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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-Q

(Mark One)



| |  | [X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                
      OF THE SECURITIES EXCHANGE ACT OF 1934
| |  | -----------------------------------------------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2000, or



| |  | [ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
| |  | ----------------------------------------------------------------------------------------------------------------------------

For the transition period from ________________ to _______________

Commission file number 1-7310

MICHIGAN CONSOLIDATED GAS COMPANY
(Exact name of registrant as specified in its charter)

|                                                                                |  |                                                
|------------------------------------------------------------------------------- |  | -----------------------------------------------
|Michigan
(State or other jurisdiction of
incorporation or organization)         |  | 38-0478040
(I.R.S. Employer
Identification No.)
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|500 Griswold Street, Detroit, Michigan
(Address of principal executive offices) |  | 48226
(Zip Code)                               

Registrants telephone number, including area code 313-965-2430

No Changes
(Former name, former address and former fiscal year, if changed since last report.)

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 _____

Number of shares outstanding of each of the registrants classes of common
stock, as of August 14, 2000:

Common Stock, par value $1.00 per share: 10,300,000

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INDEX TO FORM 10-Q

FOR QUARTER ENDED JUNE 30, 2000

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|COVER                                                                                         |  |        | i  | 
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|INDEX                                                                                         |  |        | ii | 
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|PART I   FINANCIAL INFORMATION                                                              
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|Item 1. Financial Statements                                                                  |  |        | 9  | 
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|Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |        | 1  | 
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|PART II  OTHER INFORMATION                                                                  
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|Item 6. Exhibits and Reports on Form 8-K                                                      |  |        | 17 | 
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|SIGNATURE                                                                                     |  |        | 18 | 

ii



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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONSResults reflect reduced contributions from gas sales program- MichCons
earnings were $4.0 million and $70.9 million for the 2000 quarter and six-month
period, respectively, resulting in decreases of $4.2 million and $21.2 million
from the comparable 1999 periods. Earnings for the 2000 twelve-month period were
$85.1 million, a decrease of $19.3 million from the corresponding 1999 period.
As subsequently discussed, the 2000 periods include costs associated with the
merger between MichCons parent company, MCN Energy Group Inc. (MCN), and DTE
Energy Company (Note 2). The 1999 twelve-month period includes the write-down of
a gas gathering pipeline (Note 3). Excluding the merger costs and write-down,
earnings for the 2000 quarter, six- and twelve-month periods decreased $3.5
million, $20.3 million and $13.0 million, respectively, over the corresponding
1999 periods. The earnings declines for the 2000 quarter and six-month period
reflect reduced contributions from the gas sales program. Warmer weather and
higher financing costs drove the earnings decline in the 2000 twelve-month
period and contributed to the decline in the 2000 six-month period.

Earnings Components (Dollars in Millions)
Comparing 2000 to 1999

|                             |  |         |      |          |  |           |       |        |  |        |       |        |  |  |       |   |  |  |       |   |  |  |       |  
|---------------------------- |  | ------- | ---- | -------- |  | --------- | ----- | ------ |  | ------ | ----- | ------ |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                             |  | Quarter |      | 6 Months |  | 12 Months
|                             |  |         |      |          |  |          
|                             |  | $       |      | %        |  | $         |       | %      |  | $      |       | %     
|                             |  | Change  |      | Change   |  | Change    |       | Change |  | Change |       | Change
|                             |  |         |      |          |  |           |       |        |  |        |       |       
|Operating Revenues           |  |         | 1.9  |          |  |           | 1.0   |        |  |        | (53.4 | )      |  |  | (7.8  | ) |  |  | (33.0 | ) |  |  | (3.0  | )
|                            
|                            
|                            
|                            
|Cost of Gas                  |  |         | 9.7  |          |  |           | 16.1  |        |  |        | (22.1 | )      |  |  | (7.2  | ) |  |  | (23.4 | ) |  |  | (4.8  | )
|                            
|                            
|                            
|                            
|Gross Margin                 |  |         | (7.8 | )        |  |           | (6.2  | )      |  |        | (31.3 | )      |  |  | (8.3  | ) |  |  | (9.6  | ) |  |  | (1.5  | )
|                            
|                            
|                            
|                            
|Operation and Maintenance    |  |         | (5.5 | )        |  |           | (8.6  | )      |  |        | (9.0  | )      |  |  | (6.9  | ) |  |  | (2.7  | ) |  |  | (1.0  | )
|                            
|                            
|                            
|                            
|Depreciation and Depletion   |  |         | 1.3  |          |  |           | 5.3   |        |  |        | 2.6   |        |  |  | 5.3   |   |  |  | 5.2   |   |  |  | 5.4   |  
|                            
|                            
|                            
|                            
|Property and Other Taxes     |  |         | .9   |          |  |           | 7.0   |        |  |        | 1.4   |        |  |  | 4.6   |   |  |  | (8.7  | ) |  |  | (15.7 | )
|                            
|                            
|                            
|                            
|Merger Costs (Note 2)        |  |         | 1.1  |          |  |           | N/A   |        |  |        | 1.4   |        |  |  | N/A   |   |  |  | 26.9  |   |  |  | N/A   |  
|                            
|                            
|                            
|                            
|Property Write-down (Note 3) |  |         |     |          |  |           |      |        |  |        |      |        |  |  |      |   |  |  | (24.8 | ) |  |  | N/A   |  
|                            
|                            
|                            
|                            
|Other Income and Deductions  |  |         | .9   |          |  |           | 7.6   |        |  |        | 2.7   |        |  |  | 11.4  |   |  |  | 14.0  |   |  |  | 33.4  |  
|                            
|                            
|                            
|                            
|Income Tax Provision         |  |         | (2.2 | )        |  |           | (56.1 | )      |  |        | (9.2  | )      |  |  | (19.6 | ) |  |  | (.2   | ) |  |  | (.3   | )
|                            
|                            
|                            
|                            
|Net Income                   |  |         | (4.2 | )        |  |           | (51.2 | )      |  |        | (21.2 | )      |  |  | (23.0 | ) |  |  | (19.3 | ) |  |  | (18.5 | )

Gross Margin
Gross margin (operating revenues less cost of gas) decreased $7.8 million, $31.3
million and $9.6 million in the 2000 quarter, six- and twelve-month periods,
respectively. Gross margins for the 2000 quarter and six-month period reflect
lower margins generated under MichCons three-year gas sales program which began
in January 1999 (Note 4a). Under the gas sales program, MichCons gas sales
rates include a gas commodity component fixed at $2.95 per thousand cubic feet
(Mcf). As part of its gas acquisition strategy, MichCon has entered into
fixed-price contracts at an average cost below $2.95 per Mcf for a substantial
portion of its expected gas supply requirements in 2000 and approximately 65% of
such requirements in 2001. However, gas sales margins in the 2000 first and
second quarters were lower than the same 1999 periods as a result of higher
fixed-price supplies.

Gross margins for the 2000 twelve-month period include higher margins generated
under MichCons gas sales program. As a result of the gas sales program
beginning in January 1999, the 2000 twelve-

1MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)month period includes a full years contribution, whereas the 1999 twelve-month
period includes only six months of contributions.Gross margins for all three 2000 periods were affected by the number of
customers who chose to purchase their gas from other suppliers under MichCons
three-year customer choice program. Year one of this program began in April 1999
with approximately 70,000 customers choosing to participate. Year two commenced
in April 2000 with the number of customers participating declining to
approximately 55,000. Distribution margins are retained from these customers as
MichCon continues to transport and deliver the gas to the customers premises.Gross margins for all three 2000 periods were also impacted by varying weather
which was 13.3% colder in the 2000 quarter, and 5.2% and .6% warmer in the 2000
six- and twelve-month periods, respectively, compared to the same 1999 periods.
Additionally, the 2000 periods reflect a provision for customer refunds (Note
4b), as well as a decline in intermediate transportation revenues and revenues
from other gas-related services.Effect of Weather on Gas Markets and Earnings

|                                       |                          |  |         |      |          |  |           |      |      |  |        |       |      |  |       |       |   |  |        |       |   |  |        |       |  
|-------------------------------------- | ------------------------ |  | ------- | ---- | -------- |  | --------- | ---- | ---- |  | ------ | ----- | ---- |  | ----- | ----- | - |  | ------ | ----- | - |  | ------ | ----- | -
|                                       |                          |  | Quarter |      | 6 Months |  | 12 Months
|                                       |                          |  |         |      |          |  |          
|                                       |                          |  | 2000    |      | 1999     |  | 2000      |      | 1999 |  | 2000   |       | 1999
|                                       |                          |  |         |      |          |  |           |      |      |  |        |       |     
|Percentage Colder (Warmer)
Than Normal |                          |  | (8.1)   | %    |          |  | (21.4)    | %    |      |  | (13.0) | %     |      |  | (7.8) | %     |   |  | (12.2) | %     |   |  | (11.6) | %    
|                                      
|                                      
|                                      
|                                      
|Increase (Decrease) From
Normal in:   
|                                      
|                                      
|                                      
|                                      
|                                       | Gas markets (in Bcf)     |  |         | (1.9 | )        |  |           | (5.3 | )    |  |        | (18.0 | )    |  |       | (10.4 | ) |  |        | (26.4 | ) |  |        | (25.4 | )
|                                      
|                                      
|                                      
|                                      
|                                       | Net income (in Millions) |  | $       | (1.7 | )        |  | $         | (5.1 | )    |  | $      | (16.7 | )    |  | $     | (10.3 | ) |  | $      | (25.0 | ) |  | $      | (23.7 | )

Gas sales and end user transportation revenuesin total increased $3.4 million
for the 2000 quarter, and decreased $49.5 million and $29.2 million for the 2000
six- and twelve-month periods, respectively. Revenues for the 2000 quarter
reflect an increase in gas sales volumes and end user transportation deliveries
due primarily to more normal weather. The 2000 six- and twelve-month periods
reflect a decline in gas sales revenues due to lower sales volumes, partially
offset by higher end user transportation revenues due to increased deliveries.
Gas sales volumes decreased 13.6 billion cubic feet (Bcf) in the 2000 six-month
period and 16.1 Bcf in the 2000 twelve-month period due primarily to warmer
weather and customers who chose to purchase their gas from other suppliers under
MichCons customer choice program. End user transportation deliveries increased
14.7 Bcf in the 2000 six-month period and 25.6 Bcf in the 2000 twelve-month
period. The improvement includes volumes associated with customers participating
in the customer choice program who are reflected as end user transportation
customers rather than gas sales customers. Accordingly, gas sales revenues have
decreased, partially offset by an increase in end user transportation revenues,
resulting in a net decrease in total operating revenues due to the gas commodity
component included in gas sales rates. Partially offsetting the 2000 six- and
twelve-month periods increase in end user transportation volumes attributable
to the customer choice program was the impact of warmer weather.

2MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)The gas sales revenues comparison was impacted by a $2.4 million provision for
customer refunds recorded in the 2000 quarter, and the end user transportation
comparison was affected by the temporary shutdown of an industrial customers
plant in the 1999 quarter.Additionally, the gas sales revenues comparison for the twelve-month period was
impacted by the cost of the gas commodity component of gas sales rates. As
previously discussed, this gas commodity component was fixed under MichCons gas
sales program at $2.95 per Mcf beginning in January 1999. Prior to 1999,
MichCons sales rates were set to recover all of its reasonably and prudently
incurred gas costs. The gas commodity component of MichCons sales increased
$.12 per Mcf (4%) for the 2000 twelve-month period.

|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|--------------------------- |  | ------- | ----- | -------- |  | --------- | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ------- |  |  | - | ------- | 
|                            |  | Quarter |       | 6 Months |  | 12 Months
|                            |  |         |       |          |  |          
|                            |  | 2000    |       | 1999     |  | 2000      |       | 1999 |  | 2000 |       | 1999
|                            |  |         |       |          |  |           |       |      |  |      |       |     
|Gas Markets (in Millions)  
|                           
|                           
|                           
|                           
|Gas Sales                   |  | $       | 134.1 |          |  | $         | 133.0 |      |  | $    | 504.8 |      |  | $ | 568.7 |  |  | $ | 843.6   |  |  | $ | 902.0   | 
|                           
|                           
|                           
|                           
|End User Transportation     |  |         | 25.6  |          |  |           | 23.3  |      |  |      | 64.4  |      |  |   | 50.0  |  |  |   | 118.0   |  |  |   | 88.8    | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|                            |  |         | 159.7 |          |  |           | 156.3 |      |  |      | 569.2 |      |  |   | 618.7 |  |  |   | 961.6   |  |  |   | 990.8   | 
|                           
|                           
|                           
|                           
|Intermediate Transportation |  |         | 12.7  |          |  |           | 13.9  |      |  |      | 27.2  |      |  |   | 28.6  |  |  |   | 56.3    |  |  |   | 58.0    | 
|                           
|                           
|                           
|                           
|Other                       |  |         | 15.0  |          |  |           | 15.4  |      |  |      | 33.8  |      |  |   | 36.3  |  |  |   | 64.3    |  |  |   | 66.5    | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|                            |  | $       | 187.4 |          |  | $         | 185.6 |      |  | $    | 630.2 |      |  | $ | 683.6 |  |  | $ | 1,082.2 |  |  | $ | 1,115.3 | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|Gas Markets (in Bcf)       
|                           
|                           
|                           
|                           
|Gas Sales                   |  |         | 24.3  |          |  |           | 23.6  |      |  |      | 101.0 |      |  |   | 114.6 |  |  |   | 164.6   |  |  |   | 180.7   | 
|                           
|                           
|                           
|                           
|End User Transportation     |  |         | 37.3  |          |  |           | 31.8  |      |  |      | 88.9  |      |  |   | 74.2  |  |  |   | 166.4   |  |  |   | 140.8   | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|                            |  |         | 61.6  |          |  |           | 55.4  |      |  |      | 189.9 |      |  |   | 188.8 |  |  |   | 331.0   |  |  |   | 321.5   | 
|                           
|                           
|                           
|                           
|Intermediate Transportation |  |         | 111.7 |          |  |           | 135.0 |      |  |      | 294.6 |      |  |   | 262.3 |  |  |   | 564.1   |  |  |   | 503.0   | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 
|                            |  |         | 173.3 |          |  |           | 190.4 |      |  |      | 484.5 |      |  |   | 451.1 |  |  |   | 895.1   |  |  |   | 824.5   | 
|                            |  |         |       |          |  |           |       |      |  |      |       |      |  |   |       |  |  |   |         |  |  |   |         | 

Intermediate transportation revenuesdecreased $1.2 million, $1.4 million and
$1.7 million in the 2000 quarter, six- and twelve-month periods, respectively.
Although revenues declined slightly, the related deliveries fluctuated
significantly, decreasing 23.3 Bcf in the 2000 quarter, and increasing 32.3 Bcf
and 61.1 Bcf in the 2000 six- and twelve-month periods, respectively. A
significant portion of the volume variations was for customers who pay a fixed
fee for intermediate transportation capacity regardless of actual usage.
Although volumes associated with these fixed-fee customers may vary, the related
revenues are not affected. The decrease in intermediate transportation revenues
is due to non fixed-fee customers shifting volumes from a higher rate to a lower
rate transportation route.

Other operating revenuesdecreased $.4 million, $2.5 million and $2.2 million in
the 2000 quarter, six- and twelve-month periods, respectively. Revenues in the
2000 six- and twelve-month periods reflect a decline in storage revenues,
partially offset by an increase in late payment fees and revenues from providing
appliance maintenance services.

Cost of Gas
Cost of gas is affected by variations in sales volumes and cost of purchased gas
as well as related transportation costs. Under the Gas Cost Recovery (GCR)
mechanism that was in effect through December 1998, MichCons sales rates were
set to recover all of its reasonably and prudently

3



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MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

incurred gas costs. Therefore, fluctuations in cost of gas sold had little
effect on gross margins. Under MichCons gas sales program, the gas commodity
component of its sales rates is fixed. Accordingly, beginning in January 1999,
changes in cost of gas sold directly impact gross margins and earnings.

Cost of gas sold increased $9.7 million in the 2000 quarter, and decreased $22.1
million and $23.4 million in the 2000 six- and twelve-month periods,
respectively. The cost of gas variations primarily reflects weather-driven sales
volumes as well as changes in sales volumes associated with customers who have
chosen to purchase gas from other suppliers under MichCons customer choice
program. Also impacting cost of gas sold was an increase in the price paid for
gas purchased of $.10 per Mcf (4%) in the 2000 quarter and $.11 per Mcf (4%) in
both the 2000 six- and twelve-month periods.

Other Operating ExpensesOperation and maintenanceexpenses decreased $5.5 million, $9.0 million and $2.7
million in the 2000 quarter, six- and twelve-month periods, respectively. The
decreases are attributable to lower employee benefit costs, primarily pension
costs. The 2000 six- and twelve-month periods also benefited from the receipt of
insurance proceeds resulting from the settlement of environmental claims with
certain insurance carriers. As discussed in MichCons 1999 Annual Report on Form
10-K, the settlement has allowed MichCon to recover previously incurred costs
and resolved the carriers liabilities for future costs of environmental
investigation and remediation at former manufactured gas plant sites.

Partially offsetting the improvement in the 2000 twelve-month period were
additional computer system support costs associated with MichCons new customer
information system, higher injuries and damages costs, and higher employee
incentive payments.

Depreciation and depletionincreased $1.3 million, $2.6 million and $5.2 million
in the 2000 quarter, six- and twelve-month periods, respectively, reflecting
depreciation on higher plant balances.

Property and other taxesincreased $.9 million and $1.4 million in the 2000
quarter and six-month period, respectively, and decreased $8.7 million in the
2000 twelve-month period. All three 2000 periods were impacted by taxes on
higher plant balances. However, the effect of higher plant balances in the 2000
twelve-month period was more than offset by a change in the calculation of the
value of personal property subject to taxation by local taxing jurisdictions.
MichCon has pending tax appeals with various local taxing jurisdictions to
recover excess payments made in prior years based on the revised calculation.
This calculation change, coupled with the favorable impact of new valuation
tables approved by the Michigan State Tax Commission (STC) in November 1999, is
expected to lower MichCons personal property taxes by approximately $8 million
annually beginning in July 2000. Several local taxing jurisdictions have taken
legal action against the State of Michigan to prevent the STC from implementing
the new valuation tables (Note 6a).

Merger costsof $1.1 million, $1.4 million and $26.9 million in the 2000
quarter, six- and twelve-month periods, respectively, include legal, consulting,
accounting, employee benefit and other expenses associated with the pending
merger between MCN and DTE Energy Company (Note 2).

4MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)Property write-downof $24.8 million in the 1999 twelve-month period reflects
the impairment of certain gas gathering properties in northern Michigan (Note
3).Other Income and Deductions
Other income and deductions increased $.9 million, $2.7 million and $14.0
million in the 2000 quarter, six- and twelve-month periods, respectively. All
three 2000 periods reflect higher interest costs primarily due to an increase in
the average balance of long-term debt outstanding, interest on customer refunds
as well as a decline in interest capitalized relating to construction
activities. Additionally, the other income and deductions increase in the 2000
twelve-month period is attributable to lower interest income resulting from the
repayment of funds loaned to MCN. Other income and deductions in the 1999
twelve-month period include a change in minority interest reflecting the joint
venture partners share of the write-down of the gas gathering properties (Note
3).Income Taxes
Income taxes for all three 2000 periods were impacted by a decrease in pre-tax
earnings. Income tax comparisons were also affected by the favorable resolution
of prior years tax issues.Outlook
MichCons strategy is to expand its role as the preferred provider of natural
gas and high-value energy services within Michigan. Accordingly, MichCons
objectives are to increase revenues and control costs in order to deliver strong
shareholder returns and provide customers with high-quality service at
competitive prices.MichCon has begun, and plans to continue capitalizing on opportunities resulting
from the gas industry restructuring. MichCon is currently operating under its
Regulatory Reform Plan, which includes a comprehensive experimental three-year
customer choice program that is designed to offer all sales customers added
choices and greater price certainty. Year two of the customer choice program
began April 1, 2000, and approximately 55,000 customers have chosen to purchase
natural gas from suppliers other than MichCon. There are approximately 15,000
fewer customers participating in year two of the plan than in year one as a
result of fewer natural gas marketers participating due to higher gas prices.As discussed in MichCons 1999 Annual Report on Form 10-K, the Regulatory Reform
Plan also suspended the GCR mechanism for customers who continue to purchase gas
from MichCon, and fixed the gas commodity component of MichCons sales rates at
$2.95 per Mcf. The suspension of the GCR mechanism allows MichCon to profit from
its ability to purchase gas at less than $2.95 per Mcf. The plan also increases
MichCons risk associated with generating margins that cover its gas costs. As
part of its gas acquisition strategy, MichCon entered into fixed-price contracts
at an average cost below $2.95 per Mcf for a substantial portion of its expected
supply requirements in 2000 and approximately 65% of such requirements in 2001.
However, margins are expected to be lower in future periods as MichCons
fixed-price supplies in 2000 and 2001 are at prices higher than those paid in
1999. MichCon expects to meet its remaining gas supply requirements for 2000 and
2001 through open-market gas purchases, supplemented with gas from storage.
Margins in future periods could decline further if gas prices remain at their
current levels, which are high compared to historical periods. The level of
margins generated from selling gas will also be affected by actual gas sales5MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)volumes, which will fluctuate as a result of changes in weather and the number
of customers who ultimately choose to purchase gas from suppliers other than
MichCon.The State of Michigan is continuing its initiatives designed to give all of
Michigans natural gas customers added choices and the opportunity to benefit
from lower gas costs resulting from competition. Although MichCon supports
customer choice initiatives, management is concerned with the structure of the
current three-year customer choice and gas sales programs which fixed the gas
commodity component of its sales rates at $2.95 per Mcf. MichCon is unable to adjust
its sales prices to levels that are responsive to changes in the marketplace.
Given the current environment of high gas prices, MichCon could incur losses on
incremental volumes associated with unexpected demand, such as volumes resulting
from colder weather or additional gas sales customers. MichCon is exploring its
options to minimize its exposure to price risk, including supplementing its
fixed-price supplies with heavier reliance on withdrawals from storage and
seeking regulatory or legislative reform.CAPITAL RESOURCES AND LIQUIDITY

|                                                     |                      |      |          |        |   |   |     |        |  
|---------------------------------------------------- | -------------------- | ---- | -------- | ------ | - | - | --- | ------ | -
|                                                     |                      |      | 6 Months
|                                                     |                      |      |         
|Cash and Cash Equivalents (in Millions)              |                      | 2000 |          | 1999  
|                                                     |                      |      |          |       
|Cash Flow Provided From (Used For):                 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Operating activities |      | $        | 275.0  |   |   | $   | 222.6  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Financing activities |      |          | (235.1 | ) |   |     | (159.7 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investing activities |      |          | (46.6  | ) |   |     | (58.7  | )
|                                                     |                      |      |          |        |   |   |     |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                      | $    | (6.7     | )      |   | $ | 4.2 |       
|                                                     |                      |      |          |        |   |   |     |       

Operating Activities
Cash flow provided from operating activities increased $52.4 million during the
2000 six-month period compared to the same 1999 period. The increase was due
primarily to lower working capital requirements, partially offset by a decrease
in earnings, after adjusting for non-cash items (depreciation and deferred
taxes).

Financing Activities
Cash flow used for financing activities increased $75.4 million during the 2000
six-month period compared to the same 1999 period. The increase is due to the
repayment of more short- and long-term debt, net of new debt issuances. This
increase was partially offset by a reduction in dividends paid to MCN. A summary
of MichCons financing strategies, as well as its significant financing
activities follows.

MichCon maintains a relatively consistent amount of cash and cash equivalents
through the use of short-term borrowings. Short-term borrowings are normally
reduced in the first part of each year as gas inventories are depleted and funds
are received from winter heating sales. During the latter part of the year,
MichCons short-term borrowings normally increase as funds are used to finance
increases in gas inventories and customer accounts receivable. To meet its
seasonal short-term borrowing needs, MichCon normally issues commercial paper
that is backed by credit lines with

6



---



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

several banks. MichCon has established credit lines to allow for borrowings
under a 364-day revolving credit facility and a three-year revolving credit
facility. The 364-day facility was renewed in July 2000 and was increased from
$150 million to $200 million. The three-year facility totals $150 million and
expires in July 2001. During the first six months of 2000, MichCon repaid $194.1
million of commercial paper, leaving borrowings of $41.8 million outstanding
under this program at June 30, 2000.

In March 2000, MichCon repaid $12.3 million of term debt of a non-utility
subsidiary that was scheduled to mature in 2006. Additionally, MichCon repaid
$20 million of first mortgage bonds that matured in May 2000.

In July 2000, MichCon paid a $25 million dividend to MCN.

Investing Activities
MichCons cash used for investing activities decreased $12.1 million in the 2000
six-month period compared to the same 1999 period. The decrease was due
primarily to lower capital expenditures. Capital expenditures primarily
represent the construction of distribution lines to attach new customers, new
computer systems and improvements to existing storage, distribution, and
transmission systems.

It is managements opinion that MichCon will have sufficient capital resources,
both internal and external, to meet anticipated capital requirements.

MARKET RISK INFORMATION
MichCon has market risk arising from fluctuations in natural gas prices. MichCon
manages natural gas price risk by entering into fixed-price contracts for a
large portion of its expected supply requirements. If MichCon did not enter into
these fixed-price supply contracts, its exposure to such risk would be
substantially higher. See the Outlook section for a further discussion of
MichCons market risks.

As discussed in MichCons 1999 Annual Report on Form 10-K, MichCon also has
market risk arising from fluctuations in interest rates. MichCon is subject to
interest rate risk in connection with the issuance of variable and fixed-rate
debt. MichCon manages interest rate risk through the use of various derivative
instruments and limits the use of such instruments to hedging activities.
MichCon uses interest rate swap agreements to exchange fixed and variable-rate
interest payment obligations over the life of the agreements without exchange of
the underlying principal amounts. During the 2000 six-month period, there were
no material changes to MichCons interest rate risk.

NEW ACCOUNTING PRONOUNCEMENTSDerivative and Hedging Activities- In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities,
effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities  Deferral of the Effective Date of FASB Statement No. 133.SFAS
No. 137 changes the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.



7



---



MANAGEMENTS DISCUSSION AND ANALYSIS (CONCLUDED)

SFAS No. 133 requires all derivatives to be recognized in the balance sheet as
either assets or liabilities measured at their fair value, and sets forth
conditions in which a derivative instrument may be designated as a hedge. The
Statement requires that changes in the fair value of derivatives be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivatives gains and losses to be
recorded to other comprehensive income or to offset related results on the
hedged item in earnings.

MichCon manages interest rate risk through the use of various derivative instruments and limits the use of such
instruments to hedging activities. The effects of SFAS No. 133 on MichCons financial
statements are subject to fluctuations in the market value of hedging contracts,
which are, in turn, affected by variations in interest rates. Accordingly,
management cannot quantify the effects of adopting SFAS No. 133 at this time.

MichCon initiated a corporate-wide plan in 1998 to address the issues associated
with adopting SFAS No. 133. The plan consists of: i) inventorying and
categorizing derivatives; ii) assessing risk management policies and determining
the effectiveness of hedging methodologies; iii) modeling the impact of hedging
strategies; and iv) assessing processes and technology requirements. MichCon
does not expect any complications in completing the plan or having the related
computer systems operational by the end of 2000.

Revenue Recognition- In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements.SAB No 101 summarized certain of the SECs views in
applying generally accepted accounting principles to recognizing revenues. SAB
101 will be effective for MichCon in the fourth quarter of 2000. Management does
not expect SAB No. 101 to have a material effect on MichCons financial
statements.

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve certain risks and uncertainties as set forth
in MichCons 1999 Annual Report on Form 10-K.

8



---



CONSOLIDATED STATEMENT OF INCOME (Unaudited)

|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |         |         |  
|----------------------------- | ------------------------------------ | ----------------------------------- | ------- | ------------------ | ------- | ---------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                              |                                      |                                     |         | Three Months Ended |         | Six Months Ended
|                              |                                      |                                     |         | June 30            |         | June 30         
|                              |                                      |                                     |         |                    |         |                 
|                              |                                      |                                     |         | 2000               |         | 1999             |         | 2000    |         | 1999
|(in Thousands)                |                                      |                                     |         |                    |         |                  |         |        
|Operating Revenues            |                                      | $                                   | 187,488 |                    |         | $                | 185,555 |         |         | $    | 630,235 |         |         | $ | 683,645 |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|Operating Expenses           
|                             
|                             
|                             
|                             
|                              | Cost of gas                          |                                     |         | 70,108             |         |                  |         | 60,410  |         |      |         | 286,628 |         |   |         | 308,761 |        
|                             
|                             
|                             
|                             
|                              | Operation and maintenance            |                                     |         | 58,412             |         |                  |         | 63,942  |         |      |         | 122,475 |         |   |         | 131,488 |        
|                             
|                             
|                             
|                             
|                              | Depreciation and depletion           |                                     |         | 26,063             |         |                  |         | 24,758  |         |      |         | 52,007  |         |   |         | 49,366  |        
|                             
|                             
|                             
|                             
|                              | Property and other taxes             |                                     |         | 13,591             |         |                  |         | 12,700  |         |      |         | 32,581  |         |   |         | 31,162  |        
|                             
|                             
|                             
|                             
|                              | Merger costs (Note 2)                |                                     |         | 1,079              |         |                  |         |        |         |      |         | 1,426   |         |   |         |        |        
|                             
|                             
|                             
|                             
|                              | Property write-down (Note 3)         |                                     |         |                   |         |                  |         |        |         |      |         |        |         |   |         |        |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|                              |                                      | Total operating expenses            |         |                    | 169,253 |                  |         |         | 161,810 |      |         |         | 495,117 |   |         |         | 520,777 |  
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|Operating Income              |                                      |                                     | 18,235  |                    |         |                  | 23,745  |         |         |      | 135,118 |         |         |   | 162,868 |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|Other Income and (Deductions)
|                             
|                             
|                             
|                             
|                              | Interest income                      |                                     |         | 846                |         |                  |         | 946     |         |      |         | 1,572   |         |   |         | 1,945   |        
|                             
|                             
|                             
|                             
|                              | Interest on long-term debt           |                                     |         | (12,111            | )       |                  |         | (11,525 | )       |      |         | (24,384 | )       |   |         | (22,491 | )      
|                             
|                             
|                             
|                             
|                              | Other interest expense               |                                     |         | (1,860             | )       |                  |         | (1,181  | )       |      |         | (4,869  | )       |   |         | (3,836  | )      
|                             
|                             
|                             
|                             
|                              | Minority interest (Note 3)           |                                     |         | (127               | )       |                  |         | (266    | )       |      |         | (266    | )       |   |         | (523    | )      
|                             
|                             
|                             
|                             
|                              | Equity in earnings of joint ventures |                                     |         | 599                |         |                  |         | 572     |         |      |         | 1,186   |         |   |         | 1,013   |        
|                             
|                             
|                             
|                             
|                              | Other                                |                                     |         | 140                |         |                  |         | (177    | )       |      |         | 460     |         |   |         | 287     |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|                              |                                      | Total other income and (deductions) |         |                    | (12,513 | )                |         |         | (11,631 | )    |         |         | (26,301 | ) |         |         | (23,605 | )
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|Income Before Income Taxes    |                                      |                                     | 5,722   |                    |         |                  | 12,114  |         |         |      | 108,817 |         |         |   | 139,263 |        
|                             
|                             
|                             
|                             
|Income Tax Provision          |                                      |                                     | 1,735   |                    |         |                  | 3,949   |         |         |      | 37,890  |         |         |   | 47,125  |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        
|Net Income                    |                                      | $                                   | 3,987   |                    |         | $                | 8,165   |         |         | $    | 70,927  |         |         | $ | 92,138  |        
|                              |                                      |                                     |         |                    |         |                  |         |         |         |      |         |         |         |   |         |        

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                              |                                      |                                     |           |                     |         |      |           |         |         |  
|----------------------------- | ------------------------------------ | ----------------------------------- | --------- | ------------------- | ------- | ---- | --------- | ------- | ------- | -
|                              |                                      |                                     |           | Twelve Months Ended
|                              |                                      |                                     |           |                    
|                              |                                      |                                     |           |                    
|                              |                                      |                                     |           | 2000                |         | 1999
|(in Thousands)                |                                      |                                     |           |                    
|Operating Revenues            |                                      | $                                   | 1,082,329 |                     |         | $    | 1,115,289 |        
|                              |                                      |                                     |           |                     |         |      |           |        
|Operating Expenses           
|                             
|                             
|                             
|                             
|                              | Cost of gas                          |                                     |           | 461,792             |         |      |           | 485,189 |        
|                             
|                             
|                             
|                             
|                              | Operation and maintenance            |                                     |           | 257,091             |         |      |           | 259,795 |        
|                             
|                             
|                             
|                             
|                              | Depreciation and depletion           |                                     |           | 101,520             |         |      |           | 96,312  |        
|                             
|                             
|                             
|                             
|                              | Property and other taxes             |                                     |           | 46,649              |         |      |           | 55,345  |        
|                             
|                             
|                             
|                             
|                              | Merger costs (Note 2)                |                                     |           | 26,855              |         |      |           |        |        
|                             
|                             
|                             
|                             
|                              | Property write-down (Note 3)         |                                     |           |                    |         |      |           | 24,800  |        
|                              |                                      |                                     |           |                     |         |      |           |        
|                              |                                      | Total operating expenses            |           |                     | 893,907 |      |           |         | 921,441 |  
|                              |                                      |                                     |           |                     |         |      |           |        
|Operating Income              |                                      |                                     | 188,422   |                     |         |      | 193,848   |        
|                              |                                      |                                     |           |                     |         |      |           |        
|Other Income and (Deductions)
|                             
|                             
|                             
|                             
|                              | Interest income                      |                                     |           | 2,231               |         |      |           | 5,699   |        
|                             
|                             
|                             
|                             
|                              | Interest on long-term debt           |                                     |           | (49,158             | )       |      |           | (44,656 | )      
|                             
|                             
|                             
|                             
|                              | Other interest expense               |                                     |           | (9,659              | )       |      |           | (10,801 | )      
|                             
|                             
|                             
|                             
|                              | Minority interest (Note 3)           |                                     |           | (763                | )       |      |           | 6,347   |        
|                             
|                             
|                             
|                             
|                              | Equity in earnings of joint ventures |                                     |           | 2,149               |         |      |           | 2,009   |        
|                             
|                             
|                             
|                             
|                              | Other                                |                                     |           | (843                | )       |      |           | (601    | )      
|                              |                                      |                                     |           |                     |         |      |           |        
|                              |                                      | Total other income and (deductions) |           |                     | (56,043 | )    |           |         | (42,003 | )
|                              |                                      |                                     |           |                     |         |      |           |        
|Income Before Income Taxes    |                                      |                                     | 132,379   |                     |         |      | 151,845   |        
|                             
|                             
|                             
|                             
|Income Tax Provision          |                                      |                                     | 47,254    |                     |         |      | 47,409    |        
|                              |                                      |                                     |           |                     |         |      |           |        
|Net Income                    |                                      | $                                   | 85,125    |                     |         | $    | 104,436   |        
|                              |                                      |                                     |           |                     |         |      |           |        

CONSOLIDATED STATEMENT OF RETAINED EARNINGS (Unaudited)

|                              |                                          |      |                    |       |                  |      |         |       |  |   |         |        |  |   |         |        | 
|----------------------------- | ---------------------------------------- | ---- | ------------------ | ----- | ---------------- | ---- | ------- | ----- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                              |                                          |      | Three Months Ended |       | Six Months Ended
|                              |                                          |      | June 30            |       | June 30         
|                              |                                          |      |                    |       |                 
|(in Thousands)                |                                          | 2000 |                    | 1999  |                  | 2000 |         | 1999 
|                              |                                          |      |                    |       |                  |      |         |      
|Balance  Beginning of Period |                                          | $    | 561,743            |       |                  | $    | 472,440 |       |  | $ | 494,803 |        |  | $ | 406,144 |       
|                             
|                             
|                             
|                             
|                              | Add  Net income                         |      |                    | 3,987 |                  |      |         | 8,165 |  |   |         | 70,927 |  |   |         | 92,138 | 
|                              |                                          |      |                    |       |                  |      |         |       |  |   |         |        |  |   |         |       
|                              |                                          |      | 565,730            |       |                  |      | 480,605 |       |  |   | 565,730 |        |  |   | 498,282 |       
|                             
|                             
|                             
|                             
|                              | Deduct  Common stock dividends declared |      |                    |      |                  |      |         |      |  |   |         |       |  |   |         | 17,677 | 
|                              |                                          |      |                    |       |                  |      |         |       |  |   |         |        |  |   |         |       
|Balance  End of Period       |                                          | $    | 565,730            |       |                  | $    | 480,605 |       |  | $ | 565,730 |        |  | $ | 480,605 |       
|                              |                                          |      |                    |       |                  |      |         |       |  |   |         |        |  |   |         |       

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                              |                                          |      |                     |        |  |   |         |         | 
|----------------------------- | ---------------------------------------- | ---- | ------------------- | ------ |  | - | ------- | ------- | 
|                              |                                          |      | Twelve Months Ended
|                              |                                          |      | June 30            
|                              |                                          |      |                    
|(in Thousands)                |                                          | 2000 |                     | 1999  
|                              |                                          |      |                     |       
|Balance  Beginning of Period |                                          | $    | 480,605             |        |  | $ | 440,003 |        
|                             
|                             
|                             
|                             
|                              | Add  Net income                         |      |                     | 85,125 |  |   |         | 104,436 | 
|                              |                                          |      |                     |        |  |   |         |        
|                              |                                          |      | 565,730             |        |  |   | 544,439 |        
|                             
|                             
|                             
|                             
|                              | Deduct  Common stock dividends declared |      |                     |       |  |   |         | 63,834  | 
|                              |                                          |      |                     |        |  |   |         |        
|Balance  End of Period       |                                          | $    | 565,730             |        |  | $ | 480,605 |        
|                              |                                          |      |                     |        |  |   |         |        

The notes to the consolidated financial statements are an integral part of these
statements.

9



---



CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |           |           | 
|------------------------------------ | --------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- | ----------- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                     |                                                     |                                                                                                         |           | June 30   |           | December 31
|                                     |                                                     |                                                                                                         |           |           |           |            
|                                     |                                                     |                                                                                                         |           | 2000      |           | 1999        |           | 1999     
|                                     |                                                     |                                                                                                         |           |           |           |             |           |          
|(in Thousands)                      
|                                    
|                                    
|                                    
|                                    
|ASSETS                              
|                                    
|                                    
|                                    
|                                    
|                                     | Current Assets                                     
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Cash and cash equivalents                                                                               |           | $         | 3,039     |             |           | $         | 10,823    |   |           | $         | 9,705     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accounts receivable, less allowance for doubtful accounts of
$19,261, $13,492 and $17,777, respectively |           |           | 141,455   |             |           |           | 142,017   |   |           |           | 147,412   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accrued unbilled revenues                                                                               |           |           | 18,244    |             |           |           | 20,302    |   |           |           | 98,866    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Gas in inventory (Note 5)                                                                               |           |           | 52,796    |             |           |           | 43,892    |   |           |           | 74,150    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Property taxes assessed applicable to future periods                                                    |           |           | 38,460    |             |           |           | 48,473    |   |           |           | 60,589    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 36,422    |             |           |           | 34,512    |   |           |           | 31,594    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 290,416   |           |           |             | 300,019   |           |           |   | 422,316   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Deferred Charges and Other Assets                  
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Investment in and advances to joint ventures                                                            |           |           | 19,777    |             |           |           | 19,853    |   |           |           | 19,115    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Long-term investments                                                                                   |           |           | 68,162    |             |           |           | 66,202    |   |           |           | 67,210    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Deferred environmental costs                                                                            |           |           | 26,169    |             |           |           | 28,404    |   |           |           | 28,639    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Prepaid benefit costs                                                                                   |           |           | 184,835   |             |           |           | 134,590   |   |           |           | 156,290   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 63,678    |             |           |           | 66,758    |   |           |           | 64,546    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 362,621   |           |           |             | 315,807   |           |           |   | 335,800   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Property, Plant and Equipment, at cost              |                                                                                                         |           | 3,022,964 |           |             |           | 2,942,856 |           |   |           | 2,988,318 |          
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Less  Accumulated depreciation and depletion                                                           |           |           | 1,509,079 |             |           |           | 1,445,967 |   |           |           | 1,463,706 | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 1,513,885 |           |           |             | 1,496,889 |           |           |   | 1,524,612 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     | $                                                                                                       | 2,166,922 |           |           | $           | 2,112,715 |           |           | $ | 2,282,728 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY
|                                    
|                                    
|                                    
|                                    
|                                     | Current Liabilities                                
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accounts payable                                                                                        |           | $         | 92,391    |             |           | $         | 89,662    |   |           | $         | 93,549    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Notes payable                                                                                           |           |           | 42,869    |             |           |           | 28,319    |   |           |           | 237,785   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Current portion of long-term debt and capital lease obligations                                         |           |           | 26,077    |             |           |           | 46,135    |   |           |           | 27,984    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Gas inventory equalization (Note 5)                                                                     |           |           | 43,012    |             |           |           | 22,774    |   |           |           |          | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Federal income, property and other taxes payable                                                        |           |           | 72,464    |             |           |           | 86,097    |   |           |           | 71,415    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Exchange gas payable                                                                                    |           |           | 577       |             |           |           | 20,845    |   |           |           | 3,598     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Customer deposits                                                                                       |           |           | 15,604    |             |           |           | 15,830    |   |           |           | 17,698    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 48,414    |             |           |           | 43,125    |   |           |           | 64,741    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 341,408   |           |           |             | 352,787   |           |           |   | 516,770   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Deferred Credits and Other Liabilities             
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Deferred income taxes                                                                                   |           |           | 125,965   |             |           |           | 103,198   |   |           |           | 105,351   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Unamortized investment tax credit                                                                       |           |           | 26,822    |             |           |           | 28,823    |   |           |           | 27,778    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Tax benefits amortizable to customers                                                                   |           |           | 134,996   |             |           |           | 128,869   |   |           |           | 136,236   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accrued environmental costs                                                                             |           |           | 24,463    |             |           |           | 31,704    |   |           |           | 25,068    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Minority interest                                                                                       |           |           | 1,035     |             |           |           | 8,363     |   |           |           | 8,716     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 63,210    |             |           |           | 51,663    |   |           |           | 46,398    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 376,491   |           |           |             | 352,620   |           |           |   | 349,547   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Long-Term Debt, including capital lease obligations |                                                                                                         |           | 642,594   |           |             |           | 686,004   |           |   |           | 680,909   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Commitments and Contingencies (Note 6)             
|                                    
|                                    
|                                    
|                                    
|                                     | Common Shareholders Equity                        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Common stock                                                                                            |           |           | 10,300    |             |           |           | 10,300    |   |           |           | 10,300    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Additional paid-in capital                                                                              |           |           | 230,399   |             |           |           | 230,399   |   |           |           | 230,399   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Retained earnings                                                                                       |           |           | 565,730   |             |           |           | 480,605   |   |           |           | 494,803   | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 806,429   |           |           |             | 721,304   |           |           |   | 735,502   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     | $                                                                                                       | 2,166,922 |           |           | $           | 2,112,715 |           |           | $ | 2,282,728 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          

The notes to the consolidated financial statements are an integral part of this
statement.

10



---



CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |          |         |        |          |  
|------------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------ | ------------------------------------------------------------------------ | ------- | ---------------- | -------- | -------- | ------- | ------ | -------- | -
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         | Six Months Ended
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         | June 30         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                 
|(in Thousands)                                          |                                                                                         | 2000                                                 |                                      | 1999                                                                    
|                                                        |                                                                                         |                                                      |                                      |                                                                         
|Cash Flow From Operating Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net income                                                                              |                                                      | $                                    | 70,927                                                                   |         |                  | $        | 92,138   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Adjustments to reconcile net income to net cash flow provided
from operating activities
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Depreciation and depletion
Per statement of income                       |         |                  | 52,007   |          |         |        | 49,366   |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Charged to other accounts                                                |         |                  | 4,822    |          |         |        | 4,390    |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Deferred income taxes  current                                          |         |                  | (8,236   | )        |         |        | (11,003  | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Deferred income taxes and investment tax credit, net                     |         |                  | 18,418   |          |         |        | 12,419   |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Other                                                                    |         |                  | (8,769   | )        |         |        | (1,388   | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      |                                      | Changes in assets and liabilities, exclusive of changes
shown separately |         |                  | 145,851  |          |         |        | 76,700   |  
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|                                                        |                                                                                         |                                                      |                                      | Net cash provided from operating activities                              |         |                  | 275,020  |          |         |        | 222,622  |  
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Cash Flow From Financing Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Issuance of long-term debt (Note 6a)                                                    |                                                      |                                      |                                                                         |         |                  |          | 106,535  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Notes payable, net                                                                      |                                                      |                                      | (194,916                                                                 | )       |                  |          | (192,850 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retirement of long-term debt                                                            |                                                      |                                      | (40,156                                                                  | )       |                  |          | (55,918  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Dividends paid                                                                          |                                                      |                                      |                                                                         |         |                  |          | (17,500  | )      
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|                                                        |                                                                                         |                                                      |                                      | Net cash used for financing activities                                   |         |                  | (235,072 | )        |         |        | (159,733 | )
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Cash Flow From Investing Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Capital expenditures                                                                    |                                                      |                                      | (49,446                                                                  | )       |                  |          | (58,097  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other                                                                                   |                                                      |                                      | 2,832                                                                    |         |                  |          | (572     | )      
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|                                                        |                                                                                         |                                                      |                                      | Net cash used for investing activities                                   |         |                  | (46,614  | )        |         |        | (58,669  | )
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Net Increase (Decrease) in Cash and Cash Equivalents    |                                                                                         |                                                      | (6,666                               | )                                                                        |         |                  | 4,220    |         
|                                                       
|                                                       
|                                                       
|                                                       
|Cash and Cash Equivalents, January 1                    |                                                                                         |                                                      | 9,705                                |                                                                          |         |                  | 6,603    |         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Cash and Cash Equivalents, June 30                      |                                                                                         | $                                                    | 3,039                                |                                                                          |         | $                | 10,823   |         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Changes in Assets and Liabilities, Exclusive of Changes
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Shown Separately                                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Accounts receivable, net                             |                                      | $                                                                        | 1,029   |                  |          | $        | (609    | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Gas inventory equalization                           |                                      |                                                                          | 43,012  |                  |          |          | 22,774  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Accrued unbilled revenues                            |                                      |                                                                          | 80,622  |                  |          |          | 66,465  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Accrued/deferred gas cost recovery revenues, net     |                                      |                                                                          | 3,229   |                  |          |          | (15,153 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Gas in inventory                                     |                                      |                                                                          | 21,354  |                  |          |          | 13,077  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Property taxes assessed applicable to future periods |                                      |                                                                          | 22,129  |                  |          |          | 22,692  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Prepaid benefit costs, net                           |                                      |                                                                          | (28,545 | )                |          |          | (20,711 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Accounts payable                                     |                                      |                                                                          | (1,158  | )                |          |          | (9,229  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Federal income, property and other taxes payable     |                                      |                                                                          | 1,049   |                  |          |          | 25,038  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Exchange gas payable                                 |                                      |                                                                          | (3,021  | )                |          |          | (4,492  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Other current assets and liabilities, net            |                                      |                                                                          | (13,394 | )                |          |          | (18,647 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         | Other deferred assets and liabilities, net           |                                      |                                                                          | 19,545  |                  |          |          | (4,505  | )     
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|                                                        |                                                                                         | $                                                    | 145,851                              |                                                                          |         | $                | 76,700   |         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|Supplemental Disclosures                               
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash paid for:                                                                         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                         |                                                      | Interest, net of amounts capitalized |                                                                          | $       | 30,636           |          |          | $       | 30,314 |         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         
|                                                        |                                                                                         |                                                      | Federal income taxes                 |                                                                          | $       | 1,490            |          |          | $       | 13,224 |         
|                                                        |                                                                                         |                                                      |                                      |                                                                          |         |                  |          |         

The notes to the consolidated financial statements are an integral part of this
statement.

11



---



Notes to the Consolidated Financial Statements

1. GENERAL

The accompanying consolidated financial statements should be read in conjunction
with MichCons 1999 Annual Report on Form 10-K. Certain reclassifications have
been made to the prior years financial statements to conform to the 2000
presentation. In the opinion of management, the unaudited information furnished
herein reflects all adjustments necessary for a fair presentation of the
financial statements for the periods presented.

Because of seasonal and other factors, revenues, expenses and net income for the
interim periods should not be construed as representative of revenues, expenses
and net income for all or any part of the balance of the current year or
succeeding periods.

2. MCN MERGER AGREEMENT WITH DTE ENERGY COMPANY

As discussed in MichCons 1999 Annual Report on Form 10-K, MCN Energy Group Inc.
(MCN), parent company of MichCon, and DTE Energy Company (DTE) signed a
definitive merger agreement, dated October 4, 1999, under which DTE will acquire
all outstanding shares of MCN common stock. The boards of directors and the
shareholders of both companies have approved the proposed merger. The
transaction is subject to regulatory approvals and other customary merger
conditions. Both companies continue their discussions with the Federal Trade
Commission (FTC) in connection with its review of the proposed merger. Because
of the length of the FTC review, it appears unlikely that the transaction will
be completed before the fourth quarter of 2000.

As a result of the pending merger, MCN incurred merger-related costs, a portion
of which were allocated to MichCon. Additionally, MichCon incurred
merger-related costs. The merger-related costs include legal, accounting,
consulting, employee benefit and other expenses that had the effect of
decreasing earnings by $1,079,000 pre-tax ($701,000 net of taxes), $1,426,000
pre-tax ($927,000 net of taxes) and $26,855,000 pre-tax ($17,456,000 net of
taxes) for the three-, six- and twelve-month periods ended June 30, 2000,
respectively.

3. PROPERTY WRITE-DOWN

As discussed in MichCons 1999 Annual Report on Form 10-K, MichCon recorded a
$24,800,000 pre-tax ($11,200,000 net of taxes and minority interest) write-down
of certain gas gathering properties in the third quarter of 1998. An analysis
revealed that projected cash flows from the gathering system were not sufficient
to cover the systems carrying value. Therefore, an impairment loss was recorded
representing the amount by which the carrying value of the system exceeded its
estimated fair value.

4. REGULATORY MATTERS

a. Regulatory Reform Plan
As discussed in MichCons 1999 Annual Report on Form 10-K, MichCon implemented
its Regulatory Reform Plan in January 1999. The plan includes a three-year gas
sales program under which MichCons gas sales rates include a gas commodity
component that is fixed at $2.95 per thousand cubic feet (Mcf).

12



---



Notes to the Consolidated Financial Statements (Continued)

As part of its gas acquisition strategy, MichCon has entered into fixed-price
contracts at an average cost below $2.95 per Mcf for a substantial portion of
its expected supply requirements in 2000 and approximately 65% of such
requirements in 2001.

The plan also includes a comprehensive experimental three-year customer choice
program, which is subject to annual caps on the level of participation. The
customer choice program began in April 1999, with approximately 70,000 customers
choosing to purchase natural gas from suppliers other than MichCon. Year two of
the plan began in April 2000 and the number of customers participating decreased
to approximately 55,000. MichCon continues to transport and deliver gas to these
customers premises at prices that generate favorable margins.

In addition, the plan encompasses an income sharing mechanism that allows
customers to share profits when actual returns on equity exceed predetermined
thresholds. MichCon filed its income sharing report with the Michigan Public
Service Commission (MPSC) on March 31, 2000, using the MPSC approved formula,
indicating that no income sharing was required for 1999. The MPSC staff has
requested a hearing on this matter. Management believes that no income sharing
is required.

On August 4, 2000, the MPSC issued an order establishing a
proceeding to obtain information regarding the experience gained from the
customer choice programs of Michigan utilities. The information will be used by
the MPSC to determine the future regulatory environment following the conclusion
of the current regulatory reform programs. The MPSC is expected to issue an
order on its findings during October 2000.

b. Gas Cost Recovery Proceedings
The Gas Cost Recovery (GCR) process was suspended with the implementation of
MichCons Regulatory Reform Plan in January 1999. In February 1999, MichCon
filed its final GCR reconciliation case covering gas costs incurred during 1998
indicating an overrecovery of $18,000,000, including interest. During the first
quarter of 1999, MichCon refunded the overrecovery to customers. In July 2000,
the MPSC issued an order on this case indicating that an additional $3,200,000,
including $740,000 of interest, had been overrecovered. In July 2000, MichCon
began refunding the additional overrecovery to customers as a reduction in gas
sales rates.

c. Other Rate Matters
As discussed in MichCons Annual Report on Form 10-K, several shippers on
MichCons northern Michigan gathering system filed a complaint with the MPSC
requesting that the commission issue an order reducing the rate charged for
Antrim gas transportation services from $.09 per Mcf to approximately
$.039 to $.031 per Mcf. The complaint also included a request for refunds
of approximately $21,000,000 for periods during which the rate was in effect.
The presiding MPSC administrative law judge found that no refunds are
required. The MPSC staff has proposed a rate of $.049 per Mcf which would
result in an annual revenue reduction of approximately $4,500,000. Management
will vigorously defend its proposed rate of $.088 per Mcf, however, it is
unable to predict the eventual outcome of this complaint.

13



---



Notes to the Consolidated Financial Statements (concluded)

5. GAS IN INVENTORY

Inventory gas is priced on a last-in, first-out (LIFO) basis. In anticipation
that interim inventory reductions will be replaced prior to year end, the cost
of gas for net withdrawals from inventory is recorded at the estimated average
purchase rate for the calendar year. The excess of these charges over the LIFO
cost is credited to the gas inventory equalization account. During interim
periods when there are net injections to inventory, the equalization account is
reversed.

6. CONTINGENCIES

a. Personal Property Taxes
As discussed in MichCons 1999 Annual Report on Form 10-K, in 1998, MichCon
began filing its personal property tax information with local taxing
jurisdictions that reflected a change in the calculation of the value of
personal property subject to taxation. The revised calculation excludes
intangible costs from the value of personal property. A number of local taxing
jurisdictions have accepted the revised calculation, and MichCon recorded lower
property tax expense in 1999 and 1998 associated with the accepting taxing
jurisdictions. MichCon has also filed appeals to recover excess payments made in
1996 and 1997 based on the revised calculation. MichCon has pending tax appeals
with local taxing jurisdictions that have not accepted the revised calculation.

Additionally, MichCon 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 estimate the reduction in 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 utilities personal property. The new
tables are effective in 2000 and are being used for current year assessments in
most jurisdictions. 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 superceded tables. The
legal actions regarding the appropriateness of the new tables are currently
before the Michigan Tax Tribunal (MTT), which issued an order on June 21 stating
that the tables are presumed to be correct, thus assigning the burden of proving
otherwise to the taxing jurisdictions. A trial is scheduled for December 2000.
The legal action, along with possible additional appeals by local taxing
jurisdictions, could delay expected recoveries related to the new valuation
tables until 2001.

MichCon will seek to apply the new tables retroactively and to ultimately
settle the pending tax appeals related to prior periods.
This is a solution supported by the STC in the past. MichCons future results of
operations could be significantly affected if the valuation tables are not
upheld in court or MichCon is unsuccessful in its appeals.

b. Legal and Administrative Proceedings
MichCon is involved in certain legal and administrative proceedings before
various courts and governmental agencies concerning claims arising in the
ordinary course of business. Management cannot predict the final disposition of
such proceedings, but believes that adequate provision has been made for
probable losses. It is managements belief, after discussion with legal counsel,
that the ultimate resolution of those proceedings still pending will not have a
material adverse effect on MichCons financial statements.



14



---



Notes to the Consolidated Financial Statements (concluded)

7. LINES OF CREDIT AND LONG-TERM DEBT

MichCon has established credit lines to allow for borrowings under a 364-day
revolving credit facility and a three-year revolving credit facility. The
364-day facility was renewed in July 2000 and was increased from $150,000,000 to
$200,000,000. The three-year facility totals $150,000,000 and expires in July
2001.

In March 2000, MichCon repaid $12,320,000 of a non-utility subsidiarys term
debt that was scheduled to mature in 2006.

15



---



INDEPENDENT ACCOUNTANTS REPORT

To the Board of Directors of
Michigan Consolidated Gas Company:

We have reviewed the accompanying condensed consolidated statements of financial
position of Michigan Consolidated Gas Company and subsidiaries (the Company)
as of June 30, 2000 and 1999, the related condensed consolidated statements of
income and retained earnings for the three, six and twelve-month periods ended
June 30, 2000 and 1999, and the condensed consolidated statements of cash flows
for the six-month periods ended June 30, 2000 and 1999. These financial
statements are the responsibility of the Companys management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to the
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated statement of
financial position of the Company as of December 31, 1999, and the related
consolidated statements of income, capitalization, and cash flows for the year
then ended (not presented herein); and in our report dated March 21, 2000, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated statement of financial position as of December 31, 1999 is fairly
stated, in all material respects, in relation to the consolidated statement of
financial position from which it has been derived.

DELOITTE & TOUCHE LLP

Detroit, Michigan
August 14, 2000

16



---



OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K



| |             
| | ------------
| | (a) Exhibits

|        |  |                                                  
|------- |  | -------------------------------------------------
|Exhibit
|Number  |  | Description                                      
|        |  |                                                  
|12-1    |  | Computation of Ratio of Earnings to Fixed Charges
|       
|       
|       
|       
|15-1    |  | Letter re Unaudited Interim Financial Information
|       
|       
|       
|       
|27-1    |  | Financial Data Schedule                          



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



| |  |  | None.
| |  |  | -----
| | 

17



---



SIGNATURE

Pursuant to the requirements 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.

MICHIGAN CONSOLIDATED GAS COMPANY

|                      |  |     |  |     |  |                                       
|--------------------- |  | --- |  | --- |  | --------------------------------------
|Date: August 14, 2000 |  | By: |  | /s/ |  | ROBERT KASLIK
Robert Kaslik
Controller

18



---



Exhibit Index

|            |  |                                                  
|----------- |  | -------------------------------------------------
|Exhibit No. |  | Description                                      
|            |  |                                                  
|12-1        |  | Computation of Ratio of Earnings to Fixed Charges
|           
|           
|           
|           
|15-1        |  | Letter re Unaudited Interim Financial Information
|           
|           
|           
|           
|27-1        |  | Financial Data Schedule