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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 22, 1999
COMMISSION EXACT NAME OF REGISTRANT AS I.R.S. EMPLOYER
FILE NUMBER SPECIFIED IN ITS CHARTER IDENTIFICATION NO.
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1-11607 DTE ENERGY COMPANY
(A MICHIGAN CORPORATION) 38-3217752
2000 2ND AVENUE
DETROIT, MICHIGAN 48226-1279
313-235-4000
1-2198 THE DETROIT EDISON COMPANY
(A MICHIGAN CORPORATION) 38-0478650
2000 2ND AVENUE
DETROIT, MICHIGAN 48226-1279
313-235-8000
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ITEM 5. OTHER EVENTS.
As discussed in Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing in the DTE Energy
Company and The Detroit Edison Company (Detroit Edison) Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, there are ongoing proceedings in
Michigan for the deregulation of the Michigan electric public utility industry
and the implementation of an open access program. In July 1998, Detroit Edison
filed an application with the Michigan Public Service Commission (MPSC),
indicating that accelerated amortization of Detroit Edison's Fermi 2 assets is
necessary to provide a reasonable opportunity for Detroit Edison to recover its
investment in Fermi 2 if the open access program established by the MPSC is to
proceed. Detroit Edison's application requested accounting authority to
accelerate amortization of the Fermi 2 nuclear power plant and its related
regulatory assets by $164.2 million annually beginning January 1, 1999.
In a December 28, 1998 Order, the MPSC authorized the accelerated
amortization of the remaining net book balances (as of December 31, 1998) for
Fermi 2 and its associated regulatory assets in a manner that will provide an
opportunity for full recovery under current base rates, taking into account the
related tax consequences, of those assets by December 31, 2007.
The December 1998 Order imposes six conditions for the recovery by
Detroit Edison of accelerated amortization of Fermi 2 and requires a signed
acceptance. In a January 15, 1999 response, Detroit Edison requested a
clarifying Order from the MPSC. Subject to receipt of the requested clarifying
Order, Detroit Edison has
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(1) reduced its rates by application of a credit equal to 2.787% ($93.8
million annually) of base rates, effective January 1, 1999;
(2) indicated it will reduce its jurisdictional retail rates by
removing the Fermi 2 regulatory asset from rate base on a pro rata
jurisdictional rate basis when the regulatory asset related to Fermi 2
reaches zero, which is currently anticipated to occur January 1, 2008;
(3) indicated that while it has no plans to sell Fermi 2, should such a
sale occur, it will return to customers the difference between Fermi
2's net book value at the time of sale and the actual sale price; and
the MPSC will be advised of a purchase of Detroit Edison during the
accelerated amortization period so that the MPSC may determine whether
the proposed transaction is in the public interest and properly
balances the interests of investors and customers;
(4) agreed that should Detroit Edison seek to abandon Fermi 2 (which it
has no plans to do) during the accelerated amortization period, and
only if electric generation has not been deregulated by either Michigan
State or Federal action, Detroit Edison will initiate a contested case
proceeding before the MPSC seeking approval of the abandonment;
(5) agreed to fully abide by the open access program (and schedule)
established by the MPSC in previous restructuring Orders; and
(6) indicated that if its earned rate of return exceeds its authorized
rate of return during the period of time that amortization of Fermi 2
is being accelerated, it will apply 50% of the excess earnings to
reduce its stranded investment.
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In guidance issued in 1997, the Emerging Issues Task Force of the
Financial Accounting Standards Board concluded that the application of Statement
of Financial Accounting Standards (SFAS) No. 71 to a separable portion of a
business which is subject to a deregulation plan should cease when legislation
is passed and/or a rate order is issued that contains sufficient detail on a
transition plan.
Due to its acceptance of the conditions of the December 28, 1998 MPSC
order, Detroit Edison discontinued application of SFAS No. 71 to the generation
portion of its business and performed an impairment test on its plant assets in
accordance with SFAS No. 121. The Securities and Exchange Commission in guidance
issued in 1998, concluded that when an entity ceases to apply SFAS No. 71, any
impaired portion of plant assets, identified for recovery by means of a
regulated cash flow, should not be written off and should be treated as a
regulatory asset in the separable portion of the business that still meets the
criteria of SFAS No. 71.
Accordingly, effective December 31, 1998, Detroit Edison will write off
the net book value of the Fermi 2 nuclear power plant and establish a regulatory
asset in the same amount, with no earnings impact.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by the
undersigned, hereunto duly authorized.
DTE ENERGY COMPANY
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(Registrant)
By: /s/ David E. Meador
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David E. Meador
Vice President and Controller
THE DETROIT EDISON COMPANY
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(Registrant)
By: /s/ David E. Meador
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David E. Meador
Vice President and Controller
Date: January 22, 1999
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