DTE, Wall Street, profit from utility shutoffs

[Hannah Bell]

DTE Energy Co. is a Detroit, Michigan-based utility involved in the development and management of energy-related businesses and services nationwide. DTE operates in 26 states. Its largest subsidiaries are Detroit Edison, an investor-owned electric utility serving 2.1 million customers in Southeastern Michigan, and Michigan Consolidated Gas Co. (MichCon), a natural gas utility serving 1.2 million customers in Michigan.

http://www.dteenergy.com/dteEnergyCompany/aboutDTEEnergy/holdingsMap.html



DTE, Wall Street, profit from utility shutoffs

Southeast Michigan, comprising Detroit, its suburbs, and surrounding counties, has been the metropolitan area hardest hit by the economic crisis....In real terms, about one in four workers is unemployed or underemployed. In Detroit proper, the figure is likely one in two...

DTE has disconnected utilities to nearly 400,000 households over the past two years. It cut services to 221,000 homes in 2009, a 50 percent increase over 2008, when 142,000 homes were cut off. Numbers for 2010 are not yet available...Cutting off utilities is a policy that leads to deaths...

Yet, in spite of the economic crisis in the region, DTE has weathered the storm with strong profits, which have been channeled to the incomes of company executives and top investors.

In a recent earnings statement, DTE boasted of 14 percent growth in year-over-year profit and $532 million in total earnings. DTE’s subsidiary for Detroit, Detroit Edison Company had revenue of $1.53 billion, up from $1.35 billion in 2008. On March 11 its shares were declared to be “high yield and high momentum” by the business journal Seeking Alpha.

How is this possible?

DTE has solved the problem of its declining customer base and the disappearance of its industrial clients, quite simply, by forcing those who still have utilities in the region to pay more. It has secured rate and surcharge increases from its compliant state “regulator,” the Michigan Public Services Commission (MPSC), whose openly stated purpose is to guarantee the profitability of utilities operating in the state, currently indexed to a return on equity (ROE) of 11 percent. Customers in Detroit paid 20 percent more per DTE bill in 2009 than they did in 2008, according to data from the MPSC.

This exposes the lie, meant to pit workers against each other, that “energy theft”—tapping into the energy grid without paying DTE—is the cause of higher utility rates. The only cause of high rates is DTE’s profit drive—and the complicity of state politicians in advancing it...

It has not only been through increasing fees and rates that DTE has secured its profits. According to spokesmen, the other major source of revenue has come in the form of “cost reductions”--generally a euphemism for cutting jobs and lowering wages and benefits. DTE recently announced it had implemented $130 million in cost cutting measures in 2009...

Neither consumers in Michigan nor the workers who maintain DTE’s lines and services benefit from its policies. So who does?

DTE’s top executives have made themselves rich at the expense of Detroit and Michigan. CEO Anthony F. Earley, Jr., has accrued 293,000 shares in the company, each one of which was worth, at the time of writing, $45.60. Earley has thus amassed well over $13 million in DTE stock. Earley had net wealth of $23 million in 2008, according to the executive compensation web site Equilar.

Anderson, DTE’s president, currently has about $6.5 million in stock, and was paid $3.7 million in salary in 2008. David E. Meador, Executive Vice President and Chief Financial Officer, was paid over $2 million in 2008, according to Forbes.

As obscene as this level of personal enrichment is, such figures are dwarfed by Wall Street’s interest in DTE. All of the largest shareholders in the company are finance houses, hedge funds, and mutual funds. The single largest shareholder is the finance firm Vanguard, whose stocks in the company are valued at about $500 million. Other major investors include the banks State Street and Barclays, of Great Britain, each with shares valued at around $300 million. According to one web site, there are 14 finance firms that each have assets totaling over $100 million invested in DTE.

It is the defense of these interests that dictate shutoff policies in Michigan.

http://www.wsws.org/articles/2010/mar2010/dtes-m18.shtml

[Gaedel]

1. In fairness

The Detroit city-owned waterworks will cut you off if you don't pay your bill. The only time I have ever had utilities cut off (without warning) was by a city-owned utility.

[Hannah Bell]

2. k