##### 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, 2006
 Commission file number 1-2198
  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 filero
    
    Accelerated filero
    
    Non-accelerated filerþ
  Yes o No þ




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##### 



The Detroit Edison Company
 Quarterly Report on Form 10-Q  Quarter Ended March 31, 2006
 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
    
    
    12Item 2. Managements Narrative Analysis of Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    6Part II  Other InformationItem 1. Legal Proceedings
    
    
    19Item 6. Exhibits
    
    
    19Signature
    
    
    20Computation of Ratio of Earnings to Fixed ChargesChief Executive Officer Section 302 Form 10-Q CertificationChief Financial Officer Section 302 Form 10-Q CertificationChief Executive Officer Section 906 Form 10-Q CertificationChief Financial Officer Section 906 Form 10-Q Certification




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##### Table of Contents



Definitions
 Customer Choice
    
    Statewide initiatives giving customers in
Michigan the option to choose alternative
suppliers for electricity.Company or Detroit Edison
    
    The Detroit Edison Company (a direct wholly
owned subsidiary of DTE Energy) and any
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)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 power supply
cost recovery mechanism was suspended under Michigans restructuring legislation (signed into
law June 5, 2000), which lowered and froze electric customer rates, and 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 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




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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 and regulations, and the cost of remediation and compliance;
    
    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 borrowing;
    
    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;
    
    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;
    
    uncollectible accounts receivable;
    
    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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The Detroit Edison Company
 
 Managements Narrative Analysis of Results of Operations
  Factors impacting income
 Increase (Decrease) in Income Statement ComponentsCompared to Prior Year
    
    Three(in Millions)
    
    MonthsOperating Revenues
    
    $
    60Fuel and Purchased Power
    
    
    8Gross Margin
    
    
    52Operation and Maintenance
    
    
    23Depreciation and Amortization
    
    
    17Taxes Other Than Income
    
    
    Operating Income
    
    
    12Other (Income) and Deductions
    
    
    6Income Tax Provision
    
    
    2Net Income
    
    $
    4
 Gross margins
 Increase (Decrease) in Gross Margin Components Comparedto Prior Year
    
    Three(in Millions)
    
    MonthsWeather related margin impacts
    
    $
    (10
    )Removal of residential rate caps effective January 1, 2006
    
    
    22Return of customers from electric Customer Choice
    
    
    29Service territory economic performance
    
    
    14Other, net
    
    
    (3
    )Increase in gross margin performance
    
    $
    52
 3




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Power Generated and Purchased(in Thousands of MWh)
    
    2006
    
    
    2005Power Plant GenerationFossil
    
    
    9,308
    
    
    
    71
    %
    
    
    9,763
    
    
    
    74
    %Nuclear
    
    
    2,197
    
    
    
    17
    
    
    
    2,053
    
    
    
    1511,505
    
    
    
    88
    
    
    
    11,816
    
    
    
    89Purchased Power
    
    
    1,513
    
    
    
    12
    
    
    
    1,477
    
    
    
    11System Output
    
    
    13,018
    
    
    
    100
    %
    
    
    13,293
    
    
    
    100
    %Less Line Loss and Internal Use
    
    
    (825
    )
    
    
    
    
    
    
    (596
    )Net System Output
    
    
    12,193
    
    
    
    
    
    
    
    12,697Average Unit Cost ($/MWh)Generation (1)
    
    $
    14.66
    
    
    
    
    
    
    $
    14.40Purchased Power
    
    $
    50.42
    
    
    
    
    
    
    $
    49.30Overall Average Unit Cost
    
    $
    18.82
    
    
    
    
    
    
    $
    18.28
 
 (1)
    
    Represents fuel costs associated with power plants. Three Months EndedMarch 312006
    
    
    2005Electric Sales(in Thousands of MWh)Residential
    
    
    3,836
    
    
    
    4,051Commercial
    
    
    4,008
    
    
    
    3,364Industrial
    
    
    3,154
    
    
    
    2,897Wholesale
    
    
    675
    
    
    
    563Other
    
    
    106
    
    
    
    10411,779
    
    
    
    10,979Interconnection sales (1)
    
    
    414
    
    
    
    1,718Total Electric Sales
    
    
    12,193
    
    
    
    12,697Electric Deliveries(in Thousands of MWh)Retail and Wholesale
    
    
    11,779
    
    
    
    10,979Electric Choice
    
    
    1,139
    
    
    
    1,722Electric Choice  Self Generators (2)
    
    
    224
    
    
    
    192Total Electric Sales and Deliveries
    
    
    13,142
    
    
    
    12,893
 
 (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
 Other income and deductions
 Outlook
 4




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
    
    amount and timing of cost recovery allowed as a result of regulatory proceedings,
related appeals, or new legislation;
    
    our ability to reduce costs;
    
    variations in market prices of power, coal and gas;
    
    plant performance;
    
    economic conditions within the state of Michigan;
    
    weather, including the severity and frequency of storms; and
    
    levels of customer participation in the electric Customer Choice program.
  5




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




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The Detroit Edison Company
 
 Consolidated Statement of Operations (unaudited)
 Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Operating Revenues
    
    $
    1,050
    
    
    $
    990Operating ExpensesFuel and purchased power
    
    
    309
    
    
    
    301Operation and maintenance
    
    
    344
    
    
    
    321Depreciation and amortization
    
    
    167
    
    
    
    150Taxes other than income
    
    
    69
    
    
    
    69889
    
    
    
    841Operating Income
    
    
    161
    
    
    
    149Other (Income) and DeductionsInterest expense
    
    
    72
    
    
    
    64Interest income
    
    
    
    
    
    
    (1
    )Other income
    
    
    (7
    )
    
    
    (6
    )Other expenses
    
    
    10
    
    
    
    1275
    
    
    
    69Income Before Income Taxes
    
    
    86
    
    
    
    80Income Tax Provision
    
    
    27
    
    
    
    25Net Income
    
    $
    59
    
    
    $
    55
  7




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The Detroit Edison Company
 
 Consolidated Statement of Financial Position
 (Unaudited)March 31
    
    
    December 31(in Millions)
    
    2006
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    20
    
    
    $
    26Restricted cash
    
    
    30
    
    
    
    84Accounts receivableCustomer (less allowance for doubtful accounts of $55 and $54, respectively)
    
    
    380
    
    
    
    305Accrued unbilled revenues
    
    
    183
    
    
    
    223Accrued power supply cost recovery revenue
    
    
    169
    
    
    
    144Other
    
    
    110
    
    
    
    112InventoriesFuel
    
    
    119
    
    
    
    123Materials and supplies
    
    
    114
    
    
    
    116Other
    
    
    101
    
    
    
    431,226
    
    
    
    1,176InvestmentsNuclear decommissioning trust funds
    
    
    678
    
    
    
    646Other
    
    
    65
    
    
    
    65743
    
    
    
    711PropertyProperty, plant and equipment
    
    
    13,500
    
    
    
    13,416Less accumulated depreciation
    
    
    (5,566
    )
    
    
    (5,595
    )7,934
    
    
    
    7,821Other AssetsRegulatory assets
    
    
    1,970
    
    
    
    2,006Securitized regulatory assets
    
    
    1,314
    
    
    
    1,340Other
    
    
    116
    
    
    
    1153,400
    
    
    
    3,461Total Assets
    
    $
    13,303
    
    
    $
    13,169
  8




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The Detroit Edison Company  Consolidated Statement of Financial Position
 (Unaudited)March 31
    
    
    December 31(in Millions, Except Shares)
    
    2006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    412
    
    
    $
    392Accrued interest
    
    
    59
    
    
    
    79Dividends payable
    
    
    76
    
    
    
    76Accrued payroll
    
    
    26
    
    
    
    12Accrued vacations
    
    
    81
    
    
    
    80Short-term borrowings
    
    
    356
    
    
    
    163Accrued power supply cost recovery refund
    
    
    132
    
    
    
    129Current portion of long-term debt, including capital leases
    
    
    136
    
    
    
    135Other
    
    
    209
    
    
    
    1961,487
    
    
    
    1,262Other LiabilitiesDeferred income taxes
    
    
    1,942
    
    
    
    1,961Regulatory liabilities
    
    
    232
    
    
    
    224Asset retirement obligations (Note 1)
    
    
    969
    
    
    
    953Unamortized investment tax credit
    
    
    112
    
    
    
    115Nuclear decommissioning
    
    
    90
    
    
    
    85Accrued pension liability
    
    
    280
    
    
    
    261Other
    
    
    761
    
    
    
    7874,386
    
    
    
    4,386Long-Term Debt (net of current portion)Mortgage bonds, notes and other
    
    
    3,206
    
    
    
    3,221Securitization bonds
    
    
    1,238
    
    
    
    1,295Capital lease obligations
    
    
    56
    
    
    
    574,500
    
    
    
    4,573Contingencies (Notes 3 and 4)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
    
    
    482
    
    
    
    500Accumulated other comprehensive income
    
    
    2
    
    
    
    22,930
    
    
    
    2,948Total Liabilities and Shareholders Equity
    
    $
    13,303
    
    
    $
    13,169
  9




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The Detroit Edison Company
 
 Consolidated Statement of Cash Flows (Unaudited)
 Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Operating ActivitiesNet Income
    
    $
    59
    
    
    $
    55Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    167
    
    
    
    150Deferred income taxes
    
    
    27
    
    
    
    9Changes in assets and liabilities, exclusive of changes
shown separately (Note 1)
    
    
    (113
    )
    
    
    (37
    )Net cash from operating activities
    
    
    140
    
    
    
    177Investing ActivitiesPlant and equipment expenditures
    
    
    (245
    )
    
    
    (151
    )Proceeds from sale of other assets, net
    
    
    18
    
    
    
    Restricted cash for debt redemptions
    
    
    54
    
    
    
    53Notes receivable from affiliate
    
    
    
    
    
    
    85Proceeds from sale of nuclear decommissioning trust fund assets
    
    
    37
    
    
    
    63Investment in nuclear decommissioning trust funds
    
    
    (47
    )
    
    
    (73
    )Other investments
    
    
    (8
    )
    
    
    (16
    )Net cash used for investing activities
    
    
    (191
    )
    
    
    (39
    )Financing ActivitiesIssuance of long-term debt
    
    
    
    
    
    
    395Redemption of long-term debt
    
    
    (69
    )
    
    
    (626
    )Short-term borrowings, net
    
    
    193
    
    
    
    184Dividends on common stock
    
    
    (76
    )
    
    
    (76
    )Other
    
    
    (3
    )
    
    
    (1
    )Net cash used for financing activities
    
    
    45
    
    
    
    (124
    )Net
Increase (Decrease) in Cash and Cash Equivalents
    
    
    (6
    )
    
    
    14Cash and Cash Equivalents at Beginning of the Period
    
    
    26
    
    
    
    6Cash and Cash Equivalents at End of the Period
    
    $
    20
    
    
    $
    20
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The Detroit Edison Company
 
 Consolidated Statement of Changes in Shareholders Equity
 and Comprehensive Income (unaudited)
 Premium
    
    
    
    
    
    
    
    
    
    
    Accumulatedon
    
    
    Common
    
    
    
    
    
    
    Other(Dollars in Millions,
    
    Common Stock
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    ComprehensiveShares in Thousands)
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Expense
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance, December 31, 2005
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,104
    
    
    $
    (44
    )
    
    $
    500
    
    
    $
    2
    
    
    $
    2,948Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    (77
    )Balance, March 31, 2006
    
    
    138,632
    
    
    $
    1,386
    
    
    $
    1,104
    
    
    $
    (44
    )
    
    $
    482
    
    
    $
    2
    
    
    $
    2,930
  2006
    
    
    2005(in Millions)Net income
    
    $
    59
    
    
    $
    55Comprehensive income
    
    $
    59
    
    
    $
    55
  11




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The Detroit Edison Company
 
 Notes to Consolidated Financial Statements (unaudited)
 NOTE 1  GENERAL
    Consolidated Statement of Cash Flows
  Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Changes in Assets and Liabilities, Exclusive
of Changes Shown SeparatelyAccounts receivable, net
    
    $
    (71
    )
    
    $
    (23
    )Accrued unbilled receivables
    
    
    40
    
    
    
    50Inventories
    
    
    5
    
    
    
    (3
    )Accrued pensions
    
    
    26
    
    
    
    27Accounts payable
    
    
    20
    
    
    
    (35
    )Accrued power supply cost recovery refund
    
    
    (22
    )
    
    
    (8
    )Income taxes payable
    
    
    (1
    )
    
    
    10General taxes
    
    
    8
    
    
    
    7Postretirement obligation
    
    
    (21
    )
    
    
    15Other assets
    
    
    (57
    )
    
    
    (54
    )Other liabilities
    
    
    (40
    )
    
    
    (23
    )$
    (113
    )
    
    $
    (37
    )
  Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Cash Paid for:Interest (excluding interest capitalized)
    
    $
    92
    
    
    $
    87Income taxes
    
    $
    
    
    
    $
    
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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, 2006
    
    $
    953Accretion
    
    
    16Asset retirement obligations at March 31, 2006
    
    $
    969
  Retirement Benefits and Trusteed Assets
  Other Postretirement(in Millions)
    
    Pension Benefits
    
    
    BenefitsThree Months Ended March 31
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Service Cost
    
    $
    13
    
    
    $
    14
    
    
    $
    12
    
    
    $
    11Interest Cost
    
    
    34
    
    
    
    33
    
    
    
    22
    
    
    
    20Expected Return on Plan Assets
    
    
    (34
    )
    
    
    (34
    )
    
    
    (12
    )
    
    
    (15
    )Amortization ofNet loss
    
    
    12
    
    
    
    13
    
    
    
    13
    
    
    
    11Prior service cost
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net Periodic Benefit Cost
    
    $
    27
    
    
    $
    28
    
    
    $
    37
    
    
    $
    30
  13




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NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Stock-Based Compensation
 Share-Based
Payment,
  NOTE 3  REGULATORY MATTERS
 Electric Rate Restructuring Proposal
  Other Postretirement Benefits Costs Tracker
  2004 PSCR Reconciliation and 2004 Net Stranded Cost Case
   14




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MPSC Show-Cause Order
  Power Supply Recovery Proceedings
 2005 Plan Year
 2006 Plan Year 
 15




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Administrative and General Expenses Report to the MPSC
  Emergency Rules for Electric Bills
  
    
    lengthen the period of time before a bill is due once it is transmitted to the customer;
    
    prohibit shut off or late payment fees unless an actual meter read is made;
    
    limit the required monthly payment on a settlement agreement;
    
    increase the income level qualifying for shut-off protection and lower the payment
required to remain on shut-off protection; and
    
    lessen or eliminate certain deposit requirements.
 Other
  16




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NOTE 4  COMMITMENTS AND CONTINGENCIES
 Environmental
 Air
 Water
 Contaminated Sites
 Personal Property Taxes
   17




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Income Taxes
  Other Commitments
   Bankruptcies
  Other
   18




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Other Information
 
 Legal Proceedings
    
 Exhibits
 ExhibitNumber
    
    DescriptionFiled:12-24
    
    Computation of Ratio of Earnings to Fixed Charges31-23
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-24
    
    Chief Financial Officer Section 302 Form 10-Q CertificationFurnished:32-23
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-24
    
    Chief Financial Officer Section 906 Form 10-Q Certification
 19




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SIGNATURE
  THE DETROIT EDISON COMPANYDate: May 10, 2006
    
    /s/ PETER B. OLEKSIAKPeter B. OleksiakController and Chief Accounting Officer,
 20




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EXHIBIT NO.
    
    DESCRIPTION12-24
    
    Computation of Ratio of Earnings to Fixed Charges31-23
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-24
    
    Chief Financial Officer Section 302 Form 10-Q Certification32-23
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-24
    
    Chief Financial Officer Section 906 Form 10-Q Certification