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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2005 Commission file number 1-7310 The registrant meets the conditions set forth in General Instructions H (1) (a) and (b) of
Form 10-Q and is, therefore, filing this Form with the reduced disclosure format. MICHIGAN CONSOLIDATED GAS COMPANY  Michigan
(State or other jurisdiction of
incorporation or organization)
    
    38-0478040
(I.R.S. Employer
Identification No.)
 2000 2nd Avenue, Detroit, Michigan
(Address of principal executive offices)
    
    48226-1279
(Zip Code)
 313-235-4000
(Registrants telephone number, including area code) 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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o No þ




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Michigan Consolidated Gas Company Quarterly Report on Form 10-QQuarter Ended March 31, 2005 Table of Contents PageNumberDEFINITIONS
    
    
    1FORWARD-LOOKING STATEMENTS
    
    
    2PART I  - FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statement of Operations
    
    
    7Consolidated Statement of Financial Position
    
    
    8Consolidated Statement of Cash Flows
    
    
    10Consolidated Statement of Retained Earnings and Comprehensive Income
    
    
    11Notes to Consolidated Financial Statements
    
    
    12Report of Independent Registered Public Accounting Firm
    
    
    17Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    6PART II - OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18SIGNATURE
    
    
    19Form of Consent Memorandum dated as of May 9, 2005Chief Executive Officer Section 302 CertificationChief Financial Officer Section 302 CertificationChief Executive Officer Section 906 CertificationChief Financial Officer Section 906 CertificationForm of Consent Memorandum dated as of May 9, 2005




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Definitions Customer Choice
    
    The choice program is a statewide initiative
giving customers in Michigan the option to
choose alternative suppliers for gas.DTE Energy
    
    DTE Energy Company, directly or indirectly,
the parent of The Detroit Edison Company,
MichCon and numerous non-utility subsidiaries.End user transportation
    
    A gas delivery service historically provided
to large-volume commercial and industrial
customers who purchase natural gas directly
from producers or brokerage companies. Under
MichCons Customer Choice program that began
in 1999, this service is also provided to
residential customers and small-volume
commercial and industrial customers.Enterprises
    
    DTE Enterprises Inc., indirectly the parent of
MichCon.Gas storage
    
    For MichCon, the process of injecting, storing
and withdrawing natural gas from a depleted
underground natural gas field.GCR
    
    A gas cost recovery mechanism authorized by
the MPSC, permitting MichCon to pass the cost
of natural gas to its customers.Intermediate transportation
    
    A gas delivery service provided to producers,
brokers and other gas companies that own the
natural gas, but are not the ultimate
consumers.MichCon
    
    Michigan Consolidated Gas Company, an
indirect, wholly-owned natural gas
distribution and intrastate transmission
subsidiary of Enterprises.MPSC
    
    Michigan Public Service Commission.SFAS
    
    Statement of Financial Accounting Standards.Units of MeasurementBcf
    
    Billion cubic feet of gas.Mcf
    
    Thousand cubic feet of gas.
 1




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Forward-Looking Statements Certain information presented herein includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain
risks and uncertainties that may cause actual future results to differ materially from those
contemplated, projected, estimated or budgeted in such forward-looking statements. There are many
factors that may impact forward-looking statements including, but not limited to, the following:  
    the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;
    economic climate and growth or decline in the geographic areas where we do business;
    environmental issues, laws and regulations, and the cost of remediation and compliance associated therewith;
    implementation of the gas Customer Choice program;
    impact of gas utility restructuring in Michigan, including legislative amendments;
    employee relations and the impact of collective bargaining agreements;
    access to capital markets and capital market conditions and the results of other financing efforts which can be
affected by credit agency ratings;
    the timing and extent of changes in interest rates;
    the level of borrowings;
    changes in the cost and availability of natural gas;
    effects of competition;
    impact of regulation by the MPSC and other applicable governmental proceedings and regulations;
    changes in federal, state and local tax laws and their interpretations, including the Internal Revenue Code,
regulations, rulings, court proceedings and audits;
    the ability to recover costs through rate increases;
    the availability, cost, coverage and terms of insurance;
    the cost of protecting assets against or damage due to terrorism;
    changes in accounting standards and financial reporting regulations;
    changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business
issues;
    uncollectible accounts receivable; and
    changes in the economic and financial viability of our suppliers and customers, and the continued ability of such
parties to perform their obligations to the Company. New factors emerge from time to time. We cannot predict what factors may arise or how such factors
may cause our results to differ materially from those contained in any forward-looking statement.
Any forward-looking statements speak only as of the date on which such statements are made. We
undertake no obligation to update any forward-looking statement to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of unanticipated
events. 2




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MANAGEMENTS NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS The Managements Narrative Analysis of the Results of Operations discussion for MichCon is
presented in accordance with General Instruction H(2)(a) of Form 10-Q. MichCon reported a loss of $13 million for the first quarter of 2005 compared to earnings of $70
million for the 2004 first quarter. Results for the first quarter of 2005 were impacted by the
April 2005 MPSC gas cost recovery and final rate orders. Results for the
first quarter of 2005 were also impacted by increases in operation and maintenance expenses due to
higher uncollectible accounts expense. Gas cost recovery order- In December 2001, the MPSC issued an order that permitted MichCon to
implement gas cost recovery (GCR) factors up to $3.62 per thousand cubic feet (Mcf) for January
2002 billings and up to $4.38 per Mcf for the remainder of 2002. The order also allowed MichCon to
recognize a regulatory asset representing the difference between the $4.38 factor and the $3.62
factor for volumes that were unbilled at December 31, 2001. MichCons 2002 GCR reconciliation case
was filed with the MPSC in February 2003. The Staff and various intervening parties in this
proceeding sought to have the MPSC disallow $26 million representing unbilled revenues at December
2001. On April 28, 2005, the MPSC issued an order in the 2002 GCR reconciliation case that
disallowed $26 million plus accrued interest of $3 million. We recorded the impact of
the disallowance in the first quarter of 2005. Gas final rate order- On April 28, 2005, the MPSC issued an order for final rate relief.
The MPSC granted a base rate increase to MichCon of $61 million annually, effective April 29, 2005.
This amount is an increase of $26 million over the $35 million in interim rate relief approved in
September 2004. The rate increase was based on a 50% debt and 50% equity capital structure and an
11% rate of return on common equity. The MPSC adopted MichCons proposed tracking mechanism for uncollectible accounts receivable. Each
year, MichCon will file an application comparing its actual uncollectible expense to its designated
revenue recovery of approximately $37 million. Ninety percent of the difference will be refunded or
surcharged after an annual reconciliation proceeding before the MPSC. The MPSC also approved the deferral of the noncapitalized portion of the
negative pension expense. MichCon will record a regulatory liability in its financial statements for any negative pension costs
as determined under generally accepted accounting principles. In addition, the MPSC approved a one-way tracker which provided for $25 million
which is refundable in the event that the funds are not expended by safety and training operation and maintenance expenses. The MPSC order reduces MichCons depreciation rates, and the related revenue requirement associated
with depreciation expense by $14.5 million with no impact on net income. The MPSC did not allow the recovery of approximately $25 million of costs allocated to MichCon that
were incurred by DTE Energy as a result of the acquisition of MCN Energy. The MPSC order also resulted in the disallowance of computer system and equipment costs and
adjustments to environmental regulatory assets and liabilities. The MPSC disallowed recovery of 90%
of the costs of a computer billing system that was in place prior to DTE Energys acquisition of
MCN Energy in 2001. We impaired this asset by approximately $42 million. The MPSC disallowed
approximately $6 million of certain computer equipment and related depreciation. The MPSC order
also disallowed recovery of certain internal labor and legal costs related to remediation of manufactured gas
plants of approximately $6 million. 3




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Increase (Decrease) in Income Statement Components  Compared to Prior Year
 (in Millions)
    
    2005Operating revenues
    
    $
    119Cost of gas
    
    
    139Gross margin
    
    
    (20
    )Operation and maintenance
    
    
    22Depreciation, depletion and amortization
    
    
    (1
    )Taxes other than income
    
    
    1Asset (gains) and losses, net
    
    
    50Other (income) and deductions
    
    
    Income tax provision
    
    
    (9
    )Net income
    
    $
    (83
    )
   Operating revenuesincreased $119 million in the first quarter of 2005. Gas sales revenues
increased $116 million in the first quarter of 2005 due primarily to an increase in the gas
commodity component of sales rates reflecting higher natural gas prices and higher base rates due
to the interim rate increase in 2004. The gas commodity component portion of revenues is offset by
a similar increase in gas costs, which is collectible through the GCR mechanism. The comparison
was also affected by the impact of the April 2005 MPSC GCR order that disallowed $26 million
representing unbilled revenues at December 2001. Additionally, gas sales revenues and volumes in
both periods reflect the impact of weather, which was 2% colder in the first quarter of 2005 from
the comparable 2004 period. End user transportation revenues increased $3 million in the first
quarter of 2005 due to contractually driven adjustments to end user
transportation contracts.   Quarter2005
    
    
    2004Gas Markets (in Millions)Gas sales
    
    $
    756
    
    
    $
    640End user transportation
    
    
    45
    
    
    
    42801
    
    
    
    682Intermediate transportation
    
    
    14
    
    
    
    15Other
    
    
    19
    
    
    
    18$
    834
    
    
    $
    715Gas Markets (in Bcf)Gas sales
    
    
    82
    
    
    
    83End user transportation
    
    
    50
    
    
    
    50132
    
    
    
    133Intermediate transportation
    
    
    134
    
    
    
    174266
    
    
    
    307
   Cost of gasis affected by variations in sales volumes, cost of purchased gas and related
transportation costs, and the effects of any permanent liquidation of inventory gas. Cost
of gas sold increased $139 million in the first quarter of 2005, primarily due to prices paid for
gas supply. The average cost of gas sold increased $1.65 per Mcf (28%) in the first quarter of 2005
from the comparable 2004 period. 4




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Operation and maintenanceexpense increased $22 million in the first quarter of 2005, reflecting
higher reserves for uncollectible accounts receivable, increased postretirement benefit costs and
the impact of the April 2005 MPSC final rate order which increased our environmental costs, as
previously discussed. The increase in uncollectible accounts expense reflects higher past due
amounts attributable to an increase in gas prices, continued weak economic conditions and a lack of
adequate public assistance for low-income customers. Asset gains and losses, netdecreased $50 million due to the disallowances of approximately $42
million of costs related to a computer billing system and $6 million of certain computer equipment
and related depreciation, as previously discussed. In March 2004, we
recorded a $2 million gain from the sale of a gas storage facility. Income taxesdecreased $9 million in the first quarter of 2005. Income tax comparisons were
affected by variations in pre-tax earnings. The decrease in income taxes is due primarily to a
lower effective tax rate in 2005 compared to 2004 based on estimated lower pretax income in 2005. SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS We currently have an $81.25 million, three-year unsecured credit agreement originally
entered into in October 2003, and a $243.75 million, five-year unsecured revolving credit facility
entered into in October 2004. These credit facilities are with a syndicate of banks and may be
utilized for general corporate borrowings, but primarily are intended to provide liquidity support
for our commercial paper program. This credit facility facilitates short-term borrowing primarily
for seasonal needs to buy gas in the summer for use in the winter heating season. In the last
twelve months, the peak borrowing for this facility was $324.8 million. Borrowings under the
facilities are available at prevailing short-term interest rates. Among other things, the
agreements require us to maintain an earnings before interest, taxes, depreciation and
amortization (EBITDA) to interest ratio of no less than 2 to 1 for each twelve-month period ending
on the last day of March, June, September and December of each year. As a result of the non-recurring accounting adjustments that were required due to the MPSC gas rate
orders issued on April 28, 2005, we did not meet the EBITDA to interest ratio at March 31,
2005. The lenders have agreed to amend the credit facilities to exclude the EBITDA to interest
ratio for the first quarter of 2005. If lenders had not amended the
credit facility, our access to the commercial paper markets would be limited. At March 31, 2005 and the date of the
amendments, we did not have any indebtedness under the credit facilities or any commercial
paper outstanding. We plan to seek rehearing of
the MPSC orders to improve our resulting underlying cash flows. If
unsuccessful in rehearing, we may file a follow on rate case in 2005. In
addition, we may seek further amendments to the EBITDA to interest ratio for future periods. If
we experience diminished ability to access the short-term and /or long-term capital markets,
we would have to seek additional sources of liquidity. This may have a material negative impact on
our financial position and significantly harm the operation of the business. We believe that we
will have sufficient internal and external capital resources to manage liquidity and to fund
anticipated capital requirements. 5




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CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures Management of the Company carried out an evaluation, under the supervision and with the
participation of the Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of March 31, 2005, which is the end of the period covered by this
report. Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer
have concluded that such controls and procedures are effectively
designed and operating to ensure that
information required to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. (b) Changes in internal control over financial reporting There has been no change in the Companys internal control over financial reporting during the
first quarter of 2005 that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting. 6




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MICHIGAN CONSOLIDATED GAS COMPANY 
 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
   Three Months EndedMarch 31(in Millions)
    
    2005
    
    
    2004Operating Revenues
    
    $
    834
    
    
    $
    715Operating ExpensesCost of gas
    
    
    627
    
    
    
    488Operation and maintenance
    
    
    119
    
    
    
    97Depreciation, depletion and amortization
    
    
    26
    
    
    
    27Taxes other than income
    
    
    13
    
    
    
    12Asset (gains) and losses, net (Note 3)
    
    
    48
    
    

    
    (2
    )833
    
    
    
    622Operating Income
    
    
    1
    
    
    
    93Other (Income) and DeductionsInterest expense
    
    
    15
    
    
    
    14Interest income
    
    
    (2
    )
    
    
    (2
    )Other
    
    
    
    
    
    
    113
    
    
    
    13Income (Loss) Before Income Taxes
    
    
    (12
    )
    
    
    80Income Tax Provision
    
    
    1
    
    
    
    10Net Income (Loss)
    
    $
    (13
    )
    
    $
    70
   See Notes to Consolidated Financial Statements (Unaudited) 7




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MICHIGAN CONSOLIDATED GAS COMPANY 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
   March 31, 2005
    
    
    December 31(in Millions)
    
    (Unaudited)
    
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1
    
    
    $
    Accounts receivableCustomer (less allowance for doubtful accounts of $80 and
$71, respectively)
    
    
    336
    
    
    
    184Accrued unbilled revenues
    
    
    134
    
    
    
    167Other
    
    
    56
    
    
    
    82Accrued gas cost recovery revenue
    
    
    53
    
    
    
    55Due from affiliate
    
    
    46
    
    
    
    InventoriesGas
    
    
    15
    
    
    
    89Material and supplies
    
    
    16
    
    
    
    15Other
    
    
    59
    
    
    
    77716
    
    
    
    669Property, Plant and Equipment
    
    
    3,147
    
    
    
    3,195Less accumulated depreciation, depletion and amortization
    
    
    (1,413
    )
    
    
    (1,409
    )1,734
    
    
    
    1,786Other AssetsOther investments
    
    
    89
    
    
    
    92Notes receivable
    
    
    81
    
    
    
    81Regulatory assets
    
    
    62
    
    
    
    64Prepaid benefit costs and due from affiliate
    
    
    375
    
    
    
    367Other
    
    
    15
    
    
    
    17622
    
    
    
    621Total Assets
    
    $
    3,072
    
    
    $
    3,076
   See Notes to Consolidated Financial Statements (Unaudited) 8




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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION   March 31, 2005
    
    
    December 31(in Millions)
    
    (Unaudited)
    
    
    2004LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    150
    
    
    $
    149Dividends payable
    
    
    13
    
    
    
    13Short-term borrowings
    
    
    5
    
    
    
    242Current portion of long-term debt, including capital leases
    
    
    
    
    
    
    Federal income, property and other taxes payable
    
    
    61
    
    
    
    38Regulatory liabilities
    
    
    
    
    
    
    28Gas inventory equalization (Note 1)
    
    
    278
    
    
    
    Other
    
    
    68
    
    
    
    72575
    
    
    
    542Other LiabilitiesDeferred income taxes
    
    
    165
    
    
    
    184Regulatory liabilities
    
    
    565
    
    
    
    564Unamortized investment tax credit
    
    
    18
    
    
    
    18Accrued postretirement benefit costs
    
    
    123
    
    
    
    118Accrued environmental costs
    
    
    20
    
    
    
    17Other
    
    
    56
    
    
    
    57947
    
    
    
    958Long-Term debt, including capital lease obligations
    
    
    785
    
    
    
    785Contingencies (Note 5)Shareholders EquityCommon stock, $1 par value, 15,100,000 shares authorized,
10,300,000 shares issued and outstanding
    
    
    10
    
    
    
    10Additional paid in capital
    
    
    432
    
    
    
    432Retained earnings
    
    
    324
    
    
    
    350Accumulated other comprehensive loss
    
    
    (1
    )
    
    
    (1
    )765
    
    
    
    791Total Liabilities and Shareholders Equity
    
    $
    3,072
    
    
    $
    3,076
   See Notes to Consolidated Financial Statements (Unaudited) 9




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MICHIGAN CONSOLIDATED GAS COMPANY 
 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
   Three Months EndedMarch 312005
    
    
    2004(in Millions)Operating ActivitiesNet income (loss)
    
    $
    (13
    )
    
    $
    70Adjustments to reconcile net income (loss) to net cash
from operating activities:Depreciation, depletion and amortization
    
    
    26
    
    
    
    27Deferred income taxes and investment tax credit, net
    
    
    (22
    )
    
    
    (7
    )Asset (gains) and losses, net
    
    
    48
    
    
    
    (2
    )Changes in assets and liabilities:Accounts receivable, net
    
    
    (126
    )
    
    
    (84
    )Accrued unbilled revenues
    
    
    33
    
    
    
    43Inventories
    
    
    73
    
    
    
    86Postretirement obligation
    
    
    5
    
    
    
    3Property taxes assessed applicable to future periods
    
    
    (10
    )
    
    
    (9
    )Prepaid benefit costs and due from affiliate
    
    
    (8
    )
    
    
    (9
    )Accrued gas cost recovery
    
    
    (26
    )
    
    
    (38
    )Accounts payable
    
    
    1
    
    
    
    (3
    )Gas inventory equalization
    
    
    278
    
    
    
    167Federal income, property and other taxes payable
    
    
    23
    
    
    
    23Other
    
    
    34
    
    
    
    5Net cash from operating activities
    
    
    316
    
    
    
    272Investing ActivitiesCapital expenditures
    
    
    (20
    )
    
    
    (14
    )Proceeds from sale of assets
    
    
    
    
    
    
    5Notes receivable from affiliate
    
    
    (46
    )
    
    
    (12
    )Net cash used for investing activities
    
    
    (66
    )

    
    
    (21
    )Financing ActivitiesRedemption of long-term debt
    
    
    
    
    
    
    (1
    )Short-term borrowings, net
    
    
    (237
    )
    
    
    (232
    )Dividends paid
    
    
    (12
    )
    
    
    (12
    )Net cash used for financing activities
    
    
    (249
    )
    
    
    (245
    )Net Increase in Cash and Cash Equivalents
    
    
    1
    
    
    
    6Cash and Cash Equivalents at Beginning of Period
    
    
    
    
    
    
    1Cash and Cash Equivalents at End of Period
    
    $
    1
    
    
    $
    7Supplementary Cash Flow InformationInterest paid (excluding interest capitalized)
    
    $
    18
    
    
    $
    19Income taxes paid
    
    
    
    
    
    
    
   See Notes to Consolidated Financial Statements (Unaudited) 10




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MICHIGAN CONSOLIDATED GAS COMPANY 
 CONSOLIDATED STATEMENT OF RETAINED EARNINGS
 AND COMPREHENSIVE INCOME (UNAUDITED)
   Three Months EndedMarch 31(in Millions)
    
    2005
    
    
    2004Balance  beginning of period
    
    $
    350
    
    
    $
    381Net income (loss)
    
    
    (13
    )
    
    
    70Common stock dividends declared
    
    
    (13
    )
    
    
    (13
    )Balance  end of period
    
    $
    324
    
    
    $
    438
   The following table displays other comprehensive income (loss) for the three-month periods ended
March 31:   (in Millions)
    
    2005
    
    
    2004Net income (loss)
    
    $
    (13
    )
    
    $
    70Comprehensive income (loss)
    
    $
    (13
    )
    
    $
    70
   See Notes to Consolidated Financial Statements (Unaudited) 11




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Michigan Consolidated Gas Company 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1 SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements should be read in conjunction with the notes to the
consolidated financial statements included in our 2004 Annual Report on Form 10-K. The accompanying consolidated financial statements are prepared using accounting principles
generally accepted in the United States of America. These accounting principles require us to use
estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and
expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from
those estimates. The consolidated financial statements are unaudited, but in our opinion, include all adjustments
necessary for a fair statement of the results for the interim periods. Financial results for this
interim period are not necessarily indicative of the results that may be expected for any other
interim period or for the fiscal year. We reclassified certain prior year balances to match the current years financial statement
presentation. Asset Retirement Obligations SFAS No. 143, Accounting for Asset Retirement Obligations, requires that fair value of
an asset retirement obligation be recognized in the period in which it is incurred. We believe
that adoption of SFAS No. 143 results primarily in timing differences in the recognition of legal
asset retirement costs that we are currently recovering in rates and will be deferring such
differences under SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. A reconciliation of the asset retirement obligation for the 2005 three-month period follows:   (in Millions)Asset retirement obligations at January 1, 2005
    
    $
    5Accretion
    
    
    Liabilities settled
    
    
    Asset retirement obligations at March 31, 2005
    
    $
    5
   Retirement Benefits and Trusteed Assets MichCon sponsors a defined benefit retirement plan for eligible MichCon represented employees.
MichCon also participates in a defined benefit retirement plan sponsored by Detroit Edison for its
other nonrepresented employees, which is treated as a plan covering employees of various affiliates
of DTE Energy from the affiliates perspective. We are allocated income or an expense each year as
a result of our participation in the DTE Energy Company Retirement Plan. Income was approximately
$7 million for the three months ended March 31, 2005 and for the three months ended March 31, 2004
and is not reflected in following table. 12




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The components of net
periodic benefit cost (credit) for pension benefits and other postretirement benefits
follow:   Other PostretirementPension Benefits
    
    
    Benefits(in Millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Three Months Ended March 31Service Cost
    
    $
    2
    
    
    $
    2
    
    
    $
    3
    
    
    $
    2Interest Cost
    
    
    4
    
    
    
    4
    
    
    
    6
    
    
    
    5Expected Return on Plan Assets
    
    
    (7
    )
    
    
    (7
    )
    
    
    (3
    )
    
    
    (2
    )Amortization ofNet loss
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Net Periodic Benefit Cost (Credit)
    
    $
    (1
    )
    
    $
    (1
    )
    
    $
    10
    
    
    $
    7
   Gas in Inventory Gas inventory 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 of 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. NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS Medicare Act Accounting In May 2004, FASB Staff Position (FSP) No. 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, was issued
on accounting for the effects of the Medicare Act. In the second quarter of 2004, we adopted FSP
No. 106-2, retroactive to January 1, 2004 and as a result earnings for the first quarter of 2004
have been restated. As a result of the adoption, our accumulated postretirement benefit obligation
for the subsidy related to benefits attributed to past service was reduced by approximately $24
million and was accounted for as an actuarial gain. The effects of the subsidy reduced net
postretirement costs by $1 million in the first quarter of 2004. Accounting for Conditional Asset Retirement Obligations In March 2005, the FASB issued Interpretation No. 47 (FIN 47), Accounting for Conditional
Asset Retirement Obligations, an interpretation of FASB Statement No. 143.FIN 47 seeks to clarify
the requirement to record liabilities stemming from a legal obligation to perform asset retirement
activities on fixed assets when that retirement is conditioned on a future event. FIN 47 is
effective no later than the end of fiscal years ending after December 15, 2005. The
Company is currently assessing the effects of this interpretation, but has not yet determined the
impact on the consolidated financial statements. 13




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NOTE 3  REGULATORY MATTERS Gas Rate Case MPSC Final Rate Order -In September 2003, MichCon filed an application with the MPSC for an increase
in service and distribution charges (base rates) for its gas sales and transportation customers.
The filing requested an overall increase in base rates of $194 million per year beginning January
1, 2005. MichCon requested that the MPSC increase base rates by $154 million per year on an interim
basis by April 1, 2004. The final rate request was subsequently revised to $159 million. On April 28, 2005, the MPSC issued an order for final rate relief. The MPSC
determined that the base rate increase granted to MichCon should be $61 million annually effective
April 29, 2005. This amount is an increase of $26 million over the $35 million in interim rate
relief approved in September 2004. The rate increase was based on a 50% debt and 50% equity capital
structure and an 11% rate of return on common equity. The MPSC adopted MichCons proposed tracking mechanism for uncollectible accounts receivable. Each
year, MichCon will file an application comparing its actual uncollectible expense to its designated
revenue recovery of approximately $37 million. Ninety percent of the difference will be refunded or
surcharged after an annual reconciliation proceeding before the MPSC.
The MPSC also approved the deferral of the non-capitalized portion of the negative
pension expense. MichCon will record a regulatory liability in its financial statements for any negative pension costs as
determined under generally accepted accounting principles. In addition, the MPSC approved a one-way tracker which provided
for $25 million which is refundable in the event that the funds are not expended for safety and training operation and maintenance
expenses. The MPSC order reduces MichCons depreciation rates, and the related revenue requirement associated
with depreciation expense by $14.5 million with no impact on net income. The MPSC did not allow the recovery of approximately $25 million of costs allocated to MichCon that
were incurred by DTE Energy as a result of the acquisition of MCN Energy. The MPSC order also resulted in the disallowance of computer system and equipment costs and
adjustments to environmental regulatory assets and liabilities. The MPSC disallowed recovery of 90%
of the costs of a computer billing system that was in place prior to DTE Energys acquisition of
MCN Energy in 2001. We impaired this asset by approximately $42 million. The MPSC disallowed
approximately $6 million of certain computer equipment and related depreciation. The MPSC order
also disallowed recovery of certain internal labor and legal costs related to remediation of manufactured gas
plants of approximately $6 million. Gas Cost Recovery Proceedings 2002 Plan Year- In December 2001, the MPSC issued an order that permitted MichCon to
implement GCR factors up to $3.62 per thousand cubic feet (Mcf) for January 2002 billings and up to
$4.38 per Mcf for the remainder of 2002. Consistent with prior orders, MichCon recognized a regulatory
asset representing the difference between the $4.38 factor and the $3.62 factor for volumes that
were unbilled at December 31, 2001. The regulatory asset was subject to the 2002 GCR reconciliation
process. In March 2003, the MPSC issued an order in MichCons 2002 GCR plan case. The MPSC ordered
MichCon to reduce its gas cost recovery expenses by $26.5 million for purposes of calculating the
2002 GCR factor due to MichCons decision to utilize storage gas during 2001 that resulted in a gas
inventory decrement for the
2001 calendar year. We recorded a $26.5 million reserve in 2002 to reflect the impact of this
order. 14




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MichCons 2002 GCR reconciliation case was filed with the MPSC in February 2003. The Staff and
various intervening parties in this proceeding sought to have the MPSC disallow an additional $26
million, representing unbilled revenues at December 2001. One party also proposed the disallowance
of half of an $8 million payment made to settle Enron bankruptcy issues. The other parties to the
case recommended that the Enron bankruptcy settlement be addressed in the 2003 GCR reconciliation
case. In April 2005, the MPSC issued an order in the 2002 GCR reconciliation case affirming the
order in the 2002 GCR plan case disallowing $26.5 million related to the use of storage gas in
2001. The April 2005 order also disallowed the additional $26 million representing unbilled
revenues at December 2001. We recorded the impact of the disallowance in the first quarter of 2005.
The MPSC agreed that the $8 million related to the Enron issue be addressed in the 2003 GCR
reconciliation case. MichCon included this item in testimony in the 2003 GCR reconciliation filed
in February 2004 and the Staff has recommended that MichCon be allowed to recover the entire $8
million related to the Enron issue. 2005-2006 Plan Year -In December 2004, MichCon filed its 2005-2006 GCR plan case proposing a
maximum GCR factor of $7.99 per Mcf. The plan includes quarterly contingent GCR factors. These
contingent factors allow MichCon to increase the maximum GCR factor to compensate for increases in
market prices, thereby reducing the possibility of a GCR under-recovery. In April 2005, the MPSC
issued an order recognizing that Michigan law allows MichCon to self-implement its quarterly
contingent factors. Approval of the contingent factors will be determined in the MPSCs final order
in this case. Other We are unable to predict the outcome of the regulatory matters discussed herein. Resolution
of these matters is dependent upon future MPSC orders, which may materially impact the financial
position, results of operations and cash flows of the Company. NOTE 4 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS We currently have an $81.25 million, three-year unsecured credit
agreement originally entered into in October 2003, and a $243.75 million, five-year unsecured revolving credit
facility entered into in October 2004. These credit facilities are with a syndicate of banks and may be utilized
for general corporate borrowings, but primarily are intended to provide liquidity support for our commercial paper program.
Borrowings under the facilities are available at prevailing short-term interest rates. Among other things,
the agreements require us to maintain an earnings before interest, taxes, depreciation and amortization
(EBITDA) to interest ratio of no less than 2 to 1 for each twelve-month period ending on the last day of March, June,
September and December of each year. As a result of the non-recurring accounting adjustments that were required due to the MPSC gas
rate orders issued on April 28, 2005, we did not meet the EBITDA to interest ratio at March 31, 2005. The lenders have agreed to amend
the credit facilities to exclude the EBITDA to interest ratio for the first quarter of 2005. At March 31, 2005 and the date of the
amendments, we did not have any indebtedness under the credit facilities or any commercial paper outstanding. NOTE 5 - COMMITMENTS AND CONTINGENCIES Environmental Matters Contaminated Sites - Prior to the construction of major interstate natural gas
pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke or oil. We own, or previously
owned, 17 such former manufactured gas plant (MGP) sites. During the mid-1980s, we conducted preliminary environmental investigations at former
MGP sites, and some contamination related to the by-products of gas manufacturing was discovered at each site. The
existence of these sites and the results of the environmental investigations have been reported to the Michigan Department of
Environmental Quality (MDEQ). We are remediating eight of the former MGP sites and conducting more extensive investigations
at four other former MGP sites. We received MDEQ closure of one site
and a determination that we are not a responsible party for three
other sites. We received closure from the EPA in 2002 for one site. In 1984, we established a $12 million reserve for costs associated with environmental investigation
and remediation activities. During 1993, we received MPSC approval of a cost deferral and rate recovery mechanism for investigation and
remediation costs incurred at former MGP sites in excess of this reserve. We employed outside consultants to evaluate remediation alternatives for these
sites, to assist in estimating its potential liabilities and to review its archived insurance policies. As a result of these studies, we
recorded an additional liability and a corresponding regulatory asset of $32 million during 1995. In early December 2004, we retained
multiple environmental consultants to estimate the projected cost to remediate each MGP facility. The results of the evaluation indicated
that the MGP reserve should be set at $22 million. During 2004, we spent $2.3 million, investigating and remediating these former MGP sites. At December
31, 2004, the reserve balance was $21.5 million, of which $4.5 million was classified as current. Any significant change in assumptions, such as
remediation techniques, nature and extent of contamination and regulatory requirements, could impact the estimate of remedial action costs for the
sites and, therefore, have an effect on our financial position and cash flows. However, we anticipate the cost deferral and rate recovery mechanism
approved by the MPSC will prevent environmental costs from having a material adverse impact on our results of operations. 15




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Personal Property Taxes Prior to 1999, MichCon and other Michigan utilities asserted that Michigans valuation tables result in the
substantial overvaluation of utility personal property. Valuation tables established by the Michigan State Tax Commission (STC) are used to determine
the taxable value of personal property based on the propertys age. In November 1999, the STC approved new valuation tables that more accurately recognize
the value of a utilitys personal property. The new tables became effective in 2000 and are currently used to calculate property tax expense.
However, several local taxing jurisdictions have taken legal action attempting to prevent the STC from implementing the new valuation tables and have
continued to prepare assessments based on the superseded tables. The legal actions regarding the appropriateness of the new tables were before the
Michigan Tax Tribunal (MTT) which, in April 2002, issued its decision essentially affirming the validity of the STCs new tables. In June 2002,
petitioners in the case filed an appeal of the MTTs decision with the Michigan Court of Appeals. In January 2004, the Michigan Court of Appeals
upheld the validity of the new tables. With no further appeal by the petitioners available, the MTT began to schedule utility personal property valuation cases for
Prehearing General Calls. MichCon has filed motions and the MTT agreed to place their cases in abeyance pending the conclusion of settlement negotiations being
conducted by State of Michigan Treasury officials. On February 14, 2005, MTT issued a scheduling order that lifts the prior abeyances in a significant
number of our appeals. The scheduling order sets litigation calendars for these cases extending into mid-2006. We continue to record property tax expense based on the new tables. We will continue through settlement or
litigation to seek to apply the new tables retroactively and to ultimately resolve the pending tax appeals related to 1997 through 1999. This is a
solution supported by the STC in the past. To the extent that
settlements cannot be achieved with the jurisdictions, litigation regarding the
valuation of utility property will delay any recoveries by MichCon. Other Commitments At December 31, 2004, we have entered into numerous long-term purchase commitments relating to a variety of goods and
services required for our business. These agreements primarily
consist of long-term gas purchase and transportation agreements. We
estimate that these commitments will be approximately
$1.1 billion through 2011. We also estimate that our 2005
base level capital expenditures will be approximately $115 million. We have made certain commitments in connection with such expected capital expenditures. Bankruptcies We sell gas to numerous companies operating in the steel, automotive, energy and retail industries. A number of
customers have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. We have negotiated or are currently involved in negotiations
with each of the companies, or their successor companies, that have filed for bankruptcy protection. We regularly review contingent matters relating to sale
contracts and record provisions for amounts considered probable of loss. We believe our previously accrued amounts are adequate for probable losses. The
final resolution of these matters is not expected to have a material effect on our financial statements in the period they are resolved. Other We are involved in certain legal, regulatory, administrative and environmental proceedings
before various courts, arbitration panels and governmental agencies concerning matters arising in
the ordinary course of business. These proceedings include certain contract disputes,
environmental reviews and investigations, audits, inquiries from various regulators, and pending
judicial matters. We cannot predict the final disposition of such proceedings. We regularly
review legal matters and record provisions for claims that are considered probable of loss. The
resolution of pending proceedings is not expected to have a material effect on our operations or
financial statements in the period they are resolved. See Note 3 for a discussion of contingencies related to Regulatory Matters. 16




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholder of
Michigan Consolidated Gas Company We have reviewed the accompanying condensed consolidated statement of financial position of
Michigan Consolidated Gas Company and subsidiaries as of March 31, 2005, and the related condensed
consolidated statements of operations, cash flows and retained earnings and comprehensive income
for the three-month periods ended March 31, 2005 and 2004. These interim financial statements are
the responsibility of Michigan Consolidated Gas Companys management. We conducted our reviews in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made to such
condensed consolidated interim 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 the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statement of financial position of Michigan
Consolidated Gas Company and subsidiaries as of December 31, 2004, and the related consolidated
statements of operations, cash flows and retained earnings and comprehensive income for the year
then ended (not presented herein); and in our report dated March 15, 2005 (which report includes an
explanatory paragraph relating to the change in the method of accounting for asset retirement
obligations in 2003), 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, 2004 is fairly stated, in all material respects,
in relation to the consolidated statement of financial position from which it has been derived. /S/ DELOITTE & TOUCHE LLP Detroit, Michigan
May 10, 2005 17




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OTHER INFORMATION 
 LEGAL PROCEEDINGS We are involved in certain legal, regulatory, administrative and environmental proceedings
before various courts, arbitration panels and governmental agencies concerning claims arising
in the ordinary course of business. These proceedings include certain contract disputes,
environmental reviews and investigations, audits, inquiries from various regulators, and
pending judicial matters. We cannot predict the final disposition of such proceedings. We
regularly review legal matters and record provisions for claims that are considered probable
of loss. The resolution of pending proceedings is not expected to have a material effect on
our financial statements in the period they are resolved. OTHER INFORMATION Pursuant to consent memoranda dated May 9, 2005, MichCons Three-Year Credit
Agreement, dated as of October 24, 2003 and Amended and Restated Five-Year Credit Agreement, dated as of October 15, 2004
were amended. Forms of each such consent memorandum are filed as exhibits to this report. See Managements
Narrative Analysis of the Results of Operation for more information. 
 EXHIBITS ExhibitNumber
    
    Description(i) Exhibits filed herewith:10-16
    
    Form of Consent Memorandum dated as of May 9, 2005 and amending the Amended and
Restated Five-Year Credit Agreement, dated as of October 15, 2004.31-15
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-16
    
    Chief Financial Officer Section 302 Form 10-Q Certification99-13
    
    Form of Consent Memorandum dated as
of May 9, 2005 and amending the Three-Year
Credit Agreement, dated as of October 24, 2003.(ii) Exhibits furnished herewith:32-15
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-16
    
    Chief Financial Officer Section 906 Form 10-Q Certification
 18




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##### Table of Contents



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 COMPANYDate: May 10, 2005
    
    
    
    /s/ DANIEL G. BRUDZYNSKIDaniel G. BrudzynskiChief Accounting Officer,Vice President and Controller
 19




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##### Table of Contents



Exhibit Index ExhibitNumber
    
    Description(i) Exhibits filed herewith:10-16
    
    Form of Consent Memorandum dated as of May 9, 2005 and amending the Amended
and Restated Five-Year Credit Agreement, dated as of October 15, 2004.31-15
    
    Chief Executive Officer Section 302 Form 10-Q Certification31-16
    
    Chief Financial Officer Section 302 Form 10-Q Certification32-15
    
    Chief Executive Officer Section 906 Form 10-Q Certification32-16
    
    Chief Financial Officer Section 906 Form 10-Q Certification99-13
    
    Form of Consent Memorandum dated as of May 9, 2005 and amending the Three-Year Credit
Agreement, dated as of October 24, 2003.