UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~__________________~~___________________________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended September 30, ~~2014~~ 2016

Commission file number 1-2198



Commission File Number	Registrants; State of Incorporation; Address; and Telephone Number	I.R.S. Employer Identification No.
1-11607	DTE Energy Company (a Michigan corporation) One Energy Plaza Detroit, Michigan 48226-1279 313-235-4000	38-3217752

1-2198	DTE Electric Company (a Michigan corporation) One Energy Plaza Detroit, Michigan 48226-1279 313-235-4000	38-0478650

The DTE Electric Company meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is, therefore, filing this Form with the reduced disclosure format.

DTE ELECTRIC COMPANY

(Exact name of registrant as specified in its charter)

Michigan	38-0478650
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
One Energy Plaza, Detroit, Michigan	48226-1279
(Address of principal executive offices)	(Zip Code)

313-235-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

DTE Energy Company (DTE Energy) Yes x No o DTE Electric Company (DTE Electric) Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Web~~web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

DTE Energy Yes x No o DTE Electric Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

DTE Energy Large accelerated filer ox Accelerated filer o Non-accelerated filer xo Smaller reporting company o (Do not check if a ~~smaller~~smallerreporting company) DTE Electric Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o (Do not check if a smallerreporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

DTE Energy Yes o No x DTE Electric Yes o No x

~~DTE~~Number ~~Electric~~of ~~Company~~shares of Common Stock outstanding at September 30, 2016:

Quarterly Report on Form 10-Q



Registrant	Description	Shares
DTE Energy	Common Stock, without par value	179,434,907

DTE Electric	Common Stock, $10 par value, directly owned by DTE Energy	138,632,324

~~Quarter~~This ~~Ended~~combined ~~September 30,~~Form ~~2014~~10-Q is filed separately by two registrants: DTE Energy and DTE Electric. Information contained herein relating to an individual registrant is filed by such registrant solely on its behalf. DTE Electric makes no representation as to information relating exclusively to DTE Energy.

DTE Electric, a wholly-owned subsidiary of DTE Energy, meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.

THIS PAGE INTENTIONALLY LEFT BLANK

TABLE OF CONTENTS

	~~Page~~	Page
~~Definitions~~	1Definitions	1
Forward-Looking Statements	2
	Filing Format	3
Part I - FINANCIAL INFORMATION
	Forward-Looking Statements	3
Item 1. Financial Statements	3
PART I - FINANCIAL INFORMATION
Consolidated Statements of Operations (Unaudited)	3
Item 1.	Financial Statements
Consolidated Statements of Comprehensive Income (Unaudited)	4
	DTE Energy Consolidated Financial Statements (Unaudited)	5
Consolidated Statements of Financial Position (Unaudited)	5
	DTE Electric Consolidated Financial Statements (Unaudited)	11
Consolidated Statements of Cash Flows (Unaudited)	7
	Combined Notes to Consolidated Financial Statements (Unaudited)	17
Consolidated Statements of Changes in Shareholder's Equity (Unaudited)	8
	Note 1 — Organization and Basis of Presentation	17
Notes to Consolidated Financial Statements (Unaudited)	9
	Note 2 — Significant Accounting Policies	19
Item 2. Management's Narrative Analysis of Results of Operations	24
	Note 3 — New Accounting Pronouncements	20
Item 4. Controls and Procedures	27
	Note 4 — Regulatory Matters	22
Part II - OTHER INFORMATION
	Note 5 — Earnings Per Share	23
Item 1. Legal Proceedings	28
	Note 6 — Fair Value	23
Item 1A. Risk Factors	28
	Note 7 — Financial and Other Derivative Instruments	31
Item 6. Exhibits	28
	Note 8 — Long-Term Debt	36
SIGNATURE	29
	Note 9 — Short-Term Credit Arrangements and Borrowings	37
EX-12-51
	Note 10 — Commitments and Contingencies	38
EX-31-93
	Note 11 — Retirement Benefits and Trusteed Assets	42
EX-31-94
	Note 12 — Segment and Related Information	43
EX-32-93
	Note 13 — Subsequent Events	44
EX-32-94
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
EX-101.INS XBRL Instance Document
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
EX-101.SCH XBRL Taxonomy Extension Schema
Item 4.	Controls and Procedures	62
EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
PART II - OTHER INFORMATION
EX-101.DEF XBRL Taxonomy Extension Definition Database
Item 1.	Legal Proceedings	63
EX-101.LAB XBRL Taxonomy Extension Label Linkbase
Item 1A.	Risk Factors	63
EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 6.	Exhibits	64
	Signatures	65

DEFINITIONS

COA		U.S. Court of Appeals for the District of Columbia
ACHD	Allegheny County, PA Health Department
Company		DTE Electric Company and any subsidiary companies
AGS	Appalachia Gathering System is a midstream natural gas asset located in Pennsylvania and West Virginia. DTE Energy purchased 100% of AGS in October 2016, and this asset is part of DTE Energy's non-utility Gas Storage and Pipelines business.
Customer Choice		Michigan legislation giving customers the option to choose alternative suppliers for electricity.
ASU	Accounting Standards Update issued by the FASB
DOE		U.S. Department of Energy
CFTC	U.S. Commodity Futures Trading Commission
DTE Electric	DTE Electric Company (a direct wholly-owned subsidiary of DTE Energy) and subsidiary companies	~~DTE Electric Company (a direct wholly owned subsidiary of DTE Energy Company) and subsidiary companies.~~
DTE Energy	DTE Energy Company, directly or indirectly the parent of DTE Electric, DTE Gas, and numerous non-utility subsidiaries	~~DTE Energy Company, directly or indirectly the parent of DTE Electric, DTE Gas Company and numerous non-utility subsidiaries~~
EPA		U.S. Environmental Protection Agency
DTE Gas	DTE Gas Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies
FASB		Financial Accounting Standards Board
EPA	U.S. Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
FASB	Financial Accounting Standards Board
FOV		Finding of Violation
FERC	Federal Energy Regulatory Commission
FTRs		Financial transmission rights are financial instruments that entitle the holder to receive payments related to costs incurred for congestion on the transmission grid.
FOV	Finding of Violation
MDEQ		Michigan Department of Environmental Quality
FTRs	Financial Transmission Rights are financial instruments that entitle the holder to receive payments related to costs incurred for congestion on the transmission grid.
MISO		Midcontinent Independent System Operator, Inc.
GCR	A Gas Cost Recovery mechanism authorized by the MPSC that allows DTE Gas to recover through rates its natural gas costs.
MPSC		Michigan Public Service Commission
GHGs	Greenhouse gases
MTM		Mark to Market
IRM	Infrastructure Recovery Mechanism
NEIL		Nuclear Electric Insurance Limited
MDEQ	Michigan Department of Environmental Quality
NOV		Notice of Violation
MPSC	Michigan Public Service Commission
NRC		U.S. Nuclear Regulatory Commission
MTM	Mark-to-market
PLD		City of Detroit's Public Lighting Department
NAV	Net Asset Value
PSCR		A Power Supply Cost Recovery mechanism authorized by the MPSC that allows DTE Electric to recover through rates its fuel, fuel-related and purchased power costs.
NEXUS	NEXUS Gas Transmission, LLC
Securitization		DTE Electric financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, The Detroit Edison Securitization Funding LLC.
Non-utility	An entity that is not a public utility. Its conditions of service, prices of goods and services, and other operating related matters are not directly regulated by the MPSC.
TRIA		Terrorism Risk Insurance Extension Act of 2005
NOV	Notice of Violation
TRM		Transitional Reconciliation Mechanism
NRC	U.S. Nuclear Regulatory Commission
VIE		Variable Interest Entity
PADEP	Pennsylvania Department of Environmental Protection
PLD	City of Detroit's Public Lighting Department
Production tax credits	Tax credits as authorized under Sections 45K and 45 of the Internal Revenue Code that are designed to stimulate investment in and development of alternate fuel sources. The amount of a production tax credit can vary each year as determined by the Internal Revenue Service.
PSCR	A Power Supply Cost Recovery mechanism authorized by the MPSC that allows DTE Electric to recover through rates its fuel, fuel-related, and purchased power costs.
REF	Reduced Emissions Fuel
Registrants	DTE Energy and DTE Electric
Retail access	Michigan legislation provided customers the option of access to alternative suppliers for electricity and natural gas.

Units of Measurement kWh Kilowatthour of electricity MWh Megawatthour of electricity

DEFINITIONS



RSN	Remarketable Senior Notes

Securitization	DTE Electric financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, The Detroit Edison Securitization Funding LLC.

SGG	Stonewall Gas Gathering is a midstream natural gas asset located in West Virginia. DTE Energy purchased 55% of SGG in October 2016, and this asset is part of DTE Energy's non-utility Gas Storage and Pipelines business.

Shenango	Shenango Incorporated is a coke battery plant located in Pittsburgh, PA, that was closed in January 2016 and is included in the Power and Industrial Projects segment.

TRM	A Transitional Reconciliation Mechanism authorized by the MPSC that allows DTE Electric to recover through rates the deferred net incremental revenue requirement associated with the transition of PLD customers to DTE Electric's distribution system.

VIE	Variable Interest Entity



Units of Measurement

Bcf	Billion cubic feet of natural gas

BTU	Heat value (energy content) of fuel

MMBtu	One million BTU

MWh	Megawatthour of electricity

FILING FORMAT

This combined Form 10-Q is separately filed by DTE Energy and DTE Electric. Information in this combined Form 10-Q relating to each individual Registrant is filed by such Registrant on its own behalf. DTE Electric makes no representation regarding information relating to any other companies affiliated with DTE Energy other than its own subsidiaries. Neither DTE Energy, nor any of DTE Energy’s other subsidiaries (other than DTE Electric), has any obligation in respect of DTE Electric's debt securities and holders of such debt securities should not consider the financial resources or results of operations of DTE Energy nor any of DTE Energy’s other subsidiaries (other than DTE Electric and its own subsidiaries (in relevant circumstances)) in making a decision with respect to DTE Electric's debt securities. Similarly, none of DTE Electric nor any other subsidiary of DTE Energy has any obligation in respect of debt securities of DTE Energy. This combined Form 10-Q should be read in its entirety. No one section of this combined Form 10-Q deals with all aspects of the subject matter of this combined Form 10-Q. This combined Form 10-Q report should be read in conjunction with the Consolidated Financial Statements and Combined Notes to Consolidated Financial Statements and with Management's Discussion and Analysis included in the combined DTE Energy and DTE Electric 2015 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

Certain information presented herein includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, and ~~business~~businesses of ~~DTE~~the ~~Electric~~Registrants. Words such as “anticipate,” “believe,” “expect,” “projected,” “aspiration,” and “goals” signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to numerous assumptions, risks, and uncertainties that may cause actual future results to be materially different from those contemplated, projected, estimated, or budgeted. Many factors may impact forward-looking statements of the Registrants including, but not limited to, the following:

• impact of regulation by the EPA, FERC, MPSC, NRC, and CFTC, as well as other applicable governmental proceedings and regulations, including any associated impact on rate structures;

• the amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals, or new legislation, including legislative amendments and ~~Customer~~retail ~~Choice~~access programs;

• economic conditions and population changes in ~~our~~the Registrants' geographic area resulting in changes in demand, customer conservation, and thefts of electricity and, for DTE Energy, natural gas;


•	environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements;

• health, safety, financial, environmental, and regulatory risks associated with ownership and operation of nuclear facilities;

• changes in the cost and availability of coal and other raw materials, ~~and~~ purchased power, and natural gas;


•	volatility in the short-term natural gas storage markets impacting third-party storage revenues related to DTE Energy;


•	impact of volatility of prices in the oil and gas markets on DTE Energy's gas storage and pipelines operations;


•	impact of volatility in prices in the international steel markets on DTE Energy's power and industrial projects operations;


•	volatility in commodity markets, deviations in weather, and related risks impacting the results of DTE Energy's energy trading operations;


•	changes in the financial condition of DTE Energy's significant customers and strategic partners;


•	the potential for losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions;


•	access to capital markets and the results of other financing efforts which can be affected by credit agency ratings;


•	instability in capital markets which could impact availability of short and long-term financing;


•	the timing and extent of changes in interest rates;


•	the level of borrowings;

• the potential for increased costs or delays in completion of significant ~~construction~~capital projects;

• changes in, and application of, federal, state, and local tax laws and their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings, and audits;


•	the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;


•	unplanned outages;


•	the cost of protecting assets against, or damage due to, terrorism or cyber attacks;


•	employee relations and the impact of collective bargaining agreements;

• the ~~availability,~~risk ~~cost,~~of ~~coverage~~a ~~and~~major ~~terms~~safety ofincident ~~insurance~~at an electric distribution or generation facility and, ~~stability~~for ofDTE ~~insurance~~Energy, ~~providers~~a gas storage, transmission, or distribution facility;


•	the availability, cost, coverage, and terms of insurance and stability of insurance providers;


•	cost reduction efforts and the maximization of plant and distribution system performance;


•	the effects of competition;


•	changes in and application of accounting standards and financial reporting regulations;

• changes in federal or state laws and their interpretation with respect to regulation, energy policy, and other business issues;

• contract disputes, binding arbitration, litigation, and related appeals; and

• the risks discussed in ~~our~~the Registrants' public filings with the Securities and Exchange Commission.

New factors emerge from time to time. WeThe Registrants cannot predict what factors may arise or how such factors may cause ~~our~~ results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak only as of the date on which such statements are made. WeThe Registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Part I — Financial Information

Item 1. Financial Statements

DTE Energy Company

Consolidated Statements of Operations (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In millions, except per share amounts)
Operating Revenues
Utility operations	$	1,748		$	1,528		$	4,847		$	4,726
Non-utility operations	1,180			1,070			2,909			3,124
	2,928			2,598			7,756			7,850

Operating Expenses
Fuel, purchased power, and gas — utility	503			458			1,482			1,585
Fuel, purchased power, and gas — non-utility	1,034			870			2,527			2,644
Operation and maintenance	562			542			1,620			1,600
Depreciation and amortization	230			196			702			625
Taxes other than income	92			91			282			282
Asset (gains) losses and impairments, net	—			1			(1		)	9
	2,421			2,158			6,612			6,745
Operating Income	507			440			1,144			1,105

Other (Income) and Deductions
Interest expense	114			116			341			341
Interest income	(3		)	(4		)	(17		)	(10		)
Other income	(51		)	(55		)	(160		)	(155		)
Other expenses	12			17			27			36
	72			74			191			212
Income Before Income Taxes	435			366			953			893

Income Tax Expense	110			102			243			250

Net Income	325			264			710			643

Less: Net Loss Attributable to Noncontrolling Interests	(13		)	(1		)	(27		)	(4		)

Net Income Attributable to DTE Energy Company	$	338		$	265		$	737		$	647

Basic Earnings per Common Share
Net Income Attributable to DTE Energy Company	$	1.88		$	1.47		$	4.10		$	3.61

Diluted Earnings per Common Share
Net Income Attributable to DTE Energy Company	$	1.88		$	1.47		$	4.10		$	3.61

Weighted Average Common Shares Outstanding
Basic	179			179			179			179
Diluted	180			180			180			179
Dividends Declared per Common Share	$	0.77		$	0.73		$	2.23		$	2.11

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Energy Company

Consolidated Statements of Comprehensive Income (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In millions)
Net Income	$	325		$	264		$	710		$	643

Other comprehensive income, net of tax:
Benefit obligations, net of taxes of $2, $2, $3, and $6, respectively	4			3			6			9
Net unrealized gains on investments during the period, net of taxes of $1, $—, $1, and $—, respectively	1			—			1			—
Foreign currency translation	(1		)	(2		)	—			(4		)
Other comprehensive income	4			1			7			5

Comprehensive income	329			265			717			648
Less comprehensive loss attributable to noncontrolling interests	(13		)	(1		)	(27		)	(4		)
Comprehensive Income Attributable to DTE Energy Company	$	342		$	266		$	744		$	652

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Energy Company

Consolidated Statements of Financial Position (Unaudited)



	September 30,			December 31,
	2016			2015
	(In millions)
ASSETS
Current Assets
Cash and cash equivalents	$	66		$	37
Restricted cash	21			23
Accounts receivable (less allowance for doubtful accounts of $46 and $49, respectively)
Customer	1,250			1,276
Other	87			72
Inventories
Fuel and gas	467			480
Materials and supplies	326			323
Derivative assets	56			129
Regulatory assets	65			32
Prepaid property tax	130			62
Other	127			141
	2,595			2,575
Investments
Nuclear decommissioning trust funds	1,321			1,236
Investments in equity method investees	706			514
Other	199			186
	2,226			1,936
Property
Property, plant, and equipment	28,748			28,121
Accumulated depreciation and amortization	(10,198		)	(10,087		)
	18,550			18,034
Other Assets
Goodwill	2,018			2,018
Regulatory assets	3,686			3,692
Intangible assets	91			89
Notes receivable	75			85
Derivative assets	46			54
Other	175			179
	6,091			6,117
Total Assets	$	29,462		$	28,662

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Energy Company

Consolidated Statements of Financial Position (Unaudited) — (Continued)



	September 30,			December 31,
	2016			2015
	(In millions, except shares)
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	813		$	809
Accrued interest	115			89
Dividends payable	138			131
Short-term borrowings	410			499
Current portion long-term debt, including capital leases	15			473
Derivative liabilities	85			57
Regulatory liabilities	38			41
Other	355			429
	1,969			2,528
Long-Term Debt (net of current portion)
Mortgage bonds, notes, and other	8,691			8,265
Junior subordinated debentures	780			480
Capital lease obligations	7			15
	9,478			8,760
Other Liabilities
Deferred income taxes	4,140			3,923
Regulatory liabilities	552			569
Asset retirement obligations	2,268			2,194
Unamortized investment tax credit	89			62
Derivative liabilities	99			86
Accrued pension liability	1,132			1,133
Accrued postretirement liability	148			228
Nuclear decommissioning	195			177
Other	243			207
	8,866			8,579
Commitments and Contingencies (Notes 4 and 10)

Equity
Common stock, without par value, 400,000,000 shares authorized, and 179,434,907 and 179,470,213 shares issued and outstanding, respectively	4,137			4,123
Retained earnings	5,131			4,794
Accumulated other comprehensive loss	(138		)	(145		)
Total DTE Energy Company Equity	9,130			8,772
Noncontrolling interests	19			23
Total Equity	9,149			8,795
Total Liabilities and Equity	$	29,462		$	28,662

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Energy Company

Consolidated Statements of Cash Flows (Unaudited)



	Nine Months Ended September 30,
	2016			2015
Operating Activities	(In millions)
Net Income	$	710		$	643
Adjustments to reconcile Net Income to net cash from operating activities:
Depreciation and amortization	702			625
Nuclear fuel amortization	44			40
Allowance for equity funds used during construction	(15		)	(16		)
Deferred income taxes	244			251
Equity earnings of equity method investees	(49		)	(49		)
Dividends from equity method investees	52			49
Asset (gains) losses and impairments, net	—			9
Changes in assets and liabilities:
Accounts receivable, net	6			277
Inventories	10			(36		)
Accounts payable	39			(125		)
Accrued pension liability	(1		)	(160		)
Accrued postretirement liability	(80		)	(213		)
Derivative assets and liabilities	122			32
Regulatory assets and liabilities	93			35
Other current and noncurrent assets and liabilities	(110		)	111
Net cash from operating activities	1,767			1,473
Investing Activities
Plant and equipment expenditures — utility	(1,267		)	(1,239		)
Plant and equipment expenditures — non-utility	(75		)	(162		)
Acquisition	—			(241		)
Proceeds from sale of assets	—			16
Restricted cash for debt redemption, principally Securitization, net	2			99
Proceeds from sale of nuclear decommissioning trust fund assets	1,135			627
Investment in nuclear decommissioning trust funds	(1,140		)	(638		)
Distributions from equity method investees	8			13
Contributions to equity method investees	(199		)	(58		)
Other	33			11
Net cash used for investing activities	(1,503		)	(1,572		)
Financing Activities
Issuance of long-term debt, net of issuance costs	646			956
Redemption of long-term debt	(322		)	(260		)
Repurchase of long-term debt	(59		)	—
Short-term borrowings, net	(89		)	(213		)
Issuance of common stock	—			9
Repurchase of common stock	(33		)	—
Dividends on common stock	(393		)	(370		)
Other	15			(4		)
Net cash from (used for) financing activities	(235		)	118
Net Increase in Cash and Cash Equivalents	29			19
Cash and Cash Equivalents at Beginning of Period	37			48
Cash and Cash Equivalents at End of Period	$	66		$	67

Supplemental disclosure of non-cash investing and financing activities
Plant and equipment expenditures in accounts payable	$	168		$	185

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Energy Company

Consolidated Statements of Changes in Equity (Unaudited)



						Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests
	Common Stock
	Shares		Amount												Total
	(Dollars in millions, shares in thousands)
Balance, December 31, 2015	179,470		$	4,123		$	4,794		$	(145	)	$	23		$	8,795
Implementation of ASU 2016-09	—		—			3			—			—			3
Net Income (Loss)	—		—			737			—			(27		)	710
Dividends declared on common stock	—		—			(400		)	—			—			(400		)
Repurchase of common stock	(394	)	(33		)	—			—			—			(33		)
Benefit obligations, net of tax	—		—			—			6			—			6
Net change in unrealized gains on investments, net of tax	—		—			—			1			—			1
Stock-based compensation, net contributions from noncontrolling interests, and other	359		47			(3		)	—			23			67
Balance, September 30, 2016	179,435		$	4,137		$	5,131		$	(138	)	$	19		$	9,149

See Combined Notes to Consolidated Financial Statements (Unaudited)

DTE Electric Company

Consolidated Statements of Operations (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	2016			2015			2016			2015
	(In millions)
Operating Revenues	$	1,357		$	1,457		$	4,048		$	3,941
Operating Revenues — Utility operations	$	1,608		$	1,385		$	3,976		$	3,735
Operating Expenses
Fuel and purchased power	430			487			1,328			1,294
Fuel and purchased power — utility	495			441			1,191			1,212
Operation and maintenance	~~351~~363			~~335~~330			1,~~022~~019			~~1,009~~966
Depreciation and amortization	~~238~~176			~~233~~141			~~695~~539			~~666~~461
Taxes other than income	6673			6773			~~202~~216			~~200~~214
Asset (gains) losses and reserves, net	—			(3		)	(1		)	(3		)
	1,107			985			2,965			2,853
	1,085			1,119			3,246			3,166
Operating Income	501			400			1,011			882
Operating Income	272			338			802			775
Other (Income) and Deductions
Interest expense	6566			6866			~~189~~196			~~202~~196
Other income	(15		)	(14		)	(45		)	(38		)
Interest income	—			—			(8		)	—
Other expenses	11			7			26			19
Other income	(15		)	(14		)	(48		)	(42		)
	61			61			170			183
Other expenses	9			15			22			32
Income Before Income Taxes	211			277			632			592
	60			67			162			186
Income Tax Expense	75			97			229			206
Income Before Income Taxes	441			333			849			696
Net Income	$	136		$	180		$	403		$	386
Income Tax Expense	156			117			302			244
Net Income	$	285		$	216		$	547		$	452

See Combined Notes to Consolidated Financial Statements (Unaudited)

311

DTE Electric Company

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	2016		2015		2016		2015
	(In millions)
Net income	$	136	$	180	$	403	$	386
Net Income	$	285	$	216	$	547	$	452
Other comprehensive income, net of tax:
Benefit obligations, net of taxes of $0, $0, $0 and $1, respectively	1		1		—		2
Transfer of benefit obligations, net of taxes of $— and $18 in 2015, respectively	—		—		—		28
Comprehensive income	$	137	$	181	$	403	$	388
Comprehensive Income	$	285	$	216	$	547	$	480

See Combined Notes to Consolidated Financial Statements (Unaudited)

412

DTE Electric Company

Consolidated Statements of Financial Position (Unaudited)

	September 30,			December 31,
	2014			2013
	2016			2015
	(In millions)
ASSETS
Current Assets
Cash and cash equivalents	$	2816		$	2715
Restricted cash, principally Securitization	40			100
Accounts receivable (less allowance for doubtful accounts of $27 and $28, respectively)
Accounts receivable (less allowance for doubtful accounts of $30 and $28, respectively)
Customer	778			657
Customer	718			723
Affiliates	14			14
Affiliates	2			24
Other	48			40
Other	16			24
Inventories
Fuel	~~212~~231			~~188~~271
Materials and supplies	~~229~~273			~~215~~251
Notes receivable
Affiliates	3664			~~200~~—
Other	125			2—
Regulatory assets	4657			1317
Prepaid property tax	97101			4144
Other	3013			2722
	1,466			1,584
	1,600			1,331
Investments
Nuclear decommissioning trust funds	1,~~229~~321			1,~~191~~236
Other	~~169~~33			~~160~~35
	1,398			1,351
	1,354			1,271
Property
Property, plant and equipment	19,518			18,730
Property, plant, and equipment	21,737			21,391
Less accumulated depreciation and amortization	(7,183		)	(6,951		)
Accumulated depreciation and amortization	(7,662		)	(7,646		)
	12,335			11,779
	14,075			13,745
Other Assets
Regulatory assets	2,~~171~~960			2,~~275~~969
Securitized regulatory assets	86			231
Intangible assets	44			34
Intangible assets	39			41
Prepaid postretirement costs — affiliates	24			24
Other	~~177~~133			~~149~~144
	2,473			2,696
	3,161			3,171
Total Assets	$	1720,~~672~~190		$	1719,~~410~~518

See Combined Notes to Consolidated Financial Statements (Unaudited)

513

DTE Electric Company

Consolidated Statements of Financial Position (Unaudited) — (Continued)

	September 30,			December 31,
	2014			2013
	2016			2015
	(In millions, except shares)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Accounts payable
Affiliates	$	5450		$	6040
Other	~~346~~350			~~424~~329
Accrued interest	6669			6162
Current portion long-term debt, including capital leases	119			504
Accrued vacation	43			44
Regulatory liabilities	162			278
Current portion long-term debt, including capital leases	6			157
Deferred income taxes	106			91
Regulatory liabilities	21			19
Short-term borrowings
Affiliates	56112			5875
Other	~~254~~—			—272
Other	~~142~~94			~~177~~94
	1,305			1,653
	745			1,092
Long-Term Debt (net of current portion)
Mortgage bonds, notes and other	5,144			4,540
Mortgage bonds, notes, and other	5,877			5,437
Securitization bonds	—			105
Capital lease obligations	7			15
Capital lease obligations	—			4
	5,884			5,452
	5,144			4,649
Other Liabilities
Deferred income taxes	23,~~986~~757			23,~~807~~498
Regulatory liabilities	~~276~~219			~~386~~199
Asset retirement obligations	12,~~745~~084			12,~~667~~020
Unamortized investment tax credit	3786			4158
Nuclear decommissioning	~~179~~195			~~178~~177
Accrued pension liability — affiliates	~~583~~985			~~705~~976
Accrued postretirement liability — affiliates	~~327~~255			~~369~~307
Other	~~110~~75			~~101~~66
	6,243			6,254
	7,656			7,301
Commitments and Contingencies (Notes 7 and 10)
Commitments and Contingencies (Notes 4 and 10)
Shareholder’s Equity
Common stock, $10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding	34,~~596~~086			34,~~596~~086
Retained earnings	1,~~400~~817			1,~~274~~585
Accumulated other comprehensive loss	(16		)	(16		)
Accumulated other comprehensive income	2			2
	4,980			4,854
Total Shareholder’s Equity	5,905			5,673
Total Liabilities and Shareholder’s Equity	$	1720,~~672~~190		$	1719,~~410~~518

See Combined Notes to Consolidated Financial Statements (Unaudited)

614

DTE Electric Company

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
	2014			2013
	2016			2015
	(In millions)
Operating Activities
Net income	$	403		$	386
Net Income	$	547		$	452
Adjustments to reconcile net income to net cash from operating activities:
Adjustments to reconcile Net Income to net cash from operating activities:
Depreciation and amortization	~~695~~539			~~666~~461
Nuclear fuel amortization	3344			2540
Allowance for equity funds used during construction	(1613		)	(1015		)
Deferred income taxes	~~199~~298			~~104~~269
Asset (gains) losses and reserves, net	—			(3		)
Changes in assets and liabilities:
Accounts receivable, net	36(135		)	(40103		)
Inventories	~~(38~~18		)	53(17		)
Accounts payable	759			153
Accrued pension liability — affiliates	~~(122~~9		)	(~~229~~215		)
Accrued postretirement liability — affiliates	(4252		)	(~~148~~164		)
Regulatory assets and liabilities	~~(163~~100		)	~~302~~(12		)
Other assets	(74		)	(42		)
Other current and noncurrent assets and liabilities	(119		)	9
Other liabilities	(39		)	(15		)
Net cash from operating activities	1,295			708
Net cash from operating activities	879			1,064
Investing Activities
Plant and equipment expenditures	(~~1,143~~999		)	(~~946~~1,045		)
Restricted cash for debt redemption, principally Securitization	60			58
Acquisition	—			(241		)
Notes receivable from affiliate	164			(4		)
Proceeds from sale of assets	6			—
Proceeds from sale of nuclear decommissioning trust fund assets	652			477
Restricted cash for debt redemption, principally Securitization, net	—			96
Investment in nuclear decommissioning trust funds	(665		)	(489		)
Notes receivable — affiliates	(64		)	4
Other	(16		)	(21		)
Proceeds from sale of nuclear decommissioning trust fund assets	1,135			627
Net cash used for investing activities	(948		)	(925		)
Investment in nuclear decommissioning trust funds	(1,140		)	(638		)
Transfer of Rabbi Trust assets to affiliate	—			137
Other	34			9
Net cash used for investing activities	(1,028		)	(1,051		)
Financing Activities
Issuance of long-term debt, net of issuance costs	~~942~~355			~~768~~495
Redemption of long-term debt	(~~837~~10		)	(~~491~~115		)
Short-term borrowings — other	254			(119		)
Repurchase of long-term debt	(59		)	—
Short-term borrowings — affiliate	(2		)	(25		)
Capital contribution by parent company	—			300
Dividends on common stock	(277		)	(257		)
Short-term borrowings, net — affiliate	37			(16		)
Other	(10		)	(2		)
Short-term borrowings, net — other	(272		)	(4		)
Net cash from (used for) financing activities	70			(126		)
Dividends on common stock	(315		)	(297		)
Net Increase in Cash and Cash Equivalents	1			13
Other	(2		)	(5		)
Cash and Cash Equivalents at Beginning of the Period	27			30
Net cash from (used for) financing activities	(266		)	358
Cash and Cash Equivalents at End of the Period	$	28		$	43
Net Increase in Cash and Cash Equivalents	1			15
Cash and Cash Equivalents at Beginning of Period	15			14
Cash and Cash Equivalents at End of Period	$	16		$	29
Supplemental disclosure of non-cash investing and financing activities
Plant and equipment expenditures in accounts payable	$	~~139~~118		$	~~155~~134

See Combined Notes to Consolidated Financial Statements (Unaudited)

715

DTE Electric Company

Consolidated Statements of Changes in Shareholder’'s Equity (Unaudited)

				Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive ~~Loss~~Income
	Common Stock
	Shares	Amount										Total
	(Dollars in millions, shares in thousands)
Balance, December 31, 2013	138,632	$	1,386	$	2,210	$	1,274		$	(16	)	$	4,854
Balance, December 31, 2015	138,632	$	1,386	$	2,700	$	1,585		$	2		$	5,673
Net income	—	—		—		403			—			403
Net Income	—	—		—		547			—			547
Dividends declared on common stock	—	—		—		(~~277~~315		)	—			(~~277~~315		)
Balance, September 30, 2014	138,632	$	1,386	$	2,210	$	1,400		$	(16	)	$	4,980
Balance, September 30, 2016	138,632	$	1,386	$	2,700	$	1,817		$	2		$	5,905

See Combined Notes to Consolidated Financial Statements (Unaudited)

816

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited)

Index of Combined Notes to Consolidated Financial Statements (Unaudited)

The Combined Notes to Consolidated Financial Statements (Unaudited) are a combined presentation for DTE Energy and DTE Electric. The following list indicates the Registrant(s) to which each note applies:



Note 1	Organization and Basis of Presentation	DTE Energy and DTE Electric
Note 2	Significant Accounting Policies	DTE Energy and DTE Electric
Note 3	New Accounting Pronouncements	DTE Energy and DTE Electric
Note 4	Regulatory Matters	DTE Energy and DTE Electric
Note 5	Earnings per Share	DTE Energy
Note 6	Fair Value	DTE Energy and DTE Electric
Note 7	Financial and Other Derivative Instruments	DTE Energy and DTE Electric
Note 8	Long-Term Debt	DTE Energy and DTE Electric
Note 9	Short-Term Credit Arrangements and Borrowings	DTE Energy and DTE Electric
Note 10	Commitments and Contingencies	DTE Energy and DTE Electric
Note 11	Retirement Benefits and Trusteed Assets	DTE Energy and DTE Electric
Note 12	Segment and Related Information	DTE Energy
Note 13	Subsequent Events	DTE Energy

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Corporate Structure

DTE ~~Electric~~Energy isowns ~~an electric utility engaged in~~ the ~~generation,~~following purchase, distribution and sale of electricity to approximately 2.1 million customers in southeastern Michigan. DTE Electric is regulated by the MPSC and the FERC. In addition, we are regulated by other federal and state regulatory agencies including the NRC, the EPA and the MDEQ.businesses:

~~References~~• inDTE ~~this~~Electric ~~Report~~is toa ~~“we~~public utility engaged in the generation,” ~~“us~~purchase,” ~~“our”~~distribution, orand ~~“Company”~~sale ~~are~~of electricity to ~~DTE~~approximately ~~Electric~~2.2 ~~and~~million ~~its~~customers ~~subsidiaries,~~in ~~collectively.~~southeastern Michigan;


•	DTE Gas is a public utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.2 million customers throughout Michigan and the sale of storage and transportation capacity; and


•	Other businesses involved in 1) natural gas pipelines, gathering, and storage; 2) power and industrial projects; and 3) energy marketing and trading operations.

DTE Electric and DTE Gas are regulated by the MPSC. Certain activities of DTE Electric and DTE Gas, as well as various other aspects of businesses under DTE Energy are regulated by the FERC. In addition, the Registrants are regulated by other federal and state regulatory agencies including the NRC, the EPA, the MDEQ, and the CFTC.

Basis of Presentation

~~These~~The Consolidated Financial Statements should be read in conjunction with the Combined Notes to Consolidated Financial Statements included in the ~~2013~~combined DTE Energy and DTE Electric 2015 Annual Report on Form 10-K.

The accompanying Consolidated Financial Statements of the Registrants are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the ~~Company’s~~Registrants' estimates.

The Consolidated Financial Statements are unaudited, but, in the ~~Company~~Registrants's ~~opinion~~opinions include all adjustments necessary to present a fair statement of the results for the interim periods. All adjustments are of a normal recurring nature, except as otherwise disclosed in these Consolidated Financial Statements and Combined Notes to Consolidated Financial Statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, ~~2014~~2016.

~~Prior~~ year balances were revised to reflect an increase of $437 million in the Consolidated Statements of Cash Flows line items for (i) Proceeds from sale of nuclear decommissioning trust funds, and (ii) Investment in nuclear decommissioning trust funds for the nine months ended September 30, 2013. These revisions were needed to properly state the gross purchases and sales activity in the nuclear decommissioning trust fund for the nine months ended September 30, 2013. The total of Net cash used for investing activities for the nine months ended September 30, 2013 was unchanged by these revisions. The revisions noted above are not deemed material, individually or in the aggregate, to the prior period Consolidated Financial Statements.17

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The information in these combined notes relates to each of the Registrants as noted in the Index of Combined Notes to Consolidated Financial Statements. However, DTE Electric does not make any representation as to information related solely to DTE Energy or the subsidiaries of DTE Energy other than itself.

Certain prior year balances for the Registrants were reclassified to match the current year's Consolidated Financial Statements presentation. Such revisions for DTE Energy include amounts reclassified to separate Operating Revenues and Fuel, purchased power, and gas between Utility operations and Non-utility operations and from Operations and maintenance to Fuel, purchased power, and gas — non-utility related to the Power and Industrial Projects segment. The reclassifications did not affect DTE Energy's Net Income for the prior periods, as such, they are not deemed material to the previously issued Consolidated Financial Statements. For reclassifications of debt issuance costs arising from ASU 2015-03, see Note 3 to the Consolidated Financial Statements, "New Accounting Pronouncements."

Principles of Consolidation

The ~~Company~~Registrants ~~consolidates~~consolidate all majority-owned subsidiaries and investments in entities in which itthey ~~has~~have controlling influence. Non-majority owned investments are accounted for using the equity method when the ~~Company~~Registrants isare able to significantly influence the operating policies of the investee. When the ~~Company~~Registrants ~~does~~do not influence the operating policies of an investee, the cost method is used. These Consolidated Financial Statements also reflect the ~~Company’s~~Registrants' proportionate interests in certain jointly -owned utility plants. The ~~Company~~Registrants ~~eliminates~~eliminate all intercompany balances and transactions.

The ~~Company~~Registrants ~~evaluates~~evaluate whether an entity is a VIE whenever reconsideration events occur. The ~~Company~~Registrants ~~consolidates~~consolidate VIEs for which itthey isare the primary beneficiary. If ~~the~~a ~~Company~~Registrant is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, ~~the~~a ~~Company~~Registrant considers all relevant facts and circumstances, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE’'s economic performance and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE. The ~~Company~~Registrants ~~performs~~perform ongoing reassessments of all VIEs to determine if the primary beneficiary status has changed.

~~The~~Legal ~~Company~~entities ~~has~~within ~~variable~~DTE ~~interests~~Energy's inPower ~~VIEs~~and ~~through~~Industrial ~~certain~~Projects ofsegment ~~its~~enter into long-term ~~purchase~~contractual ~~contracts. As~~arrangements ofwith ~~September 30,~~customers ~~2014,~~to ~~the~~supply ~~carrying~~energy-related ~~amount~~products ofor ~~assets~~services. The ~~and~~entities ~~liabilities~~are ingenerally ~~the~~designed ~~Consolidated Statements of Financial Position that relate~~ to ~~its~~pass-through ~~variable~~the ~~interests~~commodity ~~under~~risk ~~long-term~~associated ~~purchase~~with these contracts ~~are predominately related~~ to ~~working~~the ~~capital~~customers, ~~accounts~~with ~~and~~DTE ~~generally~~Energy ~~represent~~retaining ~~the~~operational ~~amounts~~and ~~owed~~customer bydefault ~~the~~risk. These ~~Company~~entities ~~for~~generally ~~the~~are ~~deliveries~~VIEs ~~associated~~and ~~with~~consolidated ~~the~~when ~~current~~DTE ~~billing~~Energy ~~cycle~~is ~~under~~ the ~~contracts~~primary beneficiary. ~~The~~In ~~Company~~addition, ~~has~~DTE ~~not~~Energy ~~provided~~has ~~any~~interests ~~significant~~in ~~form~~certain ofVIEs ~~financial~~through ~~support~~which ~~associated~~control ~~with~~of ~~these~~all ~~long-term~~significant ~~contracts. There~~activities is noshared ~~significant~~with ~~potential~~partners, ~~exposure~~and totherefore ~~loss~~are asaccounted afor ~~result~~under ofthe ~~its~~equity ~~variable interests through these long-term purchase contracts~~method.

DTE 9Energy has variable interests in VIEs through certain of its long-term purchase and sale contracts. DTE Electric has variable interests in VIEs through certain of its long-term purchase contracts. As of September 30, 2016, the carrying amount of assets and liabilities in DTE Energy's Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase and sale contracts are predominantly related to working capital accounts and generally represent the amounts owed by or to DTE Energy for the deliveries associated with the current billing cycle under the contracts. As of September 30, 2016, the carrying amount of assets and liabilities in DTE Electric's Consolidated Statements of Financial Position that relate to its variable interests under long-term purchase contracts are predominantly related to working capital accounts and generally represent the amounts owed by DTE Electric for the deliveries associated with the current billing cycle under the contracts. The Registrants have not provided any significant form of financial support associated with these long-term contracts. There is no significant potential exposure to loss as a result of DTE Energy's variable interests through these long-term purchase and sale contracts. In addition, there is no significant potential exposure to loss as a result of DTE Electric's variable interests through these long-term purchase contracts.

~~DTE~~The ~~Electric~~maximum ~~Company~~risk exposure for consolidated VIEs is reflected on the Registrants' Consolidated Statements of Financial Position. For non-consolidated VIEs, the maximum risk exposure is generally limited to its investment, notes receivable, and future funding commitments.

~~Notes~~ ~~to Consolidated Financial Statements (Unaudited) — (Continued)~~18

~~In 2001,~~ DTE ~~Electric~~Energy ~~financed~~Company a— ~~regulatory asset related to Fermi 2 and certain other regulatory assets through the sale of rate reduction bonds by a wholly-owned special purpose entity, Securitization.~~ DTE Electric ~~performs servicing activities including billing and collecting surcharge revenue for Securitization. This entity is a VIE and is consolidated by the~~ Company~~. The maximum risk exposure related to Securitization is reflected on the Company’s Consolidated Statements of Financial Position.~~

~~The~~Combined ~~following~~Notes ~~table~~to ~~summarizes~~Consolidated ~~the~~Financial ~~major balance sheet items as of September~~Statements ~~30, 2014 and December 31, 2013 restricted for Securitization that are either~~ (1Unaudited) ~~assets~~ ~~that can be used only to settle their obligations related to Securitization or~~ — (2Continued) ~~liabilities for which creditors do not have recourse to the general credit of the primary beneficiary.~~

	September 30,		December 31,
	2014		2013
	(In millions)
ASSETS
Restricted cash	$	40	$	100
Accounts receivable	40		34
Securitized regulatory assets	86		231
Other long-term assets	2		4
	$	168	$	369
LIABILITIES
Accounts payable and accrued current liabilities	$	1	$	7
Current portion long-term debt	105		196
Current regulatory liabilities	44		43
Securitization bonds	—		105
Other long-term liabilities	9		8
	$	159	$	359

The following table summarizes the major Consolidated Statements of Financial Position items for consolidated VIEs as of September 30, 2016 and December 31, 2015. All assets and liabilities of a consolidated VIE are presented where it has been determined that a consolidated VIE has either (1) assets that can be used only to settle obligations of the VIE or (2) liabilities for which creditors do not have recourse to the general credit of the primary beneficiary. VIEs, in which DTE Energy holds a majority voting interest and is the primary beneficiary, that meet the definition of a business and whose assets can be used for purposes other than the settlement of the VIE's obligations have been excluded from the table below.



	September 30, 2016		December 31, 2015
	(In millions)
ASSETS
Cash and cash equivalents	$	26	$	14
Restricted cash	6		8
Accounts receivable	22		18
Inventories	115		82
Property, plant, and equipment, net	70		66
Other current and long-term assets	1		4
	$	240	$	192

LIABILITIES
Accounts payable and accrued current liabilities	$	24	$	13
Current portion long-term debt, including capital leases	6		8
Mortgage bonds, notes, and other	5		10
Other current and long-term liabilities	16		6
	$	51	$	37

Amounts for DTE Energy's non-consolidated VIEs as of September 30, 2016 and December 31, 2015 are as follows:



	September 30, 2016		December 31, 2015
	(In millions)
Investment in equity method investees	$	190	$	136
Notes receivable	$	15	$	15
Future funding commitments	$	7	$	—

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

~~Changes in Accumulated~~ Other ~~Comprehensive Loss~~Income

~~For~~Other income for the ~~three~~Registrants ~~and~~is ~~nine~~recognized ~~months~~for ~~ended~~non-operating ~~September~~income 30such as equity earnings, ~~2014~~allowance ~~and~~for ~~2013~~equity funds used during construction, ~~reclassifications~~and ~~out~~contract services. DTE Energy's Power and Industrial Projects segment also recognizes Other income in connection with the sale of ~~accumulated~~membership ~~other~~interests ~~comprehensive~~in ~~loss~~reduced emissions fuel facilities to investors. In exchange for the ~~Company~~cash ~~were~~received, the investors will receive a portion of the economic attributes of the facilities, including income tax attributes. The transactions are not ~~material~~treated as a sale of membership interests for financial reporting purposes. ~~Changes~~Other inincome ~~accumulated~~is ~~other~~considered ~~comprehensive~~earned ~~loss~~when refined coal is produced and tax credits are ~~presented~~generated. Power inand Industrial Projects recognized approximately $20 million and $24 million of Other income for the ~~Consolidated~~three ~~Statements~~months ended September 30, 2016 and 2015, respectively, and approximately $59 million and $64 million of ~~Changes~~Other inincome ~~Shareholder’s~~for ~~Equity~~the nine months ended September 30, 2016 and 2015, respectively.

~~Intangible~~Changes ~~Assets~~in Accumulated Other Comprehensive Income (Loss)

~~The~~For ~~Company~~the ~~has~~three ~~certain~~and ~~intangible~~nine ~~assets~~months ~~relating~~ended toSeptember 30, ~~emission~~2016 ~~allowances~~and 2015, reclassifications out of Accumulated other comprehensive income (loss) for the Registrants were not material. Changes in Accumulated other comprehensive income (loss) are presented in DTE Energy's Consolidated Statements of Changes in Equity and ~~renewable~~DTE ~~energy~~Electric's ~~credits~~Consolidated asStatements ~~shown~~of ~~below:~~Changes in Shareholder's Equity.

	September 30,		December 31,
	2014		2013
	(In millions)
Emission allowances	$	1	$	2
Renewable energy credits	50		51
	51		53
Less current intangible assets	12		12
	$	39	$	41

~~Emission~~DTE ~~allowances~~Energy ~~and~~Company ~~renewable~~— ~~energy~~DTE ~~credits~~Electric ~~are charged to expense, using average cost, as the allowances and credits are consumed in the operation of the business.~~Company

Combined 10Notes to Consolidated Financial Statements (Unaudited) — (Continued)

DTE Electric Company

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

Income Taxes

The ~~Company's~~ effective tax rate ~~for~~and ~~the~~unrecognized ~~three months ended September 30, 2014 was 36% as compared to 35% for the three months ended September 30, 2013. The Company's effective~~ tax ~~rate~~benefits ~~for~~of the ~~nine~~Registrants ~~months~~are ~~ended September 30, 2014 was 36%~~ as ~~compared to 35% for the nine months ended September 30, 2013.~~follows:

DTE Electric had an income tax payable of $2 million at September 30, 2014 and an income tax receivable of $23 million at December 31, 2013 with DTE Energy.



	Effective Tax Rate								Unrecognized Tax Benefits
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30,
	2016		2015		2016		2015		2016
									(In millions)
DTE Energy	25	%	28	%	25	%	28	%	$	3
DTE Electric	35	%	35	%	36	%	35	%	$	4

The ~~Company~~3% ~~had~~decrease $3in ~~million~~DTE ofEnergy's ~~unrecognized~~effective tax ~~benefits~~rate atfor ~~September 30,~~the ~~2014,~~three ~~that,~~and ifnine ~~recognized,~~months ~~would~~ended ~~favorably~~September 30, ~~impact~~2016 ~~its~~is ~~effective~~primarily ~~tax~~due ~~rate. The Company does not anticipate any material changes~~ to ~~the~~higher ~~unrecognized~~production tax ~~benefits~~credits in ~~the next twelve months~~2016.

~~Stock-Based~~DTE ~~Compensation~~Energy had $2 million of unrecognized tax benefits that, if recognized, would favorably impact its effective tax rate. DTE Electric had $3 million of unrecognized tax benefits that, if recognized, would favorably impact its effective tax rate. The Registrants do not anticipate any material changes to the unrecognized tax benefits in the next twelve months.

~~The~~DTE ~~Company~~Electric ~~received~~had anincome ~~allocation~~tax ofreceivables ~~costs~~with ~~from~~ DTE Energy ~~associated with stock-based compensation~~ of $146 million ~~and~~at ~~$10 million for the three months ended~~ September 30, ~~2014~~2016 and ~~2013~~December 31, ~~respectively while such allocation was $43 million for the nine months ended September 30, 2014 and 2013, respectively~~2015.

Unrecognized Compensation Costs

As of September 30, 2016, DTE Energy had $64 million of total unrecognized compensation cost related to non-vested stock incentive plan arrangements. That cost is expected to be recognized over a weighted-average period of 1.31 years.

Allocated Stock-Based Compensation

DTE Electric received an allocation of costs from DTE Energy associated with stock-based compensation of $7 million for the three months ended September 30, 2016 and 2015, respectively, while such allocation was $26 million and $20 million for the nine months ended September 30, 2016 and 2015, respectively.

NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS

InRecently ~~May~~Adopted 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The objectives of this ASU are to improve upon revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and timing of recognition. The core principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This ASU also requires expanded qualitative and quantitative disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. The revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. Early adoption is not permitted. The Company is currently assessing the impact of this ASU on its Consolidated Financial Statements.Pronouncements

~~NOTE~~In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis, which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The ASU affects (1) limited partnerships and similar legal entities, (2) evaluating fees paid to a decision maker or a service provider as a variable interest, (3) the effect of fee arrangements on the primary beneficiary determination, (4) —the ~~FAIR~~effect ~~VALUE~~of related parties on the primary beneficiary determination, and (5) certain investment funds. It is effective for the Registrants for the first interim period within annual reporting periods beginning after December 15, 2015. The Registrants adopted this ASU at January 1, 2016. The implementation of this guidance is reflected in Note 1 of the Consolidated Financial Statements, "Organization and Basis of Presentation." Certain entities are now deemed to be VIEs and are included in DTE Energy's non-consolidated VIE table. This implementation did not have a significant impact on the Registrants' Consolidated Financial Statements.

~~Fair~~In ~~value~~April is2015, ~~defined as~~ the ~~price~~FASB ~~that~~issued ~~would~~ASU beNo. ~~received~~2015-03, toSimplifying ~~sell~~the anPresentation ~~asset~~of orDebt ~~paid~~Issuance toCosts. This ~~transfer~~ASU arequires ~~liability~~that indebt anissuance ~~orderly~~costs ~~transaction~~related ~~between~~to ~~market~~a ~~participants~~recognized atdebt ~~the~~liability ~~measurement~~be ~~date~~presented in athe ~~principal~~balance orsheet ~~most~~as ~~advantageous market. Fair value is~~ a ~~market-based~~direct ~~measurement~~deduction ~~that~~from isthe ~~determined~~carrying ~~based~~amount onof ~~inputs, which refer broadly to assumptions~~ that ~~market~~debt ~~participants use in pricing assets or liabilities. These inputs can be readily observable~~liability, ~~market~~consistent ~~corroborated~~with ordebt ~~generally unobservable inputs~~discounts. ~~The~~This ~~Company~~ASU ~~makes~~is ~~certain~~effective ~~assumptions~~for itreporting ~~believes~~periods ~~that~~beginning ~~market~~after ~~participants~~December ~~would use in pricing assets or liabilities~~15, ~~including assumptions about risk~~2015, and ~~the~~interim ~~risks~~periods ~~inherent~~therein. It inis ~~the inputs~~ to ~~valuation~~be ~~techniques~~applied retrospectively. ~~Credit~~The ~~risk~~Registrants ofadopted ~~the~~this ~~Company~~ASU ~~and~~at ~~its~~January ~~counterparties~~1, is2016. The ~~incorporated~~effect inof the ~~valuation~~adoption ofdecreased assets and liabilities ~~through~~on ~~the~~DTE ~~use~~Energy’s ofand ~~credit~~DTE ~~reserves,~~Electric’s ~~the~~Consolidated ~~impact~~Statements of ~~which~~Financial ~~was~~Position ~~immaterial~~by at$75 ~~September 30,~~million ~~2014~~ and ~~December 31~~$36 million, ~~2013. The~~respectively, ~~Company~~at ~~believes~~December it31, ~~uses valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs~~2015.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Company classifies fair value balances based on the fair value hierarchy defined as follows:20

•DTE ~~Level~~Energy 1Company — ~~Consists~~DTE ofElectric ~~unadjusted quoted prices in active markets for identical assets or liabilities that the~~ Company ~~has the ability to access as of the reporting date.~~

Combined 11Notes to Consolidated Financial Statements (Unaudited) — (Continued)

~~DTE~~In ~~Electric~~May ~~Company~~2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share (or its equivalent) practical expedient. The guidance applies to investments for which there is not a readily determinable fair value (market quote) or the investment is in a mutual fund without a publicly available net asset value. It is effective for the Registrants for the first interim period within annual reporting periods beginning after December 15, 2015. It is to be applied retrospectively. The Registrants adopted this ASU at January 1, 2016. The implementation of this guidance is reflected in Note 6 of the Consolidated Financial Statements, "Fair Value." This implementation did not have a significant impact on the Registrants' Consolidated Financial Statements.

~~Notes~~In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the Statements of Cash Flows. Under the new standard, income tax benefits and deficiencies are to be recognized in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. This provision is to be applied prospectively. Excess tax benefits should be recognized regardless of whether the benefit reduces taxes payable in the current period, along with any valuation allowance, on a modified retrospective basis as a cumulative-effect adjustment to the retained earnings as of the date of adoption. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. This provision can be applied prospectively or retrospectively for all periods presented. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016, and interim periods therein. Effective July 1, 2016 DTE Energy elected to early adopt this standard, as permitted. As a result of the adoption, DTE Energy recognized $1 million of excess tax benefits on stock-based compensation expense in its Consolidated ~~Financial~~Statements of Operations as a component of the provision for income taxes on a prospective basis. DTE Energy also recognized a $3 million cumulative-effect adjustment to increase Retained earnings under the modified retrospective approach. While there was no impact to the current period, cash flows related to the excess tax benefits on DTE Energy's Consolidated Statements of Cash Flows will be classified as operating activities on a prospective basis. In addition, cash paid on the employees’ behalf related to restricted shares withheld for tax purposes have been classified as a financing activity on a retrospective basis. This retrospective application resulted in an increase to Net cash from operating activities with a corresponding decrease to Net cash from (~~Unaudited~~used for) — for financing activities of $5 million for the nine months ended September 30, 2015. For the nine months ended September 30, 2016, the implementation resulted in an increase to Net cash from operating activities with a corresponding decrease to Net cash from (~~Continued~~used for) for financing activities of $4 million. Finally, DTE Energy's stock compensation expense continues to reflect estimated forfeitures.

Recently Issued Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. The objectives of this ASU are to improve upon revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and timing of recognition. The core principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This ASU also requires expanded qualitative and quantitative disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The standard is to be applied retrospectively and early adoption is permitted in the preceding year. The Registrants are currently assessing the impact of the ASU, as amended on their Consolidated Financial Statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory. The ASU replaces the current lower of cost or market test with a lower of cost or net realizable value test when cost is determined on a first-in, first-out or average cost basis. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016, and interim periods therein. It is to be applied prospectively and early adoption is permitted. The ASU will not have a significant impact on the Registrants' Consolidated Financial Statements.

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU primarily impacts accounting for equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) and financial liabilities under the fair value option. Under the new guidance, equity investments will generally be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017. Upon adoption, entities will be required to make a cumulative-effect adjustment to the Statements of Financial Position as of the beginning of the first reporting period in which the guidance is effective. Changes to the accounting for equity securities without a readily determinable fair value will be applied prospectively. The ASU will not have a significant impact on the Registrants' Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), a replacement of Leases (Topic 840). This guidance requires a lessee to account for leases as finance or operating leases. Both leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. This ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for leases existing or entered into after the beginning of the earliest comparative period in the Consolidated Financial Statements. The Registrants expect an increase in assets and liabilities, however, they are currently assessing the impact of this ASU on their Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Entities will apply the new guidance as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The ASU is effective for the Registrants beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Registrants are currently assessing the impact of this standard on their Consolidated Financial Statements.

NOTE 4 — REGULATORY MATTERS

2016 Electric Rate Case Filing

DTE Electric filed a rate case with the MPSC on February 1, 2016 requesting an increase in base rates of $344 million based on a projected twelve-month period ending July 31, 2017. The requested increase in base rates is due primarily to an increase in net plant resulting from infrastructure investments, environmental compliance, and reliability improvement projects. The rate filing also includes projected changes in sales, operation and maintenance expenses, and working capital. The rate filing also requests an increase in return on equity from 10.3% to 10.5% on a capital structure of 50% equity and 50% debt. On August 1, 2016, DTE Electric self-implemented a base rate increase of $245 million. An MPSC final order in this case is expected by February 2017.

2015 DTE Gas Rate Case Filing

DTE Gas filed a rate case with the MPSC on December 18, 2015 requesting an increase in base rates of $183 million, inclusive of $41 million of existing IRM surcharges which are expected to be converted into base rates, based on a projected twelve-month period ending October 31, 2017. The requested increase in base rates is due primarily to an increase in net plant, inclusive of IRM capital investments being recovered through approved IRM surcharge filings. The rate filing also includes projected changes in sales, operation and maintenance expenses, and working capital. The rate filing also requests an increase in return on equity from 10.5% to 10.75% on a capital structure of 52% equity and 48% debt. Concurrent with the MPSC order in this rate case, the existing IRM surcharge being billed will be terminated. However, DTE Gas requested to implement a new IRM surcharge of approximately $9 million to become effective in January 2017. On May 11, 2016, DTE Gas filed an application with the MPSC for a $103 million self-implemented base rate increase effective November 1, 2016. An MPSC final order in this case is expected by December 2016.

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

NOTE 5 — EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income, adjusted for income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the dilution that would occur if any potentially dilutive instruments were exercised or converted into common shares. DTE Energy’s participating securities are restricted shares under the stock incentive program that contain rights to receive non-forfeitable dividends. Stock options and performance shares do not receive cash dividends, as such, these awards are not considered participating securities.

The following is a reconciliation of DTE Energy's basic and diluted income per share calculation for the three and nine months ended September 30:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(In millions, except per share amounts)
Basic Earnings per Share
Net Income Attributable to DTE Energy Company	$	338	$	265	$	737	$	647
Average number of common shares outstanding	179		179		179		179
Dividends declared — common shares	$	138	$	131	$	399	$	378
Dividends declared — net restricted shares	—		—		1		1
Total distributed earnings	$	138	$	131	$	400	$	379
Net Income less distributed earnings	$	200	$	134	$	337	$	268
Distributed (dividends per common share)	$	0.77	$	0.73	$	2.23	$	2.11
Undistributed	1.11		0.74		1.87		1.50
Total Basic Earnings per Common Share	$	1.88	$	1.47	$	4.10	$	3.61
Diluted Earnings per Share
Net Income Attributable to DTE Energy Company	$	338	$	265	$	737	$	647
Average number of common shares outstanding	179		180		179		179
Average incremental shares from assumed exercise of options	1		—		1		—
Common shares for dilutive calculation	180		180		180		179
Dividends declared — common shares	$	138	$	131	$	399	$	378
Dividends declared — net restricted shares	—		—		1		1
Total distributed earnings	$	138	$	131	$	400	$	379
Net Income less distributed earnings	$	200	$	134	$	337	$	268
Distributed (dividends per common share)	$	0.77	$	0.73	$	2.23	$	2.11
Undistributed	1.11		0.74		1.87		1.50
Total Diluted Earnings per Common Share	$	1.88	$	1.47	$	4.10	$	3.61

NOTE 6 — FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Registrants make certain assumptions they believe that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Registrants and their counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at September 30, 2016 and December 31, 2015. The Registrants believe they use valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Registrants classify fair value balances based on the fair value hierarchy defined as follows:


•	Level 1 — Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Registrants have the ability to access as of the reporting date.


•	Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.


•	Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

~~The~~ ~~following table presents assets measured and recorded at fair value on a recurring basis as of September 30, 2014 and December 31, 2013:~~24

	September 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Net Balance		Level 1		Level 2		Level 3		Net Balance
	(In millions)
Assets:
Cash equivalents (a)	$	5	$	51	$	—	$	56	$	2	$	114	$	—	$	116
Nuclear decommissioning trusts	789		440		—		1,229		779		412		—		1,191
Other investments (b)	92		51		—		143		91		44		—		135
Derivative assets — FTRs	—		—		4		4		—		—		3		3
Total	$	886	$	542	$	4	$	1,432	$	872	$	570	$	3	$	1,445
Assets:
Current	$	5	$	51	$	4	$	60	$	2	$	114	$	3	$	119
Noncurrent	881		491		—		1,372		870		456		—		1,326
Total Assets	$	886	$	542	$	4	$	1,432	$	872	$	570	$	3	$	1,445

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following table presents assets and liabilities for DTE Energy measured and recorded at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:



	September 30, 2016																	December 31, 2015
	Level 1			Level 2			Level 3			Other (a)		Netting (b)			Net Balance			Level 1			Level 2			Level 3			Other (a)		Netting (b)			Net Balance
	(In millions)
Assets:
Cash equivalents (c)	$	14		$	3		$	—		$	—	$	—		$	17		$	13		$	3		$	—		$	—	$	—		$	16
Nuclear decommissioning trusts	891			430			—			—		—			1,321			759			473			—			4		—			1,236
Other investments (d)	165			—			—			—		—			165			149			—			—			—		—			149
Derivative assets:
Commodity Contracts:
Natural Gas	114			106			44			—		(209		)	55			193			91			103			—		(285		)	102
Electricity	—			175			38			—		(169		)	44			—			239			68			—		(232		)	75
Other	2			2			3			—		(4		)	3			2			—			3			—		(2		)	3
Foreign currency exchange contracts	—			5			—			—		(5		)	—			—			12			—			—		(9		)	3
Total derivative assets	116			288			85			—		(387		)	102			195			342			174			—		(528		)	183
Total	$	1,186		$	721		$	85		$	—	$	(387	)	$	1,605		$	1,116		$	818		$	174		$	4	$	(528	)	$	1,584

Liabilities:
Derivative liabilities:
Commodity Contracts:
Natural Gas	$	(135	)	$	(82	)	$	(144	)	$	—	$	218		$	(143	)	$	(218	)	$	(57	)	$	(108	)	$	—	$	294		$	(89	)
Electricity	—			(182		)	(44		)	—		185			(41		)	—			(243		)	(62		)	—		253			(52		)
Other	(4		)	(3		)	(4		)	—		11			—			(2		)	—			(8		)	—		8			(2		)
Foreign currency exchange contracts	—			(3		)	—			—		3			—			—			(7		)	—			—		7			—
Total derivative liabilities	(139		)	(270		)	(192		)	—		417			(184		)	(220		)	(307		)	(178		)	—		562			(143		)
Total	$	(139	)	$	(270	)	$	(192	)	$	—	$	417		$	(184	)	$	(220	)	$	(307	)	$	(178	)	$	—	$	562		$	(143	)
Net Assets (Liabilities) at the end of the period	$	1,047		$	451		$	(107	)	$	—	$	30		$	1,421		$	896		$	511		$	(4	)	$	4	$	34		$	1,441
Assets:
Current	$	104		$	220		$	52		$	—	$	(303	)	$	73		$	174		$	284		$	128		$	—	$	(441	)	$	145
Noncurrent	1,082			501			33			—		(84		)	1,532			942			534			46			4		(87		)	1,439
Total Assets	$	1,186		$	721		$	85		$	—	$	(387	)	$	1,605		$	1,116		$	818		$	174		$	4	$	(528	)	$	1,584
Liabilities:
Current	$	(109	)	$	(207	)	$	(92	)	$	—	$	323		$	(85	)	$	(174	)	$	(260	)	$	(87	)	$	—	$	464		$	(57	)
Noncurrent	(30		)	(63		)	(100		)	—		94			(99		)	(46		)	(47		)	(91		)	—		98			(86		)
Total Liabilities	$	(139	)	$	(270	)	$	(192	)	$	—	$	417		$	(184	)	$	(220	)	$	(307	)	$	(178	)	$	—	$	562		$	(143	)
Net Assets (Liabilities) at the end of the period	$	1,047		$	451		$	(107	)	$	—	$	30		$	1,421		$	896		$	511		$	(4	)	$	4	$	34		$	1,441

_______________________________________


(a)	Amounts represent assets valued at NAV as a practical expedient for fair value.


(b)	Amounts represent the impact of master netting agreements that allow DTE Energy to net gain and loss positions and cash collateral held or placed with the same counterparties.

(c)

At September 30, 2016, available-for-sale securities of $17 million included $6 million and $11 million of cash equivalents included in Restricted cash and Other investments on DTE Energy's Consolidated Statements of Financial Position, respectively. At December 31, 2015, available-for-sale securities of $16 million, included $8 million and $8 million of cash equivalents included in Restricted cash and Other investments on DTE Energy's Consolidated Statements of Financial Position, respectively.


(d)	Excludes cash surrender value of life insurance investments.

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following table presents assets for DTE Electric measured and recorded at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:



	September 30, 2016										December 31, 2015
	Level 1		Level 2		Level 3		Other (a)		Net Balance		Level 1		Level 2		Level 3		Other (a)		Net Balance
	(In millions)
Assets:
Cash equivalents (b)	$	8	$	3	$	—	$	—	$	11	$	5	$	3	$	—	$	—	$	8
Nuclear decommissioning trusts	891		430		—		—		1,321		759		473		—		4		1,236
Other investments	8		—		—		—		8		8		—		—		—		8
Derivative assets — FTRs	—		—		3		—		3		—		—		3		—		3
Total	$	907	$	433	$	3	$	—	$	1,343	$	772	$	476	$	3	$	4	$	1,255

Assets:
Current	$	8	$	3	$	3	$	—	$	14	$	5	$	3	$	3	$	—	$	11
Noncurrent	899		430		—		—		1,329		767		473		—		4		1,244
Total Assets	$	907	$	433	$	3	$	—	$	1,343	$	772	$	476	$	3	$	4	$	1,255

_______________________________________

(a) AtAmounts ~~September~~represent ~~30,~~assets ~~2014,~~valued ~~available-for-sale~~at ~~securities~~NAV ofas ~~$56~~a ~~million,~~practical ~~included~~expedient ~~$40 million and $16 million of cash equivalents included in Restricted cash and Other investments, respectively, on the Consolidated Statements of Financial Position. At December 31, 2013, available-~~for~~-sale~~ ~~securities~~fair ~~of $116 million, included $100 million and $16 million of cash equivalents included in Restricted cash and Other investments, respectively, on the Consolidated Statements of Financial Position~~value.

(b) ~~Available~~At September 30, 2016, available-for-sale ~~equity~~ securities atof ~~both~~$11 ~~September~~million ~~30,~~consisted ~~2014~~of ~~and~~cash equivalents included in Other investments on DTE Electric's Consolidated Statements of Financial Position. At December 31, ~~2013~~2015, available-for-sale securities of $78 million ~~are~~consisted of cash equivalents included in Other investments on ~~the~~DTE Electric's Consolidated Statements of Financial Position.

Cash Equivalents

Cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value table are comprised of short-term investments and money market funds.

Nuclear Decommissioning Trusts and Other Investments

The nuclear decommissioning trusts and other investments hold debt and equity securities directly and indirectly through institutional mutual funds and commingled funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices in actively traded markets. Non-exchange-traded fixed income securities are valued based upon quotations available from brokers or pricing services. The institutional mutual funds hold exchange-traded equity or debt securities (exchange and non-exchange traded) and are valued based on ~~stated~~publicly ~~net~~available ~~asset values (NAV)~~NAVs. ~~Non-~~The commingled funds hold exchange-traded ~~fixed~~equity ~~income~~or debt securities (exchange and non-exchange traded) and are valued based ~~upon~~on ~~quotations~~a ~~available~~calculated ~~from~~NAV ~~brokers~~as ora ~~pricing~~practical ~~services~~expedient. A primary price source is identified by asset type, class, or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustee determines that another price source is considered to be preferable. The ~~Company~~Registrants ~~has~~have obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, the ~~Company~~Registrants selectively ~~corroborates~~corroborate the fair value of securities by comparison of market-based price sources. Investment policies and procedures are determined by ~~the~~DTE ~~Company~~Energy's Trust Investments Department which reports to ~~the~~DTE ~~Company~~Energy's Vice President and Treasurer.

1226

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

Derivative Assets and Liabilities

Derivative assets and liabilities are comprised of physical and financial derivative contracts, including futures, forwards, options, and swaps that are both exchange-traded and over-the-counter traded contracts. Various inputs are used to value derivatives depending on the type of contract and availability of market data. Exchange-traded derivative contracts are valued using quoted prices in active markets. The ~~Company~~Registrants ~~considers~~consider the following criteria in determining whether a market is considered active: frequency in which pricing information is updated, variability in pricing between sources or over time, and the availability of public information. Other derivative contracts are valued based upon a variety of inputs including commodity market prices, broker quotes, interest rates, credit ratings, default rates, market-based seasonality, and basis differential factors. The ~~Company~~Registrants ~~monitors~~monitor the prices that are supplied by brokers and pricing services and may use a supplemental price source or change the primary price source of an index if prices become unavailable or another price source is determined to be more representative of fair value. The ~~Company~~Registrants ~~has~~have obtained an understanding of how these prices are derived. Additionally, the ~~Company~~Registrants selectively ~~corroborates~~corroborate the fair value of ~~its~~their transactions by comparison of market-based price sources. Mathematical valuation models are used for derivatives for which external market data is not readily observable, such as contracts which extend beyond the actively traded reporting period. The ~~Company~~Registrants ~~has~~have established a Risk Management Committee whose responsibilities include directly or indirectly ensuring all valuation methods are applied in accordance with predefined policies. The development and maintenance of ~~our~~the Registrants' forward price curves has been assigned to ~~our~~DTE Energy's Risk Management Department, which is separate and distinct from the trading functions within ~~the~~DTE ~~Company~~Energy.

The following ~~table~~tables ~~presents~~present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Energy for the three and nine months ended September 30, ~~2014~~2016 and ~~2013~~2015:

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30, 2016												Three Months Ended September 30, 2015
	2014			2013			2014			2013
	Natural Gas			Electricity			Other			Total			Natural Gas			Electricity			Other			Total
	(In millions)
Net Assets as of beginning of period	$	7		$	2		$	3		$	1
Net Assets (Liabilities) as of June 30	$	(62	)	$	(6	)	$	(1	)	$	(69	)	$	(8	)	$	3		$	1		$	(4	)
Change in fair value recorded in regulatory assets/liabilities	(3		)	3			9			7
Transfers into Level 3 from Level 2	—			—			—			—			—			—			—			—
Purchases, issuances and settlements:
Transfers from Level 3 into Level 2	(1		)	—			—			(1		)	—			—			—			—
Settlements	—			—			(8		)	(3		)
Total gains (losses):
Net Assets as of September 30,	$	4		$	5		$	4		$	5
Included in earnings	(65		)	24			—			(41		)	24			18			(3		)	39
The amount of total gains (losses) included in regulatory assets and liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30, 2014 and 2013	$	(1	)	$	3		$	4		$	5
Recorded in Regulatory liabilities	—			—			2			2			—			—			3			3
Purchases, issuances, and settlements:
Settlements	28			(24		)	(2		)	2			5			(18		)	(2		)	(15		)
Net Assets (Liabilities) as of September 30	$	(100	)	$	(6	)	$	(1	)	$	(107	)	$	21		$	3		$	(1	)	$	23
The amount of total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30, 2016 and 2015 and reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, and gas — non-utility in DTE Energy's Consolidated Statements of Operations	$	(50	)	$	6		$	—		$	(44	)	$	18		$	(3	)	$	(3	)	$	12

No ~~transfers between Levels 1, 2 or 3 occurred in the three and nine months ended September 30, 2014 and 2013.~~27

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)



	Nine Months Ended September 30, 2016												Nine Months Ended September 30, 2015
	Natural Gas			Electricity			Other			Total			Natural Gas			Electricity			Other			Total
	(In millions)
Net Assets (Liabilities) as of December 31	$	(5	)	$	6		$	(5	)	$	(4	)	$	30		$	(5	)	$	(1	)	$	24
Transfers into Level 3 from Level 2	—			—			—			—			—			—			—			—
Transfers from Level 3 into Level 2	—			—			—			—			—			—			—			—
Total gains (losses):
Included in earnings	(123		)	(22		)	1			(144		)	(11		)	42			(5		)	26
Recorded in Regulatory liabilities	—			—			6			6			—			—			14			14
Purchases, issuances, and settlements:
Purchases	—			1			—			1			—			2			—			2
Settlements	28			9			(3		)	34			2			(36		)	(9		)	(43		)
Net Assets (Liabilities) as of September 30	$	(100	)	$	(6	)	$	(1	)	$	(107	)	$	21		$	3		$	(1	)	$	23
The amount of total gains (losses) included in Net Income attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30, 2016 and 2015 and reflected in Operating Revenues — Non-utility operations and Fuel, purchased power, and gas — non-utility in DTE Energy's Consolidated Statements of Operations	$	(165	)	$	(1	)	$	2		$	(164	)	$	(94	)	$	8		$	(4	)	$	(90	)

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Electric for the three and nine months ended September 30, 2016 and 2015:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In millions)
Net Assets as of beginning of period	$	4		$	5		$	3		$	3
Change in fair value recorded in Regulatory liabilities	2			3			6			14
Purchases, issuances, and settlements:
Settlements	(3		)	(3		)	(6		)	(12		)
Net Assets as of September 30	$	3		$	5		$	3		$	5
The amount of total gains (losses) included in Regulatory liabilities attributed to the change in unrealized gains (losses) related to assets held at September 30, 2016 and 2015 and reflected in DTE Electric's Consolidated Statements of Financial Position	$	1		$	1		$	3		$	5

Derivatives are transferred between levels primarily due to changes in the source data used to construct price curves as a result of changes in market liquidity. Transfers in and transfers out are reflected as if they had occurred at the beginning of the period.

There were no transfers between Levels 1 and 2 for the Registrants during the three and nine months ended September 30, 2016 and 2015, and there were no transfers from or into Level 3 for DTE Electric during the same periods.

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following tables present the unobservable inputs related to DTE Energy's Level 3 assets and liabilities as of September 30, 2016 and December 31, 2015:



	September 30, 2016
Commodity Contracts	Derivative Assets		Derivative Liabilities			Valuation Techniques	Unobservable Input	Range						Weighted Average
	(In millions)
Natural Gas	$	44	$	(144	)	Discounted Cash Flow	Forward basis price (per MMBtu)	$	(2.08	) —	$	5.75	/MMBtu	$	(0.07	)/MMBtu
Electricity	$	38	$	(44	)	Discounted Cash Flow	Forward basis price (per MWh)	$	(10	) —	$	14	/MWh	$	1	/MWh



	December 31, 2015
Commodity Contracts	Derivative Assets		Derivative Liabilities			Valuation Techniques	Unobservable Input	Range						Weighted Average
	(In millions)
Natural Gas	$	103	$	(108	)	Discounted Cash Flow	Forward basis price (per MMBtu)	$	(1.50	) —	$	2.77	/MMBtu	$	(0.19	)/MMBtu
Electricity	$	68	$	(62	)	Discounted Cash Flow	Forward basis price (per MWh)	$	(11	) —	$	14	/MWh	$	2	/MWh

The unobservable inputs used in the fair value measurement of the electricity and natural gas commodity types consist of inputs that are less observable due in part to lack of available broker quotes, supported by little, if any, market activity at the measurement date or are based on internally developed models. Certain basis prices (i.e., the difference in pricing between two locations) included in the valuation of natural gas and electricity contracts were deemed unobservable.

The inputs listed above would have a direct impact on the fair values of the above security types if they were adjusted. A significant increase (decrease) in the basis price would result in a higher (lower) fair value for long positions, with offsetting impacts to short positions.

Fair Value of Financial Instruments

The fair value of financial instruments included in the table below is determined by using quoted market prices when available. When quoted prices are not available, pricing services may be used to determine the fair value with reference to observable interest rate indexes. The ~~Company~~Registrants ~~has~~have obtained an understanding of how the fair values are derived. The ~~Company~~Registrants also selectively ~~corroborates~~corroborate the fair value of ~~its~~their transactions by comparison of market-based price sources. Discounted cash flow analyses based upon estimated current borrowing rates are also used to determine fair value when quoted market prices are not available. The fair values of notes receivable, excluding capital leases, and notes payable are generally estimated using discounted cash flow techniques that incorporate market interest rates as well as assumptions about the remaining life of the loans and credit risk. Depending on the information available, other valuation techniques may be used that rely on internal assumptions and models. Valuation policies and procedures for the Registrants are determined by ~~the~~DTE ~~Company~~Energy's Treasury Department which reports to ~~the~~DTE ~~Company~~Energy's Vice President and Treasurer.

The 13following table presents the carrying amount and fair value of financial instruments for DTE Energy as of September 30, 2016 and December 31, 2015:

DTE Electric Company



	September 30, 2016								December 31, 2015
	Carrying		Fair Value						Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
	(In millions)
Notes receivable, excluding capital leases	$	33	$	—	$	—	$	33	$	32	$	—	$	—	$	32
Dividends payable	$	138	$	138	$	—	$	—	$	131	$	131	$	—	$	—
Short-term borrowings	$	410	$	—	$	410	$	—	$	499	$	—	$	499	$	—
Notes payable (a)	$	15	$	—	$	—	$	15	$	—	$	—	$	—	$	—
Long-term debt, excluding capital leases	$	9,481	$	802	$	8,588	$	1,322	$	9,210	$	496	$	8,136	$	1,203

~~Notes to Consolidated Financial Statements (Unaudited) — (Continued)~~_______________________________________

~~The~~(a) ~~following~~Included ~~table~~in ~~presents~~Current ~~the~~Liabilities ~~carrying~~— ~~amount~~Other and ~~fair~~Other ~~value~~Liabilities of— ~~financial~~Other ~~instruments~~on asDTE ofEnergy's ~~September 30,~~Consolidated ~~2014~~Statements ~~and~~of ~~December 31,~~Financial ~~2013:~~Position.

	September 30, 2014								December 31, 2013
	Carrying		Fair Value						Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
	(In millions)
Notes receivable, excluding capital leases	$	14	$	—	$	—	$	14	$	10	$	—	$	—	$	10
Notes receivable — affiliates	$	36	$	—	$	—	$	36	$	200	$	—	$	—	$	200
Short-term borrowings — affiliates	$	56	$	—	$	—	$	56	$	58	$	—	$	—	$	58
Short-term borrowings — other	$	254	$	—	$	254	$	—	—		$	—	$	—	$	—
Long-term debt, excluding capital leases	$	5,259	$	—	$	5,062	$	728	$	5,146	$	—	$	5,253	$	136

DTE Energy Company — DTE Electric Company

Combined Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The following table presents the carrying amount and fair value of financial instruments for DTE Electric as of September 30, 2016 and December 31, 2015:



	September 30, 2016								December 31, 2015
	Carrying		Fair Value						Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
	(In millions)
Notes receivable, excluding capital leases	$	5	$	—	$	—	$	5	$	5	$	—	$	—	$	5
Notes receivable — affiliates	$	64	$	—	$	—	$	64	$	—	$	—	$	—	$	—
Short-term borrowings — affiliates	$	112	$	—	$	—	$	112	$	75	$	—	$	—	$	75
Short-term borrowings — other	$	—	$	—	$	—	$	—	$	272	$	—	$	272	$	—
Notes payable — other (a)	$	4	$	—	$	—	$	4	$	—	$	—	$	—	$	—
Long-term debt, excluding capital leases	$	5,877	$	—	$	6,082	$	602	$	5,588	$	—	$	5,432	$	545

_______________________________________


(a)	Included in Current Liabilities — Other and Other Liabilities — Other on DTE Electric's Consolidated Statements of Financial Position.

For further fair value information on financial and derivative instruments, see Note 7 to the Consolidated Financial Statements, "Financial and Other Derivative Instruments."

Nuclear Decommissioning Trust Funds

DTE Electric has a legal obligation to decommission its nuclear power plants following the expiration of ~~their~~its operating licenses. This obligation is reflected as an ~~asset~~Asset retirement obligation on ~~the~~DTE Electric's Consolidated Statements of Financial Position. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 and the disposal of low-level radioactive waste. ~~DTE Electric is continuing to fund FERC jurisdictional amounts for decommissioning even though explicit provisions are not included in FERC rates.~~

The following table summarizes ~~the~~DTE Electric's fair value of the nuclear decommissioning trust fund assets:

	September 30,		December 31,
	September 30, 2016		December 31, 2015
	2014		2013
	(In millions)
Fermi 2	$	1,~~205~~292	$	1,~~172~~211
Fermi 1	3		3
Low-level radioactive waste	2126		1622
Total	$	1,~~229~~321	$	1,~~191~~236

The costs of securities sold are determined on the basis of specific identification. The following table sets forth ~~the~~DTE Electric's gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	2016			2015			2016			2015
	(In millions)
Realized gains	$	813		$	118		$	2459		$	30
Realized losses	$	(38	)	$	(1110	)	$	(1448	)	$	(2523	)
Proceeds from sales of securities	$	177		$	168		$	652		$	477
Proceeds from sale of securities	$	394		$	187		$	1,135		$	627

~~Realized~~ gains and losses from the sale of securities for the Fermi 2 and the low-level radioactive waste funds are recorded to the Regulatory asset and Nuclear decommissioning liability. The following table sets forth the fair value and unrealized gains for the nuclear decommissioning trust funds:30

	September 30, 2014				December 31, 2013
	Fair		Unrealized		Fair		Unrealized
	Value		Gains		Value		Gains
	(In millions)
Equity securities	$	748	$	209	$	730	$	201
Debt securities	465		18		442		12
Cash and cash equivalents	16		—		19		—
	$	1,229	$	227	$	1,191	$	213

DTE Energy Company — DTE Electric Company

Combined 14Notes to Consolidated Financial Statements (Unaudited) — (Continued)

Realized gains and losses from the sale of securities for Fermi 2 are recorded to the Regulatory asset and Nuclear decommissioning liability. Realized gains and losses from the sale of securities for low-level radioactive waste funds are recorded to the Nuclear decommissioning liability. The following table sets forth DTE Electric's ~~Company~~fair value and unrealized gains and losses for the nuclear decommissioning trust funds:

Notes to Consolidated Financial Statements (Unaudited) — (Continued)



	September 30, 2016							December 31, 2015
	Fair Value		Unrealized Gains		Unrealized Losses			Fair Value		Unrealized Gains		Unrealized Losses
	(In millions)
Equity securities	$	872	$	213	$	(47	)	$	731	$	195	$	(68	)
Debt securities	439		25		(1		)	499		16		(4		)
Cash and cash equivalents	10		—		—			6		—		—
	$	1,321	$	238	$	(48	)	$	1,236	$	211	$	(72	)

The debt securities at September 30, ~~2014~~2016 and December 31, ~~2013~~2015 had an average maturity of approximately 7 and 6 years, respectively. Securities held in the ~~nuclear~~Nuclear decommissioning trust funds are classified as available-for-sale. As DTE Electric does not have the ability to hold impaired investments for a period of time sufficient to allow for the anticipated recovery of market value, all unrealized losses are considered to be other-than-temporary impairments.

Unrealized losses incurred by the Fermi 2 trust are recognized as a Regulatory asset~~. DTE~~ ~~Electric~~and ~~recognized~~Nuclear ~~$37~~decommissioning ~~million~~liability. Unrealized ~~and~~losses ~~$31~~on ~~million~~the oflow-level ~~unrealized~~radioactive ~~losses~~waste asfunds ~~Regulatory~~are ~~assets~~recognized atas ~~September 30,~~a ~~2014~~Nuclear ~~and~~decommissioning ~~December 31, 2013, respectively~~liability.

Other Securities

At September 30, ~~2014~~2016 and December 31, ~~2013~~2015, the Registrants' securities were comprised primarily of money market and equity securities. ~~During~~There ~~the~~were ~~three and nine months ended September 30, 2014 and 2013,~~ no ~~amounts of~~ unrealized losses on available-for-sale securities which were reclassified out of ~~other~~Other comprehensive income (loss) and realized into ~~net~~Net ~~income~~Income for DTE Energy or DTE Electric during the ~~periods~~three and nine months ended September 30, 2016 and 2015. Gains related to trading securities held at September 30, ~~2014~~2016 ~~and 2013~~ were $815 million and losses related to trading securities held at September 30, 2015 were $122 million, respectively, for the Registrants. The trading gains or losses related to the Rabbi Trust assets, included in Other investments at DTE Energy, are allocated from DTE Energy to DTE Electric.

NOTE 57 — FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS

The ~~Company~~Registrants ~~recognizes~~recognize all derivatives at their fair value as Derivative assets or liabilities on ~~the~~their respective Consolidated Statements of Financial Position unless they qualify for certain scope exceptions, including the normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge),; or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in the value of the underlying exposure is deferred in Accumulated other comprehensive income (loss) and later reclassified into earnings when the underlying transaction occurs. Gains or losses from the ineffective portion of cash flow hedges are recognized in earnings immediately. For fair value hedges, changes in fair values for the derivative and hedged item are recognized in earnings each period. For derivatives that do not qualify or are not designated for hedge accounting, changes in fair value are recognized in earnings each period.

The ~~Company's~~Registrants’ primary market risk exposure is associated with commodity prices, credit, and interest rates. The ~~Company~~Registrants ~~has~~have risk management policies to monitor and manage market risks. The ~~Company~~Registrants ~~uses~~use derivative instruments to manage some of the exposure. DTE ~~Electric~~Energy ~~generates, purchases, distributes and sells electricity. DTE Electric~~ uses ~~forward~~derivative ~~energy~~instruments ~~contracts~~for totrading ~~manage~~purposes ~~changes~~ in ~~the~~its ~~price~~Energy ofTrading ~~electricity and fuel~~segment. ~~Substantially~~Contracts ~~all~~classified ofas ~~these~~derivative ~~contracts~~instruments ~~meet~~include ~~the~~electricity, ~~normal~~natural ~~purchases~~gas, ~~and~~oil, ~~sales~~certain ~~exemption~~coal ~~and~~forwards, ~~are~~futures, ~~therefore~~options, ~~accounted~~swaps, ~~for~~and ~~under~~foreign ~~the~~currency ~~accrual~~exchange ~~method~~contracts. ~~Other~~Items ~~derivative~~not ~~contracts~~classified ~~are~~as ~~MTM~~derivatives ~~and~~include ~~recoverable~~natural ~~through~~gas ~~the~~inventory, ~~PSCR~~pipeline ~~mechanism~~transportation ~~when~~contracts, ~~settled. This~~renewable ~~results~~energy incredits, ~~the deferral of unrealized gains~~ and ~~losses~~natural asgas ~~Regulatory~~storage assets ~~or liabilities until realized~~.

~~The~~ ~~following table presents the fair value of derivative instruments as of September 30, 2014 and December~~ 31~~, 2013:~~

	September 30,		December 31,
	2014		2013
	(In millions)
FTRs — Other current assets	$	4	$	3
Total derivatives not designated as hedging instrument	$	4	$	3

DTE Energy Company — DTE Electric Company

Combined 15Notes to Consolidated Financial Statements (Unaudited) — (Continued)

DTE Electric — ~~Company~~DTE Electric generates, purchases, distributes, and sells electricity. DTE Electric uses forward energy contracts to manage changes in the price of electricity and fuel. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Other derivative contracts are MTM and recoverable through the PSCR mechanism when settled. This results in the deferral of unrealized gains and losses as Regulatory assets or liabilities until realized.

~~Notes~~DTE toGas ~~Consolidated~~— ~~Financial~~DTE ~~Statements~~Gas ~~(Unaudited)~~purchases, ~~— (Continued)~~stores, transports, distributes and sells natural gas, and sells storage and transportation capacity. DTE Gas has fixed-priced contracts for portions of its expected natural gas supply requirements through March 2019. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. DTE Gas may also sell forward transportation and storage capacity contracts. Forward transportation and storage contracts are generally not derivatives and are therefore accounted for under the accrual method.

~~NOTE~~Gas 6Storage and Pipelines — ~~ASSET~~This ~~RETIREMENT~~segment ~~OBLIGATIONS~~is primarily engaged in services related to the transportation and storage of natural gas. Primarily fixed-priced contracts are used in the marketing and management of transportation and storage services. Generally these contracts are not derivatives and are therefore accounted for under the accrual method.

APower ~~reconciliation~~and ofIndustrial Projects — This segment manages and operates energy and pulverized coal projects, a coke battery, reduced emissions fuel projects, landfill gas recovery, and power generation assets. Primarily fixed-price contracts are used in the ~~asset~~marketing ~~retirement~~and ~~obligations~~management ~~for~~of the ~~nine~~segment ~~months~~assets. These ~~ended~~contracts ~~September~~are ~~30,~~generally ~~2014~~not ~~follows:~~derivatives and are therefore accounted for under the accrual method.

	(In millions)
Asset retirement obligations at December 31, 2013	$	1,667
Accretion	77
Liabilities incurred	8
Liabilities settled	(3		)
Revision in estimated cash flows	(4		)
Asset retirement obligations at September 30, 2014	$	1,745

Energy Trading — Commodity Price Risk — Energy Trading markets and trades electricity, natural gas physical products, and energy financial instruments, and provides energy and asset management services utilizing energy commodity derivative instruments. Forwards, futures, options, and swap agreements are used to manage exposure to the risk of market price and volume fluctuations in its operations. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met.

~~NOTE~~Energy 7Trading — Foreign Currency Exchange Risk — ~~REGULATORY~~Energy ~~MATTERS~~Trading has foreign currency exchange forward contracts to economically hedge fixed Canadian dollar commitments existing under natural gas and power purchase and sale contracts and natural gas transportation contracts. Energy Trading enters into these contracts to mitigate price volatility with respect to fluctuations of the Canadian dollar relative to the U.S. dollar. These derivatives are accounted for by recording changes in fair value to earnings unless hedge accounting criteria are met.

~~Refundable~~Corporate ~~Revenue~~and ~~Decoupling~~Other — ~~(RDM)/~~Interest ~~Deferred~~Rate ~~Gain~~Risk — ~~Amortization~~DTE Energy may use interest rate swaps, treasury locks, and other derivatives to hedge the risk associated with interest rate market volatility.

InCredit ~~September~~Risk — ~~2012, the MPSC approved~~ DTE ~~Electric's~~Energy ~~accounting~~maintains ~~application~~credit topolicies ~~defer~~that ~~for~~significantly ~~future~~minimize ~~amortization~~overall ~~the~~credit ~~gain~~risk. These ~~resulting~~policies ~~from~~include ~~the~~an ~~reversal~~evaluation of ~~the~~potential ~~Company's~~customers’ ~~$127~~and ~~million~~counterparties’ ~~regulatory~~financial ~~liability~~condition, ~~associated~~including ~~with~~ the ~~operation~~viability of ~~the~~underlying ~~RDM. The~~productive ~~approved~~assets, ~~application~~credit ~~provided~~rating, ~~for~~collateral ~~the~~requirements, ~~amortization~~or ofother ~~the~~credit ~~regulatory~~enhancements ~~liability~~such toas ~~income,~~letters ~~at a monthly rate~~ of ~~approximately~~credit ~~$10~~or guarantees.6 DTE ~~million,~~Energy ~~beginning~~generally ~~January~~uses ~~2014. On~~standardized ~~April~~agreements 1,that ~~2014,~~allow the ~~MPSC~~netting ~~approved~~of ~~DTE~~positive ~~Electric's~~and ~~accounting~~negative ~~application~~transactions toassociated ~~suspend~~with ~~the~~a ~~amortization~~single ofcounterparty. DTE ~~the~~Energy ~~RDM~~maintains ~~regulatory~~a ~~liability~~provision asfor ofcredit ~~June~~losses ~~30,~~based ~~2014~~on ~~and~~factors tosurrounding ~~complete~~ the ~~amortization~~credit ~~over~~risk ~~the~~of ~~period~~its ~~January~~customers, ~~2015~~historical totrends, ~~June~~and ~~2015~~other information. IfBased on DTE ~~Electric~~Energy's ~~base~~credit ~~rates~~policies ~~are~~and ~~increased~~its ~~prior~~September 30, to2016 ~~July~~provision 1,for ~~2015~~credit losses, ~~the~~DTE ~~Company~~Energy’s ~~will~~exposure ~~cease~~to ~~amortization~~counterparty ~~and~~nonperformance ~~refund~~is not expected to ~~customers~~have ~~the~~a ~~remaining~~material ~~unamortized~~adverse ~~balance~~effect ofon ~~the~~DTE ~~regulatory~~Energy's ~~liability~~Consolidated Financial Statements.

~~Transition~~Derivative ~~of PLD Customers to DTE Electric's Distribution System~~Activities

~~On July 19, 2013,~~ DTE ~~Electric~~Energy ~~filed~~manages its ~~TRM~~MTM ~~application~~risk ~~proposing~~on a ~~transitional~~portfolio ~~tariff~~basis ~~option~~based ~~for~~upon ~~certain~~the ~~former~~delivery ~~PLD~~period ~~customers~~of ~~and~~its acontracts ~~modified~~and ~~line~~the ~~extension~~individual ~~provision. The~~components ~~application~~of ~~also proposed a recovery mechanism for~~ the ~~deferred~~risks ~~net~~within ~~incremental~~each ~~revenue requirement associated with the transition~~contract. ~~The~~Accordingly, ~~net~~it ~~incremental~~records ~~revenue~~and ~~requirement~~manages ~~includes~~the ~~costs~~energy topurchase ~~install meters~~ and ~~attach~~sale ~~customers;~~obligations ~~system~~under ~~and~~its ~~customer~~contracts ~~facility~~in ~~upgrades~~separate ~~and~~components ~~repairs;~~based ~~and~~on the ~~difference~~commodity ~~between~~(e.g. ~~DTE~~electricity ~~Electric's~~or ~~tariff~~natural ~~rates~~gas), ~~and~~the ~~any~~product ~~transitional~~(e.g. ~~rates~~electricity ~~approved~~for indelivery ~~the~~during ~~future. On~~peak ~~May~~or ~~13,~~off-peak ~~2014~~hours), the ~~MPSC~~delivery ~~approved~~location ~~the~~(e.g. ~~TRM~~by asregion), ~~requested~~the ~~and~~risk ~~also~~profile ~~ordered~~(e.g. ~~DTE~~forward ~~Electric~~or tooption), ~~include~~and in the ~~TRM the PLD transmission~~ delivery ~~service~~period ~~costs~~(e.g. ~~incurred~~by ~~while~~month ~~DTE Electric is temporarily relying upon PLD to operate~~ and ~~maintain PLD's system during the system conversion period~~year). The ~~meter~~following ~~installation~~describes ~~phase of~~ the ~~transition~~categories ~~was~~of ~~completed~~activities inrepresented ~~June~~by ~~2014. On~~their ~~July~~operating 1,characteristics ~~2014,~~and ~~former~~key ~~PLD customers became customers of DTE Electric.~~risks:

~~PSCR~~• ~~Proceedings~~Asset Optimization — Represents derivative activity associated with assets owned and contracted by DTE Energy, including forward natural gas purchases and sales, natural gas transportation, and storage capacity. Changes in the value of derivatives in this category typically economically offset changes in the value of underlying non-derivative positions, which do not qualify for fair value accounting. The difference in accounting treatment of derivatives in this category and the underlying non-derivative positions can result in significant earnings volatility.

~~The~~ PSCR process is designed to allow DTE Electric to recover all of its power supply costs if incurred under reasonable and prudent policies and practices. DTE Electric's power supply costs include fuel and related transportation costs, purchased and net interchange power costs, nitrogen oxide and sulfur dioxide emission allowances costs, urea costs, transmission costs and MISO costs. The MPSC reviews these costs, policies and practices for prudence in annual plan and reconciliation filings.32

~~2012~~DTE ~~PSCR~~Energy ~~Year~~Company — ~~In March 2013,~~ DTE Electric filed the 2012 PSCR reconciliation calculating a net under-recovery of approximately $87 million that includes an under-recovery of approximately $148 million for the 2011 PSCR year. The reconciliation includes purchased power costs related to the manual shutdown of our Fermi 2 nuclear power plant in June 2012 caused by the failure of one of the plant's two non-safety related feed-water pumps. The plant was restarted on July 30, 2012, which restored production to nominal 68% of full capacity. In September 2013, the repair to the plant was completed and production was returned to full capacity. DTE Electric was able to purchase sufficient power from MISO to continue to provide uninterrupted service to our customers. Certain intervenors in the reconciliation case have challenged the recovery of up to $32 million of the Fermi 2 related purchased power costs. Resolution of this matter is expected by early 2015.Company

Combined 16Notes to Consolidated Financial Statements (Unaudited) — (Continued)

~~DTE~~• ~~Electric~~Marketing ~~Company~~and Origination — Represents derivative activity transacted by originating substantially hedged positions with wholesale energy marketers, producers, end-users, utilities, retail aggregators, and alternative energy suppliers.

~~Notes~~• toFundamentals ~~Consolidated~~Based ~~Financial~~Trading ~~Statements~~— ~~(Unaudited)~~Represents ~~— (Continued)~~derivative activity transacted with the intent of taking a view, capturing market price changes, or putting capital at risk. This activity is speculative in nature as opposed to hedging an existing exposure.


•	Other — Includes derivative activity at DTE Electric related to FTRs. Changes in the value of derivative contracts at DTE Electric are recorded as Derivative assets or liabilities, with an offset to Regulatory assets or liabilities as the settlement value of these contracts will be included in the PSCR mechanism when realized.

The following table presents the fair value of derivative instruments as of September 30, 2016 and December 31, 2015 for DTE Energy:



	September 30, 2016					December 31, 2015
	Derivative Assets		Derivative Liabilities			Derivative Assets		Derivative Liabilities
	(In millions)
Derivatives not designated as hedging instruments:
Commodity Contracts:
Natural Gas	$	264	$	(361	)	$	387	$	(383	)
Electricity	213		(226		)	307		(305		)
Other	7		(11		)	5		(10		)
Foreign currency exchange contracts	5		(3		)	12		(7		)
Total derivatives not designated as hedging instruments:	$	489	$	(601	)	$	711	$	(705	)

Current	$	359	$	(408	)	$	570	$	(521	)
Noncurrent	130		(193		)	141		(184		)
Total derivatives	$

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