##### 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, 2007
 Commission file number 1-2198
 The Detroit Edison Company meets the conditions set forth in General Instruction H (1) (a) and (b)
of Form 10-Q and is, therefore, filing this Form with the reduced disclosure format.
 THE DETROIT EDISON COMPANY
  Michigan
    
    38-0478650(State or other jurisdiction of 
incorporation or organization)
    
    (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
  Large accelerated filer o Accelerated filer o Non-accelerated filer þ
  Yes o No þ




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##### 



The Detroit Edison Company
 Quarterly Report on Form 10-Q  Quarter Ended June 30, 2007
 Table of Contents
 PageDefinitions
    
    
    1Forward-Looking Statements
    
    
    2Part I  Financial InformationItem 1. Financial StatementsConsolidated Statement of Operations
    
    
    8Consolidated Statement of Financial Position
    
    
    9Consolidated Statement of Cash Flows
    
    
    11Consolidated Statement of Changes in Shareholders Equity
and Comprehensive Income
    
    
    12Notes to Consolidated Financial Statements
    
    
    13Item 2. Managements Narrative Analysis of Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    7Part II  Other InformationItem 6. Exhibits
    
    
    25Signature
    
    
    26Chief Executive Officer Section 302 CertificationChief Financial Officer Section 302 CertificationChief Executive Officer Section 906 CertificationChief Financial Officer Section 906 Certification




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Definitions
 CTA
    
    Costs to achieve, consisting of project management, consultant support and employee severance, related to
the Performance Excellence ProcessCustomer Choice
    
    Statewide initiatives giving customers in Michigan the option to choose alternative suppliers for
electricity.Detroit Edison
    
    The Detroit Edison Company (a direct wholly owned subsidiary of
DTE Energy Company) and subsidiary companiesDTE Energy
    
    DTE Energy Company, the parent of Detroit Edison
and directly or indirectly the parent company of
two gas utility subsidiaries and numerous
non-utility subsidiariesEPA
    
    United States Environmental Protection AgencyFERC
    
    Federal Energy Regulatory CommissionITC Transmission
    
    International Transmission Company (until
February 28, 2003, a wholly owned subsidiary of
DTE Energy Company)MDEQ
    
    Michigan Department of Environmental QualityMISO
    
    Midwest Independent System
Operator, a Regional Transmission OrganizationMPSC
    
    Michigan Public Service CommissionNRC
    
    Nuclear Regulatory CommissionPSCR
    
    A power supply cost recovery mechanism
authorized by the MPSC that allows Detroit
Edison to recover through rates its fuel,
fuel-related and purchased power expenses.Securitization
    
    Detroit Edison financed specific stranded costs
at lower interest rates through the sale of rate
reduction bonds by a wholly owned special
purpose entity, the Detroit Edison
Securitization Funding LLC.SFAS
    
    Statement of Financial Accounting StandardsStranded Costs
    
    Costs incurred by utilities in order to serve
customers in a regulated environment that absent
special regulatory approval would not otherwise
be recoverable if customers switch to
alternative energy suppliers.Units of MeasurementkWh
    
    Kilowatthour of electricityMW
    
    Megawatt of electricityMWh
    
    Megawatthour of electricity
 1




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Forward-Looking Statements
  
    
    the effects of weather and other natural phenomena on operations and sales to customers,
and purchases from suppliers;
    
    economic climate and population growth or decline in the geographic areas where we do
business;
    
    environmental issues, laws, regulations, and the cost of remediation and compliance,
including potential new federal and state requirements that could include carbon and more
stringent mercury emission controls, a renewable portfolio standard and energy efficiency
mandates;
    
    nuclear regulations and operations associated with nuclear facilities;
    
    impact of the electric Customer Choice program;
    
    impact of electric utility restructuring in Michigan, including legislative amendments;
    
    employee relations, and the negotiation and impacts of collective bargaining agreements;
    
    unplanned outages;
    
    access to capital markets and capital market conditions and the results of other
financing efforts that 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 FERC, MPSC, NRC and other applicable governmental proceedings
and regulations, including any associated impact on rate structures;
    
    changes in and application of federal, state and local tax laws and their
interpretations, including the Internal Revenue Code, regulations, rulings, court
proceedings and audits;
    
    the ability to recover costs through rate increases;
    
    the availability, cost, coverage and terms of insurance;
    
    the cost of protecting assets against, or damage due to, terrorism;
    
    changes in and application of accounting standards and financial reporting regulations;
    
    changes in federal or state laws and their interpretation with respect to regulation,
energy policy and other business issues;
    
    uncollectible accounts receivable;
    
    binding arbitration, litigation and related appeals;
    
    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; and
    
    implementation of new processes and new core information systems.
  2




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The Detroit Edison Company
 
 Managements Narrative Analysis of Results of Operations
  Factors impacting income:
 Increase (Decrease) in Statement of Operations Components Compared to 
Prior Year
    
    Three 
Months
    
    
    Six
 Months(in Millions)Operating Revenues
    
    $
    35
    
    
    $
    79Fuel and Purchased Power
    
    
    (7
    )
    
    
    38Gross Margin
    
    
    42
    
    
    
    41Operation and Maintenance
    
    
    11
    
    
    
    14Depreciation and Amortization
    
    
    30
    
    
    
    45Taxes Other Than Income
    
    
    4
    
    
    
    7Asset (gains) and reserves, net
    
    
    (1
    )
    
    
    6Operating Income
    
    
    (2
    )
    
    
    (31
    )Other (Income) and Deductions
    
    
    (7
    )
    
    
    (11
    )Income Tax Provision
    
    
    2
    
    
    
    (5
    )Cumulative Effect of Accounting Change
    
    
    
    
    
    
    (1
    )Net Income
    
    $
    3
    
    
    $
    (16
    )
 Gross margin
  3




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Increase (Decrease) in Gross Margin Components Compared to Prior Year
    
    Three 
Months
    
    
    Six
 Months(in Millions)Weather related margin impacts
    
    $
    17
    
    
    $
    25Return of customers from electric Customer Choice
    
    
    18
    
    
    
    35Service territory economic performance
    
    
    (5
    )
    
    
    (20
    )Impact of 2006 MPSC show cause order
    
    
    (17
    )
    
    
    (34
    )Impact of MPSC 2005 PSCR reconciliation order
    
    
    34
    
    
    
    34Other, net
    
    
    (5
    )
    
    
    1Increase in gross margin
    
    $
    42
    
    
    $
    41
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30Power Generated and Purchased
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(in Thousands of MWh)Power Plant GenerationFossil
    
    
    10,117
    
    
    
    9,206
    
    
    
    20,674
    
    
    
    18,515Nuclear
    
    
    2,415
    
    
    
    922
    
    
    
    4,843
    
    
    
    3,11812,532
    
    
    
    10,128
    
    
    
    25,517
    
    
    
    21,633Purchased Power
    
    
    1,887
    
    
    
    3,318
    
    
    
    3,120
    
    
    
    4,832System Output
    
    
    14,419
    
    
    
    13,446
    
    
    
    28,637
    
    
    
    26,465Less Line Loss and Internal Use
    
    
    (624
    )
    
    
    (856
    )
    
    
    (1,408
    )
    
    
    (1,681
    )Net System Output
    
    
    13,795
    
    
    
    12,590
    
    
    
    27,229
    
    
    
    24,784Average Unit Cost ($/MWh)Generation (1)
    
    $
    14.75
    
    
    $
    16.41
    
    
    $
    15.09
    
    
    $
    15.48Purchased Power
    
    $
    68.45
    
    
    $
    54.03
    
    
    $
    66.64
    
    
    $
    52.89Overall Average Unit Cost
    
    $
    21.77
    
    
    $
    25.69
    
    
    $
    20.70
    
    
    $
    22.31
 
 (1)
    
    Represents fuel costs associated with power plants. Three Months Ended
    
    Six Months EndedJune 30
    
    June 30(in Thousands of MWh)
    
    2007
    
    2006
    
    2007
    
    2006Electric SalesResidential
    
    
    3,718
    
    
    
    3,514
    
    
    
    7,504
    
    
    
    7,350Commercial
    
    
    4,871
    
    
    
    4,506
    
    
    
    9,179
    
    
    
    8,513Industrial
    
    
    3,322
    
    
    
    3,209
    
    
    
    6,696
    
    
    
    6,363Wholesale
    
    
    715
    
    
    
    702
    
    
    
    1,451
    
    
    
    1,377Other
    
    
    89
    
    
    
    89
    
    
    
    199
    
    
    
    19712,715
    
    
    
    12,020
    
    
    
    25,029
    
    
    
    23,800Interconnections sales (1)
    
    
    1,080
    
    
    
    570
    
    
    
    2,200
    
    
    
    984Total Electric Sales
    
    
    13,795
    
    
    
    12,590
    
    
    
    27,229
    
    
    
    24,784Electric DeliveriesRetail and Wholesale
    
    
    12,715
    
    
    
    12,020
    
    
    
    25,029
    
    
    
    23,800Electric Customer Choice
    
    
    323
    
    
    
    984
    
    
    
    774
    
    
    
    2,347Electric Customer Choice  Self Generators (2)
    
    
    200
    
    
    
    127
    
    
    
    267
    
    
    
    478Total Electric Sales and Deliveries
    
    
    13,238
    
    
    
    13,131
    
    
    
    26,070
    
    
    
    26,625
 
 (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. 4




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Operation and maintenance
 Depreciation and amortization
 Asset (gains) and reserves, net
 Outlook
     
    
    amount and timing of cost recovery allowed as a result of regulatory proceedings,
related appeals, or new legislation;
    
    our ability to reduce costs and maximize plant performance;
    
    variations in market prices of power, coal and gas;
    
    economic conditions within the State of Michigan;
    
    weather, including the severity and frequency of storms;
    
    levels of customer participation in the electric Customer Choice program; and
    
    potential new federal and state environmental requirements.
 5




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st
 
    
    a requirement that all retail electric suppliers obtain at least 10 percent of their
energy supplies from renewable resources by 2015;
    
    an opportunity for utility-built generation, contingent upon the granting of a
certificate of need and competitive bidding of engineering, procurement and
construction services;
    
    investigating the cost of a requirement to bury certain power lines; and
    
    creation of a Michigan Energy Efficiency Program, administered by a third party
under the direction of the MPSC with initial funding estimated at $68 million.
  ENTERPRISE BUSINESS SYSTEMS
  6




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CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
   7




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The Detroit Edison Company
 
 Consolidated Statement of Operations (unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 30(in Millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Operating Revenues
    
    $
    1,210
    
    
    $
    1,175
    
    
    $
    2,304
    
    
    $
    2,225Operating ExpensesFuel and purchased power
    
    
    402
    
    
    
    409
    
    
    
    756
    
    
    
    718Operation and maintenance
    
    
    380
    
    
    
    369
    
    
    
    728
    
    
    
    714Depreciation and amortization
    
    
    198
    
    
    
    168
    
    
    
    380
    
    
    
    335Taxes other than income
    
    
    69
    
    
    
    65
    
    
    
    141
    
    
    
    134Asset (gains) and reserves, net
    
    
    (1
    )
    
    
    
    
    
    
    6
    
    
    
    1,048
    
    
    
    1,011
    
    
    
    2,011
    
    
    
    1,901Operating Income
    
    
    162
    
    
    
    164
    
    
    
    293
    
    
    
    324Other (Income) and DeductionsInterest expense
    
    
    75
    
    
    
    76
    
    
    
    149
    
    
    
    148Interest income
    
    
    (2
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    (1
    )Other income
    
    
    (7
    )
    
    
    (6
    )
    
    
    (18
    )
    
    
    (13
    )Other expenses
    
    
    6
    
    
    
    10
    
    
    
    15
    
    
    
    2072
    
    
    
    79
    
    
    
    143
    
    
    
    154Income Before Income Taxes
    
    
    90
    
    
    
    85
    
    
    
    150
    
    
    
    170Income Tax Provision
    
    
    30
    
    
    
    28
    
    
    
    50
    
    
    
    55Income Before Accounting Change
    
    
    60
    
    
    
    57
    
    
    
    100
    
    
    
    115Cumulative Effect of Accounting Change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net Income
    
    $
    60
    
    
    $
    57
    
    
    $
    100
    
    
    $
    116
  8




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The Detroit Edison Company
 
 Consolidated Statement of Financial Position (Unaudited)
 June 30
    
    
    December 312007
    
    
    2006(in Millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    36
    
    
    $
    27Restricted cash
    
    
    131
    
    
    
    132Accounts receivable (less allowance for doubtful accounts of $74 and $72,
respectivelyCustomer
    
    
    651
    
    
    
    601Collateral held by others
    
    
    77
    
    
    
    Other
    
    
    177
    
    
    
    70Accrued power supply cost recovery revenue
    
    
    87
    
    
    
    116InventoriesFuel
    
    
    166
    
    
    
    136Materials and supplies
    
    
    143
    
    
    
    130Other
    
    
    40
    
    
    
    541,508
    
    
    
    1,266InvestmentsNuclear decommissioning trust funds
    
    
    794
    
    
    
    740Other
    
    
    92
    
    
    
    89886
    
    
    
    829PropertyProperty, plant and equipment
    
    
    14,177
    
    
    
    13,916Less accumulated depreciation
    
    
    (5,642
    )
    
    
    (5,580
    )8,535
    
    
    
    8,336Other AssetsRegulatory assets
    
    
    2,736
    
    
    
    2,862Securitized regulatory assets
    
    
    1,182
    
    
    
    1,235Intangible assets
    
    
    9
    
    
    
    9Other
    
    
    75
    
    
    
    744,002
    
    
    
    4,180Total Assets
    
    $
    14,931
    
    
    $
    14,611
  9




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The Detroit Edison Company
 Consolidated Statement of Financial Position (Unaudited)
 June 30
    
    
    December 312007
    
    
    2006(in Millions, Except Shares)LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    744
    
    
    $
    411Accrued interest
    
    
    78
    
    
    
    79Dividends payable
    
    
    76
    
    
    
    76Accrued vacations
    
    
    46
    
    
    
    77Short-term borrowings
    
    
    254
    
    
    
    277Current portion of long-term debt, including capital leases
    
    
    148
    
    
    
    142Other
    
    
    299
    
    
    
    2881,645
    
    
    
    1,350Long-term Debt (net of current portion)Mortgage bonds, notes and other
    
    
    3,496
    
    
    
    3,515Securitization bonds
    
    
    1,124
    
    
    
    1,184Capital lease obligations
    
    
    45
    
    
    
    504,665
    
    
    
    4,749Other LiabilitiesDeferred income taxes
    
    
    1,835
    
    
    
    1,928Regulatory liabilities
    
    
    281
    
    
    
    255Asset retirement obligations
    
    
    1,105
    
    
    
    1,069Unamortized investment tax credit
    
    
    100
    
    
    
    105Nuclear decommissioning
    
    
    126
    
    
    
    119Accrued pension liability
    
    
    372
    
    
    
    364Accrued postretirement liability
    
    
    1,063
    
    
    
    1,055Other
    
    
    499
    
    
    
    5025,381
    
    
    
    5,397Commitments and Contingencies (Notes 4 and 6)Shareholders EquityCommon stock, 400,000,000 shares
authorized, 138,632,324 shares issued
and outstanding
    
    
    2,771
    
    
    
    2,596Retained earnings
    
    
    464
    
    
    
    516Accumulated other comprehensive income
    
    
    5
    
    
    
    33,240
    
    
    
    3,115Total Liabilities and Shareholders Equity
    
    $
    14,931
    
    
    $
    14,611
  10




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The Detroit Edison Company
 
 Consolidated Statement of Cash Flows (Unaudited)
 Six Months EndedJune 302007
    
    
    2006(in Millions)Operating ActivitiesNet Income
    
    $
    100
    
    
    $
    116Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    380
    
    
    
    335Deferred income taxes
    
    
    (111
    )
    
    
    5Asset (gains) and reserves, net
    
    
    6
    
    
    
    Changes in assets and liabilities, exclusive of changes
shown separately
    
    
    119
    
    
    
    (111
    )Net cash from operating activities
    
    
    494
    
    
    
    345Investing ActivitiesPlant and equipment expenditures
    
    
    (383
    )
    
    
    (512
    )Proceeds from sale of assets, net
    
    
    
    
    
    
    18Restricted cash for debt redemptions
    
    
    1
    
    
    
    2Proceeds from sale of nuclear decommissioning trust fund assets
    
    
    124
    
    
    
    99Investment in nuclear decommissioning trust funds
    
    
    (140
    )
    
    
    (118
    )Other investments
    
    
    (7
    )
    
    
    (15
    )Net cash used for investing activities
    
    
    (405
    )
    
    
    (526
    )Financing ActivitiesIssuance of long-term debt
    
    
    
    
    
    
    247Redemption of long-term debt
    
    
    (76
    )
    
    
    (71
    )Short-term borrowings, net
    
    
    (23
    )
    
    
    13Capital contribution by parent company
    
    
    175
    
    
    
    150Dividends on common stock
    
    
    (152
    )
    
    
    (152
    )Other
    
    
    (4
    )
    
    
    (5
    )Net cash from (used for) financing activities
    
    
    (80
    )
    
    
    182Net Increase in Cash and Cash Equivalents
    
    
    9
    
    
    
    1Cash and Cash Equivalents at Beginning of the Period
    
    
    27
    
    
    
    26Cash and Cash Equivalents at End of the Period
    
    $
    36
    
    
    $
    27
  11




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The Detroit Edison Company
 
 Consolidated Statement of Changes in Shareholders Equity  and Comprehensive Income (unaudited)
 Accumulated(Dollars in Millions,
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherShares in Thousands)
    
    Common Stock
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    Earnings
    
    Income
    
    TotalBalance, December 31, 2006
    
    
    138,632
    
    
    $
    2,596
    
    
    $
    516
    
    
    $
    3
    
    
    $
    3,115Net income
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    100Capital contribution by parent
company
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    175Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    
    
    
    
    (152
    )Net change in unrealized gains
on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Balance, June 30, 2007
    
    
    138,632
    
    
    
    2,771
    
    
    
    464
    
    
    
    5
    
    
    
    3,240
  2007
    
    
    2006(in Millions)Net income
    
    $
    100
    
    
    $
    116Other comprehensive income, net of tax:Net unrealized gains on investments:Amounts reclassified from income, net of taxes of $1 and $-
    
    
    2
    
    
    
    Comprehensive income
    
    $
    102
    
    
    $
    116
  12




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The Detroit Edison Company
 
 Notes to Consolidated Financial Statements (unaudited)
 NOTE 1  GENERAL
     Asset Retirement Obligations
  Accounting for the
Effects of Certain Types of Regulation
  (in Millions)Asset retirement obligations at January 1, 2007
    
    $
    1,069Accretion
    
    
    35Liabilities settled
    
    
    (2
    )Revision in estimated cash flows
    
    
    3Asset retirement obligations at June 30, 2007
    
    $
    1,105
  13




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Retirement Benefits and Trusteed Assets
  Other Postretirement(in Millions)
    
    Pension Benefits
    
    
    BenefitsThree Months Ended June 30
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    12
    
    
    $
    13
    
    
    $
    12
    
    
    $
    12Interest cost
    
    
    34
    
    
    
    34
    
    
    
    23
    
    
    
    22Expected return on plan assets
    
    
    (38
    )
    
    
    (34
    )
    
    
    (14
    )
    
    
    (13
    )Amortization
ofNet loss
    
    
    11
    
    
    
    11
    
    
    
    13
    
    
    
    13Prior service cost
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    1Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Special termination benefits
    
    
    1
    
    
    
    14
    
    
    
    
    
    
    
    1Net periodic benefit cost
    
    $
    21
    
    
    $
    40
    
    
    $
    36
    
    
    $
    38
 Other Postretirement(in Millions)
    
    Pension Benefits
    
    
    BenefitsSix Months Ended June 30
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    25
    
    
    $
    26
    
    
    $
    23
    
    
    $
    24Interest cost
    
    
    68
    
    
    
    68
    
    
    
    46
    
    
    
    44Expected return on plan assets
    
    
    (75
    )
    
    
    (68
    )
    
    
    (27
    )
    
    
    (25
    )Amortization
ofNet loss
    
    
    22
    
    
    
    23
    
    
    
    25
    
    
    
    26Prior service cost
    
    
    3
    
    
    
    4
    
    
    
    2
    
    
    
    2Net transition liability
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Special termination benefits
    
    
    5
    
    
    
    14
    
    
    
    2
    
    
    
    1Net periodic benefit cost
    
    $
    48
    
    
    $
    67
    
    
    $
    74
    
    
    $
    75
  Income Taxes
 Uncertain Tax Positions
 Accounting for Uncertainty in Income Taxes
 an interpretation of FASB Statement No. 109 (FIN 48)
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Michigan Business Tax
   
    
    An apportioned modified gross receipts tax of 0.8 percent; and
    
    An apportioned business income tax of 4.95 percent.
      Stock-Based Compensation
 Share-Based
Payment (SFAS 123(R),
 15




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##### Table of Contents



Consolidated Statement of Cash Flows
  Six Months EndedJune 302007
    
    
    2006(in Millions)Changes in Assets and Liabilities,
Exclusive of Changes Shown SeparatelyAccounts receivable, net
    
    $
    (250
    )
    
    $
    (118
    )Inventories
    
    
    (40
    )
    
    
    (25
    )Accrued pensions
    
    
    24
    
    
    
    66Accounts payable
    
    
    308
    
    
    
    39Accrued power supply cost recovery refund
    
    
    46
    
    
    
    (63
    )Income taxes payable
    
    
    46
    
    
    
    49General taxes
    
    
    21
    
    
    
    2Postretirement obligation
    
    
    8
    
    
    
    Other assets
    
    
    38
    
    
    
    (22
    )Other liabilities
    
    
    (82
    )
    
    
    (39
    )$
    119
    
    
    $
    (111
    )
  Six Months EndedJune 30(in Millions)
    
    2007
    
    2006Cash Paid for:Interest paid (excluding interest capitalized)
    
    $
    150
    
    
    $
    147Income taxes
paid
    
    $
    111
    
    
    $
    1
 Asset (gains) and reserves, net
  16




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##### Table of Contents



NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Fair Value Accounting
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 Accounting for Defined Benefit Pension and Other Postretirement Plans
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans  an Amendment of FASB Statements No. 87, 88, 106, and
132(R).
   17




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##### Table of Contents



NOTE 3  RESTRUCTURING
 Performance Excellence Process
    Employee Severance Costs (1)
    
    
    Other Costs
    
    
    Total Cost(in Millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Costs incurred:
    
    $
    3
    
    
    $
    18
    
    
    $
    7
    
    
    $
    19
    
    
    $
    10
    
    
    $
    37Less amounts
deferred or
capitalized:
    
    
    3
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    10
    
    
    
    Amount expensed
    
    $
    
    
    
    $
    18
    
    
    $
    
    
    
    $
    19
    
    
    $
    
    
    
    $
    37
 
 (1)
    
    Includes corporate allocations.  Employee Severance Costs (1)
    
    
    Other Costs
    
    
    Total Cost(in Millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Costs incurred:
    
    $
    11
    
    
    $
    18
    
    
    $
    14
    
    
    $
    31
    
    
    $
    25
    
    
    $
    49Less amounts
deferred or
capitalized:
    
    
    11
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    25
    
    
    
    Amount expensed
    
    $
    
    
    
    $
    18
    
    
    $
    
    
    
    $
    31
    
    
    $
    
    
    
    $
    49
 
 (1)
    
    Includes corporate allocations. Accounting for Costs
Associated with Exit or Disposal Activities
 18




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##### Table of Contents



NOTE 4  REGULATORY MATTERS
 Regulation
  MPSC Show-Cause Order
   2007 Electric Rate Case Filing
    
    
    Make progress toward correcting the existing rate structure to more accurately reflect
the actual cost of providing service to customers.
    
    Equalize distribution rates between Detroit Edison full service and electric Customer
Choice customers.
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##### Table of Contents




    
    Re-establish with modification the Choice Incentive Mechanism (CIM) originally
established in the Detroit Edison 2006 show cause filing. The CIM reconciles changes
related to customers moving between Detroit Edison full service and electric Customer
Choice.
    
    Terminate the Pension Equalization Mechanism.
    
    Establish an emission allowance pre-purchase plan to ensure that adequate emission
allowances will be available for environmental compliance.
    
    Establish a methodology for recovery of the costs associated with preparation of an
application for a new nuclear generation facility.
 st
   Regulatory Accounting Treatment for Performance Excellence Process
  20




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Accounting for Costs Related to Enterprise Business Systems (EBS)
  Fermi 2 Enhanced Security Costs Settlement
  Reconciliation of Regulatory Asset Recovery Surcharge
  Power Supply Costs Recovery Proceedings
 2005 Plan Year
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2006 Plan Year 
  22




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##### Table of Contents



2007 Plan Year 
 Other
   NOTE 5  SHAREHOLDERS EQUITY
  NOTE 6  COMMITMENTS AND CONTINGENCIES
 Environmental
 Air
 Water
 23




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Contaminated Sites
 Labor Contracts
  Purchase Commitments
   Bankruptcies
  24




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Other Contingencies
    
 Other Information
 
 Exhibits
 ExhibitNumber
    
    DescriptionFiled:31-33
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-34
    
    Chief Financial Officer Section 302 Form 10-Q CertificationFurnished:32-33
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-34
    
    Chief Financial Officer Section 906 Form 10-Q Certification
 25




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SIGNATURE
  THE DETROIT EDISON COMPANYDate: August 14, 2007
    /s/ PETER B. OLEKSIAKPeter B. OleksiakVice President, Controller and Chief

Accounting Officer 26