##### 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 March 31, 2004 Commission file number 1-2198 The registrant 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 (Exact name of registrant as specified in its charter)
 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 officers)
    
    (Zip Code)
 313-235-4000(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act)
during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes þ          No o Indicate by check mark whether the registrant is an accelerated filer as defined in
Rule 12b-2 of the Exchange Act. Yes o          No þ




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THE DETROIT EDISON COMPANY QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2004 TABLE OF CONTENTS  
 PAGEDEFINITIONS
    
    
    
    
    3FORWARD-LOOKING STATEMENTS
    
    
    4PART I  FINANCIAL INFORMATIONItem 1.

    
    Financial StatementsConsolidated Statement of Operations
    
    
    9Consolidated Statement of Financial Position
    
    
    10Consolidated Statement of Cash Flows
    
    
    12Consolidated
Statement of Changes in Shareholder's Equity and Comprehensive Income
    
    
    13Notes to Consolidated Financial Statements
    
    
    14Independent Accountants' Report
    
    
    19Item 2.
    
    Management's Narrative Analysis of Results of Operations
    
    
    5Item 4.
    
    Controls and Procedures
    
    
    8PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    20Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    20SIGNATURE
    
    
    
    
    22Trustee Thirteenth Supplemental IndentureIndenture dated as of March 15, 2004Awareness Letter of Deloitte & Touche LLPSection 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEOSection 906 Certification of CFOAmendment dated February 25, 2004Amendment No. 3 dated February 25, 2004
  2




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DEFINITIONS

Company
    
    DTE Energy Company and subsidiary companiesCustomer Choice
    
    Statewide initiatives giving customers in Michigan the option
to choose alternative suppliers for electricity.Detroit Edison
    
    The Detroit Edison Company (a wholly owned subsidiary of
DTE Energy Company) and subsidiary companiesDTE Energy
    
    DTE Energy Company, the parent of
Detroit Edison and MichConFERC
    
    Federal Energy Regulatory CommissionMichCon
    
    Michigan Consolidated Gas Company and subsidiary companiesMPSC
    
    Michigan Public Service CommissionMWh
    
    Megawatthour of electricityNRC
    
    Nuclear Regulatory CommissionPSCR
    
    A power supply cost recovery mechanism authorized by the MPSC
that allowed Detroit Edison to recover through rates its fuel,
fuel-related and purchased power electric 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.SFAS
    
    Statement of Financial Accounting StandardsStranded Costs
    
    Costs incurred by utilities in order to serve customers in a
regulated environment that are not expected to be recoverable
if customers switch to alternative suppliers of electricity.


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FORWARD-LOOKING STATEMENTS Certain information presented herein includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve certain risks and uncertainties that may
cause actual future results to differ materially from those contemplated,
projected, estimated or budgeted in such forward-looking statements. There are
many factors that may impact forward-looking statements including, but not
limited to, the following:  
    
    the effects of weather and other natural phenomena on operations and sales to, and purchases by, customers;  
    
    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 electric Customer Choice programs;  
    
    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;  
    
    impacts of FERC, MPSC, NRC and other applicable governmental proceedings and regulations;  
    
    contributions to earnings by non-regulated businesses;  
    
    changes in federal, state and local tax laws and their interpretations, including the 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; 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 the Company. New factors emerge from time to time. We cannot predict what factors may arise
or how such factors may cause our results to differ materially from those
contained in any forward-looking statement. Any forward-looking statements
speak only as of the date on which such statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. 4




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THE DETROIT EDISON COMPANY MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS The Managements Narrative Analysis of Results of Operations discussion for
Detroit Edison is presented in accordance with General Instruction H(2) (a) of
Form 10-Q. We had income of $41 million in the 2004 first quarter compared to income of
$15 million for the 2003 first quarter. The comparability of earnings was
impacted by the adoption of a new accounting rule in the 2003 first quarter.
As required by generally accepted accounting principles, on January 1, 2003, we
adopted a new accounting rule for asset retirement obligations as discussed in
Note 2. The cumulative effect of adopting this new accounting rule was to
reduce the 2003 first quarter earnings by $6 million. Results for the 2003
first quarter were also affected by a $14 million net of tax loss on the sale
of our steam heating business in January 2003. Detroit Edison has the following two reportable segments. ENERGY RESOURCES Power Generation The power generation plants of Detroit Edison comprise our regulated power
generation business. Detroit Edisons numerous fossil plants, its
hydroelectric pumped storage plant and its nuclear plant generate electricity.
The generated electricity, supplemented with purchased power, is sold
principally throughout Michigan and the Midwest to residential, commercial,
industrial and wholesale customers. Factors impacting income:Power Generation earnings declined $10 million during
the 2004 first quarter. As subsequently discussed, these results primarily
reflect reduced gross margins, partially offset by the recording of higher
regulatory deferrals, which lowered depreciation and amortization expenses.  Three Months EndedMarch 312004
    
    2003(in Millions)Operating Revenues
    
    $
    551
    
    
    $
    617Fuel and Purchased Power
    
    
    210
    
    
    
    240Gross Margin
    
    
    341
    
    
    
    377Operation and Maintenance
    
    
    183
    
    
    
    183Depreciation and Amortization
    
    
    50
    
    
    
    73Taxes Other Than Income
    
    
    39
    
    
    
    43Operating Income
    
    
    69
    
    
    
    78Other (Income) and Deductions
    
    
    46
    
    
    
    39Income Tax Provision
    
    
    8
    
    
    
    14Net Income
    
    $
    15
    
    
    $
    25Operating Income as a Percent of Operating Revenues
    
    
    13
    %
    
    
    13
    %
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Gross marginsdeclined $36 million due primarily to lost margins from retail
customers choosing to purchase power from alternative suppliers under the
electric Customer Choice program. Detroit Edison lost 16% of retail sales in
the 2004 first quarter and 10% of such sales in the 2003 first quarter as a
result of Customer Choice penetration. The loss of retail sales resulted in
lower purchase power requirements, as well as excess power capacity which was
sold in the wholesale market. Under an interim rate order issued by
the Michigan Public Service Commission on February 20, 2004,
revenues from selling excess power reduces the level of recoverable fuel and
purchased power costs and therefore do not impact margins. The interim rate
order also lowered PSCR revenues, partially offset by increased base rate and
transition charge revenues, resulting in a decrease in margins in the 2004
first quarter. Weather in the 2004 first quarter was milder than the 2003
quarter resulting in decreased margins from retail customers of $7 million.
Operating revenues and fuel and purchased power costs decreased in the 2004
first quarter compared to the 2003 first quarter reflecting a $2.37 per
megawatt hour (MWh) (14%) decline in fuel and purchased power costs which is a
pass-through with the reinstatement of the PSCR. The decrease in fuel and
purchased power costs is attributable to lower priced purchases and using a
more favorable power supply mix. The favorable mix is due to lower purchases,
which is driven by lost sales under the electric Customer Choice program.  Three Months EndedMarch 312004
    
    2003Electric
Sales(in Thousands of MWh)Retail
    
    
    10,423
    
    
    
    11,174Wholesale and other
    
    
    2,186
    
    
    
    1,27712,609
    
    
    
    12,451
  Power generated and purchased(in
Thousands of MWh)Power plant generationFossil
    
    
    9,784
    
    
    
    9,134Nuclear
    
    
    2,408
    
    
    
    2,24812,192
    
    
    
    11,382Purchased power
    
    
    1,198
    
    
    
    1,888System output
    
    
    13,390
    
    
    
    13,270Average
unit cost ($/MWh)Generation
(1)
    
    $
    12.88
    
    
    $
    13.29Purchased Power (2)
    
    $
    34.54
    
    
    $
    40.67Overall Average Unit Cost
    
    $
    14.82
    
    
    $
    17.19
  (1)
    
    Represents fuel costs associated with power plants.(2)
    
    The average purchased power amounts include hedging activities. Depreciation and amortizationexpense decreased $23 million and is attributable
to the income effect of recording regulatory assets totaling $35 million in the
2004 first quarter compared to $19 million in the 2003 first quarter. The
regulatory assets represent the deferral of net stranded costs ($25 million in
the 2004 first quarter and $6 million in the 2003 first quarter) and other
costs we believe are recoverable under Public Act 141. Partially offsetting the
decline was increased depreciation associated with generation-related capital
expenditures. Outlook Future operating results are expected to vary as a result of external
factors such as regulatory proceedings, new legislation, changes in market
prices of power, coal and gas, plant performance, changes in economic
conditions, weather and the levels of customer participation in the electric
Customer Choice program. 6




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We expect to continue losing retail sales and margins in future years under the
electric Customer Choice program until the inequities associated with this
program are addressed. We will accrue as regulatory assets our unrecovered
generation-related fixed costs due to electric Customer Choice that we believe
are recoverable under Michigan legislation. We have addressed the issue of
stranded costs in our June 2003 electric rate filing and are also pursuing a
legislative solution. Additionally, we requested an increase in retail electric
rates of $427 million annually to recover higher operating costs. The actual
timing and level of recovering stranded and operating costs will ultimately be
determined by the MPSC or legislation. We cannot predict the outcome of these
matters. See Note 3  Regulatory Matters. ENERGY DISTRIBUTION Power Distribution Power Distribution operations include the electric distribution services of
Detroit Edison. Power Distribution distributes electricity generated and
purchased by Energy Resources and alternative electric suppliers to Detroit
Edisons 2.1 million customers. Factors impacting income: Power Distribution earnings increased $30 million
during the 2004 first quarter. As subsequently discussed, these results
primarily reflect an increase in operating revenues, a non-recurring loss
recorded in the 2003 first quarter and a decrease in operation and maintenance
expenses.  Three Months EndedMarch 312004
    
    2003(in Millions)Operating Revenues
    
    $
    335
    
    
    $
    320Fuel and Purchased Power
    
    
    6
    
    
    
    7Operation and Maintenance
    
    
    163
    
    
    
    183Depreciation and Amortization
    
    
    64
    
    
    
    62Taxes other than Income
    
    
    29
    
    
    
    30Operating Income
    
    
    73
    
    
    
    38Other (Income) and Deductions
    
    
    33
    
    
    
    44Income Tax Benefit (Provision)
    
    
    14
    
    
    
    (2
    )Net Income (Loss)
    
    $
    26
    
    
    $
    (4
    )Operating Income as a Percent of Operating Revenues
    
    
    22
    %
    
    
    12
    %
    Three Months EndedMarch 312004
    
    2003Electric Deliveries(in Thousands of MWh)Residential
    
    
    4,069
    
    
    
    3,856Commercial
    
    
    3,491
    
    
    
    4,126Industrial
    
    
    2,754
    
    
    
    3,085Wholesale
    
    
    556
    
    
    
    576Other
    
    
    109
    
    
    
    10710,979
    
    
    
    11,750Electric Choice
    
    
    2,142
    
    
    
    1,284Total Electric Sales and Deliveries
    
    
    13,121
    
    
    
    13,034
  7




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Operating revenuesincreased $15 million primarily due to residential sales
growth and the increase in base rates resulting from the interim order. These
improvements were partially offset by the effects of milder weather. Operation and maintenanceexpense decreased $20 million due primarily to a $22
million loss ($14 million net of tax) on the sale of our steam heating business
in the 2003 first quarter. The 2004 first quarter also benefited from our
Company-wide cost savings initiative and lower transmission expenses, partially
offset by higher reserves for uncollectable accounts receivables and increased
pension and health care costs. The increase in uncollectable accounts expense
reflects higher past due amounts attributable to current economic conditions. Outlook Operating results are expected to vary as a result of external
factors such as weather, changes in economic conditions and the severity and
frequency of storms. As previously mentioned, Detroit Edison filed a rate case
in June 2003 to address future operating costs and other issues. Detroit
Edison received an interim order in this rate case in February 2004. See Note 3
 Regulatory Matters. 
 CONTROLS AND PROCEDURES (a)     Evaluation of disclosure controls and procedures The Companys Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Companys disclosure controls and procedures
(as defined in Exchange Act Rules 13a  15(e) and 15d  15(e)) as of March 31,
2004, which is the end of the period covered by this report, and have concluded
that such controls and procedures are effectively designed to ensure that
required information disclosed by the Company in reports that it files or
submits under the Act is recorded, processed, summarized and timely reported in
accordance with Commissions rules and forms. 8




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THE DETROIT EDISON
COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)  Three Months EndedMarch 31(in Millions, Except per Share Amounts)
    
    2004
    
    2003Operating Revenues
    
    $
    886
    
    
    $
    937Operating ExpensesFuel and purchased power
    
    
    216
    
    
    
    247Operation and maintenance
    
    
    346
    
    
    
    366Depreciation, depletion and amortization
    
    
    114
    
    
    
    135Taxes other than income
    
    
    68
    
    
    
    73744
    
    
    
    821Operating Income
    
    
    142
    
    
    
    116Other (Income) and DeductionsInterest expense
    
    
    72
    
    
    
    75Other income
    
    
    (15
    )
    
    
    (11
    )Other expenses
    
    
    22
    
    
    
    1979
    
    
    
    83Income Before Income Taxes
    
    
    63
    
    
    
    33Income Tax Provision
    
    
    22
    
    
    
    12Income Before Accounting Change
    
    
    41
    
    
    
    21Cumulative Effect of Accounting Change
    
    
    
    
    
    
    (6
    )Net Income
    
    $
    41
    
    
    $
    15
  See Notes to Consolidated Financial Statements (Unaudited) 9




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THE DETROIT EDISON
COMPANY CONSOLIDATED STATEMENT OF FINANCIAL POSITION  (Unaudited)March 31
    
    December 312004
    
    2003(in Millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    13
    
    
    $
    6Restricted cash
    
    
    26
    
    
    
    82Accounts receivableCustomer (less allowance for doubtful
accounts of $54 and $51, respectively)
    
    
    318
    
    
    
    291Accrued unbilled revenues
    
    
    189
    
    
    
    196Other
    
    
    250
    
    
    
    169InventoriesFuel
    
    
    85
    
    
    
    108Materials and supplies
    
    
    125
    
    
    
    124Other
    
    
    83
    
    
    
    291,089
    
    
    
    1,005InvestmentsNuclear decommissioning trust funds
    
    
    537
    
    
    
    518Other
    
    
    54
    
    
    
    54591
    
    
    
    572PropertyProperty, plant and equipment
    
    
    12,784
    
    
    
    12,671Less accumulated depreciation and depletion
    
    
    (5,416
    )
    
    
    (5,339
    )7,368
    
    
    
    7,332Other AssetsRegulatory assets
    
    
    2,022
    
    
    
    2,000Securitized regulatory assets
    
    
    1,505
    
    
    
    1,527Other
    
    
    111
    
    
    
    1133,638
    
    
    
    3,640Total Assets
    
    $
    12,686
    
    
    $
    12,549
  See Notes to Consolidated Financial Statements (Unaudited) 10




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THE DETROIT EDISON
COMPANY CONSOLIDATED STATEMENT OF FINANCIAL POSITION  (Unaudited)March 31
    
    December 312004
    
    2003(in Millions, Except Shares)LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    197
    
    
    $
    211Accrued interest
    
    
    54
    
    
    
    76Dividends payable
    
    
    76
    
    
    
    74Accrued payroll
    
    
    19
    
    
    
    27Short-term borrowings
    
    
    232
    
    
    
    100Current portion of long-term debt, including capital leases
    
    
    325
    
    
    
    144Other
    
    
    359
    
    
    
    3441,262
    
    
    
    976Other LiabilitiesDeferred income taxes
    
    
    1,897
    
    
    
    1,783Regulatory liabilities
    
    
    254
    
    
    
    254Asset retirement obligations (Note 2)
    
    
    832
    
    
    
    819Unamortized investment tax credit
    
    
    133
    
    
    
    135Accrued pension liability
    
    
    174
    
    
    
    321Nuclear decommissioning
    
    
    69
    
    
    
    67Other
    
    
    563
    
    
    
    5843,922
    
    
    
    3,963Long-Term Debt (net of current portion)Mortgage bonds, notes and other
    
    
    2,886
    
    
    
    3,076Securitization bonds
    
    
    1,446
    
    
    
    1,496Capital lease obligations
    
    
    72
    
    
    
    754,404
    
    
    
    4,647Contingencies (Notes 3 and 6)Shareholders EquityCommon stock, $10 par value, 400,000,000 shares
authorized, 138,632,324 and 134,287,832 shares issued
and outstanding, respectively
    
    
    1,386
    
    
    
    1,343Premium on common stock
    
    
    1,104
    
    
    
    977Common stock expense
    
    
    (44
    )
    
    
    (44
    )Retained earnings
    
    
    651
    
    
    
    686Accumulated other comprehensive income
    
    
    1
    
    
    
    13,098
    
    
    
    2,963Total Liabilities and Shareholders Equity
    
    $
    12,686
    
    
    $
    12,549
  See Notes to Consolidated Financial Statements (Unaudited) 11




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THE DETROIT EDISON
COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)  Three Months EndedMarch 312004
    
    2003(in Millions)Operating ActivitiesNet Income
    
    $
    41
    
    
    $
    15Adjustments to reconcile net income to net cash from
operating activities:Depreciation, depletion and amortization
    
    
    114
    
    
    
    135Deferred income taxes
    
    
    113
    
    
    
    135Loss on sale of assets
    
    
    
    
    
    
    21Cumulative effect of accounting change
    
    
    
    
    
    
    6Changes in assets and liabilities, exclusive of changes
shown separately (Note 1)
    
    
    (150
    )
    
    
    (473
    )Net cash from (used for) operating activities
    
    
    118
    
    
    
    (161
    )Investing ActivitiesPlant and equipment expenditures
    
    
    (147
    )
    
    
    (178
    )Proceeds from sale of assets
    
    
    
    
    
    
    2Restricted cash for debt redemptions
    
    
    55
    
    
    
    86Other investments
    
    
    (15
    )
    
    
    36Net cash used for investing activities
    
    
    (107
    )
    
    
    (54
    )Financing ActivitiesRedemption of long-term debt
    
    
    (61
    )
    
    
    (307
    )Short-term borrowings, net
    
    
    132
    
    
    
    Notes payable to affiliates
    
    
    
    
    
    
    408Capital contribution by parent company
    
    
    
    
    
    
    170Dividends on common stock
    
    
    (74
    )
    
    
    (74
    )Other
    
    
    (1
    )
    
    
    (2
    )Net cash from
(used for) financing activities
    
    
    (4
    )
    
    
    195Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    7
    
    
    
    (20
    )Cash and Cash Equivalents at Beginning of the Period
    
    
    6
    
    
    
    36Cash and Cash Equivalents at End of the Period
    
    $
    13
    
    
    $
    16
  See Notes to Consolidated Financial Statements (Unaudited) 12




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THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME (UNAUDITED)  (Dollars in Millions,Shares in Thousands)
    
    Common Stock
    
    PremiumonCommon
    
    CommonStock
    
    Retained
    
    AccumulatedOtherComprehensiveShares
    
    Amount
    
    Stock
    
    Expense
    
    Earnings
    
    Loss
    
    TotalBalance,
December 31, 2003
    
    
    134,288
    
    
    $
    1,343
    
    
    $
    977
    
    
    $
    (44
    )
    
    $
    686
    
    
    $
    1
    
    
    $
    2,963Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    41Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76
    )
    
    
    
    
    
    
    (76
    )Net change in unrealized
losses
on derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued to
parent company (Note 5)
    
    
    4,344
    
    
    
    43
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Balance, March 31, 2004
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,104
    
    
    $
    (44
    )
    
    $
    651
    
    
    $
    1
    
    
    $
    3,098
  The following table displays other comprehensive income for the
three-month periods ended March 31:  2004
    
    2003(in Millions)Net income
    
    $
    41
    
    
    $
    15Other comprehensive income (loss), net of tax:Net unrealized income (losses) on derivatives:Gains (losses) arising during the period, net of taxes of $- and $3, respectively
    
    
    
    
    
    
    5Amounts reclassified to earnings, net of taxes of $- and $(1), respectively
    
    
    
    
    
    
    (2
    )
    
    
    
    3Pension obligations, net of taxes of $- and $224, respectively
    
    
    
    
    
    
    417
    
    
    
    420Comprehensive income
    
    $
    41
    
    
    $
    435
  See Notes to Consolidated Financial Statements (Unaudited) 13




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THE DETROIT EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1  GENERAL

These consolidated financial statements should be read in conjunction with the
notes to consolidated financial statements included in the 2003 Annual Report
on Form 10-K.

The accompanying consolidated financial statements are prepared using
accounting principles generally accepted in the United States of America. These
accounting principles require us to use estimates and assumptions that impact
the reported amounts of assets, liabilities, revenues and expenses, and the
disclosure of contingent assets and liabilities. Actual results may differ
from our estimates.

The consolidated financial statements are unaudited, but in our opinion include
all adjustments necessary for a fair statement of the results for the interim
periods. Financial results for this interim period are not necessarily
indicative of results that may be expected for any other interim period or for
the fiscal year.

We reclassified certain prior year balances to match the current years
presentation.

Consolidated Statement of Cash Flows

The components of changes in assets and liabilities follow:

---

Three Months EndedMarch 312004
    
    2003(in Millions)Changes
in Assets and Liabilities, Exclusive of Changes Shown SeparatelyAccounts receivable, net
    
    $
    (18
    )
    
    $
    (40
    )Accrued unbilled receivables
    
    
    6
    
    
    
    30Inventories
    
    
    21
    
    
    
    24Accrued pensions
    
    
    22
    
    
    
    (204
    )Accounts payable
    
    
    (14
    )
    
    
    (61
    )Income taxes payable
    
    
    (90
    )
    
    
    (18
    )General taxes
    
    
    (4
    )
    
    
    (9
    )Risk management and trading activities
    
    
    (1
    )
    
    
    (5
    )Other
    
    
    (72
    )
    
    
    (190
    )$
    (150
    )
    
    $
    (473
    )


---

Other cash and non-cash investing and financing activities follow:

---

Three Months EndedMarch 31(in Millions)
    
    2004
    
    2003Supplementary Cash Flow InformationInterest paid (excluding interest capitalized)
    
    $
    94
    
    
    $
    101Income taxes paid
    
    $
    1
    
    
    $
    32Common stock issued to parent company
    
    $
    170
    
    
    $
    


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14



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##### Table of Contents



Retirement Benefits and Trusteed Assets The components of net periodic benefit costs for qualified and non-qualified
pension benefits and other postretirement benefits follow:  Other Postretirement(in Millions)
    
    Pension Benefits
    
    BenefitsThree Months Ended March 31
    
    2004
    
    2003
    
    2004
    
    2003Service Cost
    
    $
    13
    
    
    $
    11
    
    
    $
    8
    
    
    $
    9Interest Cost
    
    
    33
    
    
    
    32
    
    
    
    19
    
    
    
    17Expected Return on Plan Assets
    
    
    (31
    )
    
    
    (32
    )
    
    
    (11
    )
    
    
    (9
    )Amortization of
Net loss
    
    
    12
    
    
    
    8
    
    
    
    8
    
    
    
    6Prior service cost
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Net Periodic Benefit Cost
    
    $
    29
    
    
    $
    21
    
    
    $
    26
    
    
    $
    25
  In March 2004, DTE Energy common stock, valued at $170 million, was contributed
to our defined benefit retirement plan. In January 2004, we made a $40 million
cash contribution to our postretirement health care and life insurance plans.
We do not expect to make any additional contributions during 2004. NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS Asset Retirement Obligations On January 1, 2003, we adopted Statement of Financial Accounting Standards
(SFAS) No. 143, Accounting for Asset Retirement Obligations, which requires
that the fair value of an asset retirement obligation be recognized in the
period in which it is incurred. We identified a legal retirement obligation for
the decommissioning costs for our Fermi 1 and Fermi 2 nuclear plants. We
believe that adoption of SFAS No. 143 results primarily in timing differences
in the recognition of legal asset retirement costs that we are currently
recovering in rates and will be deferring such differences under SFAS No. 71,
Accounting for the Effects of Certain Types of Regulation. As a result of adopting SFAS No. 143 on January 1, 2003, we recorded a plant
asset of $278 million with offsetting accumulated depreciation of $103 million,
a retirement obligation liability of $771 million and reversed previously
recognized obligations of $366 million, principally nuclear decommissioning
liabilities. We also recorded a cumulative effect amount related to regulated
operations as a regulatory asset of $221 million, and a cumulative effect
charge against earnings of $6 million (net of taxes of $3 million) for 2003. A reconciliation of the asset retirement obligation for the 2004 three-month
period follows:  (in Millions)Asset retirement obligations at January 1, 2004
    
    $
    819Accretion
    
    
    13Asset retirement obligations at March 31,2004
    
    $
    832
  15




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##### Table of Contents



NOTE 3  REGULATORY MATTERS Electric Transitional Rate Plan Rate Request In June 2003, Detroit Edison filed an application with the MPSC
requesting a change in retail electric rates, resumption of the Power Supply
Cost Recovery (PSCR) mechanism, and recovery of net stranded costs. The
application requested a base rate increase for both full-service and electric
Customer Choice customers totaling $416 million annually (approximately 12%
increase) in 2006, with a three-year phase-in starting in 2004 as the caps on
customer rates expire. Detroit Edison proposed that the $416 million increase
be allocated between full-service customers ($265 million) and electric
Customer Choice customers ($151 million). In November 2003, Detroit Edison
increased its original rate request by $11 million to $427 million. A summary of the total rate increase request follows:  (in Millions)Base Rate Revenue Deficiency
    
    $
    553PSCR Savings/Choice Mitigation
    
    
    (126
    )Base Rate Increase
    
    
    427Regulatory Asset Recovery Surcharge
    
    
    109Total
    
    $
    536Phase in By Year2004
    
    $
    2992005
    
    
    572006
    
    
    180Total
    
    $
    536
  MPSC Interim Rate Order On February 20, 2004, the MPSC issued an order for
interim rate relief. The order authorized an interim increase in base rates, a
transition charge for customers participating in the electric Customer Choice
program and a new PSCR factor. The interim base rate increase totaled $248 million annually, effective
February 21, 2004, and is applicable to all customers not subject to the rate
cap. The increase has been allocated to both full-service customers ($240
million) and electric Customer Choice customers ($8 million). However, because
of the rate caps under PA 141, not all of the increase will be recognized in
2004. The order also terminated certain transition credits and authorized
transition charges to Choice customers designed to result in $30 million in
additional revenues. Additionally, the MPSC authorized a PSCR factor for all
customers, a credit of 1.05 mills per kWh compared to the 2.04 mills per kWh
charge previously in effect. However, the MPSC order will allow Detroit Edison
to increase base rates for customers still subject to the cap in an equal and
offsetting amount with the change in the PSCR factor to maintain the total
capped rate levels currently in effect for these customers. Although the base rate increase and transition charges total $278 million, the
interim order is only designed to result in an increase in 2004 revenues of $51
million. This lower amount is a result of the rate caps, the February 21, 2004
effective date and the PSCR adjustment. Amounts collected are subject to
refund pending a final order in this rate case. 16




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##### Table of Contents



The MPSC deferred addressing other items in the rate request, including a
surcharge to recover regulatory assets, until a final rate order which is
expected in the third quarter of 2004, is issued. We cannot predict the amount
of final rate relief that will be granted by the MPSC. MPSC Staff Report on Final Rate Relief On March 5, 2004, the MPSC Staff
(Staff) filed testimony regarding final rate relief requested by Detroit
Edison. The Staff recommended a base rate increase of $275 million, a $27
million increase over the $248 million interim order, compared to Detroit
Edisons request of $553 million. The Staffs proposed $275 million base rate
increase excluded an estimated $93 million of stranded costs from sales lost to
electric Customer Choice. The Staffs proposal would provide Detroit Edison the
opportunity to mitigate this loss with third-party wholesale sales by modifying
the PSCR mechanism to remove the revenue credit from these sales. The revenue
credit from third-party wholesale sales currently included in the PSCR
mechanism flows this benefit to full-service customers. The Staff recommends
that any future stranded costs be recovered using two basic provisions. Detroit
Edison will be allowed to retain 90% of the net third-party revenue earned from
wholesale sales up to 110% of each years electric Customer Choice sales.
Secondly, the Staff proposed that non-cost Choice margin loss (impact of
inter-class rate subsidization) be recovered through future rate increases from
full-service customers. The Staff recommended that accrued regulatory assets be recovered through three
mechanisms. The first mechanism would recover electric Customer Choice
implementation costs through a charge to both full-service and electric
Customer Choice customers of approximately $25 million per year, effective in
2006 when all current rate caps expire. The second mechanism recovers accrued
regulatory assets, including deferred costs under the Clean Air Act through a
five-year surcharge that would only be collected from full-service customers as
their rate caps expire for an average of approximately $33 million per year.
The third mechanism would recover prior period stranded costs determined
pursuant to the MPSCs existing production fixed cost revenue deficiency
methodology. The Staff estimated that Detroit Edisons stranded costs for 2002,
2003 and 2004 through the date of the interim rate order of February 20, 2004
are approximately $64 million. These stranded costs would be recovered from
electric Customer Choice customers utilizing the Choice transition charge
approved in the interim rate order. The Staff recommended a capital structure of 54% debt and 46% equity and
proposed an 11% return on equity. Electric Industry Restructuring Electric Rates, Customer Choice and Stranded Costs PA 141 provides Detroit
Edison with the right to recover net stranded costs. The MPSC authorized
Detroit Edison to establish a regulatory asset to defer recovery of its
incurred stranded costs, subject to review in a subsequent annual net stranded
cost proceeding. During each quarter, Detroit Edison records a regulatory asset
representing an estimate of the cumulative stranded costs as of that period.
Our revised and ongoing calculations concluded that the $68 million of net
stranded costs recorded as of December 31, 2003 is appropriate. During the
first quarter of 2004, we recorded $25 million of additional stranded costs as
a regulatory asset . We are unable to predict the outcome of the regulatory matters discussed
herein. Resolution of these matters is dependent upon future MPSC orders,
which may materially impact our financial position, results of operations and
cash flows. NOTE 4  LONG -TERM DEBT In April 2004, Detroit Edison issued $36 million of 4-7/8% tax-exempt bonds due
2029, the proceeds of which will be used to redeem $36 million of 6.55%
tax-exempt bonds due 2024. In April 2004, Detroit Edison also issued $32
million of 4.65% tax-exempt bonds due in 2028, the proceeds of which will be 17




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##### Table of Contents



used to redeem the following tax-exempt issues: $11.5 million of 6.05% bonds
due 2023, $7.5 million of 5.875% bonds due 2024, and $13 million of 6.45% bonds
due 2024. NOTE 5  COMMON STOCK In March 2004, we issued 4,344,492 shares of common stock, valued at $170
million to DTE Energy. DTE Energy contributed a like amount of its stock to our
defined benefit retirement plan. NOTE 6  CONTINGENCIES Other We are involved in certain legal, regulatory and administrative proceedings
before various courts, arbitration panels and governmental agencies concerning
claims arising in the ordinary course of business. These proceedings include
certain contract disputes, environmental reviews and investigations, audits,
inquiries from various regulators, and pending judicial matters. We cannot
predict the final disposition of such proceedings. We regularly review legal
matters and record provisions for claims that are considered probable of loss.
The resolution of pending proceedings is not expected to have a material effect
on our financial statements in the period they are resolved. NOTE 7  SEGMENT INFORMATION Detroit Edison has the following two reportable segments. Inter-segment
revenues are not material.  Three Months Ended(in Millions)
    
    March 312004
    
    2003Operating RevenuesEnergy Resources
    
    $
    551
    
    
    $
    617Energy Distribution
    
    
    335
    
    
    
    320$
    886
    
    
    $
    937Net IncomeEnergy Resources
    
    $
    15
    
    
    $
    25Energy Distribution
    
    
    26
    
    
    
    (4
    )Cumulative Effect of Accounting Change
    
    
    
    
    
    
    (6
    )$
    41
    
    
    $
    15
  18




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##### Table of Contents



INDEPENDENT ACCOUNTANTS REPORT To the Board of Directors and Shareholder of
The Detroit Edison Company We have reviewed the accompanying condensed consolidated statement of financial
position of The Detroit Edison Company and subsidiaries as of March 31, 2004,
and the related condensed consolidated statements of operations and cash flows
for the three-month periods ended March 31, 2004 and 2003, and changes in
shareholders equity and comprehensive income for the three-month period ended
March 31, 2004 and the three-month periods ended March 31, 2004 and 2003,
respectively. These interim financial statements are the responsibility of The
Detroit Edison Companys management. We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion. Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America. We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated statement of
financial position of The Detroit Edison Company and subsidiaries as of
December 31, 2003, and the related consolidated statements of operations, cash
flows and changes in shareholders equity and comprehensive income for the year
then ended (not presented herein); and in our report dated March 1, 2004 (which
report includes an explanatory paragraph relating to the change in the methods
of accounting for asset retirement obligations in 2003 and derivative
instruments and hedging activities in 2001), we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated statement of
financial position as of December 31, 2003 is fairly stated, in all material
respects, in relation to the consolidated statement of financial position from
which it has been derived. /s/ DELOITTE & TOUCHE LLP Detroit, Michigan
May 5, 2004 19




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##### Table of Contents



OTHER INFORMATION LEGAL PROCEEDINGS We are involved in certain legal, regulatory and administrative proceedings
before various courts, arbitration panels and governmental agencies concerning
matters arising in the ordinary course of business. These proceedings include
certain contract disputes, environmental reviews and investigations, audits,
inquiries from various regulators, and pending judicial matters. We cannot
predict the final disposition of such proceedings. We regularly review legal
matters and record provisions for claims that are considered probable of loss.
The resolution of pending proceedings is not expected to have a material effect
on our operations or financial statements in the period they are resolved. For
additional discussion on legal matters, see the Notes to the Consolidated
Financial Statements. 
 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits ExhibitNumber
    
    DescriptionFiled:4-237
    
    Thirteenth Supplemental Indenture dated April 1, 2004, Supplementing the
Collateral Trust Indenture dated as of June 30, 1993 providing for 4.875%
Senior Notes Due 2029 and 4.65% Senior Notes Due 20284-238
    
    Supplemental Indenture dated as of March 15, 2004, establishing the 2004
Series A and 2004 Series B Mortgage Bonds15-26
    
    Awareness Letter of Deloitte & Touche LLP31-7
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-8
    
    Chief Financial Officer Section 302 Form 10-Q Certification99-15
    
    Amendment dated February 25, 2004
to Trade Receivables Purchase and Sale Agreement among The Detroit
Edison Company, Citibank, N.A. and Citicorp North America, Inc.99-16
    
    Amendment Number 3 dated February
25, 2004 to Trade Receivables Purchase and Sale Agreement among The
Detroit Edison Company, CAFCO, LLC, Citibank, N.A. and Citicorp North
America, Inc.Furnished:32-7
    
    Chief Executive Officer Section 906 Certification of Periodic Report32-8
    
    Chief Financial Officer Section 906 Certification of Periodic Report
 (b) Reports on Form 8-K. During the quarterly period ended March 31, 2004, we filed or furnished
Current Reports on Form 8-K covering matters, as follows: Item 7. Exhibits and Item 12. Results of Operations and Financial Condition
filed and dated February 3, 2004; 20




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##### Table of Contents



Item 7. Exhibits and Item 12. Results of Operations and Financial Condition
dated February 5, 2004 and filed February 6, 2004; Item 7. Exhibits and Item 9. Regulation FD Disclosure filed and dated
February 6, 2004; Item 5. Other Events and Item 7. Financial Statements and Exhibits filed and
dated February 20, 2004; and Item 5. Other Events and Item 7. Financial Statements and Exhibits filed and
dated February 24, 2004. 21




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##### Table of Contents



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. THE DETROIT EDISON COMPANY/s/ DANIEL G. BRUDZYNSKI
Daniel G. BrudzynskiChief Accounting Officer,
Vice President and Controller
 Date: May 5, 2004 22




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Description4-237
    
    Thirteenth Supplemental Indenture dated April 1, 2004, Supplementing the
Collateral Trust Indenture dated as of June 30, 1993 providing for 4.875%
Senior Notes Due 2029 and 4.65% Senior Notes Due 20284-238
    
    Supplemental Indenture dated as of March 15, 2004, establishing the 2004
Series A and 2004 Series B Mortgage Bonds15-26
    
    Awareness Letter of Deloitte & Touche LLP31-7
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-8
    
    Chief Financial Officer Section 302 Form 10-Q Certification99-15
    
    Amendment dated February 25, 2004
to Trade Receivables Purchase and Sale Agreement among The Detroit
Edison Company, Citibank, N.A. and Citicorp North America, Inc.99-16
    
    Amendment Number 3 dated February
25, 2004 to Trade Receivables Purchase and Sale Agreement among The
Detroit Edison Company, CAFCO, LLC, Citibank, N.A. and Citicorp North
America, Inc.Furnished:32-7
    
    Chief Executive Officer Section 906 Certification of Periodic Report32-8
    
    Chief Financial Officer Section 906 Certification of Periodic Report