<PAGE>   1
                                                                 EXHIBIT  10.39


                          [DETROIT EDISON LETTERHEAD]

                                 July 24, 2000


Mr. Eric H. Peterson
2207 Cambria Boulevard
Dallas, Texas  75214

Dear Eric:

Pursuant to approval by the Board of Directors, I am pleased to offer you
employment in the position of Senior Vice President and General Counsel at an
annual salary of $325,000.

Upon employment, you will be eligible for the benefits described in the Benefit
Highlights brochure enclosed, as well as the perquisites described on a
separate listing also enclosed.  In addition, you will receive the following:

-  You will receive a signing bonus of $100,000 to be paid in your first
   paycheck.

-  You will receive an immediate annual benefit of two weeks (10 days) vacation
   for 2000.  In subsequent years you will receive four weeks (20 days) of
   vacation.

-  You will be paid an amount (considered imputed income to be grossed up for
   taxes) to cover the premium for three (3) months health care coverage for you
   and your dependents under the Company's plan.  After that you will be
   eligible for normal participation in the Company's health care plan.

-  You will be eligible to participate in our supplemental executive retirement
   plan. The current design is under review and is likely to change.  The new
   plan is being designed to provide competitive retirement benefits.

-  You will be eligible to participate in our annual incentive plan.  The plan
   provides for a target annual bonus of 50% of salary with a potential award of
   100% adjusted for performance. For the year 2000, you will be eligible for a
   pro-rata share of the applicable bonus. However, the bonus will be adjusted
   to ensure that your 2000 total cash compensation from DTE Energy and your
   prior employer is at least $450,000.

-  You will be eligible for annual grants under our Long-Term Incentive Plan
   that provides for a target award of 60% of salary (30% in performance shares
   and 30% in stock options). Performance share grants pay out in accordance
   with performance on a number of corporate goals with a potential award of
   200% of the grant.
<PAGE>   2
Mr. Eric H. Peterson
July 24, 2000
Page 2

-    You will be eligible for relocation assistance that will include interim
     living for 90 days, moving your household goods and assistance in selling
     your home. See the enclosed relocation guide.

-    You will be eligible for a mortgage differential payment of up to $3,000
     per month for three years after employment. This payment will be calculated
     as the difference between your current mortgage payment and your mortgage
     payment on your home in Michigan.

-    As a Senior Vice President, you will receive a change-in-control severance
     arrangement.

Subject to the approval of the Special Committee on Compensation of the Board of
Directors, you will be granted the following shares of stock pursuant to our
Long-Term Incentive Plan:

-    8,000 shares of restricted stock in the Long-Term Incentive Plan with a
     vesting period of four (4) years from the date of grant. These shares will
     pay current dividends in accordance with the Company's dividend policy. At
     current policy, this would equal $16,480.

-    10,000 shares of nonqualified stock options (vesting annually over four
     years from the date of grant).

This offer is subject to successful completion of a pre-employment physical
examination and a review of references.

Please contact me at (313) 235-8610 after you have completed your review of this
offer of employment. I hope to hear from you soon.

                                                  Sincerely,

                                                  /s/ Sandra J. Miller


Attachments


Accepted:


--------------------------------
Eric H. Peterson           Date