##### Table of Contents



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 June 30, 2005
 Commission file number 1-7310
  MICHIGAN CONSOLIDATED GAS COMPANY
  Michigan
    
    38-0478040(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2000 2
ndAvenue, Detroit, Michigan
(Address of principal executive offices)
    
    48226-1279
(Zip Code)
 313-235-4000
  Yes þ No o
  Yes o No þ




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Michigan Consolidated Gas Company
 Quarterly Report on Form 10-Q
 Quarter Ended June 30, 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
    
    
    19Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    3Item 4. Controls and Procedures
    
    
    6PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURE
    
    
    21Awareness Letter of Deloitte & Touche LLPChief Executive Officer Section 302 CertificationChief Financial Officer Section 302 CertificationChief Executive Officer Section 906 CertificationChief Financial Officer Section 906 Certification




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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 Detroit
Edison Company, and
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 Measurement:Bcf
    
    Billion cubic feet of gas.Mcf
    
    Thousand cubic feet of gas.
 1




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Forward-Looking Statements
  
    
    the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;
    
    economic climate and 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.
  2




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Managements Narrative Analysis of the Results of Operations
  OVERVIEW
  Gas cost recovery order
 Gas final rate order
     3




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RESULTS OF OPERATION
 Quarter
    
    Six MonthsIncrease (Decrease) in Income StatementComponents Compared to Prior Year(in Millions)Operating revenues
    
    $
    (10
    )
    
    $
    109Cost of gas
    
    
    (30
    )
    
    
    109Gross margin
    
    
    20
    
    
    
    Operation and maintenance
    
    
    (12
    )
    
    
    10Depreciation, depletion and amortization
    
    
    (2
    )
    
    
    (3
    )Taxes other than income
    
    
    
    
    
    
    1Asset (gains) and losses, net
    
    
    
    
    
    
    50Other (income) and deductions
    
    
    
    
    
    
    Income tax provision
    
    
    47
    
    
    
    38Net income
    
    $
    (13
    )
    
    $
    (96
    )
 Gross margins
    4




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Quarter
    
    Six Months2005
    
    2004
    
    2005
    
    2004Gas Markets (in Millions)Gas sales
    
    $
    202
    
    
    $
    216
    
    
    $
    958
    
    
    $
    856End user transportation
    
    
    28
    
    
    
    25
    
    
    
    73
    
    
    
    67230
    
    
    
    241
    
    
    
    1,031
    
    
    
    923Intermediate transportation
    
    
    11
    
    
    
    12
    
    
    
    26
    
    
    
    27Other
    
    
    20
    
    
    
    18
    
    
    
    38
    
    
    
    36$
    261
    
    
    $
    271
    
    
    $
    1,095
    
    
    $
    986Gas Markets (in Bcf)Gas sales
    
    
    22
    
    
    
    22
    
    
    
    104
    
    
    
    105End user transportation
    
    
    33
    
    
    
    29
    
    
    
    82
    
    
    
    7955
    
    
    
    51
    
    
    
    186
    
    
    
    184Intermediate transportation
    
    
    84
    
    
    
    129
    
    
    
    218
    
    
    
    303139
    
    
    
    180
    
    
    
    404
    
    
    
    487
 Operation and maintenance
 Asset gains and losses, net
 Income taxes
 Outlook
  SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
 5




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CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  6




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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 30(in Millions)
    
    2005
    
    2004
    
    2005
    
    2004Operating Revenues
    
    $
    261
    
    
    $
    271
    
    
    $
    1,095
    
    
    $
    986Operating ExpensesCost of gas
    
    
    131
    
    
    
    161
    
    
    
    758
    
    
    
    649Operation and maintenance
    
    
    96
    
    
    
    108
    
    
    
    215
    
    
    
    205Depreciation, depletion and amortization
    
    
    24
    
    
    
    26
    
    
    
    50
    
    
    
    53Taxes other than income
    
    
    13
    
    
    
    13
    
    
    
    26
    
    
    
    25Asset (gains) and losses, net (Note 3)
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    (2
    )264
    
    
    
    308
    
    
    
    1,097
    
    
    
    930Operating Income (Loss)
    
    
    (3
    )
    
    
    (37
    )
    
    
    (2
    )
    
    
    56Other (Income) and DeductionsInterest expense
    
    
    13
    
    
    
    13
    
    
    
    28
    
    
    
    27Interest income
    
    
    (3
    )
    
    
    (3
    )
    
    
    (5
    )
    
    
    (5
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    10

    
    
    
    23
    
    
    
    23Income (Loss) Before Income Taxes
    
    
    (13
    )
    
    
    (47
    )
    
    
    (25
    )
    
    
    33Income Tax Provision (Benefit)
    
    
    37
    
    
    
    (10
    )
    
    
    38
    
    
    
    Net Income (Loss)
    
    $
    (50
    )
    
    $
    (37
    )
    
    $
    (63
    )
    
    $
    33
  7




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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 June 30, 2005
    
    December 31,(in Millions)
    
    (Unaudited)
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1
    
    
    $
    Accounts receivableCustomer (less allowance for doubtful accounts of $83 and
$71, respectively)
    
    
    207
    
    
    
    184Accrued unbilled revenues
    
    
    30
    
    
    
    167Other
    
    
    52
    
    
    
    82Accrued gas cost recovery revenue
    
    
    10
    
    
    
    55Due from affiliate
    
    
    99
    
    
    
    InventoriesGas
    
    
    57
    
    
    
    89Material and supplies
    
    
    16
    
    
    
    15Other
    
    
    67
    
    
    
    77539
    
    
    
    669Property, Plant and Equipment
    
    
    3,180
    
    
    
    3,195Less accumulated depreciation, depletion and amortization
    
    
    (1,433
    )
    
    
    (1,409
    )1,747
    
    
    
    1,786Other AssetsOther investments
    
    
    90
    
    
    
    92Notes receivable
    
    
    81
    
    
    
    81Regulatory assets
    
    
    56
    
    
    
    64Prepaid benefit costs and due from affiliate
    
    
    383
    
    
    
    367Other
    
    
    11
    
    
    
    17621
    
    
    
    621Total Assets
    
    $
    2,907
    
    
    $
    3,076
  8




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MICHIGAN CONSOLIDATED GAS COMPANY
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 June 30, 2005
    
    December 31,(in Millions)
    
    (Unaudited)
    
    2004LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    157
    
    
    $
    149Dividends payable
    
    
    13
    
    
    
    13Short-term borrowings
    
    
    5
    
    
    
    242Current portion of long-term debt, including capital leases
    
    
    40
    
    
    
    Federal income, property and other taxes payable
    
    
    48
    
    
    
    38Regulatory liabilities
    
    
    
    
    
    
    28Gas inventory equalization (Note 1)
    
    
    116
    
    
    
    Other
    
    
    75
    
    
    
    72454
    
    
    
    542Other LiabilitiesDeferred income taxes
    
    
    214
    
    
    
    184Regulatory liabilities
    
    
    568
    
    
    
    564Unamortized investment tax credit
    
    
    18
    
    
    
    18Accrued postretirement benefit costs
    
    
    126
    
    
    
    118Accrued environmental costs
    
    
    20
    
    
    
    17Other
    
    
    59
    
    
    
    571,005
    
    
    
    958Long-Term debt, including capital lease obligations
    
    
    745
    
    
    
    785Contingencies (Notes 3 and 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
    
    
    262
    
    
    
    350Accumulated other comprehensive loss
    
    
    (1
    )
    
    
    (1
    )703
    
    
    
    791Total Liabilities and Shareholders Equity
    
    $
    2,907
    
    
    $
    3,076
  9




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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 Six Months EndedJune 302005
    
    2004(in Millions)Operating ActivitiesNet income (loss)
    
    $
    (63
    )
    
    $
    33Adjustments to reconcile net income (loss) to net cash
from operating activities:Depreciation, depletion and amortization
    
    
    50
    
    
    
    53Deferred income taxes and investment tax credit, net
    
    
    23
    
    
    
    2Asset (gains) and losses, net
    
    
    48
    
    
    
    (2
    )Changes in assets and liabilities:Accounts receivable, net
    
    
    7
    
    
    
    47Accrued unbilled revenues
    
    
    137
    
    
    
    92Inventories
    
    
    31
    
    
    
    44Property taxes assessed applicable to future periods
    
    
    (2
    )
    
    
    (1
    )Postretirement obligation
    
    
    8
    
    
    
    7Prepaid benefit costs and due from affiliate
    
    
    (16
    )
    
    
    (17
    )Accrued gas cost recovery
    
    
    17
    
    
    
    (70
    )Accounts payable
    
    
    8
    
    
    
    24Gas inventory equalization
    
    
    116
    
    
    
    93Federal income, property and other taxes payable
    
    
    10
    
    
    
    (3
    )Other
    
    
    38
    
    
    
    22Net cash from operating activities
    
    
    412
    
    
    
    324Investing ActivitiesCapital expenditures
    
    
    (51
    )
    
    
    (41
    )Proceeds from sale of assets
    
    
    
    
    
    
    5Notes receivable from affiliate
    
    
    (99
    )
    
    
    (32
    )Other
    
    
    1
    
    
    
    1Net cash used for investing activities
    
    
    (149
    )
    
    
    (67
    )Financing ActivitiesRedemption of long-term debt
    
    
    
    
    
    
    (1
    )Short-term borrowings, net
    
    
    (237
    )
    
    
    (232
    )Dividends paid
    
    
    (25
    )
    
    
    (25
    )Net cash used for financing activities
    
    
    (262
    )
    
    
    (258
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    1
    
    
    
    (1
    )Cash and Cash Equivalents at Beginning of Period
    
    
    
    
    
    
    1Cash and Cash Equivalents at End of Period
    
    $
    1
    
    
    $
    Supplementary Cash Flow InformationInterest paid (excluding interest capitalized)
    
    $
    28
    
    
    $
    27Income taxes paid
    
    
    
    
    
    
    
  10




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MICHIGAN CONSOLIDATED GAS COMPANY
 
 CONSOLIDATED STATEMENT OF RETAINED EARNINGS
 AND COMPREHENSIVE INCOME (UNAUDITED)
 Six Months EndedJune 302005
    
    2004(in Millions)Balance  beginning of period
    
    $
    350
    
    
    $
    381Net income (loss)
    
    
    (63
    )
    
    
    33Common stock dividends declared
    
    
    (25
    )
    
    
    (25
    )Balance  end of period
    
    $
    262
    
    
    $
    389
  (in Millions)
    
    2005
    
    2004Net income (loss)
    
    $
    (63
    )
    
    $
    33Comprehensive income (loss)
    
    $
    (63
    )
    
    $
    33
  11




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Michigan Consolidated Gas Company
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  GENERAL
     Asset Retirement Obligations
 Accounting for Asset Retirement Obligations, Accounting for the Effects of Certain Types of Regulation
  (in Millions)Asset retirement obligations at January 1, 2005
    
    $
    5Accretion
    
    
    Liabilities settled
    
    
    Asset retirement obligations at June 30, 2005
    
    $
    5
 Retirement Benefits and Trusteed Assets
  12




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Other Postretirement(in Millions)
    
    Pension Benefits
    
    BenefitsThree Months Ended June 30
    
    2005
    
    2004
    
    2005
    
    2004Service Cost
    
    $
    1
    
    
    $
    1
    
    
    $
    3
    
    
    $
    2Interest Cost
    
    
    3
    
    
    
    3
    
    
    
    6
    
    
    
    6Expected Return on Plan Assets
    
    
    (7
    )
    
    
    (7
    )
    
    
    (3
    )
    
    
    (3
    )Amortization ofNet loss
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Prior service cost
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Net Periodic Benefit Cost (Credit)
    
    $
    (2
    )
    
    $
    (2
    )
    
    $
    9
    
    
    $
    8
 Other Postretirement(in Millions)
    
    Pension Benefits
    
    BenefitsSix Months Ended June 30
    
    2005
    
    2004
    
    2005
    
    2004Service Cost
    
    $
    3
    
    
    $
    3
    
    
    $
    6
    
    
    $
    4Interest Cost
    
    
    7
    
    
    
    7
    
    
    
    12
    
    
    
    11Expected Return on Plan Assets
    
    
    (14
    )
    
    
    (14
    )
    
    
    (6
    )
    
    
    (5
    )Amortization ofNet loss
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    1Prior service cost
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    Net transition liability
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    4Net Periodic Benefit Cost (Credit)

    
    $
    (3
    )
    
    $
    (3
    )
    
    $
    19
    
    
    $
    15
 Gas in Inventory
  NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Accounting for Conditional Asset Retirement Obligations
 Accounting for Conditional
Asset Retirement Obligations, an interpretation of FASB Statement No. 143.
 13




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NOTE 3  REGULATORY MATTERS
 Gas Rate Case
 Rate Request 
 MPSC Final Rate Order
     Rehearing Request
 Gas Cost Recovery Proceedings
 2002 Plan Year
 14




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2003 Plan Year
 2005-2006 Plan Year 
 Other
  15




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NOTE 4  SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
   NOTE 5  CONTINGENCIES
 Environmental Matters
 Contaminated Sites
    16




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Personal Property Taxes
   Other Commitments
  Bankruptcies
  17




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Other
   18




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 19




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OTHER INFORMATION
 
 LEGAL PROCEEDINGS
   
 EXHIBITS
 ExhibitNumber
    
    DescriptionFiled:15-10
    
    Awareness Letter of Deloitte &
Touche LLP31-17
    
    Chief Executive Officer Section 302 Certification31-18
    
    Chief Financial Officer Section 302 CertificationIncorporated by Reference:10-17
    
    Form of Amendment No. 2 dated as of June 10, 2005 to Amended
and Restated Five-Year Credit Agreement dated as of October
15, 2004 among Michigan Consolidated Gas Company, JP Morgan
Chase Bank, N.A. (successor to Bank One, N.A.), as a Lender
and as administrative agent, and the Co-Syndication Agents
named therein. (Exhibit 10.1 to Form 8-K dated June 10,
2005).99-14
    
    Form of Amendment No. 2 dated as of June 10, 2005 to
Three-Year Credit Agreement dated as of October 24, 2003 among
Michigan Consolidated Gas Company, JP Morgan Chase Bank, N.A.
(successor to Bank One, N.A.), as a Lender and as
administrative agent, and the Co-Syndication Agents named
therein. (Exhibit 99.1 to Form 8-K dated June 10, 2005).Furnished:32-17
    
    Chief Executive Officer Section 906 Certification32-18
    
    Chief Financial Officer Section 906 Certification
 20




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Signature
  MICHIGAN CONSOLIDATEDGAS COMPANYDate: August 4, 2005
    
    /s/ DANIEL G. BRUDZYNSKIDaniel G. BrudzynskiChief Accounting Officer,Vice President and Controller
 21




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ExhibitNumber
    
    Description15-10
    
    Awareness Letter of Deloitte &
Touche LLP31-17
    
    Chief Executive Officer Section 302 Certification31-18
    
    Chief Financial Officer Section 302 Certification32-17
    
    Chief Executive Officer Section 906 Certification32-18
    
    Chief Financial Officer Section 906 Certification