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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): DECEMBER 20, 1996
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 7-Management's Discussion & Analysis of Financial
Condition & Results of Operations of the Annual Report on Form 10-K for the
year ended December 31, 1995 of DTE Energy Company ("DTE") and The Detroit
Edison Company ("Detroit Edison") and Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30,
1996 of DTE and Detroit Edison, the Michigan Public Service Commission ("MPSC")
has been considering various proposals to implement a competitive utility
environment as recommended by Michigan Governor John Engler and the Michigan
Jobs Commission ("MJC") in January 1996.
On December 19, 1996, the MPSC Staff Report on Electric Industry
Restructuring was filed with the MPSC. The Staff Report recognizes that
Michigan utilities should have the opportunity to prepare for competition and
be able to maintain their financial health and, among other things, recommends:
1. A phase-in program beginning in 1997 for direct customer
access (also known as customer choice) by 2004, with the phase-in of
load at the rate of approximately 2 1/2% (225 megawatts) in 1997, 5%
in 1998, 7 1/2% in 1999 and 10% total in 2000 for Detroit Edison.
These blocks would be allocated among customers through a bidding
process. In 2001, all commercial and industrial customers served at
primary voltage would be
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eligible for direct access and in 2004, all remaining customers would
be eligible for direct access
2. A freeze on base electric rate increases in conjunction with
the implementation of a direct customer access program and the
suspension of the power supply cost recovery clause during the
transition period (ending 2004) for direct customer access. For
generation costs, the moratorium should remain effective until a
customer class has the option of direct access. A fixed level of
fuel and purchased power costs would be subject to recovery in rates
during the transition period.
3. The functional separation of generation, transmission and
distribution service for rate purposes. Generation costs would be
subject to competitive considerations, while transmission and
distribution costs would be regulated, but subject to limited
performance based regulation ("PBR"). A CPI-1% methodology would be
used for regulation of transmission and distribution costs during
the transition period. The PBR process would be subject to review
at five-year intervals, with the first review in 2001.
4. The recovery of transition costs or stranded costs, (costs
that were incurred during the regulated era that will be above
market prices during competition and costs that are incurred to
facilitate the transition from regulated monopoly status to
competitive market status), which the Staff Report indicates
include: (a) regulatory assets, (b) nuclear capital costs,
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(c) contract capacity costs in power purchase agreements, (d)
employee related restructuring costs, including retraining and (e)
other costs related to implementing restructuring (establishing an
independent system operator, creating new billing software systems,
new metering systems, etc.). These costs, which total approximately
$2.8 billion for Detroit Edison, would be recovered primarily
through securitization and secondarily through a transition
charge which would commence when a customer takes direct access and
would continue through 2007.
5. Securitization is a method of refinancing that lowers
electric cost to all customers. The securitization proposed would
be implemented by the issuance of "rate reduction bonds" by a trust
to be created for such purpose. The proceeds from the sale of such
bonds would be earmarked to reduce the amount of Detroit Edison's
outstanding debt and equity. Securitization results in a reduction
in base rates that is partially offset by a charge for bond
repayment. The overall impact is a reduction in customer rates
which, in the case of Detroit Edison, would amount to a 9% or
approximately $300 million annual rate reduction.
6. Eligible power suppliers would be limited to those able to
grant comparable and reciprocal direct access to the Michigan host
utility.
7. A requirement that local utilities provide standby power for
two years but not after 2001.
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8. The collection of nuclear decommissioning and site security
costs by means of a non-by-passable charge.
On December 20, 1996 the MPSC issued an order providing for public
hearings on the Staff Report on January 7, 13 and 14, 1997 and a written
comment period on the Staff Report ending on January 21, 1997.
If the Staff Report recommendations are adopted by the MPSC, a number of
legislative and regulatory changes would be necessary for implementation.
Detroit Edison is the principal subsidiary of DTE.
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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/ Ronald W. Gresens
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Ronald W. Gresens
Vice President and Controller
THE DETROIT EDISON COMPANY
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(Registrant)
By: /s/ Ronald W. Gresens
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Ronald W. Gresens
Vice President and Controller
Date: December 20, 1996
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