##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period ended June 30, 2008
 Commission file number 1-2198
 The Detroit Edison Company meets the conditions set forth in General Instruction H (1) (a) and (b) of Form
10-Q and is, therefore, filing this Form with the reduced disclosure format.
 THE DETROIT EDISON COMPANY
  Michigan
    
    38-0478650(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2000 2nd Avenue, Detroit, Michigan
    
    48226-1279(Address of principal executive offices)
    
    (Zip Code)
 313-235-4000
  Yes þ No o
  Large accelerated filer
o
    
    Accelerated filer
o
    
    Non-accelerated filerþ
    
    Smaller reporting
company o(Do not check if a
smaller reporting company)
  Yes o No þ




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##### 



The Detroit Edison Company  Quarterly Report on Form 10-Q  Quarter Ended June 30, 2008
 Table Of Contents
 PageDefinitions
    
    
    1Forward-Looking Statements
    
    
    2Part I  Financial InformationItem 1. Financial StatementsConsolidated Statements of Operations (Unaudited)
    
    
    8Consolidated Statements of Financial Position (Unaudited)
    
    
    9Consolidated Statements of Cash Flows (Unaudited)
    
    
    11Consolidated Statements of Changes in Shareholders Equity
and Comprehensive Income (Unaudited)
    
    
    12Notes to Consolidated Financial Statements (Unaudited)
    
    
    13Item 2. Managements Narrative Analysis of Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    7Part II  Other InformationItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 6. Exhibits
    
    
    26Signature
    
    
    28Supplemental IndentureTwenty-Fourth Supplemental IndentureSupplemental IndentureTwenty-Fourth Supplemental IndentureSupplemental IndentureTwenty-Fourth Supplemental IndentureComputation of Ratio of Earnings to Fixed Charges302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer




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##### Table of Contents



Definitions
 CTA
    
    Costs to achieve, consisting of project management, consultant support and employee severance, related to
the Performance Excellence ProcessCustomer Choice
    
    Statewide initiatives giving customers in Michigan the option to choose alternative suppliers for
electricity.Detroit Edison
    
    The Detroit Edison Company (a direct wholly owned subsidiary of
DTE Energy Company) and subsidiary companiesDTE Energy
    
    DTE Energy Company, the parent of Detroit Edison
and directly or indirectly the parent company of
numerous non-utility subsidiariesEPA
    
    United States Environmental Protection AgencyFERC
    
    Federal Energy Regulatory CommissionMDEQ
    
    Michigan Department of Environmental QualityMISO
    
    Midwest Independent System
Operator, a Regional Transmission OrganizationMPSC
    
    Michigan Public Service CommissionNRC
    
    Nuclear Regulatory CommissionPSCR
    
    A power supply cost recovery mechanism authorized
by the MPSC that allows Detroit Edison to recover
through rates its fuel, fuel-related and purchased
power expenses.Securitization
    
    Detroit Edison financed specific stranded costs at
lower interest rates through the sale of rate
reduction bonds by a wholly owned special purpose
entity, the Detroit Edison Securitization Funding
LLC.SFAS
    
    Statement of Financial Accounting StandardsStranded Costs
    
    Costs incurred by utilities in order to serve
customers in a regulated environment that absent
special regulatory approval would not otherwise be
recoverable if customers switch to alternative
energy suppliers.Units of MeasurementkWh
    
    Kilowatthour of electricityMW
    
    Megawatt of electricityMWh
    
    Megawatthour of electricity
 1




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Forward-Looking Statements
  
    
    the effects of weather and other natural phenomena on operations and sales to customers,
and purchases from suppliers;
    
    economic climate and population growth or decline in the geographic areas where we do
business;
    
    environmental issues, laws, regulations, and the cost of remediation and compliance,
including potential new federal and state requirements that could include carbon and more
stringent mercury emission controls, a renewable portfolio standard and energy efficiency
mandates;
    
    nuclear regulations and operations associated with nuclear facilities;
    
    impact of electric utility restructuring in Michigan, including legislative amendments
and Customer Choice programs;
    
    employee relations and the impact of collective bargaining agreements;
    
    unplanned outages;
    
    access to capital markets and capital market conditions and the results of other
financing efforts which can be affected by credit agency ratings;
    
    the timing and extent of changes in interest rates;
    
    the level of borrowings;
    
    changes in the cost and availability of coal and other raw materials, and purchased
power;
    
    effects of competition;
    
    impact of regulation by the FERC, MPSC, NRC and other applicable governmental proceedings
and regulations, including any associated impact on rate structures;
    
    changes in and application of federal, state and local tax laws and their
interpretations, including the Internal Revenue Code, regulations, rulings, court
proceedings and audits;
    
    the ability to recover costs through rate increases;
    
    the availability, cost, coverage and terms of insurance;
    
    the cost of protecting assets against, or damage due to, terrorism;
    
    changes in and application of accounting standards and financial reporting regulations;
    
    changes in federal or state laws and their interpretation with respect to regulation,
energy policy and other business issues;
    
    amounts of uncollectible accounts receivable;
    
    binding arbitration, litigation and related appeals; and
    
    changes in the economic and financial viability of our suppliers, customers and trading
counterparties, and the continued ability of such parties to perform their obligations to
Detroit Edison.
  2




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##### Table of Contents



Part I  Item 2.
 The Detroit Edison Company
 
 Managements Narrative Analysis of Results of Operations
  Factors impacting income
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30(in Millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Operating Revenues
    
    $
    1,173
    
    
    $
    1,210
    
    
    $
    2,326
    
    
    $
    2,304Fuel and Purchased Power
    
    
    415
    
    
    
    402
    
    
    
    817
    
    
    
    756Gross Margin
    
    
    758
    
    
    
    808
    
    
    
    1,509
    
    
    
    1,548Operation and Maintenance
    
    
    369
    
    
    
    380
    
    
    
    727
    
    
    
    728Depreciation and Amortization
    
    
    178
    
    
    
    198
    
    
    
    370
    
    
    
    380Taxes Other Than Income
    
    
    60
    
    
    
    69
    
    
    
    122
    
    
    
    141Other Asset (Gains), Losses and Reserves, Net
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    6Operating Income
    
    
    151
    
    
    
    162
    
    
    
    290
    
    
    
    293Other (Income) and Deductions
    
    
    71
    
    
    
    72
    
    
    
    145
    
    
    
    143Income Tax Provision
    
    
    29
    
    
    
    30
    
    
    
    53
    
    
    
    50Net Income
    
    $
    51
    
    
    $
    60
    
    
    $
    92
    
    
    $
    100Operating Income as a Percentage of Operating Revenues
    
    
    13
    %
    
    
    13
    %
    
    
    12
    %
    
    
    13
    %
 Gross margin
  Increase (Decrease) in Gross Margin Components Compared to Prior Year
 Three Months
    
    
    Six Months(in Millions)Weather related impacts
    
    $
    (20
    )
    
    $
    (19
    )Return of customers from electric Customer Choice
    
    
    6
    
    
    
    14Service territory performance
    
    
    (16
    )
    
    
    (7
    )Refundable pension cost
    
    
    (11
    )
    
    
    (14
    )2005 PSCR reconciliation order in 2007
    
    
    (34
    )
    
    
    (34
    )April 2008 expiration of show-cause rate decrease
    
    
    12
    
    
    
    12Other, net
    
    
    13
    
    
    
    9Decrease in gross margin
    
    $
    (50
    )
    
    $
    (39
    )
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Three Months Ended
    
    
    Six Months EndedPower Generated and Purchased
    
    June 30
    
    
    June 30(in Thousands of MWh)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Power Plant GenerationFossil
    
    
    10,347
    
    
    
    10,117
    
    
    
    20,587
    
    
    
    20,674Nuclear
    
    
    2,408
    
    
    
    2,415
    
    
    
    4,751
    
    
    
    4,84312,755
    
    
    
    12,532
    
    
    
    25,338
    
    
    
    25,517Purchased Power
    
    
    1,509
    
    
    
    1,887
    
    
    
    3,239
    
    
    
    3,120System Output
    
    
    14,264
    
    
    
    14,419
    
    
    
    28,577
    
    
    
    28,637Less Line Loss and Internal Use
    
    
    (722
    )
    
    
    (624
    )
    
    
    (1,567
    )
    
    
    (1,408
    )Net System Output
    
    
    13,542
    
    
    
    13,795
    
    
    
    27,010
    
    
    
    27,229Average Unit Cost ($/MWh)Generation (1)
    
    $
    17.98
    
    
    $
    14.75
    
    
    $
    17.30
    
    
    $
    15.09Purchased Power
    
    $
    61.53
    
    
    $
    68.45
    
    
    $
    61.56
    
    
    $
    66.64Overall Average Unit Cost
    
    $
    22.59
    
    
    $
    21.77
    
    
    $
    22.31
    
    
    $
    20.70
 
 (1)
    
    Represents fuel costs associated with power plants. Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30(in Thousands of MWh)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Electric SalesResidential
    
    
    3,428
    
    
    
    3,718
    
    
    
    7,360
    
    
    
    7,504Commercial
    
    
    4,913
    
    
    
    4,871
    
    
    
    9,275
    
    
    
    9,179Industrial
    
    
    3,231
    
    
    
    3,322
    
    
    
    6,747
    
    
    
    6,696Wholesale
    
    
    700
    
    
    
    715
    
    
    
    1,423
    
    
    
    1,451Other
    
    
    87
    
    
    
    89
    
    
    
    196
    
    
    
    19912,359
    
    
    
    12,715
    
    
    
    25,001
    
    
    
    25,029Interconnections sales (1)
    
    
    1,183
    
    
    
    1,080
    
    
    
    2,009
    
    
    
    2,200Total Electric Sales
    
    
    13,542
    
    
    
    13,795
    
    
    
    27,010
    
    
    
    27,229Electric DeliveriesRetail and Wholesale
    
    
    12,359
    
    
    
    12,715
    
    
    
    25,001
    
    
    
    25,029Electric Customer Choice
    
    
    284
    
    
    
    323
    
    
    
    682
    
    
    
    774Electric
Customer Choice  Self Generators (2)
    
    
    12
    
    
    
    200
    
    
    
    70
    
    
    
    267Total Electric Sales and Deliveries
    
    
    12,655
    
    
    
    13,238
    
    
    
    25,753
    
    
    
    26,070
 
 (1)
    
    Represents power that is not distributed by Detroit Edison.(2)
    
    Represents deliveries for self generators who have purchased power from alternative energy
suppliers to supplement their power requirements. Operation and maintenance ,
 Depreciation and amortization
 Taxes other than income
 Other asset (gains), losses and reserves, net
 4




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Outlook
    
    
    The amount and timing of cost recovery allowed as a result of regulatory proceedings,
related appeals or new legislation;
    
    Our ability to reduce costs and maximize plant and distribution system performance;
    
    Variations in market prices of power, coal and gas;
    
    Economic conditions within Michigan and corresponding impacts on demand for electricity;
    
    Collectibility of accounts receivable;
    
    Weather, including the severity and frequency of storms;
    
    The level of customer participation in the electric Customer Choice program; and
    
    Any potential new federal and state environmental, renewable energy and energy efficiency
requirements.
  
    
    A 10 percent limit on the electric Customer Choice program. Once customers representing
10 percent of a utilitys load have elected to receive their generation from an alternate
electricity supplier, remaining customers would be maintained on full, bundled utility
service. As of June 30, 2008, approximately 2 percent of Detroit Edisons load was on the
electric Customer Choice program. The bill also codifies prior MPSC requirements for
customers returning to full utility service.
    
    A requirement that the MPSC set rates based on cost-of-service for all customer classes,
eliminating the current subsidy for residential customers included in business customer
rates. Elimination of the subsidy (de-skewing) would be phased in over a five year period.
Rates for schools and other qualified educational institutions would be immediately set at
their cost of service.
    
    A 12 month hard-stop deadline for the MPSC to complete a rate case and the ability for
the utility to self-implement rate changes six months after a rate filing, bringing Michigan
in line with many other states. If the
 5




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final rate case order leads to lower rates than the
utility had self-implemented, the utility would refund, with interest, the difference. In
addition, utility rate cases would be based on a forward test year. The bill also provides
organizational changes which may enable the MPSC to obtain increased funding to hire staff
to meet the new timetable.
    
    A Certificate of Need (CON) process for capital projects costing more than $500 million.
The MPSC would be required to review for prudency proposed investments in new generating
assets, acquisition of existing power
plants, major upgrades of power plants, and long-term power purchase agreements. Utilities
would also be provided the opportunity to recover interest expense during construction.
    
    A review and approval process, including evaluation criteria, for the MPSC for proposed
utility merger and acquisitions in Michigan.
    
    A renewable portfolio standard (RPS) of 4% by 2012 and 10% by 2015. Qualifying renewable
energy sources would include wind, biomass, solar, hydro, geothermal, waste industrial gases
and industrial thermal energy. After passage of the new law, the MPSC would establish a per
meter surcharge to fund the RPS requirements. The monthly surcharge is limited to $3 for
residential customers, $16.58 for commercial customers and $187.50 for industrial customers.
The recovery mechanism starts prior to actual construction in order to smooth the rate
impact for customers. Within 5 months of the passage of the new law, the utilities would
file an RPS plan with the MPSC. A utility will not have to comply with the RPS standards if
the MPSC determines that the added costs of meeting the RPS standard exceed the per meter
caps. The bills specify that a utility can build up to 33 percent of the generation required
to meet the RPS. An additional 33 percent would be developed by others and sold to the
utility. The remaining renewable generation would be contracted through long-term power
purchase agreements (PPA).
    
    A requirement for utilities to create specific efficiency programs for each customer
class including incentives for meeting performance goals. For electric sales, the program
would target 0.3 percent annual savings in 2008/2009, ramping up to 1 percent annual savings
by 2012. For natural gas sales, the targeted annual savings start at 0.1 percent in
2008/2009 before ramping up to 0.75 percent by 2012. The MPSC may allow a utility to recover
over time the actual costs of its efficiency programs in base rates. Costs would be limited
to 2 percent maximum of total utility revenues (1.5 percent of business revenues). The bill
would also allow a natural gas utility that spends at least 0.5 percent of its revenues on
energy efficiency programs to decouple revenues from volumetric sales, adjusting for sales
volumes above or below forecasted levels. Similar to the RPS bills, a cost test would be
implemented to ensure reasonable costs. If a utility spends at the MPSC approved levels, it
would be considered in full compliance even if the savings targets are not met.
  
    
    A requirement that the MPSC set rates based on cost-of-service for all customer classes,
eliminating the current subsidy for residential customers and certain business customers
included in business customer rates. Elimination of the subsidy (de-skewing) would be phased
in over a five year period for certain business customers and over a ten year period for
residential customers.
    
    A combined renewable portfolio standard (RPS) and energy efficiency impacts of 2% by
2011, 4% by 2012, 6% by 2014 and 7% by 2015.
  6




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Part I  Item 4.
 CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  7




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Part I  Item 1.
 The Detroit Edison Company
 
 Consolidated Statements of Operations (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30(in Millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Operating Revenues
    
    $
    1,173
    
    
    $
    1,210
    
    
    $
    2,326
    
    
    $
    2,304Operating ExpensesFuel and purchased power
    
    
    415
    
    
    
    402
    
    
    
    817
    
    
    
    756Operation and maintenance
    
    
    369
    
    
    
    380
    
    
    
    727
    
    
    
    728Depreciation and amortization
    
    
    178
    
    
    
    198
    
    
    
    370
    
    
    
    380Taxes other than income
    
    
    60
    
    
    
    69
    
    
    
    122
    
    
    
    141Asset (gains) and reserves, net
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    61,022
    
    
    
    1,048
    
    
    
    2,036
    
    
    
    2,011Operating Income
    
    
    151
    
    
    
    162
    
    
    
    290
    
    
    
    293Other (Income) and DeductionsInterest expense
    
    
    71
    
    
    
    75
    
    
    
    147
    
    
    
    149Interest income
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (3
    )Other income
    
    
    (11
    )
    
    
    (7
    )
    
    
    (23
    )
    
    
    (18
    )Other expenses
    
    
    12
    
    
    
    6
    
    
    
    23
    
    
    
    1571
    
    
    
    72
    
    
    
    145
    
    
    
    143Income Before Income Taxes
    
    
    80
    
    
    
    90
    
    
    
    145
    
    
    
    150Income Tax Provision
    
    
    29
    
    
    
    30
    
    
    
    53
    
    
    
    50Net Income
    
    $
    51
    
    
    $
    60
    
    
    $
    92
    
    
    $
    100
  8




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The Detroit Edison Company
 
 Consolidated Statements of Financial Position (Unaudited)
 June 30
    
    
    December 31(in Millions)
    
    2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    131
    
    
    $
    47Restricted cash
    
    
    84
    
    
    
    135Accounts receivable (less allowance for
doubtful accounts of $116 and $93,
respectively)Customer
    
    
    739
    
    
    
    727Affiliates
    
    
    4
    
    
    
    3Other
    
    
    64
    
    
    
    90Accrued power supply cost recovery revenue
    
    
    2
    
    
    
    75InventoriesFuel
    
    
    196
    
    
    
    150Materials and supplies
    
    
    171
    
    
    
    165Other
    
    
    50
    
    
    
    601,441
    
    
    
    1,452InvestmentsNuclear decommissioning trust funds
    
    
    794
    
    
    
    824Other
    
    
    107
    
    
    
    111901
    
    
    
    935PropertyProperty, plant and equipment
    
    
    14,609
    
    
    
    14,372Accumulated depreciation
    
    
    (5,781
    )
    
    
    (5,640
    )8,828
    
    
    
    8,732Other AssetsRegulatory assets
    
    
    2,475
    
    
    
    2,511Securitized regulatory assets
    
    
    1,065
    
    
    
    1,124Intangible assets
    
    
    18
    
    
    
    9Other
    
    
    131
    
    
    
    1223,689
    
    
    
    3,766Total Assets
    
    $
    14,859
    
    
    $
    14,885
  9




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The Detroit Edison Company
 
 Consolidated Statements of Financial Position (Unaudited)
 June 30
    
    
    December 31(in Millions, Except Shares)
    
    2008
    
    
    2007LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts
payable  affiliates
    
    $
    146
    
    
    $
    138Accounts
payable  other
    
    
    367
    
    
    
    396Accrued interest
    
    
    79
    
    
    
    77Dividends payable
    
    
    76
    
    
    
    76Accrued vacations
    
    
    59
    
    
    
    52Short-term
borrowings  affiliates
    
    
    232
    
    
    
    277Short-term
borrowings  other
    
    
    100
    
    
    
    406Current portion of long-term debt, including capital leases
    
    
    181
    
    
    
    174Other
    
    
    299
    
    
    
    2431,539
    
    
    
    1,839Long-Term Debt (net of current portion)Mortgage bonds, notes and other
    
    
    3,759
    
    
    
    3,473Securitization bonds
    
    
    996
    
    
    
    1,065Capital lease obligations
    
    
    36
    
    
    
    424,791
    
    
    
    4,580Other LiabilitiesDeferred income taxes
    
    
    1,793
    
    
    
    1,825Regulatory liabilities
    
    
    561
    
    
    
    583Asset retirement obligations
    
    
    1,178
    
    
    
    1,160Unamortized investment tax credit
    
    
    90
    
    
    
    95Nuclear decommissioning
    
    
    127
    
    
    
    134Accrued pension liability
    
    
    48
    
    
    
    47Accrued postretirement liability
    
    
    823
    
    
    
    816Other
    
    
    490
    
    
    
    5035,110
    
    
    
    5,163Commitments and Contingencies (Notes 4 and 6)Shareholders EquityCommon stock, $10 par value, 400,000,000 shares authorized,
and 138,632,324 shares issued and outstanding
    
    
    2,946
    
    
    
    2,771Retained earnings
    
    
    468
    
    
    
    528Accumulated other comprehensive income
    
    
    5
    
    
    
    43,419
    
    
    
    3,303Total Liabilities and Shareholders Equity
    
    $
    14,859
    
    
    $
    14,885
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The Detroit Edison Company
 
 Consolidated Statements of Cash Flows (Unaudited)
 Six Months EndedJune 30(in Millions)
    
    2008
    
    
    2007Operating ActivitiesNet Income
    
    $
    92
    
    
    $
    100Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    370
    
    
    
    380Deferred income taxes
    
    
    (19
    )
    
    
    (111
    )Asset (gains) and reserves, net
    
    
    (1
    )
    
    
    6Changes in assets and liabilities, exclusive of changes shown separately
    
    
    153
    
    
    
    119Net cash from operating activities
    
    
    595
    
    
    
    494Investing ActivitiesPlant and equipment expenditures
    
    
    (414
    )
    
    
    (383
    )Restricted cash for debt redemptions
    
    
    51
    
    
    
    1Proceeds from sale of nuclear decommissioning trust fund assets
    
    
    106
    
    
    
    124Investment in nuclear decommissioning trust funds
    
    
    (124
    )
    
    
    (140
    )Other investments
    
    
    (23
    )
    
    
    (7
    )Net cash used for investing activities
    
    
    (404
    )
    
    
    (405
    )Financing ActivitiesIssuance of long-term debt
    
    
    538
    
    
    
    Redemption of long-term debt
    
    
    (74
    )
    
    
    (76
    )Repurchase of long-term debt
    
    
    (238
    )
    
    
    Short-term borrowings, net
    
    
    (351
    )
    
    
    (23
    )Capital contribution by parent company
    
    
    175
    
    
    
    175Dividends on common stock
    
    
    (152
    )
    
    
    (152
    )Other
    
    
    (5
    )
    
    
    (4
    )Net cash from (used for) financing activities
    
    
    (107
    )
    
    
    (80
    )Net Increase in Cash and Cash Equivalents
    
    
    84
    
    
    
    9Cash and Cash Equivalents at Beginning of the Period
    
    
    47
    
    
    
    27Cash and Cash Equivalents at End of the Period
    
    $
    131
    
    
    $
    36
  11




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##### Table of Contents



The Detroit Edison Company  Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    OtherCommon Stock
    
    Paid In
    
    Retained
    
    Comprehensive(Dollars in Millions, shares in thousands)
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    Income
    
    TotalBalance, December 31, 2007
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,385
    
    
    $
    528
    
    
    $
    4
    
    
    $
    3,303Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    92Capital contribution by parent
company
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    175Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    
    
    
    
    (152
    )Net change in unrealized gains
on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Balance, June 30, 2008
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,560
    
    
    $
    468
    
    
    $
    5
    
    
    $
    3,419
  (in Millions)
    
    2008
    
    
    2007Net income
    
    $
    92
    
    
    $
    100Other comprehensive income, net of tax:Net unrealized gains on investments:Amounts reclassified to income, net of taxes of $- and $1
    
    
    1
    
    
    
    2Comprehensive income
    
    $
    93
    
    
    $
    102
  12




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##### Table of Contents



The Detroit Edison Company
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE
1  GENERAL
    Asset Retirement Obligations
 Accounting for
Asset Retirement Obligations Accounting for Conditional Asset Retirement Obligations,
an interpretation of FASB Statement No. 143
 Accounting for the Effects of Certain Types of Regulation
  (in Millions)Asset retirement obligations at January 1, 2008
    
    $
    1,170Accretion
    
    
    39Liabilities settled
    
    
    (5
    )Revision in estimated cash flows
    
    
    (10
    )Asset retirement obligations at June 30, 2008
    
    
    1,194Less amount included in current liabilities
    
    
    (16
    )$
    1,178
  13




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##### Table of Contents



Retirement Benefits and Trusteed Assets
  (in Millions)
    
    Pension Benefits
    
    
    Other Postretirement BenefitsThree Months Ended June 30
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    11
    
    
    $
    12
    
    
    $
    12
    
    
    $
    12Interest cost
    
    
    37
    
    
    
    34
    
    
    
    24
    
    
    
    23Expected return on plan assets
    
    
    (41
    )
    
    
    (38
    )
    
    
    (15
    )
    
    
    (14
    )Amortization of:Net actuarial loss
    
    
    6
    
    
    
    11
    
    
    
    7
    
    
    
    13Prior service cost
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Net transition liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Special termination benefits
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    14
    
    
    $
    21
    
    
    $
    29
    
    
    $
    36
 (in Millions)
    
    Pension Benefits
    
    
    Other Postretirement BenefitsSix Months Ended June 30
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    23
    
    
    $
    25
    
    
    $
    24
    
    
    $
    23Interest cost
    
    
    74
    
    
    
    68
    
    
    
    47
    
    
    
    46Expected return on plan assets
    
    
    (82
    )
    
    
    (75
    )
    
    
    (29
    )
    
    
    (27
    )Amortization of:Net actuarial loss
    
    
    13
    
    
    
    22
    
    
    
    14
    
    
    
    25Prior service cost
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    2Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    3Special termination benefits
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    2Net periodic benefit cost
    
    $
    31
    
    
    $
    48
    
    
    $
    58
    
    
    $
    74
     Income Taxes
   14




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##### Table of Contents



Short-Term Credit Arrangements and Borrowings
  Stock-Based Compensation
 Share-Based Payment,
 Consolidated Statements of Cash Flows
  Six Months EndedJune 30(in Millions)
    
    2008
    
    
    2007Changes in Assets and Liabilities, Exclusive of Changes Shown SeparatelyAccounts receivable, net
    
    $
    11
    
    
    $
    (250
    )Inventories
    
    
    (53
    )
    
    
    (40
    )Accrued pensions
    
    
    13
    
    
    
    24Accounts payable
    
    
    23
    
    
    
    308Accrued PSCR refund
    
    
    95
    
    
    
    46Income taxes payable
    
    
    32
    
    
    
    46General taxes
    
    
    (13
    )
    
    
    21Postretirement obligation
    
    
    7
    
    
    
    8Other assets
    
    
    54
    
    
    
    38Other liabilities
    
    
    (16
    )
    
    
    (82
    )$
    153
    
    
    $
    119Supplementary Cash InformationCash paid for interest (net of interest capitalized)
    
    $
    145
    
    
    $
    150Cash paid for income taxes
    
    $
    2
    
    
    $
    111
 Asset (gains) and reserves, net
  NOTE
2  NEW ACCOUNTING PRONOUNCEMENTS
 Fair Value Accounting
 Fair Value Measurements
 15




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##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 Business Combinations
 Business Combinations,
 GAAP Hierarchy
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 Useful Life of Intangible Assets
 Determination of the Useful Life of Intangible Assets. Goodwill and Other Intangible Assets
 Noncontrolling Interests in Consolidated Financial Statements
 Noncontrolling Interests in Consolidated Financial
Statements  an Amendment of ARB No. 51.
 16




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##### Table of Contents



Disclosures about Derivative Instruments and Hedging Activities
  Offsetting Amounts Related to Certain Contracts
 Amendment of FASB Interpretation No. 39
 NOTE
3  FAIR VALUE
    
    
    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.
  17




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##### Table of Contents



Net Balance at(in Millions)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    June 30, 2008Assets:Nuclear decommissioning trusts
    
    $
    493
    
    
    $
    301
    
    
    $
    
    
    
    $
    794Employee benefit trust investments
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Derivative assets
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Total
    
    $
    493
    
    
    $
    360
    
    
    $
    4
    
    
    $
    857Liabilities:Deferred compensation
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    (1
    )Derivative liabilities
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total
    
    $
    
    
    
    $
    (1
    )
    
    $
    (2
    )
    
    $
    (3
    )Net Assets at June 30, 2008
    
    $
    493
    
    
    $
    359
    
    
    $
    2
    
    
    $
    854
 Nuclear Decommissioning Funds
  Employee Benefit Trust Investments
  Deferred Compensation Liabilities
  Derivative Assets and Liabilities
  NOTE 4
 RESTRUCTURING
 Restructuring
 Performance Excellence Process
   18




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##### Table of Contents



Three Months Ended June 30
    
    Employee Severance Costs (1)
    
    
    Other Costs
    
    
    Total Cost(in Millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Costs incurred
    
    
    
    
    
    
    3
    
    
    
    8
    
    
    
    7
    
    
    
    8
    
    
    
    10Less amounts deferred or
capitalized
    
    
    
    
    
    
    3
    
    
    
    8
    
    
    
    7
    
    
    
    8
    
    
    
    10Amount expensed
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Six Months Ended June 30
    
    Employee Severance Costs (1)
    
    
    Other Costs
    
    
    Total Cost(in Millions)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Costs incurred
    
    
    
    
    
    
    11
    
    
    
    12
    
    
    
    14
    
    
    
    12
    
    
    
    25Less amounts deferred
or capitalized
    
    
    
    
    
    
    11
    
    
    
    12
    
    
    
    14
    
    
    
    12
    
    
    
    25Amount expensed
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes corporate allocations. NOTE 5
 REGULATORY MATTERS
 Regulation
  MPSC Show-Cause Order
   2007 Electric Rate Case Filing
  19




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##### Table of Contents




    
    Make progress toward correcting the existing rate structure to more accurately reflect
the actual cost of providing service to business customers;
    
    Equalize distribution rates between Detroit Edison full service and Customer Choice
customers;
    
    Re-establish with modification the CIM originally established in the Detroit Edison 2006
show cause filing. The CIM reconciles changes related to customers moving between Detroit
Edison full service and electric Customer Choice;
    
    Terminate the Pension Equalization Mechanism;
    
    Establish an emission allowance pre-purchase plan to ensure that adequate emission
allowances will be available for environmental compliance; and
    
    Establish a methodology for recovery of the costs associated with preparation of an
application for a new nuclear generation facility.
 st
   Regulatory Accounting Treatment for Performance Excellence Process
  20




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##### Table of Contents



Accounting for Costs Related to Enterprise Business Systems (EBS)
  Fermi 2 Enhanced Security Costs Settlement
  Reconciliation of Regulatory Asset Recovery Surcharge
  Power Supply Costs Recovery Proceedings
 2005 Plan Year
 21




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##### Table of Contents



2006 Plan Year 
 2007 Plan Year  2
 2008 Plan Year  2
 22




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##### Table of Contents



Other
   NOTE 6  SHAREHOLDERS EQUITY
  NOTE 7  LONG-TERM DEBT
  Debt Issuances
  ($ millions)Company
    
    Month Issued
    
    
    Type
    
    
    Interest Rate
    
    
    Maturity
    
    
    AmountDetroit Edison
    
    April
    
    Tax-Exempt Revenue Bonds (1) (2)
    
    Variable
    
    
    2036
    
    
    
    69Detroit Edison
    
    May
    
    Tax-Exempt Revenue Bonds (1) (2)
    
    Variable
    
    
    2029
    
    
    
    118Detroit Edison
    
    May
    
    Tax-Exempt Revenue Bonds (1) (3)
    
    
    5.30
    %
    
    
    2030
    
    
    
    51Detroit Edison
    
    June
    
    Senior Notes (4)
    
    
    5.60
    %
    
    
    2018
    
    
    
    300Detroit Edison
    
    July
    
    Tax-Exempt Revenue Bonds (1) (5)
    
    Variable
    
    
    2020
    
    
    
    32$
    570
 
 (1)
    
    Detroit Edison Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to
Detroit Edison on terms substantially mirroring the Revenue Bonds.(2)
    
Proceeds were used to refinance auction rate Tax-Exempt Revenue
Bonds.(3)
    
These Tax-Exempt Revenue Bonds were previously converted from an
auction rate mode and remarketed in a fixed rate mode to
maturity.(4)
    
    The proceeds from the issuance were used to pay down short-term debt and for general corporate
purposes.(5)
    
    Proceeds were used to
refinance Tax-Exempt Revenue Bonds that matured July
2008. 23




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##### Table of Contents



Debt Retirements and Redemptions
  ($ millions)Company
    
    Month Issued
    
    
    Type
    
    
    Interest Rate
    
    
    Maturity
    
    
    AmountDetroit Edison
    
    April
    
    Tax-Exempt Revenue Bonds (1)
    
    Variable
    
    
    2036
    
    
    $
    69Detroit Edison
    
    May
    
    Tax-Exempt Revenue Bonds (1)
    
    Variable
    
    
    2029
    
    
    
    118Detroit Edison
    
    July
    
    Tax-Exempt Revenue Bonds (2)
    
    
    7.00
    %
    
    
    2008
    
    
    
    32$
    219
 
 (1)
    
    These Tax-Exempt Revenue Bonds were converted from auction rate mode, then repurchased and
reissued in a weekly rate mode.(2)
    
    These Tax-Exempt Revenue Bonds were redeemed with the proceeds from the issuance of new
Detroit Edison Tax-Exempt Revenue Bonds. NOTE 8  COMMITMENTS AND CONTINGENCIES
 Environmental
 Air .
 Water
 Contaminated Sites
 24




---



##### Table of Contents



Labor Contracts
  Purchase Commitments
   Bankruptcies
  Other Contingencies
   25




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##### Table of Contents



Part II
 
 Item 1.
 Legal Proceedings
   
 Item 1A.
 Risk Factors
  
 Item 6.
 Exhibits
 ExhibitNumber
    
    DescriptionExhibits filed herewith:4-253
    
    Supplemental Indenture, dated as of May 1, 2008 to Mortgage
and Deed of Trust dated as of October 1, 1924 between The
Detroit Edison Company and J.P. Morgan Trust Company,
National Association, as successor trustee, providing for
General and Refunding Mortgage Bonds, 2008 Series ET.4-254
    
    Twenty-Fourth Supplemental Indenture, dated as of May 1,
2008 to the Collateral Trust Indenture, dated as of June
30, 1993 between The Detroit Edison Company and J.P. Morgan
Trust Company, National Association, as successor trustee,
providing for 2008 Series ET Variable Rate Senior Notes due
2029.4-255
    
    Supplemental Indenture, dated as of June 1, 2008 to
Mortgage and Deed of Trust dated as of October 1, 1924
between The Detroit Edison Company and J.P. Morgan Trust
Company, National Association, as successor trustee,
providing for General and Refunding Mortgage Bonds, 2008
Series G.4-256
    
    Twenty-Fifth Supplemental Indenture, dated as of June 1,
2008 to the Collateral Trust Indenture, dated as of June
30, 1993 between The Detroit Edison Company and J.P. Morgan
Trust Company, National Association, as successor trustee,
providing for 2008 Series G 5.60% Senior Notes due 2018.4-257
    
    Supplemental Indenture, dated as of July 1, 2008 to
Mortgage and Deed of Trust dated as of October 1, 1924
between The Detroit Edison Company and J.P. Morgan Trust
Company, National Association, as successor trustee,
providing for General and Refunding Mortgage Bonds, 2008
Series KT.
 26




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##### Table of Contents



ExhibitNumber
    
    Description4-258
    
    Twenty-Sixth Supplemental Indenture, dated as of July 1,
2008 to the Collateral Trust Indenture, dated as of June
30, 1993 between The Detroit Edison Company and J.P. Morgan
Trust Company, National Association, as successor trustee,
providing for 2008 Series KT Variable Rate Senior Notes due
2020.12-30
    
    Computation of Ratio of Earnings to Fixed Charges31-41
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-42
    
    Chief Financial Officer Section 302 Form 10-Q CertificationExhibits furnished herewith:32-41
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-42
    
    Chief Financial Officer Section 906 Form 10-Q Certification
 27




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##### Table of Contents



SIGNATURE
  THE DETROIT EDISON COMPANY(Registrant)Date: August 7, 2008
    
    /s/ PETER B. OLEKSIAKPeter B. OleksiakVice President and Controller andChief Accounting Officer
 28