Fair Value | 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 March 31, 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. 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 and liabilities for DTE Energy measured and recorded at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 : March 31, 2016 December 31, 2015 Level Level Level Other Netting Net Balance Level Level Level Other Netting Net Balance (In millions) Assets: Cash equivalents (c) $ 11 $ 3 $ — $ — $ — $ 14 $ 13 $ 3 $ — $ — $ — $ 16 Nuclear decommissioning trusts 752 491 — 3 — 1,246 759 473 — 4 — 1,236 Other investments (d) 154 — — — — 154 149 — — — — 149 Derivative assets: Commodity Contracts: Natural Gas 133 89 76 — (216 ) 82 193 91 103 — (285 ) 102 Electricity — 305 72 — (299 ) 78 — 239 68 — (232 ) 75 Other 3 — 1 — (3 ) 1 2 — 3 — (2 ) 3 Foreign currency exchange contracts — 6 — — (5 ) 1 — 12 — — (9 ) 3 Total derivative assets 136 400 149 — (523 ) 162 195 342 174 — (528 ) 183 Total $ 1,053 $ 894 $ 149 $ 3 $ (523 ) $ 1,576 $ 1,116 $ 818 $ 174 $ 4 $ (528 ) $ 1,584 Liabilities: Derivative liabilities: Commodity Contracts: Natural Gas $ (188 ) $ (52 ) $ (110 ) $ — $ 258 $ (92 ) $ (218 ) $ (57 ) $ (108 ) $ — $ 294 $ (89 ) Electricity — (308 ) (88 ) — 327 (69 ) — (243 ) (62 ) — 253 (52 ) Other (5 ) — (8 ) — 12 (1 ) (2 ) — (8 ) — 8 (2 ) Foreign currency exchange contracts — (4 ) — — 3 (1 ) — (7 ) — — 7 — Total derivative liabilities (193 ) (364 ) (206 ) — 600 (163 ) (220 ) (307 ) (178 ) — 562 (143 ) Total $ (193 ) $ (364 ) $ (206 ) $ — $ 600 $ (163 ) $ (220 ) $ (307 ) $ (178 ) $ — $ 562 $ (143 ) Net Assets (Liabilities) at the end of the period $ 860 $ 530 $ (57 ) $ 3 $ 77 $ 1,413 $ 896 $ 511 $ (4 ) $ 4 $ 34 $ 1,441 Assets: Current $ 118 $ 325 $ 98 $ — $ (418 ) $ 123 $ 174 $ 284 $ 128 $ — $ (441 ) $ 145 Noncurrent 935 569 51 3 (105 ) 1,453 942 534 46 4 (87 ) 1,439 Total Assets $ 1,053 $ 894 $ 149 $ 3 $ (523 ) $ 1,576 $ 1,116 $ 818 $ 174 $ 4 $ (528 ) $ 1,584 Liabilities: Current $ (150 ) $ (296 ) $ (99 ) $ — $ 478 $ (67 ) $ (174 ) $ (260 ) $ (87 ) $ — $ 464 $ (57 ) Noncurrent (43 ) (68 ) (107 ) — 122 (96 ) (46 ) (47 ) (91 ) — 98 (86 ) Total Liabilities $ (193 ) $ (364 ) $ (206 ) $ — $ 600 $ (163 ) $ (220 ) $ (307 ) $ (178 ) $ — $ 562 $ (143 ) Net Assets (Liabilities) at the end of the period $ 860 $ 530 $ (57 ) $ 3 $ 77 $ 1,413 $ 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 March 31, 2016 , available-for-sale securities of $14 million included $7 million and $7 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. The following table presents assets for DTE Electric measured and recorded at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 : March 31, 2016 December 31, 2015 Level 1 Level 2 Level 3 Other Net Balance Level 1 Level 2 Level 3 Other Net Balance (In millions) Assets: Cash equivalents (b) $ 4 $ 3 $ — $ — $ 7 $ 5 $ 3 $ — $ — $ 8 Nuclear decommissioning trusts 752 491 — 3 1,246 759 473 — 4 1,236 Other investments 8 — — — 8 8 — — — 8 Derivative assets — FTRs — — 1 — 1 — — 3 — 3 Total $ 764 $ 494 $ 1 $ 3 $ 1,262 $ 772 $ 476 $ 3 $ 4 $ 1,255 Assets: Current $ 4 $ 3 $ 1 $ — $ 8 $ 5 $ 3 $ 3 $ — $ 11 Noncurrent 760 491 — 3 1,254 767 473 — 4 1,244 Total Assets $ 764 $ 494 $ 1 $ 3 $ 1,262 $ 772 $ 476 $ 3 $ 4 $ 1,255 _______________________________________ (a) Amounts represent assets valued at NAV as a practical expedient for fair value. (b) At March 31, 2016 , available-for-sale securities of $7 million consisted of cash equivalents included in Other investments on DTE Electric's Consolidated Statements of Financial Position. At December 31, 2015 , available-for-sale securities of $8 million consisted of cash equivalents included in Other investments on 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 publicly available NAVs. The commingled funds hold exchange-traded equity or debt securities (exchange and non-exchange traded) and are valued based on a calculated NAV as a practical 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 Registrants 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 Registrants selectively corroborate the fair value of securities by comparison of market-based price sources. Investment policies and procedures are determined by DTE Energy's Trust Investments Department which reports to DTE Energy's Vice President and Treasurer. 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 Registrants 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 Registrants 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 Registrants have obtained an understanding of how these prices are derived. Additionally, the Registrants selectively corroborate the fair value of 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 Registrants 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 the Registrants' forward price curves has been assigned to DTE Energy's Risk Management Department, which is separate and distinct from the trading functions within DTE Energy. The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for DTE Energy for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, 2016 Three Months Ended March 31, 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 — — — — — — (1 ) (1 ) Transfers from Level 3 into Level 2 (1 ) — — (1 ) — — — — Total gains (losses): Included in earnings (20 ) (58 ) (1 ) (79 ) (29 ) 7 (2 ) (24 ) Recorded in Regulatory assets — — (2 ) (2 ) — — (2 ) (2 ) Purchases, issuances, and settlements: Settlements (8 ) 36 1 29 (1 ) (9 ) 1 (9 ) Net Assets (Liabilities) as of March 31 $ (34 ) $ (16 ) $ (7 ) $ (57 ) $ — $ (7 ) $ (5 ) $ (12 ) 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 March 31, 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 $ (72 ) $ (3 ) $ (1 ) $ (76 ) $ (91 ) $ (3 ) $ (2 ) $ (96 ) 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 months ended March 31, 2016 and 2015 : Three Months Ended March 31, 2016 2015 (In millions) Net Assets as of December 31 $ 3 $ 3 Change in fair value recorded in Regulatory assets (2 ) (2 ) Purchases, issuances, and settlements: Settlements — — Net Assets as of March 31 $ 1 $ 1 The amount of total gains (losses) included in Regulatory assets attributed to the change in unrealized gains (losses) related to assets held at March 31, 2016 and 2015 and reflected in DTE Electric's Consolidated Statements of Financial Position $ — $ — 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 months ended March 31, 2016 and 2015 , and there were no transfers from or into Level 3 for DTE Electric during the same periods. The following tables present the unobservable inputs related to DTE Energy's Level 3 assets and liabilities as of March 31, 2016 and December 31, 2015 : March 31, 2016 Commodity Contracts Derivative Assets Derivative Liabilities Valuation Techniques Unobservable Input Range Weighted Average (In millions) Natural Gas $ 76 $ (110 ) Discounted Cash Flow Forward basis price (per MMBtu) $ (1.21 ) — $ 3.62 /MMBtu $ (0.12 )/MMBtu Electricity $ 72 $ (88 ) Discounted Cash Flow Forward basis price (per MWh) $ (14 ) — $ 13 /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 Registrants have obtained an understanding of how the fair values are derived. The Registrants also selectively corroborate the fair value of 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, 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 DTE Energy's Treasury Department which reports to DTE Energy's Vice President and Treasurer. The following table presents the carrying amount and fair value of financial instruments for DTE Energy as of March 31, 2016 and December 31, 2015 : March 31, 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 $ 32 $ — $ — $ 32 $ 32 $ — $ — $ 32 Dividends payable $ 131 $ 131 $ — $ — $ 131 $ 131 $ — $ — Short-term borrowings $ 365 $ — $ 365 $ — $ 499 $ — $ 499 $ — Long-term debt, excluding capital leases $ 9,201 $ 495 $ 8,353 $ 1,299 $ 9,210 $ 496 $ 8,136 $ 1,203 The following table presents the carrying amount and fair value of financial instruments for DTE Electric as of March 31, 2016 and December 31, 2015 : March 31, 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 Short-term borrowings — affiliates $ 97 $ — $ — $ 97 $ 75 $ — $ — $ 75 Short-term borrowings — other $ 211 $ — $ 211 $ — 272 $ — $ 272 $ — Long-term debt, excluding capital leases $ 5,579 $ — $ 5,501 $ 717 $ 5,588 $ — $ 5,432 $ 545 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 its operating licenses. This obligation is reflected as an ARO on 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 DTE Electric's fair value of the nuclear decommissioning trust fund assets: March 31, 2016 December 31, 2015 (In millions) Fermi 2 $ 1,220 $ 1,211 Fermi 1 3 3 Low-level radioactive waste 23 22 Total $ 1,246 $ 1,236 The costs of securities sold are determined on the basis of specific identification. The following table sets forth DTE Electric's gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds: Three Months Ended March 31, 2016 2015 (In millions) Realized gains $ 9 $ 9 Realized losses $ (15 ) $ (7 ) Proceeds from sales of securities $ 260 $ 246 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 fair value and unrealized gains and losses for the nuclear decommissioning trust funds: March 31, 2016 December 31, 2015 Fair Unrealized Unrealized Fair Unrealized Unrealized (In millions) Equity securities $ 728 $ 199 $ (68 ) $ 731 $ 195 $ (68 ) Debt securities 512 24 (2 ) 499 16 (4 ) Cash and cash equivalents 6 — — 6 — — $ 1,246 $ 223 $ (70 ) $ 1,236 $ 211 $ (72 ) The debt securities at March 31, 2016 and December 31, 2015 had an average maturity of approximately 6 years , respectively. Securities held in the 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 and Nuclear decommissioning liability. Unrealized losses on the low-level radioactive waste funds are recognized as a Nuclear decommissioning liability. Other Securities At March 31, 2016 and December 31, 2015 , the Registrants' securities were comprised primarily of money market and equity securities. There were no unrealized losses on available-for-sale securities which were reclassified out of Other comprehensive income (loss) and realized into Net Income for DTE Energy or DTE Electric during the three months ended March 31, 2016 and 2015 . Gains related to trading securities held at March 31, 2016 and March 31, 2015 were $5 million and $1 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. |