DTE Energy 2014 Annual Report Download - page 34

Energy Trading results are discussed below:




Operating Revenues  
$ 1,771
$ 1,109
Fuel, purchased power and gas 
1,782
1,011
Gross Margin 
(11)
98
Operation and maintenance 
72
66
Depreciation and amortization 
1
2
Taxes other than income 
4
3
Operating Income (Loss) 
(88)
27
Other (Income) and Deductions 
8
8
Income Tax Expense (Benefit) 
(38)
7
Net Income (Loss) Attributable to DTE Energy Company  
$ (58)
$ 12
Operating revenues and Fuel, purchased power and gas were impacted by an increase in gas volumes and prices, primarily in our gas structured
strategy for the year ended December 31, 2014.
Gross margin increased $295 million in 2014 and decreased $109 million in 2013. The overall increase in gross margin in 2014 was primarily due to
timing from MTM adjustments on certain transactions in our gas structured strategy.
The increase in gross margin in 2014 represents a $92 million increase in realized margins and a $203 million increase in unrealized margins. The $92
million increase in realized margins is due to $149 million of favorable results, primarily in our gas structured and gas transportation strategies, offset by $57
million of unfavorable results, primarily in our power full requirements, gas full requirements and gas trading strategies. The $203 million increase in
unrealized margins is due to $211 million of favorable results, primarily in our gas structured and gas full requirements strategies, offset by $8 million of
unfavorable results, primarily in our power full requirements strategy.
The decrease in gross margin in 2013 represents a $1 million decrease in realized margins and a $108 million decrease in unrealized margins. The $1
million decrease in realized margins is due to $40 million of unfavorable results, primarily in our power trading, power full requirements and gas
transportation strategies, offset by $39 million of favorable results, primarily in our gas and coal trading and gas structured strategies. The $108 million
decrease in unrealized margins is due to $123 million of unfavorable results, primarily in our gas structured, gas trading and gas transportation strategies,
offset by $15 million of favorable results, primarily in our power full requirements strategy.
Natural gas structured transactions typically involve a physical purchase or sale of natural gas in the future and/or natural gas basis financial
instruments which are derivatives and a related non-derivative pipeline transportation contract. These gas structured transactions can result in significant
earnings volatility as the derivative components are marked-to-market without revaluing the related non-derivative contracts. During the fourth quarter of
2014 we saw significant decreases in gas prices, and in the fourth quarter of 2013 significant increases in gas prices which led to the volatility in the
accounting earnings due to the physical component being marked-to-market without an offsetting mark on the transportation component. Included in the
$149 million of favorable realized results for the year ended December 31, 2014 in our gas strategies is $65 million of timing related losses recognized in
2013 that reversed as the underlying contracts were settled. Included in the $211 million of favorable unrealized results for the year ended December 31,
2014 in our gas strategies is $102 million of timing related gains which will reverse in future periods, and the absence of $89 million of timing related losses
in 2013. We anticipate that approximately $50 million of unrealized gains will reverse during 2015 as the underlying contracts settle.
Outlook — In the near-term, we expect market conditions to remain challenging and the profitability of this segment may be impacted by the volatility
in commodity prices in the markets we participate in and the uncertainty of impacts associated with financial reform, regulatory changes and changes in
operating rules of regional transmission organizations.
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