DTE ENERGY CO (DTE) · Material Event (8-K) SEC Filing

EX-99.1 2 dtegas-exhibit991x063026.htm EX-99.1 Document Exhibit 99.1DTE Gas CompanyUnaudited Consolidated Financial Statements as of and for the Three and Six Months Ended June 30, 2026TABLE OF CONTENTS Page Definitions 1 Consolidated Statements of Operations (Unaudited) 2 Consolidated Statements of Comprehensive Income (Unaudited) 3 Consolidated Statements of Financial Position (Unaudited) 4 Consolidated Statements of Cash Flows (Unaudited) 6 Consolidated Statements of Changes in Shareholder's Equity (Unaudited) 7 Notes to Consolidated Financial Statements (Unaudited) 8 Note 1 Organization and Basis of Presentation 8 Note 2 Significant Accounting Policies 9 Note 3 New Accounting Pronouncements 11 Note 4 Revenue 12 Note 5 Regulatory Matters 13 Note 6 Fair Value 13 Note 7 Financial and Other Derivative Instruments 14 Note 8 Long-Term Debt 14 Note 9 Short-Term Credit Arrangements and Borrowings 15 Note 10 Commitments and Contingencies 15 Note 11 Retirement Benefits and Trusteed Assets 16 Table of ContentsDEFINITIONS ASU Accounting Standards Update issued by the FASB Company DTE Gas Company and subsidiary companies Customer Choice Michigan legislation giving customers the option of retail access to alternative suppliers for natural gas DTE Energy DTE Energy Company, directly or indirectly the parent of DTE Electric Company, DTE Gas, and numerous non-utility subsidiaries DTE Gas DTE Gas Company (an indirect wholly-owned subsidiary of DTE Energy) and subsidiary companies EGLE Michigan Department of Environment, Great Lakes, and Energy, formerly known as Michigan Department of Environmental Quality EPA U.S. Environmental Protection Agency FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission GCR A Gas Cost Recovery mechanism authorized by the MPSC that allows DTE Gas to recover through rates its natural gas costs MGP Manufactured Gas Plant MPSC Michigan Public Service Commission TCJA Tax Cuts and Jobs Act of 2017, which reduced the corporate Federal income tax rate from 35% to 21% Topic 606 FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as amended VIE Variable Interest Entity 1Table of ContentsDTE Gas CompanyConsolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (In millions) Operating Revenues $ 311 $ 313 $ 1,234 $ 1,181 Operating Expenses Cost of gas 36 43 409 369 Operation and maintenance 158 148 307 302 Depreciation and amortization 58 54 116 108 Taxes other than income 36 33 74 70 288 278 906 849 Operating Income 23 35 328 332 Other (Income) and Deductions Interest expense 35 32 70 64 Interest income (3) (4) (4) (6) Non-operating retirement benefits, net (1) (1) Other income (4) (3) (6) (4) Other expenses 2 2 3 28 27 61 56 Income (Loss) Before Income Taxes (5) 8 267 276 Income Tax Expense (Benefit) (1) 2 62 65 Net Income (Loss) $ (4) $ 6 $ 205 $ 211 See Notes to Consolidated Financial Statements (Unaudited)2Table of ContentsDTE Gas CompanyConsolidated Statements of Comprehensive Income (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (In millions) Net Income (Loss) $ (4) $ 6 $ 205 $ 211 Other comprehensive income Comprehensive Income (Loss) $ (4) $ 6 $ 205 $ 211 See Notes to Consolidated Financial Statements (Unaudited)3Table of ContentsDTE Gas CompanyConsolidated Statements of Financial Position (Unaudited) June 30, December 31, 2026 2025 (In millions) ASSETS Current Assets Cash and cash equivalents $ 15 $ 31 Accounts receivable (less allowance for doubtful accounts of $33 and $17, respectively) Customer 212 422 Affiliates 13 10 Other 7 2 Inventories Gas 33 45 Materials and supplies 39 38 Gas customer choice deferred asset 23 39 Notes receivable Affiliates 95 Other 4 3 Regulatory assets 17 12 Other 11 31 469 633 Investments 56 54 Property Property, plant, and equipment 9,517 9,212 Accumulated depreciation and amortization (2,139) (2,072) 7,378 7,140 Other Assets Regulatory assets 542 559 Notes receivable 48 49 Prepaid pension costs affiliates 138 130 Prepaid postretirement costs affiliates 316 298 Other 51 42 1,095 1,078 Total Assets $ 8,998 $ 8,905 See Notes to Consolidated Financial Statements (Unaudited)4Table of ContentsDTE Gas CompanyConsolidated Statements of Financial Position (Unaudited) Continued June 30, December 31, 2026 2025 (In millions, except shares) LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities Accounts payable Affiliates $ 38 $ 30 Other 228 208 Accrued interest 30 31 Short-term borrowings Affiliates 1 1 Other 80 Gas inventory equalization 43 Regulatory liabilities 40 Other 49 59 389 449 Long-Term Debt 3,043 3,043 Other Liabilities Deferred income taxes 1,072 1,031 Regulatory liabilities 1,014 1,006 Asset retirement obligations 214 208 Accrued pension liability affiliates 10 11 Accrued postretirement liability affiliates 2 2 Other 45 39 2,357 2,297 Commitments and Contingencies (Notes 5 and 10) Shareholder's Equity Common stock ($1 par value, 15,100,000 shares authorized, and 10,300,000 shares issued and outstanding for both periods) 1,803 1,803 Retained earnings 1,406 1,313 Total Shareholder's Equity 3,209 3,116 Total Liabilities and Shareholder's Equity $ 8,998 $ 8,905 See Notes to Consolidated Financial Statements (Unaudited)5Table of ContentsDTE Gas CompanyConsolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2026 2025 (In millions) Operating Activities Net Income $ 205 $ 211 Adjustments to reconcile Net Income to Net cash from operating activities Depreciation and amortization 116 108 Allowance for equity funds used during construction (2) (1) Deferred income taxes 33 32 Changes in assets and liabilities Accounts receivable, net 202 156 Inventories 11 22 Prepaid pension costs affiliates (8) (8) Prepaid postretirement benefit costs affiliates (18) (18) Accounts payable 14 (13) Gas inventory equalization 43 49 Accrued pension liability affiliates (1) (1) Regulatory assets and liabilities (5) 35 Other current and noncurrent assets and liabilities 29 56 Net cash from operating activities 619 628 Investing Activities Plant and equipment expenditures (347) (276) Notes receivable from affiliates (95) (270) Other (1) Net cash used for investing activities (443) (546) Financing Activities Capital contribution by parent company 50 Short-term borrowings, net affiliates (13) Short-term borrowings, net other (80) (9) Dividends paid on common stock (112) (110) Net cash used for financing activities (192) (82) Net Decrease in Cash and Cash Equivalents (16) Cash and Cash Equivalents at Beginning of Period 31 Cash and Cash Equivalents at End of Period $ 15 $ Supplemental disclosure of non-cash investing and financing activities Plant and equipment expenditures in accounts payable $ 93 $ 63 See Notes to Consolidated Financial Statements (Unaudited)6Table of ContentsDTE Gas CompanyConsolidated Statements of Changes in Shareholder's Equity (Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Shares Amount Total (Dollars in millions, shares in thousands) Balance, December 31, 2025 10,300 $ 10 $ 1,793 $ 1,313 $ 3,116 Net Income 209 209 Dividends declared on common stock (56) (56) Balance, March 31, 2026 10,300 $ 10 $ 1,793 $ 1,466 $ 3,269 Net Loss (4) (4) Dividends declared on common stock (56) (56) Balance, June 30, 2026 10,300 $ 10 $ 1,793 $ 1,406 $ 3,209 Common Stock Additional Paid-in Capital Retained Earnings Shares Amount Total (Dollars in millions, shares in thousands) Balance, December 31, 2024 10,300 $ 10 $ 1,743 $ 1,238 $ 2,991 Net Income 205 205 Dividends declared on common stock (55) (55) Balance, March 31, 2025 10,300 $ 10 $ 1,743 $ 1,388 $ 3,141 Net Income 6 6 Dividends declared on common stock (55) (55) Capital contribution by parent company 50 50 Balance, June 30, 2025 10,300 $ 10 $ 1,793 $ 1,339 $ 3,142 See Notes to Consolidated Financial Statements (Unaudited)7Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited)NOTE 1 ORGANIZATION AND BASIS OF PRESENTATIONCorporate StructureDTE Gas is a public utility engaged in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.4 million customers throughout Michigan and the sale of storage and transportation capacity. The Company is regulated by the MPSC and certain activities are regulated by the FERC. In addition, the Company is regulated by other federal and state regulatory agencies including the EPA and EGLE.Basis of PresentationThe Consolidated Financial Statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's 2025 Consolidated Financial Statements furnished on Form 8-K.The accompanying Consolidated Financial Statements are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the Company's estimates.The Consolidated Financial Statements are unaudited but, in the Company's opinion include all adjustments necessary to present a fair statement of the results for the interim periods. All adjustments are of a normal recurring nature, except as otherwise disclosed in these Consolidated Financial Statements and Notes to Consolidated Financial Statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, 2026.Principles of ConsolidationThe Company consolidates all majority-owned subsidiaries and investments in entities in which it has controlling influence. Non-majority owned investments are accounted for using the equity method when the Company is able to significantly influence the operating policies of the investee. When the Company does not influence the operating policies of an investee, the equity investment is valued at cost minus any impairments, if applicable. The Company eliminates all intercompany balances and transactions.The Company evaluates whether an entity is a VIE whenever reconsideration events occur. The Company consolidates VIEs for which it is the primary beneficiary. If the Company is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, the Company considers all relevant facts and circumstances, including the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the expected losses and or the right to receive the expected returns of the VIE. The Company performs ongoing reassessments of all VIEs to determine if the primary beneficiary status has changed.The Company holds a variable interest in a natural gas pipeline entity through purchases under a long-term transportation capacity contract. The Company does not have a controlling influence in and does not consolidate the pipeline entity. As of June 30, 2026, the carrying amount of liabilities in the Company's Consolidated Statements of Financial Position that relate to its variable interest under the long-term contract are primarily related to working capital accounts and generally represent the amounts owed by the Company for transportation associated with the current billing cycle under the contract. The Company has not provided any significant form of financial support associated with the long-term contract. There is no material potential exposure to loss as a result of the Company's variable interest through the long-term contract.8Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)NOTE 2 SIGNIFICANT ACCOUNTING POLICIESIncome TaxesTax rates are affected by estimated annual permanent items, regulatory adjustments, and discrete items that may occur in any given period, but are not consistent from period to period. The table below summarizes how the Company's effective income tax rates have varied from the statutory federal income tax rate Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Statutory federal income tax rate 21.0 % 21.0 % 21.0 % 21.0 % Increase (decrease) due to State and local income taxes, net of federal benefit 4.8 5.4 5.4 5.4 TCJA regulatory liability amortization (2.8) (3.1) (2.9) (2.9) Other (1.9) (0.5) (0.3) (0.1) Effective income tax rate 21.1 % 22.8 % 23.2 % 23.4 % The Company had federal and state income tax payables with DTE Energy of $7 million at June 30, 2026, which are included in Accounts payable Affiliates on the Consolidated Statements of Financial Position. The Company had federal and state income tax receivables with DTE Energy of $8 million at December 31, 2025, which are included in Accounts receivable Affiliates on the Consolidated Statements of Financial Position. Allocated Stock-Based CompensationThe Company received an allocation of costs from DTE Energy associated with stock-based compensation of $3 million for the three months ended June 30, 2026 and 2025, while such allocation was $7 million and $6 million for the six months ended June 30, 2026 and 2025, respectively. Financing ReceivablesFinancing receivables are primarily composed of trade receivables, notes receivable, and unbilled revenue. The Company's financing receivables are stated at net realizable value.The Company monitors the credit quality of financing receivables on a regular basis by reviewing credit quality indicators and monitoring for trigger events, such as a credit rating downgrade or bankruptcy. Credit quality indicators include, but are not limited to, ratings by credit agencies where available, collection history, collateral, counterparty financial statements and other internal metrics. Utilizing such data, the Company has determined three internal grades of credit quality. Internal grade 1 includes financing receivables for counterparties where credit rating agencies have ranked the counterparty as investment grade. To the extent credit ratings are not available, the Company utilizes other credit quality indicators to determine the level of risk associated with the financing receivable. Internal grade 1 may include financing receivables for counterparties for which credit rating agencies have ranked the counterparty as below investment grade however, due to favorable information on other credit quality indicators, the Company has determined the risk level to be similar to that of an investment grade counterparty. Internal grade 2 includes financing receivables for counterparties with limited credit information and those with a higher risk profile based upon credit quality indicators. Internal grade 3 reflects financing receivables for which the counterparties have the greatest level of risk, including those in bankruptcy status.9Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)The following represents the Company's financing receivables by year of origination, classified by internal grade of credit risk, including current year-to-date gross write-offs, if any. The related credit quality indicators and risk ratings utilized to develop the internal grades have been updated through June 30, 2026. Year of Origination 2026 2025 2024 and Prior Total (In millions) Notes receivable Internal grade 1(a) $ 95 $ $ $ 95 Notes receivable, internal grade 2 $ 2 $ 4 $ 12 $ 18 Total notes receivable $ 97 $ 4 $ 12 $ 113 Net investment in leases, internal grade 1 $ $ $ 34 $ 34 _______________________________________(a)Included in Notes receivable Affiliates on the Consolidated Statements of Financial Position.The allowance for doubtful accounts on accounts receivable for the Company is generally calculated using an aging approach that utilizes rates developed in reserve studies. The Company establishes an allowance for uncollectible accounts based on historical losses and management's assessment of existing and future economic conditions, customer trends and other factors. Customer accounts are generally considered delinquent if the amount billed is not received by the due date, which is typically in 21 days, however, factors such as assistance programs may delay aggressive action. The Company generally assesses late payment fees on trade receivables based on past-due terms with customers. Customer accounts are written off when collection efforts have been exhausted. The time period for write-off is 150 days after service has been terminated.The allowance for doubtful accounts for other receivables is generally calculated based on specific review of probable future collections based on receivable balances generally in excess of 30 days. Existing and future economic conditions, customer trends and other factors are also considered. Receivables are written off on a specific identification basis and determined based upon the specific circumstances of the associated receivable.Notes receivable are primarily comprised of a finance lease receivable and loans that are included in Notes Receivable on the Consolidated Statements of Financial Position.The Company establishes an allowance for credit loss for principal and interest amounts due that are estimated to be uncollectible in accordance with the contractual terms of the note receivable. In determining the allowance for credit losses for notes receivable, the Company considers the historical payment experience and other factors that are expected to have a specific impact on the counterparty's ability to pay including existing and future economic conditions. Notes receivable are typically considered delinquent when payment is not received for periods ranging from 60 to 120 days. If amounts are no longer probable of collection, the Company may consider the note receivable impaired, adjust the allowance, and cease accruing interest (nonaccrual status). Cash payments received on nonaccrual status notes receivable, that do not bring the account contractually current, are first applied to the contractually owed past due interest, with any remainder applied to principal. Accrual of interest is generally resumed when the note receivable becomes contractually current.10Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)The following tables present a roll-forward of the activity for the Company's financing receivables credit loss reserves Trade accounts receivable Other receivables Total (In millions) Beginning reserve balance, January 1, 2026 $ 16 $ 1 $ 17 Current period provision 28 28 Write-offs charged against allowance (18) (18) Recoveries of amounts previously written off 6 6 Ending reserve balance, June 30, 2026 $ 32 $ 1 $ 33 Trade accounts receivable Other receivables Total (In millions) Beginning reserve balance, January 1, 2025 $ 21 $ 1 $ 22 Current period provision 25 25 Write-offs charged against allowance (42) (42) Recoveries of amounts previously written off 12 12 Ending reserve balance, December 31, 2025 $ 16 $ 1 $ 17 Uncollectible expense is primarily comprised of the current period provision for allowance for doubtful accounts. Uncollectible expense was $14 million and $7 million for the three months ended June 30, 2026 and 2025, respectively, and $28 million and $23 million for the six months ended June 30, 2026 and 2025, respectively.There are no material amounts of past due financing receivables for the Company as of June 30, 2026.NOTE 3 NEW ACCOUNTING PRONOUNCEMENTSRecently Adopted PronouncementsIn July 2025, the FASB issued ASU No. 2025-05, Financial Instruments Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The Company adopted the ASU effective January 1, 2026 on a prospective basis and elected not to apply the practical expedient, with no impact on the Company's financial position or results of operations.Recently Issued PronouncementsIn November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses, as amended. The amendments in this update require disaggregated disclosure of income statement expense captions into specified categories in disclosures with the footnotes to the financial statements. The ASU is effective for the Company for annual reporting periods beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027. The guidance may be applied on a prospective or retrospective basis. Early adoption is permitted. The Company will apply the guidance upon the effective date.In September 2025, the FASB issued ASU No. 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update modernize the accounting guidance for the costs to develop software for internal use. The amendments remove all references to a sequential software development method (referred to as project stages ) throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing eligible costs. The ASU is effective for the Company for annual and interim periods beginning after December 15, 2027. The guidance may be applied on a prospective, retrospective, or modified transition basis. Early adoption is permitted. The Company is currently assessing the impact of this standard on its Consolidated Financial Statements.11Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)In May 2026, the FASB issued ASU No. 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). The amendments in this update provide recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. The ASU is effective for the Company for annual periods beginning after December 15, 2027. The guidance will be applied on a retrospective basis as required by the ASU. Early adoption is permitted. The Company is currently assessing the impact of this standard on its Consolidated Financial Statements.NOTE 4 REVENUEDisaggregation of RevenueThe following is a summary of disaggregated revenues for the Company Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Gas sales $ 222 $ 225 $ 906 $ 908 End User Transportation 53 51 144 142 Intermediate Transportation 16 16 55 47 Other(a) 20 21 129 84 Total Gas operating revenues $ 311 $ 313 $ 1,234 $ 1,181 _______________________________________(a)Includes revenue adjustments related to various regulatory mechanisms, including the GCR, which may vary based on changes in the cost of gas.Revenues included the following which were outside the scope of Topic 606 Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Other revenues $ 4 $ 4 $ 8 $ 7 Transaction Price Allocated to the Remaining Performance ObligationsIn accordance with optional exemptions available under Topic 606, the Company did not disclose the value of unsatisfied performance obligations for (1) contracts with an original expected length of one year or less, (2) with the exception of fixed consideration, contracts for which revenue is recognized at the amount to which the Company has the right to invoice for goods provided and services performed, and (3) contracts for which variable consideration relates entirely to an unsatisfied performance obligation.Such contracts consist of varying types of performance obligations, including the supply and delivery of energy related products and services. Contracts with variable volumes and or variable pricing have also been excluded as the related consideration under the contract is variable at inception of the contract. Contract lengths vary from cancellable to multi-year.12Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)The Company expects to recognize revenue for the following amounts related to fixed consideration associated with remaining performance obligations in each of the future periods noted (In millions) 2026 $ 63 2027 120 2028 107 2029 92 2030 76 2031 and thereafter 168 $ 626 NOTE 5 REGULATORY MATTERS 2025 Gas Rate Case FilingDTE Gas filed a rate case with the MPSC on November 13, 2025 requesting a net increase in base rates of $163 million based on a projected twelve-month period ending September 30, 2027, and an increase in return on equity from 9.8% to 10.25%. The net increase is based on a total revenue deficiency of $238 million, net of the IRM roll-in of $75 million. The requested net increase in base rates was primarily due to continued infrastructure investment and increasing operations and maintenance costs needed to ensure the continued safe and reliable delivery of natural gas to customers. A final MPSC order in this case is expected in September 2026.NOTE 6 FAIR VALUEFair 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 Company makes certain assumptions it believes 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 Company and its counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which was immaterial at June 30, 2026 and December 31, 2025. The Company believes it uses 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 Company classifies 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 Company has 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.13Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)As of June 30, 2026, the Company had $15 million of equity securities, which are recorded at fair value on a recurring basis and classified as Level 1 assets. These assets are included in Investments on the Consolidated Statements of Financial Position. At December 31, 2025, the Company had $44 million recorded at fair value on a recurring basis and classified as Level 1 assets. The assets included $31 million of cash equivalents and $13 million of equity securities recorded in Cash and cash equivalents and Investments, respectively, on the Consolidated Statements of Financial Position. For both periods, the assets exclude the cash surrender value of life insurance investments.The following table presents the carrying amount and fair value of financial instruments June 30, 2026 December 31, 2025 Carrying Fair Value Carrying Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 (In millions) Notes receivable Affiliates $ 95 $ $ $ 95 $ $ $ $ Notes receivable Other, excluding lessor finance leases $ 18 $ $ $ 18 $ 18 $ $ $ 18 Short-term borrowings Affiliates $ 1 $ $ $ 1 $ 1 $ $ $ 1 Short-term borrowings Other $ $ $ $ $ 80 $ $ 80 $ Long-term debt(a) $ 3,043 $ $ 1,659 $ 1,087 $ 3,043 $ $ 1,551 $ 1,221 _______________________________________(a)Carrying value also includes unamortized debt discounts and issuance costs.For further fair value information on financial and derivative instruments, see Note 7 to the Consolidated Financial Statements, Financial and Other Derivative Instruments. NOTE 7 FINANCIAL AND OTHER DERIVATIVE INSTRUMENTSThe Company recognizes all derivatives at their fair value as Derivative assets or liabilities on the Consolidated Statements of Financial Position unless they qualify for certain scope exceptions, including the normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the derivative gain or loss is deferred in Accumulated other comprehensive income (loss) and later reclassified into earnings when the underlying transaction occurs. For fair value hedges, changes in fair values for the derivative and hedged item are recognized in earnings each period. For derivatives that do not qualify or are not designated for hedge accounting, changes in fair value are recognized in earnings each period.The Company's primary market risk exposure is associated with commodity prices, credit, and interest rates. The Company has risk management policies to monitor and manage market risks. The Company purchases, stores, transports, distributes, and sells natural gas, and buys and sells transportation and storage capacity. The Company has fixed-priced contracts for portions of its expected natural gas supply requirements through March 2029. Substantially all of these contracts meet the normal purchases and normal sales exception and are therefore accounted for under the accrual method. Forward transportation and storage contracts are generally not derivatives and are therefore accounted for under the accrual method.NOTE 8 LONG-TERM DEBTIn June 2026, the U.S. Department of Energy's Office granted a $1.6 billion loan to DTE Gas to support modernization of DTE Gas' natural gas infrastructure under the Energy Dominance Financing program (EDF). There have been no draws on this loan as of June 30, 2026. 14Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)NOTE 9 SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGSThe Company has a $300 million unsecured revolving credit agreement that can be used for general corporate borrowings but is intended to provide liquidity support for the Company's commercial paper program. Borrowings under the revolver are available at prevailing short-term interest rates. The facility will expire in October 2030. As of June 30, 2026, the Company did not have any commercial paper or revolver borrowings outstanding.The unsecured revolving credit agreement requires the Company to maintain a total funded debt to capitalization ratio of no more than 0.65 to 1. In the agreement, total funded debt means all indebtedness of the Company and its consolidated subsidiaries, including finance lease obligations, hedge agreements, and guarantees of third parties' debt, but excluding contingent obligations, nonrecourse and junior subordinated debt, and, except for calculations at the end of the second quarter, certain short-term debt. Capitalization means the sum of (a) total funded debt plus (b) consolidated net worth, which is equal to consolidated total equity of the Company and its consolidated subsidiaries (excluding pension effects under certain FASB statements), as determined in accordance with accounting principles generally accepted in the United States of America. At June 30, 2026, the total funded debt to total capitalization ratio for the Company was 0.49 to 1 and was in compliance with this financial covenant.NOTE 10 COMMITMENTS AND CONTINGENCIESEnvironmentalContaminated and Other Sites Prior to the construction of major interstate natural gas pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke, or oil. The facilities, which produced gas, have been designated as MGP sites. The Company owns or previously owned 14 former MGP sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. Cleanup of eight MGP sites is complete, and those sites are closed. The Company has also completed partial closure of five additional sites. Cleanup activities associated with the remaining sites will continue over the next several years. The MPSC has established a cost deferral and rate recovery mechanism for investigation and remediation costs incurred at former MGP sites. In addition to the MGP sites, the Company is also in the process of cleaning up other contaminated sites, including gate stations, gas pipeline releases, and underground storage tank locations. At June 30, 2026 and December 31, 2025, the Company had $25 million accrued for remediation. These costs are not discounted to their present value. Any change in assumptions, such as remediation techniques, nature and extent of contamination, and regulatory requirements, could impact the estimate of remedial action costs for the sites and affect the Company's financial position and cash flows. The Company anticipates the cost amortization methodology approved by the MPSC, which allows for amortization of the MGP costs over a ten-year period beginning with the year subsequent to the year the MGP costs were incurred, will prevent the associated investigation and remediation costs from having a material adverse impact on the Company's results of operations.Air In March 2023, the EPA published the Good Neighbor Rule, which includes provisions for compressor engines operated for the transportation of natural gas. In June 2024, the United States Supreme Court issued an opinion granting emergency applications to stay the Good Neighbor Rule. The stay will remain in effect during other litigation. The status of the rule remains uncertain as litigation is ongoing. At this time, the Company does not expect a significant financial impact.In March 2024, the EPA finalized the National Ambient Air Quality Standards for fine particulate matter, particles of pollution with diameters generally 2.5 micrometers and smaller (PM2.5). It is likely that areas of Michigan in which the Company operates will be designated as non-attainment in the future and the state will be required to develop a State Implementation Plan for such areas. However, the EPA has announced its intention to review the standard. No impact is expected in the near term, and any long-term financial impacts cannot be assessed at this time.GuaranteesIn certain limited circumstances, the Company enters into contractual guarantees. The Company may guarantee another entity s obligation in the event it fails to perform and may provide guarantees in certain indemnification agreements. The Company may also provide indirect guarantees for the indebtedness of others.Labor ContractsThere are several bargaining units for the Company's approximate 1,150 represented employees, which represents 67% of the Company's total employees. Approximately 2% of the represented employees have contracts expiring within one year.15Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)Purchase CommitmentsThe Company has made certain commitments in connection with 2026 annual capital expenditures that are expected to be approximately $900 million.Other ContingenciesThe Company is involved in certain other legal, regulatory, administrative, and environmental proceedings before various courts, arbitration panels, and governmental agencies concerning claims arising in the ordinary course of business. These proceedings include certain contract disputes, additional environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. The Company cannot predict the final disposition of such proceedings. The Company regularly reviews legal matters and records provisions for claims that it can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Consolidated Financial Statements in the periods they are resolved.For a discussion of contingencies related to regulatory matters, see Note 5 to the Consolidated Financial Statements, Regulatory Matters. NOTE 11 RETIREMENT BENEFITS AND TRUSTEED ASSETSThe Company participates in various plans that provide defined benefit pension and other postretirement benefits for DTE Energy and its affiliates. The plans are primarily sponsored by DTE Energy's subsidiary, DTE Energy Corporate Services, LLC, and cover substantially all employees of the Company. Plan participants of all plans are solely DTE Energy and affiliate participants.The Company accounts for its participation in the represented qualified pension plan by applying single-employer accounting. Non-represented participation in qualified pension plans, and non-represented and represented participation in non-qualified pension plans, are accounted for by applying multiemployer accounting. Participation in other postretirement benefit plans is accounted for by applying multiple-employer accounting. Within multiemployer and multiple-employer plans, participants pool plan assets for investment purposes and to reduce the cost of plan administration. The primary difference between plan types is that assets contributed in multiemployer plans can be used to provide benefits for all participating employers, while assets contributed within a multiple-employer plan are restricted for use by the contributing employer.16Table of ContentsDTE Gas CompanyNotes to Consolidated Financial Statements (Unaudited) - (Continued)The following tables detail the components of net periodic benefit costs (credits) for represented pension benefits and total other postretirement benefits Pension Benefits Other Postretirement Benefits 2026 2025 2026 2025 (In millions) Three Months Ended June 30, Service cost $ 1 $ 1 $ 1 $ 1 Interest cost 6 6 3 3 Expected return on plan assets (8) (9) (10) (10) Amortization of Net actuarial loss 2 2 1 2 Net periodic benefit cost (credit) $ 1 $ $ (5) $ (4) Pension Benefits Other Postretirement Benefits 2026 2025 2026 2025 (In millions) Six Months Ended June 30, Service cost $ 3 $ 3 $ 2 $ 2 Interest cost 12 12 7 7 Expected return on plan assets (16) (17) (21) (20) Amortization of Net actuarial loss 4 4 2 3 Net periodic benefit cost (credit) $ 3 $ 2 $ (10) $ (8) DTE Energy's subsidiaries accounted for under multiemployer guidance are responsible for their share of qualified and non-qualified pension benefit costs. The Company's allocated portion of pension benefit costs for non-represented plans included in regulatory assets and liabilities, operation and maintenance expense, and capital expenditures was $1 million and $2 million for the three and six months ended June 30, 2026, respectively, and nominal for the three and six months ended June 30, 2025. These amounts may include recognized contractual termination benefit charges, curtailment gains, and settlement charges.Pension and Other Postretirement ContributionsThe Company is not expecting to make any contributions to the represented or non-represented qualified pension plans or postretirement benefit plans in 2026. Plans may be updated at the discretion of management and depending on economic and financial market conditions. The Company anticipates transferring up to $25 million from its non-represented qualified pension plan to DTE Electric Company during 2026 in exchange for cash consideration. In 2025, the Company transferred $25 million of qualified pension plan funds to DTE Electric Company in exchange for cash consideration. 17