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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission file number 1-2198

The Detroit Edison Company, a Michigan corporation, meets the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K 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
(State or other jurisdiction of incorporation or
organization)     |  | 38-0478650
(I.R.S. Employer
Identification No.)
|                                                                            |  |                                                
|2000 2nd Avenue, Detroit, Michigan
(Address of principal executive offices) |  | 48226-1279
(Zip Code)                          

313-235-8000
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

|                                                                                                                                        |  |                                          
|--------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                                                                                                     |  | Name of each exchange on which registered
|                                                                                                                                        |  |                                          
|Quarterly Income Debt Securities (QUIDS)     (Junior
Subordinated Deferrable Interest     Debentures
 7.625%, 7.54% and 7.375% Series) |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:

None

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
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 [X]   No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes [  ]   No [X]

All of the registrants 134,287,832 outstanding shares of common stock, par value $10 per share, are owned by DTE Energy Company.

DOCUMENTS INCORPORATED BY REFERENCE

None



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The Detroit Edison Company

Annual Report on Form 10-K
Year Ended December 31, 2003
Table of Contents

|                           |  |               |  |                                                                                                |    |      |    | 
|-------------------------- |  | ------------- |  | ---------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                           |  |               |  |                                                                                                |    | Page
|                           |  |               |  |                                                                                                |    |     
|Definitions                |  |               |  |                                                                                                | 1  |     
|Forward-Looking
Statements |  |               |  |                                                                                                | 2  |     
|Part I                     |  |               |  |                                                                                                |    |     
|                           |  | Items 1. & 2. |  | Business & Properties                                                                          |    |      | 3  | 
|                           |  | Item 3.       |  | Legal Proceedings                                                                              |    |      | 12 | 
|                           |  | Item 4.       |  | Submission of Matters to a Vote of Security Holders                                            |    |      | 12 | 
|Part II                    |  |               |  |                                                                                                |    |     
|                           |  | Item 5.       |  | Market for Registrants Common Equity and Related
Stockholder Matters                          |    |      | 12 | 
|                           |  | Item 6.       |  | Selected Financial Data                                                                        |    |      | 12 | 
|                           |  | Item 7.       |  | Managements Narrative Analysis of Results of Operations                                       |    |      | 13 | 
|                           |  | Item 7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                                     |    |      | 17 | 
|                           |  | Item 8.       |  | Financial Statements and Supplementary Data                                                    |    |      | 18 | 
|                           |  | Item 9.       |  | Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure           |    |      | 58 | 
|                           |  | Item 9A.      |  | Controls and Procedures                                                                        |    |      | 58 | 
|Part III                   |  |               |  |                                                                                                |    |     
|                           |  | Item 10.      |  | Directors and Executive Officers of the Registrant                                             |    |      | 58 | 
|                           |  | Item 11.      |  | Executive Compensation                                                                         |    |      | 58 | 
|                           |  | Item 12.      |  | Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |    |      | 58 | 
|                           |  | Item 13.      |  | Certain Relationships and Related Transactions                                                 |    |      | 58 | 
|                           |  | Item 14       |  | Principal Accountant Fees and Services                                                         |    |      | 58 | 
|Part IV                    |  |               |  |                                                                                                |    |     
|                           |  | Item 15.      |  | Exhibits, Financial Statement Schedule and Reports on Form 8-K                                 |    |      | 59 | 
|Signatures                 |  |               |  |                                                                                                | 64 |     





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Definitions

|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Customer Choice      |  | The choice program is a statewide initiative 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 companies                                                                                                                                                                                                                                                                                      
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|DTE Energy           |  | DTE Energy Company, the parent of Detroit Edison, and subsidiary companies                                                                                                                                                                                                                                                                                                                 
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Enterprises          |  | DTE Enterprises Inc. (successor to MCN Energy) and subsidiary companies                                                                                                                                                                                                                                                                                                                    
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|EPA                  |  | United States Environmental Protection Agency                                                                                                                                                                                                                                                                                                                                              
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|FERC                 |  | Federal Energy Regulatory Commission                                                                                                                                                                                                                                                                                                                                                       
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|MCN Energy           |  | MCN Energy Group Inc. and subsidiary companies that were merged into Enterprises                                                                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|MichCon              |  | Michigan Consolidated Gas Company and subsidiary companies                                                                                                                                                                                                                                                                                                                                 
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|MPSC                 |  | Michigan Public Service Commission                                                                                                                                                                                                                                                                                                                                                         
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|NRC                  |  | Nuclear Regulatory Commission                                                                                                                                                                                                                                                                                                                                                              
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|PSCR                 |  | 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 expenses. The clause was suspended
under Michigans restructuring legislation signed into law June 5, 2000, which lowered and froze
electric customer rates. The clause was reinstated by the MPSC effective January 1, 2004.
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Securitization       |  | Detroit Edison financed specific stranded costs at lower interest rates through the sale of rate
reduction bonds by a wholly owned special purpose entity, the Detroit Edison Securitization Funding LLC.                                                                                                                                                                                  
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|SFAS                 |  | Statement of Financial Accounting Standards                                                                                                                                                                                                                                                                                                                                                
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Stranded 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.                                                                                                                                                                                                    
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Units of Measurement |  |                                                                                                                                                                                                                                                                                                                                                                                            
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|GWh                  |  | Gigawatthour of electricity                                                                                                                                                                                                                                                                                                                                                                
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|kWh                  |  | Kilowatthour of electricity                                                                                                                                                                                                                                                                                                                                                                
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|MW                   |  | Megawatt of electricity                                                                                                                                                                                                                                                                                                                                                                    
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                            
|MWh                  |  | Megawatthour of electricity                                                                                                                                                                                                                                                                                                                                                                

1



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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 customers;                                               
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | economic climate and growth in the geographic areas where we do business;                                                              
| 
| |  | environmental issues, including changes in the climate, and regulations;                                                               
| 
| |  | nuclear regulations and risks associated with nuclear operations;                                                                      
| 
| |  | implementation of electric Customer Choice programs;                                                                                   
| 
| |  | implementation of electric utility restructuring in Michigan;                                                                          
| 
| |  | employee relations;                                                                                                                    
| 
| |  | unplanned outages;                                                                                                                     
| 
| |  | access to capital markets and capital market conditions and other financing efforts that can be affected by credit agency
ratings;     
| 
| |  | the timing and extent of changes in interest rates;                                                                                    
| 
| |  | the level of borrowings;                                                                                                               
| 
| |  | changes in the cost of fuel and purchased power;                                                                                       
| 
| |  | effects of competition;                                                                                                                
| 
| |  | impact of FERC and MPSC proceedings and regulations;                                                                                   
| 
| |  | changes in federal or state tax laws and their interpretations, including the code, regulations, rulings, court proceedings
and audits;
| 
| |  | ability to recover costs through rate increases;                                                                                       
| 
| |  | insurance;                                                                                                                             
| 
| |  | the cost of protecting assets against or damage due to terrorism; and                                                                  
| 
| |  | changes in accounting standards and financial reporting regulations.                                                                   

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 statement
speaks only as of the date on which such statement is 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.

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Part I

Items 1. & 2. Business & Properties

GENERAL

Detroit Edison is a Michigan corporation organized in 1903. Detroit Edison is a
public utility subject to regulation by the MPSC and FERC and is engaged in the
generation, purchase, distribution and sale of electric energy to 2.1 million
customers in a 7,600 square mile area in southeastern Michigan.

References in this report to we, us and our are to Detroit Edison.

We currently operate our businesses through two strategic business units
(Energy Resources  Power Generation and Energy Distribution  Power
Distribution). Based on this structure, we set strategic goals, allocate
resources and evaluate performance. A discussion of each business follows.

ENERGY RESOURCES

Power Generation

Description

Power Generation comprises our regulated power generation business and plants
within Detroit Edison. These plants are regulated by numerous federal and
state governmental agencies, including the MPSC, the NRC and the EPA.
Electricity is generated from Detroit Edisons numerous fossil plants, its
hydroelectric pumped storage plant and its nuclear plant, and purchased from
electricity generators, suppliers and wholesalers. The electricity we produce
and purchase is sold to four major classes of customers: residential,
commercial, industrial and wholesale, principally throughout Michigan, the
Midwest and Ontario, Canada.

Weather, economic factors and electricity prices affect sales levels to
customers. Our peak load and highest total system sales generally occur during
the third quarter of the year driven by air conditioning and other
cooling-related demands. Power generation sales are made to a diverse base of
customers in both type and number; sales levels are not dependent on any small
market segment. However, due to residential rate subsidization, less than 1% of
the customers constitute approximately 80% of the power generation margin.
Business customers who have elected to participate in the electric Customer
Choice program are having a significant unfavorable effect on our financial
performance.

3



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Our power is generated from a variety of fuels and is supplemented with market
purchases. The table below details our energy supply mix and average cost per
unit:

|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |    |    |  
|----------------------------- | ----------------- | ------------------- | ------ | ----- | ------ |  | --- | -- | -- | ---- | ------ | ----- | ------ |  | --- | ---- | -- | - | ------ | ----- | ------ |  | --- | -- | -- | -
|                              |                   |                     |        | 2003  |        |  |     |    |    | 2002 |        |       |        |  |     | 2001 |    |   |        |      
|(in Thousands of MWh)         |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |  
|Power Generated and Purchased |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Power Plant Generation        |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|                              | Fossil            |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |    |   
|                              |                   | Coal                |        |       | 37,408 |  |     |    | 71 | %    |        |       | 37,381 |  |     |      | 64 | % |        |       | 38,424 |  |     |    | 69 | %
|                              |                   | Natural Gas & Other |        |       | 644    |  |     |    | 1  |      |        |       | 1,636  |  |     |      | 3  |   |        |       | 1,287  |  |     |    | 2  |  
|                              | Nuclear (Fermi 2) |                     |        | 8,114 |        |  |     | 16 |    |      |        | 9,301 |        |  |     | 16   |    |   |        | 8,555 |        |  |     | 16 |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|                              |                   |                     | 46,166 |       |        |  | 88  |    |    |      | 48,318 |       |        |  | 83  |      |    |   | 48,266 |       |        |  | 87  |   
|Purchased Power               |                   |                     | 6,354  |       |        |  | 12  |    |    |      | 9,807  |       |        |  | 17  |      |    |   | 7,482  |       |        |  | 13  |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|System Output                 |                   |                     | 52,520 |       |        |  | 100 | %  |    |      | 58,125 |       |        |  | 100 | %    |    |   | 55,748 |       |        |  | 100 | % 
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Average Unit Cost ($/MWh)     |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Generation (1)                |                   | $                   | 12.89  |       |        |  |     |    |    | $    | 12.53  |       |        |  |     |      |    | $ | 12.31  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Purchased Power (2)           |                   | $                   | 41.73  |       |        |  |     |    |    | $    | 39.16  |       |        |  |     |      |    | $ | 78.24  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Overall Average Unit Cost     |                   | $                   | 16.38  |       |        |  |     |    |    | $    | 17.02  |       |        |  |     |      |    | $ | 21.15  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   

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(1) Represents fuel costs associated with power plants.


(2) Includes amounts associated with hedging activities.

We expect an adequate supply of fuel and purchased power to meet our obligation
to serve customers. The effect of lost sales due the electric Customer Choice
program has reduced our need for purchased power and increased our ability to
sell power in the wholesale market. We have short and long-term supply
contracts for expected fuel and purchased power requirements as detailed in the
following table:

|                |  |            |    |      |  |  |    |  
|--------------- |  | ---------- | -- | ---- |  |  | -- | -
|                |  | 2004      
|                |  |           
|                |  | Contracted |    | Open
|Expected Supply |  |            |    |     
|Coal            |  |            | 79 | %    |  |  | 21 | %
|Natural Gas     |  |            | 29 | %    |  |  | 71 | %
|Purchased Power |  |            | 89 | %    |  |  | 11 | %

Power Generations generating capability is heavily dependent upon coal. The
coal is purchased from various sources in different geographic areas under
agreements that vary in both pricing and terms. Detroit Edison expects to
obtain the majority of its coal requirements through long-term contracts with
the balance to be obtained through short-term agreements and spot purchases.
Detroit Edison has contracts with three coal suppliers for a total purchase of
up to 28 million tons of low-sulfur western coal to be delivered from 2004
through 2008. Detroit Edison also has a contract with a supplier for the
purchase of approximately 4 million tons of Appalachian coal to be delivered
from 2004 through 2006. These existing long-term coal contracts include
provisions for price escalation as well as de-escalation. Given the geographic
diversity of supply, Detroit Edison believes it can meet the expected
generation requirements. We own and lease a fleet of rail cars and have
long-term transportation contracts with companies to provide rail and vessel
services for delivery of purchased coal to our generating facilities.

We purchase power from other electricity generators, suppliers and wholesalers.
These purchases supplement our generation capability to meet customer demand
during peak cycles. For example, when high temperatures occur during the summer
we require additional electricity to meet demand. This access to additional
power is an efficient and economical way to meet our obligation to customers
without increasing capital expenditures to build additional base-load power
facilities.

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Regulation

Detroit Edisons Power Generation business is subject to the regulatory
jurisdiction of various agencies, including the MPSC, FERC and NRC. The MPSC
issues orders pertaining to rates, recovery of certain costs, including the
costs of generating facilities and regulatory assets, conditions of service,
accounting and operating-related matters. Detroit Edisons MPSC-approved rates
charged to customers have historically been designed to allow for the recovery
of costs, plus an authorized rate of return on our investments. The FERC
regulates Detroit Edison with respect to financing authorization and wholesale
electric activities. The NRC has regulatory jurisdiction over all phases of
the operation, construction, licensing and decommissioning of Detroit Edisons
Fermi 2 nuclear plant.

Since 1996 there have been several important acts, orders, court rulings and
legislative actions in the state of Michigan that affect our Power Generation
operations. In 1996, the MPSC began an initiative designed to give all of
Michigans electric customers access to electricity supplied by other
generators and marketers. In 1998, the MPSC authorized the electric Customer
Choice program that allowed for a limited number of customers to purchase
electricity from suppliers other than their local utility. The local utility
would continue to transport the electric supply to the customers facilities,
thereby retaining distribution margins. The electric Customer Choice program
was phased in over a three-year period, with all customers having the option to
choose their electric supplier by January 2002.

In 2000, the Michigan Legislature enacted legislation that reduced electric
rates by 5% and reaffirmed January 2002 as the date for full implementation of
the electric Customer Choice program. This legislation also contained
provisions freezing rates through 2003 and preventing rate increases for
residential customers through 2005 and for small business customers through
2004. The legislation and an MPSC order issued in 2001 established a
methodology to enable Detroit Edison to recover stranded costs related to its
generation operations that may not otherwise be recoverable due to electric
Customer Choice related lost sales and margins. The legislation also provides
for the recovery of the costs associated with the implementation of electric
Customer Choice program. The MPSC has determined that these costs be treated
as regulatory assets. Additionally, the legislation provides for recovery of
costs incurred as a result of changes in taxes, laws and other governmental
actions including the Clean Air Act.

Due to MPSC orders issued in 1997 and 1998 that altered the regulatory process
in Michigan and provided a plan for transition to electric Customer Choice for
the generation business of Detroit Edison, effective December 1998, Detroit
Edisons generation business no longer met the criteria of SFAS No. 71,
Accounting for the Effects of Certain Types of Regulation. Since the June
2000 legislation was enacted into law and with the issuance of subsequent
clarifying MPSC orders in 2001 and 2002, rates for retail customers and
transition charges for electric Customer Choice customers will be set to
recover Detroit Edisons generation costs. Such costs will be billed and
recovered from both retail and choice customers and thus satisfy the criteria
of SFAS No. 71. In addition, we have the legislative authority to defer
regulatory costs in 2002 and 2003 and to begin recovery of such costs starting
in 2004 after the mandated rate freeze expires. The recovery of these costs is
dependent on authorization from the MPSC. As a result, we resumed application
of SFAS No. 71 for our generation business in the fourth quarter of 2002.

In June 2003, Detroit Edison filed an application with the MPSC for a change in
retail electric rates, resumption of the Power Supply Cost Recovery (PSCR)
mechanism, and recovery of net stranded costs. Detroit Edison is specifically
requesting authority to increase rates by $427 million annually with a
three-year phase in as customers rate caps expire.  In February
2004, the MPSC authorized an interim base rate increase of $248
million annually.

For additional information regarding our regulatory environment, see Note 4 -
Regulatory Matters.

5



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Properties

Detroit Edison owns generating properties and facilities that are all located
in the state of Michigan. Substantially all the net utility properties of
Detroit Edison are subject to the lien of its mortgage. Power Generation
plants owned and in service as of December 31, 2003 are as follows:

|                                           |                 |         |             |      |                          |       |            |                 |      |      |       |                          |                                 |  |  |  | 
|------------------------------------------ | --------------- | ------- | ----------- | ---- | ------------------------ | ----- | ---------- | --------------- | ---- | ---- | ----- | ------------------------ | ------------------------------- |  |  |  | 
|                                           |                 |         |             |      |                          |       | Summer Net |                 |      |      |      
|                                           |                 |         | Location by |      | Rated Capability (1) (2) |       |            |                 |     
|                                           |                 |         | Michigan    |      |                          |       |            |                 |     
|Plant Name                                 |                 | County  |             | (MW) |                          | (%)   |            | Year in Service
|                                           |                 |         |             |      |                          |       |            |                
|Fossil-fueled Steam-Electric               |                 |         |             |      |                          |       |            |                 |      |      |       |                          |                                 |  |  | 
|                                           | Belle River (3) |         | St. Clair   |      |                          | 1,026 |            |                 |      | 9.3  | %     |                          | 1984 and 1985                  
|                                           | Conners Creek   |         | Wayne       |      |                          | 215   |            |                 |      | 1.9  |       |                          | 1999                           
|                                           | Greenwood       |         | St. Clair   |      |                          | 785   |            |                 |      | 7.1  |       |                          | 1979                           
|                                           | Harbor Beach    |         | Huron       |      |                          | 103   |            |                 |      | 0.9  |       |                          | 1968                           
|                                           | Marysville      |         | St. Clair   |      |                          | 84    |            |                 |      | 0.8  |       |                          | 1930, 1943 and 1947            
|                                           | Monroe (4)      |         | Monroe      |      |                          | 3,045 |            |                 |      | 27.6 |       |                          | 1971, 1973 and 1974            
|                                           | River Rouge     |         | Wayne       |      |                          | 510   |            |                 |      | 4.6  |       |                          | 1957 and 1958                  
|                                           | St. Clair       |         | St. Clair   |      |                          | 1,415 |            |                 |      | 12.8 |       |                          | 1953, 1954, 1959, 1961 and 1969
|                                           | Trenton Channel |         | Wayne       |      |                          | 730   |            |                 |      | 6.6  |       |                          | 1949, 1968 and 1999            
|                                           |                 |         |             |      |                          |       |            |                 |      |      |       |                          |                                 |  |  | 
|                                           |                 |         |             |      |                          |       | 7,913      |                 |      |      | 71.6  |                          |                                 |  |  | 
|Oil or Gas-fueled Peaking Units            |                 | Various |             |      | 1,102                    |       |            |                 | 10.0 |      |       | 1966-1971, 1981 and 1999
|Nuclear-fueled Steam-Electric
Fermi 2 (5)  |                 | Monroe  |             |      | 1,111                    |       |            |                 | 10.1 |      |       | 1988                    
|Hydroelectric Pumped Storage
Ludington (6) |                 | Mason   |             |      | 917                      |       |            |                 | 8.3  |      |       | 1973                    
|                                           |                 |         |             |      |                          |       |            |                 |      |      |       |                          |                                 |  |  | 
|                                           |                 |         |             |      |                          |       | 11,043     |                 |      |      | 100.0 | %                        |                                 |  |  | 
|                                           |                 |         |             |      |                          |       |            |                 |      |      |       |                          |                                 |  |  | 



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|(1) |  | Summer net rated capabilities of generating units in service are based on periodic load tests and are changed depending on operating
experience, the physical condition of units, environmental control limitations and customer requirements for steam, which otherwise
would be used for electric generation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excludes one oil-fueled unit, St. Clair Unit No. 5 (250 MW), in cold standby status.                                                                                                                                                                                                                           
|   
|(3) |  | The Belle River capability represents Detroit Edisons entitlement to 81.39% of the capacity and energy of the plant. See Note 6 
Jointly Owned Utility Plant.                                                                                                                                                
|   
|(4) |  | The Monroe Power Plant provided 38% of Detroit Edisons total 2003 power plant generation.                                                                                                                                                                                                                     
|   
|(5) |  | Fermi 2 has a design electrical rating (net) of 1,150 MW.                                                                                                                                                                                                                                                      
|   
|(6) |  | Represents Detroit Edisons 49% interest in Ludington with a total capability of 1,872 MW.                                                                                                                                                                                                                     

Strategy and Competition

We continue to strive to be the preferred electricity supplier in southeast
Michigan. We believe that we can accomplish our goal by working with our
customers, communities and regulatory agencies to be a reliable low cost
supplier of electricity. To control expenses, we optimize our fuel blends
thereby taking maximum advantage of low cost, environmentally friendly
low-sulfur western coals. To ensure generation reliability we will continue to
make investments in our generating plants that will improve plant availability
and improve operating efficiencies. Revenues from year to year will vary due
to weather conditions, economic factors, regulatory events and other risk
factors as discussed in the Risk Factors section that follows.

Effective January 1, 2002, the electric Customer Choice program expanded in
Michigan whereby all of the Companys electric customers can choose to purchase
their electricity from alternative suppliers of generation services. Detroit
Edison lost 16% of retail sales in 2003 and 6% of such sales in 2002 as a
result of customers choosing to purchase power from alternative suppliers under
the electric Customer Choice program. If regulatory or legislative changes are
not made, we expect to lose between 17% to 20% of retail sales in 2004 as a
result of customers choosing to participate in the program. Customers
participating in the electric Customer Choice program consist primarily of
industrial and large commercial customers. There is a significant price
difference in the wholesale and retail markets, which

6



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only allows for partial offset of the lost revenue from customer choice
migration. We will continue to aggressively utilize the wholesale market to
sell the generation made available by the electric Customer Choice program.

ENERGY DISTRIBUTION

Power Distribution

Description

The electric distribution services of Detroit Edison comprise our regulated
Power Distribution business. This business distributes electricity generated
by Energy Resources Power Generation business and alternative electric
suppliers to Detroit Edisons 2.1 million customers in southeastern Michigan.
This business also shares, with the DTE Energys Gas Distribution segment, the
customer service function for the electric and gas utilities of DTE Energy.
Accordingly, costs associated with this function, including collections, our
call center and uncollectable accounts receivable is shared between Power
Distribution and DTE Energys Gas Distribution segment.

In January 2003, we sold the steam heating business of Detroit Edison to
Thermal Ventures II, LP. In February 2003, DTE Energy sold the International
Transmission Company (ITC), a FERC regulated transmission company, to an
affiliate of Kohlberg, Kravis, Roberts & Co. and Trimaran Capital Partners,
LLC. ITC will continue to provide transmission services to the Energy
Distribution business at rates that will be recovered from Detroit Edisons
utility customers.

Weather and economic factors affect our sales and revenues. Similar to the
Power Generation business, our peak load and highest total system sales
generally occur during the third quarter of the year driven by air conditioning
and cooling-related demands. Power Distributions sales are not dependent upon
a limited number of customers. Additionally, customers participating in the
electric Customer Choice program do not impact Power Distributions operating
revenues or the number of customers served. The loss of any one or a few
customers is not reasonably likely to have a material adverse effect on Power
Distribution.

|                          |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                          |  | 2003 |        | 2002 |  | 2001
|(in MWh)                  |  |      |        |      |  |     
|Electric Deliveries       |  |      |        |      |  |      |        |  |  |  |        | 
|Residential               |  |      | 15,074 |      |  |      | 15,958 |  |  |  | 14,503 | 
|Commercial                |  |      | 15,942 |      |  |      | 18,395 |  |  |  | 18,777 | 
|Industrial                |  |      | 12,254 |      |  |      | 13,590 |  |  |  | 14,430 | 
|Wholesale                 |  |      | 2,241  |      |  |      | 2,249  |  |  |  | 2,159  | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 
|                          |  |      | 45,511 |      |  |      | 50,192 |  |  |  | 49,869 | 
|Electric Choice           |  |      | 7,281  |      |  |      | 3,510  |  |  |  | 1,268  | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 
|Total Electric Deliveries |  |      | 52,792 |      |  |      | 53,702 |  |  |  | 51,137 | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 

Regulation

Detroit Edisons Power Distribution is subject to the jurisdiction of the
MPSC and the FERC, which have regulatory authority over rates, conditions of
service and other operating-related matters. As previously discussed, Michigan
legislation prevents Detroit Edison from increasing rates to residential
customers through 2005 and for small business customers through 2004. By order
of the FERC, rates charged by ITC will remain at current levels through
December 2004.

In June 2003, Detroit Edison filed an application with the MPSC for a
change in retail electric rates, resumption of the PSCR mechanism, and recovery
of net stranded costs. In February 2004, the MPSC authorized an
interim base rate increase of $248 million annually. See Note 4 for further discussion of the Electric
Transitional Rate Plan filing.

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In January 2004, the MPSC issued an order adopting rules governing service
quality and reliability standards for electric distribution systems. The
reliability standards establish performance levels for service restoration,
wire-down relief requests, customer call answer time, customer complaint
response, meter reading and new service installations. The order also
establishes penalties for delays in service restoration during normal
conditions, catastrophic storms and repetitive outages. Detroit Edison is
required to file an annual report providing information regarding performance
against the measures provided and any penalties incurred.

For additional information regarding our regulatory environment, see Note 4 
Regulatory Matters.

Energy Assistance Programs

Energy assistance programs funded by the federal government and the State of
Michigan, remain
critical to Detroit Edisons ability to control its uncollectable accounts
receivable and collections expenses.

Detroit Edisons uncollectable accounts receivable expense is directly affected
by the level of government funded assistance its qualifying customers receive.
We are working with the State of Michigan and others to increase the share of
funding allocated to our customers to be representative of the number of
low-income individuals in our service territory.

Properties

Detroit Edison owns and operates 663 distribution substations with a capacity
of approximately 31,079,000 kilovolt-amperes (kVA) and approximately 407,000
line transformers with a capacity of approximately 24,542,000 kVA.
Substantially all of the net utility properties of Detroit Edison are subject
to the lien of its mortgage. Circuit miles of distribution lines owned and in
service as of December 31, 2003 are as follows:

|                                   |  |               |        |             |  |  |        | 
|---------------------------------- |  | ------------- | ------ | ----------- |  |  | ------ | 
|Electric Distribution              |  | Circuit Miles
|                                   |  |              
|Operating Voltage
 Kilovolts (kV) |  | Overhead      |        | Underground
|                                   |  |               |        |            
|4.8 kV to 13.2 kV                  |  |               | 27,916 |             |  |  | 12,745 | 
|24 kV                              |  |               | 101    |             |  |  | 690    | 
|40 kV                              |  |               | 2,341  |             |  |  | 325    | 
|120 kV                             |  |               | 77     |             |  |  | 13     | 
|                                   |  |               |        |             |  |  |        | 
|                                   |  |               | 30,435 |             |  |  | 13,773 | 
|                                   |  |               |        |             |  |  |        | 

There are numerous interconnections that allow the interchange of electricity
between Detroit Edison and electricity providers external to its service area.
These interconnections are owned and operated by ITC and connect to neighboring
energy companies.

Strategy and Competition

Our strategy focuses on improving the quality of customer service and lowering
operating costs by improving operating efficiencies as well as targeting
capital investments in areas that have the greatest

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impact on reliability improvements with the goal of managing distribution rates
charged to utility customers.

The decision to sell ITC is consistent with our strategic view that
maximization of shareholder value and high levels of customer service are best
achieved with assets that we own, operate and over which we exercise
significant control. As Detroit Edisons rates are designed to recover
transmission costs, billings to Detroit Edison from ITC will be recovered from
Detroit Edisons utility customers. Rates charged by ITC to Detroit Edison
will, by FERC order, remain at current levels through December 2004.
Thereafter, rates would be subject to normal FERC regulation and market forces.

Competition in the regulated electrical distribution business is provided
primarily by on-site generation by industrial customers and distributed
generation applications by industrial and commercial customers. We do not
expect significant competition for distribution to any group of customers in
the near term.

ENVIRONMENTAL MATTERS

We are subject to extensive environmental regulation. Additional costs may
result as the effects of various chemicals on the environment are studied and
governmental regulations are developed and implemented. We expect to continue
recovering environmental costs related to utility operations through rates
charged to our customers. Greater details on environmental issues are provided
in the following Notes to the Consolidated Financial Statements:

|     |  |                              
|---- |  | -----------------------------
|Note |  | Title                        
|     |  |                              
|4    |  | Regulatory Matters           
|5    |  | Nuclear Operations           
|12   |  | Commitments and Contingencies

We are subject to applicable permit requirements, and to potentially increasing
stringent federal, state and local standards covering among other things,
particulate and gaseous stack emission limitations, the discharge of waste into
lakes and streams and the handling and disposal of waste material.

The U.S. Environmental Protection Agency (EPA) issued ozone transport
regulations and, in December 2003, proposed additional emission regulations
relating to ozone, fine particulate and mercury air pollution. The new rules
have led to additional controls on fossil-fueled power plants to reduce
nitrogen oxides, sulfur dioxide, carbon dioxide and particulate emissions. To
comply with these new controls, Detroit Edison has spent approximately $560
million through December 2003 and estimates that it will spend
approximately $40 million in 2004 and incur up to an
additional $1.2 billion of future capital expenditures over the next five to
eight years to satisfy both the existing and proposed new control requirements.
 The EPA initiated enforcement actions against several major electric utilities
citing violations of new source provisions of the Clean Air Act. Detroit Edison
received and responded to information requests from the EPA on this subject.
In October 2003, the EPA promulgated revised regulations to clarify new source review provisions
going forward. Several states and environmental organizations
have challenged these regulations and in December 2003  the Court
stayed the implementation of the regulations until the U.S. Court of
Appeals D.C. Circuit renders an opinion in the case.
We cannot predict the future impact of this issue upon Detroit Edison.

We are required to demonstrate that the cooling water intake structures at all
of its facilities minimize adverse environmental impact. We filed such
demonstrations and in the event of a final adverse decision, may be required to
install additional control technologies to further minimize the impact.

Various state and federal laws regulate Detroit Edisons handling, storage and
disposal of its waste materials. The EPA and the Michigan Department of
Environmental Quality (MDEQ) have aggressive programs to manage the clean up of
contaminated property. We have extensive land holdings and, from time to time, must investigate claims of improperly disposed contaminants. We
anticipate that we will be periodically included in these types of
environmental proceedings.

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RISK FACTORS

There are various risks associated
with the operations of Detroit Edison. To provide a framework to
understand our operating environment, we are providing a brief explanation
of the more significant risks associated with our businesses. Although we
have tried to identify and discuss key risk factors, others could emerge in the
future. Each of the following risks could affect our performance.

Electric Customer Choice Without regulatory and legislative changes, the
negative impact of the electric Customer Choice program will continue to impact
our financial performance.

Weather Weather significantly affects our operations. Deviations from normal
hot and cold weather conditions affect our earnings and cash flow. Mild
temperatures can result in decreased utilization of our assets, lowering income
and cash flow. Damage due to ice storms, tornadoes, or high winds can damage
our infrastructure and require us to perform emergency repairs and incur
material unplanned expenses.

Competition Deregulation and restructuring in the electric industry, could
result in increased competition and unrecovered costs that could affect the
financial condition, results of operations or cash flows of our business.

Rate regulation We operate in a regulated industry. Our electric rates are
set by the MPSC and the FERC and cannot be increased without their
authorization. We may be impacted by new regulations or interpretations by the
MPSC, FERC or other regulatory bodies. New legislation, regulations or
interpretations could change how our business operates, impact our ability to
recover costs through rate increases or require us to incur additional
expenses. There is no assurance that our currently pending electric rate
increases will be granted.

Credit ratings -Increased scrutiny of the energy industry and regulatory
changes, as well as changes in our economic performance could result in credit
agencies reexamining our credit rating. Several of the credit agencies have
placed a negative outlook on our ratings due primarily to the uncertainty
regarding our electric rate case. A downgrade in our rating could restrict or
discontinue our ability to access capital markets at attractive rates and
increase our borrowing costs.

Regional and national economic conditions Our businesses follow the economic
cycles of the customers we serve. Should national or regional economic
conditions decline, reduced volumes of electricity we supply will
result in decreased earnings and cash flow. Economic conditions in our service
territory also impact our collections of accounts receivable.

Environmental laws and liability We are subject to numerous environmental
regulations. These regulations govern air emissions, water quality, wastewater
discharge, and disposal of solid and hazardous waste. Compliance with these
regulations can significantly increase capital spending, operating expenses and
plant down times. These laws and regulations require us to seek a variety of
environmental licenses, permits, inspections, and other regulatory approvals.
We may also incur liabilities because of our emission of gases that may cause
changes in the climate. The regulatory environment is subject to significant
change and, therefore, we cannot predict future issues.

Additionally, we may become a responsible party for environmental clean up at
sites identified by a regulatory body. We cannot predict with certainty the
amount and timing of future expenditures related to environmental matters
because of the difficulty of estimating clean up costs. There is also
uncertainty in quantifying liabilities under environmental laws that impose
joint and several liability on all potentially responsible parties.

Operation of nuclear facilities Ownership of an operating nuclear generating
plant subjects us to significant additional risks. These risks among others,
include, but are not limited to, plant security,

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environmental regulation and remediation, and operational factors than can
significantly impact the performance and cost of operating a nuclear facility.

Supply and price of raw materials We are dependent on coal for much of our
electrical generating capacity. Price fluctuation and supply disruptions could
have a negative impact on our ability to profitably generate electricity. We
have hedging policies in place to mitigate negative fluctuations in commodity
supply prices.

Labor relations Unions represent a majority of our employees. A union
choosing to strike as a negotiating tactic would have an impact on our
business. We have begun negotiations with unions for contracts expiring in 2004
and cannot predict the outcome. An unfavorable outcome, such as a strike, could
adversely impact the business.

Unplanned outagesUnforeseen maintenance may be required to safely produce
electricity or comply with environmental regulations. This occurrence could
result in spot market purchases of electricity at costs that exceed our
generation costs.

Access to capital markets and other financing efforts and interest rates Our
ability to access capital markets is important to operate our businesses.
Heightened concerns about the energy industry, the level of borrowing by other
energy companies and the market as a whole could limit our access to capital
markets. Changes in interest rates could increase our borrowing costs.

Property tax reform We are one of the largest payers of property taxes in the
state of Michigan. Should the legislature change how schools are financed, we
could face increased property taxes on our Michigan facilities.

Insurance While we have a comprehensive insurance program in place to provide
coverage for various types of risks, catastrophic damage as a result of acts of
God, terrorism, war or a combination of significant unforeseen events could
impact our operations and economic losses might not be covered in full by
insurance.

Terrorism Damage to downstream infrastructure or our own assets by terrorist
groups would impact our operations.

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EMPLOYEES

We had 8,008 employees at December 31, 2003, of which 4,062 were represented by
unions. Of the represented employees, 3,594 are under a contract that expires
in June 2004. The contract of the remaining represented employees expires in
2005. We have begun negotiations on the labor contract that expires in June
2004 and cannot predict the outcome.

Item 3. Legal Proceedings

We are involved in certain legal, regulatory, administrative and environmental
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 following Notes to the Consolidated Financial Statements:

|     |  |                              
|---- |  | -----------------------------
|Note |  | Title                        
|     |  |                              
|4    |  | Regulatory Matters           
|5    |  | Nuclear Operations           
|12   |  | Commitments and Contingencies

Item 4. Submission of Matters to a Vote of Security Holders

Omitted per general instruction I (2) (c) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

Part II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters

All of the 134,287,832 issued and outstanding shares of common stock of Detroit
Edison, par value $10 per share, are owned by DTE Energy, and constitute 100%
of the voting securities of Detroit Edison. Therefore, no market exists for
our common stock.

We paid cash dividends of $295 million in 2003 and in 2002 and $306 million in
2001.

Item 6. Selected Financial Data

Omitted per general instruction I (2) (a) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

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Item 7. Managements Narrative Analysis of Results of Operations

The Results of Operations discussion for Detroit Edison is presented in
accordance with General Instruction I (2) (a) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

We had net income of $246 million for 2003 compared to net income of $356
million for 2002. 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 2003 earnings by $6
million. Results were also affected by a $14 million net of tax loss on the
sale of our steam heating business in January 2003.

Detroit Edisons net income decreased $123 million in 2002 from 2001. The
earnings comparability is affected by $186 million ($121 million net of tax) of
merger and restructuring charges incurred as a result of the merger between
Detroit Edisons parent company, DTE Energy Company (DTE Energy), and MCN
Energy Group Inc. (MCN Energy) in 2001.

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.

|                                                    |  |      |       |      |  |      |        |   |  |   |        |  
|--------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                    |  | 2003 |       | 2002 |  | 2001
|(in Millions)                                       |  |      |       |      |  |     
|Operating Revenues                                  |  | $    | 2,448 |      |  | $    | 2,711  |   |  | $ | 2,788  |  
|Fuel and Purchased Power                            |  |      | (920  | )    |  |      | (1,048 | ) |  |   | (1,231 | )
|                                                    |  |      |       |      |  |      |        |   |  |   |        |  
|Gross Margin                                        |  |      | 1,528 |      |  |      | 1,663  |   |  |   | 1,557  |  
|Operation and Maintenance                           |  |      | (628  | )    |  |      | (622   | ) |  |   | (571   | )
|Depreciation and Amortization                       |  |      | (224  | )    |  |      | (331   | ) |  |   | (385   | )
|Taxes other than Income                             |  |      | (157  | )    |  |      | (156   | ) |  |   | (148   | )
|Merger and Restructuring Charges (Note 3)           |  |      |      |      |  |      |       |   |  |   | (72    | )
|                                                    |  |      |       |      |  |      |        |   |  |   |        |  
|Operating Income                                    |  |      | 519   |      |  |      | 554    |   |  |   | 381    |  
|Other Income and (Deductions)                       |  |      | (149  | )    |  |      | (189   | ) |  |   | (184   | )
|Income Tax Provision                                |  |      | (135  | )    |  |      | (120   | ) |  |   | (58    | )
|                                                    |  |      |       |      |  |      |        |   |  |   |        |  
|Net Income                                          |  | $    | 235   |      |  | $    | 245    |   |  | $ | 139    |  
|                                                    |  |      |       |      |  |      |        |   |  |   |        |  
|Operating Income as a Percent of Operating Revenues |  |      | 21    | %    |  |      | 20     | % |  |   | 14     | %

Factors impacting income:Power Generation earnings decreased $10 million in
2003 and increased $106 million in 2002, compared to the prior year. As
subsequently discussed, these results primarily reflect changes in gross
margins, increased operation and maintenance expenses and the recording of
higher regulatory deferrals, which lowered depreciation and amortization
expenses.

Merger and restructuring charges associated with the 2001 MCN Energy
acquisition also impacted the comparability of results. These charges
represent costs associated with systems integration, relocation, legal,
accounting and consulting services, as well as costs associated with a work
force reduction plan. The plan included

13



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early retirement incentives and voluntary separation agreements for employees
in overlapping corporate support areas.

Gross marginsin 2003 declined $135 million due primarily to decreased cooling
demand resulting from mild summer weather, lost margins from customers choosing
to purchase power from alternative suppliers under the electric Customer Choice
program and lost margins from the August 2003 blackout. Weather in 2003 was 38%
milder than 2002 resulting in lost margins of $114 million. Detroit Edison lost
16% of retail sales in 2003 and 6% of such sales in 2002 as a result of
customers choosing to purchase power from alternative suppliers under the
electric Customer Choice program. We estimate that we lost $120 million of
margins in 2003 under the electric Customer Choice program, an increase of $70
million over 2002. Lost Choice margins that we believe are recoverable under
Michigan legislation are recorded as regulatory assets and therefore reduced
depreciation and amortization expense as subsequently discussed. Gross margins
benefited from a $.64 per MWh (4%) decline in fuel and purchased power costs
reflecting the use of 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.

Gross margins in 2002 improved $106 million due primarily to significantly
lower fuel and purchased power costs, partially offset by reduced operating
revenues. The reduction in fuel and purchased power costs was driven by a
$39.08 per MWh (50%) reduction in average purchased power prices from 2001
levels. The decline in operating revenues is attributable to commercial,
industrial and wholesale customers. Commercial and industrial revenues were
lower due to a full years impact of a 5% legislatively mandated rate reduction
for customers that began in April 2001. Additionally, revenues from these
retail customers were affected by customers switching to alternative suppliers
under the electric Customer Choice program. Revenues from wholesale customers
were reduced, reflecting lower power prices. Partially offsetting these revenue
reductions was the impact of weather, resulting in a 10% increase in cooling
demand during 2002.

|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |    |    |  
|----------------------------- | ----------------- | ------------------- | ------ | ----- | ------ |  | --- | -- | -- | ---- | ------ | ----- | ------ |  | --- | ---- | -- | - | ------ | ----- | ------ |  | --- | -- | -- | -
|                              |                   |                     |        | 2003  |        |  |     |    |    | 2002 |        |       |        |  |     | 2001 |    |   |        |      
|(in Thousands of MWh)         |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |  
|Power Generated and Purchased |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Power Plant Generation        |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|                              | Fossil            |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |    |   
|                              |                   | Coal                |        |       | 37,408 |  |     |    | 71 | %    |        |       | 37,381 |  |     |      | 64 | % |        |       | 38,424 |  |     |    | 69 | %
|                              |                   | Natural Gas & Other |        |       | 644    |  |     |    | 1  |      |        |       | 1,636  |  |     |      | 3  |   |        |       | 1,287  |  |     |    | 2  |  
|                              | Nuclear (Fermi 2) |                     |        | 8,114 |        |  |     | 16 |    |      |        | 9,301 |        |  |     | 16   |    |   |        | 8,555 |        |  |     | 16 |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|                              |                   |                     | 46,166 |       |        |  | 88  |    |    |      | 48,318 |       |        |  | 83  |      |    |   | 48,266 |       |        |  | 87  |   
|Purchased Power               |                   |                     | 6,354  |       |        |  | 12  |    |    |      | 9,807  |       |        |  | 17  |      |    |   | 7,482  |       |        |  | 13  |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|System Output                 |                   |                     | 52,520 |       |        |  | 100 | %  |    |      | 58,125 |       |        |  | 100 | %    |    |   | 55,748 |       |        |  | 100 | % 
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Average Unit Cost ($/MWh)     |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Generation (1)                |                   | $                   | 12.89  |       |        |  |     |    |    | $    | 12.53  |       |        |  |     |      |    | $ | 12.31  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Purchased Power (2)           |                   | $                   | 41.73  |       |        |  |     |    |    | $    | 39.16  |       |        |  |     |      |    | $ | 78.24  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   
|Overall Average Unit Cost     |                   | $                   | 16.38  |       |        |  |     |    |    | $    | 17.02  |       |        |  |     |      |    | $ | 21.15  |       |        |  |     |   
|                              |                   |                     |        |       |        |  |     |    |    |      |        |       |        |  |     |      |    |   |        |       |        |  |     |   



---

(1) Represents fuel costs associated with power plants.


(2) Includes amounts associated with hedging activities.

Operation and maintenanceexpense increased $6 million in 2003 and $51 million
in 2002. Operation and maintenance expenses in 2003 were affected by $5 million
in costs associated with the August 2003 blackout (Note 4) and a $69 million
increase in employee pension and health care benefit costs, due to recent
financial market performance, lower discount rates and increased health care
trend rates. Partially offsetting these increases were benefits from the DTE
Operating System, our company-wide initiative to pursue cost efficiencies as
well as enhance operating performance. The DTE Operating System involves the
application of tools and operating practices, which have resulted in inventory
reductions and improvements in technology systems, among other enhancements.
Operation and maintenance expenses in 2003 also benefited from $23 million in
sales of emissions credits and lower employee incentive costs.

14



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##### 



Operation and maintenance expenses in 2002 reflect $18 million in higher
employee pension and health care benefit costs and $43 million in expenses
associated with maintaining our generation fleet. The 2002 increase also
includes a $5 million increase in allocations for corporate support services,
as well as $11 million to fund the low income and energy efficiency fund. The
funding of the low income and energy efficiency program was required under
Michigan legislation and is recovered in current sales rates.

Depreciation and amortizationexpense decreased $107 million in 2003 and $54
million in 2002. The decrease in depreciation and amortization expense is
attributable to the income effect of recording regulatory assets totaling $126
million in 2003 and $41 million in 2002 representing the deferral of net
stranded and other costs we believe are recoverable under Public Act 141. The
decline in 2002 also reflects the extension of the amortization period from
seven years to 14 years for certain regulatory assets that were securitized in
2001. See Note 4  Regulatory Matters. Partially offsetting these declines was
increased depreciation associated with generation-related capital expenditures.

Other income and deductionsdeclined $40 million in 2003 and increased $5
million in 2002. The reduction in 2003 is attributable to lower interest
expense and increased interest income. Interest expense reflects lower
borrowing levels and rates, and interest income includes the accrual of
carrying charges on environmental-related regulatory assets.

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, changes in economic conditions and the levels of customer
participation in the electric Customer Choice program.

As previously discussed, 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 and the resumption of the PSCR mechanism. In February 2004, the
MPSC authorized an interim base rate increase of $248 million
annually.  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 4  Regulatory Matters.

15



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##### 



ENERGY DISTRIBUTION

Power Distribution

Power Distribution operations include the electric distribution services of
Detroit Edison. Power Distribution distributes electricity generated by Energy
Resources and alternative electric suppliers to Detroit Edisons 2.1 million
customers.

|                                                    |  |      |       |      |  |      |       |   |  |   |       |  
|--------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                    |  | 2003 |       | 2002 |  | 2001
|(in Millions)                                       |  |      |       |      |  |     
|Operating Revenues                                  |  | $    | 1,247 |      |  | $    | 1,343 |   |  | $ | 1,256 |  
|Fuel and Purchased Power                            |  |      | (19   | )    |  |      | (26   | ) |  |   | (10   | )
|Operation and Maintenance                           |  |      | (724  | )    |  |      | (649  | ) |  |   | (511  | )
|Depreciation, Depletion and Amortization            |  |      | (249  | )    |  |      | (246  | ) |  |   | (246  | )
|Taxes other than Income                             |  |      | (100  | )    |  |      | (117  | ) |  |   | (120  | )
|Merger and Restructuring Charges                    |  |      |      |      |  |      |      |   |  |   | (114  | )
|                                                    |  |      |       |      |  |      |       |   |  |   |       |  
|Operating Income                                    |  |      | 155   |      |  |      | 305   |   |  |   | 255   |  
|Other Income and (Deductions)                       |  |      | (128  | )    |  |      | (136  | ) |  |   | (132  | )
|Income Tax Provision                                |  |      | (10   | )    |  |      | (58   | ) |  |   | (26   | )
|                                                    |  |      |       |      |  |      |       |   |  |   |       |  
|Net Income                                          |  | $    | 17    |      |  | $    | 111   |   |  | $ | 97    |  
|                                                    |  |      |       |      |  |      |       |   |  |   |       |  
|Operating Income as a Percent of Operating Revenues |  |      | 12    | %    |  |      | 23    | % |  |   | 20    | %

Factors impacting income: Power Distribution earnings decreased $94 million
during 2003 and increased $14 million in 2002, compared to the prior year. As
subsequently discussed, these results primarily reflect changes in operating
revenues and increased operation and maintenance expenses. Merger and
restructuring charges associated with the 2001 MCN Energy acquisition also
impacted the comparability of results.

Operating revenuesdeclined $96 million in 2003 primarily due to mild summer
weather and the impact of slower economic conditions affecting commercial and
industrial sales. Operating revenues increased $87 million in 2002 reflecting
higher residential sales attributable to greater cooling demand.

Below are volumes associated with the regulated power distribution business:

|                          |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                          |  | 2003 |        | 2002 |  | 2001
|(in Thousands of MWh)     |  |      |        |      |  |     
|Electric Deliveries       |  |      |        |      |  |      |        |  |  |  |        | 
|Residential               |  |      | 15,074 |      |  |      | 15,958 |  |  |  | 14,503 | 
|Commercial                |  |      | 15,942 |      |  |      | 18,395 |  |  |  | 18,777 | 
|Industrial                |  |      | 12,254 |      |  |      | 13,590 |  |  |  | 14,430 | 
|Wholesale                 |  |      | 2,241  |      |  |      | 2,249  |  |  |  | 2,159  | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 
|                          |  |      | 45,511 |      |  |      | 50,192 |  |  |  | 49,869 | 
|Electric Choice           |  |      | 7,281  |      |  |      | 3,510  |  |  |  | 1,268  | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 
|Total Electric Deliveries |  |      | 52,792 |      |  |      | 53,702 |  |  |  | 51,137 | 
|                          |  |      |        |      |  |      |        |  |  |  |        | 

Operation and maintenanceexpense increased $75 million in 2003 and $138
million in 2002 reflecting higher costs associated with weather-related power
outages, employee benefits, uncollectable accounts receivables, allocations for
corporate support services, and customer service initiatives to improve
customer satisfaction. Restoration costs associated with three catastrophic
storms in 2003 and the August 2003 blackout totaled $76 million. We experienced
an April ice storm, resulting in more than 400,000 customers losing power, a
July windstorm, affecting over 190,000 customers, a November windstorm,
affecting 160,000 customers, and the August blackout, affecting all 2.1 million
of our customers. This compares with $49 million in costs in 2002 related to
two catastrophic storms,

16



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##### 



as well as heat-related maintenance expenses due to prolonged periods of above
normal summer temperatures and the related stress placed on our distribution
system.

Employee pension and health care benefit costs increased $26 million in 2003
and $12 million in 2002 due to recent financial market performance, lower
discount rates and increased health care trend rates. Uncollectable accounts
expense increased $17 million in 2003 and decreased $1 million in 2002
reflecting higher past due amounts attributable to current economic conditions.
Additionally, results for 2003 also reflect costs associated with customer
service initiatives and a net of tax loss of $14 million on the sale of our
non-strategic steam heating business (Note 3). Partially offsetting these
increases were benefits from the DTE Operating System, as previously discussed,
and lower employee incentive costs.

Taxes other than incomedecreased $17 million in 2003 and $3 million in 2002.
The decline in 2003 is due to lower Michigan Single Business Taxes, reflecting
reduced taxable earnings, and lower property taxes.

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. Economic conditions and prior billing issues have resulted
in an increase in past due receivables. We believe our allowance for doubtful
accounts is based on reasonable estimates. However, failure to make continued
progress in collecting our past due receivables would unfavorably affect
operating results. As a result, we have organized a focused effort to address
the credit and collection issues.

We experienced numerous catastrophic storms over the past few years. The
effect of the storms on annual earnings ranged up to $70 million and
was partially offset by storm insurance. We were
unable to obtain storm insurance at economical rates in 2004 and as a result,
we do not anticipate having insurance coverage at levels that would
significantly offset unplanned expenses from ice storms, tornadoes, or high
winds that damage our distribution infrastructure.

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 4  Regulatory
Matters.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

Detroit Edison has commodity price risk arising from market price fluctuations
in conjunction with the anticipated purchase of electricity to meet its
obligations during periods of peak demand. To limit our exposure to commodity
price fluctuations, we have entered into a series of electricity forwards and
option contracts. See Note 11  Financial and Other Derivative Instruments for
further discussion.

Interest Rate Risk

Detroit Edison estimates that if interest rates were 10% higher or lower, the
fair value of long-term debt at December 31, 2003 would decrease $188 million
and increase $199 million, respectively.

Credit Risk

We purchase and sell electricity from and to numerous companies operating in
the steel, automotive, energy and retail industries. A number of customers
have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy
Code. We have negotiated or are currently involved in negotiations with each
of the companies, or their successor companies, that have filed for bankruptcy
protection. We regularly review contingent matters relating to purchase and
sale contracts and record provisions for amounts considered probable of loss.
We believe our accrued amounts are adequate for probable losses. The final
resolution of these matters is not expected to have a material effect on our
financial statements in the period they are resolved.

17



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##### 



Item 8. Financial Statements and Supplementary Data

|                                                                                   |  |      |    | 
|---------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                   |  | Page
|                                                                                   |  |     
|Independent Auditors Report                                                       |  |      | 19 | 
|Consolidated Statement of Operations                                               |  |      | 20 | 
|Consolidated Statement of Financial Position                                       |  |      | 21 | 
|Consolidated Statement of Cash Flows                                               |  |      | 23 | 
|Consolidated Statement of Changes in Shareholders Equity and Comprehensive Income |  |      | 24 | 
|Notes to Consolidated Financial Statements                                         |  |      | 25 | 
|Schedule II  Valuation and Qualifying Accounts                                    |  |      | 63 | 

18



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##### 



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholder of
The Detroit Edison Company

We have audited the consolidated statement of financial position of The Detroit
Edison Company and subsidiaries (the Company) as of December 31, 2003 and
2002 and the related consolidated statements of operations, cash flows, and
changes in shareholders equity and comprehensive income for each of the three
years in the period ended December 31, 2003. Our audits also included the
financial statement schedule listed in the Index at Item 15. These financial
statements and the financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on the
consolidated financial statements and the financial statement schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Detroit Edison Company and
subsidiaries at December 31, 2003 and 2002, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2003 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements of the Company taken as a whole, presents fairly, in all material
respects, the information set forth therein.

As discussed in Note 2 to the
consolidated financial statements, in connection with the required
adoption of certain new accounting principles, in 2003 the
Company changed its method of accounting for asset retirement
obligations, and
in 2001 changed its method for accounting for derivative instruments and hedging
activities.

/s/ DELOITTE & TOUCHE LLP













Detroit, Michigan
March 1, 2004

19



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##### 



The Detroit Edison Company
Consolidated Statement of Operations

|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |       |  
|----------------------------------------------- | ----------------------------------------- | - | ---------------------- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                |                                           |   | Year Ended December 31
|                                                |                                           |   |                       
|                                                |                                           |   | 2003                   |       | 2002 |   | 2001 
|(in Millions)                                   |                                           |   |                        |       |      |  
|Operating Revenues                              |                                           | $ | 3,695                  |       |      | $ | 4,054 |       |   | $ | 4,044 |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Operating Expenses                              |                                           |   |                        |       |      |   |       |       |   |   |       |      
|                                                | Fuel and purchased power                  |   |                        | 939   |      |   |       | 1,074 |   |   |       | 1,241 |  
|                                                | Operation and maintenance                 |   |                        | 1,352 |      |   |       | 1,271 |   |   |       | 1,082 |  
|                                                | Depreciation and amortization             |   |                        | 473   |      |   |       | 577   |   |   |       | 631   |  
|                                                | Taxes other than income                   |   |                        | 257   |      |   |       | 273   |   |   |       | 268   |  
|                                                | Merger and restructuring charges (Note 3) |   |                        |      |      |   |       |      |   |   |       | 186   |  
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|                                                |                                           |   | 3,021                  |       |      |   | 3,195 |       |   |   | 3,408 |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Operating Income                                |                                           |   | 674                    |       |      |   | 859   |       |   |   | 636   |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Other (Income) and Deductions                   |                                           |   |                        |       |      |   |       |       |   |   |       |      
|                                                | Interest expense                          |   |                        | 284   |      |   |       | 311   |   |   |       | 306   |  
|                                                | Interest income                           |   |                        | (7    | )    |   |       | (1    | ) |   |       | (3    | )
|                                                | Other income                              |   |                        | (93   | )    |   |       | (36   | ) |   |       | (63   | )
|                                                | Other expense                             |   |                        | 93    |      |   |       | 51    |   |   |       | 76    |  
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|                                                |                                           |   | 277                    |       |      |   | 325   |       |   |   | 316   |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Income Before Income Taxes                      |                                           |   | 397                    |       |      |   | 534   |       |   |   | 320   |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Income Tax Provision                            |                                           |   | 145                    |       |      |   | 178   |       |   |   | 84    |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Income Before Accounting Change                 |                                           |   | 252                    |       |      |   | 356   |       |   |   | 236   |      
|Cumulative Effect of Accounting Change (Note 2) |                                           |   | (6                     | )     |      |   |      |       |   |   | (3    | )    
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      
|Net Income                                      |                                           | $ | 246                    |       |      | $ | 356   |       |   | $ | 233   |      
|                                                |                                           |   |                        |       |      |   |       |       |   |   |       |      

See Notes to Consolidated Financial Statements

20



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##### 



The Detroit Edison Company
Consolidated Statement of Financial Position

|               |                                        |                                                                              |        |             |     |      |        |        |     | 
|-------------- | -------------------------------------- | ---------------------------------------------------------------------------- | ------ | ----------- | --- | ---- | ------ | ------ | --- | 
|               |                                        |                                                                              |        | December 31
|               |                                        |                                                                              |        |            
|               |                                        |                                                                              |        | 2003        |     | 2002
|(in Millions)  |                                        |                                                                              |        |            
|Assets         |                                        |                                                                              |        |             |     |      |        |       
|Current Assets |                                        |                                                                              |        |             |     |      |        |       
|               | Cash and cash equivalents              |                                                                              | $      | 6           |     |      | $      | 36     |    
|               | Restricted cash                        |                                                                              |        | 82          |     |      |        | 131    |    
|               | Accounts receivable                    |                                                                              |        |             |     |      |        |        |    
|               |                                        | Customer (less allowance for doubtful accounts of $51 and
$48, respectively) |        |             | 291 |      |        |        | 325 | 
|               |                                        | Accrued unbilled revenues                                                    |        |             | 196 |      |        |        | 177 | 
|               |                                        | Other                                                                        |        |             | 169 |      |        |        | 142 | 
|               | Inventories                            |                                                                              |        |             |     |      |        |        |    
|               |                                        | Fuel                                                                         |        |             | 108 |      |        |        | 126 | 
|               |                                        | Materials and supplies                                                       |        |             | 124 |      |        |        | 130 | 
|               | Other                                  |                                                                              |        | 29          |     |      |        | 14     |    
|               |                                        |                                                                              |        |             |     |      |        |        |    
|               |                                        |                                                                              | 1,005  |             |     |      | 1,081  |       
|               |                                        |                                                                              |        |             |     |      |        |       
|Investments    |                                        |                                                                              |        |             |     |      |        |       
|               | Nuclear decommissioning trust funds    |                                                                              |        | 518         |     |      |        | 417    |    
|               | Other                                  |                                                                              |        | 54          |     |      |        | 82     |    
|               |                                        |                                                                              |        |             |     |      |        |        |    
|               |                                        |                                                                              | 572    |             |     |      | 499    |       
|               |                                        |                                                                              |        |             |     |      |        |       
|Property       |                                        |                                                                              |        |             |     |      |        |       
|               | Property, plant and equipment          |                                                                              |        | 12,671      |     |      |        | 12,121 |    
|               | Less
accumulated depreciation (Note 2) |                                                                              |        | (5,339      | )   |      |        | (5,097 | )  
|               |                                        |                                                                              |        |             |     |      |        |       
|               |                                        |                                                                              | 7,332  |             |     |      | 7,024  |       
|               |                                        |                                                                              |        |             |     |      |        |       
|Other Assets   |                                        |                                                                              |        |             |     |      |        |       
|               | Regulatory assets (Note 4)             |                                                                              |        | 2,000       |     |      |        | 1,143  |    
|               | Securitized regulatory assets (Note 4) |                                                                              |        | 1,527       |     |      |        | 1,613  |    
|               | Other                                  |                                                                              |        | 113         |     |      |        | 128    |    
|               |                                        |                                                                              |        |             |     |      |        |        |    
|               |                                        |                                                                              | 3,640  |             |     |      | 2,884  |       
|               |                                        |                                                                              |        |             |     |      |        |       
|Total Assets   |                                        | $                                                                            | 12,549 |             |     | $    | 11,488 |       
|               |                                        |                                                                              |        |             |     |      |        |       

See Notes to Consolidated Financial Statements

21



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##### 



The Detroit Edison Company
Consolidated Statement of Financial Position

|                                                  |                                                                                                           |   |        |             |   |      |        |       |   | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | - | ------ | ----------- | - | ---- | ------ | ----- | - | 
|                                                  |                                                                                                           |   |        | December 31
|                                                  |                                                                                                           |   |        |            
|                                                  |                                                                                                           |   |        | 2003        |   | 2002
|(in Millions, Except Shares)                      |                                                                                                           |   |        |            
|Liabilities and Shareholders Equity              |                                                                                                           |   |        |             |   |      |        |      
|Current Liabilities                               |                                                                                                           |   |        |             |   |      |        |      
|                                                  | Accounts payable                                                                                          |   | $      | 211         |   |      | $      | 238   |  
|                                                  | Accrued interest                                                                                          |   |        | 76          |   |      |        | 83    |  
|                                                  | Dividends payable                                                                                         |   |        | 74          |   |      |        | 74    |  
|                                                  | Accrued payroll                                                                                           |   |        | 27          |   |      |        | 24    |  
|                                                  | Short-term borrowings                                                                                     |   |        | 100         |   |      |        |      |  
|                                                  | Current portion long-term debt, including capital leases                                                  |   |        | 144         |   |      |        | 319   |  
|                                                  | Other                                                                                                     |   |        | 344         |   |      |        | 358   |  
|                                                  |                                                                                                           |   |        |             |   |      |        |      
|                                                  |                                                                                                           |   | 976    |             |   |      | 1,096  |      
|                                                  |                                                                                                           |   |        |             |   |      |        |      
|Other Liabilities                                 |                                                                                                           |   |        |             |   |      |        |      
|                                                  | Deferred income taxes                                                                                     |   |        | 1,783       |   |      |        | 1,501 |  
|                                                  | Regulatory
liabilities (Notes 2 and 4)                                                                    |   |        | 254         |   |      |        | 37    |  
|                                                  | Asset retirement obligations (Note 2)                                                                     |   |        | 819         |   |      |        |      |  
|                                                  | Asset
removal costs (Note 2)                                                                              |   |        |            |   |      |        | 227   |  
|                                                  | Unamortized investment tax credit                                                                         |   |        | 135         |   |      |        | 146   |  
|                                                  | Nuclear decommissioning (Notes 2 and 5)                                                                   |   |        | 67          |   |      |        | 416   |  
|                                                  | Accrued pension liability                                                                                 |   |        | 321         |   |      |        | 561   |  
|                                                  | Other                                                                                                     |   |        | 584         |   |      |        | 447   |  
|                                                  |                                                                                                           |   |        |             |   |      |        |       |  
|                                                  |                                                                                                           |   | 3,963  |             |   |      | 3,335  |      
|                                                  |                                                                                                           |   |        |             |   |      |        |      
|Long-Term Debt (net of current portion) (Note 8)  |                                                                                                           |   |        |             |   |      |        |      
|                                                  | Mortgage bonds, notes and other                                                                           |   |        | 3,076       |   |      |        | 3,270 |  
|                                                  | Securitization bonds                                                                                      |   |        | 1,496       |   |      |        | 1,585 |  
|                                                  | Capital lease obligations                                                                                 |   |        | 75          |   |      |        | 80    |  
|                                                  |                                                                                                           |   |        |             |   |      |        |       |  
|                                                  |                                                                                                           |   | 4,647  |             |   |      | 4,935  |      
|                                                  |                                                                                                           |   |        |             |   |      |        |      
|Commitments and Contingencies (Notes 4, 5 and 12) |                                                                                                           |   |        |             |   |      |        |      
|Shareholders Equity                              |                                                                                                           |   |        |             |   |      |        |      
|                                                  | Common stock, $10 par value, 400,000,000 shares
authorized, and 134,287,832 shares
issued and outstanding |   |        | 1,343       |   |      |        | 1,343 |  
|                                                  | Premium on common stock                                                                                   |   |        | 977         |   |      |        | 507   |  
|                                                  | Common stock expense                                                                                      |   |        | (44         | ) |      |        | (44   | )
|                                                  | Retained earnings                                                                                         |   |        | 686         |   |      |        | 735   |  
|                                                  | Accumulated other comprehensive income (loss)                                                             |   |        | 1           |   |      |        | (419  | )
|                                                  |                                                                                                           |   |        |             |   |      |        |       |  
|                                                  |                                                                                                           |   | 2,963  |             |   |      | 2,122  |      
|                                                  |                                                                                                           |   |        |             |   |      |        |      
|Total Liabilities and Shareholders Equity        |                                                                                                           | $ | 12,549 |             |   | $    | 11,488 |      
|                                                  |                                                                                                           |   |        |             |   |      |        |      

See Notes to Consolidated Financial Statements

22



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##### 



The Detroit Edison Company
Consolidated Statement of Cash Flows

|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |        |   |       |  
|---------------------------------------------------- | -------------------------------------------------------------------------- | - | --------------------------------------------------------------------------------- | ---- | ---------------------- | ---- | ---- | ---- | ---- | ---- | --- | ------ | - | ----- | -
|                                                     |                                                                            |   |                                                                                   |      | Year Ended December 31
|                                                     |                                                                            |   |                                                                                   |      |                       
|                                                     |                                                                            |   |                                                                                   |      | 2003                   |      | 2002 |      | 2001
|(in Millions)                                        |                                                                            |   |                                                                                   |      |                        |     
|Operating Activities                                 |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     | Net Income                                                                 |   | $                                                                                 | 246  |                        |      | $    | 356  |      |      | $   | 233    |  
|                                                     | Adjustments to reconcile net income to net cash from
operating activities: |   |                                                                                   |      |                        |      |      |      |      |      |     |        |  
|                                                     |                                                                            |   | Depreciation and amortization                                                     |      |                        | 473  |      |      |      | 577  |     |        |   | 631   |  
|                                                     |                                                                            |   | Merger and restructuring charges                                                  |      |                        |     |      |      |      |     |     |        |   | 147   |  
|                                                     |                                                                            |   | Deferred income taxes                                                             |      |                        | 32   |      |      |      | (52  | )   |        |   | (72   | )
|                                                     |                                                                            |   | Loss on sale of assets                                                            |      |                        | 21   |      |      |      |     |     |        |   |      |  
|                                                     |                                                                            |   | Cumulative effect of accounting change                                            |      |                        | 6    |      |      |      |     |     |        |   | 3     |  
|                                                     |                                                                            |   | Changes in assets and liabilities, exclusive of
changes shown separately (Note 1) |      |                        | (13  | )    |      |      | (123 | )   |        |   | 204   |  
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     |                                                                            |   | Net cash from operating activities                                                |      |                        | 765  |      |      |      | 758  |     |        |   | 1,146 |  
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|Investing Activities                                 |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     | Plant and equipment expenditures                                           |   |                                                                                   | (580 | )                      |      |      | (685 | )    |      |     | (673   | )
|                                                     | Proceeds from sale of assets                                               |   |                                                                                   | 2    |                        |      |      |     |      |      |     |       |  
|                                                     | Restricted cash for debt redemptions                                       |   |                                                                                   | 49   |                        |      |      | (63  | )    |      |     | (68    | )
|                                                     | Other investments                                                          |   |                                                                                   | (76  | )                      |      |      | (143 | )    |      |     | (145   | )
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     |                                                                            |   | Net cash used for investing activities                                            |      |                        | (605 | )    |      |      | (891 | )   |        |   | (886  | )
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|Financing Activities                                 |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     | Issuance of long-term debt                                                 |   |                                                                                   | 49   |                        |      |      | 570  |      |      |     | 2,679  |  
|                                                     | Redemption of long-term debt                                               |   |                                                                                   | (504 | )                      |      |      | (318 | )    |      |     | (1,271 | )
|                                                     | Short-term borrowings, net                                                 |   |                                                                                   | 100  |                        |      |      |     |      |      |     | (245   | )
|                                                     | Capital contribution by parent company                                     |   |                                                                                   | 470  |                        |      |      |     |      |      |     |       |  
|                                                     | Capital lease obligations                                                  |   |                                                                                   | (10  | )                      |      |      | (3   | )    |      |     | (80    | )
|                                                     | Repurchase of common stock                                                 |   |                                                                                   |     |                        |      |      |     |      |      |     | (846   | )
|                                                     | Dividends on common stock                                                  |   |                                                                                   | (295 | )                      |      |      | (295 | )    |      |     | (306   | )
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|                                                     |                                                                            |   | Net cash used for financing activities                                            |      |                        | (190 | )    |      |      | (46  | )   |        |   | (69   | )
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                            |   | (30                                                                               | )    |                        |      | (179 | )    |      |      | 191 |       
|Cash and Cash Equivalents at Beginning of the Period |                                                                            |   | 36                                                                                |      |                        |      | 215  |      |      |      | 24  |       
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       
|Cash and Cash Equivalents at End of the Period       |                                                                            | $ | 6                                                                                 |      |                        | $    | 36   |      |      | $    | 215 |       
|                                                     |                                                                            |   |                                                                                   |      |                        |      |      |      |      |      |     |       

See Notes to Consolidated Financial Statements

23



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##### 



The Detroit Edison Company
Consolidated Statement of Changes in Shareholders Equity and
Comprehensive Income

|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|------------------------------------------------------------ |  | ------------ | ------- | ------ |  | ------ | ----- | -------- |  | ------------- | --- | ------------- |  | ----- | --- | - |  | - | ----- | ----------- |  | - | ---- | - |  | - | ----- | -
|                                                             |  |              |         |        |  |        |       |          |  | Premium       |     |               |  |       |     |   |  |   |       | Accumulated |  |   |      |  
|                                                             |  | Common Stock |         | On     |  | Common |       |          |  |               |     | Other         |  |       |     |  
|                                                             |  |              |         | Common |  | Stock  |       | Retained |  | Comprehensive |     |               |  |      
|                                                             |  | Shares       |         | Amount |  | Stock  |       | Expense  |  | Earnings      |     | Income (Loss) |  | Total
|(Dollars in Millions, Shares in Thousands)                   |  |              |         |        |  |        |       |          |  |               |     |               |  |      
|Balance, December 31, 2000                                   |  |              | 145,120 |        |  | $      | 1,451 |          |  | $             | 548 |               |  | $     | (48 | ) |  | $ | 1,772 |             |  |   |     |   |  | $ | 3,723 |  
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Net income                                                   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | 233   |             |  |   |     |   |  |   | 233   |  
|Dividends declared on
Common stock                           |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | (301  | )           |  |   |     |   |  |   | (301  | )
|Distribution of International
Transmission Company
to Parent |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | (327  | )           |  |   |     |   |  |   | (327  | )
|Repurchase and retirement
of common stock                    |  |              | (10,832 | )      |  |        | (108  | )        |  |               | (41 | )             |  |       | 4   |   |  |   | (701  | )           |  |   |     |   |  |   | (846  | )
|Net change in unrealized
losses
on derivatives, net of tax   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   |      |             |  |   | (23  | ) |  |   | (23   | )
|Other                                                        |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | (1    | )           |  |   |     |   |  |   | (1    | )
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Balance, December 31, 2001                                   |  |              | 134,288 |        |  |        | 1,343 |          |  |               | 507 |               |  |       | (44 | ) |  |   | 675   |             |  |   | (23  | ) |  |   | 2,458 |  
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Net income                                                   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | 356   |             |  |   |     |   |  |   | 356   |  
|Dividends declared on
Common stock                           |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | (296  | )           |  |   |     |   |  |   | (296  | )
|Net change in unrealized
losses
on derivatives, net of tax   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   |      |             |  |   | 21   |   |  |   | 21    |  
|Other                                                        |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   | (417 | ) |  |   | (417  | )
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Balance, December 31, 2002                                   |  |              | 134,288 |        |  |        | 1,343 |          |  |               | 507 |               |  |       | (44 | ) |  |   | 735   |             |  |   | (419 | ) |  |   | 2,122 |  
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Net income                                                   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | 246   |             |  |   |     |   |  |   | 246   |  
|Dividends declared on
Common stock                           |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   | (295  | )           |  |   |     |   |  |   | (295  | )
|Net change in unrealized
losses
on derivatives, net of tax   |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   |      |             |  |   | 3    |   |  |   | 3     |  
|Pension obligation (Note 13)                                 |  |              |        |        |  |        |      |          |  |               |    |               |  |       |    |   |  |   |      |             |  |   | 417  |   |  |   | 417   |  
|Capital contribution by
parent company                       |  |              |        |        |  |        |      |          |  |               | 470 |               |  |       |    |   |  |   |      |             |  |   |     |   |  |   | 470   |  
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  
|Balance, December 31, 2003                                   |  |              | 134,288 |        |  | $      | 1,343 |          |  | $             | 977 |               |  | $     | (44 | ) |  | $ | 686   |             |  | $ | 1    |   |  | $ | 2,963 |  
|                                                             |  |              |         |        |  |        |       |          |  |               |     |               |  |       |     |   |  |   |       |             |  |   |      |   |  |   |       |  

The following table displays comprehensive income (loss):

|                                               |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |   |  |     |  
|---------------------------------------------- | -------------------------------------------------------- | - | ----------------------------------------------------------------------------- | --- | ---- | -- | ---- | ---- | ---- | -- | --- | - |  | --- | -
|                                               |                                                          |   |                                                                               |     | 2003 |    | 2002 |      | 2001
|(in Millions)                                  |                                                          |   |                                                                               |     |      |   
|Net income                                     |                                                          | $ | 246                                                                           |     |      | $  | 356  |      |      | $  | 233 |  
|                                               |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |  
|Other comprehensive income (loss), net of tax: |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |  
|                                               | Net unrealized losses on derivatives:                    |   |                                                                               |     |      |    |      |      |      |    |     |   | 
|                                               |                                                          |   | Gains or (losses) arising during the period, net of taxes of $4, $- and $(24) |     |      | 8  |      |      |      | (1 | )   |   |  | (42 | )
|                                               |                                                          |   | Amounts reclassified to earnings, net of taxes of $(3), $11 and $10           |     |      | (5 | )    |      |      | 22 |     |   |  | 19  |  
|                                               |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |  
|                                               |                                                          |   | 3                                                                             |     |      |    | 21   |      |      |    | (23 | )
|                                               | Pension obligations, net of taxes of $224, $(224) and $- |   |                                                                               | 417 |      |    |      | (417 | )    |    |     |  | 
|                                               |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |  
|Comprehensive
income (loss)                    |                                                          | $ | 666                                                                           |     |      | $  | (40  | )    |      | $  | 210 |  
|                                               |                                                          |   |                                                                               |     |      |    |      |      |      |    |     |  

See Notes to Consolidated Financial Statements

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The Detroit Edison Company
Notes to Consolidated Financial Statements

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure

Detroit Edison is a Michigan public utility engaged in the generation,
purchase, distribution and sale of electric energy to 2.1 million customers in
a 7,600 square-mile area in southeastern Michigan. Detroit Edison is regulated
by the Michigan Public Service Commission (MPSC) and the Federal Energy
Regulatory Commission (FERC).

On May 31, 2001, our parent company, DTE Energy, completed the acquisition of
MCN Energy, now referred to as Enterprises. Enterprises is an exempt holding
company under the Public Utility Holding Company Act of 1935. Enterprises is a
Michigan corporation primarily engaged in natural gas production, gathering,
processing, transmission, storage, distribution and energy marketing.
Enterprises largest subsidiary is MichCon, a natural gas utility serving 1.2
million customers throughout the State of Michigan.

Effective January 2001, we transferred our transmission assets, with a book
value of approximately $390 million, to a wholly owned subsidiary,
International Transmission Company (ITC). On May 31, 2001, we distributed 100
percent of the shares of ITC to DTE Energy.

References in this report to we, us and our are to Detroit Edison and its
subsidiaries, collectively.

Principles of Consolidation

We consolidate all majority owned subsidiaries and investments in entities in
which we have controlling influence. Non-majority owned investments are
accounted for using the equity method when the company is able to influence the
operating policies of the investee. Non-majority owned investments include
investments in limited liability companies, partnerships or joint ventures.
When we do not influence the operating policies of an investee, the cost method
is used.

For entities that are considered variable interest entities we apply the
provisions of FASB Interpretation No. (FIN) 46-R, Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51.For a detailed discussion
of FIN 46-R see Note 2  New Accounting Pronouncements.

Basis of Presentation

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
reported amounts of assets, liabilities, revenues, expenses, and the disclosure
of contingent assets and liabilities. Actual results may differ from our
estimates.

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

Revenues

Revenues from the sale and delivery of electricity are recognized as services
are provided. We record revenues for electric services provided but unbilled at
the end of each month. Under agreement with the MPSC, we were not allowed to
raise rates through 2003.

25



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Comprehensive Income

We comply with SFAS No. 130, Reporting Comprehensive Income, that established
standards for reporting comprehensive income. SFAS No. 130 defines
comprehensive income as the change in common shareholders equity during a
period from transactions and events from non-owner sources, including net
income. As shown in the following table, amounts recorded to other
comprehensive income include unrealized derivative gains and losses under SFAS
No. 133, and minimum pension liabilities as prescribed by SFAS No. 87,
Employers Accounting for Pensions,at December 31, 2003.
The minimum pension liability was reclassified to a regulatory asset
during 2003 (Note 4).

|                      |  |             |    |            |  |               |      |   |  |   |      |  
|--------------------- |  | ----------- | -- | ---------- |  | ------------- | ---- | - |  | - | ---- | -
|                      |  | Net         |    | Minimum    |  | Accumulated  
|                      |  | Unrealized  |    | Pension    |  | Other        
|                      |  | Losses on   |    | Liability  |  | Comprehensive
|                      |  | Derivatives |    | Adjustment |  | Income (Loss)
|(in Millions)         |  |             |    |            |  |              
|Beginning balance     |  | $           | (2 | )          |  | $             | (417 | ) |  | $ | (419 | )
|Current-period change |  |             | 3  |            |  |               | 417  |   |  |   | 420  |  
|                      |  |             |    |            |  |               |      |   |  |   |      |  
|Ending balance        |  | $           | 1  |            |  | $             |     |   |  | $ | 1    |  
|                      |  |             |    |            |  |               |      |   |  |   |      |  

Inventories

We value fuel inventory and materials and supplies at average cost.

Property, Retirement and Maintenance, and Depreciation and Depletion

Summary of property by classification as of December 31:

|                                            |                  |              |        |        |        |        |       |        |        |  
|------------------------------------------- | ---------------- | ------------ | ------ | ------ | ------ | ------ | ----- | ------ | ------ | -
|                                            |                  |              |        | 2003   |        | 2002  
|(in Millions)                               |                  |              |        |       
|Property, Plant and Equipment               |                  |              |        |        |        |        |       |       
|                                            | Electric Utility |              |        |        |        |        |       |        |       
|                                            |                  | Generation   |        | $      | 6,938  |        |       | $      | 6,515  |  
|                                            |                  | Distribution |        |        | 5,733  |        |       |        | 5,606  |  
|                                            |                  |              |        |        |        |        |       |        |        |  
|                                            | Total            |              |        | 12,671 |        |        |       | 12,121 |       
|                                            |                  |              |        |        |        |        |       |       
|Less Accumulated Depreciation and Depletion |                  |              |        |        |        |        |       |       
|                                            | Electric Utility |              |        |        |        |        |       |        |       
|                                            |                  | Generation   |        |        | (3,231 | )      |       |        | (3,046 | )
|                                            |                  | Distribution |        |        | (2,108 | )      |       |        | (2,051 | )
|                                            |                  |              |        |        |        |        |       |        |        |  
|                                            | Total            |              | (5,339 | )      |        | (5,097 | )    
|                                            |                  |              |        |        |        |        |       |       
|Net Property, Plant and Equipment           |                  | $            | 7,332  |        |        | $      | 7,024 |       
|                                            |                  |              |        |        |        |        |       |       

Property is stated at cost and includes construction-related labor, materials
and overheads. The cost of properties retired, less
salvage, are charged to accumulated depreciation.

Expenditures for maintenance and repairs are charged to expense when incurred,
except for Fermi 2. Approximately $37 million of expenses related to the
anticipated Fermi 2 refueling outage scheduled for 2004 are being accrued on a
pro-rata basis over an 18-month period that began in May 2003. We have

26



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##### 



utilized the accrue-in-advance policy for nuclear refueling outage costs since
the Fermi 2 plant was placed in service in 1988. This method also matches the
regulatory recovery of these costs in rates set by the MPSC.

We base depreciation provisions for utility property on straight-line and units
of production rates approved by the MPSC. The composite depreciation rate for
Detroit Edison was 3.4 % in 2003, 2002 and 2001.

The average estimated useful life for each class of property, plant and
equipment as of December 31, 2003 follows:

|                                |  |            |    |              |  |  |    | 
|------------------------------- |  | ---------- | -- | ------------ |  |  | -- | 
|Estimated Useful Lives in Years
|                               
|Utility                         |  | Generation |    | Distribution
|                                |  |            |    |             
|Electric                        |  |            | 39 |              |  |  | 37 | 

We credit depreciation and amortization expense when we establish regulatory
assets for stranded costs related to the electric Customer Choice program and
deferred environmental expenditures.

Long-Lived Assets

Long-lived assets that we own are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not be
recoverable. If the carrying amount of the asset exceeds the expected future
cash flows generated by the asset, an impairment loss is recognized resulting
in the asset being written down to its estimated fair value. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
cost to sell.

Software Costs

We capitalize the costs associated with computer software we develop or obtain
for use in our business. We amortize computer software costs on a straight-line
basis over expected periods of benefit once the installed software is ready for
its intended use.

Excise and Sales Taxes

We record the billing of excise and sales taxes as receivables with an
offsetting payable to the applicable taxing authority, with no impact on the
statement of operations.

Deferred Debt Costs

The costs related to the issuance of long-term debt are deferred and amortized
over the life of each debt issue. In accordance with MPSC regulations
applicable to Detroit Edison the unamortized discount, premium and expense
related to debt redeemed with a refinancing are amortized over the life of the
replacement issue.

Insured and Uninsured Risks

We have a comprehensive insurance program in place to provide coverage for
various types of risks. Our insurance policies cover risk of loss from various
events, including catastrophic storms, general liability, workers
compensation, auto liability, property and directors and officers liability.

27



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##### 



Under our risk management policy, we self-insure portions of certain risks up
to specified limits, depending on the type of exposure. We
periodically review our insurance coverages and during 2003, we
reviewed our process for estimating
and recognizing reserves for self-insured risks. As a result of this review,
we revised the process for estimating liabilities under our self-insured layers
to include an actuarially determined estimate of incurred but not reported
(IBNR) claims. This revision resulted in the recording of an additional
liability and reduced earnings in 2003 by approximately $15 million, primarily
related to general liability and workers compensation exposures. We intend to
have an actuarially determined estimate of our IBNR liability prepared annually
and will adjust the related reserve as appropriate.

Investments in Debt and Equity
Securities

We generally classify investments in debt
and equity securities as either trading or available-for-sale and have recorded such investments at market value with
unrealized gains or losses included in the  Consolidated Statement of
Operations or in other comprehensive income or loss, respectively.
Changes in the fair value of certain other investments are recorded
as adjustments to regulatory assets or liabilities.

Consolidated Statement of Cash Flows

We consider investments purchased with a maturity of three months or less to be
cash equivalents. Cash contractually designated for debt service is classified
as restricted cash.

|                                                                         |                                        |   |      |      |      |   |      |     |   |   |     |     |  
|------------------------------------------------------------------------ | -------------------------------------- | - | ---- | ---- | ---- | - | ---- | --- | - | - | --- | --- | -
|                                                                         |                                        |   | 2003 |      | 2002 |   | 2001
|(in Millions)                                                            |                                        |   |      |      |      |  
|Changes in Assets and Liabilities,
Exclusive of Changes Shown Separately |                                        |   |      |      |      |   |      |     |   |   |     |    
|                                                                         | Accounts receivable, net               |   | $    | 13   |      |   | $    | 40  |   |   | $   | 4   |  
|                                                                         | Accrued unbilled receivables           |   |      | (19  | )    |   |      | (47 | ) |   |     | 58  |  
|                                                                         | Inventories                            |   |      | 18   |      |   |      | 34  |   |   |     | 13  |  
|                                                                         | Accounts payable                       |   |      | (27  | )    |   |      | (78 | ) |   |     | 67  |  
|                                                                         | Accrued payroll                        |   |      | 3    |      |   |      | (65 | ) |   |     | (65 | )
|                                                                         | Income taxes payable                   |   |      | (24  | )    |   |      | (75 | ) |   |     | 7   |  
|                                                                         | General taxes                          |   |      | (7   | )    |   |      | (2  | ) |   |     | 8   |  
|                                                                         | Risk management and trading activities |   |      | (7   | )    |   |      | (32 | ) |   |     | 33  |  
|                                                                         | Pension contributions                  |   |      | (222 | )    |   |      | (35 | ) |   |     | (35 | )
|                                                                         | Postretirement obligation              |   |      | 73   |      |   |      | 58  |   |   |     | 27  |  
|                                                                         | Other                                  |   |      | 186  |      |   |      | 79  |   |   |     | 87  |  
|                                                                         |                                        |   |      |      |      |   |      |     |   |   |     |    
|                                                                         |                                        | $ | (13  | )    |      | $ | (123 | )   |   | $ | 204 |    
|                                                                         |                                        |   |      |      |      |   |      |     |   |   |     |    

Other cash and non-cash investing and financing activities for the years ended
December 31 were as follows:

|                                           |                                                              |  |      |     |      |  |      |     |  |  |   |     | 
|------------------------------------------ | ------------------------------------------------------------ |  | ---- | --- | ---- |  | ---- | --- |  |  | - | --- | 
|                                           |                                                              |  | 2003 |     | 2002 |  | 2001
|(in Millions)                              |                                                              |  |      |     |      | 
|Supplementary Cash Flow Information        |                                                              |  |      |     |      |  |      |     |  |  |   |    
|                                           | Interest paid (excluding interest capitalized)               |  | $    | 291 |      |  | $    | 312 |  |  | $ | 277 | 
|                                           | Income taxes paid                                            |  |      | 153 |      |  |      | 308 |  |  |   | 157 | 
|Noncash Investing and Financing Activities |                                                              |  |      |     |      |  |      |     |  |  |   |    
|                                           | Distribution of International Transmission Company to parent |  | $    |    |      |  |      |    |  |  |   | 327 | 

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See the following notes for other accounting policies impacting our financial
statements.

|     |  |                                           
|---- |  | ------------------------------------------
|Note |  | Title                                     
|     |  |                                           
|2    |  | New Accounting Pronouncements             
|4    |  | Regulatory Matters                        
|7    |  | Income Taxes                              
|11   |  | Financial and Other Derivative Instruments
|13   |  | Retirement Benefits and Trusteed Assets   

NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS

Derivative Instruments and Hedging Activities

Effective January 1, 2001, we adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. SFAS No. 133 required that as of the date of initial
adoption, the difference between the fair value of derivative
instruments and the previous carrying amount of those derivatives be
reported in net income or other comprehensive income as the
cumulative effect of a change in accounting principle.  The
cumulative effect of adopting SFAS No. 133 on January 1, 2001 was an
decrease in net income of $3 million and an increase in other
comprehensive loss of $13 million.

Effective July 1, 2003, we adopted SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.The statement amends and
clarifies financial accounting and reporting for derivative instruments,
including derivative instruments embedded in other contracts and for hedging
activities. Our financial statements were not impacted by the adoption of SFAS
No. 149.

See Note 11  Financial and Other Derivative Instruments for additional
information.

Goodwill and Other Intangible Assets

Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which addresses the financial accounting and reporting
standards for the acquisition of intangible assets outside of a business
combination and for goodwill and other intangible assets subsequent to their
acquisition. As of the date of adoption, we had no goodwill.

In connection with the adoption of SFAS No. 142, we also reassessed the useful
lives and the classification of identifiable intangible assets and determined
that they continue to be appropriate. Our intangible assets consist primarily
of software and are subject to amortization. Intangible assets amortization
expense was approximately $30 million in 2003, $36 million in 2002 and $38
million in 2001. There were no material acquisitions of intangible assets
during 2003 and 2002. The gross carrying amount and accumulated amortization
of intangible assets at December 31, 2003 were $352 million and $250 million,
respectively. The gross carrying amount and accumulated amortization of
intangible assets at December 31, 2002 were $357 million and $269 million,
respectively. Amortization expense of intangible assets is estimated to be $28
million annually for 2004 through 2008.

Asset Retirement Obligations

On January 1, 2003, we adopted 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. It applies to
legal obligations associated with the retirement of long-lived assets resulting
from the acquisition, construction, development and (or) the normal operation
of a long-lived asset. When a new liability is recorded, an entity will
capitalize the costs of the liability by increasing the carrying amount of the
related long-lived asset. The liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.

We have 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

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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 tax of $9 million) for 2003.

If a reasonable estimate of fair value cannot be made in the period the asset
retirement obligation is incurred, such as assets with an indeterminate life,
the liability is to be recognized when a reasonable estimate of fair value can
be made. Generally, distribution assets have an indeterminate life, retirement
cash flows cannot be determined and there is a low probability of retirement,
therefore no liability has been recorded for these assets.

The impact on the twelve-month period of 2003 of SFAS No. 143 and the pro-forma
effect for the comparable 2002 periods as if SFAS No. 143 had been adopted at
January 1, 2002 are immaterial.

A reconciliation of the asset retirement obligation for the 2003 twelve-month
period follows:

|                                                  |  |   |     |  
|------------------------------------------------- |  | - | --- | -
|(In Millions)                                     |  |   |     |  
|Asset retirement obligations at January 1, 2003   |  | $ | 771 |  
|Accretion                                         |  |   | 52  |  
|Liabilities settled                               |  |   | (4  | )
|                                                  |  |   |     |  
|Asset retirement obligations at December 31, 2003 |  | $ | 819 |  
|                                                  |  |   |     |  

SFAS No. 143 also requires the quantification of the estimated cost of removal
obligations arising from other than legal obligations, which have been accrued
through depreciation charges. At December 31, 2002, we reclassified
approximately $227 million of previously accrued asset
removal costs related to our regulated operations, which had been
previously netted against accumulated depreciation, to an asset
removal cost liability.  At December 31, 2003, we reclassified
approximately $238 million of these accrued asset removal obligations to regulatory
liabilities.

Exit and Disposal Activities

Effective January 1, 2003, we adopted SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which requires that the liability
for costs associated with exit or disposal activities be recognized when
incurred, rather than at the date of a commitment to an exit or disposal plan.
The adoption of this statement had no impact on our consolidated financial
statements.

Consolidation of Variable Interest Entities

In January 2003, FASB Interpretation No. (FIN) 46, Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51,was issued and requires an
investor with a majority of the variable interests (primary beneficiary) in a
variable interest entity to consolidate the assets, liabilities and results of
operations of the entity. A variable interest entity is an entity in which the
equity investors do not have controlling interests, the equity investment at
risk is insufficient to finance the entitys activities without receiving
additional subordinated financial support from other parties, or equity
investors do not share proportionally in gains or losses. FIN 46 was
applicable (i) immediately for all variable interest entities created after
January 31, 2003; or (ii) in the first fiscal year or interim period beginning
after June 15, 2003 for variable interest entities created before February 1,
2003.

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In October 2003, the FASB issued Staff Position No. FIN 46-6, which allowed for
the deferral of the effective date for applying the provisions of
Interpretation No. 46 for all interests in variable interest entities created
before February 1, 2003, until the end of the first interim or annual period
ending after December 15, 2003.

In December 2003, the FASB issued FIN 46-Revised (FIN 46-R) which clarified and
replaced FIN 46. FIN 46-R again deferred the adoption of its provisions until
periods ending after March 15, 2004, however, application is required for
periods ended after December 15, 2003 for public entities that have interests
in special-purpose entities. FIN 46-R defines special purpose entities as any
entity whose activities are primarily related to securitizations or other forms
of asset-backed financings or single-lessee leasing arrangements. In addition,
FIN 46-R provides for further scope exceptions, including an exception for
entities that are deemed to be a business, provided certain conditions are met.

Detroit Edison had a synthetic lease, relating to certain railcars and other
coal transportation-related equipment. FIN 46 would have required the
consolidation of the related leasing company. However, Detroit Edison
refinanced this lease into a traditional operating lease during the 2003 third
quarter.

We continue to evaluate all of our cost and equity method investments created
prior to February 1, 2003 to determine whether those entities are variable
interest entities that require consolidation. The effects of adopting the
provisions of FIN 46-R to those entities are not expected to have a material
effect on our financial statements.

Financial Instruments with Characteristics of Liabilities and Equity

Effective July 1, 2003, we adopted SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,
which establishes standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity.

The adoption of SFAS No. 150 did not impact our financial statements.

NOTE 3  ACQUISITIONS AND DISPOSITIONS

Acquisition of MCN Energy

On May 31, 2001, our parent company, DTE Energy, completed the acquisition of
MCN Energy. We incurred merger-related charges and restructuring charges
associated with the acquisition. The merger-related charges of $20 million
($13 million after tax) in 2001 and $25 million ($16 million after tax) in
2000, consisted primarily of system integration, relocation, legal, accounting
and consulting costs. Restructuring charges of $166 million ($108 million
after tax) in 2001, were primarily associated with a work force reduction plan.
The plan included early retirement incentives along with voluntary separation
arrangements for 890 employees, primarily in overlapping corporate support
functions. The merger and restructuring costs had the effect of decreasing
Detroit Edisons earnings by $186 million ($121 million after tax) in 2001.
Approximately $39 million of the merger and restructuring charges were paid as
of December 31, 2001 and remaining benefit payments have been or will be paid
from retirement plans.

Disposition of Steam Heating Business

In January 2003, we sold our steam heating business to Thermal Ventures II,
LLP. This disposition is consistent with our strategy of divestiture of
non-strategic assets. Due to our continuing involvement in the steam heating
business, including the commitment to purchase $150 million in steam for resale

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through 2008, fund certain capital improvements and guarantee the buyers
credit facility, we recorded a net of tax loss of approximately $14 million in
2003. As a result of our continuing involvement, this transaction is not
considered a sale for accounting purposes. The steam heating business had
assets of $6 million at December 31, 2002, and had net losses of $12 million in
2002 and net income of $3 million in 2001. See Note 12  Commitments and
Contingencies.

NOTE 4 - REGULATORY MATTERS

Regulation

Detroit Edison is subject to the regulatory jurisdiction of the MPSC, which
issues orders pertaining to retail rates, recovery of certain costs, including
the costs of generating facilities and regulatory assets, conditions of
service, accounting and operating-related matters. Detroit Edison is also
regulated by the FERC with respect to financing authorization and wholesale
electric activities.

In 1998, based on MPSC Orders, the Power Generation business of Detroit Edison
started transitioning to market-based rates with the start of a customer choice
program. In compliance with EITF Issue No. 97-4, Deregulation of the Pricing
of Electricity, we ceased application of SFAS No. 71, Accounting for the
Effects of Certain Types of Regulation, for the generation business in 1998.
Since that time, there have been significant legislative and regulatory changes
in Michigan that have resulted in our generation business being fully regulated
with cost-based ratemaking.

In June 2000, the Customer Choice and Electric Reliability Act (PA 141) was
enacted into law providing the regulatory framework to maintain cost-based
rates for retail customers and ensuring the recovery of all amounts of
generation-related stranded costs from choice customers. Subsequent MPSC
orders developed a cost-based methodology to determine the amount of our net
stranded costs to be recovered from choice customers. Since the rates for
retail customers and the recovery of net stranded costs that are set by the
regulator recover Detroit Edisons generation costs and are billed and
recovered from full service and choice customers, the criteria of SFAS No. 71
are satisfied. In addition, we believe we have both the legislative and
regulatory authority to defer regulatory costs and to begin recovery of such
costs starting in 2004 after the PA 141 mandated rate freeze expires. The SEC
had no objection to Detroit Edison resuming application of SFAS No. 71 for its
generation business in the fourth quarter of 2002. Detroit Edison recorded $15
million of additional regulatory assets for the equity component of Allowance
for Funds Used During Construction and costs related to reacquired debt that
was refinanced with lower cost debt. Prior period financial statements were not
restated due to the immaterial effect of retroactively applying SFAS No. 71 to
Detroit Edisons generation business.

Regulatory Assets and Liabilities

SFAS No. 71 requires the recording of regulatory assets and liabilities for
certain transactions that would have been treated as revenue and expense in
non-regulated businesses. Continued applicability of SFAS No. 71 requires that
rates be designed to recover specific costs of providing regulated services and
be charged to and collected from customers. Future regulatory changes or
changes in the competitive environment could result in the company
discontinuing the application of SFAS No. 71 for some or all of its businesses
and require the write-off of the portion of any regulatory asset or liability
that was no longer probable of recovery through regulated rates. Management
believes that currently available facts support the continued application of
SFAS No. 71 to Detroit Edison.

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The following are the balances of the regulatory assets and liabilities at
December 31:

|              |                                                                   |                                             |   |       |     |      |   |       |    | 
|------------- | ----------------------------------------------------------------- | ------------------------------------------- | - | ----- | --- | ---- | - | ----- | -- | 
|              |                                                                   |                                             |   | 2003  |     | 2002
|(in Millions) |                                                                   |                                             |   |      
|Assets        |                                                                   |                                             |   |       |     |      |   |      
|              | Securitized regulatory assets                                     |                                             | $ | 1,527 |     |      | $ | 1,613 |   
|              | Recoverable income taxes related to securitized regulatory assets |                                             |   | 837   |     |      |   | 884   |   
|              | Minimum pension liability                                         |                                             |   | 583   |     |      |   |      |   
|              | Asset retirement obligation                                       |                                             |   | 192   |     |      |   |      |   
|              | Other recoverable income taxes                                    |                                             |   | 114   |     |      |   | 118   |   
|              | Recoverable
costs under PA 141                                    |                                             |   |       |     |      |   |       |   
|              |                                                                   | Net stranded costs                          |   |       | 68  |      |   |       | 10 | 
|              |                                                                   | Deferred Clean Air Act Expenditures         |   |       | 54  |      |   |       | 11 | 
|              |                                                                   | Midwest Independent System Operator charges |   |       | 21  |      |   |       | 9  | 
|              |                                                                   | Transmission integration costs              |   |       | 10  |      |   |       | 10 | 
|              |                                                                   | Electric Choice implementation costs        |   |       | 84  |      |   |       | 76 | 
|              |                                                                   | Enhanced Security Costs                     |   |       | 6   |      |   |       |   | 
|              | Unamortized loss on reacquired debt                               |                                             |   | 28    |     |      |   | 20    |   
|              | Other                                                             |                                             |   | 3     |     |      |   | 5     |   
|              |                                                                   |                                             |   |       |     |      |   |      
|              | Total Assets                                                      |                                             | $ | 3,527 |     |      | $ | 2,756 |   
|              |                                                                   |                                             |   |       |     |      |   |      
|Liabilities   |                                                                   |                                             |   |       |     |      |   |      
|              | Asset removal costs                                               |                                             | $ | 238   |     |      | $ |      |   
|              | Excess securitized savings                                        |                                             |   | 14    |     |      |   | 35    |   
|              | Customer Refund  1997 Storm                                      |                                             |   | 2     |     |      |   | 2     |   
|              |                                                                   |                                             |   |       |     |      |   |      
|              |                                                                   | Total Liabilities                           |   | $     | 254 |      |   | $     | 37 | 
|              |                                                                   |                                             |   |       |     |      |   |      

Securitized regulatory assets The net book balance of the Fermi 2 nuclear
plant was written off in 1998 and an equivalent regulatory asset was
established. In 2001, the Fermi 2 regulatory asset and certain other regulatory
assets were securitized pursuant to Public Act (PA) 142 and an MPSC Order. A
non-bypassable securitization bond surcharge recovers the securitized
regulatory asset over a fourteen-year period ending in 2015.

Recoverable income taxes related to securitized regulatory assets Receivable
for the recovery of income taxes to be paid on the non-bypassable
securitization bond surcharge. A non-bypassable securitization tax surcharge
recovers the income tax.

Recoverable minimum pension liability An additional minimum pension liability
was recorded in 2002 and 2003 (Note 13). The traditional rate setting process
allows for the recovery of pension costs as measured by generally
accepted accounting principles.
Accordingly, the minimum pension liability associated with regulated operations
is recoverable.

Asset retirement obligation Asset retirement obligations were recorded
pursuant to adoption of SFAS No. 143 in 2003. These obligations are primarily
for Fermi 2 decommissioning costs that are recovered in rates.

Other recoverable income taxes Income taxes receivable from Detroit Edisons
customers representing the difference in property-related deferred income taxes
payable and amounts previously reflected in Detroit Edisons rates.

Net stranded costs PA 141 permits, after MPSC authorization, the full
recovery of fixed cost deficiency associated with the electric Customer Choice
program. Net stranded costs occur when fixed cost related revenues do not cover
the fixed cost revenue requirements.

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Deferred Clean Air Act expenditures PA 141 permits, after MPSC authorization,
the recovery of and a return on Clean Air Act expenditures.

Midwest Independent System Operator charges PA 141 permits, after MPSC
authorization, the recovery of charges from a regional transmission operator
such as the Midwest Independent System Operator.

Transmission integration costs PA 141 permits, after MPSC authorization, the
recovery of transmission integration costs.

Electric Choice implementation costs PA 141 permits, after MPSC
authorization, the recoverability of costs incurred associated
with the implementation of the electric Customer Choice program. A deferred
return of 7% is also being accrued on the unrecovered balance.

Enhanced security costs PA 141 permits, after MPSC authorization, the
recovery of enhanced homeland security costs for an electric generating
facility.

Unamortized loss on reacquired debt The unamortized discount, premium and
expense related to debt redeemed with a refinancing are deferred, amortized and
recovered over the life of the replacement issue.

Asset removal costs The amount collected from customers for the funding of
future asset removal activities.

Excess securitization savings Savings associated with the 2001 securitization
of Fermi 2 and other costs are refundable to Detroit Edisons customers.

Customer Refund  1997 Storm The over collection of the 1997 storm costs,
which are refundable to Detroit Edison customers after January 1, 2004.

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, as subsequently discussed. 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. The rate request also seeks a five-year surcharge totaling $109
million from both full service and electric Customer Choice customers to
recover certain deferred regulatory asset balances, including electric Customer
Choice program implementation costs, return on and of clean air investments
made prior to inclusion in base rates and net stranded costs for years prior to
2004. Detroit Edison requested authority to increase rates on an interim basis
by $299 million annually to all customers not subject to a rate cap. PA 141
became effective in June 2000 and contains provisions freezing rates through
2003 and preventing rate increases for residential customers through 2005 and
for small commercial and industrial customers through 2004. Detroit Edison
requested the MPSC act on our interim request in order to be effective January
1, 2004. Concurrent with the issuance of an order for interim rate relief,
Detroit Edison requested reinstatement of the PSCR mechanism. The PSCR
mechanism allows Detroit Edison to recover through rates its fuel and purchased
power expenses. The PSCR was suspended by the MPSC following passage of PA
141. Detroit Edison also proposed that base rates for the customer classes
still subject to rate caps in 2004 and 2005 remain frozen and not be subject to
the PSCR mechanism until the caps expire.

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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
 The filing also requests a permanent capital structure based on 50% debt and
50% equity, and a proposed return on equity (ROE) of 11.5%. Detroit Edison is
also proposing a symmetrical ROE sharing mechanism, which will apply to full
service and electric Customer Choice customers whose rates are no longer capped
under PA 141. The sharing proposal would provide that shareholders retain all
earnings within a 1% band above and below the authorized ROE. If the actual
ROE falls
outside of the band, customers would share between 20% and 80% of the excess or
shortfall of earnings, depending on actual ROE. The ROE sharing mechanism
would be effective for the calendar year in which a final order is received in
this case. As previously discussed, Detroit Edison requested that its PSCR clause remain
suspended and that implementation of a new PSCR factor not begin until the date
of the MPSC order authorizing adequate and compensatory relief. Detroit Edison
also proposed an adjustment whereby the revenues from the sale of excess
capacity and off-system energy would be used to mitigate the effect of stranded
costs. In December 2003, the MPSC issued an order that reinstated the PSCR
clause on January 1, 2004 and did not rule on the mitigation adjustment
proposed by Detroit Edison. Detroit Edison has filed an appeal of this order
with the Michigan Court of Appeals. 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 will be 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. Additionally, the MPSC terminated certain transition credits and
authorized a uniform 4 mills per kWh transition charge to Choice customers
which is designed to result in $30 million in revenues, based on an estimated
7,565 gWh level of Choice sales volumes. The MPSC concluded that the
implementation of transition charges, coupled with the termination of
transition credits, will reduce the anticipated volume of Choice sales
resulting in an additional $30 million in margins. The MPSC also 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 totaled $248 million, the interim order is only
designed to result in an increase in 2004 revenues of $71 million. This lower
amount is a result of the rate caps, the February 21, 2004 effective date and
the PSCR adjustment. Amounts collected will be subject to refund pending a
final order in this rate case. As part of the interim order, the MPSC approved Detroit Edisons request to
recover pension and healthcare expenses included in the rate filing. The
recovery is conditioned on Detroit Edison making minimum annual prorated
pension contributions equal to the amount of expense reflected in rates during
the period that the authorized interim rates are in effect. Detroit Edison has
agreed to comply with this requirement through the interim period until a final
order is issued in this case. Additionally, the MPSC interim order requires
Detroit Edison to continue funding the Low Income Energy Efficiency Fund at $40
million annually. 35




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The MPSC deferred addressing other items in the rate request, including a
surcharge to recover regulatory assets, until a final rate order is issued
which is expected in the third quarter of 2004. We cannot predict the amount of
final rate relief that will be granted by the MPSC.

Electric Industry Restructuring

Electric Rates, Customer
Choice and Stranded Costs PA 141 provided Detroit
Edison with the right to recover net stranded costs, codified and established
January 1, 2002 as the date for full implementation of the MPSCs existing
electric Customer Choice program, and required the MPSC to reduce residential
electric rates by 5%. At that time, PA 142 also became effective. PA 142
provided for the recovery through securitization of qualified costs which
consist of an electric utilitys regulatory assets, plus various costs
associated with, or resulting from, the establishment of a competitive electric
market and the issuance of securitization bonds.

Acting pursuant to PA 141, in an order issued in June 2000, the MPSC reduced
Detroit Edisons residential electric rates by 5% and imposed a rate freeze for
all classes of customers through 2003. In April 2001, commercial and
industrial rates were lowered by 5% as a result of savings derived from the
issuance of securitization bonds in March 2001, as subsequently discussed.

Certain costs may be deferred and recovered once rates can be increased. This
rate cap may be lifted when certain market test provisions are met,
specifically, when an electric utility has no more than 30% of generation
capacity in its relevant market, with consideration for capacity needed to meet
a utilitys responsibility to serve its retail customers. Statewide,
multi-utility transmission system improvements also are required. In May 2003,
Detroit Edison submitted filings with the MPSC regarding its compliance with
the provisions of PA 141 related to market test and transmission system
improvements. Detroit Edison entered into a settlement agreement with
interested parties, indicating that the market power test provisions of PA 141
had been met. The MPSC approved the settlement agreement on February 20, 2004.

As required by PA 141, the MPSC conducted a proceeding to develop a methodology
for calculating the net stranded costs associated with electric Customer
Choice. In a December 2001 order, the MPSC determined that Detroit Edison
could recover net stranded costs associated with the fixed cost component of
its electric generation operations. Specifically, there would be an annual
proceeding or true-up before the MPSC reconciling the receipt of revenues
associated with the fixed cost component of its generation services to the
revenue requirement for the fixed cost component of those services, inclusive
of an allowance for the cost of capital. Any resulting shortfall in recovery,
net of mitigation, would be considered a net stranded cost. The MPSC, in its
December 2001 order, also determined that Detroit Edison had no net stranded
costs in 2000 and consequently established a zero net stranded cost transition
charge for billing purposes in 2002. 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. The
MPSC also determined that Detroit Edison should provide a full and offsetting
credit for the securitization and tax charges applied to electric Customer
Choice bills in 2002. In addition, the MPSC ordered an additional credit on
bills equal to the 5% rate reduction realized by full service customers. Both
credits were to be funded from savings derived from securitization. The
December 2001 order, coupled with lower wholesale power prices, has encouraged
additional customer participation in the electric Customer Choice program and
has resulted in the loss of margins attributable to generation services. In
May 2002, the MPSC denied Detroit Edisons request for rehearing and
clarification of the December 2001 order. In June 2002, Detroit Edison filed
an appeal of the MPSC order at the Michigan Court of Appeals, challenging the
legality of specific aspects of the MPSC order. The Court of Appeals denied
Detroit Edisons appeal.

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In May 2002, Detroit Edison submitted its 2001 net stranded cost filing with
the MPSC. The filing provided refinements to the MPSC Staffs calculation of
net stranded costs that was adopted in the December 2001 order, sought more
timely recovery of net stranded costs, and addressed issues
raised by the continuation of securitization offsets and rate reduction
equalization credits. The filing supported that Detroit Edison had no net
stranded costs in 2000 and $13 million of recoverable net stranded costs
attributable to electric Customer Choice in 2001. In the fourth quarter of
2002, Detroit Edison recorded an estimated regulatory asset of $10 million for
the 2001 net stranded costs based on the MPSC Staffs report. In July 2003, the
MPSC issued an order finding that Detroit Edison had no net stranded costs in
2000 and 2001 and established a zero net stranded cost transition charge for
billing purposes in 2003. In addition, this order clarified the inclusion of
revenue discounts granted customers under special contracts in the net stranded
cost calculation, but declined to rule on the proposed modifications to the
method for determining net stranded costs. Detroit Edison filed a petition for
rehearing of the July 2003 order, which the MPSC denied in December 2003.
Detroit Edison has appealed. During each quarter of 2003, Detroit Edison
recorded a regulatory asset representing an estimate of the cumulative stranded
costs as of that period. As a result of the MPSC July 2003 order and the
related clarifying language, we recalculated net stranded costs for 2002 and
2003. Our revised and ongoing calculations conclude that the $68 million of
net stranded costs recorded as of December 31, 2003 is appropriate.

Securitization In an order issued in November 2000 and clarified in January
2001, the MPSC approved the issuance of securitization bonds to recover
qualified costs that include the unamortized investment in Fermi 2, costs of
certain other regulatory assets, Electric Choice implementation costs, costs of
issuing securitization bonds, and the costs of retiring securities with the
proceeds of securitization. The order permits the collection of these
qualifying costs from Detroit Edisons customers.

Detroit Edison formed The Detroit Edison Securitization Funding LLC
(Securitization LLC), a wholly owned subsidiary, for the purpose of
securitizing its qualified costs. In March 2001, the Securitization LLC issued
$1.75 billion of Securitization Bonds, and Detroit Edison sold $1.75 billion of
qualified costs to the Securitization LLC. The Securitization Bonds mature
over a 14-year period and have an annual average interest rate of 6.3% over the
life of the bonds. Detroit Edison used the proceeds to retire debt and equity
in approximately equal amounts. DTE Energy corporate likewise retired
approximately 50% debt and 50% equity with the proceeds received as the sole
shareholder of Detroit Edison. Detroit Edison implemented a non-bypassable
surcharge on its customer bills, effective in March 2001, for the purpose of
collecting amounts sufficient to provide for the payment of interest and
principal and the payment of income tax on the additional revenue from the
surcharge. As a result of securitization, Detroit Edison established a
regulatory asset for securitized costs including costs that had previously been
recorded in other regulatory asset accounts.

The Securitization LLC is independent of Detroit Edison, as is its ownership of
the qualified costs. Due to principles of consolidation, qualified costs sold
by Detroit Edison to the Securitization LLC and the securitization bonds appear
on the companys consolidated statement of financial position. The company
makes no claim to these assets. Ownership of such assets has vested in the
Securitization LLC and been assigned to the trustee for the Securitization
Bonds. Funds collected by Detroit Edison, acting in the capacity of a servicer
for the Securitization LLC, are remitted to the trustee for the Securitization
Bonds. Neither the qualified costs which were sold nor funds collected from
Detroit Edisons customers for the payment of costs related to the
Securitization LLC and Securitization Bonds are available to Detroit Edisons
creditors.

Low-Income Energy Assistance Credit In October 2003, Detroit Edison filed an
application with the MPSC to implement a low-income energy assistance credit
for residential electric customers. The proposed 2.6 cent per kilowatthour
credit is expected to assist many low-income customers who are experiencing
difficulties in paying their electric bills due to poor economic conditions in
Detroit Edisons service area. Detroit Edison proposed to fund the low-income
energy assistance credit by utilizing excess securitization

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savings currently being used to provide credits to electric Choice Customers.
In January 2004, the MPSC issued an order implementing a 1 cent per
kilowatthour low-income energy assistance credit for residential electric
customers and terminated the rate equalization credit for uncapped electric
Customer Choice customers.

Excess Securitization Savings In January 2004, the MPSC issued an order
directing Detroit Edison to file a report by March 15, 2004, of the accounting
of the savings due to securitization and the application of those savings
through December 2003. In addition, Detroit Edison was requested to include in
the report an estimate of the foregone carrying cost associated with the excess
securitization savings.

Blackout Costs

On August 14, 2003, failures in the regional power transmission grid caused
nine of Detroit Edisons power plants to trip offline, which left virtually
all of its 2.1 million customers without power. We estimate that amounts
expensed in 2003 related to the blackout, excluding lost margins, were
approximately $25 million ($16 million net of tax). In October 2003, Detroit
Edison filed an accounting application with the MPSC requesting authority to
defer outage related costs associated with the blackout until a future rate
proceeding to recover outage costs from customers in a manner consistent with
the provisions of PA 141. We anticipate an accounting order in the third
quarter of 2004.

Minimum Pension Liability

In December 2002, we recorded an additional minimum pension liability as
required under SFAS No. 87, Employers Accounting for Pensions, with
offsetting amounts to an intangible asset and other comprehensive income.
During the first quarter of 2003, the MPSC Staff provided an opinion that the
MPSCs traditional rate setting process allowed for the recovery of pension
costs as measured by SFAS No. 87. Based on the MPSC Staff opinion, management
believes that it will be allowed to recover in rates the minimum pension
liability associated with its regulated operations. In 2003, we reclassified
approximately $583 million ($379 million net of tax) of other comprehensive
loss associated with the minimum pension liability to a regulatory asset.

Other

In accordance with a November 1997 MPSC order, Detroit Edison reduced rates by
$53 million annually to reflect the scheduled reduction in the revenue
requirement for Fermi 2. The $53 million reduction was effective in January
1999. In addition, the November 1997 MPSC order authorized the deferral of $30
million of storm damage costs and amortization and recovery of the costs over a
24-month period commencing January 1998. After various legal appeals, the
Michigan Court of Appeals remanded back to the MPSC for hearing the November
1997 order. In December 2000, the MPSC issued an order reopening the case for
hearing. The parties in the case have agreed to a stipulation of fact and
waiver of hearing. In June 2002, the MPSC issued an order modifying its 1997
order that will require Detroit Edison to refund approximately $1.5 million
after January 1, 2004. In July 2002, the Michigan Attorney General filed an
appeal with the Michigan Court of Appeals regarding the June 2002 MPSC Order.

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 the financial position, results of operations and
cash flows of the company.

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NOTE 5  NUCLEAR OPERATIONS

General

Fermi 2, our nuclear generating plant, began commercial operation in 1988.
Fermi 2 has a design electrical rating (net) of 1,150 megawatts. This plant
represents approximately 10% of Detroit Edisons summer net rated capability.
The net book balance of the Fermi 2 plant was written off at December 31, 1998,
and an equivalent regulatory asset was established. In 2001, the Fermi 2
regulatory asset was securitized. See Note 4 - Regulatory Matters. Detroit
Edison also owns Fermi 1, a nuclear plant that was shut down in 1972 and is
currently being decommissioned. The Nuclear Regulatory Commission (NRC) has
jurisdiction over the licensing and operation of Fermi 2 and the
decommissioning of Fermi 1.

Property Insurance

Detroit Edison maintains several different types of property insurance policies
specifically for the Fermi 2 plant. These policies cover such items as
replacement power and property damage. The Nuclear Electric Insurance Limited
(NEIL) is the primary supplier of these insurance polices.

Detroit Edison maintains a policy for extra expenses, including replacement
power costs necessitated by Fermi 2s unavailability due to an insured event.
These policies have a 12-week waiting period and provide an aggregate $490
million of coverage over a three-year period.

Detroit Edison has $500 million in primary coverage and $2.25 billion of excess
coverage for stabilization, decontamination, debris removal, repair and/or
replacement of property and decommissioning. The combined coverage limit for
total property damage is $2.75 billion.

For multiple terrorism losses caused by acts of terrorism not covered under the
Terrorism Risk Insurance Act (TRIA) of 2002 occurring within one year after the
first loss from terrorism, the NEIL policies would make available to all
insured entities up to $3.2 billion plus any amounts recovered from
reinsurance, government indemnity, or other sources to cover losses.

Under the NEIL policies, Detroit Edison could be liable for maximum assessments
of up to approximately $28 million per event if the loss associated with any
one event at any nuclear plant in the United States should exceed the
accumulated funds available to NEIL.

Public Liability Insurance

As required by federal law, Detroit Edison maintains $300 million of public
liability insurance for a nuclear incident. For liabilities arising from a
terrorist act outside the scope of TRIA the policy is subject to one industry
aggregate limit of $300 million. Further, under the Price-Anderson Amendments
Act of 1988 (Act), deferred premium charges up to $101 million could be levied
against each licensed nuclear facility, but not more than $10 million per year
per facility. Thus, deferred premium charges could be levied against all
owners of licensed nuclear facilities in the event of a nuclear incident at any
of these facilities. The Act expired on August 1, 2002. During 2003, the U.S.
Congress extended the Act for commercial nuclear facilities through December
31, 2003. However, provisions of the Act remain in effect for existing
commercial reactors. Legislation to extend the Act in conjunction with
comprehensive energy legislation is currently under debate in Congress. We
cannot predict whether the legislation will pass the Congress.

39



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Decommissioning

The NRC has jurisdiction over the decommissioning of nuclear power plants and
requires decommissioning funding based upon a formula. The MPSC and FERC
regulate the recovery of costs of decommissioning nuclear power plants and both
require the use of external trust funds to finance the decommissioning of Fermi
2. Rates approved by the MPSC provide for the recovery of decommissioning
costs of Fermi 2. Detroit Edison is continuing to fund FERC jurisdictional
amounts for decommissioning even though explicit provisions are not included in
FERC rates. We believe the MPSC and FERC collections will be adequate to fund
the estimated cost of decommissioning using the NRC formula.

Detroit Edison has established a restricted external trust to hold funds
collected from customers for decommissioning and the disposal of low-level
radioactive waste. Detroit Edison collected $36 million in 2003, $42 million
in 2002 and $38 million in 2001 from customers for decommissioning and
low-level radioactive waste disposal. Net unrealized investment gains of $62
million and losses of $39 million in 2003 and 2002, respectively, were recorded
as adjustments to the nuclear decommissioning trust funds and
regulatory assets. At December 31, 2003, investments in the external trust consisted
of approximately 54.8% in publicly traded equity securities, 44.4% in fixed
debt instruments and 0.8% in cash equivalents.

At December 31, 2003 and 2002, Detroit Edison had external decommissioning
trust funds of $474 million and $377 million, respectively, for the future
decommissioning of Fermi 2. At December 31, 2003 and 2002, Detroit Edison had
an additional $22 million for the decommissioning of Fermi 1. Detroit Edison
also had an external decommissioning trust fund of $22 million for low-level
radioactive waste disposal costs at December 31, 2003 and $17 million as of
December 31, 2002. It is estimated that the cost of decommissioning Fermi 2,
when its license expires in 2025, will be $1.0 billion in 2003 dollars and $3.4
billion in 2025 dollars, using a 6% inflation rate. In 2001, the company began
the decommissioning of Fermi 1, with the goal of removing the radioactive
material and terminating the Fermi 1 license. The decommissioning of Fermi 1
is expected to be complete by 2009.

As a result of adopting SFAS No. 143, Detroit Edison recorded a retirement
obligation liability for the decommissioning of Fermi 1 and 2 and reversed
previously recognized decommissioning liabilities. We continue to have
liability for the removal of the non-nuclear portion of the plants of $67
million at December 31, 2003.

Nuclear Fuel Disposal Costs

In accordance with the Federal Nuclear Waste Policy Act of 1982, Detroit Edison
has a contract with the U.S. Department of Energy (DOE) for the future storage
and disposal of spent nuclear fuel from Fermi 2. Detroit Edison is obligated
to pay the DOE a fee of one mill per net kilowatthour of Fermi 2 electricity
generated and sold. The fee is a component of nuclear fuel expense. Delays
have occurred in the DOEs program for the acceptance and disposal of spent
nuclear fuel at a permanent repository. Until the DOE is able to fulfill its
obligation under the contract, Detroit Edison is responsible for the spent
nuclear fuel storage. Detroit Edison estimates that existing storage capacity
will be sufficient until 2007. Detroit Edison has entered into litigation
against the DOE for damages caused by the DOE not accepting spent nuclear fuel
on a timely basis.

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NOTE 6 - JOINTLY OWNED UTILITY PLANT

Detroit Edisons share of jointly owned utility plants at December 31, 2003 was
as follows:

|                                       |  |             |           |                |  |               |      |  
|-------------------------------------- |  | ----------- | --------- | -------------- |  | ------------- | ---- | -
|                                       |  |             |           |                |  | Ludington    
|                                       |  |             |           |                |  | Hydroelectric
|                                       |  | Belle River |           | Pumped Storage
|                                       |  |             |           |               
|In-service date                        |  |             | 1984-1985 |                |  |               | 1973 |  
|Ownership interest                     |  |             | *         |                |  |               | 49   | %
|Investment (in Millions)               |  | $           | 1,587     |                |  | $             | 197  |  
|Accumulated depreciation (in Millions) |  | $           | 711       |                |  | $             | 114  |  

|  |  |                                                                                                                                                                                                                      
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|* |  | Detroit Edisons ownership interest is 63% in Unit No. 1, 81% of the
facilities applicable to Belle River used jointly by the
Belle River and St. Clair Power Plants and 75% in common facilities used
at Unit No. 2.

Belle River

The Michigan Public Power Agency (MPPA) has an ownership interest in Belle
River Unit No. 1 and other related facilities. The MPPA is entitled to 19% of
the total capacity and energy of the plant (1,026 MW) and is responsible for
the same percentage of the plants operation, maintenance and capital
improvements costs.

Ludington Hydroelectric Pumped Storage

Operation, maintenance and other expenses of the Ludington Hydroelectric Pumped
Storage Plant (1,872 MW) are shared by Detroit Edison and Consumers Energy
Company in proportion to their respective plant ownership interests.

NOTE 7 - INCOME TAXES

We are part of the consolidated federal income tax return of DTE Energy. The
federal income tax expense for Detroit Edison is determined on an individual
company basis with no allocation of tax benefits or expenses from other
affiliates of DTE Energy.

Total income tax expense varied from the statutory federal income tax rate for
the following reasons:

|                                         |       |   |      |     |      |   |      |     |  |   |      |    | 
|---------------------------------------- | ----- | - | ---- | --- | ---- | - | ---- | --- |  | - | ---- | -- | 
|                                         |       |   | 2003 |     | 2002 |   | 2001
|(Dollars in Millions)                    |       |   |      |     |      |  
|Effective federal income tax rate        |       |   | 36.5 | %   |      |   | 33.3 | %   |  |   | 26.3 | % 
|                                         |       |   |      |     |      |   |      |     |  |   |      |   
|Income tax expense at 35% statutory rate |       | $ | 139  |     |      | $ | 187  |     |  | $ | 112  |   
|Investment tax credits                   |       |   | (7   | )   |      |   | (7   | )   |  |   | (7   | ) 
|Depreciation                             |       |   | 3    |     |      |   | 3    |     |  |   | 3    |   
|Research expenditures tax credits        |       |   |     |     |      |   |     |     |  |   | (7   | ) 
|Employee Stock Ownership Plan dividends  |       |   | (4   | )   |      |   | (3   | )   |  |   | (2   | ) 
|Other-net                                |       |   | 14   |     |      |   | (2   | )   |  |   | (15  | ) 
|                                         |       |   |      |     |      |   |      |     |  |   |      |   
|                                         | Total |   | $    | 145 |      |   | $    | 178 |  |   | $    | 84 | 
|                                         |       |   |      |     |      |   |      |     |  |   |      |   

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Components of income tax expense were as follows:

|                                                 |       |   |      |     |      |   |      |     |  |   |      |    | 
|------------------------------------------------ | ----- | - | ---- | --- | ---- | - | ---- | --- |  | - | ---- | -- | 
|                                                 |       |   | 2003 |     | 2002 |   | 2001
|(in Millions)                                    |       |   |      |     |      |  
|Current federal and other income tax expense     |       | $ | 109  |     |      | $ | 236  |     |  | $ | 199  |   
|Deferred federal and other tax expense (benefit) |       |   | 36   |     |      |   | (58  | )   |  |   | (115 | ) 
|                                                 |       |   |      |     |      |   |      |     |  |   |      |   
|                                                 | Total |   | $    | 145 |      |   | $    | 178 |  |   | $    | 84 | 
|                                                 |       |   |      |     |      |   |      |     |  |   |      |   

Deferred tax assets and liabilities are recognized for the estimated future tax
effect of temporary differences between the tax basis of assets or liabilities
and the reported amounts in the financial statements. Deferred tax assets and
liabilities are classified as current or noncurrent according to the
classification of the related assets or liabilities. Deferred tax assets and
liabilities not related to assets or liabilities are classified according to
the expected reversal date of the temporary differences.

Deferred income tax assets (liabilities) were comprised of the following at
December 31:

|                                |  |      |        |      |  |   |        |  
|------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                |  | 2003 |        | 2002
|(in Millions)                   |  |      |        |     
|Property                        |  | $    | (989   | )    |  | $ | (1,009 | )
|Securitized regulatory assets   |  |      | (827   | )    |  |   | (871   | )
|Pension and benefits            |  |      | 43     |      |  |   | 292    |  
|Other                           |  |      | (2     | )    |  |   | 74     |  
|                                |  |      |        |      |  |   |        |  
|                                |  | $    | (1,775 | )    |  | $ | (1,514 | )
|                                |  |      |        |      |  |   |        |  
|Deferred income tax liabilities |  | $    | (2,117 | )    |  | $ | (2,062 | )
|Deferred income tax assets      |  |      | 342    |      |  |   | 548    |  
|                                |  |      |        |      |  |   |        |  
|                                |  | $    | (1,775 | )    |  | $ | (1,514 | )
|                                |  |      |        |      |  |   |        |  

The Internal Revenue Service is currently conducting audits of Detroit Edison
as a component of the DTE Energy federal income tax returns for the years 1998
through 2001.

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NOTE 8 - LONG-TERM DEBT AND PREFERRED SECURITIES

Long-Term Debt

Our long-term debt outstanding and weighted average interest rates of debt
outstanding at December 31 were:

|                                                 |                       |   |       |       |      |   |       |       | 
|------------------------------------------------ | --------------------- | - | ----- | ----- | ---- | - | ----- | ----- | 
|                                                 |                       |   | 2003  |       | 2002
|(in Millions)                                    |                       |   |       |      
|Detroit Edison Taxable Debt, Principally Secured |                       |   |       |       |      |   |       |      
|                                                 | 6.2% due 2005 to 2034 |   | $     | 1,485 |      |   | $     | 1,812 | 
|Detroit Edison Tax Exempt Revenue Bonds          |                       |   |       |       |      |   |       |      
|                                                 | 5.7% due 2004 to 2032 |   |       | 1,175 |      |   |       | 1,208 | 
|Quarterly Income Debt Securities                 |                       |   |       |       |      |   |       |      
|                                                 | 7.8% due 2026 to 2038 |   |       | 385   |      |   |       | 385   | 
|Other Long-Term Debt                             |                       |   | 81    |       |      |   | 87    |      
|                                                 |                       |   |       |       |      |   |       |      
|                                                 |                       |   | 3,126 |       |      |   | 3,492 |      
|Less amount due within one year                  |                       |   | (50   | )     |      |   | (222  | )    
|                                                 |                       |   |       |       |      |   |       |      
|                                                 |                       | $ | 3,076 |       |      | $ | 3,270 |      
|                                                 |                       |   |       |       |      |   |       |      
|Securitization Bonds                             |                       | $ | 1,585 |       |      | $ | 1,673 |      
|Less amount due within one year                  |                       |   | (89   | )     |      |   | (88   | )    
|                                                 |                       |   |       |       |      |   |       |      
|                                                 |                       | $ | 1,496 |       |      | $ | 1,585 |      
|                                                 |                       |   |       |       |      |   |       |      

During 2003 and 2002, we issued and repurchased long-term debt consisting of
the following:

2003



| |  |  | Issued $49 million of 5.5% tax exempt bonds maturing in 2030                                             
| | - |  | ---------------------------------------------------------------------------------------------------------
|
| |  |  | Redeemed $49 million of 6.55% tax-exempt bonds maturing in 2024                                          
|
| |  |  | Redeemed $314 million of taxable debt with an average interest rate
of 7.4% and maturities from 2003-2023
|
| |  |  | Redeemed $34 million of 6.875% tax-exempt bonds maturing in 2022.                                        

2002



| |  |  | Issued $225 million of Detroit Edison senior notes bearing interest
at 5.20 % and maturing in 2012                                                                                         
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Issued $225 million of Detroit Edison senior notes bearing interest
at 6.35 % and maturing in 2032                                                                                         
|
| |  |  | Issued $64 million of Detroit Edison tax exempt bonds bearing
interest at 5.45% and issued $56 million of Detroit Edison tax exempt
bonds bearing interest at 5.25%, both maturing in 2032.

In the years 2004 - 2008, our long-term debt maturities are $138 million, $493
million, $126 million, $135 million and $178 million, respectively.

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Quarterly Income Debt Securities (QUIDS)

Each series of QUIDS provides that interest will be paid quarterly. However,
we have the right to extend the interest payment period on the QUIDS for up to
20 consecutive interest payment periods. Interest would continue to accrue
during the deferral period. If this right is exercised, we may not declare or
pay dividends on, or redeem, purchase or acquire, any of its capital stock
during the deferral period.

Cross Default Provisions

Substantially all of the net utility properties of Detroit Edison are subject
to the lien of its mortgage. Should Detroit Edison fail to timely pay their
indebtedness under this mortgage, such failure will create cross defaults in
the indebtedness of DTE Energy.

Preferred and Preference Securities  Authorized and Unissued

At December 31, 2003, Detroit Edison had 6.75 million shares of preferred stock
with a par value of $100 per share and 30 million shares of preference stock
with a par value of $1 per share authorized, with no shares issued.

NOTE 9  SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS

In October 2003, we entered into a
$137.5 million, 364-day unsecured revolving facility
and a $137.5 million, three-year unsecured revolving facility. These credit facilities
can be used for general corporate purposes, but are primarily intended to
provide liquidity for our commercial paper program. These agreements require
us to maintain a debt to total capitalization ratio of not more than .65 to 1,
and earnings before interest, taxes, depreciation and amortization to
interest ratio of no less than 2 to 1. We are currently in compliance with
these financial covenants.

Detroit Edison has a $200 million short-term financing agreement secured by
customer accounts receivable. This agreement contains certain covenants related
to the delinquency of accounts receivable. Detroit Edison is currently in
compliance with these covenants. We had $100 million outstanding under this
financing agreement at December 31, 2003 at an interest rate of
1.6%.

NOTE 10  CAPITAL AND OPERATING LEASES

Lessee We lease various assets under capital and operating leases, including
locomotives, coal cars, computers, vehicles and other equipment. The lease
arrangements expire at various dates through 2022 with renewal options
extending beyond that date.

Future minimum lease payments under non-cancelable leases at December 31, 2003
were:

|                             |  |         |     |           |  |   |     | 
|---------------------------- |  | ------- | --- | --------- |  | - | --- | 
|                             |  | Capital |     | Operating
|                             |  | Leases  |     | Leases   
|(in Millions)                |  |         |     |          
|2004                         |  | $       | 11  |           |  | $ | 30  | 
|2005                         |  |         | 12  |           |  |   | 29  | 
|2006                         |  |         | 14  |           |  |   | 28  | 
|2007                         |  |         | 10  |           |  |   | 28  | 
|2008                         |  |         | 11  |           |  |   | 29  | 
|2009 and thereafter          |  |         | 50  |           |  |   | 193 | 
|                             |  |         |     |           |  |   |     | 
|Total minimum lease payments |  |         | 108 |           |  | $ | 337 | 
|                             |  |         |     |           |  |   |     | 

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|                                            |  |   |     |  
|------------------------------------------- |  | - | --- | -
|Less imputed interest                       |  |   | (27 | )
|                                            |  |   |     |  
|Present value of net minimum lease payments |  |   | 81  |  
|Less current portion                        |  |   | (6  | )
|                                            |  |   |     |  
|Non-current portion                         |  | $ | 75  |  
|                                            |  |   |     |  

Rental expenses for operating leases
was $30 million in 2003, $26 million in
2002 and $9 million in 2001.

NOTE 11  FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS

We comply with SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 established accounting and reporting
standards for derivative instruments and hedging activities. Listed
below are important SFAS No. 133 requirements:

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |  | All derivative instruments must
be recognized as assets or liabilities and measured at fair value,
unless they meet the normal purchases and sales exemption.                                                                                                                                                                                                                                                                                                                         | 
| 
| |  | The accounting for changes in
fair value depends upon the purpose of the derivative instrument and
whether it is designated as a hedge and qualifies for hedge
accounting.                                                                                                                                                                                                                                                                                                            | 
| 
| |  | Special accounting is allowed for
a derivative instrument qualifying as a hedge and designated as a
hedge for the variability of cash flow associated with a forecasted
transaction.  Gain or loss associated with the effective portion of
the hedge is recorded in other comprehensive income.  The effective
portion is recorded to earnings.  Amounts recorded in other
comprehensive income will be reclassified to net income when the
forecasted transaction affects earnings. | 
| 
| |  | If a cash flow hedge is
discontinued because it is likely the forecasted transaction will not
occur, net gains or losses are immediately recorded into earnings.                                                                                                                                                                                                                                                                                                                      | 
| 
| |  | Special accounting is allowed for
a derivative instrument qualifying as a hedge and designated as a
hedge of the changes in fair value of an existing asset, liability or
firm commitment.  Gain or loss on the hedging instrument is recorded
into earnings.  The gain or loss on the underlying asset, liability
or firm commitment is also recorded into earnings.                                                                                                                 | 

Our primary market risk exposure is associated with commodity prices, and
interest rates. We have risk management policies to monitor and decrease
market risks. We use derivative instruments to manage some of the exposure.
We do not hold or issue derivative instruments for trading purposes. The fair
value of all derivatives is shown as assets or liabilities from risk
management and trading activities in the consolidated statement of financial
position.

Commodity Price Risk

We use forward energy, capacity, and futures contracts to manage changes in the
price of electricity and natural gas. Changes in fair value of derivatives are
recognized currently in earnings, unless hedge accounting and the normal
purchase and sale exceptions apply. Changes in fair value of derivatives
designated and qualifying as an effective cash flow hedge are recorded as a
component of other comprehensive loss and reclassified into earnings. Any
changes in fair value of ineffective cash flow hedges are recognized currently
in earnings. Changes in fair value of normal contracts are not recorded.
These contracts are recorded on an accrual basis.  There were no
commodity price risk cash flow hedges at December 31, 2003.

Our operating policy is that transactions for electricity or fuel are not done
in a speculative manner but to optimize the efficiency of the power supply
costs. All contracts entered into by Detroit Edison to sell energy are
physically delivered. All purchases of power are considered capacity contracts
under SFAS No. 133 (as amended by SFAS No. 138 and SFAS No. 149). In addition,
the summer shortfall calculation submitted to the MPSC is in support of our
short positions. It is based on managements judgment of the above criteria
that our commodity contracts are considered normal.

Credit Risk

We are exposed to credit risk if customers or counterparties do not comply with
their contractual obligations. We maintain credit policies that significantly
minimize overall credit risk. These policies include an evaluation of
potential customers and counterparties financial condition, credit rating,
collateral requirements or other credit enhancements such as letters of credit
or guarantees. We use standardized agreements that allow the netting of
positive and negative transactions associated with a single counterparty.

45



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##### 



Fair Value of Other Financial Instruments

The fair value of financial instruments is determined by using various market
data and other valuation techniques. The table below shows the fair value
relative to the carrying value for long-term debt:

|               |  |              |  |                |  |              |  |                |  |  |  |  |  |  |  | 
|-------------- |  | ------------ |  | -------------- |  | ------------ |  | -------------- |  |  |  |  |  |  |  | 
|               |  | 2003         |  | 2002          
|               |  |              |  |               
|               |  | Fair Value   |  | Carrying Value |  | Fair Value   |  | Carrying Value
|               |  |              |  |                |  |              |  |               
|Long-Term Debt |  | $5.1 billion |  | $4.7 billion   |  | $5.6 billion |  | $5.2 billion  

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Personal Property Taxes

Detroit Edison and other Michigan utilities have asserted that Michigans
valuation tables result in the substantial overvaluation of utility personal
property. Valuation tables established by the Michigan State Tax Commission
(STC) are used to determine the taxable value of personal property based on the
propertys age. In November 1999, the STC approved new valuation tables that
more accurately recognize the value of a utilitys personal property. The new
tables became effective in 2000 and are currently used to calculate property
tax expense. However, several local taxing jurisdictions have taken legal
action attempting to prevent the STC from implementing the new valuation tables
and have continued to prepare assessments based on the superseded tables. The
legal actions regarding the appropriateness of the new tables were before the
Michigan Tax Tribunal (MTT) which, in April 2002, issued its decision
essentially affirming the validity of the STCs new tables. In June 2002,
petitioners in the case filed an appeal of the MTTs decision with the Michigan
Court of Appeals. On January 20, 2004, the Michigan Court of Appeals upheld
the validity of the new tables.

We record property tax expense based on the new tables. We will seek to apply
the new tables retroactively and to ultimately settle the pending tax appeals
related to 1997 through 1999. This is a solution supported by the STC in the
past.

Commitments

Detroit Edison has an Energy Purchase Agreement to purchase steam and
electricity from the Greater Detroit Resource Recovery Authority (GDRRA).
Under the Agreement, Detroit Edison will purchase steam through 2008 and
electricity through June 2024. In 1996, a special charge to income was recorded
that included a reserve for steam purchase commitments in excess of replacement
costs from 1997 through 2008. The reserve for steam purchase commitments is
being amortized to fuel, purchased power and gas expense with non-cash
accretion expense being recorded through 2008. In 2001, due to changes in
estimated future replacement costs we reduced the reserve for future steam
purchase commitments by $22 million. We purchased $30 million of steam and
electricity in 2003, $37 million in 2002 and $41 million in 2001. We estimate
annual steam and electric purchase commitments from 2004 until 2008 will not
exceed $150 million. As discussed in Note 3  Acquisitions and
Dispositions, in January 2003, we sold the steam heating business of Detroit
Edison to Thermal Ventures II, LLP. Due to terms of the sale, Detroit Edison
remains contractually obligated to GDRRA until 2008 and recorded an additional
liability of $20 million for future commitments. Also, we have guaranteed bank
loans that Thermal Ventures II, LLP may use for capital improvements to the
steam heating system.

46



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##### 



The  EPA  issued ozone transport
regulations and, in December, 2003, proposed additional emission regulations
relating to ozone, fine particulate and mercury air pollution. The new rules
have led to additional controls on fossil-fueled power plants to reduce
nitrogen oxides, sulfur dioxide, carbon dioxide and particulate emissions. To
comply with these new controls, Detroit Edison has spent approximately $560
million through December 2003 and estimates that it will spend
approximately $40 million in 2004 and incur up to an
additional approximately $1.2 billion of future capital expenditures over the
next five to eight years to satisfy both the existing and proposed new control
requirements. Under the
June 2000 Michigan restructuring legislation, beginning January 1, 2004, annual
return of and on this capital expenditure, in excess of current depreciation
levels, would be deferred in ratemaking, until after the expiration of the rate
cap period, presently expected to end December 31, 2005.

At December 31, 2003, we have also
entered into long-term fuel supply commitments through 2008 of approximately
$405 million. We estimate that 2004 base level capital
expenditures will be $710 million. We have made commitments in connection with
expected capital expenditures.

Bankruptcies

We purchase and sell electricity from and to numerous companies operating in
the steel, automotive, energy and retail industries. A number of customers
have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy
Code. We have negotiated or are currently involved in negotiations with each of
the companies, or their successor companies, that have filed for bankruptcy
protection. We regularly review contingent matters relating to purchase and
sale contracts and record provisions for amounts considered probable of loss.
We believe our previously accrued amounts are adequate for probable losses.
The final resolution of these matters is not expected to have a material effect
on our financial statements in the period they are resolved.

Other

Several Midwest utilities seek to recover lost transmission revenues associated
with the creation of multiple regional transmission organizations in the
Midwest. Positions advocated by several parties in a FERC  proceeding could require that Detroit Edison and its
customers be responsible for increased transmission costs. Detroit Edison
continues to actively participate in this proceeding and depending upon the
outcome would subsequently seek rate recovery of these costs.

We are involved in certain legal, regulatory, administrative and environmental
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.

See Note 4 and Note 5 for a discussion of contingencies related to Regulatory
Matters and Nuclear Operations.

NOTE 13  RETIREMENT BENEFITS AND TRUSTEED ASSETS

Qualified Pension Plan Benefits

47



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##### 



Detroit Edison has a defined benefit retirement plan. Effective December 31,
2001, the MCN Energy Group Retirement Plan, that covered nonrepresented
employees, merged into Detroit Edisons retirement plan. The combined plan is
noncontributory, covers substantially all employees and provides retirement
benefits based on the employees years of benefit service, average final
compensation and age at retirement. Certain nonrepresented employees are
covered under cash balance benefits based on annual employer contributions and
interest credits. Detroit Edison operates as the sponsor of the merged plan,
which is treated as a plan covering employees of various affiliates of DTE
Energy Company. The annual expense disclosed below is Detroit Edisons portion
of the total plan expense. Each affiliate is charged their portion of the
expense. Our policy is to fund pension cost by contributing the minimum amount
required by the Employee Retirement Income Security Act (ERISA) and additional
amounts we deem appropriate.

Net pension cost for the years ended December 31 includes the following
components:

|                                      |                      |   |      |    |      |   |      |    |   |   |      |    |  
|------------------------------------- | -------------------- | - | ---- | -- | ---- | - | ---- | -- | - | - | ---- | -- | -
|                                      |                      |   | 2003 |    | 2002 |   | 2001
|(in Millions)                         |                      |   |      |    |      |  
|Service Cost                          |                      | $ | 40   |    |      | $ | 35   |    |   | $ | 35   |   
|Interest Cost                         |                      |   | 127  |    |      |   | 124  |    |   |   | 117  |   
|Expected Return on Plan Assets        |                      |   | (129 | )  |      |   | (133 | )  |   |   | (139 | ) 
|Amortization of                       |                      |   |      |    |      |   |      |    |   |   |      |   
|                                      | Net loss             |   |      | 32 |      |   |      | 2  |   |   |      |   |  
|                                      | Prior service cost   |   |      | 9  |      |   |      | 9  |   |   |      | 10 |  
|                                      | Net transition asset |   |      |   |      |   |      | (1 | ) |   |      | (5 | )
|Special Termination Benefits (Note 3) |                      |   |     |    |      |   |     |    |   |   | 119  |   
|                                      |                      |   |      |    |      |   |      |    |   |   |      |   
|Net Pension Cost                      |                      | $ | 79   |    |      | $ | 36   |    |   | $ | 137  |   
|                                      |                      |   |      |    |      |   |      |    |   |   |      |   

48



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##### 



The following table reconciles the obligations, assets and funded status of the
plan as well as the amount recognized as pension liability in the consolidated
statement of financial position at December 31. The results include
liabilities and assets for Detroit Edison and all affiliates participating in
the combined plan. The prepaid asset contributed to the combined plan by such
affiliates is reflected as an amount due to affiliates, $219 million and $187
million at December 31, 2003 and 2002, respectively.

|                                                            |                      |             |       |             |      |   |       |     |  
|----------------------------------------------------------- | -------------------- | ----------- | ----- | ----------- | ---- | - | ----- | --- | -
|                                                            |                      |             | 2003  |             | 2002
|(in Millions)                                               |                      |             |       |            
|Measurement Date                                            |                      | December 31 |       | December 31
|Accumulated Benefit Obligation at the End of the Period     |                      | $           | 2,316 |             |      | $ | 2,104 |    
|                                                            |                      |             |       |             |      |   |       |    
|Projected Benefit Obligation at the Beginning of the Period |                      | $           | 2,287 |             |      | $ | 2,036 |    
|Service Cost                                                |                      |             | 44    |             |      |   | 39    |    
|Interest Cost                                               |                      |             | 150   |             |      |   | 148   |    
|Actuarial Loss                                              |                      |             | 166   |             |      |   | 210   |    
|Benefits Paid                                               |                      |             | (145  | )           |      |   | (146  | )  
|Plan Amendments                                             |                      |             | (4    | )           |      |   |      |    
|                                                            |                      |             |       |             |      |   |       |    
|Projected Benefit Obligation at the End of the Period       |                      | $           | 2,498 |             |      | $ | 2,287 |    
|                                                            |                      |             |       |             |      |   |       |    
|Plan Assets at Fair Value at the Beginning of the Period    |                      | $           | 1,572 |             |      | $ | 1,865 |    
|Actual Return on Plan Assets                                |                      |             | 380   |             |      |   | (182  | )  
|Company Contributions                                       |                      |             | 222   |             |      |   | 35    |    
|Benefits Paid                                               |                      |             | (145  | )           |      |   | (146  | )  
|                                                            |                      |             |       |             |      |   |       |    
|Plan Assets at Fair Value at the End of the Period          |                      | $           | 2,029 |             |      | $ | 1,572 |    
|                                                            |                      |             |       |             |      |   |       |    
|Funded Status of the Plans                                  |                      | $           | (469  | )           |      | $ | (715  | )  
|Unrecognized                                                |                      |             |       |             |      |   |       |    
|                                                            | Net loss             |             |       | 753         |      |   |       | 815 |  
|                                                            | Prior service cost   |             |       | 41          |      |   |       | 58  |  
|                                                            | Net transition asset |             |       |            |      |   |       | (8  | )
|                                                            |                      |             |       |             |      |   |       |    
|Net Amount Recognized                                       |                      | $           | 325   |             |      | $ | 150   |    
|                                                            |                      |             |       |             |      |   |       |    
|Amount Recorded as:                                         |                      |             |       |             |      |   |       |    
|Accrued Pension Liability                                   |                      | $           | (288  | )           |      | $ | (531  | )  
|Regulatory Asset                                            |                      |             | 572   |             |      |   |      |    
|Accumulated Other Comprehensive Loss                        |                      |             |      |             |      |   | 632   |    
|Intangible Asset                                            |                      |             | 41    |             |      |   | 49    |    
|                                                            |                      |             |       |             |      |   |       |    
|                                                            |                      | $           | 325   |             |      | $ | 150   |    
|                                                            |                      |             |       |             |      |   |       |    

Assumptions used in determining the projected benefit obligation at December 31
are listed below:

|                                              |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                              |  | 2003 |      | 2002 |  | 2001
|                                              |  |      |      |      |  |     
|Discount rate                                 |  |      | 6.25 | %    |  |      | 6.75 | % |  |  | 7.25 | %
|Annual increase in future compensation levels |  |      | 4.0  | %    |  |      | 4.0  | % |  |  | 4.0  | %

49



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##### 



Assumptions used in determining the net pension cost at December 31 are listed
below:

|                                                 |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                 |  | 2003 |      | 2002 |  | 2001
|                                                 |  |      |      |      |  |     
|Discount rate                                    |  |      | 6.75 | %    |  |      | 7.25 | % |  |  | 7.50 | %
|Annual increase in future compensation levels    |  |      | 4.0  | %    |  |      | 4.0  | % |  |  | 4.0  | %
|Expected long-term rate of return on Plan assets |  |      | 9.0  | %    |  |      | 9.5  | % |  |  | 9.5  | %

We employ a consistent formal process in determining the long-term rate of
return for various asset classes. We evaluate input from our consultants,
including their review of historic financial market risks and returns and
long-term historic relationships between the asset classes of equities, fixed
income and other assets, consistent with the widely accepted capital market
principle that asset classes with higher volatility generate a greater return
over the long-term. Current market factors such as inflation, interest rates,
asset class risks and asset class returns are evaluated and considered before
long-term capital market assumptions are determined. The long-term portfolio
return is also established employing a consistent formal process, with due
consideration of diversification, active investment management and rebalancing.
Peer data is reviewed to check for reasonability.

We employ a total return investment approach whereby a mix of equities, fixed
income and other investments are used to maximize the long-term return of plan
assets consistent with prudent levels of risk. The intent of this strategy is
to minimize plan expenses over the long-term. Risk tolerance is established
through consideration of future plan cash flows, plan funded status, and
corporate financial considerations. The investment portfolio contains a
diversified blend of equity, fixed income and other investments. Furthermore,
equity investments are diversified across U.S. and non-U.S. stocks, growth and
value investment styles, and large and small market capitalizations. Other
assets such as private equity and absolute return funds are used judiciously to
enhance long term returns while improving portfolio diversification.
Derivatives may be used to gain market exposure in an efficient and timely
manner; however, derivatives may not be used to leverage the portfolio beyond
the market value of the underlying investments. Investment risk is measured and
monitored on an ongoing basis through annual liability measurements, periodic
asset/liability studies, and quarterly investment portfolio reviews.

Our Plans weighted-average asset allocations by asset category at December 31
are as follows:

|                  |  |      |     |      |  |  |     |  
|----------------- |  | ---- | --- | ---- |  |  | --- | -
|                  |  | 2003 |     | 2002
|                  |  |      |     |     
|Equity Securities |  |      | 67  | %    |  |  | 62  | %
|Debt Securities   |  |      | 27  |      |  |  | 31  |  
|Other             |  |      | 6   |      |  |  | 7   |  
|                  |  |      |     |      |  |  |     |  
|                  |  |      | 100 | %    |  |  | 100 | %
|                  |  |      |     |      |  |  |     |  

Our Plans weighted-average asset target allocations by asset category at
December 31, 2003 are as follows:

|                  |  |  |     |  
|----------------- |  |  | --- | -
|Equity Securities |  |  | 65  | %
|Debt Securities   |  |  | 28  |  
|Other             |  |  | 7   |  
|                  |  |  |     |  
|                  |  |  | 100 | %
|                  |  |  |     |  

50



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##### 



In December 2002, we recognized an additional minimum pension liability as
required under SFAS No. 87, Employers Accounting for Pensions. An
additional pension liability may be required when the accumulated benefit
obligation of the plan exceeds the fair value of plan assets. Under SFAS No.
87, we recorded an additional minimum pension liability of $682 million, ($531
million after netting the previously recognized prepaid pension asset
associated with the nonunion plan), an intangible asset of $49 million and an
other comprehensive loss of $632 million ($411 million after tax). In 2003, we
reclassified $572 million of other comprehensive loss related to the minimum
pension liability to a regulatory asset.

At December 31, 2003 the minimum pension liability was $613 million, intangible
asset was $41 million and regulatory asset was $572 million.

We plan on making a $170 million contribution of DTE Energy common stock to our
defined benefit retirement plans in the first quarter of 2004. A contribution is not
required under ERISA

We also sponsor defined contribution retirement savings plans. Participation
in one of these plans is available to substantially all represented and
nonrepresented employees. We match employee contributions up to certain
predefined limits based upon eligible compensation, the employees contribution
rate and years of credited service. The cost of these plans was $21 million in
2003, $20 million in 2002 and $21 million in 2001.

Nonqualified Pension Benefit Plans

We maintain supplemental nonqualified, noncontributory, retirement
benefit plans for selected management employees. These plans provide for
benefits that supplement those provided by Detroit Edisons other retirement
plans.

Net pension cost for the years ended December 31 includes the following
components:

|                                      |                    |   |      |   |      |   |      |   |  |   |   |   | 
|------------------------------------- | ------------------ | - | ---- | - | ---- | - | ---- | - |  | - | - | - | 
|                                      |                    |   | 2003 |   | 2002 |   | 2001
|(in Millions)                         |                    |   |      |   |      |  
|Service Cost                          |                    | $ | 1    |   |      | $ | 1    |   |  | $ | 1 |  
|Interest Cost                         |                    |   | 2    |   |      |   | 2    |   |  |   | 2 |  
|Amortization of                       |                    |   |      |   |      |   |      |   |  |   |   |  
|                                      | Net loss           |   |      | 1 |      |   |      | 1 |  |   |   |  | 
|                                      | Prior service cost |   |      |  |      |   |      |  |  |   |   | 1 | 
|Special Termination Benefits (Note 3) |                    |   |     |   |      |   |     |   |  |   | 1 |  
|                                      |                    |   |      |   |      |   |      |   |  |   |   |  
|Net Pension Cost                      |                    | $ | 4    |   |      | $ | 4    |   |  | $ | 5 |  
|                                      |                    |   |      |   |      |   |      |   |  |   |   |  

51



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##### 



The following table reconciles the obligations, assets and funded status of the
plans as well as the amounts recognized as an accrued pension liability in the
consolidated statement of financial position at December 31:

|                                                            |                    |             |      |             |      |   |     |    | 
|----------------------------------------------------------- | ------------------ | ----------- | ---- | ----------- | ---- | - | --- | -- | 
|                                                            |                    |             | 2003 |             | 2002
|(in Millions)                                               |                    |             |      |            
|Measurement Date                                            |                    | December 31 |      | December 31
|Accumulated Benefit Obligation at the End of the Period     |                    | $           | 34   |             |      | $ | 30  |   
|                                                            |                    |             |      |             |      |   |     |   
|Projected Benefit Obligation at the Beginning of the Period |                    | $           | 31   |             |      | $ | 25  |   
|Service Cost                                                |                    |             | 1    |             |      |   | 1   |   
|Interest Cost                                               |                    |             | 2    |             |      |   | 2   |   
|Actuarial Loss                                              |                    |             | 4    |             |      |   | 5   |   
|Benefits Paid                                               |                    |             | (2   | )           |      |   | (2  | ) 
|                                                            |                    |             |      |             |      |   |     |   
|Projected Benefit Obligation at the End of the Period       |                    | $           | 36   |             |      | $ | 31  |   
|                                                            |                    |             |      |             |      |   |     |   
|Plan Assets at Fair Value at the Beginning of the Period    |                    | $           |     |             |      | $ |    |   
|Company Contributions                                       |                    |             | 2    |             |      |   | 2   |   
|Benefits Paid                                               |                    |             | (2   | )           |      |   | (2  | ) 
|                                                            |                    |             |      |             |      |   |     |   
|Plan Assets at Fair Value at the End of the Period          |                    | $           |     |             |      | $ |    |   
|                                                            |                    |             |      |             |      |   |     |   
|Funded Status of the Plans                                  |                    | $           | (36  | )           |      | $ | (31 | ) 
|Unrecognized                                                |                    |             |      |             |      |   |     |   
|                                                            | Net loss           |             |      | 13          |      |   |     | 10 | 
|                                                            | Prior service cost |             |      | 3           |      |   |     | 3  | 
|                                                            |                    |             |      |             |      |   |     |   
|Net Amount Recognized                                       |                    | $           | (20  | )           |      | $ | (18 | ) 
|                                                            |                    |             |      |             |      |   |     |   
|Amount Recorded as:                                         |                    |             |      |             |      |   |     |   
|Accrued Pension Liability                                   |                    | $           | (33  | )           |      | $ | (30 | ) 
|Regulatory Asset                                            |                    |             | 11   |             |      |   |    |   
|Accumulated Other Comprehensive Loss                        |                    |             |     |             |      |   | 9   |   
|Intangible Asset                                            |                    |             | 2    |             |      |   | 3   |   
|                                                            |                    |             |      |             |      |   |     |   
|                                                            |                    | $           | (20  | )           |      | $ | (18 | ) 
|                                                            |                    |             |      |             |      |   |     |   

Assumptions used in determining the projected benefit obligation at December 31
are listed below:

|                                              |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                              |  | 2003 |      | 2002 |  | 2001
|                                              |  |      |      |      |  |     
|Discount rate                                 |  |      | 6.25 | %    |  |      | 6.75 | % |  |  | 7.25 | %
|Annual increase in future compensation levels |  |      | 4.0  | %    |  |      | 4.0  | % |  |  | 4.0  | %

Assumptions used in determining the net pension costs at December 31 are listed
below:

|                                              |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                              |  | 2003 |      | 2002 |  | 2001
|                                              |  |      |      |      |  |     
|Discount rate                                 |  |      | 6.75 | %    |  |      | 7.25 | % |  |  | 7.50 | %
|Annual increase in future compensation levels |  |      | 4.0  | %    |  |      | 4.0  | % |  |  | 4.0  | %

52



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##### 



At December 31, 2003, under SFAS No. 87, the minimum pension liability was $13
million, intangible asset was $2 million and regulatory asset was $11 million.

Other Postretirement Benefits

We provide certain postretirement health care and life insurance benefits for
some employees who may become eligible for these benefits while working for us.
Our policy is to fund certain trusts to meet our postretirement benefit
obligations. Separate qualified Voluntary Employees Beneficiary Association
(VEBA) trusts exist for union and nonunion employees.

Net postretirement cost for the years ended December 31 includes the following
components:

|                                      |                           |   |      |    |      |   |      |    |  |   |     |    | 
|------------------------------------- | ------------------------- | - | ---- | -- | ---- | - | ---- | -- |  | - | --- | -- | 
|                                      |                           |   | 2003 |    | 2002 |   | 2001
|(in Millions)                         |                           |   |      |    |      |  
|Service Cost                          |                           | $ | 31   |    |      | $ | 25   |    |  | $ | 26  |   
|Interest Cost                         |                           |   | 66   |    |      |   | 59   |    |  |   | 55  |   
|Expected Return on Plan Assets        |                           |   | (36  | )  |      |   | (44  | )  |  |   | (47 | ) 
|Amortization of                       |                           |   |      |    |      |   |      |    |  |   |     |   
|                                      | Net loss                  |   | 23   |    |      |   | 2    |    |  |   | 1   |   
|                                      | Net transition obligation |   |      | 13 |      |   |      | 19 |  |   |     | 20 | 
|Special Termination Benefits (Note 3) |                           |   |     |    |      |   |     |    |  |   | 27  |   
|                                      |                           |   |      |    |      |   |      |    |  |   |     |   
|Net Postretirement Cost               |                           | $ | 97   |    |      | $ | 61   |    |  | $ | 82  |   
|                                      |                           |   |      |    |      |   |      |    |  |   |     |   

53



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##### 



The following table reconciles the obligations, assets and funded status of the
plans including amounts recorded as accrued postretirement cost in the
consolidated statement of financial position at December 31:

|                                                                             |                           |                    |       |             |     |      |       |     |     | 
|---------------------------------------------------------------------------- | ------------------------- | ------------------ | ----- | ----------- | --- | ---- | ----- | --- | --- | 
|                                                                             |                           |                    |       | 2003        |     | 2002
|(in Millions)                                                                |                           |                    |       |            
|Measurement Date                                                             |                           | December 31        |       | December 31
|Accumulated Postretirement Benefit Obligation at the Beginning of the Period |                           | $                  | 1,131 |             |     | $    | 863   |    
|Service Cost                                                                 |                           |                    | 31    |             |     |      | 25    |    
|Interest Cost                                                                |                           |                    | 66    |             |     |      | 59    |    
|Actuarial Loss                                                               |                           |                    | 122   |             |     |      | 233   |    
|Plan Amendments                                                              |                           |                    | (106  | )           |     |      |      |    
|Benefits Paid                                                                |                           |                    | (52   | )           |     |      | (49   | )  
|                                                                             |                           |                    |       |             |     |      |       |    
|Accumulated Postretirement Benefit Obligation at the End of the Period       |                           | $                  | 1,192 |             |     | $    | 1,131 |    
|                                                                             |                           |                    |       |             |     |      |       |    
|Plan Assets at Fair Value at the Beginning of the Period                     |                           | $                  | 425   |             |     | $    | 475   |    
|Actual Return on Plan Assets                                                 |                           |                    | 91    |             |     |      | (39   | )  
|Company Contributions                                                        |                           |                    |      |             |     |      | 33    |    
|Benefits Paid                                                                |                           |                    | (48   | )           |     |      | (44   | )  
|                                                                             |                           |                    |       |             |     |      |       |    
|Plan Assets at Fair Value at the End of the Period                           |                           | $                  | 468   |             |     | $    | 425   |    
|                                                                             |                           |                    |       |             |     |      |       |    
|Funded Status of the Plans                                                   |                           | $                  | (724  | )           |     | $    | (706  | )  
|Unrecognized                                                                 |                           |                    |       |             |     |      |       |    
|                                                                             |                           | Net loss           |       |             | 518 |      |       |     | 475 | 
|                                                                             |                           | Prior service cost |       |             | 1   |      |       |     | 3   | 
|                                                                             | Net transition obligation |                    |       | 74          |     |      |       | 191 |    
|                                                                             |                           |                    |       |             |     |      |       |    
|Accrued Postretirement Liability                                             |                           | $                  | (131  | )           |     | $    | (37   | )  
|                                                                             |                           |                    |       |             |     |      |       |    

Assumptions used in determining the projected benefit obligation at December 31
are listed below:

|              |  |      |      |      |  |      |      |   |  |  |      |  
|------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|              |  | 2003 |      | 2002 |  | 2001
|              |  |      |      |      |  |     
|Discount rate |  |      | 6.25 | %    |  |      | 6.75 | % |  |  | 7.25 | %

Assumptions used in determining the benefit cost at December 31 are listed
below:

|                                                 |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                 |  | 2003 |      | 2002 |  | 2001
|                                                 |  |      |      |      |  |     
|Discount rate                                    |  |      | 6.75 | %    |  |      | 7.25 | % |  |  | 7.50 | %
|Expected long-term rate of return on Plan assets |  |      | 9.0  | %    |  |      | 9.5  | % |  |  | 9.5  | %

Benefit costs were calculated assuming health care cost trend rates beginning
at 9.0% for 2004 and decreasing to 5.0% in 2009 and thereafter for persons
under age 65 and decreasing from 8.0% to 5.0% for persons age 65 and over. A
one-percentage-point increase in health care cost trend rates would have
increased the total service cost and interest cost components of benefit costs
by $14 million. The accumulated benefit obligation would have increased by
$111 million at December 31, 2003. A one-percentage-point decrease in the
health care cost trend rates would have decreased the total service and
interest cost components of benefit costs by $12 million and would have
decreased the accumulated benefit obligation by $99 million at December 31,
2003.

54



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##### 



We amended our postretirement health
care and life insurance plans to reduce benefits, modify eligibility
criteria and increase retiree co-pays.  The changes reduced the
postretirement benefit obligation by $106 million, the 2003
postretirement costs by $14 million and the expected 2004
postretirement costs by $25 million.

We employ a consistent formal process in determining the long-term rate of
return for various asset classes. We evaluate input from our consultants,
including their review of historic financial market risks and returns and
long-term historic relationships between the asset classes of equities, fixed
income and other assets, consistent with the widely accepted capital market
principle that asset classes with higher volatility generate a greater return
over the long-term. Current market factors such as inflation, interest rates,
asset class risks and asset class returns are evaluated and considered before
long-term capital market assumptions are determined. The long-term portfolio
return is also established employing a consistent formal process, with due
consideration of diversification, active investment management and rebalancing.
Peer data is reviewed to check for reasonability.

We employ a total return investment approach whereby a mix of equities, fixed
income and other investments are used to maximize the long-term return of plan
assets consistent with prudent levels of risk. The intent of this strategy is
to minimize plan expenses over the long-term. Risk tolerance is established
through consideration of future plan cash flows, plan funded status, and
corporate financial considerations. The investment portfolio contains a
diversified blend of equity, fixed income and other investments. Furthermore,
equity investments are diversified across U.S and non-U.S. stocks, growth and
value investment styles, and large and small market capitalizations. Other
assets such as private equity and absolute return funds are used judiciously to
enhance long term returns while improving portfolio diversification.
Derivatives may be used to gain market exposure in an efficient and timely
manner; however, derivatives may not be used to leverage the portfolio beyond
the market value of the underlying investments. Investment risk is measured and
monitored on an ongoing basis through annual liability measurements, periodic
asset/liability studies, and quarterly investment portfolio reviews.

Our Plans weighted-average asset allocations by asset category at December 31
are as follows:

|                  |  |      |     |      |  |  |     |  
|----------------- |  | ---- | --- | ---- |  |  | --- | -
|                  |  | 2003 |     | 2002
|                  |  |      |     |     
|Equity Securities |  |      | 65  | %    |  |  | 59  | %
|Debt Securities   |  |      | 30  |      |  |  | 36  |  
|Other             |  |      | 5   |      |  |  | 5   |  
|                  |  |      |     |      |  |  |     |  
|                  |  |      | 100 | %    |  |  | 100 | %
|                  |  |      |     |      |  |  |     |  

Our Plans weighted-average asset target allocations by asset category at
December 31, 2003 are as follows:

|                  |  |  |     |  
|----------------- |  |  | --- | -
|Equity Securities |  |  | 65  | %
|Debt Securities   |  |  | 28  |  
|Other             |  |  | 7   |  
|                  |  |  |     |  
|                  |  |  | 100 | %
|                  |  |  |     |  

We made a $40 million cash contribution to our postretirement health care and
life insurance plans in January 2004.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization
Act (Act) was signed into law. This law provides for a federal subsidy to
sponsors of retiree health care benefit plans that provide a benefit that is at
least actuarially equivalent to the benefit established by law. We have elected
to defer the provisions of the Act, and our measures of the accumulated
postretirement benefit obligation or net periodic postretirement benefit cost
do not reflect the effects of the Act, if any. Specific authoritative guidance, when
issued by the FASB, could require us to re-determine the impact of the Act and
change previously reported information.

55



---



##### 



NOTE 14  RELATED PARTY TRANSACTIONS

We have transactions with affiliated companies to provide fuel supply services
and power plant operation and maintenance services for the delivery of electric
energy. Under a service agreement with DTE Energy, various DTE
affiliates, including Detroit Edison provide corporate
support services and various financial, auditing, tax, legal, treasury and cash
management, human resources, information technology, regulatory and other
services, which were billed to DTE Energy corporate. These administrative and
general expenses along with interest and financing costs were then billed down
to various subsidiaries of DTE Energy, including Detroit Edison. The net
of these amounts included in the consolidated statement of operations
was income of $18 million in 2003 and expenses of $7 million in 2002 and $4 million in 2001.

We continue to bill and collect transmission revenues as currently authorized
in its bundled distribution rates approved by the MPSC. International
Transmission Company (ITC) provides transmission services to Detroit Edison and
other non-affiliated customers. ITC billed Detroit Edison approximately $18
million in 2003, $116 million in 2002 and $57 million in 2001 from June 1, 2001
for the costs of providing transmission services to utility customers. ITC was
sold in February 2003 and continues to provide services to Detroit Edison as an
unaffiliated company.

In addition, we had intercompany
revenue, primarily for the sale of energy to affiliates, of
$71 million, $108 million and $15 million in 2003,
2002 and 2001, respectively.  We had intercompany expenses, primarily
for purchased power, of $45 million, $100 million and
$16 million in 2003, 2002 and 2001, respectively.

Our accounts receivable from
affiliated companies totaled $34 million and $193 million,
and accounts payable to affiliated companies totaled $67 million
and $219 million at December 31, 2003 and 2002, respectively.

We paid dividends to DTE Energy of $295 million in 2003 and 2002 and $306
million in 2001. We received a $470 million capital contribution from DTE
Energy in 2003.

NOTE 15  SEGMENT AND RELATED INFORMATION

Beginning in 2002, we realigned our internal and external financial reporting
structure into two strategic business units (Energy Resources  Power
Generation and Energy Distribution  Power Distribution). Based on this
structure we set strategic goals, allocate resources and evaluate performance.

Energy Resourcesincludes the power generation services of Detroit Edison.
Electricity is generated from our numerous fossil plants or our nuclear plant
and sold throughout Southeastern Michigan to residential, commercial,
industrial and wholesale customers.

Energy Distributionincludes the power distribution services of Detroit Edison.
Energy Distribution distributes electricity generated by Energy Resources to
Detroit Edisons 2.1 million residential, commercial and industrial customers.

56



---



##### 



Inter-segment revenues are not material. Financial data of the business
segments follows:

|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|-------------------------------------- |  | --------- | ----- | ------------ |  | ------------ | --- | ------ |  | ------ | --- | ------ |  | ------------ | --- |  |  | - | --- | - |  | - | ------ |  |  | - | --- | 
|                                       |  |           |       |              |  | Depreciation |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |  
|                                       |  | Operating |       | And          |  | Interest     |     | Income |  | Net    |     | Total  |  | Capital     
|                                       |  | Revenue   |       | Amortization |  | Expense      |     | Taxes  |  | Income |     | Assets |  | Expenditures
|(in Millions)                          |  |           |       |              |  |              |     |        |  |        |     |        |  |             
|2003                                   |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Energy Resources                       |  | $         | 2,448 |              |  | $            | 224 |        |  | $      | 157 |        |  | $            | 135 |  |  | $ | 235 |   |  | $ | 7,216  |  |  | $ | 340 | 
|Energy Distribution                    |  |           | 1,247 |              |  |              | 249 |        |  |        | 127 |        |  |              | 10  |  |  |   | 17  |   |  |   | 5,333  |  |  |   | 240 | 
|Cumulative Effect
of Accounting
Change |  |           |      |              |  |              |    |        |  |        |    |        |  |              |    |  |  |   | (6  | ) |  |   |       |  |  |   |    | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Total                                  |  | $         | 3,695 |              |  | $            | 473 |        |  | $      | 284 |        |  | $            | 145 |  |  | $ | 246 |   |  | $ | 12,549 |  |  | $ | 580 | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|2002                                   |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Energy Resources                       |  | $         | 2,711 |              |  | $            | 331 |        |  | $      | 184 |        |  | $            | 120 |  |  | $ | 245 |   |  | $ | 7,334  |  |  | $ | 395 | 
|Energy Distribution                    |  |           | 1,343 |              |  |              | 246 |        |  |        | 127 |        |  |              | 58  |  |  |   | 111 |   |  |   | 4,154  |  |  |   | 290 | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Total                                  |  | $         | 4,054 |              |  | $            | 577 |        |  | $      | 311 |        |  | $            | 178 |  |  | $ | 356 |   |  | $ | 11,488 |  |  | $ | 685 | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|2001                                   |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Energy Resources                       |  | $         | 2,788 |              |  | $            | 385 |        |  | $      | 181 |        |  | $            | 58  |  |  | $ | 139 |   |  | $ | 7,400  |  |  | $ | 348 | 
|Energy Distribution                    |  |           | 1,256 |              |  |              | 246 |        |  |        | 125 |        |  |              | 26  |  |  |   | 97  |   |  |   | 4,073  |  |  |   | 325 | 
|Cumulative Effect
of Accounting
Change |  |           |      |              |  |              |    |        |  |        |    |        |  |              |    |  |  |   | (3  | ) |  |   |       |  |  |   |    | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 
|Total                                  |  | $         | 4,044 |              |  | $            | 631 |        |  | $      | 306 |        |  | $            | 84  |  |  | $ | 233 |   |  | $ | 11,473 |  |  | $ | 673 | 
|                                       |  |           |       |              |  |              |     |        |  |        |     |        |  |              |     |  |  |   |     |   |  |   |        |  |  |   |     | 

NOTE 16  SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

|                                        |  |         |     |         |  |         |     |         |  |      |       |  |  |   |     |  |  |   |       | 
|--------------------------------------- |  | ------- | --- | ------- |  | ------- | --- | ------- |  | ---- | ----- |  |  | - | --- |  |  | - | ----- | 
|                                        |  | First   |     | Second  |  | Third   |     | Fourth  |  |      |       | 
|                                        |  | Quarter |     | Quarter |  | Quarter |     | Quarter |  | Year
|(in Millions, except per share amounts) |  |         |     |         |  |         |     |         |  |     
|2003                                    |  |         |     |         |  |         |     |         |  |      |       |  |  |   |     |  |  |   |       | 
|Operating Revenues                      |  | $       | 937 |         |  | $       | 870 |         |  | $    | 1,017 |  |  | $ | 871 |  |  | $ | 3,695 | 
|Operating Income                        |  | $       | 116 |         |  | $       | 112 |         |  | $    | 219   |  |  | $ | 227 |  |  | $ | 674   | 
|Net Income                              |  | $       | 15  |         |  | $       | 30  |         |  | $    | 96    |  |  | $ | 105 |  |  | $ | 246   | 
|2002                                    |  |         |     |         |  |         |     |         |  |      |       |  |  |   |     |  |  |   |       | 
|Operating Revenues                      |  | $       | 930 |         |  | $       | 962 |         |  | $    | 1,200 |  |  | $ | 962 |  |  | $ | 4,054 | 
|Operating Income                        |  | $       | 226 |         |  | $       | 192 |         |  | $    | 240   |  |  | $ | 201 |  |  | $ | 859   | 
|Net Income                              |  | $       | 92  |         |  | $       | 74  |         |  | $    | 105   |  |  | $ | 85  |  |  | $ | 356   | 

57



---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. 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 December
31, 2003, 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 reported within
the time periods specified in the Commissions rules and forms.

Part III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

All omitted per general instruction I (2) (c) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

Item 14. Principal Accountant Fees and Services

Audit and Non-Audit Fees

For the years ended December 31, 2003 and 2002, professional services were
performed by Deloitte & Touche LLP, the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates (collectively, Deloitte). The
following table presents fees for professional services rendered by Deloitte
for the audit of Detroit Edisons annual financial statements for the years
ended December 31, 2002 and December 31, 2003, and fees billed for other
services rendered by Deloitte during those periods.

2002
    
    2003Audit Fees (1)
    
    $
    1,374,798
    
    $
    952,527Audit related fees (2)
    
    
    831,883
    
    
    33,422Tax fees
    
    
    
    
    
    All other fees
    
    
    
    
    
    Total
    
    $
    2,206,681
    
    $
    985,949




|(1) |  | Represents the aggregate fees billed for the audit of Detroit
Edisons annual financial statements and for the reviews of the
financial statements included in Detroit Edisons Quarterly Reports on
Form 10-Q.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Represents the aggregate fees billed for audit-related services.
|--- |  | ----------------------------------------------------------------







|The above listed fees were pre-approved by the DTE Energy audit
committee.
|--------------------------------------------------------------------------

58



---



##### 



Part IV

Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K



|(a) |  | The following documents are filed as part of this Annual Report on
Form 10-K.
|--- |  | -----------------------------------------------------------------------------



| | (1) |  | Consolidated financial statements. See Item 8  Financial Statements and Supplementary Data.
| | --- |  | ----------------------------------------------------------------------------------------------
|
| | (2) |  | Financial statement schedule. See Item 8  Financial Statements and Supplementary Data.      
|
| | (3) |  | Exhibits.                                                                                     

|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|----------------- | ----- | ------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit           |       |                                                             
|Number            |       | Description                                                 
|                  |       |                                                             
|(i)               |       | Exhibits filed herewith.                                    
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 12-20 |                                                              |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 23-16 |                                                              |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                 
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 31-5  |                                                              |  | Chief Executive Officer Section 302 Form 10-K Certification of Periodic Report.                                                                                                                                                                                                                                                   
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 31-6  |                                                              |  | Chief Financial Officer Section 302 Form 10-K Certification of Periodic Report.                                                                                                                                                                                                                                                   
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|(ii)              |       |                                                              |  | Exhibits incorporated herein by reference.                                                                                                                                                                                                                                                                                        
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 3(b)  |                                                              |  | Bylaws of The Detroit Edison Company, as amended through September 22, 1999. (Exhibit 3-14 to Form 10-Q for quarter ended September 30, 1999).                                                                                                                                                                                    
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|                  | 4(a)  |                                                              |  | Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and First Chicago Trust Company of New York
as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as
exhibits to the filings as set forth below:
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|September 1, 1947 |       | Exhibit B-20 to Registration No. 2-7136.                    
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|November 15, 1971 |       | Exhibit 2-B-38 to Registration No. 2-42160.                 
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|January 15,1973   |       | Exhibit 2-B-39 to Registration No. 2-46595.                 
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|June 1, 1978      |       | Exhibit 2-B-51 to Registration No. 2-61643.                 
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|June 30, 1982     |       | Exhibit 4-30 to Registration No. 2 78941.                   
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|August 15, 1982   |       | Exhibit 4-32 to Registration No. 2-79674.                   
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|December 1, 1989  |       | Exhibit 4-211 to Form 10-K for year ended December 31, 2000.
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|February 15, 1990 |       | Exhibit 4-212 to Form 10-K for year ended December 31, 2000.
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|April 1, 1991     |       | Exhibit 4-15 to Form 10-K for year ended December 31, 1996. 
|                  |       |                                                              |  |                                                                                                                                                                                                                                                                                                                                   
|November 1, 1991  |       | Exhibit 4-181 to Form 10-K for year ended December 31, 1996.

59



---



##### 



|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|------------------ | ---- | ----------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit            |      |                                                                              
|Number             |      | Description                                                                  
|                   |      |                                                                              
|January 15, 1992   |      | Exhibit 4-182 to Form 10-K for year ended December 31, 1996.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|February 29, 1992  |      | Exhibit 4-187 to Form 10-Q for quarter ended March 31, 1998.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|April 15, 1992     |      | Exhibit 4-188 to Form 10-Q for quarter ended March 31, 1998.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|July 15, 1992      |      | Exhibit 4-189 to Form 10-Q for quarter ended March 31, 1998.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|November 30, 1992  |      | Exhibit 213 to Form 10-K for year ended December 31, 2000.                   
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|January 1, 1993    |      | Exhibit 4-131 to Registration No. 33-56496.                                  
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|March 1, 1993      |      | Exhibit 4-191 to Form 10-Q for quarter ended March 31, 1998.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|April 1, 1993      |      | Exhibit 4-214 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|April 26, 1993     |      | Exhibit 4-215 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|May 31, 1993       |      | Exhibit 4-148 to Registration No. 33-64296.                                  
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|June 30, 1993      |      | Exhibit 4-216 to Form 10-K for year ended December 31, 2000 (1993 Series AP).
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|June 30, 1993      |      | Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H).  
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|September 15, 1993 |      | Exhibit 4-217 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|March 1, 1994      |      | Exhibit 4-163 to Registration No. 33-53207                                   
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|June 15, 1994      |      | Exhibit 4-218 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 15, 1994    |      | Exhibit 4-220 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 1, 1995     |      | Exhibit 4-221 to Form 10-K for year ended December 31, 2000.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 1, 1999     |      | Exhibit 4-204 to Form 10-Q for quarter ended September 30, 1999.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 15, 1999    |      | Exhibit 4-205 to Form 10-Q for quarter ended September 30, 1999.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|January 1, 2000    |      | Exhibit 4-205 to Form 10-K for year ended December 31, 1999.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|April 15, 2000     |      | Exhibit 206 to Form 10-Q for quarter ended March 31, 2000.                   
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 1, 2000     |      | Exhibit 4-210 to Form 10-Q for quarter ended September 30, 2000.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|March 15, 2001     |      | Exhibit 4-222 to Form 10-Q for quarter ended March 31, 2001.                 
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|May 1, 2001        |      | Exhibit 4-226 to Form 10-Q for quarter ended June 30, 2001.                  
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|August 15, 2001    |      | Exhibit 4-227 to Form 10-Q for quarter ended September 30, 2001.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|September 15, 2001 |      | Exhibit 4-228 to Form 10-Q for quarter ended September 30, 2001.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|September 17, 2002 |      | Exhibit 4.1 to Registration No. 333-100000.                                  
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|October 15, 2002   |      | Exhibit 4-230 to Form 10-Q for quarter ended September 30, 2002.             
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(b) |                                                                               |  | Collateral Trust Indenture (notes), dated as of June 30, 1993
(Exhibit 4-152 to Registration No. 33-50325).                                                                                                                                     
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(c) |                                                                               |  | First Supplemental Note Indenture, dated as of June 30, 1993
(Exhibit 4-153 to Registration No. 33-50325).                                                                                                                                      
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(d) |                                                                               |  | First Amendment, dated as of July, 2000, to the First
Supplemental Indenture, dated as of June 30, 1993, to the
Collateral Trust Indenture (Notes), dated as of June 30, 1993
(Exhibit 4-208 to Form 10-Q for quarter ended September 30,
2000).
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(e) |                                                                               |  | Second Supplemental Note Indenture, dated as of September 15,
1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30,
1993).                                                                                                           
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(f) |                                                                               |  | First Amendment, dated as of August 15, 1996, to Second
Supplemental Note Indenture (Exhibit 4-17 to Form 10-Q for
quarter ended September 30, 1996).                                                                                           
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(g) |                                                                               |  | Third Supplemental Note Indenture, dated as of August 15, 1994
(Exhibit 4-169 to Form 10-Q for quarter ended September 30,
1994).                                                                                                               
|                   |      |                                                                               |  |                                                                                                                                                                                                                                                 
|                   | 4(h) |                                                                               |  | First Amendment, dated as of
December 12, 1995, to Third
Supplemental Note Indenture, dated
as of August 15, 1994 (Exhibit 4-12
to Registration No. 333-00023).                                                                                 

60



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                           
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 4(i)  |             |  | Sixth Supplemental Note Indenture, dated as of May 1, 1998, between
Detroit Edison and Bankers Trust Company, as Trustee, creating
the 7.54% Quarterly Income Debt Securities (QUIDS), including form of
QUIDS (Exhibit
4-193 to Form 10-Q
for quarter ended
June 30, 1998).            
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(j)  |             |  | Seventh
Supplemental Note
Indenture, dated as
of October 15,
1998, between
Detroit Edison and
Bankers Trust
Company, as
Trustee, creating
the 7.375% QUIDS,
including form of
QUIDS (Exhibit
4-198 to Form 10-K
for year ended
December 31, 1998).                                        
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(k)  |             |  | Eighth Supplemental
Indenture, dated as
of April 15, 2000,
appointing Bank One
Trust Company of
New York as Trustee
under the Detroit
Edison Trust
Indenture (Notes),
dated as of June
30, 1993 (Exhibit
4-207 to Form 10-Q
for the quarter
ended March 31,
2000).                        
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(l)  |             |  | Ninth Supplemental Indenture, dated as October 10,
2001, establishing the 5.050% Senior Notes due
2005 and 6.125% Senior Notes due 2010 (Exhibit
4-229 to Form 10-Q for the quarter ended September
30, 2001)                                                                             
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(m)  |             |  | Tenth Supplemental Indenture, dated as of October
23, 2002, establishing the 5.20% Senior Notes due
2012 and 6.35% Senior                                                                                                                                                                 
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(n)  |             |  | Notes due 2032 (Exhibit
4-231 to Form 10-Q for the quarter ended September
30, 2002).                                                                                                                                                                                                     
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(o)  |             |  | Trust Agreement of Detroit Edison Trust I (Exhibit
4-9 to Detroit Edison Trust Is registration
statement on Form S-3 (File No. 333-100000)).                                                                                                                                             
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(p)  |             |  | Trust Agreement of Detroit Edison Trust II
(Exhibit 4-10 to Detroit Edison Trust Is
registration statement on Form S-3 (File No.
333-100000)).                                                                                                                                           
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 10(a) |             |  | Securitization Property Sale Agreement (Exhibit
10-42 to Form 10-Q for quarter ended March 31,
2001).                                                                                                                                                                                     
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(q)  |             |  | Supplemental Indenture dated as of December 1,
2002, establishing the 2002 Series C and 2002
Series D Mortgage Bonds (Exhibit 4-232 to Form
10-K for year ended December 31, 2002).                                                                                                       
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(r)  |             |  | Eleventh Supplemental Indenture dated December 1,
2002, Supplementing the Collateral Trust Indenture
dated as of June 30,1993 providing for 5.45%
Senior Notes Due 2032 and 5.25% Senior Notes Due
2032 (Exhibit 4-233 to Form 10-Q for quarter ended
March 31, 2003).                    
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(s)  |             |  | Insurance Agreement dated as of August 28, 2003,
among XL Capital Assurance Inc., The Detroit
Edison Company, and Bank One Trust Company,
National Association (Exhibit 4-234 to Form 10-Q
for quarter ended September 30, 2003).                                                         
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(t)  |             |  | Indenture dated as of August 1, 2003,
Supplementing the Mortgage and Deed of Trust Dated
as of October 1, 1924, providing for (a) General
and Refunding Mortgage Bonds, 2003 Series A and
(b) Recording and Filing Data (Exhibit 4-235 to
Form 10-Q for quarter ended September 30, 2003).
|        |       |             |  |                                                                                                                                                                                                                                                                                           
|        | 4(u)  |             |  | Twelfth Supplemental Indenture dated as of August
1, 2003, Supplementing the Collateral Trust
Indenture dated as of June 30, 1993, providing for
5 1/2% Senior Notes Due 2030 (Exhibit 4-236 to
Form 10-Q for quarter ended September 30, 2003).                                          

61



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(a) |             |  | Belle River Participation Agreement between
Detroit Edison and Michigan Public Power Agency,
dated as of December 1, 1982 (Exhibit 28-5 to
Registration No. 2-81501).                                                                                                                                                                                                                                                                                                                                 
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(b) |             |  | Belle River Transmission Ownership and Operating
Agreement between Detroit Edison and Michigan
Public Power Agency, dated as of December 1, 1982
(Exhibit 28-6 to Registration No. 2-81501).                                                                                                                                                                                                                                                                                                          
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(c) |             |  | Inter-Creditor Agreement (Exhibit 99-41 to Form
10-Q for quarter ended March 31, 2001).                                                                                                                                                                                                                                                                                                                                                                                                               
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(d) |             |  | Amendment to Trade Receivables Purchase and Sale
Agreement (Exhibit 99-42 to Form 10-Q for quarter
ended March 31, 2001).                                                                                                                                                                                                                                                                                                                                                                             
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(e) |             |  | Amended and Restated Trade Receivables Purchase
and Sale Agreement (Exhibit 99-43 to Form 10-Q for
quarter ended March 31, 2001).                                                                                                                                                                                                                                                                                                                                                                     
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(f) |             |  | Amendment dated as of May 28, 2003 to the Trade
Receivables Purchase and Sale Agreement, dated as
of February 28, 1989, and an Amendment and
Restatement thereof, dated as of October 1, 1991,
and as further amended by an Amendment dated as of
February 28, 1994, an Amendment dated as of
February 1, 1999, an Amendment dated as of January
27, 2000 and an Amendment dated as of January 25,
2001, among The Detroit Edison Company, as seller,
Citibank, N.A., and Citicorp North America, Inc.
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(g) |             |  | Amendment No. 2 dated as of May 28, 2003 to the
Trade Receivables Purchase and Sale Agreement,
dated as of February 28, 1989, an Amendment and
Restatement thereof, dated as of October 1, 1991,
an Amendment and Restatement thereof dated as of
March 9, 2001 and an Amendment dated as of January
17, 2003, among The Detroit Edison Company, as
seller, Corporate Asset Funding Company, Inc.,
Citibank, N.A., and Citicorp North America, Inc.                                                   
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(h) |             |  | 364-Day Credit Agreement dated as of October 24,
2003 ($137.5 million) (Exhibit 99-13 to Form 10-Q
for quarter ended September 30, 2003).                                                                                                                                                                                                                                                                                                                                                             
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 99(i) |             |  | Three-Year Credit Agreement dated as of October
24, 2003 ($137.5 million) (Exhibit 99-14 to Form
10-Q for quarter ended September 30, 2003).                                                                                                                                                                                                                                                                                                                                                          
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(iii)   |       |             |  | Exhibits furnished
herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 32-5  |             |  | Chief Executive Officer Section 906 Form 10-K
Certification of Periodic Report.                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 32-6  |             |  | Chief Financial Officer Section 906 Form 10-K
Certification of Periodic Report.                                                                                                                                                                                                                                                                                                                                                                                                                       



|b) |  | Reports on Form 8-K.
|-- |  | --------------------

During the quarterly period ended December 31, 2003, we filed Current Reports
on Form 8-K covering matters, as follows:



| |  | Item 7. Exhibits and Item 12. Results of Operations and Financial
Conditions filed and dated November 7, 2003;
| |  | --------------------------------------------------------------------------------------------------------------

62



---



##### 



The Detroit Edison Company
Schedule II  Valuation and Qualifying Accounts

|                                                                                                                                  |                               |   |                          |    |      |   |      |    |  |   |     |    | 
|--------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | - | ------------------------ | -- | ---- | - | ---- | -- |  | - | --- | -- | 
|                                                                                                                                  |                               |   | Year Ending December 31,
|                                                                                                                                  |                               |   |                         
|                                                                                                                                  |                               |   | 2003                     |    | 2002 |   | 2001
|(in Millions)                                                                                                                     |                               |   |                          |    |      |  
|Allowance for Doubtful Accounts (shown as
Deduction from accounts receivable in the
consolidated statement of financial position) |                               |   |                          |    |      |   |      |    |  |   |     |   
|Balance at Beginning of Period                                                                                                    |                               | $ | 48                       |    |      | $ | 27   |    |  | $ | 20  |   
|Additions:                                                                                                                        |                               |   |                          |    |      |   |      |    |  |   |     |   
|                                                                                                                                  | Charged to costs and expenses |   |                          | 39 |      |   |      | 24 |  |   |     | 22 | 
|                                                                                                                                  | Charged to other accounts (1) |   |                          | 3  |      |   |      | 9  |  |   |     | 12 | 
|Deductions (2)                                                                                                                    |                               |   | (39                      | )  |      |   | (12  | )  |  |   | (27 | ) 
|                                                                                                                                  |                               |   |                          |    |      |   |      |    |  |   |     |   
|Balance At End of Period                                                                                                          |                               | $ | 51                       |    |      | $ | 48   |    |  | $ | 27  |   
|                                                                                                                                  |                               |   |                          |    |      |   |      |    |  |   |     |   
|Fermi 2 Refueling Outage Accrual (included in other
current liabilities in the consolidated statement
of financial position)      |                               |   |                          |    |      |   |      |    |  |   |     |   
|Balance at Beginning of Period                                                                                                    |                               | $ | 25                       |    |      | $ | 1    |    |  | $ | 10  |   
|Charged to costs and expenses                                                                                                     |                               |   | 23                       |    |      |   | 25   |    |  |   | 13  |   
|Deductions (3)                                                                                                                    |                               |   | (32                      | )  |      |   | (1   | )  |  |   | (22 | ) 
|                                                                                                                                  |                               |   |                          |    |      |   |      |    |  |   |     |   
|Balance At End of Period                                                                                                          |                               | $ | 16                       |    |      | $ | 25   |    |  | $ | 1   |   
|                                                                                                                                  |                               |   |                          |    |      |   |      |    |  |   |     |   

(1) Collection of accounts previously written off.

(2) Non-collectible accounts written off.

(3) Actual amounts paid during the refueling outage.

63



---



##### 



Signatures

Pursuant to the requirements of Section 13 or 15 (d) 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   
|                    |  |    |  |                              
|                    |  |    |  | (Registrant)                 
|                    |  |    |  |                              
|Date: March 1, 2004 |  | By |  | /s/ DANIEL G. BRUDZYNSKI     
|                    |  |    |  |                              
|                    |  |    |  | Daniel G. Brudzynski         
|                    |  |    |  | Chief Accounting Officer,    
|                    |  |    |  | Vice President and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.

|   |  |                                        | 
|-- |  | -------------------------------------- | 
|By |  | /s/ ANTHONY F. EARLEY, JR.             | 
|   |  |                                        | 
|   |  | Anthony F. Earley, Jr.                 | 
|   |  | Chairman of the Board,                 | 
|   |  | Chief Executive Officer,
President and | 
|   |  | Chief Operating Officer                | 
|   |  |                                        | 
|By |  | /s/ SUSAN M. BEALE                     | 
|   |  |                                        | 
|   |  | Susan M. Beale                         | 
|   |  | Director, Vice President and           | 
|   |  | Corporate Secretary                    | 
|   |  |                                       
|By |  | /s/ DAVID E. MEADOR                    | 
|   |  |                                        | 
|   |  | David E. Meador                        | 
|   |  | Director                               | 

Date: March 1, 2004

64



---



##### 



Exhibit Index

|       |  |                                                                                
|------ |  | -------------------------------------------------------------------------------
|Number |  | Description                                                                    
|       |  | Exhibits filed herewith.                                                       
|       |  |                                                                                
|12-20  |  | Computation of Ratio of Earnings to Fixed Charges.                             
|       |  |                                                                                
|23-16  |  | Consent of Deloitte & Touche LLP.                                              
|       |  |                                                                                
|31-5   |  | Chief Executive Officer Section 302 Form 10-K Certification of
Periodic Report.
|       |  |                                                                                
|31-6   |  | Chief Financial Officer Section 302 Form 10-K Certification of
Periodic Report.
|       |  |                                                                                
|32-5   |  | Chief Executive Officer Section 906
Form 10-K Certification of Periodic
Report.
|       |  |                                                                                
|32-6   |  | Chief Financial Officer Section 906
Form 10-K Certification of Periodic
Report.