NRC-99-0021, 1998 Annual Financial Rept for Detroit Edison Co. with
| ML20206E018 | |
| Person / Time | |
|---|---|
| Site: | Fermi  |
| Issue date: | 12/31/1998 |
| From: | Earley A, Garberding L, Peterson N DETROIT EDISON CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| CON-NRC-99-0021, CON-NRC-99-21 NUDOCS 9905040311 | |
| Download: ML20206E018 (53) | |
Text
{{#Wiki_filter:Ferm12 6400 Noah Dixie Hwy., Newport, MI 48166 Detroit Edison 10 CFR 50.71(b) April 30,1999 ' NRC-99-0021 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington DC 20555
Reference:
Fermi 2 i NRC Docket No. 50-341 NRC License No. NPF-43 l j
Subject:
Annual Financial Report Pursuant to 10 CRF 50.71(b), please find attached the 1998 Annual Financial Report for the Detroit Edison Company. If you have any questions regarding this report, please contact me at (734) 586-4258. Sincerely, of ' l Norman K. Peterson Director, Nuclear Licensing I Enclosure cc: All w/ enclosure l J. E. Dyer A. J. Kugler { A. J. Vegel M. V. Yudasz, Jr.
't
')r.g' L
NRC Residents Office 0O7 : Region III l Wayne County Emergency Management Division j
~"
9905040311 981231 PDR ADOCK 05000341 I PDR A IrfE Energy Company
.:.: .. x.;; ? : . ..:. :- : .. w..c ,,
^ . . .>..' ':: m; , -;. . , . . - . . . t)c.::,:. ': :+. v. .- . '. .1....
. . . m .:.
',, .*.-.y s "~
n -
.e., .. -.. . ^ . ' :- . . ,.: m - .
n .....:....~u..- . : d
'--.t . ':. .
..u.,s.-
y _'. .*;'.,.. -..
^
,*1 4
~-(
- . - 2.'.\. . . .
- .
. t ..
._ . j . ,l '. ' . :; f , . ...; . y. -:' - .. ~'.,:.
. . ' 'n i :.;:. ' '. . ,:.,_3
, ...sl ,.....j, <.
. ;: . :.::,..' ,.. . . _ : ; . f -lp, . * *
; g. .~. . * - . " . .. L. ; ,- .. . . . . . ..,..,.:;..-....r.~,
,.a- .%._.
- m. .: .
._r,., - ;, ..
...... . A..3 .. - . - ,
- : , ; . . ' . :, . , ..,.: . ..,2
. , . . . .; , ._. . :., c~ . . , . , . . . . .. , ..,e,..
.. : . . . - - ,i
._s..;,.".%,,: .c .. : . .,:. .. . ,. . ... . . , . c .e-
,, -:.> . .-. .,. . . ,. : ;. . \ 1,
.' . . ; s ,:. .. . , . , -
- s. ;. , . .. ,. w ...a ,. .
.- s,- ..s,,.
- i. - - ...,.,e..,
i , [ [ . ' . * . ,' ' '" # * ' '.e ki . ;*' - l '. , . '. g ,'f ,- ' h+ . ' ' ' :.%,[ ,U[h. . ,'. Y I6' ,e.4,1 -' O, .\,bg' [ [f, . ' I. . j ' >, .[.i
.*-v'*.9.; -lp d' ,.[p.',-
,l', J.r . - [ ' ' ......'.,,';I?h..,..,;.;... - ' I.*'
* . ,fs ' .; .
,.'.,'.,,-:*f '., ' '.f' .'j..<p'. W .-s
'*g..- ~
t- r - a . e- .,*
' g':.: , : ',\ k. ; t <-'z'* ','
s
- .a. * . ' f, ,
*,.g.- ' sI. ".' *;.,.'.,'[.-< ' ;,-
,. t
*,;.,,r.,,.: 'l j ' .p~ .-* ,l ., .7 l
' ~
v
,' . ' ; . 1 ; , I . , . .c ; - / ,. l*. *,f '
.J s.' ; ;. . , . .
, , _'?., , ' -.. , ', '.. . .y 'esH i
; :. . . * ' ' " .f.%%" '. - _y._. :!d
..,- .; V_. _.;.- . ' ,. , .,s. ,; i':..,i,',- y',:._,,
.: ,. y, .; .*l.'
,,_..{?,,..
.o
'. , y; : , q .- _ .f_p,,, ., .j ,, -_'^'..v.;..'_..4 : _ l. . z, ?
- 1 ; , .: 9 ... .s, '.,_s,,,'.::-,
,, . , s.*.;,..
I.
. < - : ,'. * . y_
o.
.?4..,*. e,s'~'...........s.
- r. -
.r:. r.- .;;.::.
.. ,- ,. - <.s -
y.,.- '- . - s- . *, 6,+ s. ~: _. ..: : - : o
..;. , , . .. ,,- . - . . ,,-, , 4. s .+. -:kn.- - r ./ .n,
.,yo r.,,-).,,...- . 's .. . .
..,e fl ,.'1,...'r -
- I..-. -
- A .. i. _;,
**',(, _.,u.,.:
- ; m . .
e V-- .,:
, 7,: . .,*. '. * ;. .;.g,3.', %. igd.'). *. . .., . , . , . . . . . ..f,,., . ; . ., f ' ?g , . ' . '
*.,y.
y , .* y ',. , '; . .;#; ;< ; . ,#
'C.
.;6. . , .. .. .
..... . , . ,. . ,. ,-.3.,.
,v , . , . - ,- _ '
t ..s\4' . ..., f,;
; .. y... ; , . ='
' . . , .~ .v .s.,y ' . ', , .",'.:_ _ . . , . _ _ ,_ [ . ' _.,,.4..,,,
1
, . .,,.. ,,* ,.-. . .< s.',.,.
I,,....'.[,,.. . _ _ ' E'- 'c*.,..'~ei,'.' ' *' '.; "' ' ' .i.- 5 ', _ .
; - ,4 ' d " .' ' . . . * - O . . 'O: .7; ' . . . ' ,1 l , - . . . . - ( '['. t-
_'e
?
' : ,; ) . ;.; a:',)",'._.
, ' .;, ',. . ( y ' [ _ ' ;' ,'v.y '
'p * .
- J , ;- 'f..'- .
i-{'. '-, -[ - 7
' .-_L' -' , . " .;
,, ;[ .
_.. - * ;, , / ~ - '
;k . ,:. ' s - {. . , . : * ." ' ;- 'lg}.c .
.': ; . ; , _],,, _ , , . ;v f, p- (. , .
, ; ,* , ' . - , , . .; j . ..s ,
/ s, ; . .f P i
,.g . .
.( . , " . ..
. ' .,,d. . , , ;. ,
.. . y: ; , . '.'......*t
. : g .: '. .;; ._
..:,..z.. , ..
p
,.t , , , _ .. , ...,.;..
- , . . . i
- s ,.;., ; ,,. ...-;gg'_,,,, -
- . - _ , . . .6 .,, _ _ .' .' j. . . .-, . . . , . _ . :. .
;w
- i. , .
;r .. . : ,; *. ) ._t .4.;. 7 ,
.,v.,,,'- c.;.
. . . ... .. . . . " . . -f.
.. ;, .;, ,e..o .. o,* . . - , :, , * ' . . , - .: ,.. ... . . ., . . , . , , . . ..- , , , ,.-, ..,
._. .-. r.
j
.,.c.,,l,_, ; -
f . *. -; ,j' .- - - ,- '
.. -l 1: : , ,,
.+y.-
,- ,W.', . . %, ,.'s*;..
- . ..-_~ . ' -_.:. .. , ,- ' -,, c.' * ','; q,w 3 s',.y ' .' ,.,g', ..'.?.*...s,. y.._ _ . . . - y .y
~.,?:.... :- s ; ., ,.- ,, , - .:
....',d.',.
> :. :' ., ,.:. . , ',. :...'-' _ ' _ .. .-' .'o.
a - n .
, . *%.. ' . , . v, ; ...;;,r :g_.
,.., y.-,: .; .. . -
, ', f: '
's.. ."
,'._.]._,._ * : ..:.., .. m
.' '. > a: : _r.' '_,,; -. . . W-..;.,
..g; . 3. _: :[; ; .. 9. ',s . ,, .. ,, ' ,. - y: -) . -:. , ,' q;;.. -' , ..< _ , *.q . ;. _.;.,,' * ., ._ . . .., , . ,..
' ..*.; ..,'..;j'..
~
.j,*r h' . ,,.:: y' i * ; .. _ . , . _,___*;. . ,' l :- ** *,, :;
; 7 . *^ .. -
- ' ' . ' " ' . l_*._...*.:
. . - ?. '. : o
- c. L l' i. l * ' ' '
' .,'. y N ':.'. . . '.: - ,' _".l'*- f. ; _ _ '.l' .,'.._;ys,-
> ...L '?,
_'; % ; ( -
\, ,,;-' j *. g '. ; ^',.', ' . _. ,.,*'.l' .; .' .N, . _}* ; l ', h*,__ '. ,; ".
, . '.* _. .f. -' :.:*. .**:
.,- 1. (' . -',- f. - ,'j .; ,-, j ..g,"'. . '. _ . ,**:. ..= . ).,.'.j.,,..'.*.::
. "..;?,'.* ,,
. .:.. . , . ' . '.'.'...-;''.;* ' i.,, ~- : .;. ' . ',J.;,,. ' '.. < ,, ? . , . , ,- ,. . . . . :
- . .,. - ^j; '/,' . . l, j' ' j_' 5
< . - - .- -- - , ;,.. ..o- .
a,,.
., , } , Q' ',' . .,' .-lzf .~.."& ~,!) y,*,.'.~,.N',_'.',
,._.'f..,y,- : ._......: : . . y . .- ,
.s I- .:
' . , ..s.'.',' ;
*.;1: 'l.:.', ; ,]; : ? ' ' .,
- f:... ;. .' ~~.:." . " :
'. ].N*?',, , , \
, - . . .g
;....eyn
. ' .: : .t . '.. ' -. ' . .'-: .- .. ';
' * - . . .' .,. ' . . . ' .~[
..'q,
*. . m. . . ..
^';
..% $. . V . .. 4 .. d '. ; ;. L ; :r - . . . :. - . ;. ? (. b
; :;< .. .'-k _: . % . '. ' \ ;. . . ' . . ' . ,i ' ;, ' ,; b.".m , l. ).....::..-',.' . , . ; ,,., .. . . . ,
d,3..'*.M.w, ; :' ?: ~. l *. , b ' '_ , y ,l. .if. , . ...- .\. . . ,,'.., . . ,. ...,s..' _ : ,.* :;. . c.
".. . '%'{? 4;.*;Q . :_g *
.i < -
..;li; :c: ..,.
v,;.
;.,. . .. ..s . , ' ,[ 'l.. )...;. .,. .. ,~.;,...'.'.1..'..%*"-#-
s ~.
. . . , - - . . - ~ .. .' . s.; - ....
............c... :. . :
.,...~.0:--
.i."
- . . . ' . z. .
' ' , .?... , ,., ,.. ..s..l..l.. . ,. .....'*,' -'.g, ,,-i. ..,-, j... .9,.' '.*:.'[' ' .i . .;.'.. ,. , ..:-..,, g. ..f , . . .'-*,s-; * ,:. . ,,,.'.'?
; .: ; *..'.( ' .,.;_..,'e*
'.s: *
~'. *C',..
. '- a-y..;. 7' 4 :. .l : . .:-{
- , ;,?' . , Q,,,.3'*J.,'.',..,'.'$.:.L .; .
,.._.,,'P ,( ,' , ;
,,'s.-
*' : '.,?.,y.y;- -
'..' '7- "
a . ,; .-. '.. ,,p ' '.
;.- '. ' j- gb . ; / ^'.l.f.,]. lf ".." .'i... a'.se.s.. J - , . . . *, . . * ,
p- -
* ; , N:
- . ~ . , ,,; '. , . ' -' .4
- 2 .g v ,g,:.y,, ' ...r.f
- s .';.. .
.i m -:
- v. - ..t
..'c.,.
~ . . , l
- y. ; w- ,
.'. . . .'.:..r... x. g 2' . ..% . : . .c.. ;:' -.,:;;,'.'::'.,.. - - :. ..'.:'"..._, ..',' .6~.;.'.,' v. - .
^* * . , :.. .a. .V .
}'.;. .- ;'. -. ... . ..
.:. ' ...l...',.,,'l,'*. f,.
**'..'.,.-[
,'*.: ,I :
n_....l,,'.'. _- t.
. ...f.'.,.
_.f p r.1,' '- l,.:' ^* ';;;.. ;_' , , . r '. . . ,
- , , ..t ?;,
. g"9 y'l. > z
- '. ,' . , .y.
'.'.;.<* ., . : R- .;.'y .
g:'
~~t .- ,..
- . . : ; . _ . . . ; . _ .9; ..
.. . Y, .
g .' ; . . . , - *
- ' ':~._ . . _? _
h..,~. .
~~. - ' .- .
ni. ,...' *::.... . 4 ... ;; ... .. - r'. . t.. .j . ': .,
..-)'- a- -
- , ;- . , ! ' - . . 'y. :
. :... ' 't. - .*' - .:.
* : - l: ' - ' .**
v- 4.: ;.,$. ; ';;:y.*;..
- F'.' , l . .'.. : -
x ' ::
.%. ' , .' . _. > . ' . .. . : . : . ,.';: . ~ . .-. .:~, '.' ':,.;:. i ;
3 n *, ri p ..Q v
.. :. ' . -. . . - -. - . . . , . :.4;:
'.." .n. ~ .-W'.. :-:
.'y. n.c ~ ' .s a; ' *; * : . ' '. -
.. .. . -'.. '* . :. .' ~. - .
'f. .. '. '; . r .;;:. v.
' ~:. .
a'.','.- g v.. .. -' , . ---*:., >... .-- ..., ; .:=. n. c s.
;r; :. ( .i 1 N x . .; ; "'....d':
/ -
v '.. n_ .. .'~.;. ;...~.:c .'.. . . , , ';:... t.
- ,Q :'.'
?'. ',~.. - .
s - . .. . .
.s
.:'. 1- ' z- ; .g,.p e c. i / ,..,'s,'*- . .
- ,..- , .j r- '_q'. ,- : ' ' * :'
., e ,yQ ,
;l.;',f ' . '. .; ....&..~<-
- _. s *
~..%. .
l - ; .- .'. . -w ' % ' ' . . ' ' -; ~ !*
.; ^* .
. .* : .:. ) ;: . ,-
. . . -' . .. . . .l. . ..
- ..i. + , - h. 'd i [.'h ' v ,' -
' [ . k '; .g '.' ' . ', O'....:... ;;;*. ".[ -
-* ... ,: '-4 . . ' , . . . . ' .i.fY..'h \ . .. . ,7 .; . i.
, , .. :', .q . ; ,U, -. 2,3;... .
-. . , !- 4 ; .;.. >
' . . .; .-.o,. ...; , j.
,c,,3.. . . . . . .: . ._
,i; - ,
3, . ( , , . . ;. - ,z.',,....;. . g..,;,,',,-l > l ' 17 _...t, ' h.. .': . [ ,'
. , . . .c
,- : h^
- y,W { '.;'.-.. ; .' .; :?,;.., l. . .. _ ..' .' -j l' l.: --. . [ _ ; d. . ' y,_ i z. % .
~
.} . '} *:
..._ ..[4({ '. b.. \:.. : ; . ' . . ':-
,.'. ;.y.; , ' . ; .. .;.; . . ...?,- ., .::.,..:' l,:,':. .. ...Ka ,;;e, _!.,.,:. j '
- . s. y; .:.. . .', }., ', I.'........8.. .. . ' _r.'..
.1} t
. . . p.o. , , :y. _ :,. 3;
&q ,; * . .
. ..m . : . ; **. ~ . ,--
c
..: , 4 :. ' .'.;:;. '.1 9_,. s .. . . .3..
.' i.< , :l a;;: ?....,.;,
e_(. . , . . . .:: : ' . . p.# .
' a .,,. . . '
.'M'a'...,. ;f..y . :- .? n: ..:..1 e
- - : r+: ;. ,.."..s..y"..
... ' :; ',t.
, c. -
'i. . . ,, ,. .
, .P:g
.p . e,.
p.O g: . . ;l .k . :.. 3..g;g ,_ q: . '. . . . .e ., s .1:. w/y,,. y h.. g 1.* - 7:gq* o,:.. :;v ;,.. .'?g , ; , . .
. .' A .y't,;c , c:..
a.m, 1
'.; y6 1)J - - -. ;. ,
.,,. ",.:f.:: ,' :;C.. ._.',; 9. ; .;..,.", ';. ;;3 .! .;.e '.;. , :..:-
; i. 2. .:',0 .;.g ,M.p: .u % v ,:' :. R, .f,.: s, '.; '3
...n. :. v'
- 9. v.#;gbLg' J' :;._:. p .,. ., .3. 3* t ;,:c. .^ . .
a_ :;;, -: - '.
- ya ' - ,:.- ' . g' :.-:..'f.....;
a n ; . . . s
. , . .:, u. :. m. . ,-::(;l : '
s .L : c -- % .;...' ,
. p= o,. !,y,p* e, ,. 7 < . :y.. ,N7.3. ;:;. y ~ g.up >; ,.
m )_ 'q.
. c. . ..- ;: . : ~- .
5.
. ;: *;_ ;p :n' ,' . :; ;~ . q_ ,;;. ,?. ..q ,. . - m*.. ....-: _ .: ..:. ; ; ) . . . ,.s.: ,[::c,.s_...-
;> a w .: ; v 1.. ..
y
?
cs ., .q.s_ g 2 o )y{r .: 3."w:::.. . : Q....,' .;;?p:(. n\,;,y$ ..$. u. .. w ::: ..; . b.. t w:.
;. ;g.;gy
. ; . . _ n _ ,. y
- i. ) Y;. % :$ . V.. .;; ':'
.,'L .; . ;g ff' %: :
- $ ., ;y..
. y, l.
?: ., .:. ?,c ;
g .:;. . W.l,.: j.t. 7^...;. * .p." 'rV.\ ..h y;...i. *y :,N.ll : .* f.~:: ' _ :f ' .::. ' . . . . :: : ch..y.p . L ,.y : .;- [ ["l, : ,z .,'... : .- ; .,-
.,V..;,; .c...:.,,-
.: ,[::%, .( ).q: pq. .,. :, ' f.e.; ,.: . . , . :
.s.. . _._. ::._ . . .y
.:( .gy s.:. ; + r.,v .. 4 ..~: . ,...;.f.,,,t.
4
; ~..,.
- p. . 4: . Q..p a , *. ., .. . . t c :
. :. ' y :. .-'4,..y.
.' '.:..*;'. ':C r . .
. s.'*.V. o.. .t..
a . . n; .
- 6~. %: V, : 2,'?.h, ( i .s 0 J? C i . : . .:i. . O . '
.' .i- .::: -* .- y n
.. go;' ; - ,::. ' . Y ^ a .:::- ,.
c nv
~::g g:.be e.%
'. /.%'.\j ?
.': v; V. w. %?.'% y. ,w
..; a. v% .,q ..w\:
- v. n 9 n < - . . k:rn . r. .
y:;9; '^ N -
. ~ .e ' : .
. m.> % :3 :, .
._?
'f ? '? ' "; -
; -l lp . }b 7 . .h , '_ : : . i __
U; - rs ..
.lm '
s .
," .a s . ., . . . . . .;.,, , -
. - -,. . i ; . . e
~
%.; . N' { _
.N '. ' .~ ...
h!
. . - 1,w ho .3 % $ -r
'- ? ,,
}: . p. .. ..
.. _~
; : ., f.N i
';.' _.C. ins ; 7.l. . O ' q l . ,*.ll l. . ' . i.:ygv -i..... ,.' ._ '.[~,h . . X L ,,.; . . , . . *'g(( . ..' .fk.,.i,f,$$ - . 9 .:. - ll'
, f.y !.$.* l ._
;.a,h -y y: . 7..<. g;;
. .p
;, cl ly,; y -: . "l
- h ', .',: ,v. . : , ,.
y.9.g:7.x Q , g ' ,:,.,. A.y ,;,g ., ' v .- ' . .::3. ,, -
- p,,, ;; . .< ,;; :. .. L.g- ,.,1-- ~s .- r. , - #.c .\, . ,..,.; - y ,.,',. : . ,c.
...;. ::.r. . ;
.,t, ; : . ::
. .. . ?s . 4
' y ) :p?
.,c s , s s
- f. . . :-XWy{.<;;.g, .
, . f, s .?. ; . .'*.:'
[. j ' i ' ::_s.i.p -;$' . .p). ,s'. li.3y % %& .,1'.; y = ::geb. h. 9 - L. t.: ; : '. 5 ' .-
. .(:3.J.-Q .. ,y;. '.-* t...?. ; 9 *,...',.t;-
. 3._ .\ _._.
. .. .' .f.. ' -
* , , ..n..," . '. .~, .
,,. L.;,7 .-.' ; y) :. ;_ .. .f- .,.. y o
3 ., ,. o
*: - a ,4 v f. s. JNA~ m,p ,.y, .e'..rs.,y m.- ..y'
, 5 ..
' : ~ '$-Q'p . . '.n : n: .1 ,.:1;..'...
, . ' I' ,
et,:>r ,:- i - ..: ~$ .. '
. 1 '.' g ,)\.;'.efr . k .) }; , ..*' !.'
- 5. - Q . .-) ~ '.} * .; ? :ss : h' *d.l*', *:. :; { >' '. b; i.' (-$ - N.d ;*
. ' . '4 c n- .W .
- l *
' ? '. ' ' *: ?- '. N ' E ;
, N.'.9'."
'n y.g,. g.,;s ..g .. :#.1. c. .-, - h ., V .: ~ s ,. ' ' -c I.. "..%,..".;,,. .m,.... . 6' ' l'.,'.;! *e ' >'. \.. 'f.. _ .\: , '.. .-O ~ 7..'$"./3.e....c.-.', h 1; l .F.;.
^
. ,, :,, , .:< ,i t* ,'.' ' ' , . ..- . >y"... v' . . : 'P-,
9 c ;.
. ',.-*..e". . ',-
,,3 P.', i' . . 2.r . e- - ->
.~ *'.
.; s.,1. s. %
.1 , .-
' v.m 1 -
@
- W. q,, ,, ~ . - >'.>'J..'.s.-< .',%,..1', . . .... .. ; { -" >: >:?::. . . , . . '
~t.'
' .. - . O ';' : . A x - 3.;.... A ' L ' .( ,r f. , ' .' %
V- ;-
..,': h.
'. - f { ;,.. .c. . ' .'. ., . . ' ,.. y.
.M.c..>...'..')-..y . , . .' ., : 4 4 ..'d =,,\....
. s : y ~. . M- , n ..c .-b..<!,. ?': , ol:-l p- a : .e , .t , : ~. . .m. y .e, :
< > . 'v'. . ,n. e w
.!' .- ...- . > .,. . u .:,... LQ ... . . - ,
'W. :? , :,
. , 5 . .
.l q;} - - -,"1.* *5 4 " e } 'e , t e, - Q,
',<:::l..;) ~.pl{~:?A. 3,_n,'v,' '- e\._n, y>;: .t. ._
C ,,' ' , ,l .,b . .l *. . q y t., ' g,* *
!":;;';;, i'g,,~ J .',.p... >l.
.}:;3>
g: _.%'*b,- ; _Cf.; %:.f,:',}- T * ;. 4 .;_'\s;q . ,' *L .%.,r'. s . ',:. o) r; - (.y.a ..
'f :..q .s ,- .t[xQ'; s , . i.:aty$, q:dQ %:' {l%:-... \;pn , . .' *. ; ..'.e.+
*,.y5.,. . y %"., r.
(..
' .; . .v] ) .,'p.,l,.., ,1. . . ?' ' ' * ': r .- - ' .'..;%; u:.vte.'. c .~~ .' :;. r
. i . ns oa . l-'a
,&, L ?.: z ; .;..n:) . ,- p:. n. .: -.,,c::.'*.'.4.*;'"
L.. : ..~.., , .
, .q l :R ;' , .:
'..- s.; t . : =,,;, % '. .- .-
n' ,'c. .7. . . .. .i.> .. . . . _. ;. ,: . ..: F.% {' ;. ' . ?'* . , , ' *Y ,'. ',?%$ ,.
~ ta .1 .?,-, . + : . s e; . .:..'t. ;, . ' :? ;g . . , , ; h _.%. t.* ' lr ' ; .-: . t
-t k5 ' , ; n - . ?;:k l: '. '_' l L,l .l l ' n ' ' . .'.. .' &, ', ' _ , U h*': :I N. . ' . - -N'..
- _II" :. sl,.
p b
- ." ;p$_).')li.. .b '.ll3. ?, '0 ' : < \ ,lh ' h" i; *; '. lf'-^ I. ,' ; :' :
', Y' k' Y.2
)lh h:f,. ..$t
;f?l. . E b ,, ' ' ' ' -f ,;A ' '5, E
*IN . .'f - .. - **
?
* ' , , - U ?... ~ .' . , -- * ! ' ' . , ll*,' 'f ,f'. 5 ,;':,A ' . ' _ - '. J . : ' Y' *;l; l? p -
1%l-g3,_, ; L,';: _ ' ' .".L,h. . . u ,l%.f. ; i.:n Nl ,.T. J4?' )(G,' _ L:, 2
.' o; ':V $e '.. ; &,4: Q N wq ATW:-Q.f M-s. ,. ' , ,::, ;< . ' ".,_-_':*....,
b.;?lt_ . - - - . - y
^
; ;, . ' W, .' .'. r- ', . _ -
v..,
- ' ;._ . e,. y h .o .,3. z,.:
-_ . w ,7 j. :.,_ g.: . . s ;. ; ..: -.
.".:.>N.
J $. ;.N. ,*.c y_ ._S, ,-. . ..l:Q ..,..c;
- 4. . . - - ' ' - '
; * .. ..? ' : , . . . . ,. - * * *. .t.'- ,4.-
. R,y' &f :$ Ui
. , ., o:f ' ' Q*: ,'.,.g!', s *)'. .. . ' .
', : : . ..;. , .; , ': ) ] . .' y , .. * * ,g * ' r
- . : . F ' ' , *'.;i r 5'
'. ,' : . . .:, ,.> :l...lg..< s. :,: - : /:.-:. t.: l. 'l . ?;.. . -,:w. ' j , !. ll
.: ., ,f .. .. .. .:, > e. '_g,-
.':.f&. ? Q.J.'.'<y'. i.~,p. .. .
,,,g
.,.c,. ,. . , . . . . .,:....., . , . , ..- t. -
-: a..,., ,..... .v'. ..,..
.ts .
..,,?
.,q '
- m. ,:,.... , - - .- , , . . , . ... . . . y :
Y, -- .
...:,... . ,. : ..f ':;.{^ 'y.*.q' :~ * '; ,.7. ' , . . ' ,f . . :',j l
,$, - "l p- f. . l'?{.4. ;
j ' ?,; N .'. ._ * ;' . _ fi, {y' ,', > e
' ) /.l-.. f. . : T. _;' { ' .,*l 1,f ,{ . . ,
h.'-{;+.f, , c.a ; g:.:<- ..s..=.,..... ., ,k, f ,;,O, . y
,; . s -
-s.. . < ' .*_-. -' ." - -.'. . =- _ ;,
pt ). a :- -
" . . .- '.e . - ... ** . :. i :':..: .:*..:,,,:t..- _--s-
..Ls.. s, . .
- e; - .:. t' .
- , . * : ..;.. r- ': <: .
',...m"
; ' q%
- 9. *. . ' _' --' -_ > ., .= - . - ., .:.,,;._ .'.. . . . . .. . ,r .' ? s ,' . . . :1 - :>
- ~.*. i n* %.'a . U.f:.f::-.V, ;.!:.,'v*,
s f :" ; <s : _ . ,, a -
'q.._Y- :.ya
' i. " .~ -. ; L s. v . " T:
., '. . ' ;:.l* -n - 1: , :. . n .4 " . . - :s - . - i .- .g...
l'~: ... ' q : . E.':: r.
. .'.. s;k,,.pb, ',.'. -?'.'..,,.
': '; .1 I .-
.:_.'y_" . . , . . ..: :. w ..da...-
, .j ' _. $. g.d.,f. l;,.)-. '.-.. #: :, '.4 j: . s '. ,i '~ ?
U ,- ' ,' . '. . ' 'i .?
- ' l.s . ~Q.,. ,. .' .: .,..,a... ;l-
, ' ?. %. i' , ' '
.-. . .. , .,.~-b.s'
. . . ,' . , . . . .. . .< . r ~.- - l:
.. 4"., g .s +%.. ., ..- .
-so-
..O - .....y
',...,s t*, '. ,, n.
lt.- _: ; 1. ., {. 7- . : . :t. - .3' -
- : .I . % y '?,
,.y'Q ' ;.i. ' ; * : ' ,.; , ;{ y-l.;.7 g
,,*'s.
',e l^[ ' . . .: ; , : ., ,'.
- . . ',. R Q , _ _.L_ , {, ;j. .-
,e ,. .. :. 'g , ,_ 2 ; _ T. ' .y .[, i;' ; .'.'....
'}r '* l :: ".:
Q.;.*,q:y }~p' fJ[
-,'- ~1 t 2, v .. .3.. _ y ',L , *.-, ._ ..'?
.< *n},; 5 , t c ._ * ; :
; n - .
. + - .:
A,. r*.Q,,.<::.'...,...'.,..,$..h..,'._'*.._._i.,~',.1..
- s. ;>.%...s,-
.'.....'..s...._...:';.:". :<
's*
. :,,'-.-(- ..,..c-:a,-
,.. t.,. >
c, . Q .m . ,..w.m. . - . , ...'..t.s.
- x. .4 '. :k .;;. . - .;.a &
-h.s.' . .... . "...,o.-:*'.,.,'l.,-. , - . . , , + . -'. , ~ - ' .--.. s
- '.'.:'.'........v. 7
- f. p-';
.:. ,: . . ' ?' . ,'. f. s '- s:..: .. ..:,.,...n.
c
.:.*. .,,y.
r-m
- s ,,','
-?- y ,, . + ' .-;w.. ,-
s'
- v .1 : in .u'..g- .u.
- l. bl . _. .F, f.n' i' ';. -(;; :, _p :' . :;:. 's.;'&.:.% . A -i . 3._ .% + p': S
- .: ...}l , .; L.3::.Y'l _ ";: ^ 3 n . ::. ' , ' - '; *. . .V: f' K
_'. f; r . , _, ' , f Gir " Y ;. ? o y' : ,;;' ': ' . ~ :, Q. ."-: .' , .j. . ,- - n . . .
^
3 . :_ 2 '~':2 .G; :i a ',.
.. ; .._ ...v.
..~..a: . , - . . . .,. . , . .; ., , . . . . .
. . , . . . , ,p _ e. .. y.; ....,., - ' .';; .;._.._ 2- ;,, _ .s
. . ,.a . 4 _ . . . . . ...
- ~; . L. v . . ..c ,< ... . . _ .,__,j.,~.:- ; .
- s . i. ;:. .- . . .. 4_l,'.,..._,.w,. ..,,y--'sq,,.. : , ... : .-
, .f. ,+. :':.,. . Q .,. ;._. ::!. 'n ;
M .. , -b. -,; .~e.. ;.g . e. ,7 ,. * :' : '. [?. 2
- n
- :.. s:..
.. _,_;- ; ,; ;.... ,.,.t_.
. : ; . ... ' , . :.. .._.' ,. ._', .~::
- , ~,q ~; .. ,s.;*
- ' ' . ' .:, ~,: : . .-
-. . .; Q : 'g,;, V,.Q'.- : ,;. , ;
.+.,..p,?.4 .(+.y ' .*~', .; ..; *. -;::. \ ._. t.s, :.._
.r;.;" ^*., y :s. ..,:; .yg :; . .. G. :w '. ....
,1 ,. ? :; :'.
.._s;., .' . .,..: :. _v..,.:.- ,.- -.n:s
.t,._.- 3's. : . . l' _' ;. :, . ,-g
- '+ .. . .., ..i...:..: .. ,... , , ,y* ...,.;g,.:,'.',,,,..[.';.'e*. * . - , , . . ,:,., . I .1
.. . \ .^ < . t ?
. ., ; - .. .., s... ....g, . ; .,f,'.
; .; . y.
-d.1...,y,,..*,,.......,...
r.>s, .:. c, ,e. . . . . . ,. ~. ,- ' ._ g i :. . ..g
- j.
-*, .-*' -. +'f 6 ,. g.,, d, , ..
. . ::* .,: $;.:s-. ."' . ' .'; ~~.' - i* .\'. ,, y,, ; } ,', C ',, . .;. , y' ,, .; . ,l ,}'3 : . . {: . ' ' ', ; . . l; :.'.,'. _.l',,.S. i - *j -? . '. i. * '
. . L,
, ,.* ; \-'.'L ,[ ? ' '_9 *,';....'.., .
- f, '-
,, iD / _* gl G; .. l_.3, 7 ib ; /;;e. ~.f:4.lli.y q::_ ::, '....y.
. ::'j".. ..+i__ , .,
; .):
.T:_ ' lf.?.;,;. ;
~
;;a . ..; .Q'
_Q ? '::;;.':. I.2: .n? j ;M . ' ' *' ' : G;: + ;j. C . ,. . - l * ' ! :: . . h .; S. :.1 .,^' .'~y.'.: '.' .' ,_ y.', .. . . ;, f.s. 7.: ;',; .,q.b_.;. _y:^::> ." 9,
.. Jg., p. _i _; p-':. f A y.O':.;p. ;
l,' .:. :' }. . .;, .\; . v..
- l ,:
.Y;
-5_
l**.-',. _ . jL
' . }]. . . :
. .: [ r_.. /. ., .
*. . ] ;*. ..t . , , . . - ' - -- ;. .,,;., :. . e.
~ , . . .'* , ,y ,.
_ _. . ' ., * , . T l ': . ;, ' .' '.'_.': j a .. . '.;' . '_,, :,. 'llf A .y
., !, f., ^[ * .' ,.~ .y- ,f' '
I_', ; .
._ _, '~.
_ - ','l,.i,.._*t. f.- ,' . ' V,'
. .; :. -I 'l.* \ ' ,. ._ ' ' .. , ' .,; ; . ,
."I . 3 e," .[. . ' ;. ' . [: ). l . 7 - ( 5.. ;
./.',* .G,
.1 y
. .; , [ -', _ .. ', . . .p. '..v- .. .' _
}',.'.
.; h. '.,, ; ,, , , ,",.:., _, ,. .'. ., .. ../. 4, r.'.i..,' '* y .s;.., .n*.. ., ,.. ' , ;.,.
' :. . , , };,y! . ., ,i ; .:_. " *
,..v. . . .. .]... -,..,,4a. .. ; - -
. . . .; . . . y' , ,3
. .; . ., <. .,,6,,
g'-'
- j., ,. ' . ,- i .; ' .,, .. ,. ?g , i... .. . ' * .' '...[..>.',"....'.P
* .. .d'" . ' ' 1 ' * : "*l'.-8 .I' . 6 '. '. *:.'. - ')
. [ j., : ' . ': ..: , -Jf , 5 .'l' i ' .; , I ' - .'i g . : , I','t, . .,T.." ,
.t 4 2 ,' .'. - '.
i i .
..: '. * .I , ; ; ;. ,
.e,. ..... - ; ... . s ( . . . - .. - ... .....,,,, ,.e
; j. 9 ._ a' ,' ., .. ' , ; .; - .;*,,.1* , .;, ,is. .,_ ,. ,;,[: . . . . . ; . 3 _;..,..
. s
- f. ,.. ;,,,,,,, . . , , , ,, .. .,, , , , . . . . . . , .. . , . ., . . .
.. q .; .. ..
r,s. :,..
; : .i ., 3 . .:. .: .;. . _ . , ., . . \. ,v.
, <.: ' . , _ , ,..: ..:q
...,.t.
;' . ' . ' .:.,,....;..g.,,..]._,...%,
.::, ,_: ..: 's 2.'......?
-o
.% _- i..f. -.r,..;' , -
.,;..,,q~ ....,,%_ -
. . .j . . .y.>r- .- ,*:..' r.".
. :,\ ..;.
. ' ,; ; L 'j, 's .?::. .s . a '. h'.', : ...,,.r,
.'.:.,; . , , o. . . z , ., . .. :. -:
.'..;'- -, , .* .. e..,'."=L'.?.,p:.--. n-
- ?
...'..':.:'y.r,-
; ?-- '
. _...,",.'..,,,......:.~;'.~.:
v-
. , ' -J'.. t . ; . , , ,' ., -:.::*e.. :, - - ;
- ' . .,.,v.'..' . - -..~s ,. . .: * . , . .g :. ... ..
., - s. .e .
6.h..,.,.>e..'......:: ' . . . . a ~..', $. ;
...oc
_%' ' -. . .....c..
}':.,.A.;:....,.,..,./..i....' . ..-.se . ,.: :. .
.'.s~
.a. . . , . * .
t.'>..'.......,.1. e J .- -
.,..,,,,.s....- .. , ' . ,,
; , ..t.*,.'
~
.: : ,t. , . , - -- .,
..,..-..":.r.*,.
f",,+,,.(..'.. ,:
.s. .. s
, . , . . .z' . .,_. .:;'
.. . ,..s .
... ' { , ' :' y ' " ..b.. .,.[ g '> l:.A l ' :. 'n , ' .:._y4.;_ ; +7,.', .. .j '.. ^..; ;f; ' j '_ L*
'. .?,*t.' , ; l ;;: ^ - ., , % _; ._ .:} l - 7 ..v . ;... x ,%
- I ' 's,.:' ..-.p.. -
~. ,
. , , b t t t I ,.rg < .
I .
\' -
lg y i
.g j ' -
JM$jff,[$
~
gL , 'J ' + y EN %y #~'
. $.Nb e .A. 1. >
93 - sR e - i' y , g
'. t
- w. ,
% s , (#q-,
, :,/ ; _ l'i> '
,y_}:(
QfA [ [G e
+;
Q QMDTE Energy suleeldieries seII electrioley, natural gee, landRII neettaene gas and steene. '
;g "
g, Our suissidiaries also provide coal and usateNurgleel ooke. In adsNelen, DTE Energy
&s .
- q.w w,wq i affMates are developing fusel cells and etIner new energy tooInselogies. f; ',
? . ,s .o y , . . :,
M. DTE Energy's poissoipal operating embeleNery Is Detroit namaa= wIsloh Ines served g I h eleetrielty custoneers in Soutleemstern Weldgan for meesty a'oentury. Ise 1998, tine 5 : , d M s $@ Oesapany foressed two new operating unito. DTE Energy Resources and M L u.[v+g,' ~e. fyyN Energy IHetribution Insprove our eleMey to encoute eur etrategies for grourth ansi 1 Y ( hy - 3 ,
. .a w#!N ' ; dueroNisation Ise ::: r.J"-ted bassinesses. TIney else help us pseviste world oless "
o vm* , ty ' seNubMey ansi a portfoNo of added-value prosimete' and serviese to oossesseerotal and
^
% tones-senarket ===*====-o. ..
&, 3 '%
$$,JThe f: in,"s}ses>reguinted
.= r aIRItates now prowlelo energy-related pred
$ servlees E
hamerles. Our plan for delivering sustainatele growtle le ~ 4 h,h 95
+ ,
e
, . . ~ ,
w %m we ' -
- s ,
g , -
- Our unIgne peelelen esalIng;Q anerkets and strong coal sourcing skills. ,
%; ma gp . . Our espagggmme eerwing highly ::C2-ted inclustrial oustoneers.
- w. ,
[. ~ 1. Our unassaging and operating energy-isstensive aseets. ;d 4 gp u % d pF
~<
fA Wpp$@w
& M t w @m%
.Our.Missl To transforssi w
wvv
~
J@M'hy 2 , 2001 late , fiercely - oonopetitive m f psi . g besoinseees, pre emenest In prowleIIng energy sekstions for custosners.
' @a %n,n@;k - n@n >
s ~~' '
. , ~,.mg ,
A 4 , 7.,)
"!J W.^
,r f y, , .
~
4 ,
. Look inside the fold-out for more information M .s,
+ ,
At Your Servloe ' @eN, '
> s *
*@ Table of Contents i n . ..
y 4 Invester selseless At a Gianoe -Se' '
.. phemmetalImeheehes,Ty a ;
M speseeless moulus @gh.g# +[3, ' ln Foramareineklasse M h. e,m.ub
, ~
k MMIdh v<>$ IM Y <, :' 2 NN* t e re e ...t . r.oree.M ~ y g$dh%p gp g% a ,7.a;.g%g l8a =
,,gpg s
,,,,,,,,,;Y@
s "9.'j ' w m. m _s ,; y" , s. A , '. <s r' f -Q l ys mw i n nn ,w ;
- /sw m s'Q. Oggj,z
,r: a ys:. y
, g<v bu gg)
,. s.
ml gggyggg, _ ;, 4 ,mx- pygggggggg g: w.m 1 - 6 +o eg'n mm . 4 wg p.
,. .l$
e
% ent
e 1 n To Our Snareraders By providing you with a total return of nearly 29 percent during 1998, DTE Energy ranked eighth out of the 44 utilities in the Dow Jones Electric Utility Industry Group. Total return is based on a yield of 4.78 percent on our annual dividend of $2.06 and share price appreciation of 24.14 percent. Our common stock closed the year at
$43.06, up from $34.G9 at the end of 1997.
Investors recall 1998 was a bumpy Detroit Edison system electricity sales year on Wall Street. In that respect, were up 5.5 percent from 1997. During DTE Energy fared better than many 1998, Detroit Edison hit an all-time peak companies. In addition, our 1998 earnings demand of 10,704 megawatts (MW) of $3.05 per share rose 5.9 percent from June 25 as well as a new winter peak 3 $2.88 in 1997, While DTE Energy demand of 7,807 MW Dec. 22. our earnings were up and the price of our principal operating subsidiary's 2 million
~
common stock climbed during the year, electricity customers in Southeastern n
"Our challenge now is to continue to run our core i
business exceptionally well. At the same time, we must aggressively grow our new businesses to meet , our target of 6 percent average annual growth in earnings over the next flve years." Anthony F. Earley, Jr. we're even more pleased Michigan set new monthly peak demand with the steady steps we've records in seven of 12 months in 1998. made in 1998 to diversify An all-time January peak was set during our energy-related 1999's sub-zero temperatures. businesses to provide Meanwhile, we're pleased that the you with sustainable, restructuring of the state's electric utility predictable industry took another step forward with earnings growth. Dec. 28 orders from the Michigan public our utility business gives Senice Commission (MpSC). The MpSC us a solid start. approved our request for accelerated
,J Financial Highligl ts 1998 1997 % Increase Operating Revenues (Millions) $ 4.221 $ 3,764 12.1 % .
Net income (Millions) $ 443 $ 417 6.2% Earnings Per Common Share $ 3.05 $ 2.88 5.9% Dividends Declared Per Share $ 2.06 $ 2.06 - Return on Common Equity 12.3 % 12.0 % 2.5% Average Common Shares Outstanding (Millions) 145 145 - Book Value Per Share $ 25.49 $ 24.51 4.0% Investments and Capital Expenditures (Millions) $ 956 $ 667 43.3 % Total Assets (Millions) $12,088 $11,223 7.7% System Sales (Millions of kWh) 49.7G6 47,095 5.5% Return on Common Equity Earnings Per Share vs. Earnings Per Share Dividends Per Share
$~ 15 l
$2.88 12.3 %
$2;80 $2 83 12 0 % ,
$2 06 $2J3 $2;06 $2;06 $2.15 89%
l
$.29
$.09 Q
l . . u . . , ($.01) . 0 - u e .- 0
'96 '97 '98 96 '97 '98 '96 * '97 * '98 *
-~s Dividends Per Share - Non-regulated summ Earnings Per Share c--- Regulated Detroit Edison Seniar Secured Debt Hatings
- Wn ngulated enenings c.ulude DuM & h ps Corp: A-
- Fitch investors Service: A-
- Moody's investors Servies: A3
- Standard & Poor's Corp A-Certain other affiliates e.e individually rated.
p g- - -
- c y -- -- ~
~
- -u , x ,
3 , Q,6&%.,*~ f
-o ;. ,
'>' 'W m >
@)3~ Nipke Ourminority -
?
bisiness initiatives h:1p
- k.
- create new jobs and retain
' -f
> ^ , ' :
DTE Energy aeyeie tem.rs.
. l .
e 4 Products Subsidianes 3 pf and Services and Affiliates Customers Main Competition; Electricity - Detroit Edison More than 1.8 million Other utilities and a Generation. residential customers and independent power Transmission and p .. 7 - ( .- Distribution 180.000 business customers producers, M. . . in Southeastern Michigan. . In addition to total system f J> . . . < - sales of ebout 47,000 million kWh.we have more than g" - - 3,!iOO million kWh in inter-connection sales to o , ,,, ,A syg; . . : wholesale customers. m Fossil Fuel Sourcing Midwest Energy ~ Great Lakes users of Non regulated utility and Transportation Resources Co. low sulfur Western coal. subsidiaries. ! D
- DTE Coal Services ladustrials and utilities in North America.
* ? Abover in im ear test of more - 1 DTE Itail Services Owners / operators of rail Rail car leasing companies :q i than 4,GN eeliseedeare carried + Reets and goet owners. and Aset owners.
some C stlIlles toes of coal. g , DTETrsneportation Services Rail shippers. 4 Energy Projects and Services 1 Cogenerstion, DTE Energy Services,Inc. Steel, auto, institutional, Utilities and independent - power generation, pulp and paper, food, utility affiliated developers, pulverized coalinjection, health-care, commercial coke oven batteries and and other energy-intensive < backup generation. industries. Steam, electricity and DTE Biomass Energy Landfill owners and utilities Other landilli gas extraction methane gas sales, and industries located companies. close to landfills. M. , # Liquid delivery systems for DTE Energy Original Equipment Energy services HVAC and refrigeration. Technologies,Inc. Manufacturers (OEMs), companies, DEMsJ ^, , Data monitoring systems. retail, commercial, data processing . 4
, institutional and industrials. companies and utilities.
, y, Energy distribution DTE Energy Solutions,Inc. Electric utilities,municipais - Utilities, construction
~ q' ' products, services and 'q and cooperatives, and maintenance firms, >$i ;e systems in the construction and maintenance, recycling DTE/Probyn Energy Solutions federal, state and local engineering services firms. 1 government agencios, and investment recovery firms.
and reclamation, commercial and industrial customer service and National Pole Recycling firms in the Midwest and engineering areas. Ontario, Canada. ,#mg W Energy Marketing and Tradmg Marketing of electricity and DTE Energy Trading,Inc. Wholesale cuetomers Power marketers, aQ
^
related fuels and provision and DTE retail natural gas marketers
' of risk management marketing affiliates.
! A6ever Jean M.RedEeld, solutions.
and utilities' J. DTE Edieen Americe" president, p introducedthe"onergyclub* Sale of electricity and DTE-CoEnergy Retail, industrial, M coneopt la Pennsylvania. Other energy merketers natural gas. q commercial and institutional , and non-regulated (p T customers in the Midwest, Mid-Atlantic states and
' utility subeediaries. -
Ontario, Canada. . 4 DTE Edison America" Residential and small Utilities aftlistes of
;n , business customers.
K . competitive energy companies and consumer r n arketing companies.
, w Fuel Cell Development Edison Development U.S.roeidential and Other fuel cell devolepurs. ~
Corporation and automotive markets. . % ,mf , , m
. Plug Power LLC. . T ,
[$:: ?' S;b $s$>G s '
% ~
~
8 ,
*
- W *, . , ,
- aj-)
I i i -.-. - - - O amortization of the Fermi 2 nuclear and transportation as weu as Imd'ect team and orgamzati onal structure on plant Ahhough the order does not development. Our region consumes pages40to43, directly impact earnings, it allows fbr about 40 percent of U.S. eteerricity so o n al o driving shareholder recovery of our stranded costs and we're fortunate to be in an area uhere Ue an sup"b cuMonc smh The opens the way to a level playing field so many potential new customers are n n f strength of all our people for future competition- located. We're targeting bigger business helps us transform and enrich the world
- a. ccounts, especially customers ulth
- The steps we're taking will help us to get ,
- a w mndal om nee who wAe sened espe-more customers as competition escalates synergy of our work force, we are culti-e a;;). neg m . the past. For example,
- in the electric utility industry. Our H a numployee environment about 80 percent of our sales solume domestic portfolio energy strategy TE Energy companies that respects in Pennsylvania comes from larger leverages Detroit Edison's energy n ua and Mr contributions.
u omers with which we have had expertise and leadership. In that ea by the progress made in Wne nious business relationship. respect, we owe a debt of gratitude to US on Detroit Edison employee issues Besides U S sa1es, uim exploring the our former chairman John E. Lobbia. and the renewed union / management Canadian municipal market as the Before retiring recently with 34 years, p n u continue our empha-l'rovince f Ontario deregulates the senice, this visionary began transibrm- sis m this vital area just as we hold eleetr'c i 'mcIustry there, ing a nearly century-old electric utility safety as the pillar on w hich all our other I headquartered in Detroit into a total DTE Energy Trading, Inc. our wholesale achievements can be built. energy company with customers business began operation early in 1998. During 1998, we successfully completed throughout North America. Before we began trading, we developed I our sixth refueling outage at Fermi 2 and corporate risk management practices. Our strategy to deliver sustainable the plant's fuel costs for the first time These policies and procedures sened growth builds on his legacy and more. dropped below $8 a megawatthour. us well during the volatile elect ricity We're growing from a solid foundation; What's more, we delivered safe, efficient market in the summer of 1998. we have provided an unbroken chain of and reliable electricity to customers in f j dividends for more than 90 years. Our The experience in competitive industries Southeastern Michigan last summer I i electric utility and the other large that we've added at DTE Energy sub- when the threat of electric interruptions energy projects in our portfolio prmide sidiaries typihes the new skills that our existed from the Midwest to the a powerful base- newer recruits bring to our existing team Eastern Seaboard. U De ant Mom than half of the I % hat's more our non-regulated energy u ompannose to ruany challenges .- top management staff of 16 has been related businesses and senices con- " #"' ""E ' u$ in m utside the industry. tributed 29 cents of DTE Energy s 1998 u a n gan nperienced four .- ur new organiz tional structure helps earnings per share, more than triple that ophic storms in 1998. We were us carry out our strategies mr growth of the previous year. Earnings growth . gratified to hear that Detroit Edison was ami dB' M*' ' ah.on in non-regulated from our non-regulated businesses will named one of the first recipients of th'- bus nesses. Our new execut.ive structure be increasingly important in the future. Edison Electric Institute EmergeneF a.;w o m. coordinat. ion of corporate As we expand our new energy-related on e a or its "well-maintained, od un ons n'hile we concentrate businesses, we're keenly focused on the rapid response the May 31' 1998 on o ng customers w.th i world class Great Lakes region. That's where our storm." During the year Detroit Edison reliability and senice. ibu'll find addi-assets are concentrated and we can best also lowered Ihe cost of restoring
. na n man.on about our leadership utilize our expertise in coal purchasing customers to service even as it improved
h the rate by which power was restored to Obviously, responding to Y2K and other sincerely, homes and businesses. technological and environmental A g, changes must be a priority for us. Similarly, employees working for Larry G. Garberding Rather than feeling threatened by DTE Energy companies took many steps Executive Vice President and change, we encourage our employees to chief Financial officer to provide higher-quality senice while look for ways to use it to give them - and
~
still lowering costs. As you'll discover , reading this report, they covered plenty DTE Energy - a competitive advantage. i t. In this report, you'll see many examples of new ground. Their increased focus Anthony F. Earley, Jr. of the proge we'w made togetha- Chairman of the Eloard, on the customer, the competition and continuous improvement are just what giving our customers new energy options President and Chief Executive g,,; c ,, such as fuel ( ells. we need to face the road ahead. Feb. 24,1999 We expect to spend about $80 million While some time remains before the to address Year 2000 (Y2K) issues.1 ike transformation to competition in the other companies, we are working hard to electric utility industry is completed,
' 4b T
" When you look at DTE Energy five years from now, we hope you will see a Company whose earnings are 30 percent to 35 percent
'.'g'
/. .
higher than today's levels. We expect you will also see a much ( more diversifled company, with more than 30 percent of earnings from non-regulated sources." 1 4 " Larry G. Garberding prevent problems that could occur if we're confident that we're prepared computers or computer chips don't for the change. We're stepping up to properly retrieve, process, calculate the challenge of competing on a fair or display dates in the new millennium. and level playing field. Stichigan in 1998, we pushed the clock ahead and Gov. John Engler is committed to conducted one of the county's first financially healthy and competitive successful tests of a digital control Stichigan-based utilities for the system for the boiler at Detroit Edison's state's new energy market. St. Clair Power Plant's l' nit 6. No matter what the final outcome of electric We plan to have all mission-critical industry restructuring, systems Y2K ready in 1999 to help better we believe DTE Energy will ensure the safe delivery of energy and best deliver sustainable growth senices. With that in mind, we are paying special attention to systems that impact safety, environmental and regulatory compliance. You'll find
- This is a har bM) Readiness [>isclwu re under additional Y2K information on page 22.* the nur smInformation and Readiness Act.
1 e
. ]9)7lVe in A 4) the 0$ lo ' TV $ is a DTE Energy is a dynarnic and progressive cornpany. We deliver coal, electricity and rnore. We provide our custorners with innovative energy solutions. We're covering new ground as we expand our energy-related subsidiaries and our horizons for the new rnillenniurn. Is change for the best? We think so -if we use our energy right.
Our strategic focus on building on our 1 r 4 existing skills and excelling in our I \ si'# ' core business bears repeating. After .i I V all, it's the key to sustainable growth. -
.y ,
~
We're headquartered in Detroit, but - our fanuly of companies treks across . North America turning energy into solu-tions for customers. Our sights are set 7 on more than geographic expansion. ps - , We're looking ahead to w here we want hf . 3 % to be in this colorful new energy era. 6d .. E -
; . N4 What's more, we're maneuvering to . Within 10 to 15 years, we project even reach our goals. Our business strategy greater long-term growth opportunities will keep us moving straight across the as we respond to the forces reshaping
.. e - terrain we'll likely encounter during the the electric utility industry -
~~
,, next five to 15 years as our society deregulation, competition, new
_cf- rethinks how we use energy. technology development and 9__ .
~}"' n
'M environmental pressures.
That's uhy we're upbeat about customer 1 choice in the electric utility industry. We Customers trust our energy expertise
'l '
know w here we want to go - and when. and leadership, ilusiness customers
,9 from our perspective, there are three value our experience in developing.
)"- strategic planning horizons. managing and operating large energy .-
projects. For example, as part of the
+ Over the next five years, we'll put the 1995 Special .\lanufacturing Contracts, greatest focus on help.ing our people .
Detroit Edison's on site Energy l achieve excellence in our core business . l Above: DTE Engineering Services provides . Partnership engineers have implemented
- our facilitles, infrastruct ure and predictive maintenance for robotics for the .
Ford and Mazda toint venture AutoAlliance operational processes that make elee-International,in Flat Rock, Mich. . vide energy savings of about $24 million tricity and deh.rer it to our customers. 1 annually to these customers. We also led I Above right: Detroit Edison.s expertise in I providing non-destructive testing of cables,
- lleyond t he year 2000, our growth the nation in installing and testing a I transformers and high-voltage equipment is increasingly will come from actions solid-state transfer switch on our distrib-part of our platform for growth.
that build on our core business and ut. ion system to improve power quality 1 take us into new businesses and markets, for an auto plant.
h' j
~^
^
- Ls
_, y ^ ?
- !:~
-- 'l, ;-;j[,
,; f._ g; I N. e
-[- ::'
\;4 ,
\-
e.:i
- y. /
- nw r,a
.~ .
U 9
'6 +
l ( wa- excellence .
-m o f o u n d atam Our core business is solid. After rising nearly elevenfold in the last half century, electricity consumption in the United States continues to grow due to energy-intensive lifestyles. American homes are larger and companies do more with electricity than ever. Our around-the-clock society runs on electric technology.
DTE Energy subsidiaries keep customers generating capacity and the use of our warmer in the winter and cooler in the power plants, we will continue to meet summer. They also power the growth the rising demand for electricity. For that helps keep our economy example, we are increasing the output of healthy and our customers, our peaking unit fleet by more than shareholders and o00 megawatts to meet seasonal demand. i employees financially Since electricity can't lie stored, it must be generated at the same time the power Our principal operat- is needed. So we're adding eight peaking ing subsidiary, units in 1999 to help keep the power Detroit Edison, coming and the economy churning on the ranks among the hottest, most humid summer days when l top-rated electric extra electricity is needed to meet our utilities in customer customers' air-conditioning demand. satisfaction. Each year, nuclear energy satisfies about A diverse mix of fuels 20 percent of U.S. electricity needs. provides a good start in Likewise, it helps provide cost-effective winning environmentally power for our customers. Our fermi 2 conscious customers. We use power plant achieved a 74.3 percent net renewable energy from the sun and capacity factor in 1998. This measure of . earth - including biomass, geothermal, the use of plant capacity was up from Above: Detroit Edison helped install a solar and hydropower -in addition to 63.6 percent in 1997. Detroit Edison's geothermal system that uses the earth's energy uranium and fossil fuels. We blend coal continuous improvement teams are to heat and cool French Associates' new office , building in Rochester. Mich. with varying sulfur content to improve driving higher plant efficiency to help air quality even as we cut costs. Use of make Fermi 2 one of the country's best Right The Fermi 2 power plant operated well during 1998. Nuclear energy helped us meet cleaner burning coal plus non-emitting operating nuclear power plants. In 1996,, customers' demand for electricity on some of fuels helps us all breathe easier, the Nuclear Regulatory Commission the summer's hottest days. perating efficiencies and costs at our Far right: Detroit Edison works jointly with the plant's Operational Excellence Plan. a neighboring gas utility to hone our bill fossil fuel plants are among the best-in-processing efficiency at the same time we the industry. We expect to save even Already a top performer in delivering more through fuel blending and manag- reliable service, Detroit Edison has spent ing fuel contracts. By increasing our more than $3 billion since 1992 on
i, ,
$h -
( . f.
; g..L_.
build our business Li . J
'~~~
- in the next cen; .
{ .,y
} g _ ' aj ~
g,
~
- d'
- s. .
gf 1)- f . .
*, g[- ' .
4 .
, .e,~
.s .g
' )sf % '_
- q
} .:
maintenance and improvements to its y '
. .. , , s,.Wr
'I ~
k U' transmission and distribution system in Southea. stern Michigan. Likewise, our ,.g. -
* [- -
employees were recognized for being .I; among the finest in the industry; a ',.'~ ., Detroit Edison team won top honors in the national lineman rodeo competition - in the senior division. Yet, we're not resting on our laurels. For instance, the expansion of our Lapeer Senice Center ' ' means our Michigan electricity customers receive faster senice as well as savings. #- DTE Energy Distribution President .
~
~
Robert J. Buckler said, "We're bettering ' ~- ' - J. - ' 4 - ourselves by improving every customer , experience. Customers telephoning s s Detroit Edison's call center at 1.800.477.4747 already benefit from our - extensive process improvements."
,.. i
'~, ;
p
,% Y# '
n, : e p .
-;y
(h Our talented team of hNhI 1 expertsforms the t Opportunity comes more often to those who earn it. We believe we'll thrive by proving that we deserve our customers' business. That's why we give them our best. We share what we've learned from nearly a century of running Detroit Edison, our principal operating subsidiary. l l Right: Detroit Edison is installing projects to DTE Energy companies are willing to go ing a igh ng s ste s a ch as the extra mile to deliver quality electric [57 l Roseville Main Post Office. The modifications service. A case in point from 1998: will provide a guaranteed annual energy cost g7g,ggg, qg p ggg savings of more than 20 percent. in Pennsylvania's newly deregulated far right: More than 3.000 retail ,
, gg g g g customers in Pennsylvania -including Mcdonald's' owner / operators - enrolled in helped the federal government begin ,
DTE Edison America's" new
- energy club."
some $9 million in capital projects to make 140 post offices in Southeastern Michigan more energy efficient. i 6 l1g j ( ! " National utility benchmarking shows Detroit Edison among the best ii performers in reliability, customer satisfaction and cost per customer." J Robert J. Iluckler, President, DTE Energy Distribution i Similarly, after we helped Mcdonald's' without taking their equipment out of j design an energy-efficient prototype senice. Moreover,in a 1998 competition restaurant in Westland, Mich., the of the world's top 10 providers of cable 1 national fast food chain chose reliability testing, we were judged to be 3 DTE-CoEnergy to serve more than the best. 400 restaurants in Pennsylvania. In addition, Mcdonald's' owner /
* " " " '"^ ""'"'" ""
" " "E""" " """"E""*"*"
operators in Pennsylvaniajoined m nagement. DeM Mson quWy DTE Edison America's= new mo e to our Mgan
" energy club." Members save on electricity and natural gas and senice area. We also sent line crews to receive a variety of other discounts.
help restore power after an ice storm hit DTE Energy affiliates and their Canada and a hurricane swept through employees bring superior skills. the Carolinas. DTE Energy Solutions has for example, we otter the automakers a joint venture with Canadian Probyn & Co. and other customers our unique to sell storm response and ability to diagnose cable defects management senices.
G N. ,, toSilS our t (O vi[] , U Our subsidiaries offer utilitiu and - municipalities a variety of energy solutions to help them control costs. f. ' ' ' We lead the wa.'. u, +e reclamation of g'? s^ surplus power generation and electrical - distribution equipment. As an example, \.< , S we expect to refurbish about 1,000 ) - 4 transformers annually and sell this reconditioned equipment. N
.f'-
DTE Energy subsidiaries also are helpmg 7-utilities protect our natural resources by recycling some 10,000 poles that other. wise would go to landfills. Late in 1998, ,
' ~
ourjoint venture with National Pole 1(ecycling began making crossarms and pallets at a recycling center. ; Detroit Edison expects to save about # 1
$1 million from pole recycling mer the .
next Ihree years. *) , 7 in addition, our telecommunications g 's experts design and install fiber optics systems and extend our customers' existing netwotks. .\lany business 'f , opportunities spring from the skills y . s our diverse and talented work force
" E offers customers. .y h all ~,&~ 'I as >\/
go .T
., .. s
.';- j 4 , e tg i A,
'i NomVETHRU !- M 1.
s.. . , , . ,
?. y4 / .[ f' ,
e our 101176SbiC , energyporu,oh.o in America's industrial heartland, thousands of companies own energy facilities such as boilers, generators and transformers. By owning an1 operating some of their facilities, DTE Energy delivers value to customers like Ford, General Motors, Cargill, Champion International and Bethlehem Steel. We empower them to focus on their businesses, making cars and other products that strengthen the economy. Right: We recently signed a 20-year contract As a well-developed company in a mature with GM to design, build, own, operate and , maintain a facility to heat and cool its new l global headquarters at the Renaissance Center Our strategy stems from a belief that the : in Detroit. domestic energy market is far broader . . Far right: DTE Energy affiliates control a fleet thanjust electricity. Opportunities for of lake freighters. We are the largest coal growth abound within our domestic shippers on the Great Lakes. . energy portfolio. Our strategy allows us . to leverage our core strengths and capi- - - talize on the business-outsourcing trend. * .
~
- DTE Energy flesources seeks growth that -}^1-
' ~ ~ '
builds on our power generation business. ._
"Our energy related businesses and senices will help us flourish as deregulation y >;
-a continues in the generation part of our core business."
a Gerard M. Anderson, President, DTE Energy Resources y/ s For example, our Midwest Energy DTE Transportation Senices in mid 1998 Itesources Company (MEllC) affiliate and expanded our business lines to moved more than 16 million tons of coal include rail fleet Imling and management. through its Superior, Wis. transshipment We also serve non-coal rail equipment facility during 1998 and its users in the chemical and paper industries. third party coal sales provided An a mp o our new busnes bawd record revenues. *
,g on coal transformation and processing is DTE Coal Senices' DTE Energy Senices' third coke battery new customers include project at liethlehem Steel Corporation's Northern Indiana Public Senice Co. Iturns liarbor Division in Indiana. We and the powerhouse at Itouge Steers project $100 million in annual revenue complex in
Dearborn,
Mich. from the sale of coke and coke-byprod-ucts and are assessing additional In 1998, we increased our railroad 14 de Mic d owma storage senice business and DTE Itail Senices expanded its capability Similarly, we are looking at a number of to senice and maintain unit coal trains coal-intensive projects with processes at Grand Island, Neb. We acquired that typically have waste energy that can
+ aw njy..e x m,
+
strategy 4 * :}Mi means IMSMBSS y be used to produce electricity. Our PCI /l h( (Puherized Coal lajection) business . j S, builds on our expertise in fueling a coal- 3 fired power plant, something we have ( done well for nearly a century. In 2000, [. N we are scheduled to complete our second h, such project to fuel the bhtst furnace at Ilethiehem Steel's Sparrows Point Division near Haltimore. Our on-site power senices business includes operating powerhouses at six industrial and institutional sites. We also have eight backup power installations and more than 2n0 contracts for high-voltage and power quality maintenance as well as construction management. Environmental stewardship helps fuel the , growth of DTE Iliomass Energy's projects that involve extracting methane from solid waste landfills to produce electricity or steam. One of our newest projects also provides boiler fuel to a manufacturer ;, j of grain-based ethanol in Wichita, Kan. g With 21 sites nationwide, we doubled our y landfill gas-to-energy operation in 1998. M Another integral part of our overall strat-egy involves our energy marketing and
., trading businesses. They link our genera-tion and fuel supply positions with the w holesale and retail electricity markets.
Our wholesale business began operation in 1998. It brokers power from Detroit edison to help us maximize the use and value of our generation assets. Such activities help support other DTE Energy businesses as they target medium and large industrial, commercial and institutionat eustomers throughout North America.
.A e
- n;enustyn 1 a SpBYL ..
Electric utilities' financial forecasts are clouded by the deregulation of the
- generation side of the business. On the bright side, we see opportunity for companies like ours that find innovative ways to respond to competition and other forces reshaping the electric utility industry. So we've adopted new technologies that add value and are mindful of our environmental responsi. ilities.
DTE Energy is not just growing for the testing both residential and automotive sake of increasing capacity. We wisely fuel cell systems. In . lune 1998, its seek and select opportunities in prototype became the world's first accordance with our fuel cell system to provide a home's growth strategy. complete electricity. The system has been operating daily since that time. investing in p; pg , g ,g . d energy-focused
'O m ol d m M M a d 9 e m s s c venture capital ;g ,g g,;;
- 3. g, ;
funds through where .ti is located near our partner, the Edicon khnid Tedel@ Ivorporated.
- j. g Development r Corp. gives The National Institute of Standards us the oppor- and Technology in 1998 awarded a tunity to scan $4.7 million grant to Plug Power and its and adopt subcontractors foi the purpose of advanc-f., , value-added ing this new technology. The National
~
' - technologies at Energy liesources organization also gave )
s low cost. Plug Power the 1998 Research and j Development Award for its development This approach enables HMmlei4 fud edl us to scan a number of * ' energy-related industries for the e M nm h dmoM m W . nd@ ndme phdon fna Above: Detroit Edison's Corporate and latest technologies and deselop products i Public Affairs' Regional Manager Jose Puente burning gasoline and other fossil fuels. , i helps deliver on our promise of planting without harm.g to " reinvent the wheel.,, 10 million trees to help preserve the Our primary area of concentration has Our renewable energy sources include environment for future generations. , , ., ,, gg ,, Right: In 1998, we received three awards from fuel cells and small turbine generators providing steam, electricity and l
' '"U"""" " that are fired b3 natural gas. biomass methane gas fuel to customers b n ss en rg oie t in 14 states. We're developing such alter-Far Hight: GE Power Systems and Plug Power in Fuel cells are small, on site power ,g, ,,,, ,, g,,, ,
g 1998 signed a memorandum of understanding to generators, % hich offer many benefits. pursue a joint venture to sell. install and service renewable energy sources to become Pivg Power designed and manufactured in addition to increased efficiency and 1 fuel cell systems.
'M b h khM' reliability, fuel cells are virtually j becomes more promising as environmental ;
pollution free. A DTE Energyjoint i d m W e attention I senture, Plug Power, is developing and nationally and internationally. I I
T m+ 8 4., p. ' . Y' r,. . W ,..
-g .n;$.
, g
- . . ., .: p . . :.
g
; .. l'T .d::: g a..
M>a ., PM y, u c :... N M~>}.(p( g g g. g
. eg,,-
tyy f p g l
' , ~ -' ..:..,,. ' ?: lk. ".w";41. wa[.G4, .- .. d s .,jf ,:, e
- l:y;:{ ,y gp: ,* s , y.>4 $$$
..e .
s - 0; y.. ' .
,z
.:,;...-+s,. U',,
. .- e e 47;- :r <
s '
,:. : q , :,, p. ,
;, ' .-' ' 'N .
s . _- ' . lr ;% . .: .._ _ ' ,f '_ f
~~
I~
' andQadegydela$d$Skf.,.es.&f s.
wY.g ;. w . ; ; g a g h g l f q : $ an e,w n w f -
$4
. ;. ;h .k ;
- %w- . .. . .
Y (,< m.
}, *4, 3.
1 .
... ,.y _ .. -
.)
. . . la . .. r. .
i ': N.
s
) , j .. ' ~. . ,
3 ,: ; ,. y ,p e , 4 4 xQ .
;, ,. .. .... > c . . .x- w. h 6:
< js;}};;.}}}[w;q.Qg,p
. m e, ,y :
..., . ; f. ,M , y@;.p.[:.
_ . ... ' ,v. . . .;. . . . y. byk >.x
.* ;- '4 .;. .
.gI*.
, ..R' ]iy , ')y, .
',.~ . . ,
' ' ' 1,.- .' - , .
y;3 . .
.. ; w: p 3 4. 1. ..
,. ?5 95 :;
g g g- ..,.- w . _.. ...E.$, ^-Y::ws)f} L J' 0 A d *'I f.N.: g 3. : ;'"
# .; . r: I '
~'
. ~
~ ." . i ....
. . s 4y ,f-<. .' ,; *; c.i .
~
. L. w_ 'Y:l *; f ~'Yz?,j f
, . "'I':( ' era,h.n .. :'
^
I.. ' . . ' ths =: - ; .
- s. w 0.h5l{.?
q
~
.~
? .
( v-
' ,' .l l ll .
i Yf Y k$ Yn n . . .
e ourCt Cle
< sus t' a na b e grem,,1 e We're excited to enter a colorful new energy era. We know long-term growth -
opportunities present themselves to energy leaders. DTE Energy has assembled a diversified and talented team to lead DTE Energy into the fast-emerging and fiercely
- l competitive energy marketplace. )
Using both fuel cells and brain cells, A new era in our union and management we're committed to increasing the partnership has begun. We'll continue value we provide to our shareholders by to benefit from the synergy that occurs better sersing customers. What's more, when everyone shares the corporate we're committed to creating a work vision and fully embraces its strategy. atmosphere that values the individuality Besides keeping the company healthy, of each employee and promotes greater working in harmony helps improve the opportunity and success. People, process economy, the quality of life and the and technology form a triangle to both health, safety and well-being of our encompass and strengthen our corporate employees and communities. growth strategy. Minority business initiatives and People programs such as diversity awareness Our Professional Opportunity Program training help the employees of all attracts top college graduates. DTE Energy companies confront stereotypes. This allows us all to work together better for the good of our communities. Strengthening our alliances with minority- and women. owned businesses also can help us retain these loyal customers, in addition, supplier i diversity helps bolster the economy and create newjobs. d
, Process
~
; We are always improving our core compe-M tencies. A strategic strength we bring is -
a commitment to being a learning organi-Above: Detroit Edison was one of the first 1o urthermore, we,ve rounded out our recipients of the Edison Electric Institute
" " ~ "" " " "
talented utility team by recruiting expe-Emergency Response Award, " " " * " " *" ' "" " ' rienced leaders from the auto companies
* "# "# "" "" #""" """"" "E **
Right: Detroit Edison's Ethnic Marketing group and other competitive industries. %e're helps address the energy and energy service " " " 8" developing training progi:.ms and offer-needs of various ethnic communities in . zation. For example, journeymen and Southeastern Michigan. ing all our employees ner/ opportunities foremen divide the,ri time among our to excel. Our human resources programs power plants to share their expertise and encourage all employees to embrace the enn au e te rmouren dudng inaind challenge and change in our industry nance outages. Likewise, employee and our company. teams are working diligently to reduce
f Q, ll l . g ROVenend,ixenss y . to excel as we energize ; ; ' the progress of society
- r
- g. f s to make 0 ,
the duration and costs of refueling outages at our Fermi 2 nuclear power s {M)I %i%g1 . j ,'~ if 3
- i< 3 plant. Their actions are expected to
'" %h' redoco operating and maintenance k- -
;~ 4 costs at Fermi 2 by 3~> percent. And F [W. -p,- 3 our et mpanywide supply chain process '
..[ -
f improv ?ments are expected to yield L , 470 million or more in annual savings
" ~
by the year 2000. Tet:linology
%1 The way we produce and deliver energy 4 f '*
is expected to change. Detroit Edison ~ k\' [ 9/^ pioneered the use of pollution control . equipment at its power plants. So it's g only natural that our Company continues - to lead the way in finding cleaner ways to S - power 21st century progress. We're also explcring better ways to make our energy 4 available to our customers. In 1998, the U.S. Department of Energy chose - Detroit Edison to pilot the world's first '
, f -
.-t' superconductor power cable that conveys 4(
three times the electricity carried by Y conventional copper cables. The Electric Power Research Institute
]'
noted that Detroit Edison's leadership I in opening the urban market in Detroit ( , g would help accelerate the acceptance , :[; - of the new technology. 'S'y 4-. ;<- ' 4 Hy delivering the energy for society to grow, we continually rise to new g 3 b. M (f f, b challenges while doing what we do best. . I ,, y ( g All the while, we have our eyes focused y 1 p ", s on our goal: to energize the progress of '0' ~' society, to make dreams real and to
, ,/i i .
i' ~ s - ensure that we are always here. . 7 (.
l i._. _ _ . - . - _ _ . . . - - DTE Energy Company Management's DiSCUSSi0n and Analysis of Financial Condition and Results of Operations This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and accompanying Consolidated Net Income Notes thereto, contained herein.
$443 The Detreit Edison Company (Detroit Edison) is the principal W ~
subsidiary of DTE Energy Company (Company) and, as such, unless otherwise identified, this discussion explains material $3p9 changes in results of operations of both the Company and Detroit Edison and identifies recent trends and events affecting both the Company and Detroit Edison. GROWTH g On January 1,1996, Detroit Edison's common stock was exchanged on a share-for-share basis for the common stock of .
.h .
the Company; and the Company became the parent holding company of Detroit Edhon. The Company has no operations of The Company is building a portfolio of growth businesses that its own, holding instead, directly or indirectly, the stock of leverage its skills and build upon key customer relationships. Detroit Edison, its principal operating subsidiary, and other subsidiaries engaged in energy related businesses. The holding These growth businesses include on-site energy projects and services, coal transportation and processing, and energy company structure was adopted to position the Company marketing and trading. During the five-year period ending for changes in the energy markets, and the electric utility 2002, these businesses could contribute up to $150 million in industry in particular, by providing financial flexibility earnings annually. and additional resources for the development of new energy-related businesses. The Company's long-term growth strategy recognizes the fact that competition, new technologies and environmental in order to sustain earnings growth, with an objective of e neerns will have a significant impact on reshaping the 6% growth annually, the Company and Detroit Edison have electric utility industry. Therefore, the Company is investing in developed a business strategy focused on core competencies, new energy-related technologies such as fuel cells, distributed consisting of expertise in developing, managing and operating generation and renewable sources of energy. energy assets, including coal sourcing, blending and transportation skills. In addition, Detroit Edison has a The Company believes that its financial and technological program for developing work force training and planning for resources, experience in the energy field and strategic growth , the future, plan position it well to compete in the changing energy markets, as competition is introduced in Michigan and across Detroit Edison is preparing for the transition to competition in the electric energy markets. Although Detroit Edison's electric the United States. While there can be no assurances that future performance will equal or exceed past performance, for power sales and system demand have grown at compounded annual rates of about 3% for the last five years, the transition 1998, the Company's common stock provided a total return of 29%, closing at $43.06 on December 31,1998. The following to competition is expected to reduce Detroit Edison's system chart shows tl.e performance of DTE Energy common stock in growth in the long-term. Detroit Edison projects that its relation to the Dow Jones Electric Utility Industry Group. electric power sales will increase at a compounded annual rate of approximately 2% over the next five years, but the impact of the transition to competition on earnings and operating conditions is uncertain.
6 D DTE Energy Performance vs. 1997 Restructuring Drders Dow Jones Electric utility Industry Group MPSC Orders issued in 1997 facilitated restructuring, but left (Indexed to DTE Energy at Jan.1,1993) severalissues unresohed. Due to the uncertainty regarding Price the future price of electricity, the MPSC indicated a true-up s50
; ; mechanism should be established to enstre that Detroit Edison
$46 ' I I I I I I { l l I
. I i
i l j I l ,I l l ,r lM DTE Ener established that during the transition period, affiliates of
$42 v' j jj l Vl/l.4 Y- up 24.4% gy out-of state utilities could not be alternative suppliers without * $38 # 4 DJEUlG mea anangenh, M unaEated maMm cod k M I J t-) ) l , up 9.2%
an alternative supplier without providing reciprocal senice in I
$34
( {j j f another senice territory. Jan. Dec. 5000 R* U"II"A OIb
= DTE Energy MPSC Orders issued in 1998 identified a phased-in approach
- Dow Jones Electric Utihty industry Group (DJEUlG) to restructuring, whereby Detroit Edison would implement direct access in 225 megawatt (MW) blocks of power through the transition period, with 1125 MW, or approximately 12.5%
ELECTRIC INDUSTRY RESTRUCTURING of totalload made available at the end of the transition period, Detroit Edison is subject to regulation by the Michigan Public with all remaining load available for direct access on Senice Commission (MPSC) and the Federal Energy January 1,2002. Detroit Edison requested approval of Regulatory Commission (FERC). In 1998, Michigan legislators accelerated amortization of the Fermi 2 nuclear plant. As and regulators focused on competition and direct access discussed in Note 2, the December 28,1998 MPSC Order, while in the Michigan electric public utility industry. Direct access granting Detroit Edison's request, imposed several conditions would give all retail customers equal opportunity to utilize the for the recovery of Fermi 2 costs. Detroit Edison has requested transmission system which results in access to competitive a clarifying Order from the MPSC, and other parties have generation resources. The MPSC is committed to opening the requested rehearing on aspects of the MPSC Order. electric generation market in Michigan to competition and as a result issued several Orders relating to restructuring and Neither the Company nor Detroit Edison is able to predict the competition in 1998. Although attempts to pass legislation in final outcome or timing of these proceedings. Michigan relating to restructuring were unsuccessful in 1998, Direct Access Experiment the MPSC Orders will enable Detroit Edison to begin Detroit Edison has been involved in legal proceedings implementation of direct access in 1999. Issues remain to contesting the statutory authority of the MPSC to order a be resolved and additional Orders are anticipated as direct access experiment. In October 1998 the Michigan Detroit Edison phases in the option for customers to choose Supreme Court granted Detroit Edison and other parties to the direct access service in 1999 and throughout the transition t
, full competition, which is scheduled in 2002. proceeding leave to appeal from a Michigan Court of Appeals finding that the MPSC did have statutory authority to authorize Michigan Public Service Commission experimental direct access. The December 1998 MPSC Order 3
Background provided that a 90 MW direct access experiment should be Details on restructuring the electric generation market began immediately commenced, and was in addition to the 1125 MW to emerge in 1996 with the issuance of a MPSC Staff Report on previ usly scheduled. Electric Industry Restructuring. MPSC Orders issued in 1997 Afarket Conditions
- and 1998 stated that Michigan utilities should recover stranded Wholesale power prices rose significantly in 1998. Dramatic costs and established December 31,2007 as the last day for recovery of such costs. price increases during the summer led to an investigation and report by the FERC Staff. The report concluded that a combination of factors caused the price increase, and although j the increase was dramatic, it was narrow and short-lived.
-O The report concluded that the particular combination of events The operation and parameters of the true-up mechanism needs that led to the magnitude of the price increases is not likely further clarification. It still is unknown how the MPSC will to recur, but indicated that wholesale power prices can be determine the actual price of power to use in truing-up expected to rise and fall as a result of the dynamics of supply Detroit Edison's stranded cost recovery. The actual and demand. methodology was deferred to future proceedings. Uncertainties t'
exist regarding the ultimate amount of stranded assets to be Detroit Edison's planning and preparation limited its recovered including potential disallowances for the recovery . exposure during the summer in wholesale power markets. f ree rded regulatory assets, recovery of costs to be incurred ; Detroit Edison made substantial use of options and to implement direct access, and other stranded costs. contracts with liquidated damages provisions, while spreading Itec verability of these costs will be evaluated annually its purchases over many buyers in different regions. through the true up mechanism. Detroit Edison also continues to recover approximately 80% of the charges for purchased power and generation through the The FERC requires functional separation between the use of the Power Supply Cost Recovery (PSCR) clause. transmission reliability / operation fuaction of the utility and the wholesale merchant function. The MPSC requires arm's-Because Detroit Edison must currently import power to meet length transactions between Detroit Edison and non-regulated peak loads m, the summer, transmission capacity is a necessary affili tes. Efforts are ongoing to ensure that proper procedures requirement to sene customers reliably during peak load are developed and adhered to. periods. As a result of certam. new transm.ission procedures, there is uncertainty surrounding the ability of As a result of the December 28,1998 MPSC Order, Detroit Edison to import power reliably into Michigan. Detroit Edison discontinued the application of Statement of To relieve this uncertainty, additional efforts to secure firm Financial Accounting Standards (SFAS) No. 71," Accounting for transmission rights will be necessary, as well as additional the Effects of Certain Types of Regulation" for its generation in state generating capability. business. See Notes 1 and 2. While Detroit Edison is reviewing appHcaW amunung guManw, unwMny ems as to Detroit Edison has acquired significant additional whet her additional changes in accounting policies will be commitments from other utilities, and modified operating required as a result of the discontinuation of SPAS No. 71 for practices to provide flexibility to respond to increasing hs gennamn Imsh uncertainties ofload and market conditions. Detroit Edison has also purchased new gas fired combustion turbine peakers, Federal Energy Regulatory Commission which are expected to generate approximately 550 MW of Detroit Edison is regulated at the federallevel by the FERC ( capacity for the summer of 1999. with respect to accounting, sales for resale in interstate muman, certain transmission senices, issuances of I Direct Access Implementation Issues securities, licensing of hydro and pumping stations and other Several technical issues remain to be resolved before direct matters. The FERC, as a policy matter, belives that access can be implemented. Detroit Edison formed a team, kansm on should be made available on a non-discriminatory which is responsible for coordinating activities surrounding direct access. Direct access will require new processes
** A ""* " I E" "N*' "" """ "*'"" " '
furtherance of this policy. and equipment. Some of these processes may be subject to modification by the MPSC during the transition period. In 199fs, the FERC issued Order 888, which requires public , Detroit Edison estimates that expenditures of up to utilities to file open access transmission tariffs for wholesale
$1f,8 million may be required through 2001. transmission senices in accordance with non-discriminatory terms and conditions, and Order 889, which requires public Detroit Edison believes that it may have an obligation to s and oks Main kansnssn inkmahn br render senice when a direct access supplier cannot. The u sale kansa ns ugh a systm on We Intunn terms and conditions surrounding standby senice, whereby in addition, Order 889 requires public utilities to separate Detroit Edison may be required to supply generation services transmission operations from wholesale marketing functions.
for direct access customers u hen their suppliers cannot supply the necessary generation, awaits further rulings by the MPSC. In July 1996, Detroit Edison filed its Pro Forma Open Access Transmission Tariff in compliance with FERC Order 888.
During 1997, Detroit Edison negotiated a partial settlement Cash Used forInvesting Activities regarding the price and terms and conditions of certain Net cash used for investing activities was higher in 1998 senices provided as part of the tariff. Severalissues were due to increased plant and equipment expenditures and litigated, and Detroit Edison awaits a decision. Hates non regulated investments in coke oven batteries. currently being utilized for transmission are consistent with Net cash used for investing activities was higher for the the settlement and are subject to refund upon the FERC's final decismn. Compan) in 1997 due to the acquisition of a coke oven battery, a non-regulated expenditure. For Detroit Edison, Detroit Edison has a power pooling agreement with Consumers net cash used for investing activities was lower in 1997 due i Energy Company (Consumers Energy). In March 1997, ajoint primarily to lower plant and equipment expenditures, transmission tariff, filed by Detroit Edison and Consumers Energy, became effective. In compliance with FERC Order 888, investments and CapitalExpenditures the tariff modified the pooling agreement to permit (Millions) third-party access to transmission facilities utilized for pooled $514 g operations under non-discriminatory terms and conditions. " 5 $439 $442 As Detroit Edison and Consumers Energy were unable to agree on other modifications to the pooling agreement, Detroit Edison has requested that the FERC approve its termination. Consumers Energy has requested that the
$228 pooling agreement be continued. The FERC has not ruled on either of these requests.
As part of a broad look into its policies on Independent System $52 Operators and other Regional Transmission Organizations (RTO's), the FERC on November 24,1998 announced plans to " - solicit the views of state commissions on the establishment of '96 '97 '98 regional electric transmission districts. At conferences to be
~ " #" 9 "'" "
held beginning in the first quarter of 1999, the FERC will hear Regulated the state commissions' views on the criteria that should be used to establish boundaries for RTO's and the role of states in the formation and governance of HTO's. Additional Cash requirements for 1998 Detroit Edison capital consultations with the states, industry representatives and expenditures were $514 million. Detroit Edison's cash others will follow to discuss specific district boundaries, requirements for capital expenditures are expected to be The FERC also plans to initiate a rulemaking or other generic approximately $2.1 billion for the period 1999 through 2003. proceeding on HTO's to solicit further comment. Cash requirements for 1998 non-regulated investments and LIQUIDITY AND CAPITAL RESOURCES ""P U""# "'" """ * "' " '"9'"*""" Cash From Operat.mg Activit.ies for non regulated investments and capital expenditures are expected to be approximately $1.4 billion for the period 1999 3 Net cash from operating activities, which is the Company's through 2003. Significant non-regulated investments are primary source of liquidity, was $868 million in 1998, expected to be externally financed.
$952 million in 1997 and $1,070 million in 1996. Net cash from operating aethities decreased in 1998 due primarily to Cash From (Used for) Financing Activities increased accounts receivable and other non-cash items. Net Net cash from Company financing aethities was higher in 1998 cash from operating aethities decreased in 1997 compared to due to increases in long- and short-term borrowings, partially 1996 due primarily to changes in inventory levels. offset by redemptions of preferred stock and long-term debt.
Cash flow from operations is expected to be sufficient to meet Net cash used for Company financing aethities decreased in cash requirements for Detroit Edison's capital expenditures as 1997 compared to 1996 due primarily to the redemption of + well as the Company's scheduled long-term debt redemption preferred stock in 1996, partially offset by higher redemptions requirements and dividends. of long-term debt.
t i t__._._ _ _ _ _ _ _ . _ YEAR 2000 Capitalization The Company and Detroit Edison have been involved in an (Millions) enterprisemide program to address Year 2000 issues. 84d97 A program office was established in mid-1997 to implement a
$3,779 '777 $3,706 $3,698
$3,588 rigorous plan to address the impact of Year 2000 on hardware .
1 and software systems, embedded systems (which include ! microprocessors used in the production and control of electric . power), and critical service providers. The emphasis has I been on mission critical systems that support core business activities or processes. Core business activities / processes include safety, emironmental and regulatory compliance, . product production and delivery, revenue collection, employee and supplier payment and financial asset management. 96 '97 '98 The plan for addressing Year 2000 is divided into several phases including raising general awareness of Year 2000 Long-Term Debt Long-Term Debt Ratio throughout the Company and Detroit Edison; maintaining an ammmme Equity '96 51 % inventory of systems and devices; performing an assessment of d ( 5 nventoried systems and devices; performing compliance testing of suspect systems and devices; remediation of non-mnpH n s ena an da s brough mplamnent, mpak, The following securities were issued and redeemed in ifG retirement, or identifying an acceptable work around; testing Securities issued (Millions) and mmediation of systems and devices in an integrated Quarterly Income Debt Securities environment and preparing business continuity plans. 1 7.5%-7.4% issued in May and November $200 l Inventory, assessment and compliance testing phases have 1 Remarketed Notes { n comp d for known systems and devices. The 6.2%-7.1% issued in June and November 400 mmediation phase is approximately 80% complete and is Non-Recourse Debt ' l 6.6% issued in July 163 expected to be fully complete by August 1999 for mission TotalIssued $763 critical assets and supporting assets. Integration planning, including the mapping of critical business processes, is near { Securities Redeemed completion for Detroit Edison. Integration testing and Mandatory Redemptions remediation is expected to be complete by October 1999. 1990 Series A, B, C Mortgage Bonds } 7.9%-8.4% redeemed in March $ 19 To support the program phases, the program office has been j Non-Recourse Debt working with nudor utility industry associations and ) 6.9%-7.8% redeemed in April, June, October organizations, customers and vendors to gather and share
- l and December 36 I Informat. ion on lear 2000 issues. The program office has i
Early Redemptions contacted vendors cr.tical i to Company operat. ions to determine j Series S Mortgage Bonds
- 6.4% redeemed in February 150 their progress on Year 20n0.
ou a n n ng potential problems, tests of 77 77 re eemed in May and December 150 Fne ng a s aw een con uded by advancing control Quarterly income Debt Securities systems dates to the Year 2000. Ilesults of these tests have 8.5% redeemed in December 50 shown that the generating facilities operated successfully in Total Redeemed $405 this induced " millennium mode." Exercises were conducted on December 31,1998 and January 1,1999 to assess the ability to The preceding totals do not include Detroit Edison's reach employees and the regional security centers of the Series 1999 A, $118.36 million,5.55% which was sold on a East Central Area lleliability Group through various forward basis in 1998 and will be issued in September 1999, communication channels. The exercised communication The proceeds will be used to refund two tax-exempt securities channels operated properly. The business continuity program of the same principal amount.
h will provide opportunities to conduct similar exercises on other During 1997 and 1998 the EPA issued ozone transport systems in advance of the Year 2000. Similar analysis has not regulations and final new air quality standards relating to been completed for other affiliates. ozone and particulate air pollution. In September 1998, the in the event that an unkn:nyn Year 2000 condition adversely
* " " " " '*E"""""" " #""' gMng affects senice to customers or an internal business process, ""**1"*"" " "*"N"'*"""*'" " "N""
contingency and business continuity plans and procedures are oxide emissions because of their contribution to ozone bem.g developed to provide rapid restoration to normal formation. The EPA draft proposal suggests most emission conditions. 'I.he Company and Detroit Edison have always reductions shouki come from utilities. If Michigan follows the EPA's recommendations, it is estimated that it will cost maintam.ed a comprehensive operational emergency response plan. The business contmmty function of the T. ear 2000 Detroit Edison more than $400 million to comply. Until the program will supplement the existing emergency plan to state issues its regulations, it is impossible to predict the full impact of the SIP call. Detroit Edison is unable to predict include i. ear 2000 specific events. A l. ear 2000 emergency response office wd. l be fully operational by November 1999 to what effect, if any, restructuring of the electric utility industry i i
. would base on recoverability of such environmental costs.
manage and coordm. ate operations, including mobilization of all employees as necessary, during the transition to the MARKET RISK new millennium. M Ehm W n mmMM M mh @09 h The Company and Detroit Edison believe that with all and $239 million in three nuclear decommissioning trust funds Year 2000 modifications, business continuity and emergency at December 31,1998 and 1997, respectively. At December 31, management plans in place, the Year 2nno will not have a 1998, these im'estments consisted of approximately 33% in material effect on their financial position, liquidity and results fixed debt instruments,63% in publicly traded equity securities of operations. Despite all efforts, t here can be no assurances and 4% in cash equivalents. At December 31,1997, these that Year 2000 issues can be totally eliminated. Results of investments consisted of approximately 40% in fixed debt modifications and testing iane during the fourth quarter of instruments and 60% in publicly traded equity securities. A l 1998 have demonstrated that Detroit Edison should be able to hypothetical 10% increase in interest rates and a 10% decrease maintain normal operating conditions into the Year 2000, in equity prices quoted by stock exchanges would result in a although there may be isolated electric senice interruptions. $9 million and $8 million reduction in the fair value of debt Detroit Edi.,on's internal business systems may be affected by a and a $20 million and $10 million reduction in the fair value of Year 2000 related failure that could temporarily interrupt the equity securities held by the trusts at December 31,1998 and ability to communicate with customers, collect revenue, or 1997, respectively. Adjustments to market value would result complete cash transactions. In addition, no assurances can be in a corresponding adjustment to other liabilities based on given that the systems of vendors, interconnected utilities and current regulatory treatment. customers will not result in Year 2000 problems. Mid M h rease in interest rates would increase The Company estimates that Year 2000 costs will approximate the fair value of long-term debt from $4.8 billion to $5.3 billion
, $80 million with $39 million expended between .lanuary 1,1998 at December 31,1998 and from $4.2 billion to $4.6 billion at and December 31,1998. Operating cash flow is expected to be December 31,1997.
sufficie"t to pay Year 2000 modification costs uith no material DTE Energy Trading, Inc. (DTE ET), an indirect wholly owned impact on operating results or cash flows. Aidian of the Company, which provides price risk m naganent senices utilizing energy commodity derivative ENVIRONMENTAL MATTERS instruments began operatiens in 1998. The Company measures Protecting the emironment from damage, as well as correcting the risk inherent in DTE ET's portfolio utilizing Value at Risk past emironmental damage, continues to be a focus of state (VaH) analysis and other methodologies, which simulate and federal regulators. Legislat. ion and/or rulemak.mg could forward price curves in electric power markets to quantify further impact the electric utility industry including numa eu m gnhu an pmbability of potential future Detroit Edison. The U.S. Emin>nmental Protection Agency (EPA) losses rel ted to open contract positions. DTE ET's var and the Michigan Department of Emironmental Quality have expresses the potential loss in fair value ofits forward contract aggressive programs regarding the clean up of contaminated property. Detroit Edison anticipates that it will be periodically "" E "E* " #"' " E"# *' E" *"'** specified likelihood of occurrence, due to an adverse market included .mthese types of environmental proceedings.
~l w --- - - - - -- - movement. The Company reports var as a percentage ofits Operating Revenues earnings, based on a 95% confidence interval, utilizing 10 day Operating revenue was $4.2 billion, up 12.1% from 1997 holding periods. At December 31,1998, DTE ETs var from its operating revenue of $3.8 billion. Operating revenues power marketing and trading activities was less than 1% of the increased (decreased) due to the following: Company's consolidated " Income Before income Taxes" for the I 1998 1997 year ending December 31,1998. The var model uses the variance-covariance statistical modeling technique, and . Detroit Edison j implied and historical volatilities and correlations over the past 20-day period. The estimated market prices used to value Rate changes 5 (8) $(62) these transactions for var purposes reflect the use of System sales volume and mix 220 27 established pricing models and various factors including Sales between utilities 51 48 quotations from exchanges and over-the-counter markets, price Fermi 2 performance disallowances (11) (3) volatility factors, the time value of money, and location (D Other - net 5 1 differentials. For further information, see Notes 1 and 10. Total Detroit Edison 245 15 RESULTS OF OPERATIONS Non-Regulated Net income for 1998 was $443 million, or $3.05 per share, up DTE Energy Services 124 89 {
$26 million over 1997 earnings. The increase in earnings was DTE Coal Services 39 14 j due to tax credits generated by non-regulated businesses. I' DTE Energy Trading 43 -
Net income for 1997 was $417 million, or $2.88 per share, up Other - net G 1
$108 million over 1996 earnings. After adjusting 1996 earnings Total Non Regulated 212 104 i for the steam heating special charges,1997 earnings reflect a 2.7% increase over the prior year.
Total S457 $119 f 1 Net income for 1996 included a $149 million ($97 million Detroit Edison kilowatthour (kWh) sales for 1998 and the after-tax), or $0.67 per share, special charge following percentage change by year were as follows: completion of Detroit Edison's review ofits steam ! 1998 l"8 1997 heating operations. (Billions of kWh) Sales l Operating Revenues Residential 13.7 66% (0.4)% (Millions)
$3,902 Commercial 18.9 50 1.6
$3j42 $3_657 Industrial 14.7 2.5 2.0 Other (primarily sales for resale) 2.4 21.1 9.7 \
Total System 49.7 5.5 1.5 , Sales between utilities 5.2 46.8 73.4
]
Total 54.9 84 4.5 , in 1998, residential sales increased due to more cooling
$319 l
$107 g demand and growth in the customer hase. Commercial sales ,
$3 0 .i 0 _ U - increased due to more cooling demand and favorable economic
'96 '97 '98 conditions. Industrial sales increased due to higher usage.
Sales between utilities increased due to greater demand for j
- Non-regulated Total Operating Revenues energy and increased availability of energy for sale.
Regulated '96 $3,645
'97 $3,764 j
'98 $4,221 1 II
I w I l In 1997, residential sales decreased due to less heating and higher Year 2000 expenses ($32.4 million), the 1997 storm cooling demand which more than offset growth in the customer expense deferral ($29.8 million),1998 emergency restoration base. Commercial and industrial sales increased for both and storm expense ($20.7 million), a 1997 insurance periods reflecting a continuation of good economic conditions. receivable recovery ($15.3 million),1997 storm amortization Sales to other customers increased in both periods due to a ($14.2 million), the Conners Creek restart ($13.3 million), greater demand for energy. Sales between utilities also partially offset by cost reductions of($22.7 million). increased in 1997 due to greater demand for energy and in 1997, Company operation and maintenance expenses increased availability of energy for sale. i M MMUshMm@Nimmdm elm Operating Expenses subsidiary (mainly EES Coke Hattery Company, Inc. and Fuciand Purchased Power PCI Enterprises Company) expenses of $95 million offset by Net system output and average fuel and purchased power lower net Detroit Edison operation and maintenance expenses. unit costs per megawatthour (MWh) for Detroit Edison were
"*I"U""* As a result of stringent cost controls, Detroit Edison operation and maintenance expenses decreased in 1997 due primarily to 1998 1997 1996 lower post-retirement benefit ($18.8 million) and fossil (Thousands of MWh) generation ($15.1 million) expenses, lower minor storm and Power plant generation trouble work ($13.6 million), the Fermi 2 outage accrual in Fossil 44.091 42,162 41,829 1996 ($13 million) and the receipt of additional insurance Nuclear 7.130 5,523 4,750 proceeds related to the 1993 Fermi 2 turbine replacement Purchased power 7.216 6,146 5,149 ($9.8 million), partially offset by higher compensation Net system output 58.437 53.831 expense related to a shareholder value improvement plan 51.728
($25.7 million). Average unit cost (S'MWh) $16.40 $14.54 $15.03 Depreciation and Amortization n 9 , ompany depreciation and amortization expense in 1998, fuel and purchased power expense increased for Detroit Edison due to higher purchased power unit costs as a increased due primarily to increases in property, plant and result of price volatility during periods of unseasonably warm "9" E*"" *"'I""#*""""* "" Y Y summer weather and an 8.6% increase in system output. These
"" """" """" * " " " " "N" " 'Y "**"*'
increases were partially offset by lower unit costs as a result Depreciation and amortization expense increased in 1997 due of increased usage of low cost nuclear fuel and higher third primarily to increases in property, plant and equipment. party revenues credited to inventory. Interest Expense and Other In 1998 non-regulated purchased power expense increased due interest Expense to the operations of DTE ET. Interest expense increased in 1998 due primarily to the in 1997, fuel expense decreased due to the termination of high issuance of debt to finance asset acquisitions of
~
cost long-term coal contracts, reduction in coal contract nonagulak subsidiaries and the issuance of debt to redeem buyout expense and a decrease m. nuclear fuel costs. Iligher Detroit Edison's preferred stock. 9 purchased power expense was due primarily to increased Interest expense increased in 1997 due primarily to the purchases of power while Fermi 2 was shut down. issuance of debt to finance asset acquisitions of non-regulated subsidiaries, partially offset by Detroit Edison's mandatory and
) Operation and Maintenance optional redemption of debt.
In 1998, Company operation and maintenance expenses increased $287 million, liigher non-regulated subsidiary expenses of $184 million were due to the increased level of 1 non-regulated operations and the addition of new businesses. liigher Detroit Edison expenses of $103 million were due to f
i __ _ _ g i Other- Net FORWARD-LOOKING STATEMENTS Other - net expense decreased for the Company in 1998 due Certain information presented herein is based on the primarily to lower net write downs of equity investments expectations of the Company and Detroit Edison, and, as such, ($3 million). Is forward-looking. The Private Securities Litigation Reform Act of 1995 encourages reporting companies to provide Other - net increased in 1997 due primarily to higher analyses and estimates of future prospects and also permits accretion expense ($9.5 million), lower accretion income
- rep rting companies to point out that actual results may differ 1
($3 million) and the write down of an equity investment fr m those anticipated. ($5 million). Actual results for the Company and Detroit Edison may differ Income Taxes from those expected due to a number of variables including, The effective income tax rate for the Company was lower in but not limited to, weather, actual sales, the effects of 1998 and 1997 due primarily to increased utilization of competition and the phased-in implementation of direct alternate fuels credits generated from non-regulated access, the implementation of utility restructuring in Michigan businesses. Alternate fuels credits phase out beginning in (which involves pending regulatory proceedings, possible 2003 through 2007. legislative activity, and the recovery of stranded costs), emir nmental (including proposed regulations to limit NEW ACCOUNTING STANDARD n gen on eminW and nudear mquimments, h In June 1998, the Financial Accounting Standards Board issued mpac p cee ngs an Ngulasns, h sucees of SFAS No.133, " Accounting for Derivative Instruments and . non-regulated lines of business and the timely completion IIedging Activities." This Statement requires companies t of Year 2000 modifications. While the Company and record derivatives on the balance sheet as assets and Detroit Edison believe that estimates given accurately liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be #* ", "E " * " ' " "" " " "
""""* " * * #8 """ " **
- accounted for depending on the use of the derivative and .
whether it qualifies for hedge accounting. The Company has I not yet determined the impact of this Statement on the consolidated financial statements. This Statement is effective for fiscal years beginning after June 15,1999, with earlier ! adoption encouraged. The Company will adopt this accounting standard as required by January 1,2000. i i l
1 (g} - . .. -- . DTE Energy Company Consolidated S:atemen:aIncome (Millions, Except per Share Amounts) Year Ended December 31 1998 1997 1996 Operating Revenues $ 4,221 $ 3,764 $ 3,645 Operating Expenses Fuel and purchased power 1,063 837 846 Operation and maintenance 1,288 1,001 934 Depreciation and amortization 661 660 625 Steam heating special charge - - 149 Taxes other than income 272 265 259 Total Operating Expenses 3.284 2,763 2,813 Operating income 937 1,001 832 Interest Expense and Other Interest expense ' 319 297 288 Preferred stock dividends of subsidiary 6 12 16 Other - net 15 18 (2) Total Interest Expense and Other 340 327 302 l Income Before income Taxes 597 674 530 l Income Taxes 154 257 221 Net income S 443 $ 417 $ 309 Average Common Shares Outstanding 145 145 145 Earnings per Common Share - Basic and Diluted S 3.05 $ 2.88 $ 2.13 l l 1 i (See Notes to Consolidated Financial Statements.)
i l_._-...,__..-..._______ 1 DTE Energy Company Consolidated Balance Saee~; (Millions, Except per Share Amounts and Shares) i December 31 1998 1997 ASSETS Current Assets Cash and cash equivalents S 130 $ 45 Restricted cash 121 54 Accounts receivable Customer (less allowance for doubtful accounts of $20 for 1998 and 1997) 316 305 Accrued unbilled revenues 153 137 Other 135 78 Inventories (at average cost) Fuel 171 130 I Materials and supplies 167 173 Other 39 13 1.232 935 Investments Nuclear decommissioning trust funds 309 239 Other 261 57 570 296 Property Property, plant and equipment 11,121 14,495 Property under capitalleases 242 256 Nuclear fuel under capitallease 659 607 Construction work in progress 156 16 12.178 15,374 Less accumulated depreciation and amortization 5,235 6,440 6.943 8,934 flegulatory Assets 3.091 856 Other Assets 252 202 j Total Assets $12.088 $11,223 (See Notes to Consolidated Financial Statements.)
i
- - . - _ . - , . - . - . - _ - . . . -_L December 31 1998 1997 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 239 $ 161 Accrued interest 57 57 Dividends payable 75 78 Accrued payroll 101 81 Short-term borrowings 231 42 Deferred income taxes 60 64 Current portion long-term debt 294 205 Current portion capitalleases 118 110 Other 217 219 l 1.392 1,017 Other Liabilities Deferred income taxes 1.888 1,983 Capitalleases 126 137 Regulatory liabilities 294 400 Other 493 203 2,801 2,723 Long-Term Debt 4,197 3,777 Shareholders' Equity Detroit Edison Cumulative Preferred Stock, $100 par value,6,747,484 shares authorized,5,207,657 issued,1,501,223 shares outstanding in 1997 -
144 I Common stock, without par value,400,000,000 shares authorized, 145,071,317 and 145,097,829 issued and outstanding, respectivel/ 1,951 1,951 Retained earnings 1,747 1,611 l 3.698 3,706 Commitments and Contingencies (Notes 1,2,3,9,10,11 and 12)
]
Total Liabilities and Shareholders' Equity $12,088 $11,223 ' (See Notes to Consolidated Financial Statements.) I
a l i 4 DTE Energy Company l Consolidated Soa ememaCas: 1 F:ows (Millions) Year Ended December 31 1998 1997 1996 Operating Activities Net income S 443 $ 417 $ 309 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 661 660 625 Steam heating special charge - - 149 Other (125) (29) (30) Changes in current assets and liabilities: Restricted cash (67) (54) - Accounts receivable (84) (36) (32) Inventories (40) (36) 42 Payables 15 16 2 Other 65 14 14 Net cash fiom operating activities 868 952 1,079 investing Activities Plant and equipment expenditures (555) (456) (531) j Investment in coke oven battery businesses (401) (211) - Nuclear decommissioning trust funds (70) (68) (52) Other (11) (6) (34) Net cash used for investing activities (1,037) (741) (617) Financing Activities issuance of long-term debt 763 250 224 Increase (Decrease)in short-term borrowings 189 32 (27) Redemption of long-term debt (255) (196) (176) Redemption of preferred stock (150) - (185) . Dividends on common stock (299) (299) (299) Other 6 (6) (11) , Net cash from (used for) financing activities 254 (219) (474) Net increase (Decrease)in Cash and Cash Equivalents 85 (8) (12) Cash and Cash Equivalents at Beginning of the Year 45 53 65 Cash and Cash Equivalents at End of the Year $ 130 $ 45 $ 53 Supplementary Cash Flow information Interest paid (excluding interest capitalized) $ 309 $ 290 $ 277 income taxes paid 100 243 207 New capitallease obligations 52 34 35 (See Notes to Consolidated Financial Statements.)
I DTE Energy Company ! Consolidated Statement of Changes in Shareholers' Equit
. (Millions, Except per Share Amounts; Shares in Thousands)
I 1998 1997 1996 Shares Amount Shares Amount Shares Amount Detroit Edison Cumulative Preferred Stock Balance at beginning of year 1,501 $ 144 1,501 $ 144 3,351 $ 327 i Redemption of Cumulative Preferred Stock (1,501) Preferred stock expense - (150) 6 (1,850) (185) ) 2 j Balance at end of year - S 1,501 $ 144 1,501 $ 144 f Common Stock Balance at beginning of year 145,098 $1,951 145,120 $1,951 145,120 $1,951 Repurchase and retirement of common stock (27) - (22) - - - Balance at end of year 145,071 $1,951 145,098 $1,951 145,120 $1,951 Retained Earnings 3 Balance at beginning of year $1,611 $1,493 $1,485 Not income 443 417 309 Dividends declared on common stock ($2.06 per share) (299) (299) (299) Preferred stock expense (6) - (2) Other (2) - - f Balance at end of year $1,747 $1,611 $1.493 Total Shareholders' Equity $ 3,698 $3,706 $3,588 (See Notes to Consolidated Financial Statements.)
i t - - _ - - -
\
DTE Energy Company Notes to Consolidated d lllallCla sayeineius
\
NOTE 1 - SIGNIFICANT ACCOUNTING POUCIES Issues Task Force (EITF) of the Financial Accounting . Corporate Structure and Principles of Consolidation Standards Board (FASB) concluded that the application of DTE Energy Company (Company), a Michigan corporation SFAS No. 71 to a separable portion of a business which is incorporated in 1995, is an exempt holding company under the subject to a deregulation plan should cease when legislation is . Public (ltility lloiding Company Act. The Company has no passed and/or a rate order is issued that contains sufficient signincant operations of its own, holding instead the stock of detail on a transition plan. Since MPSC Orders issued through The Detroit Edison Company (Detroit Edison), an electric December 31,1998 contain sufficient detail on a transition public utility regulated by the Michigan Public Service plan, effective December 31,1998 Detroit Edison's generation Commission (hlPSC) and the Federal Energy llegulatory business no longer met the criteria of SFAS No. 71. Commission (FERC), and other energy related businesses. Detroit Edison did not write off any regulatory assets as a On January 1,1996, the holders of Detroit Edison's common result of the discontinuation of SFAS No. 71 for its generation stock exchanged such stock on a share-for-share basis for the business, because EITF No. 97-4," Deregulation of the Pricing common stock of the Company; and certain Detroit Edison of Electricity-Issues llelated to the Application of FASB subsidiaries were transferred to the Company in the form Statement No. 71, Accounting for the Effects of Certain Types of a dividend. of Regulation, and No.101, Itegulated Enterprises - ; The Company and Detroit Edison consolidate all majority " mun"#" ng"h q'E" W"'mndnuaWn "" " Gppkadon MB "N" "' "U *
- owned subsidiaries. Investments in limited liabilit>- which are expected to be recovered through regulated rates.
companies, partnerships and joint ventures are accounted for A December 1998 SIPSC Onier authorized the recovery of an usmg the equity method. All significant intercompany additional regulatory asset equal to the net book value of balances and transactions have been ehmmated. Fermi 2 at December 31,1998. See the following table of Use of Estimates in the Preparation of regulatory assets and liabilities and Note 2 for further details. Financial Statements Detroit Edistm has recorded the following regulatory assets I The preparation of financial statements in conformity with and liabilities at December 31: generally accepted accounting principles requires management 1998 1997 to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent Wdlions) assets and liabilities at the date of the financial statements Assets and the reported amounts of revenues and expenses during Unamortized nuclear costs $ 2.808 $- Unamortized loss on reacquired debt 94 101 the reporting period. Actual results could differ from Recoverable income taxes 107 562 those estimates. Power supply cost recovery 49 - l Regulation and Regulatory Assets and Liabilities Fermi 2 phase in plan - 84 ! Detroit Edison's transmission and distribution business meets Fermi 2 deferred amortization - 66 1997 storm damage costs 15 30 the criteria of Statement of Financial Accounting Standards Other 18 13 (SFAS) No. 71," Accounting for the Effects of Certain 'lypes of Total Assets $ 3 091 $856 Regulation." This accounting standard recognizes the cost
- based ratemaking process which results in differences in the Liabilities ;
application of generally accepted accounting principles Unamortized deferred investment tax credits S 188 $301 between regulated and non-regulated businesses. SFAS No. 71 Fermi 2 capacity factor performance standard 86 74 , Other 20 25 . ( requires the recording of regulatory assets and liabilities for transactions that would have been treated as revenue and Total Uabilities S 294 $400 expense in non-regulated businesses. Detroit Edison's regulatory assets and liabilities are being amortized to revenue Unamortized nuc/ car costs - See Note 2. I and expense as they are included in rates. Continued Unamonizedloss on teacquired debt applicability of SFAS No. 71 requires that rates be designed t In accordance with MPSC regulations applicable to recover specific costs of providing regulated services and Detroit Edison, the discount, premium and expense related to products, and that it be reasonable to assume that rates are set debt redeemed with refunding are amortized over the life of at lesels that will recover a utility's costs and can be charged the replacement issue or if related to the generation business to and collected from customers, amortized through 2007. Discount, premium and expense on MPSC Orders issued in 1997 and 1998, have altered the future early redemptions of debt will be charged to earnings if regulatory process in Michigan and provide a plan for they relate to the generation business of Detroit Edison or the transition to competition for the generation business of non-regulated businesses of the Company. Detroit Edison. In guidance issued in 1997, the Emerging
i
! t O --- - - - -- - -
\
Recoverable income taxes Restricted Cash Recoverable income taxes, a regulatory asse t, represents future Cash maintained for debt senice requirements and other revenue recovery from customers for deferred income taxes contractual obligations is classified as restricted cash. recorded upon the adoption of SFAS No.100," Accounting for income Taxes," in 1993. At that time, an increase in accumulated deferred income tax liabilities was recorded tr t Ed son records unbilled revenues for electric and representing the tax effec t of temporary differences not steam heating senices provided after cycle billings through previously recognized and the recomputation of the tax liability m nth-end. at the current tax rate. The MPSC issued an Order prmiding Property, Retirement and Maintenance, Depreciation assurance that the effects of presiously flowed through tax and Amortization benefits will continue to be allowed rate recovery. A summary of property by chtssification at December 31 Power supply cost recovery (PSCR) I* ** I"U "* State legislation prmides Detroit Edison a mechanism, subject 1998 1997 to MPSC approval, for recovery of changes in power supply (Millions) costs for purchased power and generation based on a Transmission and Distribution reconciliation of actual costs and usage. Property $ 5,354 $5,074 Construction work in progress 3 fe U h P ednP an I Property under capitalleases 5 1 6 SFAS No. 92," Regulated Enterprises - Accounting for Phase-in Less accumulated depreciation (2.063) (1,912) Plans," permits the capitalization of costs deferred for future 3,169 3.299 recovery under a phase-in plan. Based on a MPSC authorized Generation f phase-in plan, Detroit Edison recorded a receivable totaling Property 5.256 9,130 $506.5 million from 1988 through 1992. Beginning in 1993 and Construction work in progress 115 11 j ending in 1998, these amounts were amortized to operating Property under capitalleases 237 250 I expense as they were included in rates. Amortization of these Less accumulated depreciation (2.587) (4,011) amounts totaled $84 million, $112 million and $102 million in 3.021 5,380 1 1998,1997 and 1996, respectively. { Nuclear fuel under capitallease 659 607 fermi 2 deferred amortization Less accumulated amortization (551) (508) Effective December 31,1998 deferred amounts are included in 108 99 unamortized nuclear costs. Non-utility 1997 storm damage costs fons r crion work in progress The costs of major storms m 1994, as authorized by the MPSC, Less accumulated depreciation (34) (9) I were deferred and are amortized into expense in 1998 and 1 515 286 1999 as they are recovered through rates. Total property S 6.943 $ 8.934 Unamortized deferred investment tax credits investment tax credits utilized, which relate to utility property, l'tility properties are stated at original cost less regulatory were deferred and are amortized over the estimated composite disallowances and impairment losses. In general, the cost service life of the related property. of properties retired in the normal course of business is fermi 2 capacity factor performance standard charged to accumulated depreciation. Expenditures for The MPSC has established a capacity factor performance maintenance and repairs are charged to expense, and the cost standard which provides for the disallowance of net f new pr perty installed, which replaces property retired, incremental replacement power cost if Fermi 2 does not is charged to property accounts. The annual provision for perform to certain operating criteria. A disallowance is utility property depreciation is calculated on the straight line imposed for the amount by which the Fermi 2 three-year remaining life method by applying annual rates approved rolling average capacity factor is less than the greater of either by the MPSC to the average of year-beginning and year-ending the average of the top 50% of U.S. boiling water reactors or balances of depreciable property by primary plant 50L An estimate of the incremental cost of replacement accounts. Provision for depreciation of Fermi 2, excluding power is required in computing ihe reserve for amounts due dee mmissioning expense, was 3.25% of average depreciable customers under this performance standard, property for 1998,1997 and 1996. Provision for depreciation of all other utility plant, as a percent of average depreciable Cash Equivalents property, was 3.29% for 1998,1997 and 1996. For purposes of the Consolidated Statement of Cash Flows, . ,. the Company considers investments purchased with a maturity Non-utility property is stated at origmal cost. Depreciation is of three months or less to be cash equivalents. e mputed over the estimated usefullives usmg straight-line and declining-balance methods.
DTE Energy Cornpany Notes to Consolidated Financial Statements Long-Lived Assets NOTE 2 - REGULATORY MATTERS Long-lived assets held and used by the Company are reviewed Detroit Edison is subject to the primary regulatoryjurisdiction based on market factors and operational considerations for of the MPSC, which, from time to time, issues its Oraers impairment whenever events or changes in circumstances pertaining to Detroit Edison's conditions of service, rates and - indicate that the carrying amount of an asset may not recovery of certain costs including the costs of generating be recoverable, facilities. MPSC Orders issued December 1988, January 1994, j November 1997 and December 1998 are currently in effect with - Software Costs respect to Detroit Edison,s rates and certam otber revenue, The Company capitalizes the cost of software developed for
, accounting and operating-related matters. ,
internal use. These costs are amortized on a straight-line basis I over a five-year period beginning with the project's completion. Electric Industry Restructuring j are ngoing pr ceedings for the restructuring of the Capitalization - Discount and Cost l
# *" E" " I*"U The discount and cost related to the issuance of long term debt tion of a direct access program. an In 199,."" Ed*T 1998, the MI SLlll are amortized over the life of each issue.
ssued several Orders relating to direct access and competition. I Fermi 2 Refueling Outages
. In hly 1998, Detroit Edison filed an application with Detroit Edison recognizes the cost of Fermt 2 refueling outages the MPSC, indicating that accelerated amortization of over periods in which related revenues are recognized. Under Detroit Edison's Fermi 2 assets was necessary to provide a l this procedure, a provision is recorded for incremental costs '
reasonable opportunity for Detroit Edison to recover its anticipated to be incurred during the next scheduled Fermi 2 nvestment in those assets. In a December 28,1998 Order, s refueling outage. the MPSC authorized the accelerated amortization of the ! Stock-Based Compensation remaining net book balances (as of December 31,1998) of The Company accounts for stock based compensation using the Fermi 2 and its associated regulatory assets in a manner that intrinsic value method. Compensation expense is not recorded will provide an opportunity for full recovery under current for stock options granted with an exercise price equal to the base rates, taking into account the related tax consequences, fair market value at the date of grant. For grants of restricted of those assets by December 31,2007, stock, compensation equal to the market value of the shares at The December 28,1998 Order imposed six conditions for the the date of grant is deferred and amortized to expense over the recovery by Detroit Edison of accelerated amortization of vesting period. Fermi 2 and required a signed acceptance, in a January 15, Accounting for Risk Management Activities 1999 response, Detroit Edison requested a clarifying Order Trading activities of DTE Energy Trading, Inc. (DTE ET), an from the MPSC. Subject to receipt of the requested clarifying indirect wholly owned subsidiary of the Company, are Order, Detroit Edison has; accounted for using the mark to-market method of accounting. . reduced its rates by application of a credit equal to Under such method, DTE ET's energy trading contracts, 2.787% ($93.8 million annually) of base rates, effective including both transactions for physical delivery and financial Januaq 1,1999; instruments, are recorded at market value. The resulting
- indicated it will reduce its jurisdictional retail rates by unrealized gams and losses from changes m market value of removing the Fermi 2 regulatory asset, referred to in Note 1 open positions are recorded as assets or liabilities on the as unamortized nuclear costs, from rate base on a pro rata Consolidated Balance Sheet. Current period changes m the M sdictional rate basis when such asset reaches zero, which -
assets or liabilities are recognized as net gains or losses in is currently anticipated to occur January 1,2008; Operating Revenues on the Consolidated Statement of Income. Realized gains and losses are also recognized in
- indicated that while it has no plans to sell Fermi 2, should .i
" Operating Revenues." The market prices used to value these such a sale occur,it will return to customers the difference - transactions reflect management's best estimate considering between Fermi 2's net book value at the time of sale and the ' various factors, including closing exchange and over the. actual sale price; and the MPSC will be advised of a purchase counter quotations, time value and volatility factors underlying of Detroit Edison during the accelerated amortization period the commitments. so that the MPSC may determine whether the proposed l transaction is in the public interest and properly balances l Detroit Edison continues to account for its forward purchase the interests of Investors and customers; l and sale commitments and over the-counter options on a
- agreed that should Detroit Edison seek to abandon Fermi 2 settlement basis, which Detroit Edison has no plans to do) during the Reclassifications accelerated amortization period, and only if electric Certain prior year balances have been reclassified to conform generation has not been deregulated by either Michigan to the 1998 presentation. state or federal action, Detroit Edison will initiate a contested case proceeding before the MPSC seeking approval of the abandonment;
O e agreed to fully abide by the direct access program (and A summary of the regulatory asset established at December 31, schedule) established by the MPSC in presious restructuring 1998 is shown in the following table: orders; and (Mi!Iions) sindicated that if its earned rate of return exceeds its Net book value of Fermi 2 before write down $2,508 authorized rate of return during the period of time that Fermi 2 future income tax regulatory asset 331 amortization of Fermi 2 is being accelerated, it will apply 50% Fermi 2 deferred amortization 66 of the excess earnings to reduce its stranded investment. Deferred investment tax credit (97) Petitions for rehearing on the December 28,1998 MPSC Order Unamortized nuclear costs $2.808 have been filed by several parties. 88 Sdement Agreement Accounting implications The December 1988 MPSC Order established for the period, Detroit Edison accounts for its transmission and distribution January 1989 through December 2003: 1) a cap on Fermi 2 business in accordance with SFAS No. 71 which requires e pital additions of $20 million per year, in 1988 dollars recognition of the t ffects of rate regulation in the financial adjusted by the Consumers Price Index (CPI), cumulative, statements. Continued application of SFAS No. 71 by
) a eap n nu n n-fuel peration and maintenance Detroit Edison requires: 1) third party regulation of rates expenses adjusted by the CPI and 3) a capacity factor
- 2) cost based rates and 3) a reasonable assumption that all perf rmance standard based on a three-year rolling average costs will be recoverable from customers through rates.
commencing in 1991. For a capital mvestment of $200 million in 1997, the FASB issued EITF No. 97-4. The EITF indicated or more (in 1988 dollars adjusted by the CPI), Detroit Edison that: 1) an entity should cease to apply SFAS No. 71 no later must obtain prior MPSC approval to include the investment than the date the specific deregulation plan is ordered by in rate base. Under the cap on Ferm12 capital expenditures, legislation or by a regulatory authority and the details of the the cumulative amount available totals $72 million (in 1998 plan are known, and 2) both stranded costs and regulated dollars) at December 31,1998. Under the cap on Fermi 2 assets and liabilities should con'inue to be recognized to the non-fuel operation and maintenance expenses, the cumulative extent that the transition plan rovides for their recoven amount available totals $105 million (in 1998 dollars) at through a separate regulated bu iness. December 31,1998. Detroit Edison believes that the restructuring orders provide Under the December 1988 0rder, if nuclear operations at rufficient details regarding the transition to competition for its Fermi 2 permanently cease, amortization in rates of a electric generation business and therefore SFAS No. 71 should $513 million investment in Fermi 2 would continue and the no longer be applied to that business. Accordingly, effective remaining net rate base investment amount would be removed December 31,1998, Detroit Edison adopted the provisions of from rate base and amortized in rates, without return, over SFAS No.101, " Regulated Enterprises - Accounting for the 10 years with such amortization not to exceed $290 million Discontinuation of Application of FASB Statement No. 71," per year. The December 1988 and January 1994 Orders do not for its electric generation business. SFAS No.101 requires an address the costs of decommissioning if the operations at evaluation to be performed to determine whether or not Fermi 2 prematurely cease. Indications of impairment exist for plant assets ungler SFAS in accordance with a November 1997 MPSC Order, No.121, Accounting for the impairment of Long Lived Assets Detroit Edison reduced revenues by $53 million to reflect the and for i ong Lived Assets to Be Disposed Of, and the f scheduled reduction in the revenue requirement for Fermi 2' ehmmation of certam effects of rate regulation that have been n accordance with the 1988 settlement agreement. The recognized as assets or liabilities pursuant to SFAS No. 71.
$53 million decrease is included in the $93.8 million decrease At December 31,1998 Detroit Edison performed an effective January 1,1999, in addition, the November 1997 {
impairment test of its Fermi 2 nuclear generation plant and MPSC Order authorized the deferral of $30 million of 1997 ] related regulatory assets pursuant to SFAS No.121. The storm damage costs and amortization and recovery of the costs ' impairment test for Fermi 2 indicated that it was fully over a 24 month period commencing January 1998. In impaired. Therefore, the Fermi 2 plant asset and its related December 1997, the Association of Businesses Advocating regulatory assets were written off. At December 31,1998, Tariff Equity in Michigan and the Residential Ratepayer the accumulation of future regulatory recovery for Ferm12 Consortium filed a lawsuit in Ingham County Circuit Court assets from bundled customers and transition surcharges contending that Detroit Edison and the MPSC breached the from unbundled customers was calculated. Since the December 1988 MPSC Order by offsetting the stipulated December 28,1998 MPSC Order prmides for full recovery of revenue reduction with the amortization of the storm costs. Fermi 2, a regulaton asset was established which will be The Michigan Attorney General has filed an appeal of the amortized through December 31,2007. There was no impact November 1997 Order in the Michigan Court of Appeals. on income from the write off of the Fermi 2 plant assets and subsequent recording of the regulatory asset for unamortized nuclear costs.
I l, o DTE Energy Company { Notes to Consolidated Financial Statements l l NOTE 3 - FERMI 2 Decommission:ng General The NItC hasjurisdiction over the decommissioning of nuclear fermi 2, a nuclear generating unit, began commercial power plants and requires decommissioning funding based operation in January 1988. The Nuclear Itegulatory upon a formula. The MPSC and FERC regulate the recovery - Commission (NitC) maintainsjurisdiction over the licensing of costs of decommissioning nuclear power plants and both ! and operation of Fermi 2. Fermi 2 has a design electrical require the use of external trust funds to finance the j rating (net) of 1,150 megawatts (MW). This unit represents decommissioning of Fermi 2.13ase rates approved by the - j approximately 12% of total operation and maintenance MPSC provide for the decommissioning costs of Fermi 2. i expenses and 11% of summer net rated capability. The net Detroit Edison is continuing to fund FEltCjurisdictional l book balance of the Fermi 2 plant was written off at December amounts for decommissioning even though explicit provisions j 31,1998 and an equivalent regulatory asset was established. are not included in FEllC rates. Detroit Edison believes that l
. the 51PSC and FEltC collections will be adequate to fund the l Ownersh.ip of an operating nuclear generating unit subjects estimated cost of decommissioning using the NItC formula.
Detroit Edison to significant additional risks. Fermi 2 is regulated by a number of different governmental agencies Detroit Edison has established external trust funds to hold concerned with public health, safety and environmental decommissioning and low level radioactive waste disposal protection. Consequently, Fermi 2 is subjected to greater funds collected from customers. During 1998,1997 and 1996 scrutiny than a comentional fossil-fueled plant. See Note 2. Detroit Edison collected $36.2 million, $35.5 million and
$37.7 million, respectively, from customers for Insurance decommissioning and low level radioactive waste disposal.
Detroit Edison insures Fermi 2 with property damage Such amounts were recorded as components of depreciation insurance provided by Nuclear Electric Insurance Limited and amortization expense in the Consolidated Statement of (NEIL). The NEIL insurance policies provide $500 milhon of income and in other liabilities in the Consolidated Balance composite primary coverage (with a $1 milhon deductible) and Sheet at December 31,1998 and in accumulated depreciation
$2.25 bilhon of excess coverage, respectively, for stabilization,
, and amortization at December 31,1997. Net unrealized decontammation and debris removal costs, repair and/or gains of $36.8 million and $31.5 million in 1998 and 1997, replacement of property and decommissiomng. Accordingly, respectively, were recorded as increases to the nuclear the combmed limits provide total property damage insurance decommissioning trust funds and other liabilities in the of $2.,o billion.
Consolidated Balance Sheet at December 31,1998 and Detroit Edison maintains insurance policies with NEIL in accumulated depreciation and amortization at providing for extra expenses, including certain replacement December 31,1997. power costs necessitated by Ferm12's unavailability due to an At December 31,1998, Detroit Edison had a reserve of insured event. These poh,cies have a 17 week waiting period and provide for three years of coverage.
$265.6 million for the future decommissioning of Fermi 2 l and $11.1 million for low level radioactive waste disposal l Under the NEIL policies, Detroit Edison could be liable for costs. These reserves are included in other liabilities in maximum retrospective assessments of up to approximately the Consolidated llalance Sheet at December 31,1998
$20 million per loss if any one loss should exceed the and in accumulated depreciation and amortization at accumulated funds available to NEIL. December 31,1997, with a like amount deposited in external trust funds. It is estimated that the cost of decommissioning As required by federal law, Detroit Edison maintains Fermi 2 when its license expires in the year 2025 will be .
$200 million of public liability insurance for a nuclear incident. $649 million in 1998 dollars and $3 billion in 2025 dollars using Further, under the Price-Anderson Amendments Act of 1988, a 6% inflation rate.
- deferred premium charges of $83.9 million could be levied against each licensed nuclear facility, but not more than Detroit Edison also had a reserve of $32.1 m41 ion at
$10 million per year per facility. On December 31,1998, there December 31,1998 for the future decommissiomng of Fermi 1, were 109 licensed nuclear facilities in the United States. an experimental nuclear unit on the Fermi 2 site that has been Thus, deferred premium charges in the aggregate amount of shut down since 1972. This reserve is included in other approximately $9.1 billion could be levied against all owners of liabilities in the Consolidated Balance Sheet with a like licensed nuclear facilities in the event of a nuclear incident at amount deposited in an external trust fund. Detroit Edison any of these facilities. estimates that the cost of decommissioning Fermi 1 in the year 2025 is between $29 million and $32 million in 1998 dollars and between $146 million and $161 million in 2025 dollars using a 6% inflation rate.
The FASH is reviewing the accounting for obligations associated with the retirement oflong lived assets, including decommissioning of nuclear power plants.
i l
-.-.-- -._ A Capacity Factor Performance Standard NOTE 5-INCOME TAXES The capacity factor disallowance for 1997 has not yet been Total income tax expense as a percent of income before tax determined by the MPSC. At December 31,1998 and 1997, varied from the statutory federal income tax rate for the Detroit Edison had accruals of $85.6 million and $74 million, following reasons:
respectively, for the Fermi 2 capacity factor performance 1998 1997 1996 standard disallowances that are expected to be imposed by the Mi SC durmg the period 1997 2003. Statutory income tax rate 35.0 % 35.0 % 35.0 % Deferred Fermi 2 depreciation and return 3.9 4.6 5.3 Nuclear Fuel Disposal Costs investment tax credit (2.5) (2.1) (2.8) In accordance with the Federal Nuclear Waste Policy Act of Depreciation 5.1 4.6 6.0 1982, Detroit Edison has a contract with the United States Removal costs D.9) (1.5) (2.2) . Department of Energy (DOE) for the future storage and Alternate fuels credit D3.1) (3.5) (0.4) Other-net (1.0) 0.4 (0.4) disposal of spent nuclear fuel from Fermi 2. Detreit Edison is obligated to pay DOE a fee of one mill per net kilowatthour of Effective income tax rate 25 5 % 37.5 % 40.5 % Ferm12 electricity generated and sold. The fee is a component of nuclear fuel expense. Delays have occurred in the DOE's Components of income tax expense were as follows: program for the acceptance and disposal of spent nuclear fuel 1998 1997 1996 at a permanent repository. Until the DOE is able to fulfillits (Millions) obligation under the contract, Detroit Edison is responsible for the spent nuclear fuel storage and estimates that existing Current federalincome tax expense $143 $267 $219 Deferred federal income tax expense - net 26 5 17 storage capacity will be sufficient until the year 2001, or until Investment tax credit DS) DS) DS) 2015 with expansion of such storage capacity. Total $154 $257 $221 NOTE 4 - JOINTLY-0WNED UTILITY PLANT Detroit Edison's portion ofjointly-owned utility plant is Internal itevenue Code Section 20 provides a tax credit as follows: (alternate fuels credit) for qualified fuels produced and sold by a taxpayer to an unrelated person during the taxable year. Ludington The alternate fuels credit reduced current federal income tax Belle River Pumped Storage expense $70 million, $24.2 million and $1.9 million for 1998, in-service date 1984 1985 1973 1997 and 1996 respectively. Ownership interest 49 % Investment (Millions) $1,031 $192 Deferred income tax assets (liabilities) were comprised of the Accumulated depreciation (Millions) $ 393 $ 88 following at December 31:
- Detroit Edison's ownership interest is 62.78% in Unit No.1,81.39% 1998 1997 1 of the portion of the facilities applicable to Belle River used (Millions) jointly by the Belle River and St. Clair Power Plants, 49.59% in certain transmission lines and, at December 31,1998, 75% in P'* P Y ' 'I III'I3 I facilities used in common with Unit No. 2. Unamortized nuclear costs I U'983)
( - Property taxes (66) (62) BeHe River investment tax credit 154 162 The Michigan Public Power Agency (MPPA) has an ownership ntrfb t onn aid f construction interest in Helle Itiver Unit No I and certain other related Other 55 66 facilities. MPPA is entitled to 18.61% of the capacity and s(1.948) $(2.047) energy of the entire plant and is responsible for the same percentage of the plant's operation and maintenance expenses Deferred income tax liabilities $(2,447) $(2,572) and capitalimprovements. Deferred income tax assets 499 525
$ (1.948) $(2.047)
Ludington Pumped Storage Operation, maintenance and other expenses of the Ludington The federalincome tax returns of the Company are settled Pumped Storage Plant are shared by Detroit Edison and
, through the year 1991. The Company believes that adequate Consumers Energy in proportion to their respective ownership provisions for federal income taxes have been made through interests in the plant. December 31,1998.
l
--O I DTE Energy Company ,
I Notes to Consolidated Financial Statements NOTE 6 - SHAREHOLDERS' EQlJITY Apart from MPSC or FERC approval and the requirement that At December 31,1998, the Company had Cumulative Preferred common, preferred and preference stock be sold for at least Stock, without rar value,5 million shares authorized with no par value, there are no legal restrictions on the issuance of shares issued. At December 31,1998,1.5 million shares of additional authorized shares of stock by Detroit Edison. - preferred stock are reserved for issuance in accordance with There are no legal restrictions on the issuance of additional the Shareholders Rights Agreement. authorized shares of the Company's common and At December 31,1998, Detroit Edison had Cumulative preferred stock. Preference Stock of $1 par value,30 million shares authorized with no shares issued. NOTE 7 - LONG-TERM DEBT Detroit Edison's 1924 Mortgage and Deed of Trust (Mortgage), Detroit Edison's 7.75% Series of Cumulative Preferred Stock the lien of which covers substantially all of Detroit Edison's was redeemed in May 1998, while its 7.74% Series was properties, provides for the issuance of additional General redeemed in December 1998. There was no Cumulative and Refunding Mortgage Bonds (Mortgage Bonds). At Preferred Stock outstanding at December 31,1998. December ;31,1998, approximately $3.8 billion principal Detroit Edison had the following Cumulative Preferred Stock amount of Mortgage Bonds could have been issued on the - outstanding at December 31,1997: basis of property additions, combined with an earnings test Shares Outstanding Amount provision, assuming an interest rate of 6.25% on any such additional Mortgage Bonds. An additional $1.6 billion (Thousands) (Millions) ] principal amount of Mortgage Bonds could have been issued i 7.75% Series 1,001 $100 on the basis of bond retirements. l 7.74% Senes 500 50 Preferred stock expense - (6) Unless an event of default has occurred, and is continuing, l 1.501 $144 each series of Quarterly income Debt Securities (QUIDS) i provides that interest will be paid quarterly. However, in September 1997, the Board of Directors of the Company Detroit Edison also has the right to extend the interest i declared a dividend distribution of one right (Right) for each payment period on the QUIDS for up to 20 consecutive interest payment periods. Interest would continue to accrue during the f share of Company common stock outstanding. Under certain 3 circumstances, each Right entitles the shareholder to purchase deferral period. If this right is exercised, Detroit Edison may l one one-hundredth of a share of Company Series A Junior not declare or pay dividends on, or redeem, purchase or Participating Preferred Stock at a price of $90. The Right is acquire, any of its capital stock during the deferral period. transferable apart from the Company common stock until Detroit Edison may redeem any series of capital stock pursuant 10 days following a public announcement that a person or to the terms of any sinking fund provisions during the deferral l group has acquired beneficial ownership of 10% or more of period. Additionally, during any deferral period, Detroit Edison outstanding Company common shares, or the commencement may not enter into any inter-company transactions with or announcement of a reclassification, merger or consolidation any affiliate of Detroit Edison, including the Company, to which would result in a 10% plus shareholder increasing its enable the payment of dividends on any equity securities of ownership of the Company more than 1%. If the acquiring the Company. person or group acquires 10% or more of the Company At December 31,1998, $113 million of tax exempt revenue common stock, and the Company sunives, each Right (other bonds were subject to periodic remarketings within one year. than those held by the acquirer) will entitle its holder to buy Remarketing agents remarket the bonds at the lowest interest
- Company common stock having a value of $180 for $90. rate necessary to produce a par bid. In the event that a tax 4 If the acquiring person or group acquires 10% or more of the exempt revenue bond remarketing fails, Standby Note .I Company common stock, and the Company does not sunive, Purchase Agreements and/or Letters of Credit provide that -
each Right (other than those held by the surviving or acquiring banks will purchase the bonds and, after the conclusion of all company) will entitle its holder to buy shares of common stock necessary proceedings, remarket the bonds. In the event the of the surviving or acqu! ring company having a value of banks' obligations under the Standby Note Purchase j
$180 for $90. The Rights will expire on October 6,2007 unless Agreements and/or Letters of Credit are not honored, then, j redeemed by the Company at $0.01 per Hight at any time prior Detroit Edison would be required to purchase any bonds to an event which would permit the Rights to be exercised. subject to a failed remarketing.
The Company may amend the Rights agreement without the approval of the holders of the Rights Certificates, except that the redemption price may not be less than $0.01 per Right. l l l
._._j The Company's long-term debt outstanding at December 31 Detroit Edison had a $200 million short term financing was: agreement secured by its customer accounts receivable and
#8 # unbilled revenues portfolio. Horrowings are at prevailing money market rates. At December 31,1998 and December 31, (Milhons) 1997 there were no amounts outstanding.
Mortgage Bonds 6 5% to 8.4% due 1999 to 2023 $ 1.742 $ 1,911 At December 31,1998, DTE Capital Corporation (DTE Capital), flemarketed Notes a Company subsidiary, had short term credit arrangements of
" 5.4% to 6.4% due 2028 to 2034 h) 410 410 $400 million backed by a Support Agreement from the 6.2% and 7.1% due 2038 400 -
Company. The credit agreement provides support for Tax bempt Revenue Bonds DTE Capital's commercial paper. At December 31,1998 there Secured by Mortgage Bonds was no commercial paper outstanding. At December 31,1997 Installment Sales Contracts DTE Capital had short-term credit arrangements of 7.1% due 2004 to 2024 (b) 282 282 $200 million, backed by a Support Agreement from the Loan Agreements Company under which $42 million was outstanding. Also in 6.7% due 2008 to 2025 (b) 607 607
.lanuary 1998, the Company entered into a $60 million Support unsecured Agreement with DTE Capital for the purpose of DTE Capital's Installment Sales Contracts credit enhancing activities on behalf of DTE Energy affiliates.
7.5% due 2004 to 2019 (b) 142 142 Loan Agreements NOTE 9 - LEASES 3.2% due 2024 to 2030 (a) 113 113 Future minimum lease payments under long-term Outos non cancelable leases, consisting of nuclear fuel ($120 million 7.4% to 7.6% due 2026 to 2028 385 235 computed on a projected units of production basis), lake Non-Recourse Debt vessels ($25 million), locomotives and coal cars ($172 million), 7.3% due 1999 to 2009 (b) 410 282 less amount due within one year (294) office space ($12 million), and computers, vehicles and other (205) equipment ($1 million) at December 31,1998 are as follows: Total Long Teno Debt $ 4197 $3.777 (a) Variable rate at December 31,1998. * *"#I Remaining (b) Weighted average interest rate at December 31,1998. 3999 2999 2993 3993 3993 y,,7g zog,; in the years 1999-20n3, the Company's long-term debt $69 $52 $44 $35 $20 $110 $330 maturities are $294, $270. $19L $275 and $238 million, respectively. Rental expenses for both capital and operating leases were
$90 million (including $49 million for nuclear fuel), $72 million NOTE 8 - SHORT-TERM CREDIT ARRANGEMENTS (including $42 million for nuclear fuel) and $78 million AND BORROWINGS (including $53 million for nuclear fuel) for 1998,1997 and At December 31,1998, Detroit Edison had total short term 1996, respectively. ;
credit arrangements of approximately $685 million, under which $231 million was outstanding. At December 31,1997 Detroit Edison has a heat purchase contract with Renaissance there were no amounts outstanding. The weighted average w hich provides for the purchase by Renaissance for interest rates for short term borrmvings during 1998,1997 and Detroit Edison < D p 'o $400 million of nuclear fuel, subject to 1996 were 5.7%,5.7% and 5.6%, respectively. the continued anhoJity of funds to Renaissance to purchase such fuel. Title to the nuclear fuel is held by Renaissance. Detroit Edison had bank lines of credit of $201 million, all of Detroit Edison makes quarterly payments under the heat which had commitment fees in lieu of compensating balances. purchase contract based on the consumption of nuclear fuel Detroit Edison uses bank lines of credit and other credit for the generation of electricity. facilities to support the issuance of commercial paper and . ) bank loans. Detroit Edison had $231 million of commercial l'nder SFAS No. 71, amortization of Detroit Edison's leased e paper outstanding at December 31,1998. Detroit Edison had assets is modified so that the total of interst on the obligation
. no commercial paper outstanding at December 31,1997. and amortization of the leased asset is - , to the rental expense allowed for ratemaking purpt , For ratemaking Detroit Edison had a nuclear fuel financing arrangement purp ses, the MpSC has treated all leases as operating leases.
(heat purchase contract) with Renaissance Energy Company Net icome was not affected by capitalization ofleases. Due to (Renaissance), an unaffiliated company. Henaissance may the fiscontinuation of the application of SFAS No. 71 for the issue commercial paper or borrow from participating g, r eration business efTertive December 31,1998, prospectively, banks on the basis of promissory notes. To the extent the e costs of these assets will be amortized based on their maximum amount of funds available to llenaissance (currently conomic usefullives.
$400 million) is not needed by Renaissance to purchase nuclear fuel, such funds may be loaned to + roit Edison for general corporate purposes pursuant to a separate Loan Agreement. At December 31,1998, approximately $284 million was available to Detroit Edison under such Loan Agreement.
See Note 9 for a discussion of Detroit Edison's heat purchase contract with Renaissance.
I i i l l DTE Energy Company Notes to Consolidated Financial Statements NOTE 10 - FINANCIAL INSTRUMENTS The intent of the swap is to shift floating rate exposure from Trading Activities taxable to tax-exempt markets. In 1998 and 1997 the average DTE ET markets and trades electricity and natural gas physical rate received was 5.68% and 5.7% and the average rate paid products and financial instruments, and provides risk was 5.02% and 5.36%, respectively. The net of interest received . management services utilizing energy commodity derivative and interest paid on the swap is accrued as a component of instruments which include futures, exchange traded and interest expense in the current period. The swap is subject to over-the-counter options, and forward purchase and sale market risk of changes in both interest rates and tax rates. . I commitments. The notional amounts and terms of DTE ET's PCI Enterprises Company (PCI), a coal pulverizing subsidiary' outstanding energy trading financial instruments and the fair entered into a seven-year interest rate swap agreement values of DTE ET s energy commodity derivative mstruments beginning June 30,1997, with the intent of reducing the were not material at December 31,1998. impact of changes in interest rates on its variable rate non-Markef Risk recourse debt. The initial notional amount was $30 million DTE ET manages, on a portfolio basis, the market risks which was based on 60% of its term loan of $50 million. The inherent in its activities subject to parameters established by notional amount outstandiag at December 31,1998 and 1997 the Company's Risk Management Committee (RMC), which was $27 million and $29.2 million, respectively and will decline l 1s authorized by its Board of Directors. Market risks are throughout the term of the loan based on amortization of monitored by the RMC to ensure compliance with the principal amounts. PCI pays a fixed interest rate of 6.96% on Company's stated risk management policies. DTE ET marks the notional amount and receives a variable interest rate based its portfolio to market and measures its risk on a daily basis on LlHOR. In 1998 and 1997 the average rate received was in accordance with Value at Risk (var) and other risk 5.65% and 5.69%, respectively. The net ofinterest received and methodologies. The quantification of market risk using var interest paid on the swap is accrued as a component of interest provides a consistent measure of risk across diverse energy expense in the current period. The swap is subject to market markets and products. risk of changes in interest rates. Credit Risk Fair Value of FinancialInstruments DTE ET is exposed to credit risk in the event of The fair value of financial instruments is determined by nonperformance by customers or counterparties of its reference to various market data and other valuation contractual obligations. The concentration of customers techniques as appropriate. The carrying amount of financial and/or counterparties may impact overall exposure to credit instruments, except for long term debt, approximates fair risk, either positively or negatively, in that the counterparties value. The estimated fair value of total long-term debt at . may be similarly affected by changes in economic, regulatory December 31,1998 and 1997 was $4.8 billion and $4.2 billion, ( or other conditions. However, DTE ET maintabs uedit respectively, compared to the carrying amount of $43 billion I policies with regard to its customers and counterparties that and $4 billion, respectively. Investments hi debt and equity l management believes significantly minimize overall credit risk, securities are classified as "available for sale." l These policies include an evaluation of potential customers' - and counterparties' financial condition and credit rating, NOTE 11-COMMITMENTS AND CONTINGENCIES l Comm,itments collateral requirements or other credit enhancements such as letters of credit or guarantees, and the use of standardized Detroit Edison has entered into purchase commitments of agreements which allow for the netting or offsetting of positive approximately $1.1 billion at December 31,1998, which and negative exposures associated with a single counterparty. Includes, among other things, line construction and clearance , Based on these policies, the Company does not anticipate a costs and other equipment purchases. The Company and , materially adverse effect on financial position or results of Detroit Edison have also entered into leng-term fuel supply [ operations as a result of customer or counterparty commitments of approximately $1.1 billion. , nonperformance. Those futures and option contracts which Detroit Edison has an Energy Purchase Agreement are traded on the New York Mercantile Exchange are (Agreement) for the purchase of steam and electricity from the l financially guaranteed by the Exchange and have nominal Detroit Resource Recovery facility. Under the Agreement, credit risk. Detroit Edison will purchase steam through the year 2008 and Non-Tradir.g Activities electricity through June 30,2024. Purchases of steam and electricity were $31.1 million, $34.3 million and $30.2 million Interest Rate Swaps for 1998,1997 and 1996, respectively. Annual purchase In October 1996, Detroit Edison entered into a three year milhon, $39 million, interest rate swap agreement based on a notional amount of commitments areandapproximately $3(hon for 1999,2000
$40 million, $41 million $43 mil $25 million, which is nominally linked to the Detroit Edison 2002 and 2003, respectively. See Note 14 relating to steam 1993 Series B Remarketed Notes. Detroit Edison receives a heating special charge, rate equal to the London Interbank Offered Rate (LIBOR) and pays a rate equal to the quarterly we!ghted average Public Securities Association Municipal Swap 1ndex divided by 67.3%.
3 Me In October 1995, the MPSC issued an Order approving The following reconciles the funded status of the Plan to the Detroit Edison's six-year capacity and energy purchase amount recorded in the Consolidated llalance Sheet at agreement with Ontario Hydro. Ontario llydro agreed to sell December 31: Detroit Edison 300 MW of capacity from m!d May through mid. 1998 1997 September. This purchase will offset a concurrent agreement to lease approximately a third of Detroit Edison's Ludington Wuhond 917 MW capacity to First Energy for the same time period. Projected benefit obligation at beginning of year $1,294 $1,176 Service cost - benefits earned during period 31 27 The net economic effect of Ludington lease and the Ontario interest cost on projected benefit obhgation 88 86 Ilydro purchase is an estimated reduction in PSCII expense of Net loss 61 77
$74 million which will be refunded to Detroit Edison customers. Benefits paid to participants (74) (72)
Contingencies Projected benefit obhgation at end of year 1,400 1,294 Lega/ Proceedings Fair value of Plan assets (primarily equity and Detroit Edison and plaintiffs in a class action pending in the debt securities) at beginning of year 1,347 1,232 Circuit Court for Wayne County, Michigan (Djlford. et al v. Actual return on Plan assets 143 187 Dein>1t Edison), as well as plaintiffs in two other pending Benefits paid to participants (74) (72) actions which make class claims (Sancheza1_al v. Deindl Fair value of Plan assets at end of year 1.416 1,347 Edis.<m, Circuit Court for Wayne County, Michigan; and frazitt Plan assets in excess of projected benefit
- v. Drtroit Edim, United States District Court, Eastern District obligation 16 53 of Michigan), are preparing for binding arbitration to settle Unrecognized net (asset) resulting from initial these matters. A .luly 1998 Consent .ludgment has received application (15) (20) preliminary Court approval. A Fairness llearing with respect Unrecognized net loss (gain) 31 (4) to the terms of the settlement was held in August 1998, and no Unrecognized prior service cost 47 52 objections to the settiement were raised. A second Fairness Asset recorded in the Consolidated S Ilearing is contemplated following the results of the arbitration. Balance Sheet $ 79 $ 81 The settlement agreement provides that Detroit Edison's monetary liability is to be no less than $17.5 million and n" greater than $65 million after the conclusion of all related Assumptions used in determining the projected benefit obligation at December 31 were as follows:
proceedings. Detroit Edison has accrued an amount considered to be probable. 1998 1997 Discount rate 65% 7.0% Other Annual increase in future compensation levels 4.0 4.5 In addition to the matters reported herein, the Company and Expected long-term rate of return on Plan assets 9.0 9,0 its subsidiaries are involved in litigation and emironmental matters dealing with the numerous aspects of their business The unrecognized net asset at date of initial application operations. The Company belieses that such litigation and the is being amortized over approximately 15.4 years, which matters discussed above will not have a material effect on its was the average remammg senice period of employees at financial position, results of operations and cash flows. .lanuary 1,1987. See Notes 2 and 3 for a discussion of contingencies related to In addition to the Plan, there are several supplemental llegulatory Matters and Fermi 2. non qualified, non-contributory, retirement benefit plans for certain management employees. NOTE 12- EMPLOYEE BENEFITS Savings and Investment Plans Retirement Plan Detroit Edison has a trusteed and non contributory defined Detroit Edison luts voluntary defined contribution plans qualified under Section 401 (a) and (k) of the Internal benefit retirement plan (Plan) covering all eligible llevenue Code for all eligible employees. Detroit Edison emplo3ees uho have completed six months of senice. The contributes up to 6% of base compensation for non-represented Plan provides retirement benefits based on the employees' employees and up to 4% for represented employees. Matching years of benefit senice, average final compensation and age at contributions were $21 million, $20 million and $17 million for retirement. Detroit Edison's policy is to fund pension cost calculated under the projected unit credit actuarial cost method. 1998,1997 and 1996, respectively. Net pension cost included the following components: Other Postretirement Benefits Ina Detroit Edison provides certain postretirement health care and 1997 1996 1 fe insurance benefits for retired employees. Substantially all WiUiO"8I of Detroit Edison's employees will become eligible for such Service cost-benef ts earned during period $ 31 $ 27 $ 25 Interest cost on projected benefit obhgation 88 benefits if they reach retirement age while working for 86 82 Detroit Edison. These benefits are provided principally I U UU through insurance companies and other organizations. mo zatio of un ecogn zed prior sendce cost 5 5 4 Amortization of unrecognized net asset resulting from initial application (4) (4) (4) Net pension cost S 2 $ 10 $ 6
f-
-- - O DTE Energy Company Notes to Consolidated Fimmeial Statements Net other postretirement benefits cost included the following Nu n 13 - STOCK-BASED COMPENSATION components: The Company adopted a Long-Term Incentive Plan (LTIP) in 1998 1997 1996 1995. IJnder the LTIP, certain key employees may be granted restricted common stock, stock options, stock appreciation (Millions) rights, performance shares and performance units. Common Service cost- benefits earned during stock granted under the LTIP may not exceed 7.2 milhon period 3 19 $ 19 $ 20 -
Interest cost on accumulated benefit shares. Performance umts (which have a face amount of $1) obligation 38 39 40 granted under the LTIP may not exceed 25 million in the Expected return on assets (30) (20) (14) aggregate. As of December 31,1998, no stock appreciation Amortization of unrecognized transition rights, performance shares or performance units have been obligation 21 21 21 granted under the LTIP. Net other postretirement benefits cost $ 48 $ 59 $ 67 l!nder the LTIP, shares of restricted common stock were awarded and are restricted for a period not exceeding four The following reconciles the funded status to the amount years. All shares are subject to forfeiture if specified recorded in the Consolidated Balance Sheet at December 31: i>erformance measures are not met. There are no exercise 1998 1997 prices related to these shares. During the applicable (Millianc! restriction period, the recipient has all the voting, dividend Postretirement benefit obligation at and other rights of a record holder except that the shares are beginning of year $580 $ 583 nontransferable, and non cash distributions paid upon the Service cost- benefits earned during period 19 19 shares would be subject to transfer restrictions and risk of Interest cost on accumulated benefit obligation 38 39 forfeiture to the same extent as the shares themselves. The Benefit payments (27) (27) shares were recorded at the market value on the date of grant Net loss (gain) 15 (34) and amortized to expense based on the award that was Postretirement benefit obligation at end of year 625 580 expected to vest and the period to which the related employee Fair value of assets (primarily equity and services were to be rendered. Ilestricted common stock debt securities) at beginning of year 309 213 activity for the year ended December 31 was: Detroit Edison contributions 57 57 1998 1997 1996 Actual return on assets 56 39 Fair value of assets at end of year 422 309 Restricted common shares awarded 74.000 68,500 56,000 Weighted average market price of Postretirement benefit obligation in (excess) shares awarded S38.77 $ 28.38 $34.28 of assets (203) (271) Compensation cost charged against Unrecognized transition obligation 287 308 income (Thousands) $ 976 $ 222 $1,165 Unrecognued net (gam) (28) (16) Asset recorded in the Consolidated Stock options were also issued under the LTIP. Options are Balance Sheet S 56 $ 21 exercisable at a rate of 25% per year during the four years following the date of grant. The options will expire 10 years Assumptions used in determining the postretirement benefit after the date of the grant. The option exercise price equals obligation at December 31 were as follows: the fair market value of the stock on the date that the option was granted. Stock option aethity was as follows: M98 W , Discount rate 6.5% 7.0% Number Weighted Average of Options Exercise Price F Annualincrease in future compensation levels 4.0 4.5 Expected long term rate of return on assets 8.5 8.5 Outstanding at January 1,1997 - - Granted 310,500 $28.38 Benefit costs were calculated assuming health care cost trend Outstanding at December 31,1997 rates beginning at 8.5% for 1999 and decreasing to 5% in 2008 (none exercisable) 310,500 28.38 Granted 319,500 38.38 and thereafter for persons under age 65 and decreasing from Exercised (22,625) 28.50 5.9% to 5% for persons age 65 and over. A one-percentage-point increase in health care cost trend rates would increase the Outstanding at December 31,1998 (58,750 exercisable) 607.375 33.70 aggregate of the service cost and interest cost components of benefit costs by $10 million for 1998 and increase the accumulated benefit obligation by $85 million at December 31, 1998. A one-percentage point decrease in the health care cost trend rates would decrease the aggregate of the service cost and interest cost components of benefit costs by $8 million - for 1998 and decrease the accumulated benefit obligation by l 870 million at December 31,1998. l l
O-The Company continues to apply APil Opinion 25 " Accounting Inter-segment revenues are not material Financial data for for Stock issued to Employees " Accordingly, no compensation business segments are as follows: expense has been recorded for options granted. As required by Regulated Reconciliations SFAS No.123, " Accounting for Stock liased Compensation," the Company has determined the pro forma information as if the Electric All and Consol-Utihty Other Eliminations idated Company had accounted for its employee stock options under the fair value method. The fair value for these options was 1998 (Milli 8"81 estimated at the date of grant using a modified Black /Scholes ting evenues $ 3,9 $3 $- S 4, 21 option pricing model- American style and the followmg interest expense net 277 34 8 319 weighted average assumptions: Income tax expense (benefit) 260 (100) (6) 154 1998 1997 Net income 412 42 (11) 443 Risk free .nterest rate Total assets 10,987 937 164 12,088 6.83 % Dividend yield 5.84"(. Capital expenditures 514 251 - 765 5.39 % 7.26 % Expected volatility 17.48 % 18.31 % 1997 Expected hfe fMillions) 10 years 10 years Operating revenues $ 3,657 $ 107 Fair value per option
$- $ 3,764
$6 43 $4.15 Depreciation and amortization 658 2 -
660 Interest expense net 282 16 (1) 297 The pro forma effect of these options wouin be to reduce income tax expense (benefit) 288 (30) (1) 257 net income by $695,000 and $244,000, for the years ending Net income 405 14 (2) 417 December 31,1998 and 1997, respectively. There was no Total assets 10,745 448 30 11,223 pro forma effect on earnings per share (EPS). Capital expenditures 439 228 - 667 NOTE 14 - STEAM HEATING SPECIAL CHARGE 19 % (Millio"81 in 1996, a special charge to net income of $140 million Operating revenues S 3,642 $ 3 $- $ 3,645 ($97 million after-tax) or $0.67 cents per share was recorded. Depreciation and amortization 624 1 - 625 The special charge included a resene for steam purchase fcon e tax expense (benefit) commitments during the period from 1997 through 2008 under (4) Net income 312 (2) (1) 309 the agreement with the Detroit Resource Recovery Facility, Total assets 10,874 106 11,015 35 expenditures for closure of a portion of the steam heating Capital expenditures 479 52 - 531 system and improvements in senice to remaining customers. The reserve for steam purchase commitments was recorded at its present value, therefore Detroit Edison will record non-cash NOTE 16 - SUPPLEMENTARY QUARTERLY FINANCIAL accretion expense during the period 1997 through 2008. In INFORMATION (UNAUDITED) addition, beginning in 1997, amortization of the reserve 1998 Quarter Ended for steam purchase commitments is netted against losses on Mar. 31 June 30 Sept. 30 Dec. 31 steam heating purchases recorded in fuel and purchased (Millions, exceptper share amounts) power expense. Operating revenues $945 $1,064 $1,199 $1,013 NOTE 15 - SEGMENT AND RELATED INFORMATION febnco"n " 04 Effective December 31,1998, the Company adopted SFAS No. Earnings per common share 0.72 0.69 0.91 0.73 131," Disclosure about Segments of an Enterprise and Related Information." The Company's reportable business segment is its regulated electric utility, Detroit Edison, which is engaged 1997 Quarter Ended in the generation, punhase, transmission, distribution and sale Mar. 31 June 30 Sept. 30 Dec. 31 of electric energy in a 7,600 square mile area in Southeastern (Mdlions, except per share amounts) Michigan. All other includes non regulated energy related Operating revenues $868 $892 $1,030 $974 businesses and senices, which develop and manage electricity Operating income 202 225 285 289 and other energy related projects, and engage in domestic Net income 71 85 132 129 energy trading and marketing. Earnings per common share 0.49 0.59 0.91 0.89
.o l DTE Energy Company Report of Managemem's Responsibili;y for Financial Statements The consolidated financial statements of DTE Energy Company The Board of Directors, through its Audit Committee consisting and subsidiary companies have been prepared by management solely of outside directors, meets with Deloitte & Touche LLP, in conformity with generally accepted accounting principles, representatives of management and the Company's ,
based upon currently available facts and circumstances and internal auditors to review the aethities of each and to management's best estimates and judgments of known discuss accounting, auditing and financial matters and the , conditions. It is the responsibility of management to assure carrying out of responsibilities and duties of each group. I the integrity and objecthity of such financial statements and Deloitte & Touche LLP has full and free access to meet with to assure that these statements fairly report the Company's the Audit Committee to discuss its audit results and opinions, l l financial position and the results of its operations. without management representatives present, to allow for complete independence. To meet this responsibility, management maintains a high standard of record keeping and an effective system of internal controls, including an extensive program of internal audits, a written administrative policies and procedures, and programs to assure the selection and training of qualified personnel. Lar 1. Garberding Executive Vice President and Chief Financial Officer These financial statements have been audited by the Company's independent auditors, Deloitte & Touche LLP, whose report appears on this page. Its audit was conducted b in accordance with generally accepted auditing standards. Such standards include the evaluation ofinternal accounting A%L h-Chairman of the Noard, President and Chief Executive Officer controls to establish a basis for developing the scope of the audit, as well as such other procedures they deem necessary for expressing an opinion as to whether the financial , statements are presented fairly. l Independent
.uc i lors 3enor; -
I
& Suite 900 l LLP 600 Itenaissance Center l 6 Detroit, Michigan 48243 1704 To the lloard of Directors and Shareholders of January 27,1999 l DTE Energy Company l We have audited the consolidated balance sheets of financial statements. An audit also includes assessing the DTE Energy Company and subsidiaries (the Company) as accounting principles used and significant estimates made by ,
of December 31,1998 and 1997, and the related consolidated management, as well as evaluating the overall financial statements of income, cash flows, and changes in shareholders' statement presentation. We believe that our audits provide a equity for each of the three years in the period ended reasonable basis for our opinion. December 31,1998. These financial statements are the In our opinion, such consolidated financial statements responsibility of the Companys management. Our referred to above present fairly, in all material respects, the responsibility is to express an opinion on these fmancial financial position of DTE Energy Company and subsidiaries statements based on our audits. at December 31,1998 and 1997, and the results of their We conducted our audits in accordance with generally operations and their cash flows for each of the three years in accepted auditing standards. Those standards require that we the period ended December 31,1998 in conformity with plan and perform the audit to obtain reasonable assurance generally accepted accounting principles. 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 I M. 4d M 44 8
e%J DTE Energy and Detroit Edison
.n . Board ofx Dlrectors
- 1. Terence E. Adderley, 65,1987, 6. Larry G. Garberding. 60,1990, Executive 11. Dean E. Richardson, 71,1977, Retired President and Chief Executive Officer of Vice President and Chief Financial 0fficer Chairman of the Board of Manufacturers Kelly Services,Inc. Mr. Adderley serves on of DTE Energy and Detroit Edison. National Corporation. Mr. Richardson the Executive, Finance, and Organization Mr. Garberding serves on the Executive serves on the Audit, Executive, Finance, and Compensation committees and Finance committees. and Organization and Compensation committees.
- 2. Lillian Bauder,59,1986, Vice President for 7. Allan D. Gilmour,64,1995, Retired Vice Corporate Affairs of Masco Corporation and Chairman of Ford Motor Co. Mr. Gilmour 12. Alan E. Schwartz, 73,1969, A partner in President of the Masco Charitable Trust. serves on the Finance, Corporate the law firm of Honigman Miller Schwartz Dr. Bauder serves on the Audit, Executive, Governance, and Pubhc Responsibikty and Cohn in Detroit. Mr. Schwartz serves Nuclear Review and Public Responsibikty committees. on the Corporate Governance, Executive, committees. Finance, and Organization and
- 8. Theodore S. Leipprandt,65,1990, Owner Compensation committees.
- 3. David Bing. 55,1985, Chairman of the of Leipprandt Orchards and retired from Board of Bing Steel,Inc. and Chief Cooperative Elevator Co. Mr. Leipprandt 13 William Wegner. 72,1990, Consultant Executive Officer of Superb Manufacturing, serves on the Audit and Nuclear Review and Owner of W Squared,Inc., a consulting a metal stamping company. Mr. Bing committees. firm providing services to nuclear utihty serves on the Audit and Organization and companies. Mr. Wegner serves on the Compensation committees. 9 John E. Lobbia. 57,1988, Retired Nuclear Review Committee.
Chairman of the Board and Chief Executive
- 4. William C. Brooks. 65,1997, Cnairman, Officer of DTE Energy and Detroit Edison.
Brooks Group International Ltd. Mr. Brooks Mr. Lobbia serves on the Executive and serves on the Corporate Governance dnd Nuclear Review committees. Key Pubhc Responsibihty committees. Name, age, year joined the Board and
- 10. Eugene A. Miller, 61,1989, Chairman committee responsibilities.
- 5. Anthony F Earley, Jr, 49,1994, Chairman, and Chief Executive Officer of Comerica President and Chief Executive Officer of Incorporated and Comerica Bank.
DTE Energy and President and Chief Mr. Miller serves on the Corporate Operating Officer of Detroit Edison. Mr. Earley serves on the Executive Governance, Finance, and Organization M 2JJ) y 3 g(p la is and Compensation committees. T , A Committee. ' o.
~> g N .*5 A ds i d ler.bbhM
, ~;y ,
- 4. N +
Q4 i.
) / L
~.p
' f n $1')'
'?
6 DTE Energy has a diversified
""""'""leade shil tea rc
- 1. Anthony F. Earley, Jr.,49, Chairman, 5. Michael E. Champley,50, Senior Vice 9. Leslie L Loomans,55, Vice President and President and Chief Executive Officer of President, joined Detroit Edison in 1977. Treasurer. His more than three decades' DTE Energy. He joined the Company in 1994 He has broad expertise in strategic and experience with the Company's marketing as President and Chief Operating Officer financial planning, pricing and regulatory and financial groups has included planning *
(C00), after serving in that role for a affairs and developing strategic supplier and issuing more than $10 billion of bonds New York utility. and customer business relationships. and stocks.
- 2. Gerard M. Anderson,40, President and 6 " Douglas R. Gipson,51, Senior Vice 10 *Ron A. May. 47, Vice President C00 of DTE Energy Resources. Prior to President, Nuclear Generation. Since Energy Delivery and Services. He joined joining the Company in 1993, he was a joining the Company in 1987 with two Detroit Edison in 1984 after holding consultant with McKinsey & Co., advising decades of experience in the nuclear management positions for two firms doing clients in the energy and financial power industry, he has directed the safe, work for its power plants. He is responsible i services fields. efficient and reliable operation of the for transmission and distribution activities Fermi 2 power plant. and customer service.
3 Robert J Buckler,49, President and C00 of DTE Energy Distnbution. He joined 7. Susan M Beale,50, Vice President and 11. David E. Meador,41, Vice President and Detroit Edison in 1974, has broad Corporate Secretary. An attorney, she Controller. A certified public accountant, expenence in all strategic and operational joined Detroit Edison in 1982 after working he joined the Company in 1997 after many aspects of the utility business and has for two other electric utilities. Her respon- years' experience driving continuous championed efforts to improve sibilities include Shareholder Services and improvement and waste reduction efforts in customer satisf action. Board of Directors' matters. the automotive industry.
- 4. Larry G. Garberding. 60, Executive Vice 8. *Lynne E. Halpin 46, Vice President and 12. ' Sandra J Miller. 55, Vice President, President and Chief Financial Officer. Chief Information Officer. Prior to joining Human Resources. Her three decades' Prior to joining the Company in 1990, he the Company in 1998, she was Vice experience with the Company includes led several gas companies as deregulation President of Business Appications for directing its Equal Employment Opportunity came to their industry. He earlier was a Netscape Communications Corp. Earlier and Compensation groups and ensuring partner in Arthur Andersen & Co , an she headed global systems deployment the continued growth of the international public accounting firm. for Xerox Corp. Union / Management Partnership.
y
I Chairman and CEO John E. Lobbia Reures
- 13. Christopher C. Nern,54, Vice President 10 *S. Manin Taylor,58, Vice President, After 34 years of dedicated service with and General Counsel. After joining Corporate and Public Affairs. An attorney, the Company, John E. Lobbia retired as its Detroit Edison in 1973, he developed its he joined the Company in 1989 with an eighth Chairman and Chief Executive internal legal function for legal services, extensive pohtical background at the Officer. Mr. Lobbia guided the development litigation and regulatory support. federal, state and locallevels. He of one of the world's most reliable electric serves on the University of Michigan systems. This visionary leader presided
- 14. ' Michael C. Porter,45, Vice President, Board of Regents.
over the Company during a period of Corporate Communications. He joined historic and revolutionary change within the the Company in 1997, bnnging more than 17. Albert J. Tack,56, General Auditor. He energy industry. He worked tirelessly with two decades of experience in marketing joined Detroit Edison in 1963 He has an government leaders to help ensure that the and advertising for highly competitive extensive knowledge cf utility accounting companies in the automotive and framework for deregulation safeguards practices, having previously served as beverage industries. the integrity and reliabihty of Michigan's assistant controller and director of electric system and provides a fair, financial consulting. competitive business environment. Over
- 15. ' William H Roller 53-the past decade he led the transformation Vice President, Power Generation. . A " '#"* "*"" W""" "" '"
He joined Detroit Edison in 1965 and leads of Detroit Edison from a mid-sized electric actions to make its fossil fueled power utility into DTE Energy, a diversified plants more competitive. He is als company with a multitude of energy related responsible for its environmental businesses and services in North America. compliance program.
'K
'g, Y rr n M? f ewruwA '
1 l l l sq 4
?
Other OlPSid8E,OS "l of key affiliates andjoint ventures
- G Paul Horst,48, Gary Mittleman,46, Curtis T. Ringer,47, of DTE Energy formed Plug Power, conducts environ.
Technologies, Inc. /< g LLC. to develop and . mentally friendly helps customers to commercialize landfill gas-to- -
-, 4. - energy projects monitor and control fuel cells for home energy-intensive and automotive use. for DTE Biomass b, processes. M Energy, Inc.
l l Barry G Markowitz, Evan J. O'Neil,54, ' Jean M. Redfield,40, j 57, heads DTE Energy heads DTE Coal of DTE Edison Services, Inc. p Services, Inc!s America", Inc. which builds, y affiliate activities, - leads national sales develops, owns and y,j including rail car
- of energy related operates energy 6 trading and leasing. products and services h , projects for industrial, institutional and b to residential and business customers.
commercial customers. Samuel Snick Meyers, Paul W. Potter,55. m is a portmi nst yr /rm ncrgy q wiat, s. 47, president of manages real estate DTE Energy Trading, projects for Syndeco
',- Inc. provides energy Realty Corporation.
sourcing and risk 'u . management %i L, solutions. .. DTE Energ ' Company g uxx a-s$ bf
+ .- as x Y
s h s
~
hY
. e
?
e m . h. w, ,I ,n,l 7-I nn t . 7 ,i pr I e,n i I, ma Fw.I w 7
- ~
y p : m'!:::::7 r 1.m y - im p tw A y
- l n ,
'I*' . g er<n 2 a-m*'d : cu oson :i dy-v93.~ [ru0,.)
g q ::;,,
h DTE Energy Company 8DallSilca_3eview 1998 1997 1996 1995 1994 (Millions, except Electric Customers and Common Share Data) Operating Revenues Residential S 1,253 $ 1,179 S 1,198 $1,211 $ 1,136 Commercial 1,553 1,501 1,506 1,496 1,473 Industrial 753 726 731 728 736 Other 343 251 207 199 174 Non regulated 319 107 3 2 - Total S 4.221 $ 3,764 S 3,645 $ 3,636 $ 3,519 Net income S 443 S 417 $ 309 $ 406 $ 390 Electric Sales (Millions of kWh) Residential 13,752 12,898 12,949 13,006 12,170 Commercial 18,897 17,997 17,706 17,471 17,042 Industrial 14,700 14,345 14,062 13,825 13,356 Other 2,357 1,855 1,690 1,671 1,586 Total system 49,706 47,095 46,407 45,373 44,154 interconnection 5,207 3,547 2,046 2,969 1,978 Total 54,913 50,642 48,453 48,942 46,132 Electric Customers at Year End (Thousands) Residential 1,884 1,870 1,847 1,825 1,805 Commercial 181 178 175 174 172 Industrial 1 1 1 1 Other 2 2 2 2 2 Total 2,068 2,051 2,025 2,002 1,980 Financial Position at Year End Net property $ 6,943 $ 8,934 S 8,833 $ 8,823 $ 8,925 Total assets 12,088 11,223 11,015 11,131 10,993 Long term debt 4.197 3,777 3,779 3,756 3,825 Total shareholders' equity 3,698 3,706 3,588 3,763 3,706 Common Share Data Earnings per common share S 3.05 $ 2.88 $ 2.13 $ 2.80 $ 2.67 Dividend payout ratio 68 % 72 % 97 % 74 % 77 % . Dividends declared S 2.06 $ 2.06 $ 2.06 $ 2.06 $ 2.06 Dividends paid S 2.06 S 2.06 S 2.06 $ 2.06 $ 2.06 Average common shares outstanding at year end (Millions) 145 145 145 145 146 Return on average common equity 12.25 % 12.03 % 8.87 % 11.85 % 11.64 % Book value per share $ 25.49 $ 24.51 S 23.69 $ 23.62 $ 22.89 Market value per share (Year end) 43 % 34 % 32% 34% 26% Market price: High 49% 34 % 37% 34% 30% low 33% 26% 27% 25% 24% Miscellaneous Financial Data Cash flow from operations S 868 $ 952 S 1,079 $ 913 $ 923 Investments and capital expenditures 956 667 531 454 366 Average cost rate long term debt (Year end) 7.3% 7.3% 7.1% 7.1% 7.2% Miscellaneous Operating Data System peak demand (MW) 10,704 10,305 10,337 10,049 9,684 Employees at year end 8.781 8,732 8,526 8,340 8,494
1 l . . -- - - - - _ _ . Corporate Dala l Market for the Company's Common Equity Annual Meeting of Shareholders and Related Shareholder Matters The 1999 Annual Meeting of DTE Energy Shareholdm On Jan.1,1996, Detroit Edison common stock was automatically will be held at 10 a.m. Detroit time, Wednesday, April 28,1999 exchanged, one-for-one, for common stock of DTE Energy at Detroit Edison Plaza,000 Plaza Drive, Detroit. Shareholders Company. DTE Energy's common stock is listed on the will be aske:t to elect members of the Board of Directors and New York Stock Exchange and the Chicago Stock Exchange ratify the appointment of independent auditors. (symbol DTE). The following table indicates the reported high and low sales prices of DTE Energy common stock on the At the 1998 DTE Energy Annual .\leeting of Shareholders, composite tape of the New York Stock Exchange and dividends four directors were elected; the appointment of independent { auditors was ratified and a shareholder proposal was rejected.
- paid per share for each quarterly period during the past two years:
Corporate Address Dividends DTE Enerm Company
" ^# " " " ' "
Calendar Quarter High Low Per hare Telephone: 313.235.4000 1997 First 32% 26 % S0.515 http://www.dteenergy.com Second 28% 26 % 0.515 Third 32% 27% 0.515 Independent Auditors Fourth 34% 28A 0.515 Deloitte & Touche 1.1.P 1998 First 39% 33% S 0.515 Second 42 37 % 0.515 Form 10-K Third 45 39W 0.515 { Copies of Form 10-K, Securities and Exchange Commission j Fourth 49% 41W 0515 Annual Report, are available. Requests should be directed to: L As of Jan. 1,1999,145,071,317 shares of the Company's Susan M. Beale common stock were outstanding. These shares were held by a Vice President and Corporate Secretary , total of 111,010 shareholders. DTE Energy Company l 2000 2nd Ave., Detroit, .\ll 48226-1279 j The amount of future dividends will depend on the Company's earnings, financial condition and other factors. Transfer Agent Distribution of Ownership of DTE Energy Common Stock . g Alan.t,t9991 Shareholder Senices: 800.551.5000 Type of Owner Owners Shares 54,592 12,307,996 Registrar of Stock Individuals The Detroit Edison Company Joint Accounts 45,957 15,136,223 2000 2nd Ave., Detroit, MI 48226-1279 Trust Accounts 10,338 6,205,624 DTE Energy common stock Nominees 26 96,912,421 1 Institutions & Foundations 173 53,510 Other Shareholder information j Brokers & Security Dealers 7 12,686 Shareholders who hold stock in street form may request j Others 517 14,442,857 quarterly reports by writing to the address below. . l Total 111,610 145,071,317 Shareholders of record automatically receive quarterly reports. As a senice to shareholders of record, DTE Energy offers direct . 1 deposit of dividend payments. Payments can be electronically State and Country Owners Shares transferred directly to the bank or sasings and loan account of choice on the payment date. Please write to the address below, Michigan 55,818 31,688, 800 or call 1.800.551.5009, to receive an authorization form to Florida 7,416 2,957,095 request direct deposit of dividend payments. California 6.041 1,801,683 IrfE Energy Company New York 4,785 98,151,558 c/o Denoit Edison, Shareholder Senices,434 W.C.B. Illinois 4,604 1,327,462 2000 2nd Ave., Detroit, MI 48226 1270 Ohio 3,650 998,013 44 other States 28,803 8,000,476 nis repor t coraainsfuneanuading statemeras reithin the Foreign Countries 493 146,230 meaning of the Priente Securities Litigation Reprm Art ofl99.1 Total 111,610 145.071,317 nese statements are based upon the companys best estimates. Actual results may dfer materially
~. -
m&& ,
&, j
'. Kf
+
+
ny}f.ftl, .y - l'f, W,g g
"ky y
AgDTE Energy. 1 E' y
^
Glossary * [Ahehnative Energy - Distributed Generatiori . #Noregeneration 1 l Easegy sources other than traditional fossil Small amounts el generation located on a Also known as distributed geassation j tuele such as coal, natural gas and oil. utility's distribution system for the purpose " Small amounts of generaties to help meet e of meeting customer peak loads and/or ; customer peak electricity domes (This , Biomass displacing the need to build or upprede een include fuel cells as well as oeuil . [, I The largest form of energy availeMe in additional local distribution lines. -
' . turbine generators tred by natural ges4 L ehe United States comes from plants and ' D > ; organic matter. Landfill waste contains a Fuel Cells Nuclear Power Q4s
- variety of organic fuel sources that
.r Our Plug Power affiliate Is devoleping -
produce methane and can be burned to Energy produced by spliaing @4@, fuel cells that use an electrochemical ' uranium atoms. " produce steam or electricity by process to convert methane and gasoline 4 DTE Biomass Energy. into electricity to power cars and homes. 3, ,,, g %w[ y I We use photavoltaic cells to osevert *
- y. Core Dusiness Geothermal g Our facilities, infrastructure and Energy created when water is!,
.- sealight into siestncal energy at our two R5chigan solar energy facilities.
~ .' operational processes that make heated underground. We have helped
- s = electricity and deliver it to our customers, about 3,000 Michigan hosnoownere install h[ ,
' Customer Choice g*ethennelheating and cooling systems g" , ,
Qhei abilley of a sessil customer to purchase" . Hydro A ., tem o seteiler scher than the ?The elfalling water used to dnve a rp elliity home it delivered over the = . turbine, is power source is used at our w Y4 ' 1"aggligtenemmission and distribution delugly owned R Ludington Pumped Storage 7
' > . spege le.k.a. direct access, retail
- plant su 1.she adichigan.
, :;g)$
, seeses, epen access and electric choice). a g
*~
g 4
, /g
- y; e
&Y welcome to the DTE Energy
===.y ~
Web Site S ' W for noggie for musinese for investors yforindusegy 21 -
'.& y
^ www.dtoenergy.com ',Tgg,af&,a,vagg i
e updat'd via computer
- Current DTE Energy stock price NN#
M
- Monthly sales updates
- Finaricial news releasos Mf b**I
^
.*Executivo speeches _
g ,
- Security and Exchange Commission filings T ,
y
- Dividend Reinvestment and Stock Purbhase Plani E
bedesanise SNNeg.SolarCwreses and ~ DTE Energy, DTE Edison America and the . @19I8 DTE gemogy Campeer. All flights Designed by pengheve Decige,1,aly, LagheAme see regieested service marks head /coroes lege are servios marks et llosoeved + M i Deereit,bliebigen. . .. _O JtegeltAmean . the DTE Energy Compsey, prinsed by Winter Seems Asseelame, tit ? g ,3 o . 4 -
'% .p
- semen.ameMesh.. -
;[ '
, IN. 'e
[-
M $2 -1 tY C0 a te et ci = m
& C Q cO ~G., "
A =e - m L9 -a pH 2m m u E o z b 5
< e t4 te 9
tu
-1 C
, ";[
, ' .'-.\gm; , s.
,,' ; v, i '"!...
A ~ ~ + ,;
.p i ,y. k fi' j DJ,." " 3 ,
N' h , . . , , Y; .& L.:;$-
;.1 e,
- n,. ,-- , ' 'ISY, + .' ,,,
i
- h. . ." h ~ >- ,
- y. 't " ' t ;l '? '?,, J. :d \
(;t :
' %. ;,' r
_=
. : . t ';;
gc:C 1 , e
- rf.jnt _
g.] ,
=
7',
e i :. I,' L -- , . c ello@ p' ..,.
- v. s J'
tw, r ~ 4, .- sS. ,=,* ;;t ,-a m. .: a a
, , .N u. . . . . -
Ugm m i,x
,e
.. ; , c: QS' ' ' , ~ . . - ' 'vW! ', ^R . -
fg5* 'j! b % n, ':f,.. r!M; ,:lff':; ll?h. l: W,, rl,L, sb ' , RiW ' = , "'" { yng L. 1E.4;f'f Qy
,gi N
; c-e R:E .-m ,
y:.y; g :- - t j p2,m[3m 3 j
- s. s a, gm o m
sua S D
-g-7 s ;-
2m a a 5:i De. i., m
>m
$h
=.
E wa l l}}