DTE Energy has been steadily improving its regulated utilities since Michigan legislators reversed years of regulatory muddle with broad utility reform legislation in 2008. Although the regulatory reforms already have led to an improved rate-making Read more
DTE pays a healthy dividend, yielding 4.5% at our fair value estimate.
Major regulatory reforms that were signed into law in 2008 have been adopted and seem to have staying power, though the decoupling mechanism was struck down by a judge.
Michigan's aging utility infrastructure needs investment, which should mean growth opportunities for DTE.
We think management's move toward a more pure-play utility business model was a wise one. The legislative reforms will help DTE put cash from nonregulated divestitures to good work, though nonregulated earnings are still substantial. Read more
DTE self-implemented a $280 million rate increase in 2009 that led to a refund in 2010. Regulators cut in half a large request in 2011 and blocked self-implementation. We expect this game to continue, perhaps leading to regulatory fatigue or ill will. Tellingly, DTE hopes to stay out of a full rate case for the next few years.
Michigan, especially Detroit, continues to struggle, which will increase pressure on regulators to keep electric and gas rates low at the utilities' expense. One rate case has already been delayed.
DTE's nonregulated businesses constitute a significant portion of earnings, making the company a riskier investment than other utilities.
Utilities tend to suffer from inflation, which erodes the earnings power of a utility's rate base, raises cash needs for capital investments and reduces the appeal of utilities' dividends. Read more
Almost all of DTE's executives have been with the companysince Michigan deregulated its utilities in 1997. That includes CEO Gerry Anderson, who picked up the mantle after serving as the company's COO since 2005 and in various other positions since Read more
DTE Energy owns two regulated utilities: Detroit Edison and MichCon. Detroit Edison is the nation's 12th-largest electric utility, supplying energy to 2.1 million customers Read more