##### 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, 2005
 Commission file number 1-2198
  THE DETROIT EDISON COMPANY
  Michigan
(State or other jurisdiction of
incorporation or organization)
    
    38-0478650
(I.R.S. Employer
Identification No.)2000 2nd Avenue, Detroit, Michigan
(Address of principal executive offices)
    
    48226-1279
(Zip Code)
 313-235-4000
  Yes þ No o
  Yes o No þ




---



The Detroit Edison Company
 Quarterly Report on Form 10-Q  Quarter Ended June 30, 2005
 Table of Contents
 PageDefinitions
    
    
    1Forward-Looking Statements
    
    
    2Part I  Financial InformationItem 1.
    
    Financial StatementsConsolidated Statement of Operations
    
    
    7Consolidated Statement of Financial Position
    
    
    8Consolidated Statement of Cash Flows
    
    
    10Consolidated Statement of Changes in Shareholders Equity and Comprehensive Income
    
    
    11Notes to Consolidated Financial Statements
    
    
    12Report of Independent Registered Public Accounting Firm
    
    
    19Item
 2.
    
    Managements Narrative Analysis of Results of Operations
    
    
    3Item 4.
    
    Controls and Procedures
    
    
    6Part II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    20Item 6.
    
    Exhibits
    
    
    20Signature
    
    
    21Computation of Ratio of Earnings to Fixed ChargesAwareness Letter of Deloitte & Touche LLPChief Executive Officer Section 302 CertificationChief Financial Officer Section 302 CertificationChief Executive Officer Section 906 CertificationChief Financial Officer Section 906 Certification




---



##### Table of Contents



Definitions
 Customer 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 CommissionITC
    
    International Transmission Company (until February 28, 2003, a
wholly owned subsidiary of DTE Energy Company)MPSC
    
    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. The clause was
suspended under Michigans restructuring legislation (signed into law June 5, 2000), which
lowered and froze electric customer rates. The clause was reinstated by the MPSC effective
January 1, 2004.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 expect to be recoverable if
customers switch to alternative energy suppliers.Units of MeasurementgWh
    
    Gigawatthour of electricitykWh
    
    Kilowatthour of electricityMW
    
    Megawatt of electricityMWh
    
    Megawatthour of electricity
 1




---



##### Table of Contents



Forward-Looking Statements
  
    
    the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;
    
    economic climate and growth or decline in the geographic areas where we do business;
    
    environmental issues, laws and regulations, and the cost of remediation and compliance associated therewith;
    
    nuclear regulations and operations associated with nuclear facilities;
    
    implementation of the electric Customer Choice program;
    
    impact of electric utility restructuring in Michigan, including legislative amendments;
    
    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 FERC, MPSC, NRC and other applicable governmental proceedings and regulations;
    
    changes in 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 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;
    
    uncollectible accounts receivable; 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




---



##### Table of Contents



The Detroit Edison Company
 
 Managements Narrative Analysis of Results of Operations
  Factors impacting income:
 Quarter
    
    Six MonthsIncrease (Decrease) in
Income Statement Components
Compared to Prior Year
(in Millions)Operating Revenues
    
    $
    200
    
    
    $
    304Fuel and Purchased Power
    
    
    143
    
    
    
    228Gross Margin
    
    
    57
    
    
    
    76Operation and Maintenance
    
    
    (29
    )
    
    
    (51
    )Depreciation and Amortization
    
    
    38
    
    
    
    74Taxes Other Than Income
    
    
    1
    
    
    
    2Operating Income
    
    
    47
    
    
    
    51Other (Income) and Deductions
    
    
    (4
    )
    
    
    (14
    )Income Tax Provision
    
    
    16
    
    
    
    19Net Income
    
    $
    35
    
    
    $
    46
 Gross margins
  3




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Power Generated and Purchased
(in Thousands of MWh)Power Plant GenerationFossil
    
    
    9,546
    
    
    
    8,507
    
    
    
    19,310
    
    
    
    18,291Nuclear
    
    
    2,272
    
    
    
    2,409
    
    
    
    4,325
    
    
    
    4,81711,818
    
    
    
    10,916
    
    
    
    23,635
    
    
    
    23,108Purchased Power
    
    
    1,331
    
    
    
    1,226
    
    
    
    2,809
    
    
    
    2,424System Output
    
    
    13,149
    
    
    
    12,142
    
    
    
    26,444
    
    
    
    25,532Less Line Loss and Internal Use
    
    
    (752
    )
    
    
    (1,130
    )
    
    
    (1,349
    )
    
    
    (1,911
    )Net System Output
    
    
    12,397
    
    
    
    11,012
    
    
    
    25,095
    
    
    
    23,621Average Unit Cost ($/MWh)Generation (1)
    
    $
    14.66
    
    
    $
    12.68
    
    
    $
    14.53
    
    
    $
    12.78Purchased Power (2)
    
    $
    85.66
    
    
    $
    34.04
    
    
    $
    66.51
    
    
    $
    34.29Overall Average Unit Cost
    
    $
    21.85
    
    
    $
    14.84
    
    
    $
    20.05
    
    
    $
    14.83
 
 (1)
    
    Represents fuel costs associated with power plants.(2)
    
    The average purchased power amounts include hedging activities. Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302005
    
    
    2004
    
    
    2005
    
    
    2004Electric Sales
(in Thousands of MWh)Residential
    
    
    3,766
    
    
    
    3,472
    
    
    
    7,817
    
    
    
    7,541Commercial
    
    
    3,820
    
    
    
    3,049
    
    
    
    7,184
    
    
    
    6,540Industrial
    
    
    3,024
    
    
    
    2,810
    
    
    
    5,920
    
    
    
    5,564Wholesale
    
    
    557
    
    
    
    552
    
    
    
    1,120
    
    
    
    1,109Other
    
    
    88
    
    
    
    103
    
    
    
    193
    
    
    
    21211,255
    
    
    
    9,986
    
    
    
    22,234
    
    
    
    20,966Interconnections sales (1)
    
    
    1,142
    
    
    
    1,026
    
    
    
    2,861
    
    
    
    2,655Total Electric Sales
    
    
    12,397
    
    
    
    11,012
    
    
    
    25,095
    
    
    
    23,621Electric Deliveries
(in Thousands of MWh)Retail and Wholesale
    
    
    11,255
    
    
    
    9,986
    
    
    
    22,234
    
    
    
    20,966Electric Choice
    
    
    1,996
    
    
    
    2,480
    
    
    
    3,910
    
    
    
    4,622Electric Choice  Self Generators (2)
    
    
    174
    
    
    
    185
    
    
    
    366
    
    
    
    352Total Electric Sales and Deliveries
    
    
    13,425
    
    
    
    12,651
    
    
    
    26,510
    
    
    
    25,940
 
 (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
 4




---



##### Table of Contents



Depreciation and amortization
 Other income and deductions
 Outlook
    MIDWEST
INDEPENDENT TRANSMISSION SYSTEM OPERATOR (MISO)
    5




---



##### Table of Contents



CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  6




---



##### Table of Contents



The Detroit Edison Company
 
 Consolidated Statement of Operations (unaudited)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 30(in Millions)
    
    2005
    
    2004
    
    2005
    
    2004Operating Revenues
    
    $
    1,035
    
    
    $
    835
    
    
    $
    2,025
    
    
    $
    1,721Operating ExpensesFuel and purchased power
    
    
    343
    
    
    
    200
    
    
    
    644
    
    
    
    416Operation and maintenance
    
    
    330
    
    
    
    359
    
    
    
    651
    
    
    
    702Depreciation and amortization
    
    
    160
    
    
    
    122
    
    
    
    310
    
    
    
    236Taxes other than income
    
    
    63
    
    
    
    62
    
    
    
    132
    
    
    
    130896
    
    
    
    743
    
    
    
    1,737
    
    
    
    1,484Operating Income
    
    
    139
    
    
    
    92
    
    
    
    288
    
    
    
    237Other (Income) and DeductionsInterest expense
    
    
    69
    
    
    
    71
    
    
    
    133
    
    
    
    143Interest income
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    Other income
    
    
    (18
    )
    
    
    (15
    )
    
    
    (30
    )
    
    
    (30
    )Other expenses
    
    
    24
    
    
    
    23
    
    
    
    42
    
    
    
    4575
    
    
    
    79
    
    
    
    144
    
    
    
    158Income Before Income Taxes
    
    
    64
    
    
    
    13
    
    
    
    144
    
    
    
    79Income Tax Provision
    
    
    21
    
    
    
    5
    
    
    
    46
    
    
    
    27Net Income
    
    $
    43
    
    
    $
    8
    
    
    $
    98
    
    
    $
    52
  7




---



##### Table of Contents



The Detroit Edison Company
 
 Consolidated Statement of Financial Position
 (Unaudited)June 30
    
    December 31(in Millions)
    
    2005
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    17
    
    
    $
    6Restricted cash
    
    
    69
    
    
    
    75Accounts receivableCustomer (less allowance for
doubtful accounts of $52 and
$55, respectively)
    
    
    331
    
    
    
    258Accrued unbilled revenues
    
    
    200
    
    
    
    207Other
    
    
    120
    
    
    
    120InventoriesFuel
    
    
    111
    
    
    
    100Materials and supplies
    
    
    115
    
    
    
    118Note receivable from Affiliate
    
    
    
    
    
    
    85Other
    
    
    77
    
    
    
    461,040
    
    
    
    1,015InvestmentsNuclear decommissioning trust funds
    
    
    613
    
    
    
    590Other
    
    
    60
    
    
    
    55673
    
    
    
    645PropertyProperty, plant and equipment
    
    
    13,155
    
    
    
    12,931Less accumulated depreciation
    
    
    (5,485
    )
    
    
    (5,354
    )7,670
    
    
    
    7,577Other AssetsRegulatory assets
    
    
    2,074
    
    
    
    2,053Securitized regulatory assets
    
    
    1,391
    
    
    
    1,438Other
    
    
    104
    
    
    
    1143,569
    
    
    
    3,605Total Assets
    
    $
    12,952
    
    
    $
    12,842
  8




---



##### Table of Contents



The Detroit Edison Company
 Consolidated Statement of Financial Position
 (Unaudited)June 30
    
    December 31(in Millions, Except Shares)
    
    2005
    
    2004LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    364
    
    
    $
    346Accrued interest
    
    
    81
    
    
    
    79Dividends payable
    
    
    76
    
    
    
    76Accrued payroll
    
    
    10
    
    
    
    12Accrued vacations
    
    
    80
    
    
    
    76Short-term borrowings
    
    
    219
    
    
    
    Accrued PSCR refund
    
    
    121
    
    
    
    112Current portion of long-term debt, including capital leases
    
    
    330
    
    
    
    499Other
    
    
    179
    
    
    
    1301,460
    
    
    
    1,330Other LiabilitiesDeferred income taxes
    
    
    1,931
    
    
    
    1,941Regulatory liabilities
    
    
    263
    
    
    
    253Asset retirement obligations (Note 1)
    
    
    897
    
    
    
    869Unamortized investment tax credit
    
    
    120
    
    
    
    125Nuclear decommissioning
    
    
    80
    
    
    
    77Accrued pension liability
    
    
    288
    
    
    
    247Other
    
    
    707
    
    
    
    6764,286
    
    
    
    4,188Long-Term Debt (net of current portion)Mortgage bonds, notes and other
    
    
    2,876
    
    
    
    2,879Securitization bonds
    
    
    1,345
    
    
    
    1,400Capital lease obligations
    
    
    61
    
    
    
    664,282
    
    
    
    4,345Contingencies (Notes 3 and 5)Shareholders EquityCommon stock, $10 par value, 400,000,000 shares
authorized, 138,632,324 shares issued
and outstanding
    
    
    1,386
    
    
    
    1,386Premium on common stock
    
    
    1,104
    
    
    
    1,104Common stock expense
    
    
    (44
    )
    
    
    (44
    )Retained earnings
    
    
    476
    
    
    
    531Accumulated other comprehensive income
    
    
    2
    
    
    
    22,924
    
    
    
    2,979Total Liabilities and Shareholders Equity
    
    $
    12,952
    
    
    $
    12,842
  9




---



##### Table of Contents



The Detroit Edison Company
 
 Consolidated Statement of Cash Flows (Unaudited)
 Six Months EndedJune 30(in Millions)
    
    2005
    
    2004Operating ActivitiesNet Income
    
    $
    98
    
    
    $
    52Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    310
    
    
    
    236Deferred income taxes
    
    
    (10
    )
    
    
    89Changes in assets and liabilities, exclusive of changes
shown separately (Note 1)
    
    
    59
    
    
    
    39Net cash from operating activities
    
    
    457
    
    
    
    416Investing ActivitiesPlant and equipment expenditures
    
    
    (321
    )
    
    
    (320
    )Restricted cash for debt redemptions
    
    
    6
    
    
    
    13Notes receivable from affiliate
    
    
    85
    
    
    
    7Other investments
    
    
    (47
    )
    
    
    (38
    )Net cash used for investing activities
    
    
    (277
    )
    
    
    (338
    )Financing ActivitiesIssuance of long-term debt
    
    
    395
    
    
    
    67Redemption of long-term debt
    
    
    (628
    )
    
    
    (130
    )Short-term borrowings, net
    
    
    219
    
    
    
    150Dividends on common stock
    
    
    (152
    )
    
    
    (150
    )Other
    
    
    (3
    )
    
    
    (4
    )Net cash used for financing activities
    
    
    (169
    )
    
    
    (67
    )Net Increase in Cash and Cash Equivalents
    
    
    11
    
    
    
    11Cash and Cash Equivalents at Beginning of the Period
    
    
    6
    
    
    
    6Cash and Cash Equivalents at End of the Period
    
    $
    17
    
    
    $
    17
  10




---



##### Table of Contents



The Detroit Edison Company
 
 Consolidated Statement of Changes in Shareholders Equity  and Comprehensive Income (unaudited)
 Premium
    
    
    
    
    
    
    
    
    
    Accumulated(Dollars in Millions,
    
    
    
    
    
    
    
    
    
    on
    
    Common
    
    
    
    
    
    OtherShares in Thousands)
    
    Common Stock
    
    Common
    
    Stock
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    Stock
    
    Expense
    
    Earnings
    
    Income
    
    TotalBalance, December 31, 2004
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,104
    
    
    $
    (44
    )
    
    $
    531
    
    
    $
    2
    
    
    $
    2,979Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    98Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Balance, June 30, 2005
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,104
    
    
    $
    (44
    )
    
    $
    476
    
    
    $
    2
    
    
    $
    2,924
  (in Millions)
    
    2005
    
    2004Net income
    
    $
    98
    
    
    $
    52Comprehensive income
    
    $
    98
    
    
    $
    52
  11




---



##### Table of Contents





The Detroit Edison Company





Notes to Consolidated Financial Statements (unaudited)


NOTE 1  GENERAL








Consolidated Statement of Cash Flows
  Six Months EndedJune 30(in Millions)
    
    2005
    
    2004Changes in Assets and Liabilities,
Exclusive of Changes Shown SeparatelyAccounts receivable, net
    
    $
    (54
    )
    
    $
    (12
    )Accrued unbilled receivables
    
    
    7
    
    
    
    9Inventories
    
    
    (8
    )
    
    
    1Accrued pensions
    
    
    54
    
    
    
    51Accounts payable
    
    
    18
    
    
    
    63Accrued PSCR refund
    
    
    (29
    )
    
    
    45Income taxes payable
    
    
    50
    
    
    
    (62
    )General taxes
    
    
    3
    
    
    
    (12
    )Risk management and trading activities
    
    
    
    
    
    
    (1
    )Other
    
    
    18
    
    
    
    (43
    )$
    59
    
    
    $
    39
 12




---



##### Table of Contents



Six Months EndedJune 30(in Millions)
    
    2005
    
    2004Cash PaidInterest (excluding interest capitalized)
    
    $
    131
    
    
    $
    144Income taxes
    
    $
    
    
    
    $
    1Non-cash Financing ActivityCommon stock issued to parent company in conjunction with parent
company common stock contribution to pension plan
    
    $
    
    
    
    $
    170
 Asset Retirement Obligations
 Accounting for Asset Retirement Obligations, Accounting for the Effects of Certain Types of
Regulation
  (in Millions)Asset retirement obligations at January 1, 2005
    
    $
    869Accretion
    
    
    29Liabilities settled
    
    
    (1
    )Asset retirement obligations at June 30, 2005
    
    $
    897
  13




---



##### Table of Contents



Retirement Benefits and Trusteed Assets
  Other PostretirementPension Benefits
    
    Benefits(in Millions)
    
    2005
    
    2004
    
    2005
    
    2004Three Months Ended June 30Service Cost
    
    $
    13
    
    
    $
    11
    
    
    $
    11
    
    
    $
    8Interest Cost
    
    
    33
    
    
    
    33
    
    
    
    20
    
    
    
    17Expected Return on Plan Assets
    
    
    (33
    )
    
    
    (36
    )
    
    
    (14
    )
    
    
    (11
    )Amortization ofNet loss
    
    
    12
    
    
    
    12
    
    
    
    11
    
    
    
    8Prior service cost
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net Periodic Benefit Cost
    
    $
    28
    
    
    $
    23
    
    
    $
    30
    
    
    $
    24Six Months Ended June 30Service Cost
    
    $
    27
    
    
    $
    24
    
    
    $
    22
    
    
    $
    16Interest Cost
    
    
    66
    
    
    
    66
    
    
    
    40
    
    
    
    35Expected Return on Plan Assets
    
    
    (67
    )
    
    
    (67
    )
    
    
    (29
    )
    
    
    (23
    )Amortization ofNet loss
    
    
    25
    
    
    
    24
    
    
    
    22
    
    
    
    17Prior service cost
    
    
    5
    
    
    
    5
    
    
    
    2
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    4Net Periodic Benefit Cost
    
    $
    56
    
    
    $
    52
    
    
    $
    60
    
    
    $
    49
 NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Accounting for Conditional Asset Retirement Obligations
 Accounting for Conditional
Asset Retirement Obligations, an interpretation of FASB Statement No. 143.
 NOTE 3  REGULATORY MATTERS
 Electric Rate Case
  14




---



##### Table of Contents



Electric Rate Restructuring Proposal
  Other Postretirement Benefits Costs Tracker
  2004 PSCR Reconciliation and 2004 Net Stranded Cost Case
    Power Supply Recovery Proceedings
 2005 Plan Year
 15




---



##### Table of Contents



Other
  NOTE 4  LONG -TERM DEBT
    NOTE 5  COMMITMENTS AND CONTINGENCIES
 Environmental
 Air
 Water
 Contaminated Sites
 16




---



##### Table of Contents



Personal Property Taxes
   Other Commitments
   17




---



##### Table of Contents



Bankruptcies
  Other
   18




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 19




---



##### Table of Contents



Other Information
 
 Legal Proceedings
  
 Exhibits
 ExhibitNumber
    
    DescriptionFiled:12-22
    
    Computation of Ratio of Earnings to Fixed Charges15-30
    
    Awareness Letter of Deloitte & Touche LLP31-17
    
    Chief Executive Officer Section 302 Certification31-18
    
    Chief Financial Officer Section 302 CertificationIncorporated by reference:10(1)
    
    The Detroit Edison Company Note Purchase Agreement dated as of July 22, 2005. (Exhibit 10.1 to Form 8-K dated July 22, 2005)Furnished:32-17
    
    Chief Executive Officer Section 906 Certification32-18
    
    Chief Financial Officer Section 906 Certification
 20




---



##### Table of Contents



SIGNATURE
  THE DETROIT EDISON COMPANYDate: August 4, 2005
    
    /s/ DANIEL G. BRUDZYNSKIDaniel G. BrudzynskiChief Accounting Officer,Vice President and Controller
 21




---



##### Table of Contents



ExhibitNumber
    

Description12-22
    
    Computation of Ratio of Earnings to
Fixed Charges15-30
    
    Awareness Letter of Deloitte & Touche LLP31-17
    
    Chief Executive Officer Section 30231-18
    
    Chief Financial Officer Section 30232-17
    
    Chief Executive Officer Section 906 Certification32-18
    
    Chief Financial Officer Section 906 Certification
 22