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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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 March 31, 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 May 12, 2000:

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

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TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Index To Form 10-Q                                                                   
|MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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Index To Form 10-Q

For Quarter Ended March 31, 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                                                                  |  |        | 8  | 
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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                                                      |  |        | 15 | 
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|SIGNATURE                                                                                     |  |        | 16 | 

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

RESULTS OF OPERATIONS

Results reflect warmer weather and reduced contributions from gas sales program
MichCons earnings were $66.9 million for the 2000 first quarter, a decrease
of $17.1 million from the comparable 1999 period of $84.0 million. Earnings
for the 2000 twelve-month period were $89.3 million, a decrease of $10.0
million from earnings for the 1999 twelve-month period of $99.3 million. As
subsequently discussed, the 2000 twelve-month period includes costs associated
with the merger between MichCons parent company, MCN Energy Group Inc. (MCN),
and DTE Energy Company which reduced earnings by $16.8 million (Note 2). The
1999 twelve-month period includes the write-down of a gas gathering pipeline
which reduced earnings by $11.2 million (Note 3). Excluding the merger costs
and write-down, earnings for the 2000 twelve-month period decreased $4.4
million over the corresponding 1999 period. The earnings decline for the 2000
first quarter reflects the impact of warmer weather and reduced contributions
from the gas sales program. The decrease in earnings for the 2000 twelve-month
period reflects warmer weather and higher financing costs, partially offset by
increased contributions from the gas sales program.

Earnings Components (Dollars in Millions)
Comparing 2000 to 1999

|                             |  |          |  |               |  |  |       |          |  |          |  |  |  |  |       |          |  |  |       |   |  |  |  |  |  |  |       |   
|---------------------------- |  | -------- |  | ------------- |  |  | ----- | -------- |  | -------- |  |  |  |  | ----- | -------- |  |  | ----- | - |  |  |  |  |  |  | ----- | --
|                             |  | Quarter  |  | Twelve Months
|                             |  |          |  |              
|                             |  | $ Change |  |               |  |  |       | % Change |  | $ Change |  |  |  |  |       | % Change
|                             |  |          |  |               |  |  |       |          |  |          |  |  |  |  |       |         
|Operating Revenues           |  |          |  |               |  |  | (55.3 | )        |  |          |  |  |  |  | (11.1 | )%       |  |  | (22.1 | ) |  |  |  |  |  |  | (2.0  | )%
|                            
|                            
|                            
|                            
|Cost of Gas                  |  |          |  |               |  |  | (31.8 | )        |  |          |  |  |  |  | (12.8 | )        |  |  | (30.2 | ) |  |  |  |  |  |  | (6.3  | ) 
|                            
|                            
|                            
|                            
|Gross Margin                 |  |          |  |               |  |  | (23.5 | )        |  |          |  |  |  |  | (9.4  | )        |  |  | 8.1   |   |  |  |  |  |  |  | 1.3   |   
|                            
|                            
|                            
|                            
|Operation and Maintenance    |  |          |  |               |  |  | (3.5  | )        |  |          |  |  |  |  | (5.2  | )        |  |  | 4.9   |   |  |  |  |  |  |  | 1.9   |   
|                            
|                            
|                            
|                            
|Depreciation and Depletion   |  |          |  |               |  |  | 1.3   |          |  |          |  |  |  |  | 5.4   |          |  |  | 5.2   |   |  |  |  |  |  |  | 5.4   |   
|                            
|                            
|                            
|                            
|Property and Other Taxes     |  |          |  |               |  |  | .5    |          |  |          |  |  |  |  | 2.9   |          |  |  | (10.8 | ) |  |  |  |  |  |  | (19.2 | ) 
|                            
|                            
|                            
|                            
|Merger Costs (Note 2)        |  |          |  |               |  |  | .3    |          |  |          |  |  |  |  | N/A   |          |  |  | 25.8  |   |  |  |  |  |  |  | N/A   |   
|                            
|                            
|                            
|                            
|Property Write-down (Note 3) |  |          |  |               |  |  |      |          |  |          |  |  |  |  |      |          |  |  | (24.8 | ) |  |  |  |  |  |  | N/A   |   
|                            
|                            
|                            
|                            
|Other Income and Deductions  |  |          |  |               |  |  | 1.8   |          |  |          |  |  |  |  | 15.1  |          |  |  | 13.8  |   |  |  |  |  |  |  | 33.2  |   
|                            
|                            
|                            
|                            
|Income Tax Provision         |  |          |  |               |  |  | (7.0  | )        |  |          |  |  |  |  | (16.3 | )        |  |  | 4.1   |   |  |  |  |  |  |  | 9.0   |   
|                            
|                            
|                            
|                            
|Net Income                   |  |          |  |               |  |  | (17.1 | )        |  |          |  |  |  |  | (20.3 | )        |  |  | (10.0 | ) |  |  |  |  |  |  | (10.1 | ) 

Gross Margin

Gross margin (operating revenues less cost of gas) decreased $23.5 million in
the 2000 first quarter and increased $8.1 million in the 2000 twelve-month
period. Gross margins for the 2000 quarter reflect lower gas sales due to
weather, which was 9.9% warmer in the current quarter compared to the same 1999
period. Additionally, the decline in the 2000 first quarter is due to lower
margins generated under MichCons three-year gas sales program that began in
January 1999 (Note 4a). Under the gas sales program, MichCons gas sales rates
include a gas commodity component that is fixed at $2.95 per thousand cubic
feet (Mcf). As part of its gas acquisition strategy, MichCon entered into
fixed-price contracts at costs below $2.95 per Mcf for a substantial portion of
its expected gas supply requirements through 2001. However, gas sales margins
in the 2000 first quarter were lower than the same 1999 period as a result of
higher fixed-price supplies and the loss of

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

approximately 70,000 customers who
chose to purchase their gas from other suppliers under MichCons customer
choice program that began in April 1999. Although MichCon has lost gas sales
margins from these customers, distribution margins are retained as MichCon
continues to transport and deliver the gas to the customers premises.
MichCons fixed-price supplies for the remainder of 2000 as well as 2001 are at
prices higher than those paid in 1999. Accordingly, margins in future periods
are expected to be lower than those generated in 1999.

The increase in gross margins for the 2000 twelve-month period reflects higher
margins generated under the gas sales program. As a result of the gas sales
program beginning in January 1999, the 2000 twelve-month period includes a full
years contribution whereas the 1999 twelve-month period includes only three
months of contributions. Gross margins for both the 2000 first quarter and the
twelve-month period were also impacted by a decline in intermediate
transportation revenues and revenues from other gas-related services.

Effect of Weather on Gas Markets and Earnings

|                                       |                          |  |         |       |               |  |      |      |      |  |       |       |   |  |       |       |  
|-------------------------------------- | ------------------------ |  | ------- | ----- | ------------- |  | ---- | ---- | ---- |  | ----- | ----- | - |  | ----- | ----- | -
|                                       |                          |  | Quarter |       | Twelve Months
|                                       |                          |  |         |       |              
|                                       |                          |  | 2000    |       | 1999          |  | 2000 |      | 1999
|                                       |                          |  |         |       |               |  |      |      |     
|Percentage Colder (Warmer)
Than Normal |                          |  | (14.2   | )%    |               |  | (4.3 | )%   |      |  | (13.9 | )%    |   |  | (12.0 | )%   
|                                      
|                                      
|                                      
|                                      
|Increase (Decrease) From
Normal in:   
|                                      
|                                      
|                                      
|                                      
|                                       | Gas markets (in Bcf)     |  |         | (16.1 | )             |  |      | (5.1 | )    |  |       | (29.7 | ) |  |       | (26.2 | )
|                                       | Net income (in Millions) |  | $       | (15.0 | )             |  | $    | (5.1 | )    |  | $     | (28.5 | ) |  | $     | (23.7 | )
|                                      
|                                      
|                                      
|                                      



| |  | Gas sales and end user transportation revenuesin total decreased $52.9 million
for the 2000 first quarter and $18.1 million for the 2000 twelve-month period.
Revenues reflect a decline in gas sales volumes, partially offset by higher end
user transportation deliveries. Gas sales volumes decreased 14.3 billion
cubic feet (Bcf) in the 2000 first quarter and 17.3 Bcf in the 2000
twelve-month period due primarily to the warmer weather and customers who chose
to purchase their gas from other suppliers under MichCons customer choice
program. End user transportation deliveries increased 9.2 Bcf in the 2000
first quarter and 20.8 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 increase in end user
transportation volumes attributable to the customer choice program was the
impact of warmer weather.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The revenue comparison for the twelve-month period was also 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 $.27 per
Mcf (10%) for the 2000 twelve-month period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|--------------------------- |  | ------- | ----- | ------------- |  | ---- | ----- | ---- |  | - | ------- |  |  | - | ------- | 
|                            |  | Quarter |       | Twelve Months
|                            |  |         |       |              
|                            |  | 2000    |       | 1999          |  | 2000 |       | 1999
|                            |  |         |       |               |  |      |       |     
|Gas Markets (in Millions)  
|                           
|                           
|                           
|                           
|Gas Sales                   |  | $       | 370.7 |               |  | $    | 435.7 |      |  | $ | 842.5   |  |  | $ | 892.6   | 
|                           
|                           
|                           
|                           
|End User Transportation     |  |         | 38.8  |               |  |      | 26.7  |      |  |   | 115.7   |  |  |   | 83.7    | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|                            |  |         | 409.5 |               |  |      | 462.4 |      |  |   | 958.2   |  |  |   | 976.3   | 
|                           
|                           
|                           
|                           
|Intermediate Transportation |  |         | 14.5  |               |  |      | 14.7  |      |  |   | 57.5    |  |  |   | 59.9    | 
|                           
|                           
|                           
|                           
|Other                       |  |         | 18.8  |               |  |      | 21.0  |      |  |   | 64.7    |  |  |   | 66.3    | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|                            |  | $       | 442.8 |               |  | $    | 498.1 |      |  | $ | 1,080.4 |  |  | $ | 1,102.5 | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|Gas Markets (in Bcf)       
|                           
|                           
|                           
|                           
|Gas Sales                   |  |         | 76.7  |               |  |      | 91.0  |      |  |   | 163.9   |  |  |   | 181.2   | 
|                           
|                           
|                           
|                           
|End User Transportation     |  |         | 51.6  |               |  |      | 42.4  |      |  |   | 160.9   |  |  |   | 140.1   | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|                            |  |         | 128.3 |               |  |      | 133.4 |      |  |   | 324.8   |  |  |   | 321.3   | 
|                           
|                           
|                           
|                           
|Intermediate Transportation |  |         | 182.9 |               |  |      | 127.4 |      |  |   | 587.4   |  |  |   | 516.5   | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 
|                            |  |         | 311.2 |               |  |      | 260.8 |      |  |   | 912.2   |  |  |   | 837.8   | 
|                            |  |         |       |               |  |      |       |      |  |   |         |  |  |   |         | 

Intermediate transportation revenuesdecreased $.2 million in the 2000 first
quarter and $2.4 million in the 2000 twelve-month period, whereas intermediate
transportation deliveries increased 55.5 Bcf and 70.9 Bcf, respectively. A
significant portion of the volume increase 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 $2.2 million in the 2000 first quarter and
$1.6 million in the 2000 twelve-month period due to 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 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 decreased $31.8 million in the 2000 first quarter and $30.2
million in the 2000 twelve-month period, primarily due to a decline in sales
volumes. As previously discussed, the decrease in sales volumes reflects the
warmer weather and customers who have chosen to purchase gas from other
suppliers under MichCons customer choice program. Partially offsetting the
impact of lower sales volumes was an increase in the price paid for gas
purchased of $.11 per Mcf (4%) in the 2000 first quarter and $.10 per Mcf (4%)
in the 2000 twelve-month period.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

Other Operating Expenses

Operation and maintenanceexpenses decreased $3.5 million in the 2000 first
quarter and increased $4.9 million in the 2000 twelve-month period. The
decrease in the current quarter is attributable to lower employee benefit
costs, primarily pension and retiree healthcare costs, and 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 liability for future costs of environmental
investigation and remediation costs at former manufactured gas plant sites.

The increase in operation and maintenance expenses in the 2000 twelve-month
period is due to additional computer system support costs associated with
MichCons new customer information system and higher injuries and damages
costs. Additionally, the increase reflects higher employee incentive payments.
The higher costs of these items more than offset the benefits from lower
pension and retiree healthcare costs and environmental insurance proceeds.

Depreciation and depletionincreased $1.3 million in the 2000 first quarter and
$5.2 million in the 2000 twelve-month period reflecting depreciation on higher
plant balances.

Property and other taxesincreased $.5 million in the 2000 first quarter and
decreased $10.8 million in the 2000 twelve-month period. The current
twelve-month period reflects a change in the calculation of the value of
personal property subject to taxation by local governments (Note 6a).

Merger costsof $25.8 million in the 2000 twelve-month period include legal,
consulting, accounting, employee benefit and other expenses associated with the
pending merger between MCN and DTE Energy Company (Note 2).

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 $1.8 million in the 2000 first quarter
and $13.8 million in the 2000 twelve-month period. Both 2000 periods were
impacted by higher interest costs primarily due to an increase in long-term
debt outstanding 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.

Income Taxes

Income taxes for both 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 in the 1999 periods.

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

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

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 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.
As part of its gas acquisition strategy, MichCon entered into fixed-price
contracts at costs below $2.95 per Mcf for a substantial portion of its
expected gas supply requirements through 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.

The plan increases MichCons risk associated with generating margins that cover
its gas costs. The level of margins generated from selling gas will also be affected
by differences between actual gas sales volumes and the volume of fixed-price gas supplies.
Actual gas sales volumes 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.

CAPITAL RESOURCES AND LIQUIDITY

|                                          |                                     |                      |    |         |        |   |  |  |  |      |      |   |        |  
|----------------------------------------- | ----------------------------------- | -------------------- | -- | ------- | ------ | - |  |  |  | ---- | ---- | - | ------ | -
|                                          |                                     |                      |    | Quarter
|                                          |                                     |                      |    |        
|                                          |                                     |                      |    | 2000    |        |   |  |  |  | 1999
|                                          |                                     |                      |    |         |        |   |  |  |  |     
|Cash and Cash Equivalents(in Millions)   
|                                         
|                                         
|                                         
|                                         
|                                          | Cash Flow Provided From (Used For):
|                                         
|                                         
|                                         
|                                         
|                                          |                                     | Operating activities |    | $       | 199.2  |   |  |  |  |      |      | $ | 179.7  |  
|                                         
|                                         
|                                         
|                                         
|                                          |                                     | Financing activities |    |         | (176.3 | ) |  |  |  |      |      |   | (136.7 | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                     | Investing activities |    |         | (22.2  | ) |  |  |  |      |      |   | (26.1  | )
|                                          |                                     |                      |    |         |        |   |  |  |  |      |      |  
|Net Increase in Cash and Cash Equivalents |                                     | $                    | .7 |         |        |   |  |  |  | $    | 16.9 |  
|                                          |                                     |                      |    |         |        |   |  |  |  |      |      |  

Operating Activities

Cash flow from operating activities increased $19.5 million during the 2000
first quarter as 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).

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

Financing Activities

Cash flow used for financing activities increased $39.6 million during the 2000
first quarter as compared to the 1999 first quarter. The increase is due to
the repayment of more short- and long-term debt, 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 several banks. MichCon has
established credit lines to allow for borrowings of up to $150 million under a
364-day revolving credit facility, and up to $150 million under a three-year
revolving credit facility. The 364-day facility expires in July 2000, and the
three-year facility expires in July 2001. During the first three months of
2000, MichCon repaid $158.4 million of commercial paper, leaving borrowings of
$78.2 million outstanding under this program at March 31, 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.

Investing Activities

MichCons cash used for investing activities decreased $3.9 million in the 2000
first quarter as 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 substantial 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 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 manages
interest rate risk through the use of various derivative instruments and limits
the use of such instruments to hedging activities.

MichCon is subject to interest rate risk in connection with the issuance of
variable and fixed-rate debt. In order to manage interest costs and risk,
MichCon uses interest rate swap agreements to exchange fixed and variable-rate
interest payment obligations over the life of the agreements without

6



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS (CONTINUED)

exchange
of the underlying principal amounts. During the 2000 first quarter, there were
no material changes to MichCons interest rate risk.

NEW ACCOUNTING PRONOUNCEMENTS

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.

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.

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.

7



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##### Table of Contents



CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

---

|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |         |         |   |  |  |  | 
|----------------------------- | ------------------------------------ | ----------------------------------- | ------- | ------------------ | ------- | ------------------- | ------- | ------- | ------- | ---- | --------- | ------- | ------- | - | --------- | ------- | ------- | - |  |  |  | 
|                              |                                      |                                     |         | Three Months Ended |         | Twelve Months Ended
|                              |                                      |                                     |         | March 31           |         | March 31           
|                              |                                      |                                     |         |                    |         |                    
|                              |                                      |                                     |         | 2000               |         | 1999                |         | 2000    |         | 1999
|                              |                                      |                                     |         |                    |         |                     |         |         |         |     
|(in Thousands)               
|                             
|                             
|                             
|                             
|Operating Revenues            |                                      | $                                   | 442,747 |                    |         | $                   | 498,090 |         |         | $    | 1,080,396 |         |         | $ | 1,102,521 |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|Operating Expenses           
|                             
|                             
|                             
|                             
|                              | Cost of gas                          |                                     |         | 216,520            |         |                     |         | 248,351 |         |      |           | 452,094 |         |   |           | 482,291 |        
|                             
|                             
|                             
|                             
|                              | Operation and maintenance            |                                     |         | 64,063             |         |                     |         | 67,546  |         |      |           | 262,621 |         |   |           | 257,721 |        
|                             
|                             
|                             
|                             
|                              | Depreciation and depletion           |                                     |         | 25,944             |         |                     |         | 24,608  |         |      |           | 100,215 |         |   |           | 95,046  |        
|                             
|                             
|                             
|                             
|                              | Property and other taxes             |                                     |         | 18,990             |         |                     |         | 18,462  |         |      |           | 45,758  |         |   |           | 56,598  |        
|                             
|                             
|                             
|                             
|                              | Merger costs (Note 2)                |                                     |         | 347                |         |                     |         |        |         |      |           | 25,776  |         |   |           |        |        
|                             
|                             
|                             
|                             
|                              | Property write-down (Note 3)         |                                     |         |                   |         |                     |         |        |         |      |           |        |         |   |           | 24,800  |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|                              |                                      | Total operating expenses            |         |                    | 325,864 |                     |         |         | 358,967 |      |           |         | 886,464 |   |           |         | 916,456 |  
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|Operating Income              |                                      |                                     | 116,883 |                    |         |                     | 139,123 |         |         |      | 193,932   |         |         |   | 186,065   |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|Other Income and (Deductions)
|                             
|                             
|                             
|                             
|                              | Interest income                      |                                     |         | 726                |         |                     |         | 999     |         |      |           | 2,331   |         |   |           | 5,575   |        
|                             
|                             
|                             
|                             
|                              | Interest on long-term debt           |                                     |         | (12,273            | )       |                     |         | (10,966 | )       |      |           | (48,572 | )       |   |           | (43,644 | )      
|                             
|                             
|                             
|                             
|                              | Other interest expense               |                                     |         | (3,009             | )       |                     |         | (2,655  | )       |      |           | (8,980  | )       |   |           | (11,511 | )      
|                             
|                             
|                             
|                             
|                              | Minority interest (Note 3)           |                                     |         | (139               | )       |                     |         | (257    | )       |      |           | (902    | )       |   |           | 6,215   |        
|                             
|                             
|                             
|                             
|                              | Equity in earnings of joint ventures |                                     |         | 587                |         |                     |         | 441     |         |      |           | 2,122   |         |   |           | 1,798   |        
|                             
|                             
|                             
|                             
|                              | Other                                |                                     |         | 320                |         |                     |         | 464     |         |      |           | (1,160  | )       |   |           | 161     |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|                              |                                      | Total other income and (deductions) |         |                    | (13,788 | )                   |         |         | (11,974 | )    |           |         | (55,161 | ) |           |         | (41,406 | )
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|Income Before Income Taxes    |                                      |                                     | 103,095 |                    |         |                     | 127,149 |         |         |      | 138,771   |         |         |   | 144,659   |        
|                             
|                             
|                             
|                             
|Income Tax Provision          |                                      |                                     | 36,155  |                    |         |                     | 43,176  |         |         |      | 49,468    |         |         |   | 45,374    |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        
|Net Income                    |                                      | $                                   | 66,940  |                    |         | $                   | 83,973  |         |         | $    | 89,303    |         |         | $ | 99,285    |        
|                              |                                      |                                     |         |                    |         |                     |         |         |         |      |           |         |         |   |           |        

CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)

|                              |                                          |   |                    |        |                     |   |         |        |      |   |         |        |  |   |         |        |  |  |  |  | 
|----------------------------- | ---------------------------------------- | - | ------------------ | ------ | ------------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  |  |  |  | 
|                              |                                          |   | Three Months Ended |        | Twelve Months Ended
|                              |                                          |   | March 31           |        | March 31           
|                              |                                          |   |                    |        |                    
|                              |                                          |   | 2000               |        | 1999                |   | 2000    |        | 1999
|                              |                                          |   |                    |        |                     |   |         |        |     
|(in Thousands)               
|                             
|                             
|                             
|                             
|Balance  Beginning of Period |                                          | $ | 494,803            |        |                     | $ | 406,144 |        |      | $ | 472,440 |        |  | $ | 436,989 |       
|                             
|                             
|                             
|                             
|                              | Add  Net income                         |   |                    | 66,940 |                     |   |         | 83,973 |      |   |         | 89,303 |  |   |         | 99,285 | 
|                              |                                          |   |                    |        |                     |   |         |        |      |   |         |        |  |   |         |       
|                              |                                          |   | 561,743            |        |                     |   | 490,117 |        |      |   | 561,743 |        |  |   | 536,274 |       
|                             
|                             
|                             
|                             
|                              | Deduct  Common stock dividends declared |   |                    |       |                     |   |         | 17,677 |      |   |         |       |  |   |         | 63,834 | 
|                              |                                          |   |                    |        |                     |   |         |        |      |   |         |        |  |   |         |       
|Balance  End of Period       |                                          | $ | 561,743            |        |                     | $ | 472,440 |        |      | $ | 561,743 |        |  | $ | 472,440 |       
|                              |                                          |   |                    |        |                     |   |         |        |      |   |         |        |  |   |         |       

---

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

8



---



##### Table of Contents



CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

---

|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |           |           |  |  |  |  | 
|------------------------------------ | --------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- | ----------- | --------- | --------- | --------- | - | --------- | --------- | --------- |  |  |  |  | 
|                                     |                                                     |                                                                                                         |           | March 31  |           | December 31
|                                     |                                                     |                                                                                                         |           |           |           |            
|                                     |                                                     |                                                                                                         |           | 2000      |           | 1999        |           | 1999     
|                                     |                                                     |                                                                                                         |           |           |           |             |           |          
|(in Thousands)                      
|                                    
|                                    
|                                    
|                                    
|ASSETS                              
|                                    
|                                    
|                                    
|                                    
|                                     | Current Assets                                     
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Cash and cash equivalents                                                                               |           | $         | 10,366    |             |           | $         | 23,512    |   |           | $         | 9,705     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accounts receivable, less allowance for doubtful accounts of
$18,276, $11,545 and $17,777, respectively |           |           | 201,207   |             |           |           | 214,693   |   |           |           | 147,412   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accrued unbilled revenues                                                                               |           |           | 67,744    |             |           |           | 76,431    |   |           |           | 98,866    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Gas in inventory (Note 5)                                                                               |           |           | 34,014    |             |           |           | 24,485    |   |           |           | 74,150    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Property taxes assessed applicable to future periods                                                    |           |           | 49,525    |             |           |           | 59,255    |   |           |           | 60,589    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 31,742    |             |           |           | 32,990    |   |           |           | 31,594    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 394,598   |           |           |             | 431,366   |           |           |   | 422,316   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Deferred Charges and Other Assets                  
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Investment in and advances to joint ventures                                                            |           |           | 19,802    |             |           |           | 19,808    |   |           |           | 19,115    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Long-term investments                                                                                   |           |           | 68,104    |             |           |           | 66,110    |   |           |           | 67,210    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Deferred environmental costs                                                                            |           |           | 26,067    |             |           |           | 28,286    |   |           |           | 28,639    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Prepaid benefit costs                                                                                   |           |           | 170,563   |             |           |           | 124,235   |   |           |           | 156,290   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 58,138    |             |           |           | 61,250    |   |           |           | 64,546    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 342,674   |           |           |             | 299,689   |           |           |   | 335,800   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Property, Plant and Equipment, at cost              |                                                                                                         |           | 3,004,736 |           |             |           | 2,911,368 |           |   |           | 2,988,318 |          
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Less  Accumulated depreciation and depletion                                                           |           |           | 1,486,590 |             |           |           | 1,420,513 |   |           |           | 1,463,706 | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 1,518,146 |           |           |             | 1,490,855 |           |           |   | 1,524,612 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     | $                                                                                                       | 2,255,418 |           |           | $           | 2,221,910 |           |           | $ | 2,282,728 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY
|                                    
|                                    
|                                    
|                                    
|                                     | Current Liabilities                                
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accounts payable                                                                                        |           | $         | 81,071    |             |           | $         | 96,390    |   |           | $         | 93,549    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Notes payable                                                                                           |           |           | 79,416    |             |           |           | 107,900   |   |           |           | 237,785   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Current portion of long-term debt and capital lease obligations                                         |           |           | 26,150    |             |           |           | 58,211    |   |           |           | 27,984    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Gas inventory equalization (Note 5)                                                                     |           |           | 80,844    |             |           |           | 79,559    |   |           |           |          | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Federal income, property and other taxes payable                                                        |           |           | 78,328    |             |           |           | 103,464   |   |           |           | 71,415    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Exchange gas payable                                                                                    |           |           | 2,048     |             |           |           | 25,835    |   |           |           | 3,598     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Customer deposits                                                                                       |           |           | 16,944    |             |           |           | 17,459    |   |           |           | 17,698    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 53,285    |             |           |           | 58,935    |   |           |           | 64,741    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 418,086   |           |           |             | 547,753   |           |           |   | 516,770   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Deferred Credits and Other Liabilities             
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Deferred income taxes                                                                                   |           |           | 117,250   |             |           |           | 96,353    |   |           |           | 105,351   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Unamortized investment tax credit                                                                       |           |           | 27,300    |             |           |           | 29,303    |   |           |           | 27,778    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Tax benefits amortizable to customers                                                                   |           |           | 135,616   |             |           |           | 129,494   |   |           |           | 136,236   | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Accrued environmental costs                                                                             |           |           | 24,711    |             |           |           | 31,888    |   |           |           | 25,068    | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Minority interest                                                                                       |           |           | 6,524     |             |           |           | 8,175     |   |           |           | 8,716     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Other                                                                                                   |           |           | 58,703    |             |           |           | 51,860    |   |           |           | 46,398    | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 370,104   |           |           |             | 347,073   |           |           |   | 349,547   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     | Long-Term Debt, including capital lease obligations |                                                                                                         |           | 664,786   |           |             |           | 613,945   |           |   |           | 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                                                                                       |           |           | 561,743   |             |           |           | 472,440   |   |           |           | 494,803   | 
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     |                                                                                                         | 802,442   |           |           |             | 713,139   |           |           |   | 735,502   |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          
|                                     |                                                     | $                                                                                                       | 2,255,418 |           |           | $           | 2,221,910 |           |           | $ | 2,282,728 |          
|                                     |                                                     |                                                                                                         |           |           |           |             |           |           |           |   |           |          

---

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

9



---



##### Table of Contents



CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

---

|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |          |         |        |          |   |  |  |  | 
|------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------------------------ | ------------------------------------ | ------------------------------------------- | ------- | ------------------ | -------- | -------- | ------- | ------ | -------- | - |  |  |  | 
|                                                        |                                                                    |                                                                          |                                      |                                             |         | Three Months Ended
|                                                        |                                                                    |                                                                          |                                      |                                             |         | March 31          
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                   
|                                                        |                                                                    |                                                                          |                                      |                                             |         | 2000               |          | 1999    
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|(in Thousands)                                         
|                                                       
|                                                       
|                                                       
|                                                       
|Cash Flow From Operating Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net income                                                         |                                                                          | $                                    | 66,940                                      |         |                    | $        | 83,973   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Adjustments to reconcile net income to net cash flow provided
from |                                                                          |                                      |                                             |         |                    |          |          |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | operating activities                                               |                                                                          |                                      |                                             |         |                    |          |          |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Depreciation and depletion                                               |                                      |                                             |         |                    |          |          |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    |                                                                          |                                      | Per statement of income                     | 25,944  |                    |          |          | 24,608  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    |                                                                          |                                      | Charged to other accounts                   |         |                    | 2,391    |          |         |        | 2,162    |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Deferred income taxes  current                                          |                                      |                                             | (4,266  | )                  |          |          | (5,309  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Deferred income taxes and investment tax credit, net                     |                                      |                                             | 10,801  |                    |          |          | 6,679   |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Other                                                                    |                                      |                                             | (3,002  | )                  |          |          | (1,211  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Changes in assets and liabilities,
exclusive of changes shown separately |                                      |                                             | 100,413 |                    |          |          | 68,811  |       
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|                                                        |                                                                    |                                                                          |                                      | Net cash provided from operating activities |         |                    | 199,221  |          |         |        | 179,713  |  
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Cash Flow From Financing Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Notes payable, net                                                 |                                                                          |                                      | (158,369                                    | )       |                    |          | (113,269 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retirement of long-term debt                                       |                                                                          |                                      | (17,925                                     | )       |                    |          | (5,934   | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Dividends paid                                                     |                                                                          |                                      |                                            |         |                    |          | (17,500  | )      
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|                                                        |                                                                    |                                                                          |                                      | Net cash used for financing activities      |         |                    | (176,294 | )        |         |        | (136,703 | )
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Cash Flow From Investing Activities                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Capital expenditures                                               |                                                                          |                                      | (20,963                                     | )       |                    |          | (24,209  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other                                                              |                                                                          |                                      | (1,303                                      | )       |                    |          | (1,892   | )      
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|                                                        |                                                                    |                                                                          |                                      | Net cash used for investing activities      |         |                    | (22,266  | )        |         |        | (26,101  | )
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Net Increase in Cash and Cash Equivalents               |                                                                    |                                                                          | 661                                  |                                             |         |                    | 16,909   |         
|                                                       
|                                                       
|                                                       
|                                                       
|Cash and Cash Equivalents, January 1                    |                                                                    |                                                                          | 9,705                                |                                             |         |                    | 6,603    |         
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Cash and Cash Equivalents, March 31                     |                                                                    | $                                                                        | 10,366                               |                                             |         | $                  | 23,512   |         
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Changes in Assets and Liabilities, Exclusive of Changes
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Shown Separately                                                  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Accounts receivable, net                                                 |                                      | $                                           | (53,909 | )                  |          | $        | (72,560 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Gas inventory equalization                                               |                                      |                                             | 80,844  |                    |          |          | 79,559  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Accrued unbilled revenues                                                |                                      |                                             | 31,122  |                    |          |          | 10,336  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Accrued/deferred gas cost recovery revenues, net                         |                                      |                                             |        |                    |          |          | (15,153 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Gas in inventory                                                         |                                      |                                             | 40,136  |                    |          |          | 32,484  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Property taxes assessed applicable to future periods                     |                                      |                                             | 11,064  |                    |          |          | 11,910  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Prepaid benefit costs, net                                               |                                      |                                             | (14,273 | )                  |          |          | (10,356 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Accounts payable                                                         |                                      |                                             | (12,478 | )                  |          |          | (2,501  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Federal income, property and other taxes payable                         |                                      |                                             | 6,913   |                    |          |          | 42,405  |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Exchange gas payable                                                     |                                      |                                             | (1,550  | )                  |          |          | (498    | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Other current assets and liabilities, net                                |                                      |                                             | (8,384  | )                  |          |          | (4,852  | )     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    | Other deferred assets and liabilities, net                               |                                      |                                             | 20,928  |                    |          |          | (1,963  | )     
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|                                                        |                                                                    | $                                                                        | 100,413                              |                                             |         | $                  | 68,811   |         
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|Supplemental Disclosures                               
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash paid (received) for:                                         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                    |                                                                          | Interest, net of amounts capitalized |                                             | $       | 13,450             |          |          | $       | 13,447 |         
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         
|                                                        |                                                                    |                                                                          | Federal income taxes                 |                                             | $       | (857               | )        |          | $       | (5,133 | )       
|                                                        |                                                                    |                                                                          |                                      |                                             |         |                    |          |         

---

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

10



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##### Table of Contents



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) have 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. While it is still possible for the merger to close in mid- to late
2000, discussions continue with the Federal Trade Commission and a final
closing date cannot be determined with certainty.

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 which had the effect of
decreasing earnings by $347,000 pre-tax ($226,000 net of taxes) and $25,776,000
pre-tax ($16,754,000 net of taxes) for the three- and twelve-month periods
ended March 31, 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
|-- |  | ----------------------

11



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 will continue to
transport and deliver the gas to the 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.



|b. |  | Gas Cost Recovery Proceedings
|-- |  | -----------------------------



|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
|-- |  | -----------------------

12



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Additionally, MichCon and other Michigan utilities have asserted that
Michigans valuation tables result in the substantial overvaluation of utility
personal property. Valuation tables are used to estimate the
reduction in value of personal property based on the propertys age. In
November 1999, the Michigan State Tax Commission (STC) approved new valuation
tables that more accurately recognize the value of utilities personal
property. The new tables are effective in 2000, however several local
governments have taken legal action to prevent the STC from implementing the
new valuation tables. The Michigan Tax Tribunal has requested parties to
submit briefs to determine what is the proper scope and standard for its review of the tables. It is managements
belief that several local governments will not use the revised tables until the
legal actions have been resolved. The legal action, along with possible additional
appeals by local governments, could delay expected recoveries related to the
new valuation tables until 2001.

Based on past practice, MichCon expects to ultimately settle pending tax
appeals with local governments by applying the new tables retroactively, a
solution supported in the past by the STC. 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.

13



---



##### Table of Contents



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 March 31, 2000 and 1999, the related condensed consolidated
statements of income and retained earnings for the three and twelve-month
periods ended March 31, 2000 and 1999, and the condensed consolidated
statements of cash flows for the three-month periods ended March 31, 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
May 11, 2000

14



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##### Table of Contents



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.              

15



---



##### 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 COMPANY
|                  
|                  
|                  
|                  
|                  
|Date: May 15, 2000 |               | By:                               | /s/ Robert Kaslik
|                   |              
|                   | Robert Kaslik
|                   | Controller   

16



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##### Table of Contents



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