STATE OF MICHIGAN

RICK SNYDER GOVERNOR

DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS PUBLIC SERVICE COMMISSION

ORJIAKOR N. ISIOGU JOHN D. QUACKENBUSH GREG R. WHITE COMMISSIONER CHAIRMAN COMMISSIONER

STEVE ARWOOD DIRECTOR

LARA is an equal opportunity employer/program. Auxiliary aids, services and other reasonable accommodations are available upon request to individuals with disabilities.

4300 W. SAGINAW HIGHWAY • P.O. BOX 30221 • LANSING, MICHIGAN 48909 • www.michigan.gov/mpsc • (517) 241-6180

May 3, 2013 Michigan Public Service Commission Staff Report to the Commission Case No. U-16407: DTE Gas Company (DTE Gas) formally known as Michigan Consolidated Gas Company (MichCon) 2012 Main Replacement Program (MRP) Report The Company is required by Commission Order in Case No. U-16407 to file an annual report by March 31, 2013 on its main replacement program (MRP). DTE Gas began expensing its main renewal/retirement costs for projects under 50 feet as a result of the Commission Order in Case No. U-15985 in June 2010. In 2009, the unplanned main renewal costs were approximately $4.052 million. In 2010, the unplanned main renewal costs were approximately $3.468 million and the main retirement and planned renewals were $3.350 million. DTE Gas received the Commission Order in Case No. U-16407 in September 2011 establishing the MRP. On October 28, 2011, DTE Gas submitted to Staff the Main Renewal Planning Report, which consisted of the Planned Main Renewal Candidate List and the Planned Main Retirement Candidate List, both for the 2012 calendar year. The 2012 Planned Main Renewal Candidate List included 15 miles per MPSC Order in Case U-16407, plus 43.98 miles of other work to be completed in 2012 if resources permit. The 2012 Main Retirement Candidate List included 15 miles per MPSC Order in Case U-16407, plus 19.87 miles of other work to be completed in 2012 if resources permit. Please reference Attachment 1, “Michigan Consolidated Gas Company’s Main Renewal Planning Report.” On April 4, 2013, DTE Gas filed four reports inside of its “DTE Gas’s Main Renewal Report for 2012 Activity.” The first report entitled, “2012 Planned Main Replacement-FINAL REPORT 2013” details the projects by street name, municipality, area, and cross street; capital expenditures; main footage retired by material type and total; service units impacted by tie-overs, service replacement and meter relocation, service replacement only, and service and meter removal; leaks remediated; and main installed by length size and type of material. The second report entitled, “2012 MAIN RETIREMENT-FINAL REPORT 3/31/2013” details the projects by street name, municipality, and cross street; main retired by length, size, and material type; service

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and meter replacements or removals; leaks remediated; and project cost. The third report entitled, “2012 Unplanned Main Replacement-Final Report 3/31/2013” details the projects by region; address; leaks remediated; main retired by length, size, and material type; replacement main installed by length, size, and material type. The fourth report entitled, “Exhibit S-2 Table” provides an overview of the count, footage, and total cost by MRP Mains Replaced; MRP Mains Retired; MRP Service Line Replaced and Meter Relocated; Service Line Replaced; MRP Service Line and Meter Removed; MRP Tie Overs; and Other Infrastructure Removed. Referencing the “Exhibit S-2 Table” report first, DTE Gas’s 2012 total MRP capital expenditure was $27,361,019. The total cost of the MRP Mains Replaced was $18,221,166. The total cost of the MRP Mains Retired was $1,876,403. The total cost of the MRP Service line replaced and meter relocated was $6,119,616. The total cost of the MRP Service line replaced was $682,505. The total cost of the MRP Service line and meter removed was $131,421 and the total cost of the MRP tie overs was $329,908. DTE Gas reported that the Company replaced 221,715 feet (41.99 miles) of main; retired 60,835 feet (11.52 miles) of main; replaced service lines and relocated meters at 2,340 locations; removed services and meters at 280 locations; replaced service lines only at 617 locations; and tied over 458 existing service lines. In total, DTE Gas replaced or retired 53.51 miles of main under the MRP in 2012 for a total of $27,361,019. Referencing the “2012 Planned Main Replacement -Final Report 3/31/2013” report, DTE Gas completed 99 planned main replacement projects in 2012 with capital expenditures of $25,444,617. The Company reported the net total of main retired through replacement was 221,715 feet equating to 41.99 miles, which was replaced by 216,838 feet (41.07 miles) of primarily plastic main ranging in size from 2- to 8-inch pipe. The main footage retired consisted of 144,740 feet of cast iron (CI) main; 26,731 feet of coated and wrapped (CW) main; 49,843 feet of bare steel (BS) main; and 401 feet of plastic (PLA) main. The Company reported tie-overs of 458 existing service lines, replacing the service line and relocating the meter at 2,331 existing locations, removing services and meters from 180 locations replacing 617 services only, and remediating 94 leaks as a result of the planned main replacement projects. Referencing the “2012 Main Retirement –Final Report 3/31/2013” report, DTE Gas completed 99 main retirement projects in 2012 with capital expenditures of $1,916,402. The Company reported that the total of main planned main retired was 60,835 feet (11.52 miles) of pipe, of which 57,672 feet (10.92 miles) was cast iron and 3,163 feet (0.60 miles) was bare steel. A total of nine service replacement and meter relocations, 100 service and meter removals, and one leak remediation were completed as a result of the planned main retirement projects. Referencing the “2012 Unplanned Main Replacement – Final Report 3/31/2013” report, DTE Gas completed 225 unplanned main replacement projects in 2012 with capital expenditures of $3,629,618. The Company reported that the net total of main retired was 30,370 feet (5.75 miles) and 21,527 feet (4.08 miles) of main was installed as a result of unplanned main replacement projects. The main retired consisted of 13,377 feet of cast iron main; 1,291 feet of wrought iron main; 8,492 feet of coated and wrapped main; 4,263 feet of bare steel main; and 2,947 feet of plastic main. The

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replacement main installed consisted of 21,402 feet of plastic main, 73 feet of steel main, and 52 feet of coated and wrapped main. This report exemplifies that DTE Gas is committed to the MRP and has exceeded its goal for 2012, wherein the Company were specified in Case No. U-16407 to replace an incremental 15 miles of main and retire 15 miles of main. DTE Gas was able to change its accounting system to reflect the detail as requested by the Commission in its Order, wherein the Company reported in Exhibit S-2 an allocation of MRP service and meter costs by three main categories; service lines replaced, service lines replaced and meters relocated, and service lines and meters removed. The report does capture the actual mains that are removed and/or replaced and/or retired for the planned projects. Staff supports and applauds the Company as it is nearly doubled the planned footage of mains replaced or retired of 30 miles to 53.51 miles. Staff also encourages the Company to maintain the consistent level of unplanned main footage retired or replaced of 3-5 miles annually. The increased remediation of up to 66 planned miles of high-risk pipe in 2013, as approved by the Commission Order in Case No. U-16999 dated April 16, 2013, should reduce leaks, help stabilize the number of new leaks, reduce lost and unaccounted for gas, and improve safety to DTE Gas’s customers, its employees, and the general public. Staff continues to monitor the Company’s progress under the MRP. The Company meets with Staff and provides updates at least three times a year. Attachment 2 entitled, “Michigan Consolidated Gas Company’s 2012 Main Replacement Program through October 31, 2012,” provides information provided to Staff in a December 4, 2012 meeting. Attachment 2 shows the Planned Main Replacement, Unplanned Main Replacement, Main Retirement, and Public Improvement projects by month, for both actual and plan through October 31, 2012, and provides the same items by area served, by pipe type through October 31, 2012. In addition to these two meetings between the Company and Staff in 2012, Staff performed periodic safety-related inspections of pipeline replacement activities and records. The Staff is further updated on corrosion work orders and pending leak reports monthly. Attachment 3 entitled, “DTE Energy Gas Operations 2012 Leak Remediation Plan vs. Actuals,” highlights the actual versus planned leaks and end of the year leak inventory. Staff accepts the report of DTE Gas as filed and continues to support that this MRP is beneficial and necessary. No surcharges have been imposed by DTE Gas at this time on this MRP, but will begin with the first billing cycle of May 2013. The MRP can only be continued through the Company’s commitment to spend the dollars on the respective program. Staff will continue to monitor the MRP for accountability and performance throughout 2013 with updates and periodic safety-related inspections related to the program throughout the year. Staff expects the Company to reach and exceed the goals set forth in Case No. U-16999 in 2013.

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