Specific review of probable future collections based on receivable balances, threshold duration

[Table of Contents](#ie1b09d57e49a40aaa81f572e6311eac9_10)DTE Energy Company — DTE Electric CompanyCombined Notes to Consolidated Financial Statements (Unaudited) — (Continued)The Registrants monitor the credit quality of their 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 Registrants have 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 Registrants utilize 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 Registrants have 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.The following represents the Registrants' financing receivables by year of origination, classified by internal grade of credit risk. The related credit quality indicators and risk ratings utilized to develop the internal grades have been updated through March 31, 2022.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | DTE Energy |  | DTE Electric |
|  | Year of Origination |
|  | 2022 |  | 2021 |  | 2020 and Prior |  | Total |  | 2022 and Prior |
|  | (In millions) |
| Notes receivable |  |  |  |  |  |  |  |  |  |
| Internal grade 1 | $ | —  |  |  | $ | —  |  |  | $ | 19  |  |  | $ | 19  |  |  | $ | 14  |  |
| Internal grade 2 | 1  |  |  | 16  |  |  | 91  |  |  | 108  |  |  | 3  |  |
|  |  |  |  |  |  |  |  |  |  |
| Total notes receivable(a) | $ | 1  |  |  | $ | 16  |  |  | $ | 110  |  |  | $ | 127  |  |  | $ | 17  |  |
|  |  |  |  |  |  |  |  |  |  |
| Net investment in leases |  |  |  |  |  |  |  |  |  |
| Net investment in leases, internal grade 1 | $ | —  |  |  | $ | —  |  |  | $ | 38  |  |  | $ | 38  |  |  | $ | —  |  |
| Net investment in leases, internal grade 2 | —  |  |  | —  |  |  | 191  |  |  | 191  |  |  | —  |  |
| Total net investment in leases(a) | $ | —  |  |  | $ | —  |  |  | $ | 229  |  |  | $ | 229  |  |  | $ | —  |  |

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(a)For DTE Energy, included in Current Assets — Other and Other Assets — Notes Receivable on the Consolidated Statements of Financial Position. For DTE Electric, included in Current Assets — Other on the Consolidated Statements of Financial Position.The allowance for doubtful accounts on accounts receivable for the utility entities is generally calculated using an aging approach that utilizes rates developed in reserve studies. DTE Electric and DTE Gas establish 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. DTE Electric and DTE Gas generally assess 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 customer allowance for doubtful accounts for non-utility businesses and other receivables for both utility and non-utility businesses 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 for DTE Energy are primarily comprised of finance lease receivables and loans that are included in Notes Receivable and Other current assets on DTE Energy's Consolidated Statements of Financial Position. Notes receivable for DTE Electric are primarily comprised of loans.22
