Utility – Power Generation
Power Generation comprises our utility power generation business and plants
within Detroit Edison. These plants are regulated by numerous federal and state
governmental agencies, including the MPSC, the FERC, the NRC, the EPA and the
MDEQ. Electricity is generated from Detroit Edison’s numerous fossil plants,
its hydroelectric pumped storage plant and its nuclear plant, and is purchased
from electricity generators, suppliers and wholesalers. The electricity we produce
and purchase is sold to four major classes of customers: residential, commercial,
industrial and wholesale, principally throughout Michigan, the Midwest and Ontario,
Canada.
Weather, economic factors and electricity prices affect sales levels to customers.
Our peak load and highest total system sales generally occur during the third
quarter of the year, driven by air conditioning and other cooling-related demands.
Power generation sales are made to a diverse base of customers in both type
and number; sales levels are not dependent on any small market segment. Customers
who elect to purchase their electricity from alternative energy suppliers by
participating in the electric Customer Choice program have an unfavorable effect
on our financial performance.
Energy Services
Energy Services has three business lines: Coal-Based Fuels, On-Site Energy
Projects and Power Generation.
Coal-Based Fuels
Energy Services’ Coal-Based Fuels operations include producing synthetic fuel
from nine synfuel plants and producing coke from three coke battery plants.
The production of synfuel from all of the synfuel plants and the production
of coke from one of the coke battery plants generate tax credits under Section
29 of the Internal Revenue Code. Section 29 is designed to stimulate investment
in and development of alternate fuel sources. We have private letter rulings
from the IRS for all of our synfuel plants.
Energy Marketing & Trading
Energy Marketing & Trading consists of the wholesale electric and gas marketing
and trading operations of DTE Energy Trading, Inc. and DTE-CoEnergy L.L.C. (CoEnergy).
Energy Marketing & Trading focuses on physical power marketing and structured
transactions for large customers, as well as the enhancement of returns from
DTE Energy’s power plants, pipeline and storage assets. In pursuing these goals,
Energy Marketing & Trading may enter into forwards, futures, swaps and option
contracts.
Coal Services
Coal Services provides fuel, transportation and equipment management services
tailored to the individual requirements of each customer. We specialize in minimizing
fuel costs and maximizing reliability of supply for energy-intensive customers.
Our external customers include electric utilities, merchant power producers,
integrated steel mills and large industrial companies with significant energy
requirements. We also operate a number of railcar maintenance and repair facilities
serving coal transporters, as well as other industries and rail car types. We
participate in the trading of coal and emissions credits as well as coal-to-power
tolling transactions. In 2003, we entered into the waste coal recovery business
by purchasing a patented technology and constructing our first commercial facility.
Biomass
Biomass develops, owns and operates landfill gas recovery systems in the U.S.
Landfill gas, a byproduct of solid waste decomposition, is composed of approximately
equal portions of methane and carbon dioxide. Converting the methane into a
renewable energy resource conserves fossil fuels. Some Biomass operations generate
Section 29 tax credits that will expire in 2007. Biomass helps limit potential
greenhouse gas emissions by developing and implementing landfill gas recovery
systems that capture the gas and use it productively. Such a recovery system
eliminates detrimental air emissions by preventing methane from escaping into
the atmosphere or migrating off-site and becoming a safety hazard. Landfill
gas recovery systems also provide local utilities, industry and consumers with
an opportunity to use a competitive, renewable source of energy. Applications
for this form of energy include steam and electricity generation, fueling of
asphalt plants and brick kilns and for processing into pipeline quality gas.
In 2004, Biomass entered into a joint venture with Coal Services to acquire
facilities that produce coal mine methane gas.
ENERGY DISTRIBUTION
Utility – Power Distribution
The electric distribution services of Detroit Edison comprise our utility Power
Distribution business. This business distributes electricity generated by Energy
Resources’ Power Generation business and alternative energy suppliers to Detroit
Edison’s 2.1 million customers in southeastern Michigan. This business also
shares, with the Gas Distribution segment, the customer service and regulated
marketing functions for our utilities. Accordingly, costs associated with these
functions, including collections and customer service activities, are shared
between Power Distribution and Gas Distribution.
Distributed Generation
Distributed Generation, primarily consisting of DTE Energy Technologies (Dtech),
invests in emerging technologies that complement our existing businesses. We
currently have businesses that develop, assemble, market, distribute and service
distributed generation products, provide application engineering, and monitor
and manage system operations.
In 2004, Dtech revised its strategy to reduce the losses that occurred in the
development phase of the business over the past four years. As a result, we
closed most of our sales offices and created two regional selling offices, located
in Southern California and in Michigan. These offices will concentrate on higher-margin
sales. Additionally, Dtech’s organization was reduced and realigned to be more
efficient.
ENERGY GAS
Gas Distribution operations primarily consist of MichCon, our gas utility.
Gas Distribution provides gas sales and transportation delivery services to
1.2 million residential, commercial and industrial customers located throughout
Michigan.
Gas Distribution makes gas sales primarily to residential and small-volume
commercial and industrial customers. It provides end user transportation to
large-volume commercial and industrial customers and gas Customer Choice customers
who purchase natural gas directly from other suppliers and utilize MichCon’s
pipeline network to transport the gas to the customers’ facilities. Gas Distribution
provides intermediate transportation to producers, brokers and other gas companies
that own the natural gas transported, but are not the ultimate consumers. MichCon’s
revenues and net income are impacted by weather and are concentrated in the
first and fourth quarters of the year due to heating-related demand. MichCon’s
operations are not dependent upon a limited number of customers, and the loss
of any one or a few customers is not reasonably likely to have a material adverse
effect on MichCon.
Gas Production
The Gas Production business is engaged in natural gas exploration, development
and production. Gas Production owns one of the industry’s largest Antrim gas
reserve bases predominantly located in the northern portion of the lower peninsula
of Michigan. Our emphasis is on developing and producing the 335.4 Bcfe of proven
reserves we owned as of December 31, 2004. We drilled 79 wells (67.3 net of
interest of others) in 2004 with a success rate of 99%. Wells drilled in the
Antrim shale have high success rates and low drilling costs, and are therefore
considered low risk.
Gas Storage, Pipelines & Processing
The Gas Storage, Pipelines & Processing business has partnership interests
in an interstate transmission pipeline, Vector Pipeline (Vector), seven carbon
dioxide processing facilities and a 9.7 Bcf natural gas storage field. Additionally,
we lease through 2029 a 60.5 Bcf natural gas storage field located in Michigan.