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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period ended March 31, 2006
 Commission file number 1-7310
  MICHIGAN CONSOLIDATED GAS COMPANY
  Michigan
    
    38-0478040(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 2000 2ndAvenue, Detroit, Michigan
(Address of principal executive offices)
    
    48226-1279
(Zip Code)
 313-235-4000
  Yesþ
    
    No o
  Large accelerated filer o Accelerated filer o Non-accelerated filer þ
  Yeso
    
    No þ




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##### 



Michigan Consolidated Gas Company
 Quarterly Report on Form 10-Q  Quarter Ended March 31, 2006
 Table of Contents
 PageNumberDEFINITIONS
    
    
    1FORWARD-LOOKING STATEMENTS
    
    
    2PART I   FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statement of Operations
    
    
    5Consolidated Statement of Financial Position
    
    
    6Consolidated Statement of Cash Flows
    
    
    8Consolidated Statement of Retained Earnings and Comprehensive Income
    
    
    9Notes to Consolidated Financial Statements
    
    
    10Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    4PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 6. Exhibits
    
    
    16SIGNATURE
    
    
    17Computation of Ratio of Earnings to Fixed ChargesChief Executive Officer Section 302 Form 10-Q CertificationChief Financial Officer Section 302 Form 10-Q CertificationChief Executive Officer Section 906 Form 10-Q CertificationChief Financial Officer Section 906 Form 10-Q Certification




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Definitions
 Company or MichCon
    
    Michigan Consolidated Gas Company, an
indirect, wholly-owned natural gas
distribution and intrastate transmission
subsidiary of Enterprises.Customer Choice
    
    Statewide initiatives giving customers in
Michigan the option to choose alternative
suppliers for gas.DTE Energy
    
    DTE Energy Company, directly or indirectly,
the parent of The Detroit Edison Company,
MichCon and numerous non-utility subsidiaries.End User Transportation
    
    A gas delivery service historically provided
to large-volume commercial and industrial
customers who purchase natural gas directly
from producers or brokerage companies. Under
MichCons Customer Choice Program that began
in 1999, this service is also provided to
residential customers and small-volume
commercial and industrial customers.Enterprises
    
    DTE Enterprises Inc., a wholly owned
subsidiary of DTE Energy and indirectly the
parent of MichCon.Gas storage
    
    For MichCon, the process of injecting,
storing, and withdrawing natural gas from a
depleted underground natural gas field.GCR
    
    A gas cost recovery mechanism authorized by
the MPSC, permitting MichCon to pass the cost
of natural gas to its customers.Intermediate Transportation
    
    A gas delivery service provided to producers,
brokers and other gas companies that own the
natural gas, but are not the ultimate
consumers.MPSC
    
    Michigan Public Service CommissionSFAS
    
    Statement of Financial Accounting StandardsUnits of Measurement:Bcf
    
    Billion cubic feet of gasMcf
    
    Thousand cubic feet of gas
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Forward-Looking Statements
  
    
    the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;
    
    economic climate and population growth or decline in the geographic areas where we do business;
    
    environmental issues, laws, regulations, and the cost of remediation and compliance;
    
    implementation of the gas Customer Choice program;
    
    impact of gas utility restructuring in Michigan, including legislative amendments;
    
    employee relations and the impact of collective bargaining agreements;
    
    access to capital markets and capital market conditions and the results of other financing efforts which can be
affected by credit agency ratings;
    
    the timing and extent of changes in interest rates;
    
    the level of borrowing;
    
    changes in the cost and availability of natural gas;
    
    effects of competition;
    
    impact of regulation by the MPSC and other applicable
governmental proceedings and regulations;
    
    changes in and application of federal, state and local tax laws and their interpretations, including the Internal
Revenue Code, regulations, rulings, court proceedings and audits;
    
    the ability to recover costs through rate increases;
    
    the availability, cost, coverage and terms of insurance;
    
    the cost of protecting assets against, or damage due to, terrorism;
    
    changes in and application of accounting standards and financial reporting regulations;
    
    changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business
issues;
    
    uncollectible accounts receivable;
    
    litigation and related appeals; and
    
    changes in the economic and financial viability of our suppliers and customers, and the continued ability of such
parties to perform their obligations to the Company.
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Managements Narrative Analysis of the Results of Operations
   Factors impacting income:
  Increase (Decrease) in Income Statement Components Compared to Prior Year
 (in Millions)
    
    2006Operating revenues
    
    $
    29Cost of gas
    
    
    (3
    )Gross margin
    
    
    32Operation and maintenance
    
    
    Depreciation, depletion and amortization
    
    
    (3
    )Taxes other than income
    
    
    2Asset (gains) and losses, net
    
    
    (48
    )Other (income) and deductions
    
    
    1Income tax provision
    
    
    17Net income
    
    $
    63
 Gross margins
 Quarter2006
    
    
    2005Gas Markets (in Millions)Gas sales
    
    $
    782
    
    
    $
    756End user transportation
    
    
    45
    
    
    
    45827
    
    
    
    801Intermediate transportation
    
    
    15
    
    
    
    14Other
    
    
    21
    
    
    
    19$
    863
    
    
    $
    834Gas Markets (in Bcf)Gas sales
    
    
    65
    
    
    
    82End user transportation
    
    
    44
    
    
    
    50109
    
    
    
    132Intermediate transportation
    
    
    163
    
    
    
    134272
    
    
    
    266
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Operation and maintenance
 Asset (gains) and losses, net
 Income taxes
 Outlook
 
 CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
 
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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
 Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Operating Revenues
    
    $
    863
    
    
    $
    834Operating ExpensesCost of gas
    
    
    624
    
    
    
    627Operation and maintenance
    
    
    119
    
    
    
    119Depreciation, depletion and amortization
    
    
    23
    
    
    
    26Taxes other than income
    
    
    15
    
    
    
    13Asset (gains) and losses, net
    
    
    
    
    
    
    48781
    
    
    
    833Operating Income
    
    
    82
    
    
    
    1Other (Income) and DeductionsInterest expense
    
    
    17
    
    
    
    15Interest income
    
    
    (2
    )
    
    
    (2
    )Other income
    
    
    (2
    )
    
    
    (2
    )Other expenses
    
    
    1
    
    
    
    214
    
    
    
    13Income (Loss) Before Income Taxes
    
    
    68
    
    
    
    (12
    )Income Tax Provision
    
    
    18
    
    
    
    1Net Income (Loss)
    
    $
    50
    
    
    $
    (13
    )
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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 March 31, 2006
    
    
    December 31,(in Millions)
    
    (Unaudited)
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1
    
    
    $
    7Accounts receivableCustomer (less allowance for doubtful accounts of $101 and
$78, respectively)
    
    
    473
    
    
    
    322Accrued unbilled revenues
    
    
    111
    
    
    
    230Other
    
    
    73
    
    
    
    79Accrued gas cost recovery revenue
    
    
    1
    
    
    
    42InventoriesGas
    
    
    70
    
    
    
    119Material and supplies
    
    
    15
    
    
    
    16Gas customer choice deferred asset
    
    
    24
    
    
    
    65Other
    
    
    47
    
    
    
    30815
    
    
    
    910Property, Plant and Equipment
    
    
    3,265
    
    
    
    3,252Less accumulated depreciation, depletion and amortization
    
    
    (1,485
    )
    
    
    (1,468
    )1,780
    
    
    
    1,784Other AssetsOther investments
    
    
    92
    
    
    
    90Notes receivable
    
    
    80
    
    
    
    80Regulatory assets
    
    
    64
    
    
    
    65Prepaid benefit costs and due from affiliate
    
    
    407
    
    
    
    399Other
    
    
    9
    
    
    
    15652
    
    
    
    649Total Assets
    
    $
    3,247
    
    
    $
    3,343
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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 March 31, 2006
    
    
    December 31,(in Millions)
    
    (Unaudited)
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    197
    
    
    $
    246Dividends payable
    
    
    12
    
    
    
    13Short-term borrowings
    
    
    186
    
    
    
    439Current portion of long-term debt, including capital leases
    
    
    40
    
    
    
    40Federal income, property and other taxes payable
    
    
    57
    
    
    
    24Regulatory liabilities
    
    
    10
    
    
    
    Gas inventory equalization (Note 1)
    
    
    158
    
    
    
    Other
    
    
    62
    
    
    
    70722
    
    
    
    832Other LiabilitiesDeferred income taxes
    
    
    175
    
    
    
    191Regulatory liabilities
    
    
    495
    
    
    
    490Unamortized investment tax credit
    
    
    16
    
    
    
    17Accrued postretirement benefit costs
    
    
    130
    
    
    
    144Accrued environmental costs
    
    
    29
    
    
    
    29Other
    
    
    143
    
    
    
    141988
    
    
    
    1,012Long-Term debt, including capital lease obligations
    
    
    745
    
    
    
    745Contingencies (Notes 3 and 4)Shareholders EquityCommon stock, $1 par value, 15,100,000 shares authorized,
10,300,000 shares issued and outstanding
    
    
    10
    
    
    
    10Additional paid in capital
    
    
    432
    
    
    
    432Retained earnings
    
    
    351
    
    
    
    313Accumulated other comprehensive loss
    
    
    (1
    )
    
    
    (1
    )792
    
    
    
    754Total Liabilities and Shareholders Equity
    
    $
    3,247
    
    
    $
    3,343
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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Operating ActivitiesNet income (loss)
    
    $
    50
    
    
    $
    (13
    )Adjustments to reconcile net income (loss) to net cash
from operating activities:Depreciation, depletion and amortization
    
    
    23
    
    
    
    26Deferred income taxes and investment tax credit, net
    
    
    (19
    )
    
    
    (22
    )Asset (gains) and losses, net
    
    
    
    
    
    
    48Changes in assets and liabilities:Accounts receivable, net
    
    
    (145
    )
    
    
    (126
    )Accrued unbilled revenues
    
    
    119
    
    
    
    33Inventories
    
    
    50
    
    
    
    73Postretirement obligation
    
    
    (14
    )
    
    
    5Property taxes assessed applicable to future periods
    
    
    (7
    )
    
    
    (10
    )Prepaid benefit costs and due from affiliate
    
    
    (8
    )
    
    
    (8
    )Accrued gas cost recovery
    
    
    51
    
    
    
    (26
    )Accounts payable
    
    
    (36
    )
    
    
    1Gas inventory equalization
    
    
    158
    
    
    
    278Federal income, property and other taxes payable
    
    
    33
    
    
    
    23Other assets
    
    
    38
    
    
    
    37Other liabilities
    
    
    (1
    )
    
    
    (3
    )Net cash from operating activities
    
    
    292
    
    
    
    316Investing ActivitiesCapital expenditures
    
    
    (32
    )
    
    
    (20
    )Notes receivable from affiliate
    
    
    
    
    
    
    (46
    )Net cash used for investing activities
    
    
    (32
    )
    
    
    (66
    )Financing ActivitiesShort-term borrowings, net
    
    
    (254
    )
    
    
    (237
    )Dividends paid
    
    
    (12
    )
    
    
    (12
    )Net cash used for financing activities
    
    
    (266
    )
    
    
    (249
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (6
    )
    
    
    1Cash and Cash Equivalents at Beginning of Period
    
    
    7
    
    
    
    Cash and Cash Equivalents at End of Period
    
    $
    1
    
    
    $
    1Supplementary Cash Flow InformationInterest paid (excluding interest capitalized)
    
    $
    21
    
    
    $
    18Income taxes paid
    
    
    
    
    
    
    
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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF RETAINED EARNINGS
AND COMPREHENSIVE INCOME (UNAUDITED)
 Three Months EndedMarch 31(in Millions)
    
    2006
    
    
    2005Balance  beginning of period
    
    $
    313
    
    
    $
    350Net income (loss)
    
    
    50
    
    
    
    (13
    )Common stock dividends declared
    
    
    (12
    )
    
    
    (13
    )Balance  end of period
    
    $
    351
    
    
    $
    324
  (in Millions)
    
    2006
    
    
    2005Net income (loss)
    
    $
    50
    
    
    $
    (13
    )Comprehensive income (loss)
    
    $
    50
    
    
    $
    (13
    )
  9




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Michigan Consolidated Gas Company
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  GENERAL
    Asset Retirement Obligations
 Accounting for
Asset Retirement Obligations Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement No. 143
 Accounting for the
Effects of Certain Types of Regulation.
  (in Millions)Asset retirement obligations at January 1, 2006
    
    $
    97Accretion
    
    
    2Liabilities settled
    
    
    Asset retirement obligations at March 31, 2006
    
    $
    99
 Retirement Benefits and Trusteed Assets
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Other Postretirement(in Millions)
    
    Pension Benefits
    
    
    BenefitsThree Months Ended March 31
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Service Cost
    
    $
    2
    
    
    $
    2
    
    
    $
    4
    
    
    $
    3Interest Cost
    
    
    4
    
    
    
    4
    
    
    
    6
    
    
    
    6Expected Return on Plan Assets
    
    
    (7
    )
    
    
    (7
    )
    
    
    (2
    )
    
    
    (3
    )Amortization ofNet loss
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Prior service cost
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net Periodic Benefit Cost (Credit)
    
    $
    (1
    )
    
    $
    (1
    )
    
    $
    12
    
    
    $
    10
  Gas in Inventory
  NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Stock-Based Compensation
 Share-Based
Payment,
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NOTE 3  REGULATORY MATTERS
 Emergency Rules for Gas Bills
  
    
    lengthen the period of time before a bill is due once it is transmitted to the customer;
    
    prohibit shut off or late payment fees unless an actual meter read is made;
    
    limit the required monthly payment on a settlement agreement;
    
    increase the income level qualifying for shut-off protection and lower the payment
required to remain on shut-off protection; and
    
    lessen or eliminate certain deposit requirements.
 Uncollectible Expense Tracker Mechanism and Report of Safety and Training-Related Expenditures
  Gas Cost Recovery Proceedings
 2004 Plan Year 
 2005-2006 Plan Year 
 12




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2006-2007 Plan Year
 Other
  NOTE 4  CONTINGENCIES
 Environmental Matters
 Contaminated Sites 
   13




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Personal Property Taxes
   Income Taxes
  Other Commitments
  Bankruptcies
  14




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Other
   15




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OTHER INFORMATION
 
 LEGAL PROCEEDINGS
   
 EXHIBITS
 ExhibitNumber
    
    DescriptionFiled:12-7
    
    Computation of Ratio of Earnings to Fixed Charges31-23
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-24
    
    Chief Financial Officer Section 302 Form 10-Q CertificationFurnished:32-23
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-24
    
    Chief Financial Officer Section 906 Form 10-Q Certification
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Signature
  MICHIGAN CONSOLIDATED
GAS COMPANYDate: May 10, 2006
    
    /s/ PETER B. OLEKSIAKPeter B. OleksiakController and Chief Accounting Officer
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EXHIBIT NO.
    
    DESCRIPTION12-7
    
    Computation of Ratio of Earnings to Fixed Charges31-23
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-24
    
    Chief Financial Officer Section 302 Form 10-Q Certification32-23
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-24
    
    Chief Financial Officer Section 906 Form 10-Q Certification