ITEM 3 - LEGAL PROCEEDINGS.
Detroit Edison in the ordinary course of its business, is involved in a number of suits and controversies including claims for personal injuries and property damage and matters involving zoning ordinances and other regulatory matters. As of December 31, 1995, Detroit Edison was named as defendant in 129 lawsuits involving claims for personal injuries and property damage and had been advised of 25 other potential claims not evidenced by lawsuits.
From time to time Detroit Edison has paid nominal penalties which were administratively assessed by the United States Coast Guard, United States Department of Transportation under the Federal Water Pollution Control Act, as amended, with respect to minor accidental oil spills at Detroit Edison's power plants into navigable waters of the United States. Payment of such penalties represents full disposition of these matters.
Detroit Edison in its 1982 main electric rate case requested the MPSC to recognize the costs associated with the abandoned Greenwood Unit Nos. 2 and 3 for ratemaking purposes. In March 1983, the MPSC, consistent with past precedent, granted Detroit Edison authority to defer, amortize and recover these costs (over a period of 10 years) through the ratemaking process. The Michigan Attorney General appealed the MPSC's order. In August 1990, the Ingham County Circuit Court remanded this matter to the MPSC for additional findings of fact. On November 1, 1991, the MPSC issued its final order on remand affirming the earlier decision to allow rate recovery of the costs. The Ingham County Circuit Court has removed this case from the assigned judges docket pending resolution of issues determined favorable to Detroit Edison's position in a Michigan Supreme Court proceeding. Detroit Edison has amortized the costs associated with the abandoned Greenwood Unit Nos. 2 and 3 in accordance with the MPSC's order. The amortization was completed in 1993.
See Note 12.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5
ITEM 5 - MARKET FOR REGISTRANT's COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange, which is the principal market for such stock, and the Chicago Stock Exchange. The following table indicates the reported high and low sales prices of the Company's Common Stock on the Composite Tape of the New York Stock Exchange and dividends paid per share for each quarterly period during the past two years:
At December 31, 1995, there were 145,119,875 shares of the Company's Common Stock outstanding. These shares were held by a total of 143,177 shareholders.
The Company's By-Laws provide that Chapter 7B of the Michigan Business Corporation Act ("Act") does not apply to the Company. The Act regulates shareholder rights when an individual's stock ownership reaches at least 20 percent of a Michigan corporation's outstanding shares. As a result of the amendment, a shareholder seeking control of the Company cannot require the Company's Board of Directors to call a meeting to vote on issues related to corporate control within 10 days, as stipulated by the Act.
The level of dividends is dependent on earnings and other business conditions, each of which is periodically reviewed by the Company's Board of Directors.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA.
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto, contained herein.
CORPORATE STRUCTURE Effective January 1, 1996, DTE Energy Company became the parent holding company of The Detroit Edison Company ("Detroit Edison"). On January 1, 1996, the holders of Detroit Edison's common stock exchanged such stock on a share-for-share basis for the common stock of DTE Energy Company ("Company"). In addition, certain non-utility subsidiaries of Detroit Edison were transferred to the Company. Detroit Edison is the principal subsidiary of the Company and, as such, this discussion explains material 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. For the periods presented, the Company's operations and those of Detroit Edison are substantially the same.
RESULTS OF OPERATIONS For the year ended December 31, 1995, the Company's net income was $405.9 million, or $2.80 per common share, up 4% from the $390.3 million, or $2.67 per common share earned in 1994. The increase in net income was due to higher sales of electricity in 1995. The sales increase was partially offset by higher operating expenses, including a non-cash loss of $42 million ($32 million after-tax), or $0.22 per common share, on Detroit Edison's steam heating business due to the Company's adoption in the fourth quarter of 1995 of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). For the year ended December 31, 1994, the Company's net income was $390.3 million, or $2.67 per common share, a decrease of 20.5% from the $491.1 million, or $3.34 per common share earned in 1993. The decrease in net income was due in part to a January 21, 1994 order by the Michigan Public Service Commission ("MPSC"), which reduced Detroit Edison's rates by $78 million annually and increased depreciation and operation expenses by $84 million annually. In addition, accretion income decreased and amortization of the Fermi 2 nuclear power plant phase-in plan increased significantly in 1994. Also, Detroit Edison incurred additional one-time charges at the Fermi 2 nuclear power plant, which was out of service in 1994 due to equipment failure, for maintenance expenses and the establishment of a reserve for estimated Fermi 2 capacity factor performance disallowances in 1994-1998. The decrease in net income was limited by higher system sales and lower interest expense due to the early redemption and refinancing of higher cost debt and the redemption of maturing debt. For the year ended December 31, 1993, the Company's net income was $491.1 million, or $3.34 per common share, a decrease of 11.9% from the $557.5 million, or $3.79 per common share earned in 1992. The decrease in net income was due to a 5% reduction in Detroit Edison's rates, effective January 1, 1993, which reduced 1993 operating revenues by $169 million, or $0.75 per common share, higher operating expenses (including amortization of Fermi 2 nuclear power plant phase-in plan deferrals and higher federal income tax expense of $10.4 million for the full year 1993, or $0.07 per common share, due to an increase in the corporate income tax rate from 34% to 35% retroactive to January 1, 1993) and lower non-operating income, partially offset by higher sales and lower interest expense due to the early redemption and refinancing of higher cost debt and the redemption of maturing debt. The reduction in electric rates was due to reinstatement of the Power Supply Cost Recovery Clause, which was suspended for a four-year period, resulting in lower billings to customers of $106 million in 1993 due to lower fuel expenses, and the expiration of an expense stabilization procedure surcharge on January 1, 1993 which provided annual revenues of $63 million in 1992 for the effects of inflation. Warm summer weather and improved economic conditions in Southeastern Michigan contributed to the sales increase. At December 31, 1995, the book value of the Company's common stock was $23.62 per share, an increase of 3.2% since December 31, 1994. Return on average total common shareholders' equity was 11.8% in 1995, 11.6% in 1994 and 15.2% in 1993. Detroit Edison's ratio of earnings to fixed charges for 1995, 1994 and 1993 was 3.21, 3.13, and 3.25, respectively. Detroit Edison's ratio of earnings to fixed charges and preferred and preference stock dividends for 1995, 1994 and 1993 was 2.82, 2.73, and 2.88, respectively.
RATE CHANGES The January 21, 1994 MPSC rate order reduced Detroit Edison's rates by $78 million annually. In keeping with the MPSC's recognition of the need for industrial customers to be competitive, the January 1994 rate reduction was allocated among the various classes of customers approximately as follows: Industrial-$43 million, Commercial-$24 million, Residential-$10 million and Governmental-$1 million.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
On March 23, 1995, the MPSC issued an order approving Detroit Edison's 10-year special manufacturing contracts with Chrysler Corporation, Ford Motor Company and General Motors Corporation. The revenue reductions from these contracts initially will amount to approximately $30 million annually and increase to $50 million annually in 1999-2004, which Detroit Edison expects to offset by further reducing its operating expenses.
Residential and commercial sales increased due to substantially warmer summer weather increasing air conditioning and cooling-related loads and colder fall weather increasing heating-related loads in the fourth quarter. Improved economic conditions spurred higher sales to commercial, automotive and other industrial customers. Sales to other customers increased due to higher sales to wholesale for resale customers.
Residential sales increased due to substantially warmer weather in the second quarter resulting in increased air conditioning and cooling-related loads, partially offset by lower cooling-related loads in the third quarter. The increased heating-related loads in the first quarter were offset by decreased heating-related loads in the fourth quarter. Commercial sales increased due primarily to improved economic conditions and increased cooling-related loads. Industrial sales increased as a result of higher sales to automotive, steel and other manufacturing customers reflecting the improvement in the economy. The decreased sales to other customers reflect lower sales to wholesale for resale customers.
INTERCONNECTION SALES Interconnection sales represent sales between utilities to meet energy needs as a result of demand and/or generating unit availability.
Interconnection sales increased due to improved availability of energy for sale and lower dispatch prices in meeting the increased demand for energy during the warmer summer and colder fall period.
Interconnection sales decreased due to the reduced availability of energy for sale as a result of the Fermi 2 outage and lower sales to Consumers Power Company.
FERMI 2 CAPACITY FACTOR PERFORMANCE STANDARD RESERVE This reserve is discussed in Note 3 of the Notes to Consolidated Financial Statements.
OPERATING EXPENSES
FUEL AND PURCHASED POWER Fuel and purchased power expenses increased (decreased) due to the following factors:
The decrease in average unit cost was due to declining fuel prices resulting from greater use of lower-cost Western low-sulfur coal, lower coal contract buyout expense and increased lower-cost nuclear generation.
The increase in average unit cost resulted from replacing lower-cost nuclear generation with higher-cost fossil generation and purchased power due to the Fermi 2 outage in 1994 as a result of a turbine-generator failure in December 1993.
OTHER OPERATION
Other operation expense increased due primarily to higher incentive award expenses related to a shareholder value improvement plan ($14.5 million), higher storm expenses ($13.1 million), an increase in a reserve for the write-off of obsolete and excess stock material ($9 million), demand-side management expenses ($8.6 million) and a reserve for settlement of the Ludington fish mortality case ($8.4 million). These expenses were partially offset by lower nuclear plant expenses ($15.5 million), expenses recorded in the year-earlier period for service quality claims ($8.7 million) and lower uncollectible expense ($6.9 million).
Other operation expense increased due primarily to other postretirement health care and life insurance benefits expense ($48.3 million), service quality claims expense ($8.7 million) and higher nuclear plant ($8.1 million), transmission and
distribution ($9.7 million) and demand-side management expenses ($4.3 million). These increases were partially offset by lower incentive award expenses related to a shareholder value improvement plan ($18.7 million), expenses recorded in the year-earlier period for the write-off of obsolete and excess stock material ($12.4 million) and a reserve for steam purchases under the agreement with the Greater Detroit Resource Recovery Authority ($11 million), lower uncollectible ($9.9 million) and employee reorganization ($6.5 million) expenses and lower injuries and damages expense ($8.1 million).
MAINTENANCE
Maintenance expense decreased due primarily to lower nuclear ($17 million) and fossil ($4.3 million) plant expenses.
Maintenance expense increased due primarily to higher nuclear plant ($17.6 million) and storm ($8.9 million) expenses, partially offset by lower fossil plant ($8.7 million) and line clearance ($5.3 million) expenses. While Fermi 2 was down for repair in 1994, Detroit Edison elected to upgrade various plant facilities which resulted in higher nuclear plant maintenance expense.
STEAM PLANT IMPAIRMENT LOSS
As the result of continuing losses in the operation of its steam heating business, upon adoption of SFAS No. 121 in the fourth quarter of 1995, Detroit Edison wrote off the remaining net book value of its steam heating plant assets of $42 million.
DEPRECIATION AND AMORTIZATION
1995 AND 1994 Depreciation and amortization expense increased due to increases in plant in service, including internally developed software costs, and increased Fermi 2 decommissioning costs authorized by a January 1994 MPSC rate order.
DEFERRED FERMI 2 AMORTIZATION
1995 AND 1994 Deferred Fermi 2 amortization, a non-cash item of income, was recorded beginning with Detroit Edison's purchase of the Wolverine Power Supply Cooperative, Inc.'s ownership interest in Fermi 2 in February 1990. The annual amount deferred decreases each year through 1999.
AMORTIZATION OF DEFERRED FERMI 2 DEPRECIATION AND RETURN
1995 AND 1994 Deferred Fermi 2 depreciation and return, non-cash items of income, were recorded beginning with the implementation of the Fermi 2 rate phase-in plan in January 1988. The annual amounts of deferred depreciation and return decreased each year through 1992. Beginning in 1993 and continuing through 1998, these deferred amounts will be amortized to operating expense as the cash recovery is realized through revenues.
TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes decreased due to lower payroll and property taxes.
Taxes other than income taxes decreased due primarily to lower property taxes, partially offset by higher Michigan Single Business Tax ("MSBT").
INCOME TAXES
Income taxes increased due primarily to higher pretax income.
Income taxes decreased due primarily to lower pretax income, partially offset by higher prior years' federal income tax accrual. In March 1994, the Company and the Internal Revenue Service ("IRS") reached a settlement of the Company's income tax returns for the years 1987 and 1988.
OTHER INCOME AND (DEDUCTIONS) - NET
Other deductions increased due to higher promotional practices expense ($8.3 million), expenses incurred in the formation of a holding company ($3.1 million) and joint-use contract costs ($2.7 million), partially offset by lower expenses related to the sale of accounts receivable and unbilled revenues ($6.1 million) and a decrease in the write-off of premiums and expenses related to the portion of Detroit Edison's 1989 Series A Mortgage Bonds not refinanced ($3.5 million).
Other deductions increased slightly due primarily to the write-off of premiums and expenses related to the portion of Detroit Edison's 1989 Series A Mortgage Bonds not refinanced ($5.2 million) and an accrual for a contribution to the Detroit Edison Foundation ($5 million), partially offset by an expense recorded in 1993 for decommissioning of Fermi 1 ($7.6 million), an experimental nuclear unit that has been shut down since 1972.
ACCRETION INCOME
1995 AND 1994 Accretion income, a non-cash item of income, was recorded beginning in January 1988 to restore to income, over the period 1988-1998, losses recorded due to discounting indirect disallowances for Greenwood Unit No. 1 for the period that plant was not allowed in rate base (1988-1993) and for $300 million of Fermi 2 plant costs being recovered from 1989 to 1998 with no return. The annual amount of accretion income recorded decreases each year through 1998. In January 1994, accretion income decreased due to the return to rate base of Greenwood Unit No. 1.
LONG-TERM DEBT INTEREST CHARGES
Long-term debt interest charges increased due to the issuance of Quarterly Income Debt Securities ("QUIDS") and the timing of the early redemption and refinancing of securities when economic.
Long-term debt interest charges decreased due to the early redemption and refinancing of securities when economic and the redemption of maturing securities.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
OTHER INTEREST CHARGES
Other interest charges decreased due primarily to lower levels of short-term borrowings.
Other interest charges increased due to higher levels of short-term borrowings, accruals for prior years' MSBT audits and the settlement of 1987 and 1988 IRS audits.
PREFERRED AND PREFERENCE STOCK DIVIDENDS OF SUBSIDIARY
Preferred stock dividends of subsidiary decreased due to the exchange of a portion of Cumulative Preferred Stock 7.75% Series for QUIDS and the conversion and redemption of Cumulative Preferred Stock 5 1/2% Convertible Series.
Preferred and preference stock dividends of subsidiary decreased slightly due to the optional and mandatory redemption of outstanding shares in 1993.
LIQUIDITY AND CAPITAL RESOURCES
COMPETITION
FORMATION OF A HOLDING COMPANY The business of energy supply is experiencing rapid change as competition, coupled with statutory reform, is being introduced into the public utility sector. Competition is viewed by legislators and regulators, at both the federal and state levels, as a method of reducing utility rates while stimulating overall economic growth. In order to position itself for potential changes in the electric utility industry, Detroit Edison adopted a holding company structure, effective January 1, 1996. The new holding company structure, under which Detroit Edison is a wholly-owned subsidiary of the Company, is designed to provide financial flexibility for the development of new energy-related businesses. It is also a mechanism for separating the regulated utility business of Detroit Edison from non-regulated businesses thereby protecting the utility business from the potential volatility of non-utility operations. The Company has no significant operations of its own. Detroit Edison is the Company's principal operating subsidiary, comprising substantially all of the Company's assets. Certain of the Company's wholly-owned subsidiaries are engaged in non-regulated energy-related businesses that are still in the formative stages. DTE Capital Corporation ("DTE Capital") was incorporated in 1995 to act as the financing vehicle for the Company's non-utility affiliates. DTE Capital is in the process of negotiating a $200 million bank revolving credit agreement. Since DTE Capital does not have an established credit history, the Company anticipates that it will be asked to provide credit support for DTE Capital's initial financing activities.
THE DETROIT EDISON COMPANY The electric utility industry is facing serious issues as legislators and regulators consider various proposals designed to reduce rates and promote economic growth through competition. Municipalization, deregulation, cogeneration, independent power production, open access to transmission lines, competitive bulk power supply markets and the unbundling of utility products and services are issues under consideration. There is also a recognition by legislators and regulators that the stranded costs of utilities must be addressed as deregulation proceeds. In March 1995, the Federal Energy Regulatory Commission ("FERC") issued a Notice of Proposed Rulemaking on Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities. According to the FERC, the goals of the proposed new rules are to facilitate the development of a competitive market by ensuring that wholesale buyers and sellers can reach each other and to eliminate anticompetitive and discriminatory practices in transmission services which, in turn, should lead to lower electric rates. On January 8, 1996, Michigan Governor John Engler forwarded to the MPSC a report on economic development recommendations for electric and gas utility reform in Michigan prepared by the Michigan Jobs Commission ("MJC"). The essential component of the MJC's recommended strategy for lowering energy costs is the promotion of competition and customer choice. The Governor strongly encouraged the MPSC to use the report as guiding principles in its continued efforts to promote competition within reasonably established time frames. The MJC's recommendations, if implemented would: (1) allow new industrial and commercial load to purchase energy from providers of their choice beginning January 1, 1997 assuming that the Michigan public utilities subject to the new rules would be permitted to sell power on a reciprocal basis, (2) establish a Michigan statewide power pool by January 1, 1998, and (3) permit all industrial and commercial customers to be able to choose their energy providers by January 1, 2001. The proposals recognize that the transition to a more competitive market requires that the recovery of stranded costs be addressed. In addition, the proposals favor the unbundling of rate tariffs into functional components. The MPSC has not yet taken action with respect to the MJC's recommendations. While Detroit Edison is unable to predict the outcome of the FERC rulemaking and the Michigan proposals, increased wholesale competition is anticipated. On June 19, 1995, the MPSC issued a final order finding that an experimental retail wheeling program is in the public interest and establishing rates and charges for the five-year experimental program. Under the program, retail wheeling customers would make their own arrangements to procure power. Implementation of the experimental program would be limited to 90 megawatts ("MW") for Detroit Edison and will be coordinated with Detroit Edison's next solicitation of new capacity. On July 19, 1995, Detroit Edison filed a claim of appeal with the Michigan Court of Appeals claiming that the MPSC does not have the authority to order Detroit Edison to participate in retail wheeling and that jurisdiction over transmission rates for wheeling resides with the FERC. In response to the changing market for electricity, Detroit Edison has developed a number of programs designed to increase its efficiency and competitive status and address customer needs, which include implementing an interruptible rate for large industrial customers. The January 21, 1994 MPSC rate order provided that up to 650 MW may be sold under this interruptible rate, with Detroit Edison absorbing revenue losses associated with 250 MW.
Competitive status and customer needs were also addressed when, Detroit Edison entered into 10-year special manufacturing contracts with Chrysler Corporation, Ford Motor Company and General Motors Corporation, covering 54 of the Big Three automakers' largest manufacturing locations in Southeastern Michigan. These special manufacturing contracts are available to customers with a total connected load of 100 MW or more for specific locations of 5 MW and over. Service under the special manufacturing contracts includes both firm and interruptible service, which is priced to provide customers with competitively-based electric rates. Detroit Edison continues to review potential energy services as a method of remaining competitive while diversifying within the scope of its core business. In addition, the Company anticipates that its affiliates may also assist in overall customer satisfaction by offering energy-related services.
CASH GENERATION AND CASH REQUIREMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS The Company generates substantial cash flows from operating activities as shown in the Consolidated Statement of Cash Flows. Net cash from operating activities, which is the Company's primary source of liquidity, was $913 million in 1995, $923 million in 1994 and $1,110 million in 1993. Net cash from operating activities decreased slightly in 1995 as a result of the repurchase of $200 million of customer accounts receivable and unbilled revenues, partially offset by higher non-cash charges to income and higher net income. Net cash from operating activities decreased in 1994 due to lower net income and changes in current assets and liabilities, partially offset by higher non-cash charges to income for the Fermi 2 phase-in plan and depreciation and amortization. Net cash used for investing activities increased in 1995 due primarily to higher plant and equipment expenditures. Net cash used for investing activities increased in 1994 due primarily to increased funding of nuclear decommissioning trust funds, the purchase of leased equipment and non-utility investments, partially offset by lower plant and equipment expenditures. Detroit Edison has engaged in an extensive debt refinancing program in recent years. Assuming favorable economic conditions, Detroit Edison expects that it will continue to refinance existing higher-cost debt and equity securities. Also, in 1994, as a result of a plan change, Detroit Edison entered into the one-time purchase of common stock from the trustee of the Detroit Edison Savings & Investment Plans.
ADDITIONAL INFORMATION In May 1995, FERC issued its order authorizing the continuation of Detroit Edison's $1 billion of short-term borrowing authority. This authority will be in effect through May 31, 1997. An MPSC order permits Detroit Edison to issue approximately $3.5 billion of securities for the purpose of refinancing debt and preferred and/or preference stock (issued prior to 1993) prior to maturity (when economic) and at maturity, and to replace funds used for those purposes. Detroit Edison also has MPSC authority to refinance substantially all non-taxable debt obligations. Detroit Edison has an effective Shelf Registration Statement on file with the Securities and Exchange Commission pursuant to which it may issue up to $350 million in debt securities. On February 13, 1996, Detroit Edison issued $185 million of 7 5/8% Quarterly Income Debt Securities. Also, Detroit Edison called for redemption all of the outstanding Cumulative Preferred Stock, 7.68% Series, 7.45% Series and 7.36% Series, totaling $185 million, at per share redemption prices of $101 plus accrued dividends. Such redemption will occur on March 21, 1996. Cash requirements for scheduled long-term debt redemptions are expected to be $119 million, $144 million, $169 million, $219 million and $194 million for 1996, 1997, 1998, 1999 and 2000, respectively. Detroit Edison's cash requirements for capital expenditures are expected to be approximately $2.1 billion for the period 1996 through 2000. In 1996, cash requirements for capital expenditures are estimated at $478 million. Environmental expenditures are expected to approximate $102 million for the period 1996 through 2000, including expenditures for Clean Air Act compliance requirements. See "Environmental Matters" herein. Detroit Edison's internal cash generation is expected to be sufficient to meet cash requirements for capital expenditures as well as scheduled long-term debt redemption requirements. Detroit Edison had total short-term credit arrangements of approximately $432 million at December 31, 1995, under which $37 million of borrowings were outstanding.
CAPITALIZATION The Company's capital structure ratios (excluding long-term debt due within one year) were as follows:
FERMI 2 Detroit Edison's liquidity has improved since the 1988 commercial operation of Fermi 2, a nuclear generating unit comprising 27% of total assets and 9% of summer net rated capability, and lower levels of capital expenditures. The commercial operation of Fermi 2 completed Detroit Edison's power plant construction program. Detroit Edison has no current plans for additional generating plants. Ownership of an operating nuclear generating unit such as Fermi 2 subjects Detroit Edison to significant additional risks. Nuclear plants are highly regulated by a number of governmental agencies concerned with public health and safety as well as the environment, and consequently, are subject to greater risks and scrutiny than conventional fossil-fueled plants. Fermi 2 was out of service in 1994 and part of 1995 due to a December 1993 turbine-generator failure. Major repairs were completed in 1994 and early 1995. These repair costs are approximately $80 million for which to date Detroit Edison has received partial insurance payments of $55 million for property
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
damage. In addition, Detroit Edison has received partial insurance payments of $74.2 million for replacement power costs through December 31, 1995. Fermi 2 was operating at 874 MW at the end of December 1995 and the unit's capacity factor was 51.4% for 1995. Detroit Edison is currently operating Fermi 2 without the large seventh and eighth stage turbine blades on the three low-pressure turbines. The new turbine shafts and blades for these low-pressure turbines are being manufactured and will be installed during the next refueling outage in 1996. The expected cost of replacing the major turbine components in 1996 is between $45 million and $50 million. These costs will not be covered by insurance. These costs will be capitalized and are expected to be recovered in rates because such costs are less than the cumulative amount available under the cap on Fermi 2 capital expenditures, a provision of the MPSC's December 1988 order. At December 31, 1995, Fermi 2 was insured for property damage in the amount of $2.75 billion and Detroit Edison had available approximately $8.5 billion in public liability insurance. To the extent that insurable claims for replacement power, property damage, decontamination, repair and replacement and other costs arising from a nuclear incident at Fermi 2 exceed the policy limits of insurance, or to the extent that such insurance becomes unavailable in the future, Detroit Edison will retain the risk of loss. The Financial Accounting Standards Board is reviewing the accounting for removal costs, including decommissioning of nuclear power plants. If current electric utility industry accounting practices for such decommissioning are changed: (1) annual provisions for decommissioning could increase, and (2) the estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation.
FUTURE SALES GROWTH Since 1980, the compound annual sales growth was 1.8% and peak demand growth was 2.4% (after adjusting for the effects of unusual weather). System sales are expected to grow at a compound annual rate of about 1.5% per year and system demand at about 1.3% per year for the next 15 years.
MEETING ENERGY DEMANDS Detroit Edison expects to meet its near-term demand for energy through the implementation of new load management programs, and eventually through the return to service, subject to environmental regulations, of power plant units currently in economy reserve status when energy demand and consumption requirements provide economic justification. The return to service of these units is conditioned upon the outcome of a competitive bidding process which was established by an MPSC order issued in July 1992. On May 1, 1995, Detroit Edison filed its preliminary Request for Proposal to solicit bids for the acquisition of new capacity starting in the year 2004. Detroit Edison is proposing customer load management options which have the potential to provide an additional 500 MW of peak reduction by the year 2003. Detroit Edison has filed a proposed retail wheeling tariff and proposal for implementing the experimental retail wheeling program. See "Competition" herein. The need for capacity will determine the retail wheeling program start date. On October 13, 1995, the MPSC Staff submitted its direct testimony suggesting that Detroit Edison will need more capacity by 1997 and that the experiment should begin in 1998. On December 5, 1995, Detroit Edison filed rebuttal testimony indicating that the most recent resource plan still indicates that capacity will not be required prior to 2003.
INFLATION Inflation is a measure of the purchasing power of the dollar. In 1995, the inflation rate, as defined by the Consumer Price Index, was 2.5%. Although the current inflation rate is relatively low, its compound effect through time can be significant, primarily in its effect on Detroit Edison's ability to replace its investment in utility plant. The regulatory process limits the amount of depreciation expense recoverable through revenues to the historical cost of Detroit Edison's investment in utility plant. Such amount produces cash flows which are inadequate to replace such property in future years. However, Detroit Edison believes that it will be able to recover the increased cost of replacement facilities when, and if, replacement occurs.
ENVIRONMENTAL MATTERS Protecting the environment from damage, as well as correcting past environmental damage, continues to be the focus of state and federal regulators. Committees at both the state and federal level are studying the effects of a wide array of chemicals and electromagnetic fields as well as global warming (as potentially affected by carbon dioxide emissions). Legislation and/or rulemaking resulting from these and any future studies could further impact the electric utility industry including Detroit Edison. The Environmental Protection Agency and the Michigan Department of Environmental Quality have aggressive programs regarding the clean-up of contaminated property. Detroit Edison anticipates that it will be periodically included in these types of environmental proceedings. Further, additional environmental expenditures, although difficult to quantify, will be necessary as Detroit Edison prepares to comply with the phase-in of the 1990 Amendments to the federal Clean Air Act. Detroit Edison currently meets the first phase of sulfur dioxide emissions and nitrogen oxides emissions requirements. The second phase begins in the year 2000. Detroit Edison currently burns some level of low-sulfur coal (less than 1% sulfur) at all its coal-fired units and believes it can meet the second phase sulfur dioxide emission requirements by either increasing the amount of low-sulfur coal used at certain units, by purchasing sulfur dioxide emission allowances, or by doing some combination of both, depending upon which strategy proves to be the best economic choice. Current projections indicate that annual fuel costs may increase by $13 million to $20 million in the period 2000-2009 in order to comply with new sulfur dioxide emissions requirements. In addition, approximately $59 million in capital expenditures may be necessary for nitrogen oxides emissions requirements. Detroit Edison expects that substantially all of the costs of environmental compliance will be recovered through the ratemaking process. The Company has accrued for settlements in environmental matters discussed in Note 12 of the Notes to Consolidated Financial Statements.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and schedules are included herein.
Note: Detroit Edison's financial statements are presented here for ease of reference and are not considered to be part of Part II - Item 8 of the Company's report.
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors and Shareholders of DTE Energy Company and The Detroit Edison Company
We have audited the consolidated balance sheets of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies (together, the "Companies") as of December 31, 1995, and the related consolidated statements of income, cash flows, and common shareholders' equity for the year then ended. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Companies' management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies at December 31, 1995, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements of the Companies taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP Detroit, Michigan January 22, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of DTE Energy Company and The Detroit Edison Company
In our opinion, the consolidated balance sheet, and the related consolidated statements of income, common shareholders' equity and of cash flows present fairly, in all material respects, the financial position of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies at December 31, 1994 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies for any period subsequent to December 31, 1994.
PRICE WATERHOUSE LLP Detroit, Michigan January 23, 1995 except for Note 1, paragraph one and three, which is as of January 1, 1996.
CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS) DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS) DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS) THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
(See accompanying Notes to Consolidated Financial Statements.)
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS) THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
*At established rate for each series.
(See accompanying Notes to Consolidated Financial Statements.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
CORPORATE STRUCTURE AND PRINCIPLES OF CONSOLIDATION - DTE Energy Company ("Company") is a Michigan corporation, incorporated in 1995, and an exempt holding company under the Public Utility Holding Company Act. The Company has no significant operations of its own, holding instead the stock of an electric utility and other energy-related businesses. The Detroit Edison Company ("Detroit Edison"), a public utility incorporated in Michigan since 1967, is the Company's largest operating subsidiary. Detroit Edison represents substantially all of the Company's assets. As a regulated public utility, Detroit Edison is engaged in the generation, purchase, transmission, distribution and sale of electric energy in a 7,600 square mile area in Southeastern Michigan. The Company's service area includes about 13% of Michigan's total land area, and about half of its population (approximately five million people), electric energy consumption and industrial capacity. On January 1, 1996, the holders of Detroit Edison's common stock exchanged such stock on a share-for-share basis for the common stock of the Company. Also on January 1, 1996, Detroit Edison declared a dividend to the Company in the form of the stock of five subsidiaries: DE Energy Services, Inc., DTE Capital Corporation, Edison Development Corporation, Syndeco Realty Corporation and UTS Systems, Inc. Accordingly, the consolidated financial statements presented herein include the financial results of operations of the Company and its wholly-owned subsidiaries as if the Company's current holding company structure form had existed in all periods shown. For the periods presented, the Company's operations and those of Detroit Edison are substantially the same. All significant intercompany balances and transactions have been eliminated. Investments in 50%-owned limited liability corporations, partnerships and joint ventures are accounted for using the equity method. All non-utility operating transactions are included in the section titled Other Income and (Deductions) in the Consolidated Statement of Income. Certain amounts in prior years' consolidated financial statements have been reclassified to conform to the current year presentation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REGULATION AND REGULATORY ASSETS AND LIABILITIES - Detroit Edison is subject to regulation by the Michigan Public Service Commission ("MPSC") and the Federal Energy Regulatory Commission ("FERC") with respect to accounting matters and maintains its accounts in accordance with Uniform Systems of Accounts prescribed by these agencies. As a regulated entity, taking into account the cost recovery restrictions contained in the December 1988 and January 21, 1994 MPSC rate orders and the provisions of the Energy Policy Act of 1992 ("Energy Act"), Detroit Edison meets the criteria of Statement of Financial Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of Regulation." This accounting standard recognizes the ratemaking process which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. Detroit Edison has recorded the regulatory assets listed below. These regulatory assets are deferred costs, which are normally treated as expenses in non-regulated businesses, and are being amortized to expense as these costs are included in rates and recovered from customers. Continued applicability of SFAS No. 71 requires that rates be designed to recover specific costs of providing regulated services and products, including regulatory assets, and that it be reasonable to assume that rates are set at levels that will recover a utility's costs and can be charged and collected from customers. If the criteria of SFAS No. 71 are no longer met due to various factors, including deregulation of all or part of the business, a change in the method of regulation or a change in the competitive environment for the regulated services, the regulatory assets would have to be written off to expense at that time. Detroit Edison anticipates that it will continue to recover costs associated with its regulatory assets and continue to apply SFAS No. 71. Detroit Edison has recorded the following regulatory assets at December 31:
At December 31, 1995 and 1994, Detroit Edison had the following regulatory liabilities: (1) $330 million and $346 million, respectively, for unamortized accumulated deferred investment tax credits, (2) $53 million and $31 million, respectively, for Fermi 2 capacity factor disallowances (see Note 3), and (3) $22 million at December 31, 1995 and 1994 for other liabilities.
TEMPORARY CASH INVESTMENTS - For purposes of the Consolidated Statement of Cash Flows, the Company considers investments purchased with a maturity of three months or less to be cash equivalents.
UNAMORTIZED LOSS ON REACQUIRED DEBT - In accordance with MPSC regulations applicable to Detroit Edison, the discount, premium and expense related to debt redeemed with refunding are amortized over the life of the replacement issue.
RECOVERABLE INCOME TAXES - See Note 6.
OTHER POSTRETIREMENT BENEFITS - See Note 13.
FERMI 2 PHASE-IN PLAN - An MPSC authorized phase-in plan, effective in January 1988, for Fermi 2, a nuclear generating unit, provided for gradual rate increases in the early years of plant operation rather than a one-time substantial rate increase which conventional ratemaking would provide. SFAS No. 92, "Regulated Enterprises - Accounting for Phase-in Plans," permits the capitalization of costs deferred for future recovery under a phase-in plan. Accordingly, Detroit Edison recorded non-cash income of deferred depreciation and deferred return totaling $506.5 million through 1992. Beginning in 1993 and continuing through 1998, these deferred amounts will be amortized to operating expense as the cash recovery is realized through revenues. Amortization of these deferred amounts totaled $93 million, $84.8 million and $30.9 million in 1995, 1994 and 1993, respectively.
FERMI 2 DEFERRED AMORTIZATION - The December 1988 MPSC rate order provides for Detroit Edison's February 1990 purchase of Wolverine Power Supply Cooperative, Inc.'s ("Cooperative") ownership interest in Fermi 2 for $513 million with a 19-year principal amortization and associated interest of 8%, which is the composite average of the Cooperative debt assumed by Detroit Edison at the time of the purchase. Since the straight-line amortization of the asset exceeds the revenues provided for such amortization during the first 10 years of the recovery period, Detroit Edison is recording deferred amortization, a non-cash item of income, totaling $67.2 million through 1999. For 1995, 1994 and 1993, the amounts deferred were $6 million, $7.5 million and $9 million, respectively. The deferred amounts will be amortized to operating expense as the cash recovery is realized through revenues during the years 2000 through 2008. UNITED STATES DEPARTMENT OF ENERGY ("DOE") DECONTAMINATION AND DECOMMISSIONING - The Energy Act provided for a fund to be established for the decommissioning and decontamination of existing DOE uranium enrichment facilities. Utilities with nuclear units are required to pay for a portion of the cost by making annual payments into the fund over a 15-year period. The law directs state regulators to treat these payments as a necessary and reasonable cost of fuel. Detroit Edison recovers these costs through the Power Supply Cost Recovery ("PSCR") Clause. REVENUES - Detroit Edison records unbilled revenues for electric and steam heating services provided after cycle billings through month-end. PROPERTY, RETIREMENT AND MAINTENANCE, DEPRECIATION AND AMORTIZATION - Utility properties are recorded at original cost less regulatory disallowances and an impairment loss. In general, the cost of properties retired in the normal course of business is charged to accumulated depreciation. Expenditures for maintenance and repairs are charged to expense, and the cost of new property installed, which replaces property retired, is charged to property accounts. The annual provision for utility property depreciation is calculated on the straight-line remaining life method by applying annual rates approved by the MPSC to the average of year-beginning and year-ending balances of depreciable property by primary plant accounts. Provision for depreciation of Fermi 2, excluding decommissioning expense, was 3.26% of average depreciable property for 1995 and 1994 and 2.63% for 1993, except for $300 million being amortized over 10 years commencing in 1989 and $513 million being amortized over 19 years commencing in 1990. See Note 3. Provision for depreciation of all other utility plant, as a percent of average depreciable property, was 3.2% for 1995 and 1994 and 3.4% for 1993. SOFTWARE COSTS - Detroit Edison capitalizes internally developed software costs. These costs are amortized on a straight-line basis over a five-year period beginning with a project's completion. PROPERTY TAXES - Property taxes are accrued monthly during the fiscal period of the applicable taxing authority. INCOME TAXES - Deferred income taxes are provided for temporary differences between book and tax bases of assets or liabilities to the extent authorized by the MPSC. For federal income tax purposes, depreciation is computed using accelerated methods and shorter depreciable lives. Investment tax credits utilized which relate to utility property were deferred and are amortized over the estimated composite service life of the related property. See Note 6. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION ("AFUDC") - AFUDC, a non-operating non-cash item, is defined in the FERC Uniform System of Accounts to include "the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds when so used." AFUDC involves an accounting procedure whereby the approximate interest expense and the cost of other (common, preferred and preference shareholders' equity) funds applicable to the cost of construction are transferred from the income statement to construction work in progress in the balance sheet. The cash recovery of AFUDC, as well as other costs of construction, occurs as completed projects are placed in service and related depreciation is authorized to be recovered through customer rates. Detroit Edison capitalized AFUDC at 7.66% in 1995 and 1994 and 9.65% in 1993. ACCRETION INCOME - In 1988, Detroit Edison adopted SFAS No. 90, "Regulated Enterprises - Accounting for Abandonments and Disallowances of Plant Costs." As a result, indirect losses were recorded for Greenwood Unit No. 1 for the period that plant was not allowed in rate base (1988-1993), and for the indirect loss related to the $300 million of Fermi 2 plant costs recovered from 1989 to 1998 with no return. The net after-tax losses originally totaled $198 million based on the discounting required by SFAS No. 90. These amounts are being restored to income over the respective discount periods as Detroit Edison records a non-cash return (accretion income). The net after-tax income recorded was $7.2 million, $8.9 million and $29.5 million in 1995, 1994 and 1993, respectively. CAPITALIZATION - DISCOUNT, PREMIUM AND EXPENSE - The discount, premium and expense related to the issuance of long-term debt are amortized over the life of each issue. In accordance with MPSC regulations applicable to Detroit Edison, the discount, premium and expense related to debt redeemed without refunding are written off to other income and deductions. Capital stock premium and expense related to redeemed preferred and preference stock of Detroit Edison are written off against retained earnings used in the business. FERMI 2 REFUELING OUTAGES - Detroit Edison recognizes the cost of Fermi 2 refueling outages over periods in which related revenues are recognized. Under this procedure, it records a provision for incremental costs anticipated to be incurred during the next scheduled Fermi 2 refueling outage. See Note 2. LEASES - See Note 9. EMPLOYEE BENEFITS - See Note 13.
NOTE 2
FERMI 2
GENERAL - Fermi 2, a nuclear generating unit, began commercial operation in January 1988. Fermi 2 has a design electrical rating (net) of 1,139 megawatts ("MW"). However, due to certain equipment limitations, Fermi 2 is rated at 1,116 MW until modifications can be made to achieve the design rating. This unit represents approximately 27% of total assets, 10% of total operation and maintenance expenses and 9% of summer net rated capability. MPSC rate orders issued in April 1986, January 1987, December 1988 and January 1994 contain provisions with respect to the recovery of Fermi 2 costs. See Note 3 for a discussion of Fermi 2 rate matters and the MPSC's treatment of Fermi 2's original project costs of $4.858 billion.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
LICENSING AND OPERATION - The Nuclear Regulatory Commission ("NRC") maintains jurisdiction over the licensing and operation of Fermi 2. Fermi 2 was out of service in 1994 and part of 1995. On December 25, 1993, the reactor automatically shut down following a turbine-generator failure. Safety systems responded within design and regulatory specifications. The turbine suffered mechanical damage, the exciter and generator incurred mechanical and fire damage, and the condenser had some internal damage. The fire was contained in the turbine building, and there was no release of radioactive contaminants during the event. The nuclear part of the plant was not damaged. Major repairs were completed in 1994 and early 1995. These repair costs are approximately $80 million for which to date Detroit Edison has received partial insurance payments of $55 million for property damage. In addition, Detroit Edison has received partial insurance payments of $74.2 million for replacement power costs through December 31, 1995. The unit was operating at 874 MW at the end of December 1995 and the unit's capacity factor was 51.4% for 1995. Detroit Edison is currently operating Fermi 2 without the large seventh and eighth stage turbine blades on the three low-pressure turbines. The new turbine shafts and blades for these low-pressure turbines are being manufactured and will be installed during the next refueling outage in 1996. The expected cost of replacing the major turbine components in 1996 is between $45 million and $50 million. These costs will not be covered by insurance. These costs will be capitalized and are expected to be recovered in rates because such costs are less than the cumulative amount available under the cap on Fermi 2 capital expenditures, a provision of the MPSC's December 1988 order. See Note 3. INSURANCE - Detroit Edison insures Fermi 2 with property damage insurance provided by Nuclear Mutual Limited ("NML") and Nuclear Electric Insurance Limited ("NEIL"). The NML and NEIL insurance policies provide $500 million of composite primary coverage (with a $1 million deductible) and $2.25 billion of excess coverage, respectively, for stabilization, decontamination and debris removal costs, repair and/or replacement of property and decommissioning. Accordingly, the combined limits provide total property damage insurance of $2.75 billion. Detroit Edison maintains an insurance policy with NEIL providing for extra expenses, including certain replacement power costs necessitated by Fermi 2's unavailability due to an insured event. This policy, which has a 21-week waiting period, provides for three years of coverage. Under the NML and NEIL policies, Detroit Edison could be liable for maximum retrospective assessments of up to approximately $28 million per loss if any one loss should exceed the accumulated funds available to NML or NEIL. As required by federal law, Detroit Edison maintains $200 million of public liability insurance for a nuclear incident. Further, under the Price-Anderson Amendments Act of 1988, deferred premium charges of $75.5 million could be levied against each licensed nuclear facility, but not more than $10 million per year per facility. On December 31, 1995, there were 110 licensed nuclear facilities in the United States. Thus, deferred premium charges in the aggregate amount of approximately $8.3 billion could be levied against all owners of licensed nuclear facilities in the event of a nuclear incident. Accordingly, public liability for a single nuclear incident is currently limited to approximately $8.5 billion. DECOMMISSIONING - The NRC has jurisdiction over the decommissioning of nuclear power plants. An NRC rule requires decommissioning funding based upon a site-specific estimate or a predetermined NRC formula. Using the NRC's formula, plus an additional allowance for decommissioning the non-nuclear portion of the plant, it is estimated that the cost of decommissioning Fermi 2 when its license expires in the year 2025 is $514 million in current 1995 dollars and $3 billion in future 2025 dollars. The assumed annual inflation rate used to increase the cost to decommission is 6%, compounded annually. The MPSC and FERC regulate the recovery of costs of decommissioning nuclear power plants and both require the use of external trust funds to finance the decommissioning of Fermi 2. The MPSC's January 1994 order includes an increase in rates for the decommissioning of Fermi 2. The FERC has approved the recovery of decommissioning expense in base rates in its June 1993 order. Detroit Edison believes that the MPSC and FERC orders will be adequate to fund the estimated cost of decommissioning using the NRC formula. See Note 3. Detroit Edison has established external trust funds to hold decommissioning and low-level radioactive waste disposal funds collected from customers. During 1995, 1994 and 1993, Detroit Edison collected $32.1 million, $26.9 million and $3.7 million, respectively, from customers for decommissioning Fermi 2. Also, in 1995 and 1994, Detroit Edison collected $4.1 million and $3.3 million, respectively, from customers for low-level radioactive waste disposal. Such amounts were recorded as components of depreciation and amortization expense in the Consolidated Statement of Income and accumulated depreciation and amortization in the Consolidated Balance Sheet. Earnings on the external decommissioning trust funds assets during 1995, 1994 and 1993 were $3.3 million, $1.3 million and $1.2 million, respectively. Earnings on the external low-level radioactive waste disposal trust funds assets were $0.6 million and $0.2 million in 1995 and 1994, respectively. Trust fund earnings are recorded as an investment with a corresponding credit to accumulated depreciation and amortization. Trust fund assets are assumed to earn an after-tax rate of return of 7%, compounded annually. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", net unrealized gains of $4.6 million and $0.7 million in 1995 and 1994, respectively, were recorded as increases to the nuclear decommissioning trust funds and accumulated depreciation and amortization in the Consolidated Balance Sheet. During 1995 shipment of low-level radioactive waste to a permanent disposal site resumed. Detroit Edison incurred disposal costs of $5.7 million during 1995 which costs were reimbursed by the external trust funds. At December 31, 1995, Detroit Edison had a reserve of $91.5 million for the future decommissioning of Fermi 2 and $9.8 million for low-level radioactive waste disposal costs. These reserves are included in accumulated depreciation and amortization in the Consolidated Balance Sheet with a like amount deposited in external trust funds. Detroit Edison also had a reserve of $18.5 million at December 31, 1995 for the future decommissioning of Fermi 1, an experimental nuclear unit on the Fermi 2 site that has been shut down since 1972. This reserve is included in other deferred credits in the Consolidated Balance Sheet with a like amount deposited in an external trust fund. Detroit Edison estimates that the cost of decommissioning Fermi 1 in the year 2025 is $20 million in current 1995 dollars and $114 million in future 2025 dollars.
The Financial Accounting Standards Board is reviewing the accounting for removal costs, including decommissioning of nuclear power plants. If current electric utility industry accounting practices for such decommissioning are changed: (1) annual provisions for decommissioning could increase, and (2) the estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation.
NUCLEAR FUEL DISPOSAL COSTS - Detroit Edison has a contract with the DOE for the future storage and disposal of spent nuclear fuel from Fermi 2. Under the terms of the contract, Detroit Edison makes quarterly payments to the DOE based upon a fee of 1 mill per kilowatthour applied to the Fermi 2 electricity generated and sold. The spent nuclear fuel disposal cost is included as a component of Detroit Edison's nuclear fuel expense. The DOE has stated that it will be unable to store spent nuclear fuel at a permanent repository until after 2010. However, the DOE and utilities with nuclear units are pursuing other interim storage options. On September 7, 1995, Detroit Edison, along with two other utilities, filed a petition for review in the United States Court of Appeals for the District of Columbia Circuit. The petition seeks to overturn a decision of the DOE that it does not have a legal obligation to begin accepting spent nuclear fuel from nuclear utilities commencing January 31, 1998. The petition seeks to affirm that such an obligation exists and to establish court oversight of the development of a schedule by the DOE to accept spent nuclear fuel by that date. This action has been consolidated with existing litigation brought by a number of other utilities as well as a number of states. It is estimated that existing temporary storage capacity at Fermi 2 will be sufficient until the year 2001, or until 2019 with the expansion of such storage capacity.
NOTE 3
RATE MATTERS
Detroit Edison is subject to the primary regulatory jurisdiction of the MPSC, which, from time to time, issues its orders pertaining to Detroit Edison's conditions of service, rates and recovery of certain costs including the costs of generating facilities. MPSC orders issued in December 1988 and on January 21, 1994 are currently in effect with respect to Detroit Edison's rates and certain other revenue and operating-related matters. On January 21, 1994, the MPSC issued an order reducing Detroit Edison's rates in the amount of $78 million annually. The rate reduction was determined by using a 1994 test year and an overall rate of return of 7.66%, incorporating an 11% return on common equity and a capital structure comprised of 40% common equity, 55.01% long-term debt and 4.99% preferred stock. The MPSC order includes the recovery of (1) increased Fermi 2 decommissioning costs of $28.1 million annually, which includes the recovery of low-level radioactive waste disposal costs, (2) full recovery of 1994 other postretirement benefit costs plus recovery and amortization of the 1993 deferred cost (see Note 13), (3) costs associated with the return to rate base of Greenwood Unit No. 1, (4) Fermi 2 phase-in plan revenue requirements of $70.8 million in 1994 and (5) costs associated with a three-year $41.5 million ($7.6 million in 1994, $14.9 million in 1995 and $19 million in 1996) demand-side management program. In keeping with the MPSC's recognition of the need for industrial customers to be competitive, the January 1994 rate reduction was allocated among the various classes of customers approximately as follows: Industrial-$43 million, Commercial-$24 million, Residential-$10 million and Governmental-$1 million. The order was effective for service rendered on and after January 22, 1994 and is the subject of various appeals before the Michigan Court of Appeals. INDUSTRIAL RATES - In August 1994, Detroit Edison entered into 10-year special manufacturing contracts which were approved by the MPSC on March 23, 1995. These contracts will lower costs for Detroit Edison's three largest customers (Chrysler Corporation, Ford Motor Company and General Motors Corporation). Annual revenue reductions will range in amounts from about $30 million in 1995 to $50 million for 1999 through 2004. Detroit Edison expects to offset these reductions by further reducing operating expenses. FERMI 2 - The December 1988 MPSC order established, for the period January 1989 through December 2003, (1) a cap on Fermi 2 capital additions of $25 million per year, in 1988 dollars adjusted by the Consumers Price Index ("CPI"), cumulative, (2) a cap on Fermi 2 non-fuel operation and maintenance expenses adjusted by the CPI and (3) a capacity factor performance standard based on a three-year rolling average commencing in 1991. For a capital investment of $200 million or more (in 1988 dollars adjusted by the CPI), Detroit Edison must obtain prior MPSC approval to be included in rate base. Under the cap on Fermi 2 capital expenditures, the cumulative amount available totals $54 million (in 1995 dollars) at December 31, 1995. Under the cap on non-fuel operation and maintenance expenses, the cumulative amount available totals $52 million (in 1995 dollars) at December 31, 1995. Under the capacity factor performance standard, a disallowance of net incremental replacement power cost will be imposed for the amount by which the Fermi 2 three-year rolling average capacity factor is less than the greater of either the average of the top 50% of U.S. boiling water reactors or 50%. For purposes of the capacity factor performance standard, the capacity for Fermi 2 for the period 1989-1993 shall be 1,093 MW, and 1,139 MW for each year thereafter until December 31, 2003. As discussed in Note 2, Fermi 2 was out of service in 1994 and part of 1995 and will operate at a reduced power output until the installation of major turbine components during the next refueling outage in 1996. Therefore, the three-year rolling average capacity factor utilized in the Fermi 2 performance standard calculation will be unfavorably affected in 1994-1998. The plant's three-year rolling average capacity factor was 53.7% for 1994 and 45.4% for 1995 utilizing a capacity of 1,093 MW for 1992 and 1993 and 1,139 MW for 1994 and 1995. The three-year rolling average capacity factor for the top 50% of U.S. boiling water reactors was 78.6% for 1994 and 81.2% for the 36-month period ending September 30, 1995. Detroit Edison incurred a capacity factor disallowance totaling $19.2 million for 1994. In accordance with an MPSC order, three times this amount was used to determine the net refund to customers in the 1994 PSCR reconciliation case, resulting in banked credits of $38.5 million which will reduce future capacity factor disallowance amounts owing to customers. It is estimated that a net liability in the range of $40 million to $60 million will be required for capacity factor disallowances in the period 1995-1998. At December 31, 1995, Detroit Edison had accrued $53 million (capacity factor disallowances of $91.5 million, less banked credits of $38.5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
million) for the Fermi 2 capacity factor performance standard disallowances that are expected to be imposed by the MPSC during the period 1995-1998, based on the following assumptions: a. Fermi 2 three-year rolling average capacity factor of 45.4% in 1995 and an estimated 35.6% in 1996, 65.1% in 1997 and 72.6% in 1998; b. Estimated three-year rolling average capacity factor for the top 50% of U.S. boiling water reactors of 80% in 1995-1998; c. Estimated incremental cost of replacement power of $8 per megawatthour in 1995 and increasing to $11 per megawatthour in 1998. In accordance with April 1986 and December 1988 MPSC rate orders, ratemaking treatment of Detroit Edison's Fermi 2 original project costs of $4.858 billion is as follows: (1) $3.018 billion in rate base with recovery and return, (2) $300 million amortized over 10 years with no return, (3) $513 million amortized over 19 years with associated interest of 8% and (4) $1.027 billion disallowed and written off in 1988. At December 31, 1995, Detroit Edison's net plant investment in Fermi 2 was $2.9 billion ($3.9 billion less accumulated depreciation and amortization of $1 billion). Under the December 1988 MPSC order, if nuclear operations at Fermi 2 permanently cease, amortization in rates of the $300 million and $513 million investments in Fermi 2 would continue and the remaining net rate base investment amount shall be removed from rate base and amortized in rates, without return, over 10 years with such amortization not to exceed $290 million per year. In this event, unamortized amounts of deferred depreciation and deferred return, recorded in the Consolidated Balance Sheet under the phase-in plan prior to the removal of Fermi 2 from rate base, will continue to be amortized, with a full return on such unamortized balances, so that all amounts deferred are recovered during the period ending no later than December 31, 1998. The December 1988 and January 1994 rate orders do not address the costs of decommissioning if operations at Fermi 2 prematurely cease. Detroit Edison has and believes it will continue to operate under the terms of all applicable MPSC orders with no significant adverse effects as a result of any cost recovery restrictions contained therein.
NOTE 4 JOINTLY-OWNED UTILITY PLANT
Detroit Edison's portion of jointly-owned utility plant is as follows:
* Detroit Edison's undivided ownership interest is 62.78% in Unit No. 1, 81.39% of the portion of the facilities applicable to Belle River used jointly by the Belle River and St. Clair Power Plants, 49.59% in certain transmission lines and, at December 31, 1995, 75% in facilities used in common with Unit No. 2.
BELLE RIVER - The Michigan Public Power Agency ("MPPA") has an undivided ownership interest in Belle River Unit No. 1 and certain other related facilities. MPPA is entitled to 18.61% of the capacity and energy of the entire plant and is responsible for the same percentage of the plant's operation and maintenance expenses and capital improvements. Detroit Edison is obligated to provide MPPA with backup power when either unit is out of service. Detroit Edison was required to purchase MPPA's capacity and energy entitlement through 1994. Such purchases were 20% for 1993 and 10% for 1994. The cost for the buyback of power was based on MPPA's plant-related investment, interest costs incurred by MPPA on its original project financing plus 2.5%, and certain other costs such as depreciation and operation and maintenance expenses. Buyback payments to MPPA were $12.5 million for 1993 and $6 million for 1994. LUDINGTON PUMPED STORAGE - Operation, maintenance and other expenses of the Ludington Pumped Storage Plant ("Ludington") are shared by Detroit Edison and Consumers Power Company ("Consumers") in proportion to their respective interests in the plant. See Note 12.
NOTE 5
SALE OF ACCOUNTS RECEIVABLE AND UNBILLED REVENUES
Detroit Edison has an agreement providing for the sale, assignment and repurchase, from time to time, of an undivided ownership interest in $200 million of its customer accounts receivable and unbilled revenues. At December 31, 1994, customer accounts receivable and unbilled revenues in the Consolidated Balance Sheet were reduced by $200 million reflecting the sale. However, at December 31, 1995, customer accounts receivable and unbilled revenues increased as Detroit Edison repurchased the $200 million. Therefore at December 31, 1995, there were no sales under this agreement. All expenses associated with the program were charged to other income and (deductions) in the Consolidated Statement of Income.
NOTE 6
INCOME TAXES
Total income tax expense as a percent of income before tax varies from the statutory federal income tax rate for the following reasons:
Components of income taxes were applicable to the following: - ------------------------------------------------------------------------------
The Fermi 2 phase-in plan required Detroit Edison to record additional deferred income tax expense related to deferred depreciation totaling $33.5 million, with this amount amortized to income over the six-year period ending December 31, 1998. In January 1993, SFAS No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for financial accounting and reporting for income taxes was adopted. At January 1, 1993, an increase in accumulated deferred income tax liabilities of $740 million was recorded which represented (a) the tax effect of temporary differences not previously recognized and (b) the recomputing of its tax liability at the current tax rate. The liability increase was offset by a regulatory asset of equal value, titled "Recoverable Income Taxes." This regulatory asset represents the future revenue recovery from customers for these taxes as they become payable, with no effect on net income. In August 1993, the Omnibus Budget Reconciliation Act of 1993 increased the federal corporate income tax rate from 34% to 35% retroactive to January 1, 1993. As a result, (1) an increase of $88.1 million in accumulated deferred income tax liabilities, offset by a corresponding increase in "Recoverable Income Taxes," and (2) an increase of $10.4 million in income tax expense were recorded. In 1993, the MPSC issued an order, in a generic proceeding, authorizing accounting procedures consistent with SFAS No. 109 and providing assurance that the effects of previously flowed-through tax benefits will continue to be allowed rate recovery. Deferred income tax assets (liabilities) are comprised of the following at December 31:
The federal income tax returns of the Company are settled through the year 1988. The Company believes that adequate provisions for federal income taxes have been made through December 31, 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTE 7
COMMON STOCK AND CUMULATIVE PREFERRED AND PREFERENCE STOCK At December 31, 1995, the Company had Cumulative Preferred Stock, without par value, 5,000,000 shares authorized with 5,000,000 shares unissued. At December 31, 1995, Detroit Edison had Cumulative Preference Stock of $1 par value, 30,000,000 shares authorized with 30,000,000 shares unissued. At December 31, 1995, Detroit Edison had Cumulative Preferred Stock of $100 par value, 6,747,484 shares authorized with 1,539,827 shares unissued, and 3,351,223 shares and 3,905,470 shares outstanding at December 31, 1995 and 1994, respectively. Cumulative Preferred Stock outstanding at December 31 was:
On October 15, 1995, Detroit Edison redeemed the remaining outstanding 9,539 shares of 5 1/2% Series, $100 par value Convertible Cumulative Preferred Stock at a price of $100 per share plus accrued dividends. This series was convertible into shares of Detroit Edison Common Stock until the close of business on the date of the redemption. The number of shares converted during 1995, 1994 and 1993 was 45,931, 3,949 and 5,563, respectively. Detroit Edison's 7.68% Series, 7.45% Series and 7.36% Series Cumulative Preferred Stock are redeemable solely at the option of Detroit Edison at a per share redemption price of $101 plus accrued dividends. See Note 16. On August 15, 1995, Detroit Edison exchanged 1,995,108 depositary shares, each representing a one-quarter interest in a share of the Cumulative Preferred Stock, 7.75% Series, for $49,877,700 aggregate principal amount of Detroit Edison's Deeply Subordinated Quarterly Income Debt Securities ("QUIDS"), 8.50% Series. See Note 10 for further discussion on the QUIDS. Detroit Edison's 7.75% Series and 7.74% Series Cumulative Preferred Stock are redeemable solely at the option of Detroit Edison at a per share redemption price of $100 (equivalent to $25 per Depositary Share), plus accrued dividends, on and after April 15, 1998 and July 15, 1998, respectively. Apart from MPSC or FERC approval and the requirement that common, preferred and preference stock be sold for at least par value, there are no legal restrictions on the issuance of additional authorized shares of such stock by Detroit Edison. There are no legal restrictions on the issuance of additional authorized shares of the Company's common and preferred stock. In August 1994, Detroit Edison purchased 2,206,635 shares of its Common Stock at a price of $27.125 per share, totaling $59.9 million, from the trustee of the Detroit Edison Savings & Investment Plans. These shares were canceled and reverted to the status of authorized but unissued shares.
NOTE 8
SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At December 31, 1995, Detroit Edison had total short-term credit arrangements of approximately $432 million. At December 31, 1995 and December 31, 1994, $37 million and $39.5 million, respectively, of short-term borrowings were outstanding with a weighted average interest rate of 6.2% in 1995 and 1994. Detroit Edison had bank lines of credit of $200 million, all of which had commitment fees in lieu of compensating balances. Commitment fees incurred in 1995 for bank lines of credit were approximately $0.3 million. Detroit Edison uses bank lines of credit to support the issuance of commercial paper and bank loans. All borrowings are at prevailing money market rates which are below the banks' prime lending rates. Detroit Edison has a nuclear fuel financing arrangement (heat purchase contract) with Renaissance Energy Company ("Renaissance"), an unaffiliated company. Renaissance may issue commercial paper or borrow from participating banks on the basis of promissory notes. To the extent the maximum amount of funds available to Renaissance (currently $400 million) is not needed by Renaissance to purchase nuclear fuel, such funds may be loaned to Detroit Edison for general corporate purposes pursuant to a separate Loan Agreement. At December 31, 1995, approximately $232 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. Renaissance entered into five-year interest rate swap agreements, guaranteed by Detroit Edison, in December 1990, with five banks for a notional amount of $125 million. These agreements were used to reduce the potential impact of increases in interest rates on the variable rate debt by exchanging the receipt of variable rate amounts for fixed interest payments at rates ranging from 8.12% to 8.145% over the life of the agreements. The differential paid or received was recognized as an adjustment to the interest component included as part of nuclear fuel expense. In December 1995, all swap agreements expired and were not renewed.
NOTE 9
LEASES
Future minimum lease payments under long-term noncancellable leases, consisting of nuclear fuel ($170 million computed on a projected units of production basis), lake vessels ($42 million), locomotives and coal cars ($166 million), office space ($17 million) and computers, vehicles and other equipment ($5 million) at December 31, 1995 are as follows:
Detroit Edison has a heat purchase contract with Renaissance which provides for the purchase by Renaissance for Detroit Edison of up to $400 million of nuclear fuel, subject to the continued availability of funds to Renaissance to purchase such fuel. Title to the nuclear fuel is held by Renaissance. Detroit Edison makes quarterly payments under the heat purchase contract based on the consumption of nuclear fuel for the generation of electricity. Renaissance's investment in nuclear fuel was $145 million and $193 million at December 31, 1995 and 1994, respectively. The decrease in 1995 from 1994 of $48 million includes additions of $6 million (purchases of $5 million and capitalized interest of $1 million) less $54 million for the amortization of nuclear fuel consumed in 1995. Under SFAS No. 71, amortization of Detroit Edison's leased assets is modified so that the total of interest on the obligation and amortization of the leased asset is equal to the rental expense allowed for ratemaking purposes. For ratemaking purposes, the MPSC has treated all leases as operating leases. Net income is not affected by capitalization of leases. Rental expenses for both capital and operating leases were $97 million (including $67 million for nuclear fuel), $49 million (including $8 million for nuclear fuel) and $126 million (including $89 million for nuclear fuel) for 1995, 1994 and 1993, respectively.
NOTE 10
LONG-TERM DEBT
Detroit Edison's 1924 Mortgage and Deed of Trust ("Mortgage"), the lien of which covers substantially all of Detroit Edison's properties, provides for the issuance of additional bonds. At December 31, 1995, approximately $3.2 billion principal amount of Mortgage Bonds could have been issued on the basis of property additions, combined with an earnings test provision, assuming an interest rate of 7% on any such additional Mortgage Bonds. An additional $1.1 billion principal amount of Mortgage Bonds could have been issued on the basis of bond retirements.
Long-term debt outstanding at December 31 was:
* Weighted average interest rate at December 31, 1995. **Variable rate at December 31, 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
The QUIDS (see Note 7) provide that interest will be payable quarterly provided that, so long as an event of default has not occurred and is not continuing with respect to the QUIDS, Detroit Edison will have the right, upon prior notice by public announcement given in accordance with New York Stock Exchange rules at any time, to extend the interest payment period at any time and from time to time on the QUIDS for up to 20 consecutive quarterly interest payment periods. As a consequence, quarterly interest payments on the QUIDS would be deferred but would continue to accrue during any deferral period. In the event that Detroit Edison exercises this right, Detroit Edison may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock during such deferral period, other than redemptions of any series of capital stock of Detroit Edison pursuant to the terms of any sinking fund provisions with respect thereto. In addition, during any deferral period, Detroit Edison may not make any advance or loan to, or purchase any securities of, or make any other investment in, any affiliate of Detroit Edison, including DTE Energy Company, for the purpose of, or to enable the payment of, directly or indirectly, dividends on any equity securities of DTE Energy Company. In June 1992, Detroit Edison entered into a three-year interest rate swap agreement matched to a $31 million variable rate tax exempt revenue bond. This agreement was used to reduce the potential impact of increases in interest rates on the variable rate debt by exchanging the receipt of variable rate amounts for fixed interest payments at a rate of 4.32% over the life of the agreement. The differential paid or received was recognized as an adjustment to interest expense related to the debt. In June 1995, the swap agreement expired and was not renewed. In 1996, 1997, 1998, 1999 and 2000, Detroit Edison's long-term debt maturities consist of $119 million, $144 million, $169 million, $219 million and $194 million, respectively.
NOTE 11
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at December 31 are as follows:
The investments in debt and equity securities are classified as "available for sale." The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: OTHER INVESTMENTS - The carrying amount of other investments approximates fair value. NUCLEAR DECOMMISSIONING TRUST FUNDS - The fair value of nuclear decommissioning trust funds is estimated based on quoted market prices for securities and carrying amount for the cash equivalents. SALE OF ACCOUNTS RECEIVABLE AND UNBILLED REVENUES - The carrying amount approximates fair value because of the short maturity of accounts receivable and unbilled revenues pledged for sale. CUMULATIVE PREFERRED STOCK, LONG-TERM DEBT - The fair value of Detroit Edison's preferred stock outstanding and long-term debt is estimated based on the quoted market prices where available. The fair values of all other long-term debt are estimated using discounted cash flow analysis. The discount rates used are the Company's incremental borrowing costs for similar types of securities. SHORT-TERM BORROWINGS, CUSTOMER SURETY DEPOSITS - The carrying amount approximates fair value because of the short maturity of those instruments.
NOTE 12
COMMITMENTS AND CONTINGENCIES
COMMITMENTS - Detroit Edison has entered into purchase commitments of approximately $561 million at December 31, 1995, which includes, among other things, line construction and clearance costs and the costs of major turbine components to be replaced at Fermi 2. Detroit Edison also has entered into substantial long-term fuel supply and transportation commitments. Detroit Edison has an Energy Purchase Agreement ("Agreement") for the purchase of steam and electricity from the Detroit Resource Recovery Facility. Under the Agreement, Detroit Edison will purchase steam through the year 2008 and electricity through June 30, 2024. Purchases of steam and electricity were $28.2 million, $24.5 million and $23.6 million for 1995, 1994 and 1993, respectively, and annual purchase commitments are approximately $32.6 million, $35 million, $36.1 million, $37.3 million and $38.5 million for 1996, 1997, 1998, 1999 and 2000, respectively. On October 25, 1995, the MPSC issued an order approving Detroit Edison's long-term capacity and energy purchase from Ontario Hydro. On November 27, 1995, the Michigan Attorney General filed an application for leave to appeal the order in the Michigan Court of Appeals. The purchase is for 300 MW, on a seasonal basis from mid-May through mid-September for the years 1996 through 2001. This purchase will offset a concomitant agreement to lease 312 MW, of Detroit Edison's 917 MW Ludington capacity entitlement, to the Toledo Edison Company for essentially the same time period. The net economic effect of the Ludington lease and the Ontario Hydro purchase will be to provide Detroit Edison's customers with an estimated reduction in PSCR expense of $74 million which will be passed through to customers through the PSCR clause.
CONTINGENCIES - LUDINGTON PUMPED STORAGE PLANT - In 1986, the Michigan Attorney General and the Michigan Natural Resources Commission filed a state lawsuit against Detroit Edison and Consumers as co-owners of Ludington for claimed aquatic losses. Detroit Edison is a 49% co-owner of Ludington. The suit, which alleges violations of the Michigan Environmental Protection Act and the common law for claimed aquatic losses, seeks past damages (including interest) of approximately $148 million and future damages (from the time of the filing of the lawsuit) in the amount of approximately $89,500 per day (of which 49% would be applicable to Detroit Edison). In October 1994, Detroit Edison and all other parties to the state action except certain Indian tribes, reached a tentative settlement. On February 28, 1995, Detroit Edison and Consumers jointly submitted to FERC the Ludington Pumped Storage Project Settlement Agreement - FERC Offer of Settlement. In March 1995, the Circuit Court for Ingham County, Michigan entered an order adopting the settlement as final upon the receipt of regulatory approvals. On January 17, 1996, the FERC issued an order approving the settlement agreement. The settlement provides for damages and use of a barrier net around the plant intakes to protect fish. Also, the FERC order requires Detroit Edison and Consumers to examine new fish mortality abatement technologies, monitor local fish populations and create a scientific advisory team to review these matters. Detroit Edison is taking steps to implement the terms of the settlement and is waiving prior MPSC approval for the settlement to become effective. The net present value of Detroit Edison's portion of the settlement is estimated to be approximately $30 million which will be paid over a 24-year period, including $10 million to enhance recreational opportunities on Detroit Edison-owned and donated property. Detroit Edison has recorded a charge to other operation expense in the Consolidated Statement of Income in 1995 of $8.4 million for its share of the settlement through December 31, 1995. CARTER INDUSTRIALS - In January 1989, the Environmental Protection Agency ("EPA") issued an administrative order under the Comprehensive Environmental Response, Compensation and Liability Act ordering Detroit Edison and 23 other potentially responsible parties to begin removal activities at the Carter Industrials superfund site. In June 1993, a Consent Decree was entered by the U.S. District Court for the Eastern District of Michigan. Clean-up of the Carter Industrials site began in 1995 and is expected to be completed in 1996. There is the possibility that EPA may, through subsequent proceedings, require an additional clean-up of the sewer and sewer outfall emptying into the Detroit River. At December 1995, a remaining liability of $3.3 million is included in other deferred credits in the Consolidated Balance Sheet for completion of the Carter Industrials site clean-up costs in 1996 and the proposed clean-up of the sewer and sewer outfall. OTHER - The Energy Policy Act became effective in October 1992. While Detroit Edison is unable to predict the ultimate impact of this legislation on its operations, Detroit Edison expects that, over time, non-utility generation resources will be developed which will result in greater competition for power sales. On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking seeking comment on several proposals for encouraging more competitive electric power markets. The proposals address several fundamental issues facing the electric power industry including transmission open access, stranded costs, jurisdiction over transmission in interstate commerce including retail wheeling and over local distribution, real-time information networks and implementation of open access. Final rules are expected to be issued early in 1996. While Detroit Edison is unable to predict the ultimate impact of this rulemaking on its operations, Detroit Edison expects that it will result in substantially increased wholesale competition. In addition to the matters reported herein, the Company and its subsidiaries are involved in litigation and environmental matters dealing with the numerous aspects of their business operations. The Company believes that such litigation and the matters discussed above will not have a material effect on its financial position or results of operations. See Notes 2 and 3 for a discussion of contingencies related to Fermi 2.
NOTE 13
EMPLOYEE BENEFITS
RETIREMENT PLAN - Detroit Edison has a trusteed and non-contributory defined benefit retirement plan ("Plan") covering all eligible employees who have completed six months of service. The Plan provides retirement benefits based on the employee's years of benefit service, average final compensation and age at retirement. Detroit Edison's policy is to fund pension cost calculated under the projected unit credit actuarial cost method, provided that this amount is at least equal to the minimum funding requirement of the Employee Retirement Income Security Act of 1974, as amended, and is not greater than the maximum amount deductible for federal income tax purposes. Contributions were made to the Plan totaling $29.6 million, $45.8 million and $29.4 million for 1995, 1994 and 1993, respectively. Net pension cost included the following components:
Assumptions used in determining net pension cost are as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
The following reconciles the funded status of the Plan to the amount recorded in the Consolidated Balance Sheet:
The unrecognized net asset at date of initial application is being amortized over approximately 15.4 years, which was the average remaining service period of employees at January 1, 1987. In addition to the Plan, there are several supplemental non-qualified, non-contributory, retirement benefit plans for certain management employees. LONG-TERM INCENTIVE COMPENSATION PLAN - The Company has adopted a long-term incentive plan ("Incentive Plan"). Under the Incentive Plan, certain key employees may be granted stock options, stock appreciation rights, restricted common stock, performance shares and performance units. In 1995, 66,500 shares of restricted common stock, valued at approximately $1.9 million, were granted to officers of Detroit Edison. Compensation cost of $571,000 in 1995 was recorded based on the award that was expected to vest and recognized over the period to which the related employee services were to be rendered. The shares for officers are restricted for a period of approximately one to four years and all shares are subject to forfeiture if specified performance measures are not met. There are no exercise prices related to these shares. During the applicable restriction period, the officer-recipient has all the voting, dividends and other rights of a record holder except that the shares are nontransferable, and non-cash distributions paid upon the shares would be subject to transfer restrictions and risk of forfeiture to the same extent as the shares themselves. All shares awarded pursuant to this program were purchased on the open market. Common stock granted under the Incentive Plan may not exceed 7.2 million shares. Performance units (which have a face amount of $1) granted under the Incentive Plan may not exceed 25 million in the aggregate. No stock options, stock appreciation rights, performance shares or performance units have been granted under this plan. SAVINGS & INVESTMENT PLANS - Detroit Edison has contributory defined contribution plans qualified under Section 401 (a) and (k) of the Internal Revenue Code for all eligible employees. Matching contributions were $13.7 million, $12.5 million, $10.6 million for 1995, 1994 and 1993, respectively. OTHER POSTRETIREMENT BENEFITS - Detroit Edison provides certain postretirement health care and life insurance benefits for retired employees. Substantially all of Detroit Edison's employees will become eligible for such benefits if they reach retirement age while working for Detroit Edison. These benefits are provided principally through insurance companies and other organizations. Effective January 1, 1993, Detroit Edison adopted the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The standard required Detroit Edison to change its accounting for postretirement benefits from the pay-as-you-go (cash) basis to the accrual of such benefits during the active service periods of employees to the date they attain full eligibility for benefits. The transition obligation at the time of adoption is being amortized over 20 years. Detroit Edison's incremental cost upon adoption of the standard was $49 million for 1993 which is being deferred in accordance with the January 21, 1994 MPSC rate order. See Note 3. This amount is being amortized and recovered in rates over the estimated four-year period 1994-1997. Net other postretirement benefits cost included the following components:
The following reconciles the funded status to the amount recorded in the Consolidated Balance Sheet:
Assumptions used in determining the accumulated benefit obligation are as follows:
Benefit costs were calculated assuming health care cost trend rates beginning at 11.8% for 1995 and decreasing to 6% in 2008 and thereafter for persons under age 65 and decreasing from 7.2% to 6% for persons age 65 and over. For 1996, health care cost trend rates are assumed to begin at 10.5% and 6.5%, respectively, with both rates decreasing to 5.5% in 2008 and thereafter. A one-percentage-point increase in health care cost trend rates would increase the aggregate of the service cost and interest cost components of benefit costs by $8 million for 1995 and increase the accumulated benefit obligation by $69 million at December 31, 1995.
NOTE 14
NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company adopted SFAS No. 121 in the fourth quarter of 1995. As the result of continuing losses in the operation of its steam heating business, upon adoption of SFAS No. 121, Detroit Edison wrote off the remaining net book value of its steam heating plant assets. This resulted in a non-cash loss of $42 million ($32 million after-tax) or $0.22 per common share. Based on current market conditions, the steam heating operations continue to generate losses. Therefore, Detroit Edison will continue to review its steam heating operations to determine what actions, if any, may be necessary. The application of SFAS No. 121 to the electric plant and regulatory assets of Detroit Edison does not result in an impairment as of this time based on the existing MPSC and FERC regulations. However, this may change in the future as deregulation, competitive factors and restructuring take effect in the electric utility industry.
NOTE 15
SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The fourth quarter of 1995 includes the write-off of the remaining net book value of Detroit Edison's steam heating plant assets when the Company adopted SFAS No. 121. This resulted in a non-cash loss of $42 million ($32 million after-tax) or $0.22 per common share. See Note 14. The fourth quarter of 1994 includes a decrease in operating revenues of $59 million, a decrease in operation expense of $65 million and a decrease in maintenance expense of $1 million related to a settlement agreement, with the parties intervening in the 1994 PSCR reconciliation case with the MPSC, for business interruption insurance proceeds associated with the December 25, 1993 outage at Fermi 2. See Note 2.
NOTE 16
SUBSEQUENT EVENTS (UNAUDITED)
On February 13, 1996, Detroit Edison issued $185 million of 7 5/8% Quarterly Income Debt Securities. See Note 10 for information on the right of Detroit Edison to defer payment of interest on the QUIDS and the related consequences. Also, Detroit Edison called for redemption all of the outstanding Cumulative Preferred Stock, 7.68% Series, 7.45% Series and 7.36% Series, totaling $185 million, at per share redemption prices of $101 plus accrued dividends. Such redemption will occur on March 21, 1996.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The Board of Directors, upon the recommendation of the Board's Audit Committee, appointed Deloitte & Touche LLP as independent accountants for the year 1995. The appointment was ratified by the Common Stock Shareholders at the Annual Meeting of Common Stock Shareholders held on April 24, 1995. Deloitte & Touche LLP's report on the financial statements for the year ending December 31, 1995 did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.
In prior years, Price Waterhouse LLP served as independent accountants of the Company. During the Company's two fiscal years ending December 31, 1994, there were no disagreements with Price Waterhouse LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to its satisfaction, would have caused Price Waterhouse LLP to make reference thereto in their report on the financial statements for such years. None of Price Waterhouse LLP's reports on the financial statements for the years ended December 31, 1994 and 1993 contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.
PART III
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's executive officers is incorporated herein by reference to Items 1 and 2 - Business and Properties, "Employees and Executive Officers" on pages 23-24 hereof; information regarding compliance with section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the data under the heading "Compliance with Section 16(a) of the Securities Exchange Act of 1934" on page 21 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996; and information regarding directors is incorporated herein by reference to the data under the heading "The Election of Directors" on pages 1-5 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION.
Information regarding "Executive Compensation" is incorporated herein by reference to the data under the heading "Board Compensation Committee Report on Executive Compensation" on pages 8-15 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding ownership of equity securities is incorporated herein by reference to the heading "Security Ownership of Management" on page 6 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is incorporated herein by reference to the heading "Compensation Committee Interlocks and Insider Participation" on page 15 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY PART I
ITEMS 1 AND 2 - BUSINESS AND PROPERTIES.
See the Company's "Items 1 and 2 - Business and Properties" (other than the paragraphs under the headings "Non-Regulated Operations" and "Executive Officers"), which is incorporated herein by this reference.
(a) As of March 1, 1996
Under Detroit Edison By-Laws, the officers of Detroit Edison are elected annually by the Board of Directors at a meeting held for such purpose, each to serve until the next annual meeting of shareholders or until their respective successors are chosen and qualified. With the exception of Messrs. Anderson, Cockerham and Earley, all of the above officers have been employed by Detroit Edison in one or more management capacities during the past five years.
Gerard M. Anderson was a senior engagement manager at McKinsey & Company, Inc., a management consulting firm, from 1988 to 1993. Effective December 1, 1993, he was elected Vice President of Detroit Edison.
Haven E. Cockerham, from 1991 until 1994, was president of Cockerham, McCain & Associates, Inc., a management, business development and human resources consulting firm in Columbia, South Carolina. From 1989 to 1991, Mr. Cockerham owned Cockerham Chevrolet-Oldsmobile, an automobile dealership in Newberry, South Carolina. Prior to 1989, Mr. Cockerham was employed by General Motors in various executive positions in the human resources area. Effective June 1, 1994, he was elected Vice President-Human Resources.
Anthony F. Earley, Jr., from 1989 to 1994, was President and Chief Operating Officer of Long Island Lighting Company ("LILCO"), an electric and gas utility company serving Long Island, New York. He previously served in various executive capacities at LILCO from 1985 to 1989. Effective March 1, 1994, he was elected President and Chief Operating Officer and a member of the Board of Directors of Detroit Edison.
ITEM 3 - LEGAL PROCEEDINGS.
See the Company's "Item 3 - Legal Proceedings," which is incorporated herein by this reference.
ITEM 4 -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
See the Company's "Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters," which is incorporated herein by this reference. Detroit Edison's By-Laws contain this same provision with respect to the Michigan Business Corporation Act. All of Detroit Edison's Common Stock is held by the Company. The level of dividends paid by Detroit Edison to the Company is periodically reviewed by Detroit Edison's Board of Directors.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
See the Company's and Detroit Edison's "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by this reference to Part II - Item 7 of the Company.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages 33 through 57.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
See the Company's "Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure," which is incorporated herein by this reference.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding Detroit Edison's executive officers is incorporated herein by reference to "Items 1 and 2 - Business and Properties, Executive Officers." Detroit Edison's directors are the same as the Company's directors. Information regarding directors is incorporated herein by reference to the data under the heading "The Election of Directors" on pages 1-5 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 11 - EXECUTIVE COMPENSATION.
Information regarding "Executive Compensation" is incorporated herein by reference to the data under the heading "Board Compensation Committee Report on Executive Compensation" on pages 8-15 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding ownership of equity securities is incorporated herein by reference to the heading "Security Ownership of Management" on page 6 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is incorporated herein by reference to the heading "Compensation Committee Interlocks and Insider Participation" on page 15 of the Company's definitive proxy statement dated March 15, 1996, in connection with its Annual Meeting of Shareholders to be held on April 22, 1996.
ANNUAL REPORTS ON FORM 10-K FOR DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
PART IV
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual Report on Form 10-K.
(1) Consolidated financial statements. See "Item 8 - Financial Statements and Supplementary Data" on page 33.
(2) Financial statement schedules. See "Item 8 - Financial Statements and Supplementary Data" on page 33.
(3) Exhibits (*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14 (c) of this report).
(i) Exhibits filed herewith.
Exhibit Number ------- 3-3 - Amended and Restated By-Laws, dated as of February 26, 1996, of DTE Energy Company.
3-4 - Amended and Restated By-Laws, dated as of February 26, 1996, of The Detroit Edison Company.
4-14 - Fifth Supplemental Note Indenture, dated as of February 1, 1996.
4-15 - Supplemental Indenture, dated as of April 1, 1991, establishing the 1991 Series AP Mortgage Bonds.
*10-1 - Detroit Edison 1996 Shareholder Value Improvement Plan - A.
*10-2 - Detroit Edison Key Employee Deferred Compensation Plan (January 1990).
*10-3 - Detroit Edison Long-Term Incentive Plan.
Exhibit Number -------
11-2 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock.
12-2 - The Detroit Edison Company and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges.
12-3 - The Detroit Edison Company and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges and Preferred and Preference Stock Dividends.
16-1 - Letter regarding change in certifying accountant.
23-7 - Consent of Deloitte & Touche LLP.
23-8 - Consent of Price Waterhouse LLP.
27-1 - Financial Data Schedule for the period ended December 31, 1995 for DTE Energy Company and Subsidiary Companies.
27-2 - Financial Data Schedule for the period ended December 31, 1995 for The Detroit Edison Company and Subsidiary Companies.
99-1 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Savings Reparation Plan.
99-2 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Retirement Reparation Plan.
99-3 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Management Supplemental Benefit Plan.
99-4 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Benefit Equalization Plan.
99-5 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Plan for Deferring the Payment of Directors' Fees.
Exhibit Number ------- 99-6 - The Detroit Edison Company Irrevocable Grantor Trust for The DTE Energy Company Retirement Plan for Non-Employee Directors.
99-7 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy Company Plan for Deferring the Payment of Directors' Fees.
99-8 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy Company Retirement Plan for Non-Employee Directors.
(ii) Exhibits incorporated herein by reference.
3(a) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993).
3(b) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993).
3(c) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993).
3(d) - Amended and Restated Articles of Incorporation of DTE Energy Company, dated December 13, 1995 (Exhibit 3A (3.1) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607).
3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607).
Exhibit Number ------- 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and Bankers Trust Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below:
September 1, 1947 Exhibit B-20 to Registration No. 2-7136 October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096 November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160 January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595 June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643 June 30, 1982 Exhibit 4-30 to Registration No. 2-78941 August 15, 1982 Exhibit 4-32 to Registration No. 2-79674 October 15, 1985 Exhibit 4-170 to Form 10-K for year ended December 31, 1994 November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992 July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994 December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994 February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994 November 1, 1990 Exhibit 4-110 to Form 10-K for year ended December 31, 1990 May 1, 1991 Exhibit 4-112 to Form 10-Q for quarter ended June 30, 1991 May 15, 1991 Exhibit 4-113 to Form 10-Q for quarter ended June 30, 1991 September 1, 1991 Exhibit 4-116 to Form 10-Q for quarter ended September 30, 1991 November 1, 1991 Exhibit 4-119 to Form 10-K for year ended December 31, 1991
Exhibit Number -------
January 15, 1992 Exhibit 4-120 to Form 10-K for year ended December 31, 1991 February 29, 1992 Exhibit 4-121 to Form 10-Q for quarter ended March 31, 1992 April 15, 1992 Exhibit 4-122 to Form 10-Q for quarter ended June 30, 1992 July 15, 1992 Exhibit 4-123 to Form 10-Q for quarter ended September 30, 1992 July 31, 1992 Exhibit 4-124 to Form 10-Q for quarter ended September 30, 1992 November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 March 1, 1993 Exhibit 4-141 to Form 10-Q for quarter ended March 31, 1993 March 15, 1993 Exhibit 4-142 to Form 10-Q for quarter ended March 31, 1993 April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993 April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993 May 31, 1993 Exhibit 4-148 to Registration No. 33-64296 June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993 (1993 Series AP) June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30, 1993. March 1, 1994 Exhibit 4-163 to Registration No. 33-53207. June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended June 30, 1994. August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended September 30, 1994. December 1, 1994 Exhibit 4-169 to Form 10-K for year ended December 31, 1994. August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended September 30, 1995.
Exhibit Number -------
4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325).
4(c) - First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325).
4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993).
4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994).
4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023).
4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995 (Exhibit 4-175 to Detroit Edison Form 10-Q for quarter ended September 30, 1995).
4(h) - Fifth Supplemental Indenture, dated as of February 1, 1996 (Exhibit 4-1 to Detroit Edison Form 8-A dated March 11, 1996).
4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994).
Exhibit Number -------
*10(a) - Form of 1995 Indemnification Agreement between the Registrant and (1) Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4) Anthony F. Earley, Jr., (5) Larry G. Garberding, (6) Allan D. Gilmour, (7) Theodore S. Leipprandt, (8) John E. Lobbia, (9) Patricia S. Longe, (10) Eugene A. Miller, (11) Dean E. Richardson, (12) Alan E. Schwartz, (13) William Wegner, (14) Christopher C. Arvani, (15) Susan M. Beale, (16) Elaine M. Godfrey, (17) Ronald J. Giaier, (18) Ronald W. Gresens, (19) Thomas A. Hughes, (20) Frederick S. Karwacki, (21) Leslie L. Loomans, (22) Peter A. Marquardt, (23) Christopher C. Nern, and (24) Albert J. Tack (Exhibit 3L (10-1) to DTE Energy Company Form 8-B dated January 2, 1996).
*10(b) - Form of Indemnification Agreement between The Detroit Edison Company ("Detroit Edison") and (1) Frank E. Agosti, (2) Gerard M. Anderson, (3) Robert J. Buckler, (4) Ronald W. Gresens, (5) Leslie L. Loomans, (6) S. Martin Taylor, (7) Susan M. Beale, (8) Frederick S. Karwacki, (9) Douglas R. Gipson, (10) Thomas A. Hughes, (11) Christopher C. Nern, (12) Elaine M. Godfrey, (13) Christopher C. Arvani, (14) Michael E. Champley, (15) Haven E. Cockerham, (16) Ronald J. Giaier, (17) Peter A. Marquardt, and (18) Albert J. Tack (Exhibit 10-41 to Detroit Edison's Form 10-Q for quarter ended June 30, 1993).
*10(c) - The Detroit Edison Company Shareholder Value Improvement Plan - A, as amended and restated effective January 1, 1996 (Exhibit 3L (10-3) to DTE Energy Form 8-B dated January 2, 1996).
*10(d) - Certain arrangements pertaining to the employment of S. Martin Taylor (Exhibit 10-38 to Detroit Edison's Form 10-K for year ended December 31, 1992).
*10(e) - Certain arrangements pertaining to the employment of Anthony F. Earley, Jr. (Exhibit 10-53 to Detroit Edison's Form 10-Q for quarter ended March 31, 1994).
*10(f) - Third Restatement of The Detroit Edison Company Savings Reparation Plan, effective as of January 1, 1996 (Exhibit 3L (10-6) to DTE Energy Form 8-B dated January 2, 1996).
Exhibit Number ------- *10(g) - Certain arrangements pertaining to the employment of Haven E. Cockerham (Exhibit 10-55 to Detroit Edison's Form 10-Q for quarter ended September 30, 1994).
*10(h) - Third Restatement of the Retirement Reparation Plan for Certain Employees of Detroit Edison, effective as of January 1, 1996 (Exhibit 3L (10-9) to DTE Energy Form 8-B dated January 2, 1996).
*10(i) - Third Restatement of the Benefit Equalization Plan for Certain Employees of Detroit Edison, effective as of January 1, 1996 (Exhibit 3L (10-10) to DTE Energy Form 8-B dated January 2, 1996).
*10(j) - Certain arrangements pertaining to the employment of Larry G. Garberding (Exhibit 28-52 to Detroit Edison's Form 10-Q for quarter ended June 30, 1990).
*10(k) - Form of Indemnification Agreement, between Detroit Edison and (1) John E. Lobbia, (2) Larry G. Garberding and (3) Anthony F. Earley, Jr. (Exhibit 19-7 to Detroit Edison's Form 10-Q for quarter ended March 31, 1992).
*10(l) - Form of Indemnification Agreement between Detroit Edison and (1) Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4) Alan E. Schwartz , (5) William Wegner, (6) Theodore S. Leipprandt, (7) Patricia S. Longe, (8) Eugene A. Miller, (9) Dean E. Richardson, and (10) Alan D. Gilmour (Exhibit 19-8 to Detroit Edison's Form 10-Q for quarter ended March 31, 1992).
*10(m) - Supplemental Long Term Disability Plan, dated November 5, 1991 (Exhibit 10-32 to Detroit Edison's Form 10-K for year ended December 31, 1991).
*10(n) - Executive Vehicle Program, dated October 1, 1993 (Exhibit 10-47 to Detroit Edison's Form 10-Q for quarter ended September 30, 1993).
*10(o) - Amendment No. 1 to Executive Vehicle Plan, November 1993 (Exhibit 10-58 to Detroit Edison's Form 10-K for year ended December 31, 1993).
Exhibit Number
*10(p) - Certain arrangements pertaining to the employment of Gerard M. Anderson (Exhibit 10-40 to Detroit Edison's Form 10-K for year ended December 31, 1993).
*10(q) - Third Restatement of The Detroit Edison Company Management Supplemental Benefit Plan, effective as of January 1, 1996 (Exhibit 3L (10-18) to DTE Energy Form 8-B dated January 2, 1996).
*10(r) - Third Restatement of The Detroit Edison Company Plan for Deferring the Payment of Directors' Fees (January 1, 1996) (Exhibit 3L (10-19) to DTE Energy Form 8-B dated January 2, 1996).
*10(s) - DTE Energy Company Retirement Plan for Non-Employee Directors (January 1, 1996) (Exhibit 3L (10-20) to DTE Energy Form 8-B dated January 2, 1996).
*10(t) - DTE Energy Company Plan for Deferring the Payment of Directors' Fees (January 1, 1996) (Exhibit 3L (10-21) to DTE Energy Form 8-B dated January 2, 1996).
21(a) - Subsidiaries of DTE Energy and Detroit Edison (Exhibit 3M (21) to DTE Energy Form 8-B dated January 2, 1996).
99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501).
99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501.)
99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Renaissance Energy Company (an unaffiliated company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to Registration No. 33-50325).
Exhibit Number -------
99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325).
99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325).
99(f) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between The Detroit Edison Company and Renaissance Energy Company (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994).
99(g) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325).
99(h) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994).
99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325).
99(j) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325).
Exhibit Number -------
99(k) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325).
99(l) - Second Amendment, dated as of September 1, 1993, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance (Exhibit 99-11 to Registration No. 33-50325).
99(m) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994).
99(n) - Master Trust Agreement ("Master Trust"), dated as of June 30, 1994, between Detroit Edison and Fidelity Management Trust Company relating to the Savings & Investment Plans (Exhibit 4-167 to Form 10-Q for quarter ended June 30, 1994).
99(o) - First Amendment, effective as of February 1, 1995, to Master Trust.
99(p) - Second Amendment, effective as of February 1, 1995 to Master Trust.
99(q) - Third Amendment, effective January 1, 1996, to Master Trust.
(b) Registrants did not file any reports on Form 8-K during the fourth quarter of 1995.
(c) *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ------------------------------------------- (a) Collection of accounts previously written off.
(b) Uncollectible accounts written off.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 1996
ANNUAL REPORTS ON FORM 10-K FOR DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
File Nos. 1-11607 1-2198 EXHIBIT INDEX
Exhibit Page Number Number ------- ------
Exhibits filed herewith.
3-3 - Amended and Restated By-Laws, dated as of February 26, 1996, of DTE Energy Company.
3-4 - Amended and Restated By-Laws, dated as of February 26, 1996, of The Detroit Edison Company.
4-14 - Fifth Supplemental Note Indenture, dated as of February 1, 1996.
4-15 - Supplemental Indenture, dated as of April 1, 1991, establishing the 1991 Series AP Mortgage Bonds.
*10-1 - Detroit Edison 1996 Shareholder Value Improvement Plan - A.
*10-2 - Detroit Edison Key Employee Deferred Compensation Plan (January 1990).
*10-3 - Detroit Edison Long-Term Incentive Plan.
Exhibit Page Number Number ------- ------
11-2 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock.
12-2 - The Detroit Edison Company and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges.
12-3 - The Detroit Edison Company and Subsidiary Companies Computation of Ratio of Earnings to Fixed Charges and Preferred and Preference Stock Dividends.
16-1 - Letter regarding change in certifying accountant.
23-7 - Consent of Deloitte & Touche LLP.
23-8 - Consent of Price Waterhouse LLP.
27-1 - Financial Data Schedule for the period ended December 31, 1995 for DTE Energy Company and Subsidiary Companies.
27-2 - Financial Data Schedule for the period ended December 31, 1995 for The Detroit Edison Company and Subsidiary Companies.
99-1 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Savings Reparation Plan.
99-2 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Retirement Reparation Plan.
99-3 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Management Supplemental Benefit Plan.
99-4 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Benefit Equalization Plan.
99-5 - The Detroit Edison Company Irrevocable Grantor Trust for The Detroit Edison Company Plan for Deferring the Payment of Directors' Fees.
Exhibit Page Number Number ------- ------
99-6 - The Detroit Edison Company Irrevocable Grantor Trust for The DTE Energy Company Retirement Plan for Non-Employee Directors.
99-7 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy Company Plan for Deferring the Payment of Directors' Fees.
99-8 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy Company Retirement Plan for Non-Employee Directors.
Exhibits incorporated herein by reference.
See Page Numbers ____ for location of Exhibits Incorporated By Reference
3(a) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993).
3(b) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993).
3(c) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993).
3(d) - Amended and Restated Articles of Incorporation of DTE Energy Company, dated December 13, 1995 (Exhibit 3A (3.1) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607).
3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607).
Exhibit Page Number Number ------- ------ 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and Bankers Trust Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below:
September 1, 1947 Exhibit B-20 to Registration No. 2-7136 October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096 November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160 January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595 June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643 June 30, 1982 Exhibit 4-30 to Registration No. 2-78941 August 15, 1982 Exhibit 4-32 to Registration No. 2-79674 October 15, 1985 Exhibit 4-170 to Form 10-K for year ended December 31, 1994 November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992 July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994 December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994 February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994 November 1, 1990 Exhibit 4-110 to Form 10-K for year ended December 31, 1990 May 1, 1991 Exhibit 4-112 to Form 10-Q for quarter ended June 30, 1991 May 15, 1991 Exhibit 4-113 to Form 10-Q for quarter ended June 30, 1991 September 1, 1991 Exhibit 4-116 to Form 10-Q for quarter ended September 30, 1991 November 1, 1991 Exhibit 4-119 to Form 10-K for year ended December 31, 1991
Exhibit Page Number Number ------- ------
January 15, 1992 Exhibit 4-120 to Form 10-K for year ended December 31, 1991 February 29, 1992 Exhibit 4-121 to Form 10-Q for quarter ended March 31, 1992 April 15, 1992 Exhibit 4-122 to Form 10-Q for quarter ended June 30, 1992 July 15, 1992 Exhibit 4-123 to Form 10-Q for quarter ended September 30, 1992 July 31, 1992 Exhibit 4-124 to Form 10-Q for quarter ended September 30, 1992 November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 March 1, 1993 Exhibit 4-141 to Form 10-Q for quarter ended March 31, 1993 March 15, 1993 Exhibit 4-142 to Form 10-Q for quarter ended March 31, 1993 April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993 April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993 May 31, 1993 Exhibit 4-148 to Registration No. 33-64296 June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993 (1993 Series AP) June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30, 1993. March 1, 1994 Exhibit 4-163 to Registration No. 33-53207. June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended June 30, 1994. August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended September 30, 1994. December 1, 1994 Exhibit 4-169 to Form 10-K for year ended December 31, 1994. August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended September 30, 1995.
Exhibit Page Number Number ------- ------
4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325).
4(c) - First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325).
4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993).
4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994).
4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023).
4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995 (Exhibit 4-175 to Detroit Edison Form 10-Q for quarter ended September 30, 1995).
4(h) - Fifth Supplemental Indenture, dated as of February 1, 1996 (Exhibit 4-1 to Detroit Edison Form 8-A dated March 11, 1996).
4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994).
Exhibit Page Number Number ------- ------
*10(a) - Form of 1995 Indemnification Agreement between the Registrant and (1) Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4) Anthony F. Earley, Jr., (5) Larry G. Garberding, (6) Allan D. Gilmour, (7) Theodore S. Leipprandt, (8) John E. Lobbia, (9) Patricia S. Longe, (10) Eugene A. Miller, (11) Dean E. Richardson, (12) Alan E. Schwartz, (13) William Wegner, (14) Christopher C. Arvani, (15) Susan M. Beale, (16) Elaine M. Godfrey, (17) Ronald J. Giaier, (18) Ronald W. Gresens, (19) Thomas A. Hughes, (20) Frederick S. Karwacki, (21) Leslie L. Loomans, (22) Peter A. Marquardt, (23) Christopher C. Nern, and (24) Albert J. Tack (Exhibit 3L (10-1) to DTE Energy Company Form 8-B dated January 2, 1996).
*10(b) - Form of Indemnification Agreement between The Detroit Edison Company ("Detroit Edison") and (1) Frank E. Agosti, (2) Gerard M. Anderson, (3) Robert J. Buckler, (4) Ronald W. Gresens, (5) Leslie L. Loomans, (6) S. Martin Taylor, (7) Susan M. Beale, (8) Frederick S. Karwacki, (9) Douglas R. Gipson, (10) Thomas A. Hughes, (11) Christopher C. Nern, (12) Elaine M. Godfrey, (13) Christopher C. Arvani, (14) Michael E. Champley, (15) Haven E. Cockerham, (16) Ronald J. Giaier, (17) Peter A. Marquardt, and (18) Albert J. Tack (Exhibit 10-41 to Detroit Edison's Form 10-Q for quarter ended June 30, 1993).
*10(c) - The Detroit Edison Company Shareholder Value Improvement Plan - A, as amended and restated effective January 1, 1996 (Exhibit 3L (10-3) to DTE Energy Form 8-B dated January 2, 1996).
*10(d) - Certain arrangements pertaining to the employment of S. Martin Taylor (Exhibit 10-38 to Detroit Edison's Form 10-K for year ended December 31, 1992).
*10(e) - Certain arrangements pertaining to the employment of Anthony F. Earley, Jr. (Exhibit 10-53 to Detroit Edison's Form 10-Q for quarter ended March 31, 1994).
*10(f) - Third Restatement of The Detroit Edison Company Savings Reparation Plan, effective as of January 1, 1996 (Exhibit 3L (10-6) to DTE Energy Form 8-B dated January 2, 1996).
Exhibit Page Number Number ------- ------ *10(g) - Certain arrangements pertaining to the employment of Haven E. Cockerham (Exhibit 10-55 to Detroit Edison's Form 10-Q for quarter ended September 30, 1994).
*10(h) - Third Restatement of the Retirement Reparation Plan for Certain Employees of Detroit Edison, effective as of January 1, 1996 (Exhibit 3L (10-9) to DTE Energy Form 8-B dated January 2, 1996).
*10(i) - Third Restatement of the Benefit Equalization Plan for Certain Employees of Detroit Edison, effective as of January 1, 1996 (Exhibit 3L (10-10) to DTE Energy Form 8-B dated January 2, 1996).
*10(j) - Certain arrangements pertaining to the employment of Larry G. Garberding (Exhibit 28-52 to Detroit Edison's Form 10-Q for quarter ended June 30, 1990).
*10(k) - Form of Indemnification Agreement, between Detroit Edison and (1) John E. Lobbia, (2) Larry G. Garberding and (3) Anthony F. Earley, Jr. (Exhibit 19-7 to Detroit Edison's Form 10-Q for quarter ended March 31, 1992).
*10(l) - Form of Indemnification Agreement between Detroit Edison and (1) Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4) Alan E. Schwartz , (5) William Wegner, (6) Theodore S. Leipprandt, (7) Patricia S. Longe, (8) Eugene A. Miller, (9) Dean E. Richardson, and (10) Alan D. Gilmour (Exhibit 19-8 to Detroit Edison's Form 10-Q for quarter ended March 31, 1992).
*10(m) - Supplemental Long Term Disability Plan, dated November 5, 1991 (Exhibit 10-32 to Detroit Edison's Form 10-K for year ended December 31, 1991).
*10(n) - Executive Vehicle Program, dated October 1, 1993 (Exhibit 10-47 to Detroit Edison's Form 10-Q for quarter ended September 30, 1993).
*10(o) - Amendment No. 1 to Executive Vehicle Plan, November 1993 (Exhibit 10-58 to Detroit Edison's Form 10-K for year ended December 31, 1993).
Exhibit Page Number Number ------- ------
*10(p) - Certain arrangements pertaining to the employment of Gerard M. Anderson (Exhibit 10-40 to Detroit Edison's Form 10-K for year ended December 31, 1993).
*10(q) - Third Restatement of The Detroit Edison Company Management Supplemental Benefit Plan, effective as of January 1, 1996 (Exhibit 3L (10-18) to DTE Energy Form 8-B dated January 2, 1996).
*10(r) - Third Restatement of The Detroit Edison Company Plan for Deferring the Payment of Directors' Fees (January 1, 1996) (Exhibit 3L (10-19) to DTE Energy Form 8-B dated January 2, 1996).
*10(s) - DTE Energy Company Retirement Plan for Non-Employee Directors (January 1, 1996) (Exhibit 3L (10-20) to DTE Energy Form 8-B dated January 2, 1996).
*10(t) - DTE Energy Company Plan for Deferring the Payment of Directors' Fees (January 1, 1996) (Exhibit 3L (10-21) to DTE Energy Form 8-B dated January 2, 1996).
21(a) - Subsidiaries of DTE Energy and Detroit Edison (Exhibit 3M (21) to DTE Energy Form 8-B dated January 2, 1996).
99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501).
99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501.)
99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Renaissance Energy Company (an unaffiliated company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to Registration No. 33-50325).
Exhibit Page Number Number ------- ------
99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325).
99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325).
99(f) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between The Detroit Edison Company and Renaissance Energy Company (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994).
99(g) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325).
99(h) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994).
99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325).
99(j) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325).
Exhibit Page Number Number ------- ------
99(k) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325).
99(l) - Second Amendment, dated as of September 1, 1993, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance (Exhibit 99-11 to Registration No. 33-50325).
99(m) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994).
99(n) - Master Trust Agreement ("Master Trust"), dated as of June 30, 1994, between Detroit Edison and Fidelity Management Trust Company relating to the Savings & Investment Plans (Exhibit 4-167 to Form 10-Q for quarter ended June 30, 1994).
99(o) - First Amendment, effective as of February 1, 1995, to Master Trust.
99(p) - Second Amendment, effective as of February 1, 1995 to Master Trust.
99(q) - Third Amendment, effective January 1, 1996, to Master Trust.
(b) Registrants did not file any reports on Form 8-K during the fourth quarter of 1995.
* Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.