participant’s then-current distribution election.

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     6.04. Hardship Withdrawals . An active Participant may request, in writing to the Vice President, Human Resources, a hardship withdrawal of all or part of his remaining Account which will be paid within 30 days in a single lump sum. Such distribution shall be made only if the Vice President, Human Resources determines that the Participant has an unforeseen emergency that constitutes a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Payment may not be made to the extent that such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or by cessation of deferrals under the Plan. The distribution shall be limited to the amount required to meet the financial hardship. In making these determinations, the Vice President, Human Resources shall utilize the regulations adopted under Code section 409A. Hardship distributions shall be deducted from Contribution Subaccounts in the following order (i) the Annual Cash Bonus Subaccount; and (ii) the Base Salary Subaccount. Within each Contribution Subaccount, Post-2004 Subaccounts will be depleted first, and then the oldest Pre-2005 Subaccounts. If a Participant elects a hardship withdrawal, any on-going deferral will not cease for the remainder of the Plan Year in which the hardship withdrawal is elected, unless permitted by Code Section 409A. However, the Participant will not again be designated as an Eligible Employee eligible to make additional deferrals under the Plan until the enrollment period occurring at the end of the Plan Year following the Plan Year in which the withdrawal was made.
     6.05. Unscheduled Withdrawals . A Participant or a former Participant receiving distributions in annual installments is permitted to make unscheduled withdrawals from Pre-2005 Subaccounts as described below:
          (a) Election . A Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the amount credited to the Participant’s Pre-2005 Subaccounts, including earnings, which will be paid within 30 days in a single lump sum. A former Participant may request in writing to the Vice President, Human Resources, an unscheduled partial withdrawal or entire withdrawal of the undistributed balance of the former Participant’s Pre-2005 Subaccounts, which will be paid within 30 days in a single lump sum.
          (b) Withdrawal Penalty . There will be a penalty deducted from the Pre-2005 Subaccount prior to an unscheduled withdrawal equal to 10% of the Pre-2005 Subaccount balance as of the date the unscheduled withdrawal request is received by the Vice President, Human Resources.
          (c) Suspension of Deferrals . If a Participant elects an unscheduled withdrawal, any deferrals elected by the Participant for the current Plan Year will not cease unless permitted by Code Section 409A. However, the Participant will not be eligible to elect to again make deferrals under the Plan until the second Plan Year beginning after the Plan Year in which the withdrawal was made.

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     6.06. Revocation of Designation as an Eligible Employee . A Participant whose designation as an Eligible Employee is revoked prior to the Participant’s retirement, death, termination or disability shall not be permitted to continue to make Deferrals under the Plan subsequent to the date of such revocation. However, all monies that are in the Participant’s subaccounts as of the date of revocation shall continue to be deferred in such subaccounts until the Participant’s retirement, death, termination or disability.
     6.07. Distribution of Performance-Based Compensation . It is intended that deferrals of amounts that would have constituted “qualified performance-based compensation,” within the meaning of Code Section 162(m) and the regulations thereunder, if paid when earned shall continue to constitute “qualified performance-based compensation” when distributed under this Plan. Amounts deferred that would not have constituted “qualified performance-based compensation” if paid when earned shall not constitute “qualified performance-based compensation” when distributed under this Plan.
SECTION 7.
SELECTION OF AND PAYMENTS TO A BENEFICIARY
     7.01. Beneficiary Designation . A Participant shall designate a Beneficiary on a form provided by the Vice President, Human Resources, or his or her designee, for the purpose of designating a Beneficiary. If a Participant has not designated a Beneficiary, or if a designated Beneficiary is not living or in existence at the time of a Participant’s death, any death benefits payable under the Plan shall be paid to the Participant’s Spouse, if then living, and if the Participant’s Spouse is not then living, to the Participant’s estate.
     7.02. Change in Beneficiary . A Participant may change the designated Beneficiary from time to time by filing a new written designation with the Vice President, Human Resources, or his or her designee. Such designation shall be effective upon receipt by the Vice President, Human Resources, or his or her designee.
     7.03. Survivor Benefit . If a Participant dies with an Account balance under this Plan, his Beneficiary shall be entitled to receive a distribution of the Participant’s Account. The distribution shall be paid in a lump sum within ninety (90) days following the Participant’s death.
SECTION 8.
VESTING OF BENEFITS
     A Participant shall be 100 percent vested in his benefits under the Plan at all times, except as set forth in Sections10.03 (relating to the right to accelerate payments) and 11.03 (relating to failure of the Plan to maintain the designated ERISA exemptions). A Participant shall be treated as an unsecured creditor of the Company for all benefits under the Plan.

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SECTION 9.
TAX WITHHOLDING
     Deferrals hereunder shall be subject to applicable FICA withholding laws. Benefit payments hereunder shall be subject to applicable federal, state and 1ocal tax withholding laws. A Participant shall be responsible for making payment to DTE or a participating Affiliated Company, as appropriate, in an amount equal to the FICA tax or income payroll tax withholdings on the Fair Market Value of deferrals of or payments made in DTE Stock.
SECTION 10.
ADMINISTRATION OF THE PLAN
     10.01. Duties and Power . The Committee shall be the “named fiduciary” for the Plan responsible for the general operation and administration of the Plan and the proper execution of its provisions. It shall have full discretionary authority to interpret the Plan and to determine the response to all questions arising from its provisions. It shall maintain all necessary books of accounts and records. It shall have the full discretionary power and authority to establish, interpret, enforce, amend, and revoke, from time to time, such rules and regulations for the administration of the Plan and the conduct of its business as it deems appropriate, including the right to remedy ambiguities, inconsistencies and omissions. Any action that the Committee is required or authorized to take shall be final and binding upon each and every person who is or may become a Plan Participant or Beneficiary. The Committee may delegate its authority to administer the Plan.
     10.02. Benefit Statements . The Committee, or its designee, will provide each Participant with a quarterly statement setting forth the Participant’s Account balance, and the amount allocated to each Contribution Subaccount.
     10.03. Right to Accelerate . The Board in its sole discretion may accelerate all vested benefits upon termination of the Plan, and pay such benefits in a single lump sum, but only to the extent permitted by Code section 409A and the related Treasury Regulations with respect to Post-2004 Subaccounts. If the Internal Revenue Service or the Committee determines that any amounts in Participants’ Accounts are currently taxable, the Committee may direct immediate payment of all or some Plan benefits attributable to Pre-2005 Subaccounts in a single lump sum or to take any other action it deems appropriate. If the Internal Revenue Service determines that any amounts in Participants’ Accounts are currently taxable, the Committee may direct immediate payment in a single lump sum of any Post-2004 Subaccounts determined to be currently taxable. In addition, Participants terminating employment with an Account balance attributable to Pre-2005 Subaccounts of less than $10,000 shall receive the Pre-2005 Subaccounts in a single lump sum regardless of the distribution elections stated in their Deferral Election(s). Immediate distribution of an Account Balance attributable to Post-2004 Subaccounts upon termination will be made only as permitted by Code section 409A and the related Treasury Regulations, including any distribution delay required for specified employees.

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SECTION 11.
AMENDMENT, SUSPENSION, AND TERMINATION
     11.01. Right to Amend or Terminate . The Plan may be amended, modified or terminated by the Board at any time. Such amendment, modification or termination may modify or eliminate any benefit hereunder except that such amendment, modification or termination shall not affect the rights of Participants or Beneficiaries to the vested portion of a Participant’s Account as of the date of such amendment or termination.
     11.02. Right to Suspend . If the Board of Directors determines that payments under the Plan would have a material adverse affect on the Company’s ability to carry on its business, the Board of Directors may suspend payments of Pre-2005 Subaccounts temporarily for such time as in its sole discretion it deems advisable, but in no event for a period in excess of one year. If the Board of Directors determines that payments under the Plan will jeopardize the Company’s ability to continue as a going concern, the Board of Directors may suspend payments of Post-2004 Subaccounts until the first taxable year when payment will not have that effect. The Company shall pay such suspended payments in a lump sum immediately upon the expiration of the period of suspension.
     11.03. Partial ERISA Exemption . The Plan is intended to provide benefits for “a select group of management or highly compensated employees” within the meaning of sections 201, 301 and 401 of ERISA, and therefore to be exempt from sections 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan shall terminate and existing Account balances shall be paid in a single lump-sum (to the extent permitted by Code section 409A and the related Treasury Regulations for Post-2004 Subaccounts) and no further benefits, vested or non-vested, shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of section 3(2) of ERISA which is not so exempt.
SECTION 12.
MISCELLANEOUS
     12.01. Unfunded Plan . The Plan shall be unfunded within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) ERISA. All benefits payable under the Plan shall be paid from the Company’s general assets. The Company shall not be required to set aside or hold in trust any funds for the benefit of a Participant or Beneficiary, each of whom shall have the status of a general unsecured creditor with respect to the Company’s obligation to make benefit payments pursuant to the Plan. Any assets of the Company available to pay Plan benefits shall be subject to the claims of the Company’s general creditors and may be used by the Company in its sole discretion for any purpose.
     12.02. No Right to Continued Employment . Nothing in the Plan shall create or be construed as a contract between the Company or an Affiliated Company and employees for any matter including giving any person employed by the Company or an Affiliated Company the

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right to be retained in the Company’s or an Affiliated Company’s employ. The Company and each Affiliated Company expressly reserve the right to dismiss any person at any time, with or without cause, without liability for the effect that such dismissal might have upon him as a Participant in the Plan or for any other purpose.
     12.03. Prohibition Against Alienation . Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No such right or benefit shall be liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such right or benefit.
     12.04. Savings Clause . If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision and the remaining provisions hereof shall continue to be construed and enforced as if the invalid or unenforceable provision had not been included.
     12.05. Payment of Benefit of Incompetent . In the event the Committee finds that a Participant, former Participant or Beneficiary is unable to care for his affairs because of his minority, illness, accident, or other reason, any benefits payable hereunder may, unless other claim has been made for the Participant’s benefit by a duly appointed guardian, committee or other legal representative, be paid to a spouse, child, parent, or other blood relative or dependent or to any person found by the Committee to have incurred expenses for the support and maintenance of such Participant, former Participant, or Beneficiary; and any such payments so made shall be a complete discharge of all liability for those benefits.
     12.06. Spouse’s Interest . The interest in the benefits hereunder of a Spouse who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such Spouse in any manner including, but not limited to, such Spouse’s will, nor shall such interest pass under the laws of intestate succession.
     12.07. Successors . In the event of any consolidation, merger, acquisition or reorganization of the Company, the obligations of the Company and Participating Affiliated Companies under this Plan shall continue and be binding upon the Company, Participating Affiliated Companies and its successors.
     12.08. Gender, Number and Heading . Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan.
     12.09. Legal Fees and Expenses . The Company shall pay all reasonable legal fees and expenses that a Participant may incur as a result of the Company contesting the validity, enforceability, or the Participant’s interpretation of, or determinations under this Plan, other than

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Hardship Withdrawals under Section 6.04, Unscheduled Withdrawals under Section 6.05, and tax withholding under Section 9.01.
     12.10. Choice of Law . This Plan shall be governed by and construed in accordance with the laws of the State of Michigan, other than its choice-of-law rules, to the extent not superseded by applicable federal statues or regulations.
     12.11. Affiliated Employees . Transfers of employment between Affiliated Companies and the Company or other Affiliated Companies will be treated as continuous and uninterrupted service under the Plan.
     12.12. Plan Document . This Plan document provides the final and exclusive statement of the terms of the Plan. Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 11.01. This document legally governs the operation of the Plan, and any claim of right or entitlement under the Plan shall be determined solely in accordance with its provisions. To the extent that there are any inconsistencies between the terms of any related materials and the terms of this document, the terms of this document shall control and govern the operation of the Plan. No other evidence, whether written or oral, shall be taken into account in determining the right of an Eligible Employee, a Participant, or Beneficiary, as applicable, to any benefit of any type provided under the Plan.
SECTION 13.
ARBITRATION
     In the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between a Participant who is eligible to elect to receive the benefits provided under this Plan and the Company with respect to the payment of benefits to such Participant under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section 13.
          (a) Arbitration shall be the sole and exclusive remedy to redress any Grievance.
          (b) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
          (c) The arbitration shall be conducted by the American Arbitration Association in accordance with the Federal Arbitration Act and the Employee Benefit Plan Claims Arbitration Rules of the American Arbitration Association and reasonable expenses of the arbitrators and the American Arbitration Association shall be borne by the Company.
          (d) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit, Michigan Metropolitan area.

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          (e) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Since arbitration is the exclusive remedy with respect to any Grievance, no Participant eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court, or administrative agency by such employee or the Company with respect to any Grievance which is arbitrable as herein set forth.
          (f) The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
SECTION 14.
CHANGE IN CONTROL PROVISIONS
     14.01. General . In the event of a Change in Control, as defined in Section 14.06, then, notwithstanding any other provision of the Plan, the provisions of this Section 14 shall be applicable and shall supersede any conflicting provisions of the Plan.
     14.02. Transfer to Rabbi Trust . The Company shall establish a trust (the “Rabbi Trust”) that is intended to be an unfunded arrangement and not affect the status of the Plan as an unfunded arrangement for purposes of Title I of ERISA. The terms of the Rabbi Trust shall provide that, within seven (7) days of a Change in Control assets shall be transferred to the Rabbi Trust in (i) an amount equal to each Participant’s Account balance as of the date of the Change in Control, plus (ii) in the case of each Participant for whom no Pension Plan Make-Up described in Section 4.04(b) has been credited to his or her Qualified Plan Make-Up Subaccount on or before the date of the Change in Control, an amount equal to the Pension Plan Make-Up to which each such Participant would be entitled on his or her Normal Retirement Date under each applicable Pension Plan, assuming service through his or her Normal Retirement Date under the applicable Pension Plan and assuming annual Base Salary increases for the Participant of 5%, all as determined by the Company’s Actuaries; plus (iii) an amount deemed necessary to pay estimated Rabbi Trust administrative expenses for the following five (5) years, as determined by the Company’s Accountants. Assets transferred in accordance with the preceding sentence shall either be (i) in the form of shares of the Deemed Investments and/or DTE Stock equal to the number of shares of each such Deemed Investment and DTE Stock in which the Participant’s Contribution Subaccount is deemed to be invested for bookkeeping purposes on the date of the Change in Control or (ii) in the form of in cash, in which case an additional cash transfer shall be made, prior to the initial investment of cash by the trustee of the Rabbi Trustee in DTE Stock or any Deemed Investment, in an amount sufficient to permit the trustee of the Rabbi Trust to invest in the number of shares of each Deemed Investment and DTE Stock in which the Participant’s Contribution Subaccount was deemed to be invested for bookkeeping purposes on the date of the Change in Control (as adjusted for any subsequent share splits, consolidations, etc.). The

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Company and/or an Affiliated Company shall make all transfers of assets required by the Rabbi Trust in a timely manner and shall otherwise abide by the terms of the Rabbi Trust.
     14.03. Lump Sum Payments . In connection with a Change in Control or consummation of a transaction constituting a Change in Control, the Chairman of DTE Energy Company shall have the absolute discretion to direct that a lump sum payment be made to a Participant up to the total value of such Participant’s Pre-2005 Subaccounts if such payment will reduce the amount of any potential excise tax imposed by Code section 4999.
     14.04. Joint and Several Liability . Upon and at all times after a Change in Control, the liability under the Plan of the Company and each Affiliated Employer that has adopted the Plan shall be joint and several so that the Company and each such Affiliated Employer shall each be liable for all obligations under the Plan to each employee covered by the Plan, regardless of the corporation by which such employee is employed.
     14.05. Dispute Procedures . In the event that, upon or at any time subsequent to a Change in Control, a disputed claim for benefits under the Plan is brought by a Participant or beneficiary, the following additional procedures shall be applicable:
          (a) Any amount that is not in dispute shall be paid to the Participant or beneficiary at the time or times provided herein.
          (b) The Company shall advance to such claimant from time to time such amounts as shall be required to reimburse the claimant for reasonable legal fees, costs and expenses incurred by such claimant in seeking a judicial resolution of his or her claim, including reasonable fees, costs and expenses relating to arbitration.
     14.06. Definition of Change in Control . A “Change in Control” means the occurrence of any one of the following events:
          (a) individuals who, on December 31, 2001, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to December 31, 2001, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to directors or as a result of any other actual or threatened solicitation of proxies [or consents] by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
          (b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of

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securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided , however , that the event described in this paragraph (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c)), or (E) a transaction (other than one described in (c) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approve a resolution providing expressly that the acquisition pursuant to this clause (E) does not constitute a Change in Control under this paragraph (b);
          (c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (a “Business Combination”) or sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or
          (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
     Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided , that if after such acquisition by the Company such person becomes the beneficial owner of additional

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Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
     IN WITNESS WHEREOF, DTE Energy Company has caused this amended and restated Plan to be executed as of this 5 th day of December, 2008.
         
  DTE Energy Company
 
 
  By:   /s/ Larry E. Steward    
         Larry E. Steward   
         Vice President, Human Resources   
 

23

Exhibit 10-79
DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF DIRECTORS’ FEES

(As Amended And Restated Effective As Of January 1, 2005)
The DTE Energy Company Plan for Deferring the Payment of Directors’ Fees (the “Plan”) was originally established by DTE Energy Company (the “Company”) effective as of January 1, 1996. The Plan was previously amended and restated, effective as of January 1, 1999, to merge The Detroit Edison Company Plan for Deferring the Payment of Directors’ Fees (the “DECO Plan”) heretofore maintained by the Detroit Edison Company (“DECO”) into the Plan as so amended and restated. This amendment and restatement of the Plan is effective January 1, 2005, unless another effective date is specified for a particular Plan provision.
The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A exclusively with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this paragraph.
As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
SECTION I PURPOSE
The purpose of the Plan is to enable each Director (as defined below) to defer all or a portion of his or her fees for future services as a member of the Board of Directors or as a member of any Committee thereof.
SECTION II ELIGIBILITY
Any Director of the Company who is not a Company employee or an employee of any Affiliate (a “Director”) shall be eligible to participate in the Plan. For purposes of the Plan, “Affiliate” shall mean any entity in which the Company directly or indirectly beneficially owns more than 50% of the voting securities.
SECTION III ELECTION, MODIFICATION, AND TERMINATION PROCEDURES
Any Director wishing to participate in the Plan must file with the Company a written Notice of Election on the form provided by the Company to defer payment of all or a portion of his or her Director’s fees payable in cash. An election to participate in the Plan must be made prior to the beginning of the calendar year for which fees are payable and must be irrevocable for all fees payable in that calendar year. In. addition, with respect to any Director who had a deferred Director’s fee account under the DECO Plan as of December 31, 1998, effective beginning

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January 1, 1999, any Notice of Election filed by such Director under the DECO Plan shall be deemed to have been made under and shall be subject to the terms and conditions of this Plan as if it had been made hereunder. An effective election with respect to Directors’ fees that have been deferred under the terms of this Plan or DECO Plan and fees that have already been earned may not be modified or revoked. An effective election with regard to fees that have not been deferred or earned may be modified by filing a new Notice of Election or may be terminated by filing a Notice of Termination on the form provided by the Company. Any new Notice of Election or Notice of Termination becomes effective as of the first day of the calendar year beginning after the Notice of Election or Notice of Termination is filed. A Director who shall have terminated an effective election may thereafter file a new election to be effective as of the beginning of a subsequent calendar year.
Code §409A requires deferral election to be irrevocable for entire calendar year
SECTION IV ESTABLISHMENT AND ADMINISTRATION OF DEFERRED DIRECTORS’ FEE ACCOUNT
(A) The amount of any Director’s fees deferred in accordance with an election, including effective January 1, 1999, the deferred Director’s fee account balance under the DECO Plan transferred to this Plan by merger effective January 1, 1999, shall be credited to a deferred Director’s fee account maintained by the Company, which account shall be divided into sub accounts to specifically identify the portion of the account subject to adjustment under Section IV(C)(2) (“Subaccount I”) and the portion of the account subject to adjustment under Section IV(C)(3) (“Subaccount II”). Such account shall remain a part of the general funds of the Company and DECO, and nothing contained in this Plan shall be deemed to create a trust or fund of any kind or create any fiduciary relationship.
(B) Subaccount I and Subaccount II of each deferred Director’s fee account is further divided into two subaccounts:
(1) The “Pre-2005 Subaccount” is the portion of a deferred Director’s fee Subaccount I or Subaccount II attributable to fees deferred under Section III before January 1, 2005, and adjustments to the deferred Director’s fee Subaccount I or Subaccount II made under this Section IV attributable to the fees deferred before January 1, 2005.
(2) The “Post-2004 Subaccount” is the portion of a deferred Director’s fee Subaccount I or Subaccount II account attributable to fees deferred under Section III after December 31, 2004, and adjustments to the deferred Director’s fee Subaccount I or Subaccount II made under this Section IV attributable to the fees deferred after December 31, 2004.
(C) As of the last day of each month for each Director participating in this Plan and until all amounts in a deferred Director’s fee account are distributed to the Director, the deferred Director’s fee account for such Director shall be adjusted as follows:
(1) The account and applicable Sub accounts thereof shall first be charged with any distributions made during the month and effective as of January 1, 1999 the account and

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applicable Subaccounts thereof shall be credited with .any transfer to the Plan of the deferred Director’s fee account balance from the DECO Plan effective as of such date.
(2) The account balance in Subaccount I shall then be credited with interest for that month. Such interest shall be computed by multiplying the applicable portion of the account balance in Subaccount I after the adjustment provided for in Subsection (1) but before the adjustments provided for in Subsections (4) and (5) of this Section IV by a fraction, the numerator of which is the 5-Year United States Treasury Bond rate as of the last business day of each month, and the denominator of which is 12.
(3) The account balance in Subaccount II shall then be adjusted to reflect the number of hypothetical shares of Company Common Stock allocated to Subaccount II as of such date. The number of hypothetical shares of Company Common Stock allocated to Subaccount II as of any date shall be equal to the number of shares of Company Common Stock that would be allocated to Subaccount II as of such date if (i) the deferred Director’s fees to be credited to the Director’s account for allocation to Subaccount II were invested in the Company Common Stock at Fair Market Value (as defined below) on the trading day that is coincident with or next following the day the amount is to be credited to the account, (ii) any balance transferred from Subaccount I due to a change in election under Section V were invested in the Company Common Stock at Fair Market Value on the trading day that is coincident with or next following the effective date of such change, (iii) cash dividends on the shares of Company Common Stock treated as allocated to Subaccount II were automatically reinvested in the Company Common Stock at Fair Market Value on the trading day that is coincident with or next following the applicable dividend payment date, and (v) any transfers to Subaccount I due to a change in election under Section V or any cash distributions from Subaccount II Account were made at Fair Market Value on the trading day that is coincident with or next preceding the effective date of such change of election or distribution of the number of hypothetical             shares of Company Common Stock needed to make such transfer or distribution, which hypothetical shares shall be subtracted from the number of shares treated as allocated to Subaccount II of the Participant’s Account as of the effective date of the transfer or distribution. In the event of any stock dividend or split, recapitalization, reclassification, increase or decrease in the number of outstanding shares, merger, consolidation or exchanges in shares or other similar changes in the Company’s Common Stock, appropriate adjustments shall be made in the hypothetical shares of Company Common Stock allocated to each Director’s Subaccount II to reflect any such change. For purposes of the Plan, “Fair Market Value” means, before January 1, 2009, the average of the high and low sales prices of Company Common Stock, or, after December 31, 2008, the closing sales price of Company Common Stock on the New York Stock Exchange (or any exchange on which Company Common Stock is listed if at any time Company Common Stock is not listed on the New York Stock Exchange) on a specified date.
(4) Next, the account shall be credited with the amount, if any, of Director’s fees deferred during that month, which amount shall be allocated to Subaccount I and Subaccount II in accordance with the Director’s election or deemed election under Section V as in effect as of such date.

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(5) Finally, the amount of any transfer to or from Subaccount I or Subaccount II of the account, pursuant to a change in election or deemed election under Section V, made as of such date shall be added to or subtracted from, as the case may be, the applicable Subaccounts.
A separate record of deferred Director’s fees and adjustments thereto, identified to the participant’s Pre-2005 Subaccount and the participant’s Post-2004 Subaccount, shall be maintained by the Company for each participant in this Plan.
SECTION V ELECTION OF ACCOUNT EARNINGS ADJUSTMENTS
At the time a Director elects to participate in the Plan or as of January 1, 1999, if later, the Director shall elect by filing a notice with the Corporate Secretary of the Company to have Director fees thereafter deferred under the terms of the Plan allocated, in specified multiples of 10%, to Subaccount I or Subaccount II of the deferred Director’s fee account. If a Director who is participating in the Plan or the DECO Plan as of December 31, 1998 fails to make an election hereunder as of January 1, 1999, he or she will be deemed to have elected to have Director’s fees deferred on or after January 1, 1999 allocated to Subaccount 1. In addition, if a Director is participating in the Plan or the DECO Plan as of December 31, 1998, the Director will be deemed to have elected to have his or her deferred Director’s fee account balances as of December 31, 1998 allocated to Subaccount I effective as of January 1, 1999 unless the Director changes such deemed election as hereinafter provided in this Section V. A Director’s election or deemed election under this Section V shall remain in effect until changed as hereinafter provided in this Section V.
A Director may change his or her election or deemed election under this Section V effective as of the last day of any month beginning on or after January 1,1999 (or effective as of January 1, 1999 if the Director has a deferred Director’s fee account balance under the Plan or the DECO Plan as of December 31, 1998), by filing with the Corporate Secretary of the Company written notice of such change at least 14 days (or by such other date as the Corporate Secretary of the Company shall prescribe) prior to the effective date of such change. Any change shall direct that either or both of (a) that the balance credited to Subaccount I or Subaccount II of the deferred Director’s fee account as of such date (determined before the adjustment in Subsection (e) of Article IV) be transferred, in specified multiples of 10%, to the other Subaccount or (b) subsequent Director’s fees deferred under the terms of the Plan be allocated, in specified multiples of 10%, to Subaccount I or Subaccount II. Such change shall be effective as of the date elected and shall remain in effect until further changed as provided herein.
Any election or change in election under this Section V shall be made on the forms provided by the Company.
SECTION VI PAYMENT OF DEFERRED DIRECTORS’ FEES
Deferred fees shall be paid to a Director or, in the event of death, to his or her designated beneficiary in accordance with the Notice of Election and Beneficiary Designation forms that have been filed with the Corporate Secretary of the Company. Payment shall be made in cash.

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The amount of any payment from Subaccount I will be based on the value of Subaccount I determined as of the date of payment. The amount of any payment from Subaccount II of a deferred Director’s fee account shall be made at Fair Market Value on the trading day that is coincident with or next preceding the effective date of payment. If a Director elects to receive payment of his or her deferred fees in installments rather than in a lump sum, the payment period shall not exceed ten years following the payment commencement date. The amount of any installment payment shall be determined by multiplying the Director’s unpaid account balance on the date of such installment by a fraction, the numerator of which is one and the denominator of which is the number of remaining unpaid installments. Such balance shall be appropriately reduced to reflect the installment payments made hereunder which shall be made prorata from Subaccounts I and ll.
SECTION VII WHEN PAYMENT OF DEFERRED DIRECTORS’ FEES COMMENCES
(A)   Pre-2005 Subaccount .
(1) The payment in a lump sum or installments of amounts in a Director’s Pre-2005 Subaccount deferred pursuant to an election under this Plan shall commence on January 15 of the first year to which payment has been deferred and shall be paid in accordance with the terms of such election. If a Director shall die prior to the first year to which payment has been deferred, such payment shall commence on January 15 of the calendar year immediately following the year of death and shall be paid in the manner specified in such election.
(2) In the event a participating Director receives an assessment of income taxes from the Internal Revenue Service which treats any amount payable under this Plan from the Director’s Pre-2005 Subaccount as being includible in such Director’s gross income prior to the actual payment of such amount to such Director, the Company shall pay an amount equal to such income taxes to such Director from the Director’s Pre-2005 Subaccount within 30 days after written notice from such Director of such assessment, and such Director’s fee account shall be reduced prorata from the Director’s Pre-2005 Subaccounts in Subaccounts I and II by an amount equal to such income taxes.
(3) Each payment under this Plan from the Director’s Pre-2005 Subaccount shall be reduced by any federal, state, or local taxes which the Company determines should be withheld from such payment.
(4) Benefits under this Plan shall be payable solely from the general assets of the Company and, with respect to amounts attributable to DECO, of DECO, as the case maybe, provided, however, that no provision in this Plan shall preclude the Company or DECO from segregating assets which are intended to be a source for payment of benefits under this Plan. Each participant in this Plan shall have the status of a general unsecured creditor of the Company and of DECO. This Plan constitutes a promise by the Company and DECO to make benefit payments in the future. It is intended that this Plan be

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unfunded for tax purposes and that this Plan shall remain unfunded for the entire period of its existence.
(5) Notwithstanding the foregoing or anything to the contrary in the Plan, the distribution of all or any portion of a deferred Director’s fee Pre-2005 Subaccount will be delayed for a period not to exceed seven months or may be subject to prior approval by the Board to the extent that the Corporate Governance Committee of the Board of Directors of the Company determines that such delay or approval is necessary or desirable to ensure that any distribution from the Director’s Pre-2005 Subaccount under the Plan will qualify for an exemption from the liability provisions imposed on the Director under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any rules and regulations issued thereunder. In the event of any such delay, the undistributed portion of the deferred Director’s fee Pre-2005 Subaccount shall continue to be subject to adjustment as provided in Section IV until distribution is made.
(B)   Post-2004 Subaccount :
(1) The default deferral period for fees deferred in each calendar year after December 31, 2004 and before January 1, 2009 is to January 1 st of the second calendar year beginning after the calendar year in which the fees were otherwise payable. A Director is permitted to elect a different deferral period in the Notice of Election submitted by the Director applicable to fees deferred in a specific calendar year. The default form of distribution for fees deferred after December 31, 2004 and before January 1, 2009 is a single lump sum payable on the date the deferral period ends. A Director is permitted to elect distribution in the form of annual installments over a period of two to 10 years in the Notice of Election submitted by the Director applicable to fees deferred in a specific calendar year.
(2) A Director who first becomes a participant in the Plan before January 1, 2009 may elect to change the deferral period for the entire portion of the Director’s Post-2004 Subaccount attributable to fees deferred in calendar years after December 31, 2004 and before January 1, 2009 to:
(a) January 1, 2009; or
(b) the date the Director’s service on the Board terminates.
If a Director elects to change to January 1, 2009 the deferral period for the entire portion of the Director’s Post-2004 Subaccount attributable to fees deferred in calendar years after December 31, 2004 and before January 1, 2009, the distribution will be made in a single lump sum payable on the last day of the deferral period. No other forms of distribution are available.
If a Director elects to change the deferral period for the Director’s Post-2004 Subaccount attributable to fees deferred in calendar years after December 31, 2004 and before January 1, 2009 to the date the Director’s service on the Board terminates, the Director

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may also elect to change the form of distribution from a single lump sum payable on the last day of the deferral period to annual installments over a period of two to 10 years.
A Director who wishes to change the deferral period or the form of distribution for fees deferred in calendar years after December 31, 2004 and before January 1, 2009 must file a written election with the Company before January 1, 2009 that satisfies both of the following:
(a) The Director’s election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Subaccount otherwise required to be made before January 1, 2009; and
(b) The Director’s election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Subaccount otherwise required to be made after December 31, 2008.
(3) The deferral period for fees deferred after December 31, 2008 ends on the date the Director’s service on the Board terminates. No other deferral period is permitted for fees deferred after December 31, 2008. The default form of distribution for fees deferred after December 31, 2008 is a single lump sum payable on the January 15 th following the date the deferral period ends.
(4) A Director may elect in writing, at the time the Director first elects to defer fees payable for a calendar year after 2008, to change the form of distribution for the entire portion of the Director’s Post-2004 Subaccount attributable to fees deferred after December 31, 2008 from a single lump sum on the January 15 th following date the deferral period ends to annual installments for a period of two to 10 years, with the first installment paid on the January 15 th following the date the deferral period ends. The Director’s initial election of a form of distribution (whether by the Director’s affirmative election under this Section B(4) or by application of the default form under Section (B)(3)) will apply to all fees deferred by the Director after December 31, 2008 unless changed as permitted in this Section V.
(5) After December 31, 2008, a Director may elect to change the form of distribution previously elected for the entire portion of the Director’s Post-2004 Subaccount attributable to fees deferred after December 31, 2008 and subject to a deferral period ending on the date the Director’s service on the Board terminates by filing a written election with the Company that satisfies both of the following:
(a) The Director’s election is filed with the Company at least 12 months before the earliest date on which the distribution of that portion of the Director’s Post-2004 Subaccount would begin under the Director’s then-current distribution election; and
(b) The Director’s election extends the deferral period for that portion of the Post-2004 Subaccount to at least 5 years after the earliest date on which

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distribution of that portion of the Post-2004 Subaccount would begin under the Director’s then-current distribution election.
The Director may elect distribution in a single lump sum or in annual installments over a period of two to 10 years. No other forms of distribution are permitted.
After December 31, 2008, a Director may not elect to change the deferral period or form of distribution for any fees deferred before January 1, 2009.
(6) For purposes of the Plan, a Director’s service on the Board terminates as of the date specified by the Company in the Company’s required filing with U.S. Securities and Exchange Commission.
(7) If a Director receives an assessment of income taxes from the Internal Revenue Service that treats any amount payable under this Plan from the Director’s Post-2004 Subaccount as being includible in the Director’s gross income before the actual payment of the amount to the Director, the Company will distribute from the Director’s Post-2004 Subaccount an amount equal to the income taxes to the Director within 30 days after the Company receives written notice from the Director of the assessment. The Director’s Post-2004 Subaccount will be reduced by the amount distributed to the Director under this Section B(7) of this Article V.
(8) Each payment under this Plan will be reduced by any federal, state, or local taxes the Company determines should be withheld.
(9) Benefits under this Plan are payable solely from the general assets of the Company. However, no provision in this Plan precludes the Company from segregating assets which are intended to be a source for payment of benefits under this Plan. Each participant in this Plan has the status of a general unsecured creditor of the Company. This Plan constitutes a promise by the Company to make benefit payments in the future. It is intended that this Plan be unfunded for tax purposes and that this Plan remain unfunded for the entire period of its existence.
(10) Notwithstanding the foregoing or anything to the contrary in the Plan, the distribution of all or any portion of a Director’s Post-2004 Subaccount will be delayed if the Corporate Governance Committee of the Board of Directors of the Company determines that the delay is necessary to ensure that the distribution will not violate Federal securities laws or other applicable laws. In the event of any delay, the undistributed portion of the Director’s Post-2004 Subaccount will continue to be subject to adjustment as provided in Section IV until distribution is made. The distribution will be made at the earliest date at which the Corporate Governance Committee reasonably anticipates that making the distribution will not cause a violation of Federal securities laws or other applicable laws.

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SECTION VIII DESIGNATION OF BENEFICIARY
Each Director, on becoming a participant, shall file with the Corporate Secretary of the Company a beneficiary designation on the form provided by the Company designating one or more beneficiaries to whom payments otherwise due the participant shall be made in the event of his or her death while serving as a Director or after leaving the Board. A beneficiary designation will be effective only if the signed beneficiary designation form is filed with the Corporate Secretary of the Company when the Director is alive, and will cancel all beneficiary designations signed and filed previously under this Plan. If the primary beneficiary shall survive the Director but dies before receiving all the amounts due hereunder, the deferred amounts remaining unpaid at the time of death shall be paid in one lump sum to the legal representative of the primary beneficiary’s estate. If the primary beneficiary shall predecease the Director, amounts remaining unpaid at the time of the Director’s death shall be paid in the order specified by the Director to the contingent beneficiary(s) surviving the Director. If the contingent beneficiary(s) dies before receiving all the amounts due hereunder, the unpaid amount shall be paid in one lump sum to the legal representative of such contingent beneficiary(s) estate. If the Director shall fail to designate a beneficiary(s) as provided in this Section, or if all designated beneficiaries shall predecease the Director, the deferred amounts remaining unpaid at the time of such Director’s death shall be paid in one lump sum to the legal representative of the Director’s estate.
SECTION IX NON-ALIENABILITY AND NON-TRANSFERABILITY
No Director, beneficiary designated by the Director, or creditors of the Director shall have any right to, directly or indirectly, anticipate, alienate, sell, transfer, assign, pledge, encumber, attach, or garnish any amount that is or may be payable hereunder.
SECTION X ADMINISTRATION OF PLAN; ARBITRATION
(A) Full power and authority to construe, interpret, and administer the Plan shall be vested in the Corporate Governance Committee of the Board of Directors of the Company. Decisions of the Corporate Governance Committee shall be final, conclusive, and binding upon all parties.
(B) Notwithstanding Section X(a) hereof, in the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between a Director who is eligible to elect to receive the benefits provided under this Plan and the Company with respect to the payment of benefits to such Director under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section (b).
(1) Arbitration shall be the sole and exclusive remedy to redress any Grievance.
(2) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.

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(3) The arbitration shall be conducted by the American Arbitration Association in accordance with the Commercial Arbitration Rules of the American Arbitration Association and expenses of the arbitrators and the American Arbitration Association shall be borne by the Company. Neither the Company nor such Director shall be entitled to attorneys’ fees, expert witness fees, or other expenses expended in the course of such arbitration or the enforcement of any award rendered thereunder.
(4) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit Metropolitan area, Michigan.
(5) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Since arbitration is the exclusive remedy with respect to any Grievance, no Director eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court or administrative agency by such Director or the Company with respect to any Grievance which is arbitrable as herein set forth.
(6) The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
(C) No Director shall be deemed for any purpose to be or to have the rights and privileges of the owner of Company Common Stock with respect to any hypothetical shares treated as allocated to his or her deferred Director’s fee account.
SECTION XI AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate this Plan at any time. Any amendment or termination of this Plan shall not affect the rights of participants or beneficiaries to the amounts in the deferred Directors’ fee accounts at the time of such amendment or termination.
SECTION XII APPLICABLE LAW
The provisions of this Plan shall be interpreted and construed in accordance with the laws of the state of Michigan.
SECTION XIII SUCCESSORS
The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and to agree to perform this Plan in the same manner and to the same extent the Company would be required to perform if no such succession had taken

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place. This Plan shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Plan), and the heirs, executors and administrators of each Director.
IN WITNESS WHEREOF, DTE Energy Company, pursuant to resolutions of its Board of Directors, has caused this instrument to be executed in its name and by its Chairman of the Board as of the 4 th day of December, 2008.
         
  DTE ENERGY COMPANY
 
 
  By:   /s/Anthony F. Earley, Jr.    
    Anthony F. Earley, Jr.   
       
 

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Exhibit 10-80
DTE ENERGY COMPANY
DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
The DTE Energy Company Deferred Stock Compensation Plan (the “Plan”) was originally established by DTE Energy Company (the “Company”) effective as of January 1, 1999. This amendment and restatement of the Plan is effective January 1, 2005, unless another effective date is specified for a particular Plan provision.
The Plan is being amended and restated effective January 1, 2005 to comply with the requirements of Code Section 409A exclusively with respect to benefits accrued and vested after December 31, 2004. It is intended that all Plan benefits accrued and vested as of December 31, 2004 are not subject to Code Section 409A. Only Plan benefits accrued and vested after January 1, 2005 are subject to Code Section 409A. Any inconsistency or ambiguity in this amended and restated Plan document is to be construed consistent with this paragraph.
As permitted by the Treasury Regulations promulgated under Code Section 409A and guidance issued by the Internal Revenue Service, the Plan has been administered in compliance with applicable guidance under Code Section 409A in effect after December 31, 2004 before the adoption of this amended and restated Plan document.
SECTION I PURPOSE
The purpose of the Plan is to further the growth, development and financial success of the Company by providing incentives to Directors (as defined below) and to assist the Company in attracting and retaining Directors by offering Directors an opportunity to earn Company Common Stock.
SECTION II ELIGIBILITY
Any Director of the Company who is not a Company employee or an employee of any Affiliate (a “Director”) shall become a participant in the Plan as of the later of January 1, 1999 or the January 1 st occurring on or next following the date he or she becomes a Director. For purposes of the Plan, “Affiliate” shall mean any entity in which the Company directly or indirectly beneficially owns more than 50% of the voting securities.
SECTION III ANNUAL AWARDS
Each Director participating in the Plan who is a Director on the first business day of a calendar year beginning on or after January 1, 2008 shall receive automatically on such date as a credit to an unfunded deferred stock account established for the Director under Section IV below, the number of hypothetical shares of Company Common Stock approved for that calendar year by the Corporate Governance Committee of the Company’s Board of Directors.

1


 

SECTION IV   ESTABLISHMENT AND ADMINISTRATION OF DEFERRED STOCK ACCOUNT
(A) The annual amount of hypothetical Company Common Stock awarded to a Director under Section III shall be credited to a deferred stock account maintained by the Company. Such account shall remain a part of the general funds of the Company, and nothing contained in this Plan shall be deemed to create a trust or fund of any kind or create any fiduciary relationship.
(B) The deferred stock account for each Director who is a participant in the Plan is divided into two subaccounts:
(1) The “Pre-2005 Subaccount” is the portion of a participant’s deferred stock account attributable to hypothetical shares of Company Common Stock awarded to the Director under Section III before January 1, 2005, and adjustments to the director’s deferred stock account made under this Section IV attributable to the hypothetical shares of Company Common Stock awarded to the Director before January 1, 2005.
(2) The “Post-2004 Subaccount” is the portion of a participant’s deferred stock account attributable to hypothetical shares of Company Common Stock awarded to the Director under Section III after December 31, 2004, and adjustments to the director’s deferred stock account made under this Section IV attributable to the hypothetical shares of Company Common Stock awarded to the Director after December 31, 2004.
(C) As of the last day of each month for each Director participating in this Plan and until all amounts in a Director’s deferred stock account are distributed to the Director, the deferred stock account for such Director shall be adjusted as follows:
(1) The account shall first be charged with any distributions made during the month as of the date made.
(2) Next, the account shall be credited with the amount, if any, of hypothetical Company Common Stock awarded during that month under Section III, with such credit to be made as of the date provided in Section III.
(3) Finally, the account shall be adjusted to reflect the number of hypothetical shares of Company Common Stock allocated to the account during the month to reflect reinvested cash dividends. The number of such hypothetical shares of Company Common Stock allocated to reflect reinvested cash dividends shall be equal to the number of shares of Company Common Stock that would have been allocated to the account as of any date if cash dividends paid on the equivalent number of shares of Company Common Stock treated as allocated to the account were automatically reinvested in the Company Common Stock at Fair Market Value on the trading day that is coincident with or next following the applicable dividend payment date. For purposes of the Plan, “Fair Market Value” means, before January 1, 2009, the average of the high and low sales prices of Company Common Stock or, after December 31, 2008, the closing sales price of Company Common Stock on the New York Stock Exchange (or any exchange on which

2


 

Company Common Stock is listed if at any time Company Common Stock is not listed on the New York Stock Exchange) on the specified date.
In the event of any stock dividend or split, recapitalization, reclassification, increase or decrease in the number of outstanding shares, merger, consolidation or exchanges in shares or other similar changes in the Company’s Common Stock, appropriate adjustments shall be made in the hypothetical shares of Company Common Stock allocated to each Director’s deferred stock account to reflect any such change.
A separate record of the deferred stock account and adjustments thereto shall be maintained by the Company for each participant in this Plan.
SECTION V PAYMENT OF DEFERRED STOCK ACCOUNT
(A)   Pre-2005 Subaccount :
(1) The balance of the Director’s Pre-2005 Subaccount shall be paid to a Director or, in the event of death, to his or her designated beneficiary in accordance with the Beneficiary Designation form that has been filed with the Corporate Secretary of the Company, within 15 days after the date the Director terminates his or her service on the Board of Directors of the Company for any reason. Payment shall be made in a lump sum in cash, or at the election of the Director made prior to termination of service and with the approval of the Board, in whole shares of Company Common Stock with any fractional share being paid in cash. The amount of any cash distribution from a Director’s Pre-2005 Subaccount shall be made at Fair Market Value on the trading day that is coincident with or next preceding the date of the Director’s termination of service.
(2) In the event a participating Director receives an assessment of income taxes from the Internal Revenue Service which treats any amount payable under this Plan from the Director’s Pre-2005 Subaccount as being includible in such Director’s gross income prior to the actual payment of such amount to such Director, the Company shall pay an amount equal to such income taxes to such Director within 30 days after written notice from such Director of such assessment, and such Director’s Pre-2005 Subaccount shall be reduced by an amount equal to such income taxes.
(3) Each payment under this Plan from the Director’s Pre-2005 Subaccount shall be reduced by any federal, state, or local taxes which the Company determines should be withheld from such payment.
(4) Benefits under this Plan shall be payable solely from the general assets of the Company, provided, however, that no provision in this Plan shall preclude the Company from segregating assets which are intended to be a source for payment of benefits under this Plan. Each participant in this Plan shall have the status of a general unsecured creditor of the Company. This Plan constitutes a promise by the Company to make benefit payments in the future. It is intended that this Plan be unfunded for tax purposes and that this Plan shall remain unfunded for the entire period of its existence.

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(5) Notwithstanding the foregoing or anything to the contrary in the Plan, the distribution of all or any portion of a Director’s Pre-2005 Subaccount will be delayed for a period not to exceed seven months or may be subject to prior approval by the Board to the extent that the Corporate Governance Committee of the Board of Directors of the Company determines that such delay or approval is necessary or desirable to ensure that the distribution from the Director’s Pre-2005 Subaccount under the Plan will qualify for an exemption from the liability provisions imposed on the Director under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any rules and regulations issued thereunder. In the event of any such delay, the undistributed portion of the Director’s Pre-2005 Subaccount shall continue to be subject to adjustment as provided in Section IV until distribution is made.
(B)   Post-2004 Subaccount :
(1) A Director’s entire Post-2004 Subaccount is subject to a single election with respect to the deferral period and the form of distribution.
(2) The default deferral period for hypothetical shares awarded under Section III after December 31, 2004 is three years from date awarded. The default form of distribution for hypothetical shares awarded under Section III after December 31, 2004 is a single lump sum paid on the date the deferral period ends.
(3) A Director may elect to change the deferral period for all hypothetical shares of Company Common Stock awarded after December 31, 2004 to the date the Director’s service on the Board terminates. For purposes of the Plan, a Director’s service on the Board terminates as of the date specified by the Company in the Company’s required filing with U.S. Securities and Exchange Commission.
A Director who elects to change the deferral period for the Director’s Post-2004 Subaccount to the date the Director’s service on the Board terminates may also elect to change the form of distribution from a single lump sum to annual installments over a period of two to 10 years. The first annual installment will be paid on the date the deferral period ends (unless deferred under Section B(6)(b) of this Section V), and later annual installments will be paid on the anniversary of the date the first annual installment payment is paid. The initial installment will be determined by dividing the number of hypothetical shares of Company Common Stock in the Director’s Post-2004 Subaccount as of the first annual installment payment date by the number of annual installment payments to be made. Each annual installment payment thereafter is recalculated to reflect changes in the Post-2004 Subaccount through the anniversary of the first annual installment payment and the remaining number of annual installment payments to be made.
A Director who retains the default deferral period of three years from date awarded (or who elects before January 1, 2009 to reinstate the default deferral period of three years

4


 

from the date awarded) is not permitted to elect any form of distribution other than a single lump sum paid on the date the deferral period ends.
(4) A Director who first becomes a participant in the Plan under Section II before January 1, 2009 may change the timing and form of the distribution of the Director’s Post-2004 Subaccount by filing a written election with the Company before January 1, 2009 that satisfies both of the following:
(a) The Director’s election does not defer to a date after December 31, 2008 any distribution of the Post-2004 Subaccount otherwise required to be made before January 1, 2009; and
(b) The Director’s election does not accelerate to a date before January 1, 2009 any distribution of the Post-2004 Subaccount otherwise required to be made after December 31, 2008.
(5) A Director who first becomes a participant in the Plan under Section II after December 31, 2008 may elect, not later than 30 days after the date the Director first becomes a participant in the Plan, to change the deferral period for all hypothetical shares awarded to the Director under Section III from three years after date awarded to the date the Director’s service on the Board terminates. If a Director elects under this paragraph to change the deferral period to the date the Director’s service on the Board terminates, the Director may also elect, not later than 30 days after the date the Director first becomes a participant in the Plan, to change the form of distribution from a single lump sum on the date the deferral period ends to annual installments for a period of two to 10 years. If a Director who first becomes a participant in the Plan after December 31, 2008 does not elect to change the deferral period within 30 days after the date the Director first becomes a participant in the Plan as permitted under this Section (B)(5), the Director is not permitted to change the deferral period at any later time.
(6) After December 31, 2008, a Director who has previously elected a deferral period ending on the date the Director’s service on the Board terminates may elect to change the form of distribution previously elected for the Director’s Post-2004 Subaccount by filing a written election with the Company that satisfies both of the following:
(a) The Director’s election is filed with the Company at least 12 months before the earliest date on which the distribution of the Director’s Post-2004 Subaccount would begin under the Director’s then-current distribution election; and
(b) The Director’s election designates that distribution of the Post-2004 Subaccount will begin at least 5 years after the earliest date on which distribution of the Post-2004 Subaccount would begin under the Director’s then-current distribution election.

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(7) Any distribution from a Director’s Post-2004 Subaccount will be made in cash or, at the election of the Director made before termination of service and with the approval of the Board, in whole shares of Company Common Stock with any fractional share being paid in cash. The Director’s Post-2004 Subaccount will be valued at Fair Market Value on the trading day that is coincident with or next preceding:
(a) the date the deferral period ends, for any distribution made under the default deferral period of three years after the date awarded or for any single lump sum payment or first annual installment that is not delayed under Section B(6)(b) of this Article V; or
(b) the date a single lump sum payment or first annual installment is to be paid under the Director’s election under Section B(6)(b) of this Article V; or
(c) each anniversary of the first annual installment, for any distribution to be made in the form of annual installments over a period of two to 10 years.
(8) If a Director receives an assessment of income taxes from the Internal Revenue Service that treats any amount payable under this Plan from the Director’s Post-2004 Subaccount as being includible in the Director’s gross income before the actual payment of the amount to the Director, the Company will distribute from the Director’s Post-2004 Subaccount an amount equal to the income taxes to the Director within 30 days after the Company receives written notice from the Director of the assessment. The Director’s Post-2004 Subaccount will be reduced by the amount distributed to the Director under this Section B(8) of this Article V.
(9) Each payment under this Plan will be reduced by any federal, state, or local taxes the Company determines should be withheld.
(10) Benefits under this Plan are payable solely from the general assets of the Company. However, no provision in this Plan precludes the Company from segregating assets which are intended to be a source for payment of benefits under this Plan. Each participant in this Plan has the status of a general unsecured creditor of the Company. This Plan constitutes a promise by the Company to make benefit payments in the future. It is intended that this Plan be unfunded for tax purposes and that this Plan remain unfunded for the entire period of its existence.
(11) Notwithstanding the foregoing or anything to the contrary in the Plan, the distribution of all or any portion of a Director’s Post-2004 Subaccount will be delayed if the Corporate Governance Committee of the Board of Directors of the Company determines that the delay is necessary to ensure that the distribution will not violate Federal securities laws or other applicable laws. In the event of any delay, the undistributed portion of the Director’s Post-2004 Subaccount will continue to be subject to adjustment as provided in Section IV until distribution is made. The distribution will be made at the earliest date at which the Corporate Governance Committee reasonably

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anticipates that making the distribution will not cause a violation of Federal securities laws or other applicable laws.
SECTION VI DESIGNATION OF BENEFICIARY
Each Director, on becoming a participant, shall file with the Corporate Secretary of the Company a beneficiary designation on the form attached as Exhibit “A” designating one or more beneficiaries to whom payments otherwise due the participant shall be made in the event of his or her death while serving as a Director or after leaving the Board. A beneficiary designation will be effective only if the signed beneficiary designation form is filed with the Corporate Secretary of the Company when the Director is alive, and will cancel all beneficiary designations signed and filed previously under this Plan. If the primary beneficiary shall survive the Director but dies before receiving all the amounts due hereunder, the deferred amounts remaining unpaid at the time of death shall be paid in one lump sum to the legal representative of the primary beneficiary’s estate. If the primary beneficiary shall predecease the Director, amounts remaining unpaid at the time of the Director’s death shall be paid in the order specified by the Director to the contingent beneficiary(s) surviving the Director. If the contingent beneficiary(s) dies before receiving all the amounts due hereunder, the unpaid amount shall be paid in one lump sum to the legal representative of such contingent beneficiary(s) estate. If the Director shall fail to designate a beneficiary(s) as provided in this Section, or if all designated beneficiaries shall predecease the Director, the deferred amounts remaining unpaid at the time of such Director’s death shall be paid in one lump sum to the legal representative of the Director’s estate.
SECTION VII NON-ALIENABILITY AND NON-TRANSFERABILITY
No Director, beneficiary designated by the Director, or creditors of the Director shall have any right to, directly or indirectly, anticipate, alienate, sell, transfer, assign, pledge, encumber, attach, or garnish any amount that is or may be payable hereunder.
SECTION VIII ADMINISTRATION OF PLAN; ARBITRATION
(A) Full power and authority to construe, interpret, and administer the Plan shall be vested in the Corporate Governance Committee of the Board of Directors of the Company. Decisions of the Corporate Governance Committee shall be final, conclusive, and binding upon all parties.
(B) Notwithstanding Section VIII(a) hereof, in the event of any dispute, claim, or controversy (hereinafter referred to as a “Grievance”) between a Director who is eligible to elect to receive the benefits provided under this Plan and the Company with respect to the payment of benefits to such Director under this Plan, the computation of benefits under this Plan, or any of the terms and conditions of this Plan, such Grievance shall be resolved by arbitration in accordance with this Section VIII(b).
(1) Arbitration shall be the sole and exclusive remedy to redress any Grievance.

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(2) The arbitration decision shall be final and binding, and a judgment on the arbitration award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
(3) The arbitration shall be conducted by the American Arbitration Association in accordance with the Commercial Arbitration Rules of the American Arbitration Association and expenses of the arbitrators and the American Arbitration Association shall be borne by the Company. Neither the Company nor such Director shall be entitled to attorneys’ fees, expert witness fees, or other expenses expended in the course of such arbitration or the enforcement of any award rendered thereunder.
(4) The place of the arbitration shall be the offices of the American Arbitration Association in the Detroit Metropolitan area, Michigan.
(5) The arbitrator(s) shall not have the jurisdiction or authority to change any of the provisions of this Plan by alteration of, addition to, or subtraction from the terms thereof. The arbitrator(s)’ sole authority shall be to apply any terms and conditions of this Plan. Since arbitration is the exclusive remedy with respect to any Grievance, no Director eligible to receive benefits provided under this Plan has the right to resort to any federal court, state court, local court, or administrative agency concerning breaches of any terms and provisions hereunder, and the decision of the arbitrator(s) shall be a complete defense to any suit, action, or proceeding instituted in any federal court, state court, local court or administrative agency by such Director or the Company with respect to any Grievance which is arbitrable as herein set forth.
(6) The arbitration provisions shall, with respect to any Grievance, survive the termination of this Plan.
(C) The obligation of the Company to deliver shares of Company Common Stock under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Corporate Governance Committee.
(D) If at any time the Corporate Governance Committee determines, in its sole discretion, that the listing, registration or qualification of shares of Company Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares, no shares shall be issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Corporate Governance Committee.
(E) In the event that the disposition of shares of Company Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933 as amended (the “Securities Act”), and is not otherwise exempt from such registration, such shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Corporate Governance Committee may require any individual

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receiving shares pursuant to the Plan, as a condition precedent to receipt of such shares, to represent to the Company in writing that the shares acquired by such individual are acquired for investment only and not with a view to distribution. The certificate for any shares acquired pursuant to the Plan shall include any legend that the Corporate Governance Committee deems appropriate to reflect any restrictions on transfer.
(F) No Director shall be deemed for any purpose to be or to have the rights and privileges of the owner of Company Common Stock with respect to any hypothetical shares treated as allocated to his or her deferred stock account unless and until such Director shall have become the holder thereof upon distribution under the Plan.
SECTION IX AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate this Plan at any time. Any amendment or termination of this Plan shall not affect the rights of participants or beneficiaries to the amounts in the Directors’ deferred stock accounts at the time of such amendment or termination.
SECTION X APPLICABLE LAW
The provisions of this Plan shall be interpreted and construed in accordance with the laws of the State of Michigan.
SECTION XI SUCCESSORS
The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and to agree to perform this Plan in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Plan shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Plan), and the heirs, executors and administrators of each Director.
IN WITNESS WHEREOF, DTE Energy Company, pursuant to the resolutions of its Board of Directors, has caused this amended and restated Plan document to be executed in its name and by its Chairman as of the 4 th day of December, 2008.
         
  DTE Energy Company
 
 
  By:   /s/ Anthony F. Earley, Jr.    
         Anthony F. Earley, Jr.   
       
 

9

Exhibit 12-41
DTE ENERGY COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                                         
    Twelve Months Ended December 31  
    2008     2007     2006     2005     2004  
(Millions of Dollars)                                  
Earnings:
                                       
Pretax earnings
  $ 819     $ 1,155     $ 536     $ 415     $ 389  
Adjustments
    (3 )     (4 )     (4 )     5       2  
Fixed charges
    540       562       558       546       544  
 
                             
Net earnings
  $ 1,356     $ 1,713     $ 1,090     $ 966     $ 935  
 
                             
 
                                       
Fixed charges:
                                       
Interest expense
  $ 503     $ 533     $ 525     $ 518     $ 516  
Adjustments
    37       29       33       28       28  
 
                             
Fixed charges
  $ 540     $ 562     $ 558     $ 546     $ 544  
 
                             
 
                                       
Ratio of earnings to fixed charges
    2.51       3.05       1.95       1.77       1.72  
 
                             

Exhibit 21-4
SUBSIDIARIES OF DTE ENERGY COMPANY
DTE Energy Company’s principal subsidiaries as of December 31, 2008 are listed below. All other subsidiaries, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
     
Subsidiary   State of Incorporation
 
   
1. The Detroit Edison Company
  Michigan
 
   
2. DTE Enterprises, Inc.
  Michigan
 
   
3. DTE Energy Resources, Inc.
  Michigan
 
   
4. Michigan Consolidated Gas Company
  Michigan

Exhibit 23-21
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference of our reports dated February 27, 2009, relating to the consolidated financial statements and financial statement schedules of DTE Energy Company and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of new accounting standards) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2008, in the following registration statements:
     
    Registration
Form   Number
 
   
Form S-3
  333-99955
Form S-3
  333-109591
Form S-3
  333-136815-02
Form S-4
  333-89175
Form S-8
  333-61992
Form S-8
  333-62192
Form S-8
  333-00023
Form S-8
  333-47247
Form S-8
  333-109623
Form S-8
  333-133645
     
/S/ DELOITTE & TOUCHE LLP
Detroit, Michigan
       
February 27, 2009
   

Exhibit 31-45
FORM 10-K CERTIFICATION
I, Anthony F. Earley, Jr., certify that:
1.   I have reviewed this annual report on Form 10-K of DTE Energy Company;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
     
/s/ ANTHONY F. EARLEY, JR.
  Date: February 27, 2009
 
   
Anthony F. Earley, Jr.
Chairman of the Board
and Chief Executive Officer of DTE Energy Company
   

 

Exhibit 31-46
FORM 10-K CERTIFICATION
I, David E. Meador, certify that:
1.   I have reviewed this annual report on Form 10-K of DTE Energy Company;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
     
/s/ DAVID E. MEADOR
  Date: February 27, 2009
 
   
David E. Meador
Executive Vice President and
Chief Financial Officer of DTE Energy Company
   

 

Exhibit 32-45
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of DTE Energy Company (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony F. Earley, Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1)   the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
Date: February 27, 2009  /s/ ANTHONY F. EARLEY, JR.    
  Anthony F. Earley, Jr.   
  Chairman of the Board and Chief Executive Officer of DTE Energy Company   
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 32-46
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of DTE Energy Company (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Meador, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1)   the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
Date: February 27, 2009  /s/ DAVID E. MEADOR    
  David E. Meador   
  Executive Vice President and Chief Financial Officer of DTE Energy Company   
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 99-48
TWENTIETH AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
DTE ENERGY COMPANY
      THIS TWENTIETH AMENDMENT , dated as of the thirtieth day of April, 2008, by and between Fidelity Management Trust Company (the “Trustee”) and DTE Energy Company (the “Sponsor”);
WITNESSETH:
      WHEREAS , the Trustee and Sponsor heretofore entered into a Master Trust Agreement dated June 30, 1994, with regard to DTE Energy Company Savings and Stock Ownership Plan, The Detroit Edison Savings & Investment Plan for Employees Represented by Local 17 of the International Brotherhood of Electrical Workers, The Detroit Edison Savings & Investment Plan for Employees Represented by Local 223 of the Utility Workers Union of America, and the MichCon Savings and Stock Ownership Plan (collectively and individually, the “Plan”); and
      WHEREAS , the Sponsor has informed the Trustee that the name of the “MichCon Savings and Stock Ownership Plan” was incorrectly documented in the 13 th Amendment, dated December 21, 2001, it is hereby corrected to the “MichCon Investment and Stock Ownership Plan.” All references to the “MichCon Savings and Stock Ownership Plan” are henceforth corrected to the “MichCon Investment and Stock Ownership Plan;” and
      WHEREAS , the Eighteenth Amendment, dated July 31, 2007, removing the Fidelity Retirement Money Market Portfolio applied only to the DTE Energy Company Savings and Stock Ownership Plan; and
      WHEREAS , the Sponsor hereby directs the Trustee, in accordance with Section 8(c), of the Master Trust Agreement, as follows: (i) effective as of the close of business on April 30, 2008, to liquidate all participant balances held in the Fidelity Retirement Money Market Portfolio at its net asset value on such day, and to invest the proceeds in the Fidelity Institutional Money Market Fund at its net asset value on such day; (ii) to redirect all participant contributions directed to the Fidelity Retirement Money Market Portfolio effective the close of business on April 30, 2008, to be invested in the Fidelity Institutional Money Market Fund and, (iii) to permit no further investments in the Fidelity Retirement Money Market Portfolio as an investment option for the Plan after April 30, 2008. The parties hereto agree that the Trustee shall have no discretionary authority with respect to this sale and transfer directed by the Sponsor. Any variation from the procedure described herein may be instituted only at the express written direction of the Sponsor; and
      WHEREAS , the Sponsor hereby directs the Trustee, in accordance with Section 8(c), of the Master Trust Agreement, as follows: (i) effective as of the close of business on April 30, 2008, to liquidate all participant balances held in the Morgan Stanley Institutional Trust Mid Cap Growth Portfolio-Class P at its net asset value on such day, and to invest the proceeds in the Morgan Stanley Institutional Trust Mid Cap Growth Portfolio-Class I at its net asset value on such day; (ii) to redirect all participant contributions directed to the Morgan Stanley Institutional Trust Mid Cap Growth Portfolio-Class P Fund effective the close of business on April 30, 2008, to be invested in the Morgan Stanley Institutional Trust Mid Cap Growth Portfolio-Class I; and, (iii) to permit no further investments in the Morgan Stanley Institutional Trust Mid Cap Growth Portfolio-Class P as an investment option for the Plan after April 30, 2008. The parties hereto agree that the Trustee shall have no discretionary authority
     
DTE Energy Company   Confidential Information
20 TH Amendment – Master Trust    

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with respect to this sale and transfer directed by the Sponsor. Any variation from the procedure described herein may be instituted only at the express written direction of the Sponsor; and
      WHEREAS , the Sponsor now desires, and hereby directs the Trustee, in accordance with Section 8(c), of the Master Trust Agreement, effective at the close of business on July 31, 2008 , to liquidate all participant balances held in the Funds in Column I at their net asset value on such day, and to invest the proceeds in the corresponding Fund in Column II at their net asset value on such day; and (ii) effective close of business on April 30, 2008 , to redirect all Participant contributions directed to the Funds in Column I at their net asset value on such day, and to invest the proceeds in the corresponding fund in Column II at their net asset value on such day; and (iii) effective close of business on April 30, 2008 , to permit no new investments in the Funds in Column I.
         
    Moving    
Column I   to...   Column II
Fidelity Freedom Income Fund®
  =>   T. Rowe Price Retirement Income Fund
Fidelity Freedom 2000 Fund®
  =>   T. Rowe Price Retirement 2005 Fund
Fidelity Freedom 2010 Fund®
  =>   T. Rowe Price Retirement 2010 Fund
Fidelity Freedom 2020 Fund®
  =>   T. Rowe Price Retirement 2020 Fund
Fidelity Freedom 2030 Fund®
  =>   T. Rowe Price Retirement 2030 Fund
Fidelity Freedom 2040 Fund®
  =>   T. Rowe Price Retirement 2040 Fund
Western Asset Core Plus Bond Portfolio-FI
       
Class (f/k/a/ Western Asset Core
       
Portfolio-Institutional Class)
  =>   Western Asset Core Plus Bond Portfolio
Dodge & Cox Income Fund
  =>   Western Asset Core Plus Bond Portfolio
Goldman Sachs High Yield Fund — Institutional Class
  =>   Western Asset Core Plus Bond Portfolio
Wellington Trust Company Large Cap Value Fund
  =>   Eaton Vance Large-Cap Value Fund — Class I
Fidelity Growth & Income Portfolio
  =>   Fidelity Contrafund®
Fidelity Magellan® Fund
  =>   Fidelity Contrafund®
Putnam Voyager Fund – Class Y
  =>   Fidelity Growth Company Fund
Fidelity Blue Chip Growth Fund
  =>   Fidelity Growth Company Fund
Goldman Sachs Structured Small Cap Equity
       
Fund – Institutional Class (f/k/a Goldman
       
Sachs CORE Small Cap Equity Fund –
       
Institutional Class)
  =>   Pyramis Small/Mid Cap Core Collective
Trust
The parties hereto agree that the Trustee shall have no discretionary authority with respect to these above listed redirections directed by the Sponsor. Any variation from the procedure described herein may be instituted only at the express written directions of the Sponsor;
      WHEREAS , the Trustee and the Sponsor now desire to amend said Trust Agreement as provided for in Section 14 thereof;
      NOW THEREFORE , in consideration of the above premises, the Trustee and the Sponsor hereby amend the Trust Agreement by:
(1)   Effective December 21, 2001 , amending all references to the “MichCon Savings and Stock Ownership Plan” by replacing it with the “MichCon Investment and Stock Ownership Plan.”
     
DTE Energy Company   Confidential Information
20TH Amendment — Master Trust    

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(2)   Amending Section 1, Definitions, to add the following:
  (r)   “Group Trust”
“Group Trust” shall mean a group trust for qualified plans sponsored by the Trustee, Pyramis Global Advisers Trust Company (“PGATC”), or any of their affiliates.
(3)   Restating Section 5(g) “Participation in the Collective Investment Funds Managed by the “Trustee” as follows:
  (g)   Participation in Collective Investment Funds Managed by the Trustee
To the extent that the Named Fiduciary selects an investment option a commingled investment fund of the Group Trust, the Sponsor hereby (A) acknowledges that it has received from the Trustee a copy of the Group Trust, the Participation Agreement for the Group Trust, and the Declaration of Separate Fund for each separate fund of the Group Trust selected by the Named Fiduciary, and (B) adopts as part of this agreement the terms of the Group Trust, the Participation, and the Declaration of Separate Fund for each separate fund of the Group Trust selected by the Named Fiduciary.
(4)   Amending Section 5(h), Outside Managed Collective Investment Funds , by restating as follows:
All transactions involving Alliance Bernstein: Bernstein International Value, Barclays Global Investors US Debt Index Fund, Barclays Global Wilshire 4500 Fund and Western Asset Core Plus Bond Portfolio shall be done in accordance with separate operating procedures between the Trustee and the fund provider.
(5)   Amend Section 5(i) (ii) Trustee Powers, by restating as follows:
(ii) To invest all or any part of the assets of the Trust in investment contracts and short term investments (including interest bearing accounts with the Trustee or money market mutual funds advised by affiliates of the Trustee) and in any collective investment trust or group trust, including any collective investment trust or group trust maintained by the Trustee, which then provides for the pooling of the assets of plans described in Section 401(a) and exempt from tax under Section 501(a) of the Code, or any comparable provisions of any future legislation that amends, supplements, or supersedes those sections, provided that such collective investment trust or group trust is exempt from tax under the Code or regulations or rulings issued by the Internal Revenue Service. The provisions of the document governing such collective investment trusts or group trusts, as it may be amended from time to time, shall govern any investment therein and are hereby made a part of this Trust Agreement.
     
DTE Energy Company   Confidential Information
20 TH Amendment — Master Trust    

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(6)   Effective December 21, 2001 , amending the “Phantom Fund investment options” portion of Schedule “A” to add the following:
    Fidelity Freedom Income Fund®
 
    Fidelity Freedom 2000 Fund®
 
    Fidelity Freedom 2010 Fund®
 
    Fidelity Freedom 2020 Fund®
 
    Fidelity Freedom 2030 Fund®
(7)   Effective July 31, 2007 , amending the “Investment Options” portion of Schedules “A” and “C” to add the following:
    Fidelity Retirement Money Market Portfolio (for the Detroit Edison Savings & Investment Plan for Employees Represented by Local 17 of the International Brotherhood of Electrical Workers, The Detroit Edison Savings & Investment Plan for Employees Represented by Local 223 of the Utility Workers Union of America and the MichCon Savings And Stock Ownership Plan)
(8)   Effective close of business April 30, 2008 , amending the “Investment Options” portion of Schedules “A” and “C” to add the following:
    T. Rowe Price Retirement Income Fund
 
    T. Rowe Price Retirement 2005 Fund
 
    T. Rowe Price Retirement 2010 Fund
 
    T. Rowe Price Retirement 2020 Fund
 
    T. Rowe Price Retirement 2030 Fund
 
    T. Rowe Price Retirement 2040 Fund
 
    T. Rowe Price Retirement 2050 Fund
 
    Barclays Global Investors US Debt Index Fund
 
    Barclays Global Wilshire 4500 Fund
 
    Eaton Vance Large-Cap Value Fund – Class I
 
    WHG SMid Cap Fund – Institutional
 
    Pyramis Small/Mid Cap Core Collective Trust
 
    Alliance Bernstein: Bernstein International Value Equity Fund
 
    Julius Baer International Equity II Fund – Class I
 
    PIMCO All Asset Fund – Institutional Class
 
    Morgan Stanley Institutional Fund Trust: Mid Cap Growth Portfolio-Class I Shares
 
    Western Asset Core Plus Bond Portfolio
(9)   Effective close of business April 30, 2008 , amending the “Investment Options” portion of Schedules “A” and “C” by removing the following:
    Fidelity Retirement Money Market Portfolio (for the Detroit Edison Savings & Investment Plan for Employees Represented by Local 17 of the International Brotherhood of Electrical Workers, The Detroit Edison Savings & Investment Plan for Employees Represented by Local 223 of the Utility Workers Union of America and the MichCon Savings And Stock Ownership Plan)
     
DTE Energy Company   Confidential Information
20TH Amendment — Master Trust    

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    Morgan Stanley Institutional Fund Trust Mid Cap Growth Portfolio-Advisor Class Shares
(10)   Effective close of business July 31, 2008 , amending the “Fund Investment Options” portion of Schedules “A” and “C” by removing the following:
    Fidelity Freedom Income Fund
 
    Fidelity Freedom 2000 Fund
 
    Fidelity Freedom 2010 Fund
 
    Fidelity Freedom 2020 Fund
 
    Fidelity Freedom 2030 Fund
 
    Fidelity Freedom 2040 Fund
 
    Western Asset Core Bond Portfolio–Institutional Class
 
    Dodge and Cox Income Fund
 
    Goldman Sachs High Yield Fund – Institutional Class
 
    Wellington Trust Company Large Cap Value Fund
 
    Fidelity Growth & Income Portfolio
 
    Fidelity Magellan Fund
 
    Putnam Voyager Fund – Y Class
 
    Fidelity Blue Chip Growth Fund
 
    Goldman Sachs CORE Small Cap Equity Fund-Institutional Class
(11)   Effective close of business April 30, 2008 , amending Schedule “C” to restate the last paragraph, as follows:
The Named Fiduciary hereby directs that for Plan assets allocated to a Participant’s account to the extent the Plan allows, the investment option referred to in Section 5(c) shall be the T. Rowe Price Retirement Fund determined according to a methodology selected by the Named Fiduciary and communicated to the Trustee in writing. In the case of unallocated Plan assets, the termination or reallocation of an investment option or Plan assets described in 5(e)(vii)(B)(5), the Plan’s default investment shall be Fidelity Institutional Money Market Fund.
(12)   Effective close of business April 30, 2008 , deleting “Operating Procedures Agreement” for Wellington Trust “Schedule “K:”
      IN WITNESS WHEREOF , the Trustee and the Sponsor have caused this Twentieth Amendment to be executed by their duly authorized officers effective as of the day and year first above written. By signing below, the undersigned represent that they are authorized to execute this document on behalf of the respective parties. Notwithstanding any contradictory provision of the agreement that this document amends, each party may rely without duty of inquiry on the foregoing representation.
                     
DTE ENERGY COMPANY       FIDELITY MANAGEMENT TRUST COMPANY
 
                   
By:
  /s/ Elizabeth Pochini   4/29/2008   By:   /s/ Carolyn Redder   5/26/2008
             
 
  Authorized Signatory   Date       FMTC Authorized Signatory   Date
     
DTE Energy Company   Confidential Information
20 TH Amendment – Master Trust    

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